What to make of CCO
Breaking News……..Cameco Approves Dividend
Cameco (TSX:CCO) (NYSE:CCJ) recently announced that its board of directors has approved a quarterly cash dividend of $0.10 (Cdn) per common share, payable on April 13, 2012 to shareholders of record on March 30, 2012.
In our last newsletter we discussed Cameco in some detail. Here are a few excerpts:
URANIUM and Cameco
We recieved a number of requests about CCO since the January newsletter. Basically, the gist of the requests was “what should I do with my current holdings of CCO bought prior the earthquake?” The answer is DEPENDS.
Consider the following:
- First look at the loss you would take if you sold your shares now. Is that acceptable to you? If Yes, can you recover that loss by carefully trading other stocks & shares? If yes, proceed. If NO – I cannot sleep if I sold now – then hold until it reaches an acceptable loss position that you can deal with. Unless things change dramatically, its not likely that we will see CCO trade at pre-earthquake levels any time soon.
- If there is another Fukushima /Chernobyl event especially in China or India, CCO share prices will likely get hammered again.
- If you keep your shares, CCO is a long term hold unless there is a catalyst (SEE EXAMPLES BELOW) that creates a supply shortfall – flood; earthquake at major mines etc.
- You may be able to trade out of your position if CCO establishes a decent trading range. That range may be between $20 and $24.
Examples of things that have happened and how they affected the price of uranimum
- The uranium spot price more than doubled to a record $138 a pound in the eight months after the accident at Cigar Lake, which is on the site of the world’s richest undeveloped uranium deposit, was delayed by six years after an October 2006 underground flood at the mine.
- Uranium prices have slumped 23 percent since a magnitude-9 earthquake and tsunami struck Japan on March 11 caused a partial meltdown at Tokyo Electric Power Co.’s Fukushima Dai-Ichi nuclear plant. The crisis at Fukushima led to Germany’s declaration in May that it would close its reactors by 2022. Cameco, which is based in Saskatoon, Saskatchewan, in August cut its full-year global uranium demand estimate to 175 million pounds (79,400 metric tons) from 180 million pounds.
Something to ponder:
China /India will continue to build nuclear to meet domestic power requirements. Indian reactor demand for uranium is expected to rise to as much as 10 million pounds in 15 years. India has 17 reactors operating and six under construction, and another 23 reactors are expected to come on line in the next eight years. India’s supply of uranium now comes from mines in Canada, the United States, and Kazakhstan. However, the large uranium miners are seeking out mines in Africa that could help meet the rising demand for uranium in India.
China has 11 reactors operating, 16 under construction and 35 new plants expected to come on line within the next eight years. China’s uranium demand is expected to grow 4-6 times by 2020, as the country increases its annual installed nuclear power capacity to 40 million kilowatts from 9 million presently. The sharp increase in the demand for uranium from India and China will continue to raise the price of uranium and increase the profitability of Cameco’s uranium sales. Cameco announced its intent to develop the Kintyre project in Australia, with production planned to begin in 2016. Cameco aims to almost double annual uranium output to about 40 million pounds by 2018 to help meet demand from Asia.
France cannot afford NOT to maintain its dependence on nuclear power. Some of the reactionary policy changes and nuclear public safety issues which immediately surfaced last spring may now be revisited following some months of careful deliberation.
Challenges that European governments are facing in terms of balancing budgets could actually see the uranium industry benefit as older nuclear reactors that are reassessed may be permitted to stay open longer. This new year has already begun to see a glimmer of this, as on January 2, a new government in Spain announced that it may allow an aging nuclear plant to stay open beyond a 2013 deadline for closing set by a previous administration.
Last year Germany made policy decisions to gradually phase out nuclear energy; however, it remains unclear how the country will replace as much as 29 percent of its current electricity demand. If Germany does not reconsider these plans, France may find a potential export market for its nuclear energy.
Although nuclear energy may not be the most popular choice for sourcing electricity among individual citizens, governments will have to make difficult decisions based on unrealistic expectations set out by these citizens. Realistically in a world with burgeoning populations in emerging countries that are short on energy, there are going to be greater demands placed on all three forms of traditional energy: coal, gas and nuclear.
And there’s resilience in the United States. At the end of last month, the United States’ Department of Energy Secretary Steven Chu issued a statement in support of the Nuclear Regulatory Commission’s decision to certify Westinghouse Electric’s AP1000 nuclear reactor design, marking a noteworthy stride towards new generation nuclear reactor build. Secretary Chu said, “The Administration and the Energy Department are committed to restarting America’s nuclear industry – creating thousands of jobs in the years ahead and powering our nation’s homes and businesses with domestic, low-carbon energy. Today’s decision certifying the AP1000 reactor design marks an important milestone towards constructing the first United States nuclear reactors in three decades.” The current United States administration committed last February to an $8.33 billion conditional loan guarantee for operations of two AP1000 reactors to be built in Georgia.
Breaking News……….
FIRST NUCLEAR REACTORS IN 30 YEARS!
NEW YORK (CNN Money) — The U.S. Nuclear Regulatory Commission approved licenses to build two new nuclear reactors Thursday, the first authorized in over 30 years. The reactors are being built in Georgia by a consortium of utilities led by Southern Co. (SO, Fortune 500) They will be sited at the Vogtle nuclear power plant complex, about 170 miles east of Atlanta. The plant already houses two older reactors. (Read the article)
SASK. PREMIER PRAISES CHINA URANIUM DEAL
An agreement expected to allow Canadian companies to ship uranium to China is “very, very important” for Saskatchewan, Premier Brad Wall said Thursday in reaction to the news from Prime Minister Stephen Harper’s visit to the Asian superpower country.
“It’s a great day for Saskatchewan and we want to thank the federal government and the prime minister for raising a very Saskatchewan issue on their trade mission and making progress,” Wall told reporters at the Legislative Building on Thursday afternoon.
Though a small amount of Saskatchewan uranium has been shipped to China before under special agreements, the new trade agreement signed by Harper is expected to now allow Saskatchewan producers to directly sell Canadian yellowcake — a type of uranium concentrate powder — to China, he continued.
“We’ve worked hard to promote the fact that between 20 and 26 per cent of the uranium in the world is mined here and produced here in the province, and that we need to continue opening up markets,” Wall said, noting efforts to sell uranium to China, as well as India, have long been in the works and are now reaching fruition. (Read the article)
Why bother with CCO shares?
Some fundamental things to consider include:
- Should Mid-East Crisis blow out Oil prices, uranium will come into play
- CCO produces 25% of world’s supply
- Contract with China will generate $ 3 billion in the next 10 yrs
- Govt of Canada stands to take hundreds of millions in royalties etc
Technical analysis reveals recent uptrend which although turning down now which may indicate the development of a trading range. Remember small consistent profits.
Consider keeping a small number of shares as hedge against higher oil prices may. However, another Fukoshima – all bets off, hence a small portion. What’s a small portion? Look at your risk profile!
This entry was posted on Tuesday, February 14th, 2012 at 3:57 pm and is filed under Investment Training, Self Directed Investing, Stock Market News . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
