Q: I understand that Cameco and the other major uranium producer have lowered their production estimates. As CCJ is locked into contracts they may not even be able to fulfill I don't see how they would benefit from uranium shortage. Would an investor be better looking at uranium as a commodity rather than buying a miner?
5i Research Answer:
Contracts roll over, and CCO has the option of not renewing them. So more production could see spot pricing in the future. Contracts can also be bought back. In addtion, in a rising price CCO's reserves will be valued more by investors. Still, the company's hedges have cost it a LOT of money and certainly one can be critical of its policies. We still think companies will have more leverage in a uranium rally, but investors could also own both stocks and the metal directly. NXE may prove to have more upside to CCO over time.