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Japan's reactor restarts to cause 'violent' surge in uranium prices: Cantor Fitzgerald

Uranium stocks are glowing on news of a Japanese court decision to remove one of the last major hurdles in the way of switching on Kyushu Electric Power Co.’s Sendai nuclear power plant.

A Kagoshima District Court rejected a petition filed by a group of residents near the Sendai plant in the city of Satsumasendai to halt the restart of two reactors following a go-ahead from safety regulators.

All of Japan’s 48 nuclear reactors were taken offline following the disaster at the Fukushima plant in 2011 caused by a massive earthquake and tsunami. Roughly 30 percent of Japan’s energy mix was nuclear-generated before the disaster.

Wednesday’s court decision follows a similar case where a community-based petition led to an injunction blocking the restart of the Takahama reactors last week. Cantor Fitzgerald’s Rob Chang says a second negative ruling would have cast doubt on Japan’s intention to resume nuclear energy production.

“Research continues to hold the view that a violent upward move in the price of uranium is inevitable based on an unavoidable supply deficit occurring in 2020 where uranium supply from all sources does not meet increased demand,” said Chang in a note to investors.

Prime Minister Shinzo Abe has backed efforts to bring reactors back online, arguing that the energy shortfall stemming from the ongoing shutdown is a danger to the economy, forcing Japan to import fossil fuels to compensate. Chang estimates Japan is spending US $40 billion annually to offset the electricity lost as reactors sit idle.

Ur-Energy Inc. (URE.TO) and Denison Mines Corp. (DML.TO) shot up in late afternoon trading Wednesday. Cameco Corp. (CCO.TO) shares also gained ground.

Cameco announced a new deal with India’s Department of Atomic Energy last week that would see the Saskatoon-based supplier deliver 7.1 million pounds of uranium concentrate on a contract that runs until 2020. India is the second-fastest growing market for nuclear fuel with 21 reactors, and another six expected to come online in 2017.

Chang notes uranium supplies are already below current demand levels and few mines are expected to come online in the next five years.

“We believe uranium will need to undergo dramatic price increases to incentivize supply to meet demand. Otherwise, the world will have inactive nuclear reactors and an electricity shortage,” he said.

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