A Nuclear Renaissance Is Reviving Long Stagnant Uranium Markets – Sprott ETFs Is Giving Investors Multiple Forms Of Exposure To The Heavy Metal

Uranium is one of the latest metals to see its price surge on clean energy demand. The key fuel in nuclear power plants had been declining for decades, but a recent renewed interest in nuclear power as a clean energy source to help economies transition to a fossil fuel-free future has revived investor interest. Uranium prices are up more than 19% since the start of the year as of this writing, trading above $58 per pound in August – the highest it’s been since April of last year, according to data from Trading Economics. 

Nuclear Power Is The Not-So-New Clean Energy Rising Star

The recent surge in uranium prices has been driven largely by recent policy shifts that have made nuclear energy a higher priority as nations work to meet sustainability goals as quickly as possible. Earlier in August, for example, Sweden said it needs to triple its nuclear power capacity over the next decade in order to keep up with rising electricity demand in the country.  

In the United States, tax credits and investment initiatives in last year’s Inflation Reduction Act have clearly indicated the renewed focus on nuclear energy in the country. Joining Sweden are the UK, Canada, Japan and France which have each announced plans to ramp up uranium supply in efforts to reduce the world’s dependency on Russian uranium. 

The news has made some investors wonder why all the sudden interest in nuclear energy is cropping up now. But those in the industry are saying it’s actually always been here. 

“Nuclear is one of those silent contributors,” said Nuclear Energy Institute’s Director of Markets and Policy Benton Arnett in a recent episode of Sprott Radio.  “A lot of folks don’t realize it’s producing 20% of our national electricity consumption here in the U.S. and has been doing that very quietly for decades.”

It’s a similar story in other countries renewing their focus on nuclear. The reason it’s captured so much attention now is precisely because it’s already fairly well established in the countries that are reinvesting in it. 

“It is the largest carbon-free generator of power in the [United States.],” Arnett said. As the impacts of climate change have spurred a sense of urgency in the clean energy transition, nations are looking for a faster path away from fossil fuels. 

While renewables like wind and solar are still key in the long term, nuclear is the energy source that’s already providing a large quantity of clean power for many around the globe. Scaling that up would be a faster solution than building new renewable capacity from scratch.

Scaling Up Nuclear Could Push Uranium Into A Supply-Demand Crunch

As nations around the globe build new nuclear power plants, uranium – the key fuel supply needed for nuclear energy – is seeing record spikes in demand. In fact, the world’s existing uranium mines were already falling short of demand even before that demand spiked. According to the World Nuclear Association, production in recent years has only met 90% of current nuclear power plant needs.

“The number that we’re focused on is trying to hit 150 million pounds or more,” said Sprott Asset Management CEO John Ciampaglia in a Bloor Street Capital interview. “That’s what we think is the annual replacement rate for the world’s existing nuclear power plants.”

Getting to that target replacement rate will mean new investments from miners in the exploration and development of new uranium mines, a process that typically takes years. In the meantime, uranium prices could keep shooting higher as growing demand quickly outpaces the capacity of existing uranium mines. 

Sprott Offers Four Ways To Trade Bullish Uranium Assumptions

Sprott has been a leader in precious metals – investing for decades – so expanding into energy transition themes was a natural fit as uranium, lithium, nickel and other metals have become key to so many clean energy projects. 

The company currently offers four funds for investors who are bullish on uranium and want to gain exposure to the growing market: Sprott Uranium Miners ETF URNM, Sprott Junior Uranium Miners ETF URNJ, Sprott Energy Transition Materials ETF SETM, and the Sprott Physical Uranium Trust.

The first two are focused on uranium miners. While these stocks have felt the pressure of rising interest rates and the high costs of investing in new exploration and development activity, they’ve still managed to pull off healthy gains of over 9% year-to-date, as of this writing. Juniors, meanwhile, climbed nearly 12% in the three-month period ending in July – though they’re still down slightly since the start of the year. Likewise, shares of URNM have rallied 26% since June as of this writing while Sprott’s juniors ETF soared 35% in the same period. The Physical Uranium Trust is the world’s largest physical uranium fund — it “invests and holds substantially all of its assets in uranium in the form of U3O8”, with the goal of providing “a secure, convenient and exchange-traded investment alternative for investors interested in holding uranium.” SETM provides pure-play access to a range of critical minerals necessary for the global clean energy transition including uranium.

Featured photo by Lukas Lehotsky on Unsplash.

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