Uranium stock valuations with the spot price in a holding pattern

The World Nuclear Association projects demand for uranium to rise to 130,000 tonnes by 2040, nearly double current demand. It also forecasts mine supply to top out at 85,000 tonnes a decade from now. There are 440 reactors around the world, with 60 under construction and 110 in the planning stages. With that backdrop, what are we seeing for stock valuations in this industry?
This January, the spot price for uranium moved above the US$106-a-pound mark – the first time since 2007 that it has topped US$100. That run-up in price happened when Kazatomprom, the world’s largest producer of uranium, announced it would be at 86 per cent of previous production guidance for 2024. Prices have levelled off since then with new supply announcements, a report in The Northern Miner of the resumption of full production at Kazatomprom next year, and the dampening effect of higher prices on demand. Since March, the spot price has been trading in the US$83 to US$92 range and currently sits at about US$86.
We used StockCalc’s screener to select the top 10 listed uranium stocks by market capitalization on the TSX and TSX-V. We then used StockCalc’s valuation tools to calculate fundamental (or intrinsic) valuation for each stock to see if it is undervalued or overvalued compared with its price.
Overview of the techniques used:
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This industry comprises companies that are engaged in the production of uranium or the uranium royalties or investing business. In 2022, mines supplied 74 per cent of utilities’ annual requirements; the balance was made up from stockpiles around the world, with China estimated to have half of that global stockpile. Australia has the largest concentration of uranium reserves, followed by Kazakhstan and then Canada. Cameco is the only stock on this list paying a dividend, and nine of the 10 stocks are up over the past 12 months.
Let’s look at a producer, an explorer and a recent takeover.
Cameco Corp. CCO-T is one of the world’s largest uranium producers. It has a very interesting uranium price sensitivity chart on its website that emphasizes the long-term contract pricing it works with. In its most recent annual report, the company states that it has executed contracts to sell approximately 205 million pounds of U3O8 – uranium ore concentrate, or yellowcake – to 37 customers worldwide in its uranium segment and 75 million kilograms as UF6 conversion to 33 customers worldwide in its fuel-services segment. Our models for CCO-T are both above and below the current price and the analyst target and weighted valuation above.
IsoEnergy Ltd. ISO-X is currently advancing its Larocque East Project in Canada’s Athabasca Basin, which is home to the Hurricane deposit, the world’s highest-grade indicated uranium mineral resource. The company’s shares began trading on the Toronto Stock Exchange on Monday ISO-T and are being voluntarily delisted from the venture exchange, where they previously traded. Our comparables and adjusted book value, along with analyst consensus, are higher than the current price.
Fission Uranium Corp. FCU-T recently agreed to be taken over by Paladin Energy Ltd. for 0.1076 Paladin shares for each Fission unit – $1.30 a share at current prices. Our most recent valuation was $1.26 prior to the announcement.
You can see in the accompanying table the percentage difference between each stock’s recent closing price and its intrinsic value. The “StockCalc Valuation” column is a weighted calculation derived from the models and analyst target data if used.
Investing involves risk. StockCalc accepts no liability whatsoever for any loss or damage arising from the use of this analysis.
Brian Donovan, CBV, is the president of StockCalc, a Canadian fintech based in Miramichi, N.B.