Canadian Uranium to China

All the roads lead to Beijing

One of the most famous saying in the ancient world was "All the roads lead to Rome." Maybe it was true, but today when you hear of business on a large scale or negotiations that involve billions of dollars, check if China or a Chinese corporation is involved. It is 2010 and all the roads lead to Beijing.

Chinese Sinochem was considering buying Potash from Saskatchewan. Chinachem is negotiating with giant Israeli "Kur" to buy a "Makhteshim" chemical plan. Chinese petrol corporations have already bought oil fields in Iran and in West Africa. China is offering financial assistance to Portugal. Here is another Chinese vision and how a Canadian corporation is involved.

CGNPC

It is China's largest clean-energy enterprise under its authority are the largest numbers of nuclear power plants in the world. The Chinese are looking into the future, and they understand that they must reduce their dependence on oil, especially when many energy analysts say that the price of crude oil will rise to $200 per barrel. That will be a significant burden to the second biggest economy in the world that has to take care of 1.4 billion people.

One of the energy solutions is to build nuclear power plants that will supply electricity to the huge country. As many of us know the fuel for nuclear power plants is uranium, and it exists in Canada.

Canadian uranium

Canada has the third largest uranium reserves in the world. It has 12 per cent of the world's reserves, while Australia has 30 per cent and Kazakhstan has 16 per cent.

The deal

Cameco (NYSE – CCJ, TSX – CCO) Corporation, also from Saskatchewan, is a uranium producer and commercial supplier of the heavy material. It signed a long term agreement with the Guangdong (Province in southern China) for the supply of uranium concentrate for the production of clean energy. Cameco CEO Jerry Grandey was said the following in a statement published on November 23:

"This long-term supply agreement with China Guangdong Nuclear Power is a significant step for our company in the world's fastest growing uranium market. China Guangdong Nuclear Power has 14 nuclear power units currently under construction and is commencing preliminary work on another nine units. This deal leaves us well positioned to serve the company's growing uranium requirements."

Cameco will supply to the Chinese company 29 million pounds of uranium concentrate under a long-term agreement through 2025.

Cameco financial data

Market Capacity: $14.62 billion.

Trading range per share (12 months): $20.70 – 38.56

EPS $2.25

P/E 16.55

The Chinese strategy and the Canadian benefit

Signing a long term agreement is excellent for China as it is assuring the supply of the rare and precious material for the next 15 years. It can be assumed that the deal has a price policy which is to the satisfaction of both sides.

The Canadian company benefits from stability and the ability to plan far into the future and improve profits in the long term.