One of the main uses for the radioactive substance uranium is in the generation of nuclear power.
As a result, that means the fortunes of uranium stocks are closely tied to the popularity of nuclear power, which hasn’t exactly earned itself the best reputation over the previous few decades.
The Chernobyl disaster in 1986 was a blow, albeit one from which the nuclear power industry was somewhat able to recover.
The Fukushima disaster in 2011, along with the increased push to move towards renewables, however, looked set to prove fatal to nuclear power. By the end of the 2010s, it looked like a matter of time before nuclear energy was declared ‘extinct’.
Nevertheless, nuclear power looks set to make an unlikely comeback. Countries that had previously dismissed nuclear power as a clean energy source are increasingly coming to see it as a viable option to expedite the move away from fossil fuels.
Increasing geopolitical tensions and problems with oil (see also ‘How To Invest In Oil With Little Money‘) and gas supplies have only served to catalyze this move, with many more countries needing to diversify their energy supply for both environmental and security reasons.
There is genuine hope, according to the International Atomic Energy Agency, that the world’s global nuclear generating capacity will reach 792 gigawatts by 2050, nearly doubling from 393 gigawatts in 2020.
All of this, as you can imagine, has been good news for uranium stocks- practically every uranium stock listed in the U.S more than doubled in 2021.
Bearing that in mind, it’s understandable that investors are beginning to show serious interest in uranium stocks again. So, which are the best stocks to invest in?
You’ve come to the right place to find out. In this article, we’re going to run through some of the best uranium stocks to hold today.
Cameco (CCJ)
Cameco is undoubtedly one of the major players in the uranium market. As one of the world’s largest miners of uranium, what Cameco does matters, particularly on the supply side of the industry.
Being so influential on the supply side means that Cameco can make decisions that affect the whole uranium market- for example.
They recently gained plaudits from the rest of the industry for taking measures to significantly curtail their production of uranium, thereby constricting supply, easing concerns of oversupply, and shoring up prices.
Having such flexibility is a massive advantage for the company, especially at a time when the whole uranium industry seems to be at a turning point. Cameco seems to be well placed to take advantage of growth in the industry.
The company has the capacity to produce 53 million pounds of uranium concentrate annually, and has a further 455 million pounds of proven and probable uranium reserves.
As if this wasn’t enough, Cameco has undertaken extensive exploration projects and has good reason to believe that it is also sitting on some of the best undeveloped uranium projects on the planet.
Cameco reported revenue of $361 million in the third quarter of 2021, much of this driven by growth in long-term contracts. This is good news for Cameco, which makes most of its money from these long-term deals as opposed to the ‘spot’ market.
With the Sprott Physical Uranium Trust Fund buying up much of the uranium on the spot market, supply has constricted to the point that utilities have been forced to sign long-term contracts with uranium producers like Cameco.
Securing higher uranium prices for the long term. For example, the company ringfenced 20 million pounds of triuranium octoxide for long-term contracts in 2021, and that figure may be expected to increase going forward.
A final attraction to Cameco as an investment is its strong liquidity buffer, giving the company room to maneuver and flexibility to make smart investments in growth projects and industry development.
The company currently boasts $1.4 billion in cash and short-term investments, and has an undrawn credit facility of $1 billion, too.
Uranium Energy (UEC)
Uranium Energy is a Texas-based company that has been working in the field of uranium exploration and mining since its establishment in 2003.
Unlike Cameco, which is an established uranium miner, Uranium energy has been pursuing a strategy based on acquisition.
Instead, the plan has been to buy uranium off the spot market and hold on to it, hoping to make money off uranium prices that only seem to be heading in one direction.
That’s not a business plan that most investors would bet on, but there’s a key caveat.
Uranium Energy is about to start its own production in earnest, having recently struck a deal with Uranium One, the world’s 4th largest uranium producer (and controlled by Russia’s State Atomic Energy Corporation, Rosatom) for their American operations.
The deal has given Uranium Energy control over one of the largest uranium processing plants in the United States, with a capacity to produce 2.5 million pounds of uranium annually.
As well as taking control over an estimated 42 million pounds of uranium in Wyoming’s Powder River and Great Divide basins. Production, then, seems ready to go, although the company may wait for higher prices before making the plunge.
Either way, Uranium Energy is well positioned to secure lucrative long-term utilities contracts in both Texas and Wyoming, and become one of the biggest uranium miners in the U.S. by capacity.
With this in mind, it’s easy to see why Uranium Energy stock has increased by nearly 52% over the last year. Nevertheless, the stock has corrected downwards from an all-time high of $5.80 per share to $3.96 at the time of writing.
With the stock seemingly back on the up, now seems to be a good time to buy. A handful of hedge funds have pulled out in the last few months.
But the company is still attracting some $12.3 million in investments from seven different hedge funds, spurred on by 213% returns for investors and the news of the recommencement of the Burke Hollow ISR project in Texas, which is the largest of its kind in the country.
Denison Mines (DNN)
Established in 1997 as the Uranium Corporation and known as Denison Mines since a 2006 name change, this Canada-based company is involved in the exploration, acquisition, and production of uranium.
Most of the company’s operations are based in Canada, with well-known uranium mines at Elliot Lake and in Blind River. They have also recently moved into the Athabasca Basin, which is seen as an important asset base for the uranium mining industry.
The company has interest in several other strategic assets, as well as a potential exploration area of some 280,000 hectares.
With that in mind, Denison Mines believes it is positioned to become one of the lowest cost producers of uranium, certainly in Canada.
This includes their operations at Wheeler River, which could be a catalyst for the company to kick on to greater success. Wheeler River is worth $1.3 billion on its own according to current valuations, and will have an initial rate of return of 38.7%.
Therefore, it seems like share prices are likely to tick upwards once production starts there in earnest.
As a guide, the share price ticked up by 5% when Denison Mines simply announced plans to capitalize on a newly discovered uranium-rich deposit in McClean Lake.
Outside of that growth potential, Denison Mines boasts holdings of 2.4 million pounds of Uranium with a market value of 131 million CAD, and equity investment in both GoviEx Uranium (GVXXF) and Skyharbour Resources (SYHBF).
As a result, the company has not insubstantial exposure to several different Uranium assets. Activity in strategic investments like these, as well as a solid degree of liquidity.
Increases Denison Mines’ financial flexibility and should see them well placed to make valuation-boosting asset acquisitions in the coming years.
With all that said, Denison mines look like an attractive uranium stock to invest in. Hedge funds seem to have realized the opportunity.
There are currently a total of ten investing in the company to the tune of $18.1, a significant increase of more than 100% from the previous quarter’s investment of $7.6 million.
The share price is currently down at $1.26 from a November 2021 high of $2.14, making now look like a pretty good accumulation opportunity.
Sprott Physical Uranium Trust Fund (SRUUF)
The last couple of years have witnessed the launch of the Sprott Physical Uranium Trust Fund (SPUTF). It is an exchange-traded fund (ETF) and is now the largest of its kind with a focus on physical uranium.
You may have noticed that we mentioned the SPUTF earlier on in the segment about Cameco.
Like Cameco, the SPUTF has a major role to play in the industry. In particular, its recent aggressive campaign for buying uranium on the spot market has helped to restrict supply, thereby driving up prices.
Whilst they had just 18.3 million pounds of uranium at the end of July 2021, by the end of November this had more than doubled to 41 million pounds.
The rate of growth has since slowed, but continued steadily. At the time of writing, the SPUTF currently holds more than 55.5 million pounds of the stuff.
The timing couldn’t be better, and the SPUTF is looking to grow as rapidly as it can by exploiting strong investor interest in uranium whilst it holds. It has done this by getting regulatory approval to issue units up to a value of $3.5 billion, up from $1.3 billion.
The more investor’s interest in uranium grows, the more units the SPUTF will be able to sell, and the more uranium it’ll have to buy to hold against those prices.
As it does so, it slowly drives up uranium prices in the spot market. That’s why, if you’re looking for an investment to benefit most from a rally in the spot market, buying units of SPUTF is your best bet.
In another reflection of the strong interest in uranium that the SPUTF is seeing right now, they are also buying another ETF, North Shore Global Uranium Mining, to create their own Sprott uranium equity ETF.
No one knows for sure what will happen with the SPUTF, but the early signs are that it might go on to become one of the biggest winning uranium stocks in the long run.
Uranium Royalty Corporation (UROY)
A relatively young company, certainly amongst the big hitters in the uranium industry, the Uranium Royalty Corporation makes investments in uranium royalties and other finances driven by uranium.
Perhaps because of its infancy, the company has made quite the impression on the markets over the last few years.
Over the last twelve months, for example, it has seen returns for its investors touching 230%, with the share price doubling over the course of just a handful of days at one point in mid-2021.
One thing that caught investors’ attention was the company’s recent move to buy some 300,000 pounds of uranium on the spot market.
With the actions of the SPUTF already driving up uranium prices at extremely rapid rates, any attempt by a uranium company to buy further uranium on the spot market- no matter how paltry in comparison- is welcome.
The effect, as we know, will be to further restrict the supply, as a result helping to support uranium prices.
The Uranium Royalty Corporation holds royalty interests in a wide array of notable projects, including Reno Creek, Roca Honda, Church Rock, and others.
Such was the enthusiasm around the stock last, analysts upgraded their price target (see also ‘What Is PT In Stocks?‘) on the stock from 4.25 CAD to 7 CAD.
At one point in autumn 2021 the stock hit a high of over $5.5 per share, with the thinking being that the corporation stood to benefit from buying 300,000 pounds of uranium at something approaching an 18% discount as prices continued to rise.
The hype has calmed down somewhat since, but the stock remains buoyant. Since April 2022, the target price for Uranium Royalty Corporation stock is $3.6, perhaps influenced by something of a downwards trend in uranium stocks beginning in February.
At the time of writing, prices seem to be ticking back up nicely, and Uranium Royalty Corporation sits at $2.96 per share.
Frequently Asked Questions
What Should I Know About Investing In Uranium?
Uranium, like all commodities, tends to be cyclical and extremely sensitive to supply and demand. Uranium, though, is slightly different from other commodities in one absolutely glaring sense- it is radioactive.
As a result, it cannot be stored in bulk, leading to a supply that is comparatively restricted compared to other commodities.
Companies only mine uranium when they know they have buyers or space to store it. In theory, a constricted supply makes for higher prices, if the demand is there.
Is Uranium A Good Investment in 2022?
There are two pretty good reasons to be optimistic when investing in uranium, one that is short to medium term, and one that is longer term.
The first, and ultimately tragic reason, is the Russian invasion of Ukraine and the ensuing economic and geopolitical fallout.
The impact of this is twofold. Firstly, Russia is a major exporter of uranium. Russia supplies some 16% of American uranium imports, and thus uranium was spared from sanctions against Russia.
Nevertheless, rumors of a Russian ban on uranium exports as retaliation for the U.S. ban on oil and gas imports have created an uncertainty around ongoing supply that has helped to drive up prices.
This uncertainty has come at a time when Europe has been attempting to ease its dependence on Russian fossil fuels anyway, and the war (see also ‘What To Invest In During War‘) has accelerated this trend.
Much of this investment into new energy sources is directed towards renewable energy, but there has also been a reappraisal in the role nuclear energy might play in a post-fossil fuels world, leading many European countries to draw up plans for an expansion of their nuclear power schemes.
That meshes with the wider, long-term point, and that is that many observers are expecting to see an increase in the amount of power generated by nuclear sources going forward.
At the time of writing, there are 445 operational nuclear reactors in operation around the world, with a further 52 currently being built. Many of these are China, which is planning 150 new nuclear reactors over the next 15 years.
Is Investing In Uranium Stocks Risky?
Although investing in uranium looks like a good bet on paper, it’s worth remembering that Uranium prices, and uranium stock prices are in fact quite volatile.
Even through the relatively strong last two years, there have been several quite drastic falls in uranium prices- and as a result uranium stock prices- that have nearly matched the impressive increases.
For example, the 60% increase in prices between August and September last year was swiftly followed by a steep fall of 25%.
In the short term, much of what happens depends on the Russia-Ukraine crisis. In the longer term, it’s also worth remembering why uranium was out of fashion in the first place- nuclear disasters.
Should another nuclear disaster occur, we could very well see the market for uranium crash (see also ‘What Happens To Gold When Stocks Crash?‘), as it did in 2011 after the Fukushima disaster. In the years following, uranium prices fell from a high of over $70 to a low of just $17.95 in 2016.
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