In all honesty, after the recent run up to $73, along with the recent worldwide nuclear energy debate, a 9.8% drop-off is less than expected. However, on the flip side of that coin, additional spot price drops could be on the way.

As we all know, uranium stock prices are being hammered. Volume for Cameco was over 12 times that of the previous session, post earthquake.

Oddly enough, option call/put interest in CCJ is nearly 2:1, surprising considered the recent price drop.

The current environment makes it difficult to speculate on future Uranium Spot & stock prices. Politicians worldwide will hold a huge influence over the uranium markets mid-term fortunes or failures. Will the media continue to their current fear tactics towards nuclear power. Although all three damaged reactors are at same plant (and the rest of Japan’s reactors remain intact) is not the real issue. Perception is reality. Depending on the final outcome at the Fukushima plant, Uranium stocks could be regaining recent losses or plummeting to 52 week lows.

Here’s a chart that’s been making the rounds around the net regarding Uranium production vs consumption:

CCJ has had a great run-up of late and hit a 52 week high during inter-day trading on November 9th, reaching $38.56 US.

Considering that the stock was under $30 mid-day on October 30th and it’s fair to say that Cameco is on a roll.

Recent China Uranium power news (they are committed to exanding their nuclear power consumption considerably) pushed volume rates to more than 3 times the normal average.

January 2012 options remain bullish, with $40 strike levels currently trading at a $4.10 premium, although put side action in the $30 and $25 strike levels remains heavy.

Has the market topped out? We’ll have to see. The options market appears to be split. As always, time will tell.

Some of the highlights include

CEO Jerry Grandey shared the following quote:

The long-term fundamentals of the nuclear industry are positive. Cameco is prudently investing today in production growth and new technology to pursue our vision to be a dominant nuclear energy company.

A week later Cameco shares are trading relatively flat ($24.61 pre-announcement to $24.65 one week prior).

Via Investopedia

This past week, President Obama announced an $8.3 billion loan guarantee for the first new nuclear power plant to be constructed in 27 years…The case for nuclear energy is gaining steam in the U.S. as the president wants to triple the previous loan guarantee program to nearly $54 billion dollars and develop a plan for dealing with the generated waste.

Nuclear power plant producers have witnessed a nice push upwards after the announcement, yet actual Uranium U308 plays have received less than stellar bumps.

For example Denison gained less than 1%. Cameco pushed up only 3%. One way to gain full exposure to the overall nuclear energy category, yet not be fully exposed to the up-down nature of uranium stocks is to enter an ETF.

Market Vectors Nuclear Energy ETF (ticker NLR). Here are the funds top 10 holdings as of Feb 22nd, 2010:

As we can see the ETF does hold a large percentage of familiar names. Here’s the breakdown of the fund on a percentage basis.

With expense ratio’s capped at 0.65% this ETF offers an attractive option for those looking to expand out into the nuclear industry, all the while not being tied exclusively to uranium plays.

Regarding the most recent earnings loss ($91.3 million in third quarter) the Denison CEO said the following:

On the uranium side, it’s not that we couldn’t sell, but we used our discretion and chose not to sell into the spot market during the traditionally slow summer period.

Spot prices current hover around $45 and $47.

Currently Denison share prices sit at $1.40. The somewhat recent Denison downgrade by RBC (from $1.70 to $1.25) on October 1st is starting to look rather prophetic

In a press release sent out on November 2nd, Paladin announced the appointment of Garry Korte as CFO. He will begin his new role on November 16th. From the press release:

Garry brings a broad range of finance skills to the Company and we believe his corporate finance, commercial and international experience will add value as Paladin continues to grow.

Earnings Downgrade

Despite the timing, the downgrade of Paladin was unrelated to the hiring of Garry Korte . RBS analyst Lyndon Fagan lowered his earnings forecast by 46%, all the way down to $14.4 million in American currency. The reasoning behind this was his expectation of Paladin not being able to meet production forecasts. He bases his assumption on historical misses and lowered investor confidence. From Fagan:

‘Missing targets over the last two years has resulted in negative sentiment, and a general lack of investor confidence in delivery of future production. In our view, this is the reason the stock is now trading below our fair value.’’

Most point to a recommendation by Jon Najarian on CNBC. He claims that the option activity on Cameco represents a ‘tell’ and that the stock should be moving higher based on in-the-know institutional investors.

Note the large price and volume movement on the 20th and 21st.

At least short-term options movement supports Najarian’s claim, as the call to put ratio is close to 4-1 for the front month November contract.

The Story:

Coming across the newswire at the beginning of the Sept 30th session was an announcement from Denison. They will begin a 7500 metre drill program on the Wheeler River Property located in northern Saskatchewan.

The Wheeler property itself is a joint venture with three other companies. Denison controls 60% of the interest, Cameco 30% and JCU Exploration owns the final 10%.

The budget for the drill program is $1.5 million. 15 holes will be drilled.

The market itself reacted favourably during the Sept 30th session and in after-market trading. But the following morning RBC cut their DNN price target from $1.70 all of the way down to $1.25. This represents more than a 35% cut.

This has impacted the stock in the short-term trading, as DNN is down close to 10% on higher than average volume during the October 1st session.

Paladin raised the money via a institutional private placement of 93.45 million shares, priced at $4.60 AU. This represented a 6.1% discount vs closing share prices earlier on September 9th.

The company looks to use the new funds to advance exploration and possibly to fund acquisitions.

The North American markets haven’t reacted to this move with much fervour. Outside of September 8th pink sheet Paladin share volume has remained at average levels.

Quote from chief executive John Borshoff

“Paladin believes that with its balance sheet strength and development expertise, the company is well placed to partner both junior uranium companies and downstream companies seeking to commercialize uranium opportunities.”

Cameco came out with a positive earnings report this week, upping estimates and sharing some future growth plans.

CCJ crushed the forecast, posting a second quarter EPS of $0.36 vs a $0.25 forecast (these figures are in Canadian dollars).

Chief Executive Jerry Grandey regarding the company filing for up to $1 billion in new debt:

“Cameco watchers may see this filing as a sign that we have identified a specific acquisition target. Let me merely restate that Cameco intends to maintain the financial flexibility to take advantage of opportunities when they might emerge,”

Cameco continues to use the current depressed spot market prices to their advantage, buying a large portion of uranium on the spot market and turning around and selling it in the future for a profit.

Daniel Rohr, an analyst at Morningstar said the following regarding the spot market purchase vs production:

“Their low cost ore in Saskatchewan will always be there. market opportunities may not always be there,”

This partially lead to uraniumn production falling 27% year over year. This was also attributed to planned maintanience at two key mines.

In a forward looking statement Cameco declared that they have the potential to double their annual production over the next ten years
CCJ raises its 2009 revenue forcast 5 to 10%.