NEW YORK (TheStreet) -- Cameco (CCJ) is an unloved uranium stock that is down more than 9% this year to $18.83, but investors might want to keep a helmet light on this miner amid a rebound in uranium prices.
More than three years ago, an earthquake and tsunami in Japan triggered a nuclear crisis in that country with the meltdowns at Fukushima Daiichi nuclear power plant. The subsequent nuclear plant closures in Japan, as well as in other European countries, caused an oversupply of uranium in the international markets. As a result, the commodity's prices dropped by 57% from early-2011 to $28 per pound in May.
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However, uranium prices have slowly recovered to more than $32 per pound by Friday, with most of the growth coming in the last two weeks following the closure of the world's leading uranium mine in Canada. Spot supplies of uranium were coming down as producers from other regions, such as Kazakhstan and Australia, cut back their operations.
Meanwhile, Rob Gereghty, the manager of media relations at Cameco, the biggest U.S. listed uranium miner in terms of market cap and production, pointed towards several demand-side drivers -- new reactors in Asia and restarting reactors in Japan -- that could push prices higher over the next ten years.
Prices are currently considerably lower than the 2011 levels of $65 per pound, and a far cry from $136 per pound in mid-2006. The golden age of uranium is likely over. In order to rebound to pre-Fukushima-disaster levels, the current prices will have to double, which is going to take a lot of time. That said, the recent recovery might will give respite to investors.
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Cameco alone is responsible for around 15% of global uranium production from its mines in Canada, the U.S. and Kazakhstan. The company is the leading uranium producer of the world, ahead of Kazakhstan's KazAtomProm and France's Areva (ARVCF) .
Cameco boasts 43 million pounds of proven and probable reserves spread across 4.9 million acres of land. Cameco also has a distinct advantage of being a low-cost producer which has allowed it to withstand the turbulent business environment. The company posted annual profits throughout the crisis.