UUUU - Energy Fuels: Higher Uranium Prices Mean Even Lower Cash Flows

2024-03-26 21:02:08 ET

Summary

• Uranium sector fundamentals are weakening, and a slight increase in production could push uranium back into a glut.
• Energy Fuels, a popular US uranium stock, remains unprofitable and relies on chronic equity dilution to offset losses.
• The recent rally in uranium prices is a net negative for Energy Fuels, as it ramps up production into a market glut, widening cash-flow losses.
• Although its deal with Australia is attractive, the company's overall rare earth segment is tiny compared to its market capitalization.
• Energy Fuels has ample liquidity, but I expect its financial losses to widen in 2024-2026 as it sells more uranium at a loss.

Last week, I published " Cameco: Uranium Market Hype Clashes With Weakening Fundamentals," which detailed my bearish outlook for the uranium sector and the giant Cameco ( CCJ ). Many uranium market investors do not understand the market's supply elasticity. A slight increase in uranium production associated with the recent rally likely pushes uranium back into a glut, reversing all or most of its recent gains....

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