Analysts raise uranium targets as producers show signs of life
By John Shmuel
One year after Japan’s Fukushima nuclear crisis, analysts are hiking ratings and price targets on uranium companies that have posted some impressive gains of late.
In Canada, Uranium One Inc. shares are up 37% year to date and Cameco Corp.’s have climbed 14%.
The gains are particularly notable because both stocks recently pulled back along with other global equities on resurgent fears about the eurozone.
“We view this pullback as attractive entry points as we don’t believe either stock is accurately reflecting the significant increase in uranium prices we are forecasting,” said Tyler Langton, an analyst at JPMorgan.
Stronger predicted uranium prices are the main driver behind the improved performance of uranium companies this year.
Uranium has a current spot price of US$52 a pound, but JPMorgan forecasts that could rise to US$80 by 2014 as supply deficits catch up with demand.
Uranium prices are still down 20% from the start of 2011 because of negative sentiment about the industry. The negativity reached a peak in March 2011 when Japan struggled to rein in four unstable reactors whose cooling systems were damaged during a magnitude 9.0 earthquake.
Japan is set to restart two of the reactors idled since the earthquake, and BMO Capital Markets analysts last week noted China issued new reactor licenses, which could also be a catalyst for uranium prices.
Mr. Langton’s current 12-month price target on Uranium One is $5, a return of 67% from Tuesday’s close of $3. His price target on Cameco is $29, a 37% return from Tuesday’s close of $21.18.
Denison Mines Corp. could also benefit from more favourable prospects for uranium. Monday’s announcement that the company would sell its U.S. assets makes a takeover of the Toronto-based miner more likely.
Senior uranium producers will be very interested in Denison’s Canadian operations, said RBC Capital Markets analyst Adam Schatzker.
Mr. Schatzker reduced his price target for Denison to $1.50 from $2, but said that outlook would change if a buyer came knocking. Denison’s stock spiked 17% on Tuesday, closing at $1.65.