The world’s best uranium stock could increase


During the COVID-19 pandemic, even during the suspension of production, Cameco (TSX: CCO) (NYSE: CCJ) retained and continued to pay all of the company’s employees. These additional costs were partially offset by the receipt of approximately $ 37 million under Canada’s Emergency Wage Subsidy program and exchange rate volatility which resulted in exchange gains.

Enrichment of a portfolio of long-term uranium contracts

Regarding procurement, long-term procurement has been delayed in 2020 due to persistent market access and trade policy issues and the impact of the COVID-19 pandemic on operations. Cameco customers. However, in Cameco’s uranium segment, Cameco was successful in adding £ 12.5 million to the company’s long-term uranium contract portfolio.

Growing pipeline of uranium activities

It may take time for market signals to impact contracting in Cameco’s business, as has been the case with the transition into the company’s fuel services segment. As Cameco’s uranium business pipeline continues to grow and is larger than the one the company has experienced since 2011, Cameco patiently waits to capture as much value as possible in the company’s contract portfolio.

Wider demand for long-term contracts

Additionally, Cameco has indicated that it continues to see non-market interest, which it believes tends to be a leading indicator of broader demand for long-term contracts. In Cameco’s fuel services segment, the company had a very successful year, replacing the volumes it delivered under contract and adding an additional 17.1 million kilograms of UF6 to the long-term contract portfolio of Cameco. the company that reflects the price transition that began in 2017 in the conversion market. .

Disciplined execution of a robust strategy

In addition, Cameco expects this to allow it to continue to operate profitably and consistently meet the long-term fuel service needs of the Company’s customers. Cameco ensured a disciplined execution of the corporate strategy. This has led to a strong balance sheet and Cameco expects this will allow Cameco to see the strategy of the business as well as self-manage risks.

Impact of disruptions on global financial markets

As at December 31, 2020, Cameco had $ 943 million in cash and short-term investments and $ 1.0 billion in long-term debt. During the year, the impacts of the COVID-19 pandemic caused disruption in global financial markets, and prompted government stimulus plans and significant interest rate cuts.

Prudent financial management

On October 21, 2020, in accordance with Cameco’s prudent financial management policy and in order to take advantage of the low interest rate environment resulting from the COVID-19 pandemic, Cameco issued debentures in the amount of $ 400 million. of dollars, at an interest rate of 2.95% per annum and used the proceeds to redeem the company’s outstanding debenture of $ 400 million bearing interest at 3.75%, redefining the maturity of 2022 to 2027 and extending the maturity profile of the company.

The prepayment resulted in a cost of $ 24 million. Cameco’s next maturity is 2024. In addition, Cameco appears to have an unused credit facility of $ 1.0 billion.

Higher uranium prices

The spot price of uranium rose more than 35% after news of the first supply disruptions due to the COVID-19 pandemic in March and April, peaking at around US $ 34 per pound in 2020. Higher uranium prices are expected in 2022, which should work in the company’s favor.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .

The Motley Fool has no position in any of the stocks mentioned. Foolish contributor Nikhil Kumar has no position on any of the stocks mentioned.

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