A nuclear energy supporter for most of my investing career, I recommend buying Cameco (CCJ), a Canadian leader in mining, processing, and managing waste from uranium, asserts international investing expert Vivian Lewis, editor of Global Investing.
The easiest path to carbon cutbacks is nuclear-fueled power production. Offsetting this is fear of radioactivity which insidiously undermines the health of those exposed to it. But the risk of nuclear disaster has been greatly exaggerated.
Cameco is a stock with more appeal to institutions than retail investors, but turns out to be one of the few ways that you can buy uranium, a market which is run by governments concerned with proliferation, and therefore operating, unlike other commodity markets, being highly regulated.
Uranium deposits are mostly found in Australia, Kazakhstan, and Canada, but the only known high-grade deposits are all in Canada. As with other minerals, current production is focused on the highest grade cheapest-extractable ore.
Cameco accounts also for about 16% of all the uranium produced on earth. It is a key intermediary in a controlled market. It also dominates the North American market for components as well as the fuel needed for nuclear power plants. Nukem, a sub of Cameco, is a market intermediary between mines (not just its own) and nuclear electric power plants.
It manages its mines with a discipline to protect its interests while keeping its investment grade rating and value of its reserves and resources.
After the Fukushima disaster in Japan, Cameco cut back on production in Canada and Australia to prevent the market glut. In Nov 2017 it also slashed its dividend and this took down its stock price after a dispute with Tepco (Tokyo Electric Power Co.).
Cameco is seeking C$682 million in damages for the contract canceled early in 2017 which had been in force since 2014. The timing of a final decision will be dependent on how long the arbitrators deliberate following the conclusion of the hearing. It yields over 4% despite the dividend cut last year.
Cameco's current year production will be about 25 million lbs. of uranium from Canada mines Cigar Lake, McArthur River, and Inka although it is licensed to mine 53.4 million lbs. in Canada. Full steam ahead will be slow but sure — as 55 nuclear reactors are under construction worldwide over the next decade. Last year only 4 new reactors were connected to the grid.
Overall, this is my current investment favorite, a stock which dominates its industry and whose good results are being discounted because of worries about potential risks which are being overstated.
