On the back of just one news release last week, uranium stocks received a significant bump upwards and the spot price jumped 10% in a single day. The news is that, by the end of January 2018, Cameco will suspend production at the McArthur River Mine and its Key Lake processing facility.

McArthur River is the world's largest uranium mine. Located in the Athabasca Basin (no surprises there) the mine is responsible for a considerable portion of global uranium production. In fact, analysts estimate that the suspension at McArthur River / Key Lake will remove approximately 7% of primary supply in 2018.

The suspension is set for a ten-month duration, but I strongly suspect this number could be fluid. After all, Cameco has already shut down its Rabbit Lake uranium mine and slashed its investor dividend from $0.40 to $0.08 per share. In other words, they are reducing operations stage-by-stage to position for the uranium upswing and are refusing to enter into long-term sales contracts until prices rise. Since no one can be certain exactly when that will occur, Cameco could well tighten its belt further if the market doesn't snap out of its malaise in 2018.

Cameco isn't the only one pulling back. After reducing its production by 10%, the world's largest uranium supplier (Kazakhstan) has signalled it may apply further cuts.

The great producer 'pull back' should not be a surprise. Supply overhang, worries that the Japanese would dump the bulk of their inventories into the spot market, as well as an extended delay in utilities returning to the pre-Fukushima buying cycle has exerted brutal downwards pressure on spot prices. Analysts and industry insiders like myself and Fission President and COO, Ross McElroy, have warned for some time that most producers are losing money at current prices. The burn has finally begun to reach the point of agony.

This is clearly a very difficult time for Cameco and its investors. I have enormous respect for Tim Gitzel and team but at the same time, I'm relieved and encouraged by the announcement. Having been in the uranium sector since 1996, I've seen a lot of ups and downs in the sector and its really a case of simple math. A look at the WNA's facts and figures confirms that reactor numbers will continue to climb, while at the same time, producers are putting production on hold and refusing long-term supply commitments until prices rise. While I still can't say for sure how long we still have to wait for a consistent uptick in prices, I can say the wait just got a lot shorter.

Dev Randhawa, CEO of Fission Uranium.

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