Cameco CCJ has faced a challenging start to 2025 as its partner Kazatomprom suspended production at their Inkai joint venture (JV) in Kazakhstan. This was attributed to the delayed submission of documents required to operate at the site per local laws.
Cameco has a 40% stake in the Inkai JV and is seeking clarification regarding this unexpected development and exploring options to resume mining activities. Until this is solved, it remains a significant concern for CCJ. Cameco is trying to assess the impacts of this setback on its 2025 and 2026 production, and its financial performance.
News of the suspension from Kazatomprom, the world's largest uranium producer, sparked concerns about potential supply disruptions, leading to a 2% increase in uranium prices. Uranium stocks also jumped yesterday, with Uranium Energy Corp. UEC, Energy Fuels UUUU and NexGen Energy Ltd. NXE seeing gains of 13.9%, 10.7% and 10.45%, respectively. Despite the uncertainty over its Inkai JV, the CCJ stock also saw a modest rise of 1.5%.
CCJ, Competitor Stock Price Jump After the News
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Mounting Inkai Woes Casts a Pall on CCJ Stock Outlook
Inkai has been facing procurement and supply-chain issues for some time, mainly related to sulfuric acid deliveries. These were compounded by transportation hurdles, construction delays and escalating production costs. Production at Inkai was 5.5 million pounds for the first nine months of 2024 compared with 6.3 million pounds in the prior-year period.
Citing supply-chain issues, Cameco earlier lowered the 2024 uranium production outlook for Inkai by 0.6 million to 7.7 million pounds (on a 100% basis). Inkai produced 8.3 million pounds of uranium in 2023.
The current suspension adds to CCJ’s worries. While the required paperwork is expected to be submitted within the next couple of weeks, the timeline of approvals and commencement of operations is uncertain at this time.
Kazatomprom stated that it does not foresee any significant effects on its production outlook for 2025. However, if the issue remains unresolved, Cameco may need to rely on its uranium inventory or make spot purchases to meet its delivery commitments.
Also, Kazakhstan has changed the Mineral Extraction Tax (MET) for uranium, effective this year. Per the new code, the new MET rate will increase from 6% to 9% in 2025. From 2026 onward, it will be based on production and spot prices.
Downward Earnings Estimate Revision Trend for Cameco
The company expects the 2024 average unit cost of production at McArthur River/Key Lake to be higher than the average unit life of mine operating costs as it ramps up production. The average unit cost of sales in the fuel services segment is expected between $25.50 and $26.50 per kgU (previously $24.50-$25.50 per kgU) due to the lower production expectations for UF6 at the Port Hope conversion facility.
Westinghouse is expected to generate a net loss of $170-$230 million in 2024 due to the impacts of the purchase accounting, which requires the revaluation of Westinghouse’s inventory and other assets at the time of acquisition, and the expensing of some non-operating acquisition-related transition costs. Cameco will continue to incur care and maintenance costs for the ongoing curtailment of its tier-two assets, which are expected between $50 million and $60 million.
To reflect these headwinds and lower expectations from the Inkai JV, the Zacks Consensus Estimate for CCJ’s 2024 and 2025 earnings has moved south over the past 60 days. This is shown in the chart below.
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Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
CCJ Offers Industry-Leading Returns
CCJ’s return on equity — a profitability measure of how prudently the company utilizes its shareholders’ funds — is 3.33%, higher than the industry’s 1.66%.
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Cameco Plans to Double Dividend Payout by 2026
The company hiked its annual dividend by 33% to 16 cents per share for 2024. It is planning to implement a dividend growth plan of at least 4 cents per share each year through 2026, subject to its board’s approval. This will likely take its annual dividend to 24 cents per share by 2026, doubling from the 2023 payout.
CCJ Stock to Ride on Global Focus on Nuclear Energy
An increasing population, a growing focus on electrification and decarbonization, and concerns about energy security and affordability have led to a worldwide push to triple nuclear power capacity by 2050. Given CCJ’s low-cost and high-grade assets, and diversified portfolio spanning the nuclear fuel cycle, it is well-poised to capitalize on these trends.
Cameco is the second-largest uranium producer, accounting for 16% of 2023 global production. Through 2024-2028, the company has contracts for average annual deliveries of 29 million pounds of uranium per year. These offer CCJ a buffer against potential declines in uranium prices.
The company is investing to extend the mine life at Cigar Lake to 2036. Cameco is also increasing production at McArthur River and Key Lake from 18 million pounds to its licensed annual capacity of 25 million pounds (100% basis).
Cameco Offers Lofty Stock Valuation
The CCJ stock is trading at a forward price-to-sales ratio of 10.42 compared with the miscellaneous mining industry’s 1.32. It is above its three-year median of 6.90.
The company’s Value Score of F suggests that the stock is not so cheap and indicates a stretched valuation at this moment.
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Should You Buy Cameco Stock Now?
CCJ’s financial strength and flexibility position it well to boost production and capitalize on market opportunities. The company’s long-term contracts provide some insulation during depressed spot uranium prices. Investors holding CCJ shares should continue to retain the stock in their portfolios to benefit from the solid long-term fundamentals.
However, new investors can wait for a better entry point, considering the suspension of operations at Inkai, downward earnings estimate revisions and CCJ’s premium valuation.
Cameco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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