Uranium investing: Basic uranium facts

Uranium is a fairly common metal, and occurs in most rocks in low concentrations of 2 to 4 parts per million. It even occurs in water, making it more common than gold. Uranium was discovered in 1789 by Martin Klaproth, a German chemist, in a mineral called pitchblende. It was named after the planet Uranus, which had been discovered almost a decade prior.

Seldom found alone, uranium deposits often host vanadium or rare earths in varying amounts. Uranium reacts with most non-metal elements and their compounds, except noble gases. Its reactive properties increase with temperature; when refined, uranium is silvery white and only weakly reactive.

Naturally occurring uranium is found in two different isotopes: uranium-238 (U-238), which accounts for 99.3 percent of uranium occurrences, and uranium-235 (U-235), which makes up the remaining 0.7 percent of uranium instances.

Of those two isotopes, U-235 is the most important, as it is the one most commonly used in nuclear fuel. That is because it is fissile, meaning that under certain conditions the isotope can be split; this division creates a significant amount of energy.

Unlike U-235, U-238 is fertile, but not fissile. That means it can capture one of the neutrons flying around in the core of a reactor, creating plutonium-239. Plutonium-239 behaves very much like U-235 insofar as it is fissile and gives off significant amounts of energy.

Uranium investing: What uranium is used for

One of the most significant uses of uranium today is in nuclear power generation. The first commercial nuclear power stations started operating in the 1950s, and today there are over 400 commercial nuclear power reactors providing more than 10 percent of the world’s electricity without carbon emissions.

Using uranium to fuel power plants has allowed a growing list of countries worldwide to slowly move away from coal-fired power plants and the fossil fuel industry, which produce large amounts of environmentally damaging emissions.

The nuclear energy sector is steadily growing, with 50 reactors in various stages of construction globally.

Uranium is also used by the military sector, particularly in high-density penetrators. This ammunition uses depleted uranium alloyed with 1 or 2 percent of other metals, like titanium and molybdenum. Depleted uranium is also used to harden armor on military vehicles.

Radioactive isotopes are an important use of uranium too. With a foothold in the medical, industrial and agricultural sectors, radioisotopes play a bigger role in daily life than many people realize.

Probably the most prevalent use of uranium in military applications is weaponry, specifically nuclear bombs. That was one of the first uses of uranium before electrical power generation and radioisotopes. However, since the 1990s, most military uranium has been repurposed for electricity generation.

Uranium investing: Top-producing countries

There are several countries where uranium mining is robust industry. However, in terms of annual global uranium production, Kazakhstan, Canada and Australia are the leaders by far. The three nations contribute more than one third of the world’s uranium supply.

Canada’s Athabasca Basin is considered one of the highest-quality areas for uranium due to the dense uranium ore it holds. Located in Saskatchewan, it is home to quite a few uranium companies, including sector major Cameco( TSX:CCO,NYSE:CCJ).

Low uranium prices have hampered production levels in recent years, with some major operations going into care and maintenance until prices are higher. The 2011 Fukushima nuclear disaster is largely responsible for these low prices and has hampered demand in the years since it occurred.

Uranium investing: Why enter the market?

With the global population growing and undergoing continuous urbanization, the need to keep the lights on is more important than ever. By 2030, electricity consumption will have doubled from 2007 levels, with a significant portion of that stemming from nuclear power.

In fact, China alone is constructing between six and eight new reactors, and the country plans to get five up and running as well. Over 20 nuclear reactors are planned in Russia, and similarly India has 22 nuclear reactors with seven nuclear power plants.

Despite that growth, the uranium industry has struggled in recent years. As mentioned, the 2011 Fukushima nuclear disaster plunged the market into oversupply, and the uranium price has been depressed since, even though miners have made production cuts and even closed mines entirely.

That said, many market watchers are optimistic that the supply surplus will soon end, citing growing global demand and shrinking stockpiles throughout the industry. A number of analysts also believe the bottom of the uranium market cycle has been hit. They predict price increases for the metal, and believe these supply and demand fundamentals are what make uranium investing an attractive prospect.

Because it is an important element in the advancement of clean energy, there are a variety of ways for investors to get exposure to uranium. Unlike gold or silver, participants cannot invest directly in physical uranium; however, there are several other ways to get involved in the nuclear energy market.

Investing in uranium-mining companies, which offer a choice between uranium miners and explorers, is one way. Another is choosing a uranium exchange-traded fund.

Investing in companies that run electric power or nuclear plants is yet another option, and investors can also look at uranium futures as an energy sector investment vehicle.

This is an updated version of an article originally published by the Investing News Network in 2016.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.