Even before the
electrical blackouts in India earlier this
, the world's second most populous country had announced its
commitment to nuclear power. Cameco Corporation (
) is one company poised to benefit from the development of nuclear
energy in emerging markets.
[caption id="attachment_71677" align="alignright" width="300"
caption="Construction site of the Koodankulam Nuclear Power Plant
in southern India"]
As India's emerging middle class demands ever more electricity,
the country relies on an ancient power grid. But help is on
the way. U.S. and international companies alike recognize the
opportunities in India. And while these companies work on
developing profitable business ventures in India, a new
development in nuclear power may assist Cameco as it strives for
greater prominence in emerging markets.
A little-known metal called thorium might alter the way power is
generated in India and other countries. This is a naturally
occurring radioactive element that
once described as possibly the "
biggest energy breakthrough since fire
." Named after Thor, the Norse god of thunder, thorium could
replace uranium as a cheap energy source. At the very minimum, it
will coexist with uranium in India's nuclear development.
The metal is estimated to be three times as abundant as uranium,
and it contains up to 200 times the energy density. Earlier this
year (before the blackouts occurred), the Indian government
announced that the nation would begin construction on its first
300-megawatt thorium reactor by 2016. India is also expanding its
uranium reactor network. The country currently has 17 reactors in
operation and six under construction. An additional 23 reactors are
expected to come on line in the next eight years.
This is important news for the nuclear energy sector and
especially for companies that have seen their stock valuations drop
dramatically as a result of the 2011 nuclear disaster in Japan.
India, China, and other emerging market countries recognize the
need for cheap, clean and safe production of electricity. And while
some oppose the spread of nuclear power in developed countries like
the United States, the prospect is better received in energy-hungry
Cameco is the world's largest producer of U3O8 uranium, whose
only commercial use is to fuel nuclear power plants, and the
second-largest uranium producer in the world. Cameco accounts for
20% of world uranium production. India, China, South Korea, and
Russia all plan to install nuclear plants and increase the
percentage of energy provided by nuclear power. These new plant
installations will benefit Cameco as utility operators demand more
uranium to run them.
Despite all this good news, CCJ has not been performing like the
stock of a company in a potentially booming industry. Since the
Fukushima disaster in Japan, Cameco's stock is down by almost
Before the disaster, the stock was performing well, largely
tracking the S&P and even outperforming it at times.
But since Fukushima, Cameco has clearly underperformed.
The long-term chart is promising. Although the range is still
very wide, I can see price consolidation, which is encouraging. I
suspect we'll see Cameco move toward the top of the range, and this
promises plenty of profit potential. Given the positive outlook for
uranium demand in emerging markets, Cameco should perform very