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Uranium investors are becoming overly responsive

A group of uranium mining companies saw a plunge in stock prices on Monday after news that a nuclear power plant in southeastern China had pointed out performance problems. It was another unnecessary investor collapse.

Canadian uranium mining companies Cameco and NexGen Energy fell by nearly 10% and 9%, respectively, and baskets of uranium-related companies tracked by Global X Uranium ETFURA. 2.40%

It fell 6.5%. They had regained some of their lost land by Tuesday afternoon.

CNN’s reaction on Monday said the U.S. government was evaluating reports of an inert gas leak rather than radiation at a Chinese nuclear power plant co-owned by two Chinese energy companies and the French energy company EDF. It happened after reporting.

The market reaction was about the same as what happened after the 2011 Fukushima accident, with Kameko’s stock falling almost 13%. However, it has been a major blow to the industry’s impact on nuclear fuel demand over the years.

The Monday drop looks like an oversized reaction for several reasons. Uranium mining companies tend to have multi-year supply contracts with utilities, so there is little risk that nuclear power plants will immediately withdraw purchases from these mining companies.

Instead, the risk of a nuclear accident is whether it deprives future demand by shutting down the nuclear power plant in question, or whether the accident changes the government’s or corporate’s decision to build a new nuclear power plant in the future. Neither seems likely, but nuclear stocks have previously sold out under similar headings.

So far, the incident seems to have been a routine operational issue rather than an accident. This problem was flagged by the accumulation of noble gases in one of the reactor’s primary circuits.

EDF states that the cause is probably deterioration of the coating on some fuel rods, and that small amounts of accumulation are not considered dangerous. The company states that the presence of gas in one of the reactor’s primary circuits is “a known phenomenon studied and provided in the operating procedures of a reactor.”

Former U.S. Nuclear Regulatory Commissioner Jeff Merrifield told Bloomberg that the types of incidents reported at the Oyama Unit 1 reactor have occurred a sufficient number of times in the industry and operators know how to manage them. He added that it is usually not a threat of any kind.

Importantly, there was no evidence of real danger. No anomalous radiation has been reported from either Hong Kong, 80 miles from the power plant, or Macau, about 40 miles from the power plant.

Almost exactly 11 years ago, there was news that a fuel rod leaked at the Guangdong Daya Bay nuclear power plant in China, resulting in a slight increase in radioactive iodine and noble gases in the reactor cooling water.

It did not affect the operation of the power plant and had a modest impact on uranium-related resource performance.

Global X-Uranium ETFs fell 2.5% at the time, but Kameko’s share price actually rose. One of the big differences may have happened 11 years ago before the Fukushima incident, which blamed the industry and changed public perceptions of nuclear power.

The nuclear accidents of the past have, of course, made every story, including “nuclear” and “leakage”, quite burdensome.

In this case, the word related seems far more alarming than the actual health and economic implications.

Write to Jinjoo Lee (jinjoo.lee@wsj.com)

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Uranium investors are becoming overly responsive

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