Uranium’s Atomic Rocket
While uranium’s price has been rising slowly …
… it’s nothing compared to the doubles, and even triples, we’ve seen for some uranium mining stocks since last fall.
What’s going on?
Well, it’s because investors are seeing down the road. In fact, they see FOUR factors conspiring to light a fire under the uranium market.
Factor 1: Increasing Demand
The World Nuclear Association’s Fuel Report notes there are 53 new reactors under construction, with over 100 more in the planning stage, and another 320 proposed … mostly outside the United States.
Factor 2: Falling Production
Global uranium production fell to 123 million pounds last year — the lowest level since 2008 — as COVID-19 swept through workers’ ranks.
And BMO Capital Markets is forecasting a 33-million-pound deficit this year, or about 18% of current demand.
In fact, U.S. production fell so far in 2020 … the Energy Information Administration (EIA) couldn’t even report it!
Factor 3: A Turn in the Public Perception of Nuclear Power
Much of the world backed off of nuclear power after the accidents in Russia (Chernobyl disaster in 1986) and Japan (Fukushima Daiichi nuclear disaster in 2011). But public opinion is slowly changing.
Even formerly anti-nuclear activists are turning pro-nuclear, at least for power generation.
Names include former U.K. Prime Minister Tony Blair, former Minnesota Senator Al Franken … even Greenpeace co-founder Patrick Moore, environmental journalist George Monbiot and Hugh Montefiore, a founder of Friends of the Earth, which is a large international environmental organization.
Factor 4: President Joe Biden
Starting with former President Donald Trump’s Nuclear Fuel Working Group, a bipartisan effort is underway to support U.S. uranium mining … and to establish a national reserve.
The Biden administration is upping the ante, telling lawmakers and companies that it supports taxpayer subsidies to keep nuclear plants from closing.
And the president has set an ambitious target of 100% carbon-free electricity by 2035. That’s just 14 years away … and markets are pricing in the fact that he’ll need to support nuclear energy to reach that goal.
Bottom line: I expect the price of uranium to DOUBLE in the next couple of years. So, how should you play it?
One way is with the physical metal …
Uranium Participation Corp. (TSX: U.TO) is a physical uranium fund that invests substantially in all of its assets in uranium oxide and uranium hexafluoride rather than a portfolio of futures contracts.
It currently trades on the Toronto Stock Exchange. But Sprott Inc. (NYSE: SII) is relaunching it as the Sprott Physical Uranium Trust … with plans to list it on the New York Stock Exchange (NYSE) as a more traditional investment fund trust.
Uranium STOCKS, however, are an even more attractive option for investors looking to gain exposure to this transition.
Here’re three companies that look poised to win:
1. Cameco Corp. (NYSE: CCJ) is the world’s largest publicly traded uranium company. So, it’s uniquely positioned to expand its control over the market. And its footprint in Kazakhstan, Canada and the U.S. will only grow.
The company holds 455 million pounds of proven and probable mineral reserves, with a capacity to produce upwards of 53 million pounds of uranium concentrates.
As demand increases, Cameco should be a big winner.
2. UR-Energy (NYSE: URG) is a junior miner with a lot of room to grow.
The company’s latest project, Shirley Basin, was acquired in 2013. Up to 6.3 million pounds of U3O8, a uranium compound, could be produced by this up-and-comer.
And its Lost Creek facility in Wyoming has a current capacity of 2 million pounds per year.
This may be a good value play if the company can scale up production as demand increases.
3. Uranium Energy Corp. (NYSE: UEC) has projects in Wyoming, Texas, New Mexico, Colorado, Arizona, Canada and Paraguay. Spreading the risk to different regions adds to the company’s stability.
It’s also entirely unhedged … and massively leveraged to uranium’s price as a result. That means Uranium Energy Corp. is more likely to be able to take advantage of uranium’s rising spot price.
These are all great picks, but remember to do your own due diligence before buying anything.
This white-hot metal looks ready to trend up big-time … which means the stocks leveraged to it could blast off like a fleet of atomic rockets. And that means profit potential galore.
All the best,
P.S. Exchange-traded funds (ETFs) — tracking a basket of uranium stocks — are also available. In fact, one of my Wealth Megatrends picks is up 7% in just two weeks.