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How to invest in uranium in 2024

Source: CNN

Date: June 07, 2024

By Matt Whittaker Paul Curcio David Tony, CNN Underscored Money

The power of the atom can also power your portfolio.

Although uranium is a niche for investors among many other energy industry choices, a prudent allocation to the nuclear fuel can give a certain glow to your holdings. Uranium prices have heated up as a host of short-term factors align with the long-term global push to reduce the use of fossil fuels.

“Helping to push prices up are limited supply and nuclear power being seen as key in the fight against climate change due to its zero-carbon emissions,” said Michael Ashley Schulman, chief investment officer with Running Point Capital Advisors.

In addition to carbon-free electricity, uranium-fueled nuclear power is attractive for governments because of the increased desire for energy security, especially after Russia’s invasion of Ukraine threw global energy markets into turmoil.

“In the face of geopolitical supply risks, nuclear energy holds advantages that other fuels such as oil, gas and coal cannot replicate,” said World Nuclear Association spokesman Henry Preston. “It is for this reason that governments across the world are considering increasing their use of nuclear energy as a practical means of enhancing their domestic energy security.”

Basics of investing in uranium

Even though it can seem exotic, the main thing to understand about uranium is that it is a commodity. That means it is subject to supply and demand fundamentals that can create boom-or-bust cycles.

Economic and weather conditions that mean more homes and businesses need electricity will also mean more uranium will be consumed to generate it. The opposite is also true.

Political, regulatory and ecological factors

Uranium also has additional considerations for investors that other commodities might not.

Public opinion about nuclear power is important. After a reactor accident in Japan in 2011, governments around the world turned away from nuclear power, beginning a profound price slump that has only recently come to an end.

Because uranium is used in weapons and because spent fuel is hazardous, the market is highly regulated. That means prices can swing based on factors that aren’t purely about supply and demand.

“Commodities almost always make for volatile investments,” Schulman said. “On top of that, uranium is under strict regulation by governments globally, unlike most other commodities. Government and safety regulation can affect mining, storage and distribution of this radioactive element and cause sudden swings in price and demand.”

Pros and cons of investing in uranium

Like any investment, there are potential benefits and risks.

Pros

For uranium, the main investment thesis is its long-term demand amid the energy transition away from coal and, eventually, natural gas for electricity production.

Mining companies are betting heavily on that, with higher prices sending producers scrambling to increase capacity.

During the downturn following the reactor disaster in Japan, uranium prices dipped below $20 per pound. Facing such low prices for their product, mining companies didn’t invest much in expanding existing operations, building new mines or exploring untapped uranium deposits.

CountryResources In 2021 (Metric Tons)Percentage Of World Total
Australia
16,84,100
28%
Kazakhstan
8,15,200
13%
Canada
5,88,500
10%
Russia
4,80,900
8%
Namibia
4,70,100
8%
South Africa
3,20,900
5%
Niger
3,11,100
5%
Brazil
2,76,800
5%
China
2,23,900
4%
Mongolia
1,44,600
2%
Uzbekistan
1,31,200
2%
Ukraine
1,07,200
2%
Botswana
87,200
1%
United States
59,400
1%
Tanzania
58,200
1%
Jordan
52,500
1%
 

Now, the demand pendulum has swung the other way as nations worldwide are embracing nuclear energy again as a key component in efforts to decarbonize their economies. With some short-term supply hiccups from large producers and an expected US ban on enriched uranium from Russia, the market lifted the price of uranium to a 16-year high above $100 in February 2024 before easing to around $90 as of late May.

But there are risks, too.

Cons

Another nuclear accident could tip the scales the other way.

“On the negative side are hangover fears of the element from the 1970s and 1980s anti-nuclear protests as well as the more recent Chernobyl and Fukushima nuclear disasters,” Schulman said.

Some environmental and native groups oppose uranium mining because of its history of environmental and social damage in the American West.

Still, some environmentalists have softened their stance toward nuclear power because of its potential to help fight climate change. And the mining industry says modern methods and regulation ensure that the past won’t be repeated.

In the long term, once the reactor market stops expanding, there is the risk of oversupply if mining companies don’t ramp down production fast enough.

“Although renewable energy sources like solar and wind are increasingly cost-competitive with nuclear power and could dampen demand for uranium in the long run, neither is as constant or as predictable as nuclear energy since solar doesn’t work at night and climate change makes wind patterns even more unpredictable for consistent power generation,” Schulman said.

How to invest in uranium

Despite its niche nature, it’s not difficult to find ways to invest in uranium through stocks and funds.

Uranium stocks

When thinking about uranium stocks, the most common are those of mining companies.

These include large producers like Cameco or Kazatomprom, mid-tier companies like Energy Fuels or Uranium Energy, or smaller companies developing mines or exploring deposits they think are promising.

CompanyProduction In 2022 (Metric Tons)Percentage Of World Total
Kazatomprom
11,373
23%
Cameco
5,675
12%
Orano
5,519
11%
CGN
4,627
10%
Uranium One
4,454
9%
Navoi Mining
3,300
7%
CNNC
3,247
7%
BHP
2,813
6%
ARMZ
2,508
5%
General Atomics/Quasar
1,740
4%
Other
4,098
6%
 

Investors can consider Cameco and Centrus Energy for their downstream operations. And Nuscale Power designs and markets small modular reactors.

Uranium ETFs

Investors looking for one-stop shops that roll many different stocks into one investment vehicle can consider uranium exchange-traded funds (ETFs).

The Global X Uranium ETF and VanEck Uranium and Nuclear ETF invest in miners and other parts of the nuclear supply chain. Meanwhile, the Sprott Uranium Miners ETF takes a more focused approach on mining companies.

Other exchange-traded vehicles include the Sprott Physical Uranium Trust, units of which represent a certain amount of physical uranium. Yellow Cake, a London-based holder of physical uranium, has a long-term agreement to buy uranium from Kazatomprom at a discount. And Uranium Royalty makes upfront payments to miners in exchange for payments from future production.

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