The French nuclear fuels business Orano and Canadian uranium miner Denison Mines Corp. announced in late January that they will reopen a uranium mine that has been inactive since 2008.
The French nuclear fuels business Orano and Canadian uranium miner Denison Mines Corp. announced in late January that they will reopen a uranium mine that has been inactive since 2008. (Photo : by MICHAL CIZEK/AFP via Getty Images)
The mine's economics were unsound sixteen years ago due to falling uranium prices. They do now, as the price of uranium has nearly doubled in the last 12 months.
One obstacle to boosting supply even as demand rises is that businesses want to utilize a new mining technique that takes less time to scale up. Even then, they don't expect commercial production to start until 2025.
The world is trying to wean itself off of fossil fuels, which means that nuclear fuel must provide more power. The world's largest uranium miner, Kazakhstan-based Kazatomprom, has stated it won't produce as much as projected because it can't obtain all of the sulfuric acid it needs to extract the heavy metal. Meanwhile, the U.S. is considering banning uranium imports from Russia.
Following a significant nuclear reactor accident in Japan, uranium miners neglected to invest in new operations for years due to low pricing, which led to the production shortage and demand expectations.
Uranium Stocks
Rising uranium prices help mining businesses, but investors may gain from company-specific innovations like new mine finds and technical breakthroughs, according to Sharma. Because miners employ operating leverage to boost earnings, they can outperform the metal during periods of high uranium prices.
Cameco Corp., based in Canada, is one of the leading uranium mining firms in the West. Other Canadian participants in the market, besides Denison, are NexGen Energy Ltd. and Fission Uranium Corp.
Two diversified miners that extract significant amounts of uranium are Rio Tinto Group and BHP Group Ltd. Purchasing stock in firms such as these gives exposure to uranium while also acting as a safety net in the event that uranium prices decline. However, if uranium prices rise, these goliaths are less likely to outperform smaller businesses that are solely focused on the radioactive element.
There are company-specific risks associated with investing in mining firms, including labor issues, cost overruns, questionable permits, and poor management choices.
Incorporating nuclear utilities into the equation may also provide some hedge against erratic uranium prices. The utilities who have to purchase the materials profit as the price of the metal decreases. In an economic slump, utilities are often viewed as defensive moves since people will always want electricity, regardless of the state of the economy.
By grouping several distinct mining businesses under a single ticker symbol, as exchange-traded funds, or ETFs, do, investors in uranium stocks can mitigate some of the risks associated with individual companies.
VanEck Nuclear Energy and Uranium ETF
Investing in miners, nuclear utilities, nuclear power plant builders, and companies that supply the nuclear power sector is what the VanEck Uranium+Nuclear Energy ETF does.
NLR offers a 12-month trailing yield of 4.3% and an expense ratio of 0.61%. As of February 2, NLR has returned 36.6% in 2023 after underperforming in 2022. Looking ahead, the company is up 8.5% year to date in 2024.
Global X ETF for Uranium
The Global X Uranium ETF makes investments in businesses that produce components for the nuclear industry and mine uranium. URA, which has $3 billion in total assets and a 5.5% 12-month trailing yield, is performing well in its category in 2024, having gained 13.8% so far this year. This comes after URA earned a scorching 46% return on investment in 2023.
The three largest assets in URA's portfolio are NexGen Energy (6%), 9% of Sprott Physical Uranium Trust (OTC: SRUUF) units, and 23% of Cameco.
Uranium Miners ETF (URNM) from Sprott
The Sprott Uranium Miners ETF invests in uranium-related businesses, including those that mine, explore, develop, and produce the metal as well as those who possess actual uranium, hold royalties on it, or carry out non-mining operations that assist the mining sector. The North Shore Global Uranium Mining Index's equities comprise 80% or more of the fund's assets, therefore its returns typically mirror those of the index.
The top three holdings of URNM, which receive a weighting of around 14% apiece, are Kazatomprom, Cameco, and Sprott Physical Uranium Trust units, which account for over 75% of the company's assets. It also gives Denison Mines around 4% of the total.
Other options exist for investors to get financial exposure to uranium, which might contribute to supply constraints and drive up uranium prices in tandem with anticipated increases in demand from nuclear power plants as the energy shift picks up pace.
