The price of uranium rose steadily from $7.10 U.S. a pound in December 2000 to as high as $138 U.S. a pound in June 2007.

Prices have moved down from that speculative high to today’s price of about $40.00 a pound. But conditions look favourable for higher long-term uranium demand.

Risks and rewards of Canadian uranium stocks

Many emerging countries, such as China, India and Russia, are increasing their nuclear-power use as they switch from power plants that run on coal and oil. For example, China plans to build at least 60 nuclear power plants by 2020, including 24 that are currently under construction.

That’s brightening the prospects of one of the Canadian uranium stocks we’ve long covered in our Stock Pickers Digest newsletter. This company recently signed a big deal with a Chinese nuclear-power utility. Read on for further details.

In addition, there are now 59 nuclear-power plants under construction worldwide (including the 24 Chinese plants). That’s up from 34 in 2008 and 32 in 2007.

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While these factors look promising, investing in Canadian uranium stocks does entail some unique risks. With any mine, for example, there is a long lead time from exploration and discovery to production. That’s especially so with uranium, which needs extra regulatory approval because of its radioactivity.

Cameco: A world-dominating Canadian uranium stock that’s expanding production

In a recent Stock Pickers Digest hotline, we updated our buy/sell/hold advice on the world’s largest uranium producer, Cameco Corp. (Toronto symbol CCO).

The company supplies over 18% of global production. Most of the Canadian uranium stock’s uranium comes from its 70%-owned McArthur River mine and the Rabbit Lake mine, both of which are in Saskatchewan’s Athabasca Basin. It also owns the Crow Butte and Highland mines in the U.S.

Cameco is now developing Cigar Lake, the world’s richest unmined uranium deposit. The Cigar Lake mine could eventually produce more than 10% of global output. Production will likely begin in 2013.

Big Chinese contract adds growth prospects

The stock has moved up since June 24, 2010. That’s when the company announced its first major long-term uranium-supply agreement with a Chinese nuclear utility.

Under the agreement, Cameco will deliver 23 million pounds of uranium oxide to China National Nuclear Corp. (CNNC) by 2020. At current levels, that equals roughly one year of Cameco’s production.

CNNC is China’s largest nuclear-power producer. The state-owned company operates seven reactors with a total capacity of 5,100 megawatts. As well, it is building 10 of China’s 24 new reactors. Together, these new reactors will be capable of producing an additional 9,100 megawatts.

Separately, Cameco recently announced that it signed a memorandum of understanding with China Guangdong Nuclear Power Holding Co. (CGNPC). That will give Cameco the opportunity to negotiate a long-term supply agreement with CGNPC. The companies may also jointly develop some uranium mines.

CGNPC is China’s fastest-growing nuclear producer. Right now, it operates two nuclear-power stations with a total capacity of 4,000 megawatts. CGNPC is also building the remaining 14 new Chinese nuclear-power stations. That’s expected to push up its generating capacity to more than 50,000 megawatts by 2020.

You can get our latest buy/sell/hold advice on Cameco and dozens of other stocks that may be suitable for the part of your portfolio you devote to aggressive investing in Stock Pickers Digest. What’s more, you can get one month free when you subscribe today. Click here to learn how.