The world’s largest uranium miner does not expect to see a major impact from ongoing troubles at a Japanese nuclear power plant damaged in last week’s devastating earthquake and tsunami.
“The fundamentals of our industry remain positive,” Cameco Corp. chief executive Jerry Grandey told a conference call on Monday to discuss how the Japanese disaster is affecting his company.
Cameco’s (TSX:CCO) shares took a beating on the Toronto Stock Exchange on Monday, tumbling 14 per cent to $31.20 in afternoon trading.
And it wasn’t alone: fellow Canadian miner Uranium One (TSX:UUU) was down more than 27 per cent, while Denison Mines Corp. (TSX:DML) dropped more than 22 per cent.
Grandey said the drop has been “driven by emotion,” as one might expect in such a situation. However, he said he does not expect Cameco to see significant direct effects in the short or long term.
Some 18 to 20 per cent of Cameco’s shipments are bound for Japan, he said, calling the country an “important customer.”
The slide in uranium stocks comes as the international nuclear market sounds a note of extreme caution since Japan’s Fukushima Dai-ichi power plant sustained damage in last Friday’s disaster.
All three of the plant’s operational reactors have now been affected. A hydrogen explosion hit one reactor on Saturday, followed by a blast at a second rector on Monday. Later Monday, officials were struggling to prevent something similar from happening to a third reactor.
While concern has centred on the Fukushima Dai-ichi plant, near the Pacific coast, other nuclear power plants in the country were damaged, too.
Concern over nuclear safety spread to Europe as Germany temporarily halted plans to extend the life of its nuclear power plants, and neighbouring Switzerland suspended plans to build and replace its facilities. Austria’s environment minister called for atomic stress tests to make sure Europe’s nuclear facilities are “earthquake-proof.”
“It’s really called into question the nuclear renaissance,” said John Stephenson, first vice-president and portfolio manager with First Asset Funds Inc..
Stephenson suggested, however, that despite the situation in Japan it’s unlikely China will be dissuaded from building up its own nuclear power capacity.
“For everybody else, it’s definitely on the back burner for now and I think the reality is it will be for a little while,” he said.
Stephenson said he sees the uranium stock drops as a potential buying opportunity for investors who believe China’s nuclear energy demand will support the industry long term.
“They don’t have the same problems, or the same degree of problems with earthquakes as Japan does, so they’re not at risk per se to the same degree,” he said.
Some of the world’s biggest economic powerhouses were planning major nuclear expansions when the 8.9-magnitude earthquake and tsunami hit last week.
Japan, for instance, planned to add 14 plants to the 55 it already had in operation. China has been looking to add 77 facilities to its collection of 13, and India had been looking to more than double its capacity.
“I think they’re going to be re-examined, definitely,” said Marin Katusa, market strategist with Casey Research in Vancouver. “There’s going to be a lot of questions.”
While some of the plans may be scrapped, Katusa says he sees many of the nuclear expansions going ahead despite the devastation in Japan.
“They don’t have a choice. They may be delayed, but eventually nuclear is a real candidate and all of these countries are trying to increase their energy diversity, and they’re trying to grow,” he said.
The nuclear woes have been raising the profile of other energy sources. For instance, Katusa noted geothermal stocks like Ram Power Corp. (TSX:RPG) and Nevada Geothermal Power Inc. (TSXV:NGP) were up Monday.
“If you want the cheapest energy sector in the world right now, it’s geothermal. The difference between any other green energy and geothermal is geothermal’s first of all the cheapest and the most reliable,” he said.