Cameco stock nears all-time high as uranium rides 'frenetic bull market'

Cameco shares have gained more than 70 per cent year-to-date as uranium prices rallied. (THE CANADIAN PRESS/Liam Richards) (The Canadian Press)

Cameco (CCO.TO)(CCJ) shares climbed on Friday, pushing the Canadian uranium producer's stock closer to a fresh all-time high amid a rally for nuclear fuel prices.

Toronto-listed Cameco shares added 3.63 per cent to $54.16 as at 11:34 a.m. ET, a few dollars short of their peak value near $60. The stock has gained more than 70 per cent year-to-date as uranium prices surged to their highest levels since Japan's Fukushima plant disaster in 2011.

"Cameco is likely to trade at the high end of historical ranges," Eight Capital analyst Ralph Profiti wrote in a recent note to clients, in which he boosted his target price from $52 per share to $60.

Earlier this month, Saskatoon-based Cameco promised to meet its delivery commitments as it cut 2023 production guidance at its Cigar Lake mine due to operational challenges. Profiti says the problems are "likely transition," adding the situation shows "the growing risk to secure a reliable uranium supply that continues to shift risk from uranium producers to utilities, and puts upward pressure on prices that more than offsets Cameco's reduction in output."

According to CME Group, UxC Uranium U3O8 Futures for September 2023 are priced at US$66.25 per pound. In 2007, spot prices peaked near US$140.

Demand for cleaner forms of energy has prompted a series of policy "U-turns" in recent years, with governments from Japan to Germany revising plans to phase out nuclear power. The World Nuclear Association says demand from reactors is expected to climb 28 per cent by 2030, and nearly double by 2040.

Market research firm and consultancy UxC projects a 66 million pound uranium deficit this year, with 436 operable reactors globally requiring about 195 million pounds. Its analysts note a "dire need" for new projects to enter service between 2028 and 2040.

Natural resources research and investment firm Goehring & Rozencwajg warn fuel stock from retiring reactors, a significant source for the past two decades, is nearly exhausted.

"Utilities remain dramatically under-contracted post-2025," they wrote in a recent research note. "Although it is an opaque market, all signs point to uranium entering into a sustained and frenetic bull market."

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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