What happened
Uranium prices fell to their lowest in five months this week, but shares of Uranium Energy (UEC +4.88%) were flying 14.6% higher through 10 a.m. ET Friday, according to data provided by S&P Global Market Intelligence. The young uranium miner released its earnings this week, but the real catalyst for the uranium mining stock was a contract to supply uranium in the first quarter of 2023.
NYSEMKT: UEC
Key Data Points
So what
The U.S. generates almost 20% of its electricity from nuclear energy but imports most of the uranium it uses as a fuel in nuclear reactors. Russia's invasion of Ukraine and surging commodity prices in 2022, however, compelled the U.S. Department of Energy (DOE) to make plans to revive the domestic uranium industry. Part of the plan included the establishment of a strategic uranium reserve, and in July, the DOE sought proposals to purchase 1 million pounds of domestically produced uranium.
The DOE started awarding contracts in December, and Uranium Energy is among the few companies that bagged one -- it won a $17.85 million award on Dec. 20 to supply the DOE with 300,000 pounds of uranium concentrates at a price of $59.50 per pound. The uranium will be supplied in early 2023.
Now what
Uranium Energy hasn't generated any revenue from the sale of mined uranium compounds for several years now, and it's only this year that it started generating revenues again by buying uranium in the spot market and selling it later.
In its most recent quarter ended Oct. 31, Uranium Energy generated $57.2 million in revenue from the sale of 500,000 pounds of uranium from its inventory and earned a gross profit of $13.8 million. The company didn't generate any revenue in the corresponding period of 2021.
Uranium Energy also made two big growth moves last quarter, including the acquisition of Canada-based uranium miner UEX in a deal that made Uranium Energy the largest diversified North American-focused uranium company. It also acquired the Roughrider uranium project in Saskatchewan, Canada, from a subsidiary of mining giant Rio Tinto.
Most importantly, as of the end of its last quarter, Uranium Energy had purchased 5.8 million pounds of uranium at an average cost of $38 per pound, contracted for deliveries through December 2025. That should keep revenues and gross profits rolling for the company amid a long-due rebound in the uranium markets, even as it strives to bring production online in the near future.
