Why UEC stock outperforms Cameco in the hot uranium market

The uranium market has been booming, with prices for the element used to fuel nuclear power stations soaring. This has also led toCameco (NYSE: CCJ)respond in singingUranium Energy Corp. (New York Stock Exchange) stock (market)code(UEC)The strong performance of uranium companies, such as Uranium Energy, is a good example of how they can benefit from the continued rise in uranium prices. While both companies will benefit from the continued rise in uranium prices, Uranium Energy will benefit more. Here's why.

Reasons for the price escalation

Pricing of commodities usually depends on supply and demand, and uranium is no exception. Where demand is lower than supply, the price tends to fall, and where demand is higher than supply, the price tends to rise.

The Fukushima nuclear disaster in Japan in 2011 triggered a strong backlash against the nuclear power industry, leading many countries to either slow down their nuclear power programs or shut down nuclear power altogether. This caused the spot uranium price to plummet from $140 per pound to between $20 and $25 per pound.

More recently, however, uranium prices have climbed rapidly as future demand continues to grow, with some 60 new nuclear power plants coming on line by 2030. At the same time, the low prices of a few years ago led to the shutdown of many exploration projects and a reduction in production at the higher-cost mountain of uranium.

Adding fuel to the fire, the U.S. has introduced a bill that would restrict the import of uranium from Russia into the U.S. and ban imports after 2027. Russia provides about 20% of fuel for U.S. reactors. If passed into law, this would be another catalyst for uranium price increases.

Meanwhile, the world's largest uranium miner, Kazatomprom of Artech in Kazakhstan resonance, recently stated that it will not have enough production to meet its uranium needs after 2030. Utilities usually buy their uranium needs years in advance because there are no alternatives that can be used with nuclear reactors. Now, utilities will have to go out and find supplies to meet future demand, which will continue to drive up prices.

Uranium Energy Company is better positioned

Higher uranium prices will benefit both Cameco and Uranium Energy, but the latter will benefit much more than the former. This is due to the fact that utilities generally purchase their uranium needs several years in advance. As a result, Cameco has signed a number of long-term contracts with price caps.

While Cameco will benefit from the price increase, the company will no longer benefit once the price reaches the upper limit of the carpet, as the carpet is still valid. The company said that if the spot price reaches $140 this year, the current price will be only $59, but if the price is $140 in 2028, the current price will be $76.

On the other hand, Uranium Energy has not entered into a long-term license and is not hedged. Currently, the company has not started uranium production, but rather purchases uranium for sale. As of the end of January, the company held 1.17 million pounds of uranium concentrate in storage at an average price of approximately $54 per point, and has a further 1 million pounds of storage in place until the end of 2025 at an average price of approximately $39 per pound.

The company will also restart production in August in Wyoming, where it operates a processing plant. The company's Wyoming project has more than 66 million pounds of measured and indicated reserves, and its processing plant has a licensed annual production capacity of 2.5 million pounds.

In addition to Wyoming, the company has projects in Texas with measured and indicated reserves in excess of 9 million pounds and a processing plant with a licensed annual production capacity of 4 million pounds. The Company also owns acreage in the Athabasca Basin and Thelon Basin in Canada, which have indicated reserves of nearly 110 million pounds.

Uranium Energy's biggest risk at the moment is that it has not yet produced any uranium from its mine. Mining uranium is not the easiest of tasks, so there are bound to be problems. However, the company has built up a good portfolio of uranium projects and is just now starting to invest more as uranium prices continue to rise.

Uranium Energy should outperform Cameco in the future as it has no long term license or price cap. Uranium prices topped $105 earlier this year and have since fallen back, but given future supply and demand dynamics, and the need to bring higher priced uranium into service, there should be plenty of room for uranium prices to rise in the future. Uranium Energy looks to be one of the best stocks to benefit from these dynamics.

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Geoffrey Seiler does not own any of the shares mentioned above.The Motley Fool recommends Cameco.The Motley Fool has a disclosure policy.

Why UEC stock will outperform Cameco in the hot uranium market