Canada Unearthed: Which TSX and TSX-V uranium stocks are outrunning market giant Cameco?

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• Uranium prices have surged to decade highs of US$66.25/lb
• Canadian giant Cameco’s production failings are among the reasons for the recent surge, with higher spot prices cancelling out supply issues to make the C$23.5b company a big winner
• We look at three TSX and TSX-V companies who’ve outperformed Cameco’s share price gain in the past 12 months

Our Canada Unearthed column wraps the news driving mining and exploration stocks listed in Canada, mostly on the TSX and TSX.V.

With the dearth of investment in uranium supply since the Fukushima disaster, a nuclear meltdown which saw Japan shut its 50-strong reactor fleet for years and sent prices to long term lows, the wipeout of marginal pounds has made the role of a handful of major players in the uranium sector more pronounced.

The biggest players in the market are Kazakhstan’s Kazatomprom, France’s Areva and of course Canadian giant Cameco, listed across New York, and Toronto, where it holds the tickers CCJ and CCO.

Over in the west it is the closest thing to a barometer for uranium sentiment you can get, outside of physical trusts like Yellowcake PLC in London and the Sprott Physical Uranium Trust, which buy up pounds on the spot market to impact and derive value from spot prices.

Contracting has accelerated this year, with additional capacity coming online and a number of utilities now looking to secure new supply.

That has become even more urgent for Western utilities who don’t want to be exposed to potential supply cuts from Russia, the world’s largest enricher of uranium for nuclear power plants.

Cameco’s dominant position in North America and Kazakhstan, where it is in a 40-60 partnership with Kazatomprom at the Inkai JV, means its contracting, floor and ceiling prices and production levels are closely watched.

In a self-fulfilling prophecy Cameco, which has been tipping a coming uranium bull market for some time now — check out the words of CFO Grant Isaac from this year’s Resource Connect Asia forum up in Singapore for example — has helped stir a run to decade-long highs.

Uranium prices are up to US$66.25/lb on the spot market, something which portends likely increases to floor and ceiling levels in upcoming contracts between utilities and miners (currently between US$50-80/lb according to Cameco).

That has partly been stoked by Cameco’s own production issues, which haven’t been enough to stop the sector’s bellwether running up nearly 45% in the past 12 months, almost 75% YTD and 16.12% over the last month.

Where is Cameco falling down?

C$23.5b capped Cameco told investors back on September 3 that it would be unable to hit a production target of 18Mlb of U3O8 for 2023, dropping its outlook to 16.3Mlb.

That will include 14Mlb, down from 15Mlb, at the McArthur River/Key Lake operations in the Athabasca Basin, the highest grade uranium deposit in the world.

It was a feat of PR engineering that Cameco was able to frame its production miss as an overall positive.

“This expected production shortfall further highlights the growing security of supply risk at a time when we believe the demand outlook is stronger and more durable than ever and where the risk has shifted from producers to utilities,” the company said at the time.

“Uncertainty about where nuclear fuel supplies will come from to satisfy growing demand continues to drive long-term contracting, with clear evidence that the broader uranium market is moving toward replacement rate contracting for the first time in over a decade.

“This is the type of contracting necessary to promote the price discovery already seen in the enrichment and conversion markets and that is expected to incentivize investments in the supply needed to satisfy the growing long-term requirements.”

There are plenty of reasons to think Cameco may be right. The World Nuclear Association thinks even at a reference scenario based on existing industry and government commitments, uranium demand will almost double by 2040.

US investors Goehring and Rozencwajg think prices could triple or even quadruple from recent levels, themselves around three times higher than the lows seen in 2018.

Other TSX uranium plays to watch

If that is the case Cameco will still have miles to run, even after this year’s price gains.

But even larger value will likely be found at the smaller end of the market as incentive pricing finally kicks in for new producers.

Here are a handful of TSX and TSX-V U92 stocks which have outpaced even Cameco over the past 12 months.

F3 Uranium (TSX-V:FUU)

Market Cap: C$166.5m
12-month Gain: 324%

F3 Uranium is sitting on what it calls the newest high grade uranium discovery in Sakatchewan’s famous Athabasca Basin, where grades of mines like those owned by Cameco stretch into the 10s of per cents where other jurisdictions come in at parts per million.

The JR Zone discovery at the PLN property included a discovery hole (PLN22-035) just before Christmas in December last year of 15m at 6.97% U3O8 from 257.5m, including 5.5m at 18.6% U3O8 from 260m and 1m at 59.2% uranium oxide from 263m.

The Athabasca has been mined for 60 years and produces over 13% of the world’s uranium annually at grades between 10-20 times the global average.

Using a handheld spectrometer, radioactivity readings at PLN were literally ‘off the scale’ at over 65,000 counts per second, with more high grade hits since the find in hole PLN22-035, icluding 14.5m at 9.4% U3O8 from 238.5m in hole PLN23-060.

NexGen Energy (TSX:NXE)

Market Cap: C$4.15b
12-month Gain: 48%

NexGen, also dual-listed in Australia, is among the most advanced pre-development companies in the Athabasca Basin, counting its Rook I Project as the largest development-stage U92 projects in Canada.

A feasibility study in 2021 demonstrated it could deliver 233.6Mlb of yellowcake over an 11 year life at Rook I’s Arrow deposit from a reserve of 4.575Mt uranium grading 2.37% U3O8.

The capex came in at C$1.57b, including C$1.14b in pre-production capital costs, with NexGen stating earlier this year that it had received non-binding expressions of interest totalling over US$1 billion of debt funding for the development.

Financing agreements are intended to be completed in the fourth quarter, with NexGen having announced the submission of its final environmental impact statement in August.

Strathmore Plus Uranium (TSX-V:SUU)

Market Cap: C$27.3m
12-month Gain: 152%

And now for something a little bit different, we’re leaving the Athabasca Basin and heading to Wyoming in the USA, where Strathmore Plus Uranium owns the Night Owl project in the Shirley Basin.

Mined near surface to produce a small 83t at 0.24% U3O8 between the late 1950s and early 1960s, it was shuttered when prices of uranium fell to just US$7/lb.

But the whole thing wasn’t done how you would today. No drilling took place, with mining only consisting of the obvious outcropping stuff that was jutting out at surface.

Elsewhere in the Shirley Basin the yellowcake was being baked at a much higher rate in the decades to follow, delivering 51Mlb between the 1960s and 1990s.

At Utah International Strathmore Plus’ own co-founded and technical advisor John DeJoia oversaw the production of some ~20Mlb.

There are some massive names operating in the Shirley, including Cameco, enCore, UEC and Ur Energy.

TSX and TSX.V Winners & Losers

Here’s how TSX and TSX.V-listed mining and exploration stocks performed last week:

Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop.

Stocks missing from this list? Email [email protected]