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Why the Paladin Energy Ltd share price has gone gangbusters today

It certainly has been a stunning end to the week for shareholders of Paladin Energy Ltd (ASX: PDN). In early trade its share price has risen a massive 33% to 13 cents, despite there being no news out of the uranium producer.

Today’s jump mirrors a similarly large gain in its Canada-listed shares overnight on Wednesday. They rose 35% that night, before dropping back a touch yesterday to 12.5 Canadian cents.

These gains appear to be related to renewed optimism for uranium prices in the year ahead.

It’s no secret that the uranium producers have been under a lot of pressure in recent times. Uranium was the worst-performing commodity in 2016, tumbling 41% to a 12-year low of US$18 a pound according to the Financial Times.

But prices have started to recover now, much to the delight of Paladin, Energy Resources of Australia Limited (ASX: ERA), and Summit Resources Ltd (Australia) (ASX: SMM).

Prices were given a boost this month when major Kazakhstan-based uranium producer Kazatomprom announced that it was committed to reducing its production levels by 10% in 2017.

This is roughly the equivalent of a 3% cut in global output according to Mining.com and should go some way to reducing the current oversupply of uranium.

In addition to this, demand could increase if there are further nuclear power plant restarts in Japan this year. The Institute for Energy Economics Japan has forecast for 14 nuclear power plants to have been restarted by the end of 2017.

So all in all things don’t look too bad for Paladin right now. Shareholders have not had a lot to shout about in the last few years, but things could at long last be changing.

Whilst it is still too early for an investment for myself, I’ll certainly be keeping a close eye on this one.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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