Uranium Investing Table of Contents
Georgia Williams – June 3, 2019
Before considering uranium investing, it’s worth understanding why it’s an important commodity in the world today.
Before diving into uranium investing, it’s worth taking a look at what makes uranium an important commodity in our day-to-day lives. Here’s a brief overview of what uranium is, what it’s used for and why so many investors are interested in the sector.
What is uranium?
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.
When refined uranium is silvery white and weakly reactive. It reacts with most non-metal elements and their compounds, except noble gases. The metal’s reactive properties increase with temperature.
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 U-235 is the one most commonly used in nuclear fuel. This is because it is fissile, meaning that under certain conditions the isotope can be split. The division creating 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.
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. Today there are over 400 commercial nuclear power reactors in operation, 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 currently 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 also an important use of uranium. 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.
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 contributing more than one third of the world’s uranium supply.
Canada’s Athabasca Basin is considered one of the highest quality deposits due to the dense uranium ore in the area.
The region of Saskatchewan is home to several uranium companies, including sector major Cameco (TSX:CCO,NYSE:CCJ). Canada’s Cameco operates both the McArthur River and the Cigar Lake mines, the two largest projects in the Athabasca Basin.
While global uranium demand has remained steady post-Fukushima, the uranium price began to show momentum in 2020.
COVID-19 mine closures in the Athabasca Basin, along with a decrease in output from Kazakhstan provided a tailwind for the uranium price during the first half of the year.
Why uranium investing?
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, including a new floating nuclear plant with two nuclear reactors that was launched in 2018. Similarly, India has 22 nuclear reactors with seven nuclear power plants.
Despite that growth, the uranium industry has struggled in recent years. The 2011 Fukushima nuclear disaster plunged the market into oversupply, and the uranium price has been depressed since. To deal with the low price environment, some producers have made production cuts or closed mines entirely.
Many market watchers are optimistic that the surplus supply situation will soon end, citing growing global demand and shrinking stockpiles throughout the industry. A number of analysts also believe we have reached the bottom of the uranium market cycle. They predict increases in the spot and long-term prices 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 cant 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 ETF on publicly traded stock exchanges can also give you exposure to the uranium market. Investing in companies that run electric power or nuclear plants is yet another option.
Participants can also pick 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.