Morningstar Equity Research is predicting that global uranium demand will grow by 40% over the next 10 years.
“That’s a staggering amount for a commodity that saw next to zero demand growth in the past 10,” says Morningstar Inc., a Chicago-based investment research and investment management firm.
As supply struggles to keep pace, Morningstar says it believes uranium prices will rise from $50 a pound to $75 a pound, as higher prices are required to spur new mine investment.
Key takeaways from the 48-page report:
China’s new nuclear reactor fleet is expected to underpin higher global demand and prices for uranium in the coming years.
Uranium stockpiles accumulated decades ago are diminishing. These supplies have nearly halved since 2013 because of the end of the Russian-U.S.A. highly enriched uranium, or HEU, agreement. Other secondary sources will be unable to fill in the hole.
Mine supply of uranium will struggle to keep pace amid rising demand and falling secondary supplies.
Low uranium prices since Fukushima have left the project cupboard bare.
Canadian uranium miner
Cameco Corp. (
TSX: T.CCO,
Stock Forum) remains Morningstar’s top pick in the uranium sector.
Cameco’s production growth outlook ranks among the best in the industry because of its Cigar Lake mine in Saskatchewan.
Cameco’s uranium production is expected to grow by 60% over the next five years.
However, like most mining stocks, Cameco shares have endured a difficult past 12 months, falling 32%.
“Twelve months ago, we didn’t see much value in Cameco shares,’’ Morningstar says.
“In April 2014, they [Cameco shares] traded at $24 versus our $23 fair value estimate,’’ the report said. “But with the shares now far cheaper despite an essentially unchanged outlook for uranium, we see an opportunity.”
Cameco was trading Wednesday at $20.65, leaving a market cap of $8.2 billion, based on 395.8 million shares outstanding. The 52-week range is $25.97 and $16.73.
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