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Why Ur-Energy Stock Sank in November Despite Higher Uranium Prices

The Motley Fool logo The Motley Fool 12/9/2021 Neha Chamaria
Why Ur-Energy Stock Sank in November Despite Higher Uranium Prices © Provided by The Motley Fool Why Ur-Energy Stock Sank in November Despite Higher Uranium Prices

What happened

Uranium prices have almost single-handedly driven uranium stocks in recent weeks. Yet, despite uranium prices popping in the month of November, uranium stock Ur-Energy (NYSEMKT: URG) tumbled 14.4% in the month, according to data provided by S&P Global Market Intelligence. There's no respite in sight for Ur-Energy; the stock's down another 6% so far in December.

So what

The only release from Ur-Energy in November was a quarterly earnings report. Ur-Energy has only one operational mine, the Lost Creek in Wyoming. The company, though, is barely producing any uranium right now as it requires higher uranium prices to be commercially viable. As of Oct. 27, Ur-Energy had 285,000 pounds of uranium inventory, but management stated it doesn't expect to sell any of that uranium over the next 12 months.

Steaming cooling towers that are part of a nuclear power plant. © Getty Images Steaming cooling towers that are part of a nuclear power plant.

The biggest takeaway from Ur-Energy's earnings report was its decision to advance development of Lost Creek to prepare the mine for a production ramp-up as end markets demand. This step even encouraged analyst Jake Sekelsky at Alliance Global Partners to raise his price target on Ur-Energy stock to$2.50 per share from $2.20 per share. Sekelsky believes Ur-Energy's move should position the company to "become a domestic producer of uranium quickly once a positive restart decision is made."

Ur-Energy stock popped only briefly in early November and slid back down as the month progressed for one big reason: the company's announcement to sell shares worth $100 million in parts. Such an offer will dilute existing shareholders' wealth at a time when the company is not making any money. Moreover, the company said it will use the proceeds from shares sale for general corporate purposes and not for growth.


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Now what

Ur-Energy is, at best, a speculative penny stock. The company doesn't really stand to gain anything right now -- even if uranium prices were to inch higher -- unless it bags sales contracts from utilities. Nuclear reactors run on uranium fuel, and utilities are eventually the key end consumers that drive long-term demand for the fuel. However, such contracts run for years, and even the largest uranium producers are still waiting for utilities to make a comeback. Given the backdrop, there are far better uranium stocks than Ur-Energy you could buy right now.

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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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