Uranium mining stocks Denison Mines (NYSEMKT:DNN) and Energy Fuels (NYSEMKT:UUUU) tumbled in Friday afternoon trading, falling 7.6% and 10%, respectively, despite analysts at Canaccord Genuity having just yesterday hiked their price target for Denison.
In a brief note Thursday, TheFly.com advised that Canaccord had raised its price target on Denison Mines stock 20% to three Canadian dollars per share. The analyst also reiterated its “speculative buy” rating on the still-unprofitable uranium mining stock.
And yet, things aren’t glowing quite as brightly for the uranium stocks this week as they were last week. On Monday, Sprott Asset Management told The Financial Times that it is not attempting to “corner the market” on nuclear fuel. To an extent, that was something of a self-serving statement, as Sprott may worry that if it is thought to be buying up control over most of the world’s supply of the metal, it might attract unwanted attention from antimonopoly regulators. Nonetheless, it poured cold water on investor hopes that in cornering the market, Sprott would be able to keep uranium prices moving higher.
Uranium prices, which had peaked above $50 a pound before Sprott made its statement, began falling on Monday — and at just over $48 are now down about 5% from their high.
That’s not to say that uranium prices couldn’t turn right back around and begin climbing again. Indeed, the situation has changed dramatically since just over a month ago, when uranium could be had for less than $30 a pound. Today, we’re within spitting distance of the $60 level that, according to experts polled by MiningReview.com, will make uranium mining sufficiently profitable that miners will begin reopening shuttered mines, and producing more yellowcake.
Even if we do eventually reach $60, however, the resulting reopening of mines could quickly redress supply imbalances in the uranium market, driving prices back down again. In a cyclical industry like this one, investors should probably expect profits to be short-lived.
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