Uranium is an abundant, radioactive material that is used in nuclear power plants to generate electricity. While uranium and fossil fuels are non-renewable resources that are extracted through mining, uranium is a cleaner and safer source of energy compared to fossil fuels.
Uranium Vs. Fossil Fuels
The greenhouse gas emissions from coal are 273 times higher compared to nuclear energy (820 tonnes vs. 3 tonnes). Similarly, the death rates from accidents and air pollution are exponentially higher for fossil fuels (e.g. 0.03 deaths/TWh for nuclear vs. 18.4 for oil).
Besides safety and greenhouse emissions, the energy output and plant capacity are two other important distinctions. One uranium fuel pellet has the same output as a ton of coal or 149 gallons of oil. Nuclear plants can operate at maximum power 92.5% of the time, which is significantly higher than the capacity of natural gas (about 57%), coal (approx. 40%), and solar (nearly 25%).
The Uranium and Nuclear Power Market
While fossil fuels are still responsible for 17,000 TWh of the 25,000 TWh of global electricity generation, the future of nuclear-based generation looks promising. Currently, about 55 power reactors are under construction in 15 countries, including India, China, and Russia. In terms of reactor quantity, the top 5 countries, as of 2019, include the U.S. (98 reactors), France (58), China (46), Japan (38), and Russia (36).
As of Jan 1, 2019, there were 450 commercial nuclear reactors requiring about 59 200 tU annually. Experts project the global annual reactor-related uranium requirements (excluding mixed oxide fuel [MOX]) to be between 56 640 tU and 100 225 tU by 2040. North America, European Union, and East Asia are leading consumers. The top 5 producers of uranium, as of 2018, include Kazakhstan (41%), Canada (13%), Australia (12%), Namibia (10%), and Uzbekistan (6%).
While demand for cleaner fuels may impact the demand for uranium, factors such as fuel price, politics, and disasters can also impact the market. For instance, the Mar 2011 Fukushima disaster triggered a shutdown and suspension of nuclear power plants in Japan and other countries. More than a decade later, uranium producers are reviving suspended projects worldwide. Recently, the political situation in top uranium producers Kazakhstan and Russia drove up uranium prices. The spot price of uranium increased to $49.75 on Jun 30, 2022, from $32.25 on Jun 30, 2021.
Uranium Investment Options
Stocks and exchange-traded funds (ETFs) are common ways of investing in uranium. Here are some of the popular investment options in the uranium market:
1. Cameco Corp. (NYSE: CCJ, TSX: CCO)
Cameco Corp. (CCJ) is a leading uranium producer, with total measured and indicated reserves of 447.4 million pounds, spread across 14 properties. In Feb 2022, the company announced its plans to restart uranium production at McArthur River/Key Lake, which had been idle since 2018. The Saskatoon, Canada-based company has a market cap of $10.23 billion, and its shares were trading at $25.77 on Aug 5, 2022, compared to $17.58 on Aug 10, 2021.
Cameco expects an improvement in earnings due to: a strong balance sheet, improving fundamentals, a growing contract portfolio, and making McArthur River/Key Lake operational. Therefore, it has announced an increase of 50% to its 2020 dividend. CCJ also plans on slowing production and concentrating on selling the reserves it possesses. In 2021, the company was operating at 75% below productive capacity. By 2024, it plans to operate at about 40% below productive capacity.
2. Uranium Energy Corp. (NYSE: UEC)
Uranium Energy is a Texas-based uranium mining and exploration company operating mines in southwestern U.S. and Paraguay. UEC’s stock price nearly doubled in the last 12 months, reaching $4.26 on Aug 5, 2022, from $2.25 on Aug 10, 2021. The company has a market cap of $1.27 billion.
The U.S. warehoused holdings of the company equal 4.1 million pounds, according to President and CEO Amir Adnani. The company also recently acquired all issued and outstanding shares of Uranium One Americas, Inc. The deal includes about 37.6 million pounds of measured and indicated resources.
3. Energy Fuels Inc (NYSEAMERICAN: UUUU, TSX: EFR)
Energy Fuels is a leading producer of uranium in the U.S., with milling operations in Utah and mining operations in the southwestern U.S. The company’s conventional uranium mill, White Mesa Mill, has produced more than 6 million pounds of uranium since 2013. Besides the conventional mill, the company also owns the Nichols Ranch ISR facility in Wyoming and the Alta Mesa ISR project in Texas. UUUU has a market cap of $1.42 billion CAD, and its stock price rose from $5.49 on Aug 10, 2021, to $6.98 on Aug 5, 2022.
During Q2-2022, UUUU entered into three long-term uranium sales contracts with U.S. nuclear utilities. According to Energy Fuels President and CEO Mark Chalmers, with up to 4.2 million pounds of uranium deliveries between 2023 and 2030, the contracts will help the company’s uranium business for many years to come. Besides uranium, UUUU is in the vanadium, rare earth, and medical isotope markets. The company expects to produce 100,000 to 120,000 pounds of uranium in 2022.
4. NexGen Energy Ltd (NYSE: NXE, TSX: NXE, ASX: NXG)
NexGen Energy Ltd. is a uranium exploration and development company with projects in Sakatchwen’s Athabasca Basin. The company’s market price rose by 7.09% between Aug 10, 2021, and Aug 5, 2022, reaching $4.23. The market price of NXE is $2.63 billion CAD.
NXE’s Rook I project hosts multiple sites, including the Arrow Deposit, the South Arrow discovery, the Cannon discovery, etc. The company completed the Rook I Feasibility Study in Feb 2022 and has moved into the Front-End Engineering Design (FEED) stage of project development.
5. Iso Energy Ltd (TSX-V: ISO)*
IsoEnergy Ltd. is a Saskatoon-based uranium exploration and acquisition company with a market cap of $364.23 million CAD. The stock price of ISO increased from $2.19 CAD on 12 Aug, 2021, to $3.38 CAD on 11 Aug, 2022.
ISO’s projects include Gelger, Radio, Thorburn Lake, and Larocque East. The company recently announced a Resource Estimate of 48.61 million pounds for the Hurricane uranium deposit on its Larocque East project.
*At the time of publication, Kin Communications Inc. was contracted to provide investor relations services for this company.
1. Global X Uranium ETF (NYSE: URA)
The Global X Uranium ETF provides exposure to a wide range of companies involved in mining and nuclear components. URA’s 47 holdings include Cameco Corp., Energy Fuels Inc., BHP Group Ltd., Rio Tinto PLC, Nac Kazatog-regs, etc. The net assets of the company are $1.52 billion.
URA’s market price was $21.33 as of Aug 5, 2010, which is an 11.97% appreciation compared to Aug 10, 2021. The ETF tracks the Solactive Global Uranium Total Return Index and distributes it semi-annually.
2. North Shore Global Uranium Mining ETF (NYSEARCA: URNM)
URNM aims to invest 80% or more of its assets in the securities of the North Shore Global Uranium Mining Index (URNMX). The index tracks companies that have at least half of their total assets in uranium mining, production, holdings, royalties, or industry-supporting activities. The 36 holdings of the ETF include Caemco Corp., Uranium Energy Corp., Nexgen Energy Ltd., Energy Fuels Inc., Yellow Cake PLC, etc.
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