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Thursday December 13, 2012
Cameco: Nuclear renaissance?
by Benjamin Shepherd, editor Global Investment Strategist For nearly two years, the nuclear industry has had a mushroom cloud hanging over its head; but a nuclear renaissance is unfolding in the emerging world. Cameco (CCJ) is the largest and lowest-cost uranium producer in the world, on track to produce 36 million pounds by 2018. It will be helped towards that production goal when operations commence at its Cigar Lake joint venture in Saskatchewan, Canada, one of the richest sources of uranium in North America. While Cameco has been shouldered with a low selling price for its ore over the past two years, it should see higher prices in the future as long-term supply contracts expire and the company renegotiates them at more favorable terms. I expect uranium prices to rise over the near term, because production is currently running at a 40 million pound deficit to demand. That deficit has been made up by dipping into existing stocks and using uranium from dismantled nuclear warheads. But uranium demand should begin taking off over the next two years as new reactors come online. In particular, Cameco will benefit from surging Chinese demand for uranium. The company is the primary supplier of the country’s ore, under a contract that runs through 2025. Although uranium demand has been relatively weak over the past year, Cameco has managed to grow its revenue by nearly 12 percent while maintaining a net margin of 21 percent, thanks to its low-cost operations. It also carries very little debt and has grown its dividend by more than 15 percent over the past five years. Cameco’s shares will likely remain volatile over the short term because of analyst pessimism, but it faces extremely attractive long-term prospects. Take advantage of the stock’s current weakness and buy Cameco under $22. Learn more about this financial newsletter at Global Investment Strategist. Related articles: 
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