Nuclear power has been regaining popularity as countries look to shift away from fossil fuels and Russian gas. As the trend develops, investors are watching the price of uranium, and companies offering exposure to it. Here is a collection of stocks poised to benefit from the uranium rally.
Uranium Companies to Invest in
- Uranium Royalty has recently graduated to the main Toronto Stock Exchange to increase its “capital markets visibility”.
- Denison Mines has completed the feasibility study of a high-grade lithium deposit, which should produce 8.4 million pounds of uranium concentrate for the first five years of its mine life.
- Uranium Energy outbid Denison Mines last August to acquire UEX and its portfolio of high-grade projects in Saskatchewan’s Athabasca Basin.
The Royalty Stock
Uranium Royalty [URC.TO] is a pure-play on uranium royalties and the only royalty company in the uranium sector. Aside from royalty streams, it holds shares in Yellow Cake [YCA.L] and physical uranium reserves, including at Cameco’s [CCJ] Port Hope/Blind River facilities.
The stock offers exposure to the uranium price, which has been rising in recent months amid concerns about a potential supply shortage. The nature of its business means its assets, and thus its share price, can be subject to volatility, especially at present, given the war in Ukraine and political unrest in Kazakhstan.
In July, the company announced it was graduating from the TSX Venture Exchange to the main Toronto Stock Exchange.
“We believe that together with our existing Nasdaq listing, we are well positioned to increase our capital markets visibility as we continue to execute our long-term strategies in the exciting, and resurgent, uranium and nuclear energy industries,” said Uranium Royalty Corp CEO Scott Melbye in a regulatory release.
The Mining Stock
Denison Mines [DML.TO] reported its earnings for the three months ending 30 June last week, the highlight of which was the completion of its feasibility study for Phoenix, one of two high-grade uranium deposits at its Wheeler River project in Saskatchewan, Canada.
The pre-feasibility study had been released back in 2018, so an update was welcome news for investors. Phoenix has a mine life of 10 years, and the planned rate of production has risen approximately 43% for the first five years to 8.4 million pounds of U3O8, a concentrated form of uranium created after uranium ore has been mined.
Denison has spent several years de-risking the project, according to president and CEO David Cates. “The economics of [the] Phoenix mining operation remain exceptionally robust, despite industry-wide cost inflation, while most contemporary uranium development projects have not yet been tested against current cost inflation,” said Cates in a statement released with the earnings.
The second deposit, Gryphon, which is several years behind Phoenix, confirmed a mine life of 6.5 years and an expected annual production rate of 7.6 million pounds of U3O8.
The Diversified Stock
Uranium Energy (UEC) [UEC] is, according to its own definition, “the largest diversified North American-focused uranium company”. As well as having a major equity stake in Uranium Royalty Corp, it also boasts one of the largest physical uranium portfolios through warehoused U3O8.
Last August, UEC outbid Denison Mines to take control of UEX and its portfolio of high-grade projects in the Athabasca Basin of Saskatchewan. Then, in October, UEC acquired 100% of Rio Tinto’s [RIO] Roughrider uranium development project, also situated in the Athabasca Basin, to further strengthen its position in the region “with a critical mass of resources to enhance future production plans”.
A word of warning, however. UEC was the target of a short report by Kerrisdale Capital in March of this year. The New York-based investment management firm has alleged that, of the approximately 140 million pounds of uranium resources in the US, none can be mined profitably and “only about a quarter of the resources will be economically viable even at the much higher uranium prices”.
UEC didn’t issue a response to Kerrisdale Capital’s claims.
Another Way to Invest in Uranium
The Sprott Uranium Miners ETF
ETFs, or exchange-traded funds, offer an economical and diversified way to invest in a variety of stocks within a particular theme.
The Sprott Uranium Miners ETF [URNM] holds Uranium Royalty Corp, Denison and UEC. While the fund doesn’t provide a sector breakdown, it does look to invest at least 80% of its assets in securities of the North Shore Global Uranium Mining Index, which tracks companies that dedicate half or more of their assets to uranium mining. The fund is down 2% in the past six months.
The Global X Uranium ETF [URA], which tracks the performance of the Solactive Global Uranium and Nuclear Components Total Return Index, also holds the three stocks. The portfolio is weighted in favour of the energy sector (56.2%), followed by industrials (22.3%) and materials (18.7%), as of 31 July. Financials and information technology both have allocations of 1.4%. The fund is flat over the past six months.
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