February 21st, 2023 | 14:11 CET
Russia's uranium business is booming! Cameco, GoviEx Uranium, RWE - How investors benefit
Table of contents:
Cameco: Uranium market remains tight
As RUSI and Bloomberg's research shows, China may have more than quadrupled its nuclear imports from Russia last year. While a total volume estimated at USD 450 million is not yet the world, other countries are believed to be importing more Russian uranium than before: for example, India, Turkey, and also Hungary. Although experts estimate Russian uranium business with foreign countries at only about USD 1 billion, the deals usually attract other deals, such as the construction of new nuclear power plants and related services.
Business with uranium is also booming outside Russia. Canadian industry leader Cameco exceeded analysts' expectations about a week ago: In the fourth quarter, the Company earned USD 0.09 per share, significantly more than analysts had expected (USD 0.05 per share). The outlook for the future was also positive: "We continue to believe that Cameco is the best choice to benefit from the recovery of the uranium market. With nuclear energy clearly back in sustained growth mode, Cameco is also back in sustained growth mode," said Cameco CEO Tim Gitzel.
GoviEx: Two advanced uranium projects promise high leverage
One company where growth could significantly outpace its peers is GoviEx Uranium. The Company has three uranium projects in Zambia, Niger and Mali. The first two projects already have mining permits. In total, the Company offers an indicated uranium resource of 130 million pounds of U3O8. In the inferred resource category, there is another 89 million pounds of U3O8. The Falea project in Mali offers copper, silver and gold in addition to uranium. In January, GoviEx signed a letter of intent to sell the property to African Energy Metals for CAD 5.5 million. The payment includes a cash component as well as shares in African Energy Metals and a 3% NSR.
GoviEx Uranium Inc. CEO Daniel Major on Feb 15, 2023 at the 6th IIF
"This is a strategic deal that will allow GoviEx shareholders to retain a significant interest in the Falea project while allowing the Company to focus on further exploration and development of its two uranium projects, Madaouela and Muntanga, which already have mine permits and are at an advanced stage," commented Daniel Major, CEO of GoviEx on the proposed transaction. Especially given the currently tight uranium market and the plans to build more nuclear power plants - for example, in Japan and China - GoviEx's focus on the two advanced projects should make sense. The share is currently anything but the focus of the market - for anti-cyclical investors and all those who already maintain a uranium watchlist, GoviEx is exceedingly exciting.
RWE: Nuclear power hardly plays a role anymore
Years ago, anyone who wanted to invest in nuclear power could bet on stocks like RWE. Today, E.ON and RWE warn of high hurdles in the event of continued operation of the power plants. Above all, they say, the supply of new fuel rods is a problem. The companies would also have to import uranium from other sources in the future instead of from Kazakhstan, Russia and, to a lesser extent, Canada. While the nuclear phase-out now seems unalterable for companies such as RWE and E.ON, countries such as Sweden, Japan, the USA and South Korea think quite differently and, in some cases, even want to build new nuclear reactors. Even within the EU, operating times are being extended, for example, in Belgium. The head of the International Energy Agency (IEA), Fatih Birol, believes nuclear power is already on the verge of a global comeback. At the same time, he warns countries like Germany that a departure from nuclear power could currently be the wrong decision. Nuclear power hardly plays a role for RWE at present: based on the figures for 2021, nuclear power and coal only account for 3.7% of sales. With this share, investors can hardly bet on a comeback of nuclear power.
That leaves stocks from countries in the former Soviet Union, such as Kazakhstan, or stocks like Cameco or GoviEX. While the former stocks are subject to political risks, Cameco, like Barrick Gold in precious metals, could offer limited opportunities given its high profile. Those who like it more speculative should definitely also focus on smaller stocks, such as GoviEx. Here, there is a chance to participate in two advanced uranium projects in Africa.
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