I think this is a good long term hold. It's expected to do well. It is also a major holding in a new Nuclear Exchange Traded Fund. (see the last PR of this post) Nuclear energy is being looked at ever increasingly for energy sources around the world. Cameco is the World's largest Uranium producer and sitting on some big Gold reserves overseas as well.
Chart: CCJ - SharpCharts Workbench : StockCharts.com
Cameco Corporation, together with its subsidiaries, engages primarily in the exploration, development, mining, refining, conversion, and fabrication of uranium for sale as fuel for generating electricity in nuclear power reactors in Canada and internationally. It operates in four segments: Uranium, Fuel Services, Electricity, and Gold. The Uranium segment involves in the exploration for, mining, milling, purchase, and sale of uranium concentrate. It operates four mines in Canada and the United States, and has two mines under development, one each in Canada and Central Asia. The Fuel Services segment involves in the refining, conversion, and fabrication of uranium concentrate, and the purchase and sale of conversion services. It also manufactures fuel bundles for use in Candu reactors. The Electricity segment involves in the generation and sale of electricity. This segment includes the company's 31.6% interest in Bruce Power Limited Partnership, which operates four Bruce B nuclear reactors located in Ontario. The Gold segment involves the exploration for, mining, milling and sale of gold. It owns a 100% interest in Kumtor mine located in the Kyrgyz Republic, and a 95% interest in the Boroo mine in Mongolia. This segment also has a 100% interest in the Gatsuurt property in Mongolia, and a 62% joint-venture interest in the REN property in Nevada. The company was founded in 1987 and is based in Saskatoon, Canada.
Market Cap (intraday): 14.52B
Shares Outstanding: 353.91M
Cameco and Kyrgyz Government Reach Agreement
Thursday August 30, 12:20 pm ET
SASKATOON, SASKATCHEWAN--(MARKET WIRE)--Aug 30, 2007 -- Currency: Cdn
Cameco Corporation (Toronto:CCO.TO - News) (NYSE:CCJ - News) announced today the company and Centerra Gold Inc. have each signed binding agreements with the Kyrgyz government. These agreements are expected to provide additional business certainty for mining operations at Kumtor, further align the parties' business interests and support Centerra's growth plans.
Cameco owns 53% of Centerra while Kyrgyzaltyn owns 16%. Cameco and Kyrgyzaltyn JSC, a joint stock company owned by the Kyrgyz government, were partners in the gold company that developed and began production at the Kumtor gold mine, which subsequently became part of Centerra.
Under the terms of the agreements, the Kyrgyz government and Kyrgyzaltyn agree to support Centerra's continuing long-term development of the Kumtor project and agree to facilitate eventual divestiture of Cameco's interest in Centerra. In return, the Kyrgyz government will receive 32.3 million shares (22.3 million net from Cameco and 10 million treasury shares from Centerra) upon closing of the definitive legal agreements resulting from the agreements signed today. Of these, 15 million shares will be received immediately and 17.3 million shares will be held in escrow until the earliest of:
- Cameco's holdings of Centerra's issued and outstanding shares fall below 17.3 million shares,
- the volume weighted average closing price of Centerra's shares on the TSX being no less than $13.30 for at least 7 business days, or
- the fourth anniversary of the closing.
After the transfer of all the shares is completed, Cameco will own about 41% of Centerra, the Kyrgyz Republic will own about 29% and the public shareholders will own the remaining 30%. When Cameco's ownership falls below 50%, we will no longer consolidate Centerra's financial results and will instead account for Centerra using the equity method. Also as a consequence of the share transfer, Cameco will record a one-time, after-tax loss of about $120 million at closing.
"These agreements provide a platform for a predictable and stable business climate for the Kumtor gold mine," said Jerry Grandey, Cameco's president and CEO. "We will work closely with Centerra and the Kyrgyz government to enable Centerra to successfully pursue its mandate."
Centerra's agreement provides for the Kyrgyz government's full support of Centerra's operations and significantly enlarges its existing mine concession area by over 25,000 hectares to include all territory covered by the current exploration licence. In addition, Centerra's agreement provides for replacement of the current tax regime with a simplified, new tax rate for the Kumtor operation applied to gross revenue. The new tax rate for the Kumtor project will be 11% in 2008, 12% in 2009 and 13% thereafter.
The signed binding agreements provide the framework for definitive agreements to be entered into upon the receipt of approval by the Parliament of Kyrgyz Republic that resumes sitting on September 3. The Kyrgyz government intends to present the documents for Parliamentary approval in September. While parliamentary approval is not assured, the Kyrgyz government intends to present the documents and make a concerted effort to obtain parliamentary approval.
Cameco expects the two agreements to be finalized in about two months subject to the appropriate approvals by Cameco's board of directors, Centerra's board of directors and the Kyrgyz government.
Cameco Strengthens Uranium Exploration Portfolio
Wednesday August 29, 6:00 pm ET
SASKATOON, SASKATCHEWAN--(MARKET WIRE)--Aug 29, 2007 -- Currency: Cdn
Cameco Corporation (Toronto:CCO.TO - News) (NYSE:CCJ - News) announced today that its wholly owned subsidiary, Cameco Global Exploration II Ltd., has concluded a strategic alliance with Western Uranium Corporation (WUC), which allows Cameco's subsidiary to acquire a 70% joint venture interest in WUC's current properties. As part of the transaction, Cameco's subsidiary also became a 10% shareholder of WUC.
WUC is a uranium exploration and development company with its head office in Vancouver, B.C. Its principal properties are in Nevada and New Mexico in the US, and Nunavut and the Northwest Territories in Canada. Shares of WUC trade on the TSX Venture Exchange.
Cameco's subsidiary purchased 5,586,244 units of WUC at $3.80 per unit. Each unit is comprised of one common share and one half of a share-purchase warrant. Each whole share-purchase warrant entitles Cameco's subsidiary, for one year, to acquire an additional common share for $4.25.
This transaction provides Cameco's subsidiary with the following rights: (i) to acquire a 70% joint venture interest at such time as any of WUC's current uranium properties warrant development to production; (ii) to participate in any future equity issues; and (iii) to nominate one person for election to WUC's board of directors, as long as the company holds 7.5% of WUC's outstanding common shares.
"This transaction strengthens Cameco's extensive portfolio of exploration investments and gives us another option to expand future production consistent with our strategy to build on Cameco's competitive advantage in the uranium business," said Cameco president and CEO Jerry Grandey. "Through our investment and strategic alliance with WUC, Cameco's shareholders gain the potential of a quality company with an attractive land position."
Go Nuclear With ETFs
By Zoe Van Schyndel, CFA August 31, 2007
The energy sector has been dominating the markets in the past few years. If you are looking for an alternative to the usual energy plays, a new ETF offers the opportunity to get exposure to the nuclear energy industry. Van Eck's Market Vectors Nuclear Energy ETF (AMEX: NLR) came to market earlier this month.
NLR tracks the performance of the DAX Global Nuclear Energy Index, which has a 41% exposure in Japan, 29% in Canada, and nearly 14% in Australia. These allocations reflect not just where you'll find nuclear reactors but also where uranium and other key materials in their construction are found. As a result, even though France and the U.S. have many nuclear reactors, the index has no exposure to France and only about 3% in U.S. companies. On the other hand, Australia has only one nuclear reactor, which is more than 40 years old, but it has a key role in mining and producing uranium.
The index has its heaviest sector exposure to uranium mining at roughly 47%, while plant infrastructure is around 37% and nuclear equipment comes in at 10%. Its positions include various units of Japanese tech company Hitachi (NYSE: HIT), uranium producers Cameco (NYSE: CCJ) and USEC (NYSE: USU), and the heavy industries unit of Mitsubishi Group.
The fund itself offers a reasonable way to invest in this index. It carries a 0.65% net expense ratio, which is a bit high for an index-tracking fund but is lower than many actively managed funds.
The U.S. hasn't seen a new nuclear power plant come online since 1997, and the last plant to be licensed was in 1978, but that doesn't mean the industry has gone away. France and Japan both have significant nuclear power programs, and countries like Iran assert their interest in getting in on the action for the same reason. Accidents at Three Mile Island in the U.S. and Chernobyl in the Soviet Union helped chill interest in nuclear power in the last part of the 20th century. Development was also slowed by low oil prices, political resistance, and increased regulation.
Now that energy has become expensive once again, nuclear energy is being touted as an alternative to oil. Two of the BRIC (Brazil, Russia, India, China) countries, China and India, are both looking at nuclear energy to feed their fast-growing economies. Critics claim nuclear power is uneconomic and cite problems with storing radioactive waste and safety as serious concerns. Proponents argue that this is a power source that can help reduce carbon emissions and that the industry has a good safety record.
Global energy use continues to grow, and with massive demand from the newly industrializing economies of the BRICs, it seems likely that the energy industry will continue to seek alternatives to oil. The U.S. already gets 20% of its electricity from nuclear power, while the figure in France is closer to 75%. A narrowly focused fund like Van Eck's nuclear energy fund is one way to allocate a small portion of your portfolio to the nuclear slice of the energy sector. This might be a glowing opportunity.