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%.

Spot Price Swings

Last week spot prices took a big hit, losing over 10% of its value, dropping $5 to a U3O8 price of $47 per pound.

Yet this did not seem to affect share prices, as the majority of Uranium stocks stayed within 3% of their previous weeks prices.

This week the spot price gained back a portion of its previous losses, gaining a $1.50 to close at $48.50.

Until we witness tangible shifts in share prices that correlate with movements in the spot price we will shift our focus away from spot price fluctuations.

USEC Bounceback

The so-called media frenzy on the ‘hammering’ of Uranium shares following the USEC denied loan news appears to be over-blown.

From July 29th Tickerspy

Uranium stocks got hammered on Wednesday after the Department of Energy denied USEC’s request for $2 billion in loan guarantees.

Share Prices on July 28th and August 4th

Paladin: $3.99, $3.95
Denison: $1.72, $1.69
Cameco: $27.35, $28.56

Hardly the sector-wide destruction that some of the bears were anticipated.

Below is a percentage gain chart via Yahoo Finance. Cameco is represented by the blue line, the Dow in red.

Ok, so CCJ isn’t beating the Dow by much. But it’s still beating it. For the year it’s not even close, CCJ is dominating the markets. Of course, as a Uranium trader you already knew this… Still, with recent market fluctuations it’s a welcome change to be celebrating overall market strength.

The next few weeks should be an interesting time for the sector. Hilary Clinton is making a visit to India to discuss nuclear rectors and technology. And on August 12th Cameco will present earnings. Can the sector maintain it’s strength? The next few weeks should help us forecast the remainder of 2009 for the industry.

It’s been close to two months since we lasted looked in on Paladin Energy. Let’s see how shares have done during that stretch.

Last time around (April 24th) Paladin shares closed at $3.17. Since that time shares have trended upwards on a steady pace. After a stellar earnings report;

Paladin said the result reflected improved operating performance at its flagship Langer Heinrich uranium project in Namibia, where production was up 40 per cent for the quarter to 685.874 pounds of uranium.

And a subsequent volume increase, shares rose. On May 28th shares broke through the $4 resistance level and maintained that level on and off up until June 11th. Over the past couple of days (writing as of June 18th) shares have taken a pretty substantial hit, falling from $4.27 on June 12th to a current level of $3.65, a level that hasn’t been seen in close to one month.

Let’s see what happens with shares over the next five or six trading sessions. Can Paladin continue to ride positive momentum or are investors cashing out on some of the recent 2009 share profits?