Picking a Winner In U.S. Uranium Sector

The last post, “Domestic Uranium:  Eyes Bigger than Stomach”, discuss the Biden Administration’s attempt to boost the domestic uranium industry.  Domestic uranium production currently falls far short of domestic demand for nuclear power production, sending electric utilities out to the world market and some unsavory suppliers.     According to the EIA, in 2020 Russia and its satellites supplied 46% of U.S. uranium purchases.  Since the U.S. is not getting on with Russia after its brutal invasion of neighboring Ukraine in early 2022, an expansion in domestic production seems prudent.

If the U.S. Congress decides to act on Biden’s request for funding to promote the U.S. uranium industry, which companies would benefit?    

The tables below display a short list public companies that operate in the U.S. uranium sector. Clearly any one of them would benefit from an infusion of new demand.  Even if the funding were to be injected in the form of technology investment, that could not help but lead to thriving domestic uranium and nuclear power industries.  Which players are worthy of a long position today?

The most profitable company in the group is Centrus Energy (LEU:  NYSE), which reported $9.58 in earnings per share on $278 million in total sales in its most recently reported twelve months of operations.  The company sells enriched uranium as measured in ‘separative work units’ or SWU.    Centrus is likely to be a winner if the domestic uranium industry were to experience a boom.  Centrus is the only holder of a U.S. license to enrich high-assay, low-enriched uranium materials or HALEU, a next generation nuclear fuel that offers improved economics and safety.  By adopting HALEU, electric utilities can increase the amount of carbon-free electricity that can be generated.  The U.S. Department of Energy has already invested to build out the HALEU supply chain in the U.S. even before the Ukraine war laid bare U.S. vulnerability.

The Wyoming-based Lost Creek and Smith Ranch-Highland uranium projects were the only two to have been reported in operation in 2021.  Both rely on in situ technologies to bring uranium out of the ground.   

The Lost Creek project owned and operated by UR-Energy, Inc. (URG:  NYSE) has been in production since 2013.  So far it has produced about 2.7 million pounds of uranium.  Lost Creek along with adjoining resources is expected to yield 11.9 million pounds with potential for another 6.6 million pounds that is waiting to be finally measured.  

Cameco Resources (CCJ:  NYSE) owns and operates Smith Ranch-Highland with the capacity to produce 5.5 million pounds per year.  The project has produced 23 million pounds since going into production in 1975.  Cameco is working on bringing more resources into commercial operation at the McArthur River/Key Lake project.  It will be needed.  In 2021, Cameco claims to have added 40 million pounds to its list of long-term uranium production contracts.   

 

SELECTED U.S. URANIUM COMPANIES
Company	SYMB	Operations	Revenue	EPS
Cameco Corp.	CCJ	Uranium mining, refining and processing	$1.58B	($0.12)
Centrus Energy Corp.	LEU	Nuclear fuel production	$278 M	$9.58
Energy Fuels, Inc.	UUUU	Operation of uranium mines in Wyoming, Colorado, Texas and Utah	$5.8M	($0.01)
Lightbridge Corp.	LTBR	Metallic nuclear fuel developer	nm	($1.50)
UR-Energy, Inc.	URG	Uranium resource development in Wyoming and Colorado	$0.1M	($0.11)
Uranium Energy	UEC	Uranium resource development in Texas, Colorado and Wyoming	$23.1M	($0.01)
Western Uranium & Vanadium	WUC.CN	Development of uranium resources in Utah, Colorado and Wyoming	$0.4M	($0.08)
Uranium Royalty	UROY	Uranium resource portfolio	nm	($0.04)

 

These companies might be attractive from a fundamental standpoint as it is not difficult to draw a direct line from Congressional support of the U.S. uranium industry to new orders, higher selling prices and profits.  However, what would early investors be getting when taking a stake today?

Again, Centrus stands out with a strong return on assets.  The stock looks quite a bargain with a trailing price-earnings ratio of 2.87.  Likewise, vantage point of sales, the stock is also the best value in the selection of U.S. uranium stocks.   Cameco is not as compelling from a value standpoint, but it is the only other stock in the group that is able to convert sales to operating cash flow.  Of course, this is expected given that Cameco is a far more seasoned operation that most in the group.

    

SELECTED U.S. URANIUM COMPANIES
Company	SYMB	Return on Assets	Return on Equity	Price/ Sales	Price/ EPS	Price/   Csh Flw
Cameco Corp.	CCJ	0.76%	-1.16%	7.3	133.48	15.26
Centrus Energy Corp.	LEU	15.99%	na	1.46	2.87	8.95
Energy Fuels, Inc.	UUUU	-8.96%	-1.02%	147.89	neg	neg
Lightbridge Corp.	LTBR	-22.23%	-35.98%	nm	neg	neg
UR-Energy, Inc.	URG	-10.66%	-42.73%	nm	neg	neg
Uranium Energy	UEC	-4.03%	-0.88%	62.23	neg	neg
Western Uranium & Vanadium	WUC.CN	-6.45%	-12.26%	97.43	neg	neg
Uranium Royalty	UROY	nm	nm	nm	neg	neg

 

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.