You’re the pre-eminent producer of a key commodity, and the price outlook for your product is so poor that you shut down your best plants indefinitely, putting hundreds of people out of work. And this is good news?
Perhaps so, argue some of the analysts who follow uranium giant Cameco Corp. The company’s announcement last week that it would continue the shutdown of McArthur River, the world’s largest uranium plant, was seen as a bullish signal by some analysts, who raised expectations for uranium prices and for Cameco stock. In the first day’s trading on the news, the company’s shares jumped and pushed within a few cents of their 52-week high of $15.95.
That was the first day, however. In subsequent sessions, the shares have given back all their gains and more, as investor focus has shifted back to the damage to be done to Cameco’s earnings by low uranium prices and lack of production. The stock closed Wednesday at $14.11.
Meanwhile, the junior uranium companies whose shares had badly trailed Cameco year-to-date are maintaining double-digit bumps since the news last week. At least in the short term, everyone has benefited from Cameco’s shutdown except Cameco itself.
But this will change, according to Greg Barnes of TD Securities Inc. He has upgraded Cameco shares to “buy” from “hold,” raising his target price to $18 from $16.50.
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