The real reason why Uranium stocks fell today, it's not what you think!

While I miss being able to share our afternoon note on LW in its entirety, here is a snippet we discussed today on why Uranium stocks fell...
James Gerrish

Market Matters

Canadian based Uranium company Cameco (CCJ US) which we recently sold in the International Equities Portfolio fell 7% overnight on their quarterly production numbers and that sent the Uranium sector in Australia sharply lower today i.e. Boss Energy (BOE) -12.69, Paladin (PDN) -7.02% and Peninsula (PEN) -6.9%. The decline in local stocks is understandable while it’s also a sign that investors are sitting on one side of the canoe here, making stability an issue.

We’ve been (still are) Uranium bulls in the medium/long term, but short term the market has gotten out of whack for a few reasons with Cameco an important cog in our thinking. Cameco has sales contracts of about 29Mlb/yr out to 2027 at an average price of about US$52/lb. It will only produce about 18Mlb in 2023, and is guiding to 22.4Mlb in 2024. The shortfall is made up by purchasing spot uranium. That was fine when spot was below the contract price, but with spot uranium at US$100/lb, Cameco is losing almost US$50/lb on its spot purchases. This issue was well-known and understood by the market. What had got airtime in the market over the last few weeks was the prospect that CCJ could actually downgrade 2024 production guidance and as a result, put more pressure on prices in the spot market, which in recent times has become a lot more speculative with the rise of vehicles such as the Sprott Physical Uranium Trust which has been stockpiling pounds.

As it turns out, Cameco actually guided to better production for the year ahead and in doing so, wrong-footed a lot of speculative money that found its way into the Uranium stocks and ETF’s, which also hold large positions in the stocks, and today saw some unwinding of this, and we’d expect more to come in the short term. Cameco needing to buy fewer pounds next year should see prices come back from really frothy levels, that have been driven by speculation, momentum, and FOMO. 

  • We recently sold our Uranium stocks, looking for a better risk/reward entry point to rejoin the party, in the likes of Boss Energy (BOE), Paladin (PDN) & Co. We think we’ll get them at lower levels.
Boss Energy Weekly Chart
Boss Energy Weekly Chart

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James Gerrish
Portfolio Manager
Market Matters

James is the Lead Portfolio Manager & primary author at Market Matters, a digital advice & investment platform with over 2500 members that offers real market intel & portfolios open for investment. He is also a Senior Portfolio Manager at Shaw and...

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