Yesterday in my Special Report on the energy crisis on my subscription site JubakAM.Com I made Cameco my sixth pick.
Third, the intense competition to lock up sources of decently priced and reliable electricity: Pick #6: Cameco (CCJ)) The owners and operators of AI data centers are looking for something more. They want access to enough electricity to meet future demand. They want uninterrupted service--no threat that a utility will take the data center off line to meet residents’ need for electricity. And they want to pay as little possible for the delivery of that power--in general that means they don’t want to pay more than residential consumers to upgrade the electricity grid. Increasingly that means these companies--Microsoft, Alphabet, Meta Platforms, and Amazon among others--are making plans to buy and build their own. Like the recently announced deal at the planned Cascade Advanced Energy Facility in Washington. The facility will be built by Energy Northwest, a consortium of 29 public utility districts and municipalities across Washington, with funding from Amazon. And that funding will be used to build 12 small modular reactors (SMRs), Amazon said in a press release this week. The SMRs--the new nuclear technology that is supposed to, eventually, lower costs and lead to speedier construction, will be supplied by X-energy, which received $500 million in Series C funding from Amazon last year, using X-energy’s advanced nuclear reactor design. The Cascade facility will be built outside Richland, Washington, near Energy Northwest’s Columbia Generating Station. Construction is expected to start at the end of the decade, “with operations targeted to start in the 2030s,” Amazon said. I can see several potential problems with this project, and similar nuclear solutions announced by Alphabet, Microsoft, and Meta Platforms. First, as of now, only two SMRs have actually been built--one in Russia and the other in China. Frankly, no one knows whether this new generation of nuclear reactors will deliver the promised lower costs. (If you trust reports of construction costs out of China and Russia, I've got a bridge I want to sell you.) Second, notice the time schedule in the press release. Construction to begin by 2023 and operation to begin in the 2023s. I’m assuming that the data centers Amazon is building now will go into operation somewhat before that.And thatbthe electricity demand/supply crisis won’t wait on the pipe fitters. Third, and this isn’t mentioned in the press release, where is Energy Northwest going to get the uranium to power those reactors when they are finished? Uranium is already in a supply crunch with 2025 demand of 180 million pounds far above production from primary mining of 130 million pounds. The shortfall is being met be drawing down secondary inventories and stock piles. That’s not a long term solution, obviously. Especially when the shortfall is forecast to get worse with the World Nuclear Association forecasting that demand will increase by 28% by 2030 and double by 2024. And that doesn't begin to include the political problems surrounding uranium mining. Major production areas suffer from serious political instability and other major sources are controlled by countries such as Russia that can’t be called reliable sources of supply to the United States. (Many of these existing global mines are also nearing the end of their useful lives. Production from existing mines is expected to halve by 2050.) All this, as you might expect has led to a rush to expand North American uranium production by opening new mines.So we’ve had publicly traded uranium mining startups like Uranium Energy (UEC), Energy Fuels (UUUU) and NexGen Energy (NXE). many of these companies are still in the raising capital/build out stage--not spring since it can take 10 to 20 years to get a mine into production. Energy Fuels, for example, just priced a $600 million convertible debt offering. Uranium Energy just closed an offering for 15.5 million shares. Many of these stocks have had a huge recent run with gains of 200% on speculation that they will eventually participate in the nuchal energy boom. Talk I’m hearing now centers around thevwisdom of taking profits. Which makessensevto me here. With an eye to rebuying after the dip. I think trading these stocks makes great deal of sense as long as you realize that there’s plenty of time for more booms and a few busts before these companies actually produce significant uranium. And, of course, there is the relatively remote possibility that the success of all the current startups will result in an over-supply of uranium in the 10 to 20 year time frame. (You might even see a WhiteHouse concerned that the nuclear industry still doesn’t have a viable plan forth long-term disposal of nuclear. Given the pressure of global warming, I think that’s an unlikely scenario. Still....) If you’re looking for current real production--and thus real profits from the fundamentals of the current trend, I’d recommend a buy of Cameco (CCJ). The stock has beeN a member of my Jubak Picks Portfolio since February 2, 2023 and the position shows a 205% gain from that date as of the close on October 21. I think there are still more gains ahead for the stock. The shares are up 68.5% in 2025 to date. Cameco is the only stock that currently combines tier-one mines in reliable jurisdictions, i.e., high-quality deposits with high uranium content, low extraction costs, and long useful life, in well-known and manageable sites. Cameco’s 49% stake Westinghouse immediately monetizes the nuclear wave linked to AI power and energy security. Cameco has three reporting segments, Uranium, Fuel Services, and Westinghouse. In the core uranium segment, second quarter earnings before income taxes and adjusted EBITDA increased by 46% and 43% respectively compared to the same period in 2024; earnings before income taxes and adjusted EBITDA for the first half of the year increased by 14% and 17% respectively compared to the first six months of 2024, all mainly as a result of higher sales volumes and average realized prices. Average realized price continued to show improvements as prices from fixed price contracts increased and the U.S. dollar was stronger than in the second quarter of 2024. Westinghouse reported net earnings of $126 million (Cameco’s share of the joint venture with Brookfield Renewable Partners) for the second quarter and $64 million for the first six months, improving considerably from net losses in comparable periods in 2024. The improvement over last year is primarily due to Westinghouse’s participation in the construction of two nuclear reactors at the Dukovany power plant in Czech Republic, which resulted in a $170 million increase in Cameco’s share of Westinghouse’s 2025 second quarter revenue. Looking ahead, the company projects 18 million pounds of uranium production at each of McArthur River/Key Lake and Cigar Lake operations in Canada for 2025. Potential risks to the 2025 production outlook at McArthur River/Key Lake include the expected timing of ground freezing and development schedules in new mining areas, access to adequate skilled labour, and the timing of new equipment commissioning. Cameco now expects uranium average realized price to be approximately $87.00 per pound (previously forecast at $84.00 per pound) due to the higher uranium spot price. For Westinghouse the company now expects its share of adjusted EBITDA to be between $525 million and $580 million (previously forecast at $355 million to $405 million) due to the approximately $170 million increase in Westinghouse’s 2025 second quarter revenue tied to Westinghouse’s participation in the Dukovany construction project in the Czech Republic. Over the next five years, the company expects its share of adjusted EBITDA will grow at a compound annual growth rate of 6% to 10%. The 2025 outlook for Cameco's share of Westinghouse’s net earnings is also impacted by the increased revenue net of income taxes and is now $30 million to $80 million (previously a net loss of $20 million to $70 million. As of June 30, 2025, Cameco had commitments requiring delivery of an average of 28 million pounds of uranium per year, from 2025 through 2029, which includes deliveries made year to date in 2025, with commitment levels higher than the average in 2025 through 2027, and lower than the average in 2028 through 2029. As of June 30, 2025, the company had $716 million in cash and cash equivalents and $1.0 billion in total debt. In addition, Cameco has a $1.0 billion undrawn revolving credit facility. As I’ve noted above, I own shares of Cameco in my Jubak Picks Portfolio. Today, Wednesday October 22, I will buy Cameco for my long-term 50 Stocks Portfolio.
