After hitting a 12-year low in late 2016 uranium spot market prices have more than tripled from $30 a pound in January 2021 to a recent peak of over $100 a pound, their highest level in 16 years. Although they pulled back to $95 a pound the market is still ripe for additional gains.
A combination of factors contribute to the rise. Energy demand is increasing globally and nations are exploring all possible sources to meet it. Especially after the Nord Stream 2 gas pipeline was sabotaged, nuclear energy is back on the table. Although Germany shut down its last remaining reactors last year, Japan, France and Norway all approved new measures for going nuclear. Over 20 countries have called for tripling nuclear capacity by 2050.
Yet the primary cause behind the recent spike was the world’s largest uranium producer Kazatomprom (OTCMKTS:NATKY) announcing it would not meet production goals for 2024 and 2025.
Kazakhstan produces over 40% of all the world’s uranium supply, according to the World Nuclear Association. Canada is second at 15% and Namibia comes in third with 11% of the total. However, no country produces more nuclear energy than the U.S. It accounts for 30% of global output.
Uranium miners are springing into action. Dormant mines in states such as Wyoming, Texas, Arizona and Utah were all recently restarted. With future growth assured, these are the three miners you will want to ride to new heights.
Cameco (CCJ)
Cameco (NYSE:CCJ) is one of the world’s largest uranium miners. It owns mines in Saskatchewan and the U.S., as well as having a 40% stake in a joint venture with Kazatomprom for a mine in Kazakhstan.
The miner has been at this for 35 years and its long-term supply contracts give it clear insight into where, when and how it needs to deliver uranium to customers. The newest contracts allow Cameco to guide for production of 18 million pounds at each of its McArthur River/Key Lake and Cigar Lake projects this year. The miner also acquired last November a 49% interest in Westinghouse Electric, one of the world’s largest nuclear services businesses. Brookfield Asset Management (NYSE:BAM) took the other 51%. Cameco expects to receive adjusted EBITDA of $445 million and $510 million this year from the venture, which will grow at a compounded growth rate of 6% to 10% a year.
Although CCJ stock fell after its fourth-quarter earnings report, shares are still up 68% over the past year. But trading at 25 times expected earnings and less than twice the long-term earnings growth rate, Cameco is a uranium stock to add that special glow to your portfolio.
NexGen Energy (NXE)
Canadian uranium miner NexGen Energy (NYSE:NXE) focuses on the Athabasca Basin of Saskatchewan. It wholly owns the Rook I project, the largest development-stage uranium project in Canada. The project is centered around the Arrow development, a world-class resource where NexGen just announced the discovery of new intense uranium mineralization. The miner will be dedicating drilling operations to the area as it reflects high potential for new resources.
While the project has substantial potential considering the resources contained in the region, investors also need to be mindful that NexGen does not generate any revenue at the moment. The company only receives money from the interest earned on its cash. At the end of December, its cash balance stood at $290.7 million more than double the amount it had the year before due to financings it took during the year. Current shareholders can expect to be diluted from these events but with the hope of realizing significant profits when the Rook I eventually comes online.
Despite this, NXE stock has doubled over the past year as investors foresee the potential of the Rook I project.
Global X Uranium ETF (URA)
A better way to gain exposure to uranium miners is through an exchange-traded fund (ETF) such as Global X Uranium ETF (NYSE:URA). The reason is that many miners are like NexGen Energy: development-stage outfits without actual mining operations. For example, Uranium Energy (NYSE:UEC) has interests in several mines but actually derives revenue by buying uranium on the spot market and then reselling it at higher prices.
Global X Uranium ETF is the largest uranium ETF with $2.8 billion in assets under management (UAM). It owns shares in 47 different companies but most of its assets are in Cameco, which represents 21.2% of the total. The next largest holding is Sprotts Physical Uranium Trust (OTCMKTS:SRUUF), an ETF listed on the Toronto Stock Exchange that represents 9% of total assets. As its name suggests, Sprotts holds physical uranium, some 63.6 million pounds of uranium 3o8 that has a market value of more than $5.5 billion.
Other miners in Global X’s portfolio include NexGen, Uranium Energy, Dennison Mines (NYSE:DNN) and others. Most of the miners are Canadian but Australian miners make up a large component too, with just a handful coming from the U.S.
There is a certain level of concentration because there are relatively few uranium miners. An ETF gives investors the best shot at exposure to the sector but as much diversification as possible. Shares of the ETF are up 48% from last year.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
