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Mathew Ingram

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Radiating Growth

Mathew Ingram


TORONTO (GlobeinvestorGOLD) — Canada is known for many things — water, trees, oil and gas, Mounties — but there are only a few areas in which it is the undisputed world leader. Uranium mining happens to be one of those areas, and that makes Cameco Corp. almost unique. Although its stock has more than tripled in price over the past year, many people have still probably never heard of it.

That’s because uranium itself is a fairly unique product. Unlike other commodities such as crude oil, copper, steel and pork bellies, uranium doesn’t even trade on a public market — and while those other commodities can be made into different things, uranium really only has one use: it is used to produce nuclear radiation.

Sometimes that radiation is used in reactors to produce electricity (about 16 per cent of the world’s electric power is produced by nuclear reactors) and sometimes it is used in medical imaging devices, to treat cancerous tumours or to sterilize food.

Cameco operates the world’s largest high-grade uranium mines, based in northern Saskatchewan, and produces about 20 per cent of the world’s uranium supply. The company went public in 1991, after decades of being owned by the federal and Saskatchewan governments, (although the province still owns a single “golden share,” aimed at keeping the company’s head office in Saskatchewan).

For such a little-known company in what has been until recently an overlooked market, Cameco’s share price has been on a tear over the past two years or so. From the $10 range in early 2003, Cameco’s stock has rocketed up to the $58 level. Like many other commodities — such as steel, copper, nickel and crude oil — uranium has been boosted by rising demand, primarily from Asia. The price has more than doubled over the past two years, to a recent $21 a pound.

Interestingly enough, uranium has actually been boosted by the rising price of oil and natural gas. As both commodities have climbed higher and higher over the past year, large oil-consuming countries such as China have talked about their plans to move more of their power generation to nuclear rather than oil and gas.

That kind of demand has left people looking for ways to invest, Canaccord Capital analyst Greg Barnes recently told The Globe and Mail’s Roma Luciw. “When people look around the world for places to participate in the uranium story, they come up with one name and that is Cameco,” he said. The company only has two large competitors: Areva, owned by the French government, and WMC Resources of Australia.

There are a few caveats to this growth story, however. Analysts like Mr. Barnes note — and the company itself has pointed out over the past couple of years — that much of Cameco’s business is made up of long-term contracts, which means that it doesn’t benefit immediately from dramatically higher prices, although they will flow to the bottom line eventually.

At the moment, Mr. Barnes said that Cameco’s stock is assuming a uranium price of about $30 a pound, which may not arrive for the next 12 months or so. And after more than tripling in a single year, much of the easy money has clearly already been made in the Saskatchewan-based company. But if uranium is what you want, Cameco is still the place to go.

Mathew Ingram joined The Globe and Mail's online news team in June of 2000, after spending four years as the Western business columnist, based in Calgary.

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