The rising demand for carbon-neutral energy sources throughout the world combined with a supply shortage has caused the price of uranium to rise to a 15-year high.
A renowned investment management firm has predicted that the price of the commodity will continue to rise in the coming days, a theory shared by certain banks and research organizations as well. It was worth about US$50.60 in January and is now currently valued at over US$80.
“There is just more room for the uranium price to run. It’s been incredibly resilient against a backdrop of very soft commodity prices and very soft asset class prices across most markets around the globe,” said Sprott Asset Management’s CEO John Ciampaglia on Tuesday in an interview with S&P Global Commodity Insights.
The Sprott Physical Uranium Trust (TSX: U.U) run by the firm owns 62 million pounds of yellowcake. The fund’s assets were valued at about US$631 million in mid-2021 when it was established and are now worth over US$5 billion as a result of the metal’s rising price, according to S&P.
Shares of the trust have risen by over 105 per cent since it was created. About 80 per cent of its investors are hedge funds, major institutions or family offices.
The growing number of nuclear plants under construction is another factor contributing to the commodity’s rising price. Approximately 60 power-generating facilities are currently being built throughout the globe, requiring a vast amount of uranium fuel.
Following the aftermath of the 2011 Fukushima nuclear disaster in Japan enthusiasm for nuclear power among many governments was deterred, but that wariness has since faded.
“You’ve got an industry that’s scrambling to meet the supply requirement that’s forming and the market today is already out of balance,” said Ciampaglia. He says that uranium production will need to increase two-fold in the next 20 years to meet that demand.
Twice in the past fifty years, the price of uranium has shot up over 600%.
Both were due to a “black swan” event—one that cannot be predicted, but completely alters the landscape of an industry.
Another such event is taking place right now.https://t.co/FnmYP1MuhH pic.twitter.com/kvSRpLlqY3
— Katusa Research (@KatusaResearch) October 3, 2023
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Uranium stocks are soaring too
Top uranium companies in Canada have had rapidly rising stock prices in recent days as a result of the growing demand for uranium and nuclear energy.
Shares of the leading uranium producer Cameco Corporation (TSX: CCO) (NYSE: CCJ) have risen by almost 100 per cent since January. The second-largest Canadian uranium company NexGen Energy Ltd. (TSX: NXE) has seen its stock price shoot up by over 73 per cent in the past six months as well.
“Cameco’s advantageous geographical production base, its position as the largest and most liquid uranium stock, as well as attractive earnings before interest, taxes, depreciation and amortization growth should support further upside to its stock price,” said Bank of Montreal (TSX: BMO) mining analyst Alexander Pearce earlier this month.
The nuclear upswing has prompted increased activity in Canada’s Athabasca Basin in particular.
NexGen became the first company to receive full environmental authorization for a Saskatchewan uranium project in over two decades in early November after a rigorous assessment from the provincial government. The province’s Premier Scott Moe said the project would help fulfill the growing demand for uranium in global markets while providing employment opportunities to residents of the province.
Meanwhile, companies like ATHA Energy Corp. (CSE: SASK) (FRA: X5U) (OTCQB: SASKF) have been working to establish their stature in the region.
ATHA is a well-funded junior explorer with the largest land package in the Athabasca Basin. The company completed a major electromagnetic survey on its 3.4 million acres of land there earlier this year and is processing the data to identify top targets for drilling next year.
The stock price of the world’s top uranium-producing country’s state-owned company Kazatomprom (FRA: 0ZQ) has jumped up by nearly 40 per cent in the past year too. The Kazakhstani company reported a 25 per cent increase in its revenue year-over-year for its 2023 H1 results.
The current price of uranium makes it a very appealing investment. Investors will just need to assess the correct time to sell their assets before it inevitably drops back down again in the coming years.
Some analysts have predicted that the metal will be worth US$100 per pound by Christmas.
ATHA Energy is a sponsor of Mugglehead news coverage
rowan@mugglehead.com
