If you’re in the market for a pure uranium play that won’t cost you an arm and a leg, check out Canadian exploration and development company Denison Mines (NYSEAMERICAN:DNN). It appears that DNN stock has been in breakout mode over the past several months and could be headed higher.
Denison focuses on what’s known as the Athabasca Basin, a region in northern Saskatchewan and Alberta. It supplies “about 20% of the world’s uranium.”
The company is aggressively advancing its operations in this region. Moreover, uranium sector investors should appreciate Denison’s vast project portfolio, which covers some 280,000 hectares.
What makes Denison Mines relatively low-risk in the uranium-mining space? Investors have a right to know, so we’ll definitely explore that topic. First, though, we should look at the recent price action of the stock.
DNN Stock at a Glance
If you want to see a textbook example of what a breakout looks like, just take a look at DNN stock.
For five long years, the stock just couldn’t seem to stay above the crucial $1 level. There were numerous attempts along the way, but no real success.
However, starting in late 2020, a big moment has happened for Denison. As the old saying goes, be right and sit tight. That sit-tight strategy finally paid off when DNN started climbing in December.
During that month, the stock price increased from 38 cents to 65 cents. Was this just another head-fake that was destined to fail? Not at all — the momentum soon continued into 2021.
By Feb. 17, DNN stock reached a 52-week high of $1.81. That was quite a run and inevitably some profit taking caused the share price to retreat. Today, it trades at $1.17.
Is another share-price surge possible in the near future? Only time will tell, but you might want to position yourself ahead of time if you like the company and the uranium market generally.
Low Risk Through Low Costs
One criterion to look for in any commodities miner is low cost. That’s a key component of de-risking the investment.
Denison’s 90%-owned flagship uranium development project is known as Wheeler River. The Phoenix deposit on this property is, according to the company, “estimated to potentially have lowest costs of any undeveloped uranium deposit.”
That’s a big claim to make, but Denison has the numbers to back it up. Specifically, Phoenix features all-in costs of $8.90 per pound of U3O8. (That compound is also known as the uranium concentrate powder called yellowcake.) Moreover, Phoenix has operating costs of $3.33 per pound of U3O8 for Denison Mines.
No matter how you look at it, that’s extremely cheap. At the time of this writing, the spot price of uranium is between $27 and $28 per pound.
On top of that, another deposit on the Wheeler River site is called Gryphon. There, Denison’s all-in costs are $22.82 per pound of U3O8. The operating costs are $11.70 per pound. Not a world record, but still relatively cheap, too.
Focus on Finances
So, we’ve established that Denison Mines can get uranium out of the ground relatively inexpensively. Yet, that’s not the only way that the company is reducing its risks.
For example, Denison Mines President and CEO David Cates highlighted recent improvements in the company’s overall fiscal picture:
“[Denison Mines has] completed a round of critical capital raising over the last 12 months that has positioned the company with approximately $85 million in cash and investments, while remaining debt-free.”
Of course, not every commodities miner can claim to be free of debt. Along with this, Cates underscored the “incremental improvement” of the broader uranium market. In defense, Cates pointed to “growing calls for nuclear energy to re-emerge as a leading technology” that will be “important to a sustainable global energy transition.”
Obviously, that’s a veiled reference to President Joe Biden and the new administration’s push for cleaner energy sources. With this, uranium may be recognized as a viable alternative to fossil fuels in the next few years.
If that happens, then that would certainly be bullish for Denison Mines and DNN stock.
There’s always going to be a certain amount of risk when investing in commodity miners.
Yet, investors can mitigate those risks by checking for low mining costs. In that regard, Denison Mines gets very high marks.
All in all, DNN stock presents a solid entry point into uranium industry investing. The shares are cheap but, soon enough, they could break out to the upside.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.
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