We received big news in the uranium sector recently when Cameco (CCJ) announced it was shutting down its McArthur River mine; this is the world’s largest uranium mine, responsible for about 11% of global production, asserts mining sector expert Brien Lundin, editor of Gold Newsletter.

While it’s hard to determine in the slow-moving spot uranium market, it seemed as if the news gave a quick boost to the commodity’s price. Easier to determine was the effect on our recommended uranium juniors: They’re prices spiked immediately.

The long-term investment case for uranium revolves around the demand side of the equation. Rising demand and limited supply response means higher prices, eventually.

Remember that this development isn’t the long-term move that we’ve been waiting for. Our long-term view is based upon the utilities being forced to return to the market to enter into new contracts as their current supply contracts increasingly expire.

In other words, the big move higher is coming, and that’s the real reason to own these uranium stocks. The current supply constraint created by Cameco’s mine closure may not spark the big, secular price rally we’ve been betting upon, but it is a sign that the lows are likely behind us.

We shouldn’t chase the current price spikes, however, but wait for pull backs, which could come as we enter the year-end slack period. And for now, we should focus on the companies with resources and production capability, and wait for a confirmed move higher in uranium before shifting to the explorers.

As the largest uranium producer in the U.S., Energy Fuels (UUUU) saw its share price spike markedly after last week’s news from Cameco. The company’s conventional processing operation at its White Mesa Mill in Utah complements an in-situ recovery (“ISR”) operation in Wyoming.


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Energy Fuel’s asset base positions it perfectly to quickly monetize (and provide leverage on) rising uranium prices. The company’s assets will produce 1.6 million pounds of U3O8 in 2017, and it has resources to support much higher production, if conditions allow.

At a uranium price of $40/pound, its Nichols Ranch, Alta Mesa and Canyon operations could ramp up to 2.5 million pounds of annual production. At a price of $60/pound, it could add another 1 million to 4 million pounds of production by operationalizing its myriad other ISR assets in the U.S.

Given the price jump Energy Fuels has already experienced from the Cameco news, there’s no need to chase the price. Wait for the weakness that typically accompanies the tax-selling season and begin to accumulate in advance of 2018.

Uranium Energy (UEC) is not producing currently, but like Energy Fuels, it ideally positioned to ramp up production if the uranium market warrants. With a global uranium inventory of 54 million measured and indicated pounds U3O8 and 43 million pounds of inferred U3O8, UEC has projects in the U.S. and Paraguay at various stages of permitting and development.

The flagship operation is the hub-and-spoke portfolio it has assembled in south Texas. Three near-term producing projects (Palangana, Goliad and Burke Hollow) surround the processing plant at Hobson, which can support up to 2 million pounds of annual uranium production.

Uranium Energy’s share price perked up in the wake Cameco’s planned operation shut-down. It’s another one to build a position in if the typical December weakness for this sector sets in.

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