SRUUF - The Price Of Uranium Is Likely To Explode

2023-09-08 02:58:37 ET

Summary

• Demand for electricity, particularly for electric vehicles, is expected to increase substantially, creating a need for more uranium.
• The US is supporting domestic production of uranium, with funds allocated for the purchase of domestically produced uranium.
• Investors have various options for investing in uranium, including uranium producers, royalty companies, nuclear technology, and uranium funds.

This article examines the prospects for uranium and how investors can profit from investment in this commodity that is essential for nuclear power.

Nuclear Energy Is In Demand

There is great demand for electricity, and it will increase substantially in the near future. It suffices to ask where all the electricity for EVs (Electric Vehicles) is going to come from. EV batteries need to be charged, and for that to happen one needs electricity. Promoters of EVs do not seem to worry about how the grid is going to handle a great increase in the amount of electricity to be distributed everywhere. The cost of restructuring the grid is going to be huge. Hydrocarbons, including gas, oil and coal, are going to be phased out according to Green policy and replaced with wind and solar power. The problem with this proposal is that the wind does not blow consistently at the same strength and the sun sets every evening. Nuclear power will have to take up the slack as it is continuous. In fact, there are plans for a great number of new nuclear power plants around the world. China ( Bloomberg ) and India ( India announces plans to build more nuclear power plants) lead the way.

There are also other countries planning to build more nuclear power plants ( Plans for New Nuclear Reactors Worldwide - World Nuclear Association). It is clear that the demand for uranium is going to increase. This means that the price of uranium is also going to increase.

US Domestic Production

The largest American uranium company is UEC (UEC), which is gearing up production at the present time in consideration of the fact that Washington has earmarked funds for the purchase of uranium produced domestically. UEC has permits and facilities for the production of 6.5 million tons annually. It takes about eight to ten years to go from exploration to production for uranium. It is therefore unlikely that domestic production capacities are going to increase at a rapid pace even if the Government wants domestically produced uranium.

Investors Have Several Possibilities For Uranium

The biggest producers include Russia and Kazakhstan, but these countries are on the black list in America and there is a risk that political considerations may lead to restrictions on the importation of uranium from these suppliers. Camco is a Canadian producer and the second largest uranium company globally. It operates large mines in Canada and produces lots of uranium. UEC has already been mentioned, and it is likely that its stock price is going to go north as soon as it starts production.

It is highly risky to invest in exploration companies as they usually run out of cash for operations and are bought up for pennies on the dollar by bigger companies. On the other hand, it is much safer to invest in royalty companies. Uranium Royalty Corporation invests in uranium companies and produces dividends (UROY). Nuclear technology is also a good bet. Nuscale Power (SMR) provides technology for small reactors.

There is also an interesting uranium fund, namely, the Sprott Physical Uranium Trust ( Sprott Physical Uranium Trust ). Sprott buys uranium and holds it. Logically, the value of the fund should increase as the uranium price increases.

The price of uranium has in fact increased recently. It is probably going to go much higher soon. The recent increases are a bullish sign for uranium. See the chart below.

Uranium is now trading at just over $60 a pound, and it is a good time for investors to diversify some of their holdings into uranium. Carpe diem .

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