Investing in the uranium renaissance

There has been a commitment to nuclear energy coming from environmental concerns, with COP28 seeing nuclear energy taking centre stage with 22 countries pledging to triple their nuclear energy capacity by 2050. Big producers are also signalling lower production. One of the world’s largest producers, Kazatomprom, reduced its production guidance by 14% and said it is unlikely to reach its 2025 targets. IGTV caught up with Tom Bailey from HANetf to discuss two ETFs of note.

(AI Video Summary)

Renewed eco-friendly focus on nuclear energy

The year 2023 was a turning point for the uranium industry, as many countries, including the US and UK, made a commitment to triple their nuclear energy capacity by 2050. This renewed focus on nuclear energy as an eco-friendly and reliable source caused the price of uranium to rise. For example, the price of uranium went from $48 per pound at the beginning of the year to $91 per pound by the end of the year. The demand for uranium increased as more countries embraced nuclear energy, while concerns about supply added to the price surge.

In recent years, the uranium market faced challenges due to the Fukushima incident in 2011, which made some countries hesitant about nuclear energy. This resulted in a lack of investment in uranium mines, leading to a supply shortage. Additionally, geopolitical events like a coup in Niger and production cuts by major producers worsened the supply issue. As a consequence, the spot price of uranium reached a high of $106 per pound in 2023.

What has caused the renaissance?

The renewed interest in nuclear energy can be attributed to various factors. Although there is still a commitment to renewable energy, the intermittent nature of solar and wind power has highlighted the importance of stable energy sources. This is where nuclear power comes in, as it provides a consistent base load of energy. Furthermore, concerns about energy security, particularly after Russia's invasion of Ukraine, have pushed countries to seek alternatives to imported gas. Nuclear energy offers stable prices and reduces vulnerability to supply shocks.

With the growing demand for uranium, investment opportunities in the industry have also emerged. The Sprott Uranium Miners ETF, which follows uranium miners and the spot price of uranium, has seen significant interest. Additionally, a new ETF called the Sprott Junior Uranium Miners will be launched to focus on smaller companies in the uranium industry. These companies can now afford to start or restart production due to the higher uranium price. They have greater potential for growth compared to larger companies, who may have already contracted their future production at lower prices.

Overall, the uranium industry has experienced a renaissance, with a greater recognition of nuclear energy's role in addressing climate change and energy security. This has led to higher uranium prices and attractive investment opportunities in the sector.