Cameco Corp (USA) (CCJ)

On June 19, 2009 at 1:16 PM, 100ozRound (99.84) wrote:

Cameco is the world's largest uranium miner and has high-grade reserves and low-cost operations. With the push for clean energy and Urianium's reputation as a reliable source of power, Cameco is in a position for growth and continued profitability. With the large gap between Uranium demand and Uranium production, Cameco's potential for profitability is rather high.

So let's break it down:

McArthur River - world's largest, high-grade uranium deposit with proven and probable reserves of 332.6 million pounds U3O8 (Cameco's share – 232.2 million pounds).

Key Lake - largest high-grade uranium milling operation in the world - production capacity of 18.7 million pounds U3O8 (Triuranium octaoxide) annually.

Rabbit Lake - second largest uranium milling operation in the world with a capacity of 12 million pounds - 100% owned by Cameco.

Cigar Lake - world's largest undeveloped high-grade uranium deposit;proven and probable reserves of more than 226.3 million pounds U3O8 at an average grade of 20.7% (Cameco's share – 113.2 million pounds).

Inkai (Kazakhstan) - owned and operated by Joint Venture Inkai (JVI) which is owned by Cameco (60%) and KazAtomProm (40%); reserves of 141.8 million pounds U3O8 (Cameco's share 85.1 million).

They also pulled about 103,000 ounces of Gold out of the ground in 1st qtr '09. Cameco owns approximately 53% of Centerra Gold. Centerra owns 100% of the Kumtor mine in the Kyrgyz Republic, 100% of the Boroo mine in Mongolia, 100% of the Gatsuurt property in Mongolia near Boroo (exploration), and 63% of the REN joint venture in Nevada, U.S. (exploration).

In addition, Cameco owns significant interests in several junior explorations companies:

UEX Corporation - uex-corporation.com

UNOR Inc.- unorinc.com

Minergia (Cameco has the right to earn a 50% ownership in Minergia by investing $10mil in two payments over the next 4 years).

Western Uranium Corporation - westernuraniumcorp.com

Govi High Power Exploration Inc - goviex.com

Uranium is currently trading around US$53.00/lb (Mid June 2009) compared to an all time high of US$136.00/lb in June 2007; so there is ostensibly some upside to Uranium spot prices and CCJ should benefit from a surge in Uranium prices.

Cameco has had an apparent fall from grace. This stellar performer that once traded for only $3 a share now sits at $40. The problem is that not too long ago it was at $58 and many of the investors who put their hot many in at the end of a run were disappointed. No one could see the decreased demand for uranium going forward, but the price has been pushed downward. Many investors believe that uranium is far to risky as not many know the entire uranium story and even fewer have a grasp on supply and demand of the commodity. Cameco is by far a much less risky investment when looking at the group as a whole. Even as the spot price (which CCJ has very little exposure to) decreased from $136 to $95 per pound, they raised their dividend 20% which is the fifth increase in six years. They also increased their share repurchase by $400 million.

The price of uranium is key to Cameco, but they are anchored by legacy contracts. They developed these contracts to protect their downside with respect to uranium production. Not too long ago, the United States and Russia decided to begin dismantling their huge nuclear weapons arsenal. By doing this, they completely crushed the price of uranium on the market. The legacy contracts provided utilities with a supply of uranium and Cameco was afforded limited downside to pricing. It has also functioned in limiting upside. As many uranium companies saw unbelievable growth, Cameco lagged. With the recent decrease in spot price the same thing was seen although reversed, as their stock has held up well and companies like URRE saw their stock price decrease much more rapidly.

Even with the decrease in stock price Cameco had a great year. They saw their cash from operations increase 92%. Revenue was an all time high increasing by 26%. Net earnings increased 11%, but were hit hard by increased costs. Adjusted net earnings were up 120%, and was also an all time high. Much of this was attributed by the uranium spot price doubling. Their realized price increased 34%, as shown through the legacy contracts. These gains were also seen with decreases in production across the board. Uranium concentrate was down 5%, fuel services decreased 16%, electricity was down 9% and gold production decreased 5%.

When looking at nuclear power it has grown exponentially through out the world as the United States has found other methods. It is the third leading generator of electricity behind coal and hydro at 16%. Cameco can meet any upcoming need as they look to increase uranium production by 80% in the next 8 years. The best way to understand exactly how much uranium production will have to increase is to look at current nuclear reactors and how many are planned or being built through 2017. Currently, there are 439 nuclear reactors and 93 are being planned or started to be built in the next 10 years. The United States is planning only five, but China has 23 on the books while India is looking to build 15.

Cameco hit a double top breakout on May 8th, and has a bullish target of $53 with respect to their current trend. It looks like the stock will first take resistance at $50 so I would take profits at $49. Look for at least an 8 million volume day to break resistance and become support. The 50 day simple moving average has been broken.

CCJ currently trades at 19 times forward earnings. There are only two analysts covering the stock and I believe this will be a breakout year. Last year earnings were only $.14, which was a large miss. This was do to shipment dates with respect to their fuel services. I believe this quarter will be different as the company was reeling from one problem after another this year and they will crush earnings. I am looking for $.40 per share on increased gold prices and uranium production. Plus, the legacy contracts had an immediate increase in pricing for uranium at the beginning this year not currently reflected in share pricing. Full year expectations should be even better with more production coming on line in the third quarter.

Business: Cameco Corp.
NYSE: CCJ

With its subsidiaries, engages primarily in the exploration, development, mining, refining, conversion, and fabrication of uranium as fuel for nuclear power reactors in Canada and internationally. The company operates in four segments: Uranium, Fuel Services, Electricity, and Gold.

Reasons to be interested:

1. Nuclear power is more and more becoming the most plausible clean, cheap energy option for countries everywhere. Nuclear power is climbing up the ranks and Cameco is in a good position to benefit from nuclear expansion.

2. The company's cash flow production and free cash flow are both strong and rapidly increasing. Sales and earnings growth have been monstrous as well. In fiscal 2006, the company produced $418.02 million in cash flow. Over the past four quarters, the company has produced $756.99 million.

3. In the most recent quarter the company bought back $222.85 million of stock; the company has also been paying off debt and expanding its cash position. The company currently has $598.47 million in cash and $694.16 million in debt.

Main risk:

Political pressure could keep nuclear plant expansion down which would put a halt to Cameco's growth. Cameco is not a cheap stock with a P/E of 35+, if political pressure on nuclear power really increases worldwide, Cameco's stock would likely be hit a good amount.

http://www.pencils2.com/companysummaries/cameco.html

Anything dealing with Uranium will continue to skyrocket in the coming years. Environmentalist are going to come to the conclusion that Nuclear Power is not the demon that everyone has made it out to be. It will prove itself in the long run to be less harmful to the environment than burning fossil fuels for energy. Aside from all that, the US has been courting India and China to develop Nuclear Plants for energy production in their emerging economies instead of fossil fuels, this alone will cause the demand to outstrip the current production capabilities. China has signed a special agreement with the Australian government to receive uranium. The chain reaction is already in motion, it's just a matter of time. If you look at Europe, France and Russia derive over 80 percent of their electrical energy from nuclear power they are prime examples of what's to come in the future including here in the US. Therefore I conclude that Uranium is Hot in more Ways Than We Ever Thought Possible!

CCJ hit a 52 week high in May (45.34) since then the price has droped around 25%. During that exact same time frame, the spot price of uranium has gone from 41.00 to 55.75 a lb, at 35% increase in 5 months. It is only a matter of time before the market sees the uranium bull market and stops looking at is as grouped with all the commodities. When that time happens CCJ will be making new highs again.

Uranium will be even more widely used in future as Oil rebounds and our energy crisis returns. Undervalued at $17.00

Who knows how much growth will occur in sector, BUT Growth will continue.

Uranium supply is tight and reactors can't switch to alternative fuels. China's building lots of reactors, as are other countries. Cameco's had trouble with flooding in one of their mines...once this is resolved I think investors will push this stock to new heights.

Largest producer of Uranium - has been nicely discounted with the other commodity stocks.
Diversified - It operates in four segments: Uranium, Fuel Services, Electricity, and Gold.

9 Billion market cap (under enterprise value of 10 billion)

Profit Margin (ttm): 18.28%
Operating Margin (ttm): 26.13%

Return on Assets (ttm): 7.16%
Return on Equity (ttm): 14.68%

Trailing P/E (ttm, intraday): 23.82
Forward P/E (fye 31-Dec-09) 15.62

Not my cheapest stock - but I love the Uranium market over the next 3-4 years.

This stock should drop down to about $20/share the next few months due to the election, and then it's a good buy below $20

I use CAPS as the testing ground for my newsletter. I pick stocks and ETFs that will benefit from macro trends.

I do not like the P/E on this one or even the earnings per share, but I do like this:
"Cameco is also one of the four converters of uranium concentrates 'U3O8' to uranium hexafluoride 'UF6' in the western world, the only commercial supplier of services to convert uranium concentrates to uranium dioxide 'UO2' in the western world, and one of two Canadian commercial suppliers of fuel fabrication services for CANDU reactors."

Check out my site - http://www.positivereturns.net

This is an absolute, no way it could lose, stock. Your time horizon has to be more than next Thursday...maybe five years. We (the USA) will begin building nuclear power plants as fast as we can screw them into the ground. The rest of the world is already doing so.

In the same vein, AREVA (ARVCF or CEI in France) will similarly benefit.

Has no operations or resources in Australia, which has the most uranium and will benefit the most from the expansion of China and India's nuclear programs. Already overly hyped because the new nuclear ETF's have needed a stable company involved in uranium production and mining. Terrible long term outlook, I wouldn't jump on this bandwagon anytime soon.

Nuclear power is simply the best option for the world's increasing energy needs. Cameco's history and solid performance over the years should continue to payoff as demand for their services and product increases.

CCJ is only limited by it's ability to pull uranium out of the ground and process it for power generation. The movement from the reliance on electrically-generaled power will make this company a great play.

Cameco is looking good because of their holdings in not only uranium, but gold too. the cigar lake incident is a minor annoyance that scares the weak, but the company shows no sign of weakening or even slowing its growth

Nuclear power generation is the major technology to slowdown the step of global warming and reach the requirement of electricity cosumption for next 20 years. The price of uranium will be in high price level. CAMECO is the biggest supplier for uranium worldwide.

half of the required uranium is produced, market is using weapons grade material, with the build up of nuclear power plants the need grows, double the damand double the price Cameco corp is in the right market at the right time

Increased gap between energy demand and oil's ability to meet it = need for new energy. Need for new energy + green sentiment = Nuclear energy. Nuclear energy = success of lardgest uranium producer in the Western Hemisphere.

Wind is at their back with the world wide energy needs growing. Nuclear will continue to grow world wide and CCJ will play an important part with what they supply.