Wednesday, February 26, 2014

Uranium Stocks Surge as Japan inches closer to Nuclear Restarts

Published on Wednesday February 26 2014 (AEST  

 Uranium stocks jumped higher on Tuesday after Japan unveiled a pro-nuclear energy plan that could lead to restarts of some of its long-idled nuclear reactors.

The restarts are a key catalyst for the uranium sector that investors have awaited for years. Shares of industry leader Cameco Corp. jumped 8% on the news, Denison Mines Corp. rose 9%, and Paladin Energy Ltd. climbed 11.5%. Smaller companies such as Ur-Energy Inc. made even bigger gains (up 18%).

Shinzo Abe’s government released a draft of its long-awaited Basic Energy Plan, which makes a commitment to nuclear power as part of Japan’s energy mix. The plan, which is expected to receive cabinet approval in weeks, could open the door to restarting some of Japan’s 48 idled reactors as soon as this year. The plan also hints at new reactors, according to reports.

The reactors were shut down following the Fukushima disaster in March 2011. It was a devastating event for the nuclear power business, and gutted short-term demand for uranium.

Mr. Abe has pushed a pro-nuclear agenda since becoming prime minister in late 2012. He implemented new safety standards for the industry, which created a framework in which reactors could eventually restart. Currently, 17 reactors are being reviewed for potential restarts.
“Things are lining up nicely as we go along. It’s just taking longer than we thought it would [for the restarts],” Cameco chief executive Tim Gitzel said Tuesday at the BMO Global Metals and Mining Conference in Florida.

Before the Fukushima accident, nuclear power made up roughly 30% of Japan’s energy mix. It is unlikely to play such a large role in the future, but the energy plan provides proof that Japan is committed to nuclear power and will not attempt to phase it out completely as Germany is doing.

Investors lost interest in the uranium sector immediately after Fukushima, and the stocks have performed poorly ever since. However, they have picked up some momentum this year, partly in anticipation of reactor restarts in Japan.

The uranium producers have acknowledged that there is more than enough uranium supply to meet demand in the short term. But they believe the long-term picture remains very positive due to new reactor construction in China and other countries. There are 70 reactors under construction worldwide and another 173 being planned, according to the World Nuclear Association.

“The long-term story for our industry is a growth story,” Mr. Gitzel said.


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