Cameco: Canadian uranium mining specialist
Nuclear power is the best source of energy we have as humanity today. It is absolutely indispensable to our electrical grid. This company, which has gained 400% in the last five years on the stock market, is making sure that we have fuel for this resource. How bright is its future?
The company was founded in 1988. Cameco is one of the largest uranium producers in the world and plays a vital role in the global nuclear fuel supply chain.
It owns and operates some of the largest and richest uranium mines in the world, including mines in Canada and Kazakhstan. Key Canadian sites include the McArthur River and Cigar Lake mines, which are considered among the most productive uranium mines in the world. In addition to uranium mining, the company is also involved in uranium processing and enrichment, which enables the production of fuel for nuclear reactors.
In order to mine uranium in such extreme conditions, where it is mostly radioactive, the company had to develop special mining techniques. One of these is a method called "jet boring," which uses high-pressure water to release the uranium from the rock, helping to ensure worker safety in the harsh environment. This innovative technology has been key to the success of the Cigar Lake mining operation, which has become a major contributor to the global uranium supply. In fact, the concentration of uranium in this Canadian mine is up to 100 times higher than the average uranium mine.
Management
Timothy S. Gitzel - CEO
Tim was appointed CEO of Cameco on July 1, 2011. He joined Cameco in January 2007 as Senior Vice President and Chief Operating Officer. He was subsequently appointed President on May 14, 2010.
Tim has extensive Canadian and international uranium mining experience through over 30 years of senior management and legal experience in the industry. Prior to joining Cameco, he was Executive Vice President of Orano's mining business unit based in Paris and was responsible for global uranium and gold operations. He also served as President and Chief Executive Officer of Orano's Canadian subsidiary.
He was born and raised in Saskatchewan. He graduated from the College of Arts & Science and the College of Law at the University of Saskatchewan in 1990. He worked as a lawyer at the firm of MacPherson, Leslie and Tyerman in Saskatoon.
He currently serves on the boards of the World Nuclear Association, the Washington-based Nuclear Energy Institute, the Business Council of Canada and The Mosaic Company. He is a member of the IAEA Standing Advisory Group on Nuclear Energy, as well as advisory boards for the Canada-India Business Council, Edwards School of Business, University of Saskatchewan College of Law and a member of the Saskatchewan Polytechnic President's Circle.
He is a recipient of the Saskatchewan Centennial Medal and both the Queen Elizabeth II Diamond and Platinum Jubilee Medals.
If you would like more information about the CEO himself, you can check out his personal Linkedinwhere you can learn more about his work experience and education. Every once in a while, he'll add an interesting post about what's going on in the company.
Industry/Specialization of the company
Uranium Mining: Cameco Corporation is a leader in uranium mining, operating some of the most significant and productive uranium mines in the world. The McArthur River Mine in Canada, a joint venture with Orano (formerly Areva), is one of the world's largest uranium producers with an extremely high concentration of uranium in ore. The company is also involved in mining in Kazakhstan, allowing it to diversify its uranium resources.
Uranium processing: Once the ore is mined, it is time for processing, where Cameco converts the uranium ore into uranium concentrate, known as yellowcake. This concentrate contains a high percentage of uranium oxide (U3O8), which is the basic raw material for further processing and the production of nuclear fuel. The Company owns and operates processing facilities, including the Key Lake facility in Canada, where uranium ore is chemically processed and concentrated.
Uranium enrichment: $CCJ is also involved in uranium enrichment, a key step in the production of nuclear fuel. Enrichment increases the concentration of the isotope uranium-235, which is necessary to sustain fission reactions in nuclear reactors. The company owns interests in various enrichment facilities and has long-term uranium enrichment contracts with other global players.
Uranium sales and distribution: The company has a global customer base and supplies uranium and nuclear fuel to energy companies and government agencies around the world. Cameco also leverages a global business network that includes transportation and logistics to ensure the safe and efficient delivery of uranium and nuclear fuel to nuclear power plants around the world.
Safety and sustainability: The company places a strong emphasis on workplace safety, environmental protection and sustainability. The company has strict safety protocols and invests in technology innovation to minimize the risks associated with uranium mining and processing. Cameco is also committed to the rehabilitation of mining sites, which involves restoring the environment to its original state after mining has ceased, and to ongoing monitoring of the potential impact on local ecosystems.
Company profitability and cash
The company's shares have reached an all-time high this year. However, they have moved 23.18% away from it in the last 3 months. This was mainly due to the latest quarterly results, which failed to meet analysts' expectations. Earnings per share fell short by 43.35% and sales washed lower by 20.32%. The company's shares reacted to these figures by falling 10.5% on the day of the announcement.
The company's current market capitalization is $18.54 billion. This is one of the highest levels the company has ever been at. The amount has only been at its absolute peak this year at the end of May. If the stock manages to get to these previous TOP values, the company's valuation would be above $22 billion. The company currently employs 2,640 people.
Although the company was founded in 1988, the vast majority of its shares are spread across the market in Russia by individual investors. Only 0.38% of all shares ever issued remain in private ownership. The company's debt is $1.03 billion which is a reasonable value given its market capitalization. Management has $264.23 billion in cash on hand.
In 2019, the company's revenue was $1.44 billion. Operating margins at that time were 3.97%, resulting in net income of $57 million. The next year, when the covid started, the profit margin fell into negative territory, where it remained the following year. In 2020, it was -2.95% and the company lost $41.73 million on revenues of $1.41 billion. In 2021, revenue hit its lowest point in several years at $1.17 billion. Margins were -6.95% and the loss was $81.1 million. But in the last two years, companies have managed to get back on track. Revenues were $1.38 billion in 2022 and operating margins were 4.78%. That brought net income to $65.94 million. Last year, all of those metrics improved even more. Revenues were $1.95 billion and operating margins looked at 13.94%. Thus, the company earned $272.26 million last year. That, by the way, is higher than what the company now has in cash.
In terms of revenue sources, we only get into two countriesfor $CCJ+3.1%. The first, and the main one, is the United States, which generated $1.42 billion in revenue for the firm last year. Canada then added a further USD 535 million.
In terms of sectors, the breakdown is as follows. Uranium mining and processing is Cameco's core business. This business earned it $1.62 billion in 2023, equivalent to 83.17% of their total value. Westinghouse, or also the production and research of new types of nuclear fuels for nuclear power plants, earned $393 million in sales last year. Fuel deliveries to those facilities then took care of the last part of the company's $321 million in revenue.
Earnings per share were 12 cents in 2017. That figure was 203% higher than the market had anticipated. The company maintained such high values above estimates in the following years. For example, in 2018 when EPS were $0.39 they were above consensus by 220%. But the biggest beat occurred in 2019, when earnings per share came in 850% above estimates. They were 8 cents. But for the next 2 years they were in negative numbers. First it was -0.13 and then -0.2 dollars. But 2022 was a pivotal year for the company as it was able to get back to profitability. EPS were 8 cents. Last year, they peaked at 59 cents per share. It was below estimates for the first time and it was 8.72%. In the coming years, the earnings per share value should continue to increase. The current outlook is for a value of $1.84 by 20207.
There has been a "sag" in revenues according to the year-by-year charts. In 2017, we started the year at $1.72 billion. That was, until last year, the highest value the company had reached since then. Since then, revenue has actually started to decline. It was $1.53 billion in 2018 and $1.44 billion in 2019. In the next three years, the size of revenue continued to shrink gradually. In 2021, revenue found a stop at $1.17 billion. The last 2 years, the company has started to thrive again and sales have naturally grown with it. This year, according to analysts, revenue is expected to be $2.25 billion. By 2027, revenue could then climb to $2.71 billion.
We can also quickly compare revenues from each sector. Of course, uranium mining and downstream processing accounts for the largest share of the company's revenues, and therefore its main income. This segment earned$CCJ+3.1%.26 billionfor $CCJ+3.1% in 2017. Last year, it was already $1.62 billion, with this sector generating only $834 million in 2021, when the company was at the bottom. The newest segment, research, generated $393 million last year. Nuclear fuel production and supply then earned the firm $249 million in 2017. If we compare that to last year's $321 million we get a 29% increase.
Operating costs
Surprisingly, the company spent a lot more in 2010 than it does now. At that time, for one quarter, the company needed $416 million to operate. The company has been hovering around that figure for a long time. From 2011 to 2013, the last quarter of the year always saw a very significant increase in costs, reaching values as high as $820 million. After that, those expenses have also dropped significantly. By 2020, quarterly costs were only decreasing. They have reached as high as $250 million. The company has remained at this level to this day, within reason, despite its recent strong earnings performance.
Dividend
The company has paid a dividend since 1996. The first dividend was $0.015 per share held. There was a 3/1 split in 2004 and a 2/1 split in 2006. The new dividend thereafter was $0.034. The dividend was paid quarterly.
However, things changed from 2018 onwards when the company ran into problems with declining margins and sales. Since then, the dividend has been paid only once a year. Its current value is $0.088 per share. Thus, the company's dividend yield is 0.21% per year.
Valuation/Comparison with peers
The P/E ratio has always been highly variable for the company. Given that it has been zero three times since 2010 at times when the company was losing money, it is not necessary to take it as a leading indicator of value for this company. In 2010, its value was a nice 10 points. Over time, however, the P/E got to 40 points, where it began to fluctuate significantly. It managed to get to 156 and zero within a year. Between 2016 and 2018, it was at zero, as it was in 2020 and 2022. This year, its value has managed to stabilize at around 100 points so far, which is definitely one of those high values. The company is now below its absolute peak, but its earnings per share and revenue should gradually climb higher and higher in the coming years. This could result in at least a gradual reduction in the P/E ratio.
Rivals
Uranium Energy $UEC+8.4%: specializes in uranium mining using the in-situ recovery (ISR) method, which is considered a greener and more cost-effective method of mining compared to traditional methods. This method involves extracting uranium directly from the ground without the need to remove and process the rock at the surface. The company owns and operates several uranium projects in various stages of development, mainly in the US, but also in Canada and Paraguay. Their key asset is the Palangana project in Texas, which was the company's first ISR project brought into commercial production. In addition to uranium mining, UEC also focuses on the development of projects to mine other commodities such as vanadium.
Energy Fuels $UUUU+6.9%: Energy Fuels is one of the largest uranium producers in the United States and owns several strategic mining projects primarily in the western United States. The company's key asset is the White Mesa Mill facility in Utah, which is the only operating conventional uranium mill in the US. This mill is capable of processing uranium from a variety of sources and is a key element in the US uranium processing infrastructure. In addition to uranium mining, the company also focuses on the extraction and processing of other rare materials, notably vanadium, which is used in the steel and chemical industries, and rare earths, which are key to the production of advanced technologies such as electric motors and batteries.
Vale S.A. $VALE+2.7%: Vale is the world's largest producer of iron ore and one of the largest producers of nickel, a key raw material in the steel industry and in the production of batteries for electric vehicles. The company also mines copper, coal, cobalt, manganese and other metals and minerals, not only in Brazil but in many other countries around the world, including Canada, Indonesia, New Caledonia and Mozambique. Vale operates an extensive infrastructure, including rail lines, ports and ships, which enable it to efficiently distribute its products around the world.
Blue - $CCJ+3.1%, Black - $UUUU+6.9%, Green - $VALE+2.7%, Orange - $UEC+8.4%
Comparing the charts of companies from 2020 onwards, it is clear at a glance that the mining sector is certainly not dying. Moreover, one that procures absolutely crucial raw materials for today's world. This includes oil, nickel and uranium as fuel for nuclear power stations. Over the last 4.5 years, $UEC+8.4%has been the most successful company , with a 485% appreciation. In second place, we have $CCJ+3.1%, which is up 392% since 2020. Slightly lower, but still with a very nice 174% increase, is the stock of $UUUU+6.9%. Down, and even in negative territory, is $VALE+2.7%, which, although it has the largest dividend, the performance of its shares has been poor in recent years.
Future plans
Increase uranium production: In response to the growing demand for uranium, which is driven by the growing interest in nuclear power as a clean energy source, Cameco plans to increase production at its key operations, particularly in Canada. The company plans to increase production at mining sites such as McArthur River and Cigar Lake, which are among the largest and highest-grade uranium mines in the world.
Diversification and development projects: In addition to uranium mining, Cameco is exploring opportunities in nuclear services, such as uranium conversion and enrichment, to expand its portfolio and enhance shareholder value. The company is also continuing exploration activities to identify new uranium resources, both in traditional and new regions.
Nuclear Energy Market Development: $CCJ actively supports the growth of nuclear energy globally, believing that nuclear energy will play a vital role in the future global energy infrastructure. The company is therefore engaging in dialogue with governments and industry partners to support the further development of nuclear power, particularly in the area of small modular reactors (SMRs), which are seen as a promising technology of the future.
Sustainability and ESG initiatives: The Company emphasizes sustainability and responsibility in its operations. The Company is focused on minimizing its environmental impact, workplace safety and working with local communities, particularly Indigenous Peoples in Canada. ESG (Environmental, Social, and Governance) is a key area of focus for Cameco and it plans to continue to invest in and improve its practices.
Outlook
Shares of $CCJ+3.1% have rather sold off in recent weeks. This was due to, among other things, recent quarterly results, which supported the decline in the price per share. The company is now trading at levels that are 23% away from its absolute peak from earlier this June. However, the company, along with the majority of the market, has managed to bounce back this month and looks set to continue to pare the losses it has made in the coming days. The company has multiplied its value and market presence over the past few years. Its future financial outlook is very strong, and although it has rather failed to beat analysts' estimates over the past year, it continues to grow very rapidly. How do seasoned Wall Street analysts view its stock?
Of the 13 analysts surveyed, 11 would buy the company's stock now immediately. Their outlook for the coming twelve months is very optimistic. They think the share value could go up as much as 48.1%. If that were to happen, one share of $CCJ+3.1% would sell for $63.91 on the stock market. Another analyst would also buy the company, but his outlook already assumes lower growth. An appreciation of 32.5% would be enough for him. The last analyst, however, would continue to hold the stock only. What is your view on nuclear power? Do you think it is the future or is it an energy source that we will write off in the coming years?
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