National Bank Recent announcement from U.S. large-cap giants, like Microsoft Corp., Alphabet Inc. and Amazon.com Inc., that they’re turning to nuclear as a source of low carbon energy to meet the surging demand from data centres are likely to provide near-term tailwinds for uranium miners, according to National Bank Financial analyst Mohamed Sidib.
“When we initiated on the space, we viewed the AI data center demand story mostly as a longer-term upside to our uranium demand scenario with no near-term impact,” he said. “And while we currently do not expect these specific announcements to materially impact our demand estimate in the near term (3 million pounds U3O8 vs. average operating reactor demand of 156 million pounds U308 over the last five years), it does provide more validity to the future growth of SMRs and the potential upside to our estimates into the 2030s and a widening of future uranium supply deficit,” he said.
“As a result of this positive tailwind, multiples have expanded in the space and the positive momentum has benefited all three names under coverage.”
Mr. Sidib thinks Saskatoon-based Cameco Corp. is likely to benefit the most from the trend, citing “its exposure on both the production front as the largest North American producer of uranium, as well as through its exposure to the design and engineering of small modular reactors (SMRs) through its 49-per-cent interest in Westinghouse, though longer dated.”
“We also expect Denison Mines and NexGen Energy to overall benefit from the positive momentum given the expected timing of start of production at their flagship assets which should coincide with a pick in contracting activities related to SMRs,” he said.
Ahead of third-quarter earnings season, the analyst raised his target prices for the three companies in his coverage universe, touting exploration potential and resource upside. His changes are:
* Cameco Corp. (“outperform”) to $85 from $74. The average is $77.96.
Analyst: “We expect the uranium segment to continue to outperform vs. provided guidance driven by McArthur River/Key Lake and expect tailwinds from the conversion market to benefit the fuel services segment during the quarter. We expect this quarter to also be less noisy at Westinghouse with a substantial portion of the guided purchase price accounting adjustments already charged to H1/24. Overall, our focus will be on any potential upside to the 2024 guidance in the uranium segment, colour on potential future expansion of production at McArthur River/Key Lake and an update on the contracting activity.”
* Denison Mines Corp. (, “outperform”) to $4.15 from $3.50. Average: $3.90.
* NexGen Energy Ltd. (“outperform”) to $13 from $11. Average: $13.11.