FYI

Cameco: A world-dominating Canadian uranium stock that's expanding production

In a recent Stock Pickers Digest hotline, we updated our buy/sell/hold advice on the world's largest uranium producer, Cameco Corp. (Toronto symbol CCO).

The company supplies over 18% of global production. Most of the Canadian uranium stock's uranium comes from its 70%-owned McArthur River mine and the Rabbit Lake mine, both of which are in Saskatchewan's Athabasca Basin. It also owns the Crow Butte and Highland mines in the U.S.

Cameco is now developing Cigar Lake, the world's richest unmined uranium deposit. The Cigar Lake mine could eventually produce more than 10% of global output. Production will likely begin in 2013.

Big Chinese contract adds growth prospects

The stock has moved up since June 24, 2010. That's when the company announced its first major long-term uranium-supply agreement with a Chinese nuclear utility.

Under the agreement, Cameco will deliver 23 million pounds of uranium oxide to China National Nuclear Corp. (CNNC) by 2020. At current levels, that equals roughly one year of Cameco's production.

CNNC is China's largest nuclear-power producer. The state-owned company operates seven reactors with a total capacity of 5,100 megawatts. As well, it is building 10 of China's 24 new reactors. Together, these new reactors will be capable of producing an additional 9,100 megawatts.

Separately, Cameco recently announced that it signed a memorandum of understanding with China Guangdong Nuclear Power Holding Co. (CGNPC). That will give Cameco the opportunity to negotiate a long-term supply agreement with CGNPC. The companies may also jointly develop some uranium mines.

CGNPC is China's fastest-growing nuclear producer. Right now, it operates two nuclear-power stations with a total capacity of 4,000 megawatts. CGNPC is also building the remaining 14 new Chinese nuclear-power stations. That's expected to push up its generating capacity to more than 50,000 megawatts by 2020.