After a staggering 65% rally in 2023, shares of Uranium Energy (UEC 1.25%) continued to rally even higher in the new year and popped 19.4% in January, according to data provided by S&P Global Market Intelligence. With uranium prices hitting 16-year highs last month and Uranium Energy all set to move from the exploration to production phase, investors bet big on the uranium stock.
Uranium Energy to start production amid a uranium bull market
Although Uranium Energy extracted uranium until some years ago, it is still classified as an exploration-stage uranium company by the U.S. Securities and Exchange Commission since it has not established proven and probable reserves. Over the past year or so, Uranium Energy primarily generated revenue by selling uranium bought earlier at spot prices. The company was waiting for a stronger uranium market to restart operations, and it believes the time is now.
NYSEMKT: UEC
Key Data Points
Last month, Uranium Energy announced that it will restart production at Wyoming and expects first production from the site in August this year.
Importantly, Uranium Energy has enough cash to start production and will sell all the produce at spot market prices instead of hedging them given the recent surge in uranium prices. Uranium is a primary fuel that powers reactors to produce nuclear energy.
Uranium prices have rebounded dramatically in recent weeks and touched a 16-year high of $106 per pound in mid-January on supply concerns. Last month, the world's largest uranium miner, Kazakhstan's Kazatomprom, said it will cut its production estimate for 2024 given the shortage of sulfuric acid, which is used to leach uranium from ores.
Is Uranium Energy stock headed even higher?
Uranium Energy's CEO Amir Adnani believes the uranium market fundamentals right now are "the best the industry has witnessed" given the supply shocks that have driven uranium prices over $100 per pound. Adnani called the restart of operations at Wyoming a moment the company has been working on for "over a decade." Notably, Uranium Energy is also advancing its second site, in south Texas, to restart production.
Since Uranium Energy has been selling previously bought uranium at spot prices and intends to sell its first output from the Wyoming site at spot prices as well, it stands to benefit directly if uranium prices continue to maintain momentum. That pretty much explains why the uranium stock soared by double-digit percentages in January. As long as uranium prices remain high, investor interest in Uranium Energy should remain strong, too.
