BUY CCJ US +40% upside – Dangerously Clean

Description

*CCJ is a Canadian based company and is one of the largest Uranium producers – a pure-play nuclear fuel company, focused on providing a clean source of energy  -CCJ is net debt neutral with a market cap of EUR 6.6bn

*CCJ has a strong board of oversight of global ESG standards and 100% of the product goes to producing carbon-free, base-load electricity which should be great for ESG investors

*The company has 36% of its customer volume in the Americas, 18% in Asia, 46% in Europe

Uranium demand

*There is an increasing demand for Uranium across the world as we are seeing spike in new constructions with 54 currently in constructions (mostly in Asia/China) and an additional 100+ planned and over 300 proposed

*Currently there are around 450 reactors operating worldwide – the vast majority of the new builds will come in addition to current operations

*Before Fukushima there were over 400 companies mining for uranium while now the number is just over 60 – these only cover about 80% of the demand, not even considering lower supply due to corona  which could lower this to 2/3 – this gap is currently being filled by inventory but that is of course not sustainable and expectations the price to increase

*This has put Uranium in high demand – we also believe there is also an extra edge to holding a Canada based company even though the operations are global – the US generates 20% of its electricity from Nuclear power while only a small amount of this comes from US mines

*Market already in supply deficit and CCJ estimates that by 2040 the global demand is expected to increase by 49% – the supply shortage is partly due to suppliers cutting production as the price is currently too low to enter long-term agreements as it is currently USD 30 while producers need it around USD 50-60 to start new projects

*The company holds 69.8% of the world’s largest uranium mine McArthur River and half of the second largest mine Ciger Lake – production at both mines is suspended, Ciger due to corona and McArthur waiting for higher prices for long term contracts

Politics

*Trump was working on establishing a strategic uranium reserve which could further limit supply

*Forbes highlights that Biden is likely to continue to the focus on Nuclear energy rather focusing on getting the US more independent from China and Russia Biden is likely to use cliemate change as the rationale

*The US annual defense bill classified Uranium as critical to the defense industrial base of the United States which should provide the company with some support

Valuation

*ANR shows 6 Buys, 4 Holds and 1 Sell  with an average price target of USD 14.18 implying a +11% upside

*4Q earnings set for 10 February

*Our DCF valuation comes in at USD 18 implying a +40% upside from here