Uranium Struggles to Make a Comeback
Nov 10th 2011 10:43AM
Updated Nov 10th 2011 11:52AM
In news that should come as a surprise to no one, the government decided last week that it needed more time to make a decision. This time, it is in regards to USEC's (NYSE: USU ) $2 billion loan guarantee request. The delay is just one more problem for the industry this year.
This is the latest no decision in what has turned into a three-year process for USEC to secure a $2 billion loan guarantee for its American Centrifuge.
The company has been forced to negotiate and renegotiate extensions with its two main investors, Toshiba and Babcock and Wilcox (NYSE: BWC ) , for the third time in just over two months. These companies have yet again agreed to cling to this project, and their respective $100 million investments, until Jan. 15, 2012.
In the meantime, the DOE has offered to provide $300 million in federal funding to tide USEC over. The deal would fund research, development, and demonstration, and would essentially allow USEC to reduce financial risk and enhance its technology on a commercially viable scale.
But, and this is a big but, Congress has to approve the $300 million first.
USEC has had a tough year, and the rest of the industry has taken a beating as well. The average share price decline for uranium-related stocks Cameco (NYSE: CCJ ) , Denison Mines (AMEX: DNN ) , and Ur-Energy (AMEX: URG ) is 57%.
The steepest drop came after the Fukushima Daiichi disaster in Japan, but the stocks haven't given any indication they will recover anytime soon.
USEC: It was a rough quarter for USEC. The company announced a net income loss of $6.5 million compared to a $1 million gain last year. Year-to-date, the picture isn't much rosier. Net income was down $44.7 million compared to $1.5 million for the same period last year. USEC anticipated the losses, due in large part to higher costs related to the American Centrifuge project.
Cameco: The company reported good news and bad news to shareholders this week. Third-quarter revenue was up 26% over last year on the strength of higher sales and realized prices, but the company was punished by losses from foreign exchange derivatives, which resulted in a 60% drop in net earnings. Going forward, Cameco continues to work toward its goal of doubling uranium production by 2018.
Denison Mines: This was a much better third quarter than last year's for the Toronto-based miner. The company reported a profit of $15.5 million and $0.04 per share, dwarfing last year's $5 million loss.
Ur-Energy: The Littleton, Colo., company has yet to generate revenue. Expenses accrued in the third quarter were just shy of $1 million less than the same period last year. The company has $28.8 million in cash and cash equivalents on hand. In August, Chief Operating Officer Wayne Heili was named CEO.
In March, Ur-Energy entered into a sales agreement for uranium produced at a site in Wyoming. In the midst of the regulatory process to mine uranium there, the company announced at the end of October that it made an arrangement with a uranium marketing company. So there will be revenue. One day.
Germany will be out of nuclear power by 2022 and Switzerland by 2034, but many countries are still planning nuclear reactors, including Brazil, India, and China. A decision to guarantee USEC's American Centrifuge project would bode well for the industry. In the meantime, these stocks are slowly trying to fight their way back to pre-Fukushima disaster levels.