Why Uranium Stocks Fell Sharply on Thursday

Despite the recent drop, the long-term growth outlook for most Canadian uranium companies remains strong amid rising demand.

| More on:

What happened?

The shares of some popular Canadian uranium companies fell sharply on Thursday, reversing their gains from the previous couple sessions. Energy Fuels (TSX:EFR), Denison Mines (TSX:DML)(NYSE:DNN), and Nexgen Energy (TSX:NXE)(NYSE:NXE) dived by nearly 9% each on January 6, making them some of the worst-performing stocks on the TSX Composite benchmark for the day. By comparison, the main Canadian stock market index ended the session with minor 0.2% gains.

So what?

Yesterday’s sharp selloff in uranium stocks is worth noting, because most of these companies started the new year 2022 on a strong bullish note. For example, Denison Mines stock was trading with 14.4% year-to-date gains prior to Thursday’s sharp decline. Similarly, the shares of Energy Fuels and Nexgen Energy had jumped by 13.4% and 12.1%, respectively, in the first couple of days of the year. In order to understand the recent uranium stocks selloff, we need to look at the key reason for their rally in the first two trading sessions of the year.

Kazakhstan has been going through a lot of turmoil for the last few days, as protests against the government led to violence in the country. It’s important to note that Kazakhstan is the largest uranium producer globally, followed by Canada and Australia. That’s why Kazakhstan unrest fueled investors’ speculations about uranium supply disruptions, driving its prices and uranium stocks sharply higher earlier this year.

In contrast to investors’ bets, Kazatomprom — the world’s largest uranium miner based in Kazakhstan — clarified on Thursday that its mining operations and exports remain unaffected from the ongoing turmoil in the country. This update dimmed the possibility of the ongoing unrest’s big negative impact on uranium supply, raising the possibility of a sharp pullback in uranium prices.

As the uranium prices are directly linked to the profitability of Canadian uranium companies like Energy Fuels, Denison Mines, and Nexgen Energy, these latest updates drove their stocks lower on January 6.

Now what?

Most uranium stocks have seen a big rally lately because a surge in demand for clean energy has pushed uranium prices higher. That’s the key reason why the shares of all three Canadian uranium companies I’ve mentioned in this article have seen well more than a 200% jump in the last couple of years.

While Kazakhstan unrest updates may keep these uranium stocks highly volatile in the coming sessions, their overall long-term growth outlook still remains solid with strong demand prospects.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

todder holds a gold bar
Metals and Mining Stocks

Canadian Mining Stocks: Buy, Sell or Hold?

Investing in quality gold mining stocks that trade at a reasonable valuation could help you beat the TSX index over…

Read more »

People walk into a dark underground mine.
Metals and Mining Stocks

Is First Quantum Minerals Stock a Buy?

Let's dive into whether First Quantum Minerals (TSX:FM) is worth buying at current levels, or if investors should sit this…

Read more »

nugget gold
Metals and Mining Stocks

Competitive? Beat the Market With These 2 Dividend-Paying Growth Gems

Investors looking to beat the market buying dividend stocks right now need to focus on this right sectors. Here are…

Read more »

nugget gold
Metals and Mining Stocks

A Canadian Billionaire Investor Sold Micron Stock and Bought This TSX Company Instead

Prem Watsa focuses on value over short-term growth.

Read more »

Concept of multiple streams of income
Metals and Mining Stocks

Is Franco-Nevada Stock a Buy for Its 1.2% Dividend Yield?

Gold royalty stocks represent a niche in the precious metals industry. They have different dynamics from mining stocks.

Read more »

todder holds a gold bar
Metals and Mining Stocks

The 1 Mining Stock Canadians Should Buy and Hold Forever

Newmont is a gold mining stock that trades at a cheap valuation, making it a top investment choice for those…

Read more »

Metals and Mining Stocks

Top Canadian Gold Stocks to Buy Now

Canadian gold mining stocks such as Barrick Gold and Kinross Gold are two top investments in October 2024.

Read more »

todder holds a gold bar
Stocks for Beginners

Is the Worst Over for SSR Mining Stock?

SRR Mining stock has been rising higher after recent earnings performance that made a bit of a comeback. So is…

Read more »