IS CAMECO A SOLID BET IN 2017? A 10 per cent 2017 production cut from Kazakhstan’s state-owned uranium producer may mean prices for the commodity have bottomed.
The February 9 announcement from Kazatomprom also prompted an upgrade of Cameco Corp. to buy from hold at TD Securities.
Analyst Greg Barnes, who raised his target price on Cameo shares to $21 from $14.25, believes long-awaited industry supply discipline should lead to higher uranium prices, which recently hit a 12-year low.
This follows recent comments from Kazatomprom chairman Askar Zhumagaliyev, who stated that “putting more and more uranium into an oversupplied market does not serve our various stakeholders’ interests.”
Cameco made capacity curtailments of its own in 2016 that equated to roughly seven million pound of annual production.
Barnes said this most recent announcement out of Kazakhstan, which helped the sector rally sharply, “finally indicates that the two largest uranium producers are serious about correcting what has been an oversupplied market.”
The analyst believes it probably marks a bottom in the spot uranium price.
He also expects nuclear utilities will see the production cuts as significant, and this will lead to an increase in term contracting.