Uranium miner Cameco Corporation should benefit from strength in the metal's price as nuclear power's role in decarbonization is reconsidered, according to Bank of America. The firm upgraded the stock to buy from neutral Wednesday, saying shares can rally nearly 30% from current levels. The stock was up more than 7% by 11 a.m. ET on Wall Street. Cameco shares are up about 100% this year amid renewed interest in uranium. The metal traded at $42.75 per pound Monday, according to the most recent data from UxC . In September, prices topped $50 for the first time since 2012, UxC said. While an interest in nuclear power could be one catalyst, some of the recent activity is also due to Canada-based Sprott Physical Uranium Trust launching over the summer and subsequently scooping up physical uranium. This has skewed the supply and demand balance, and Bank of America noted that uranium spot prices have jumped more than 40% since the Sprott fund launched. Analysts led by Lawson Winder said that Cameco shares trade in tandem with spot uranium, and he's bullish on prices near-term. The firm's calling for uranium prices to hit $60 during the first quarter of 2022. "With tighter markets due to demand from the Sprott Physical Uranium Trust... and rising acceptance of nuclear's potential role in decarbonizing, we expect rising term contracting activity in the near to medium term," Winder wrote in a note to clients. A robust contract book could pave the way for Cameco to restart its McArthur River mine and Key Lake processing facility, which have been suspended since 2018 following prolonged market weakness. Bank of America said restarting the operation would boost 2022's expected EBITDA on an adjusted basis by 84%. "A growing term contract book should ultimately lead to a material improvement in profitability," the firm noted. "Rising trends in both spot and long-term prices are likely to incentivize utilities to contract in the 5+ year time frame today, in order to mitigate the risk of contracting at much higher prices in the future." Saskatchewan-based Cameco is one of the largest uranium producers in the world. The company currently has operations in North America, Asia and Australia. —CNBC's Michael Bloom contributed reporting.
Cameco is one of the world's largest publicly traded uranium companies.