Uranium is a raw material used in the production of nuclear energy. Due to its radioactive nature, it is not possible to buy and take ownership of actual uranium on the commodities market. The best way to profit from its global price fluctuations is to invest in firms that are directly involved in the mining and synthesis process. In the past, uranium has been linked with nuclear disasters like that of Chernobyl and Fukushima. This led to the reduction of nuclear power usage in Japan, the closure of nuclear reactors in Germany, and a ban on nuclear power stations in Australia.
Growing global interest in Uranium
The tail end of 2021 saw the world grapple with a natural gas shortage, and global fossil fuel reserves are expected to run out by 2060. This is in the wake of growing global demand for energy and increasing pressure to switch to environment-friendly energy sources.
The popular green energy sources such as solar and wind suffer from a lack of consistency. Even without global mass adoption, nuclear energy already produces 10% of the world’s electricity demand. One pellet of uranium is capable of producing as much electricity as a ton of coal, three barrels of oil, or 17,000 cubic feet of natural gas.
It comes as no surprise then that 70.6% of France’s energy comes from nuclear power, while 20% of the UK’s energy is nuclear. China, the largest greenhouse gas emitter, has put aside more than $400 billion to build 150 new nuclear reactors by 2040. To put this in context, only 440 reactors exist in the whole world.
Elsewhere, Kazakhstan, which produced 43% of the global uranium supply as of 2019, is currently grappling with political unrest. Public protests, riots, and police clashes are the order of the day, citing increased LPG prices. This political strife has caused uranium mining to come to a standstill, reducing global supply and increasing the commodity’s price. With this backdrop, let’s look at the most promising uranium stocks of the year.
Uranium mining stocks worth watching
1. Cameco Corporation
Cameco is a uranium mining company with global operations. It was founded in 1987. Since then, it has grown to be one of the largest uranium mining companies, producing 9% of the global uranium supply. In 2020, at the height of the COVID-19 pandemic, the company had closed its Cigar Lake uranium mine. At the beginning of 2022, they announced their mine reopening, which will solve their supply chain constraints.
In October, the company posted a net loss in its Q3 earnings. Lawson Winder, an analyst from Bank of America, upgraded its stock from neutral to buy a few days later. He also increased his share price prediction from 36.25 CAD to 40 CAD. The increase is due to the expectation for the commodity to rally following the adoption of nuclear power as an alternate power source from fossil fuels. Further, the long-term contracts awarded to Cameco make its shares a worthy addition to your portfolio.
2. Rio Tinto Group
Rio Tinto Group is a metals mining firm operating out of Australia. It is the largest producer of uranium oxide in Australia. Over the past month, Rio stock has returned about 6% to investors.
As the demand for housing increases and China’s economy recovers, uranium prices are expected to rise steadily soon. This is good news for Rio shareholders, as its shares are expected to rise in tandem. Alain Gabriel, an analyst for Morgan Stanley, upgraded its stock from equal weight to overweight, as the share price is expected to hit 110.50 AUD, up from a previously projected 101 AUD.
3. NexGen Energy Limited
NexGen is a uranium mining firm based in Canada. Founded in 2011, the firm currently boasts a market cap north of $2 billion. One of its most notable projects is named Rook I. It comprises 32 mineral claims over an area spanning 35,000 hectares in the uranium-rich southwestern region of the Athabasca Basin. This project hosts the Arrow Deposit and the South Arrow, Harpoon, Bow, and Cannon discoveries.
4. BHP Group
BHP Group is a mining company based in Australia. It mines several minerals, with uranium among them. In the just-concluded fiscal year, the firm produced approximately 3.3 tons of uranium. According to Bank of America, BHP stock has a neutral rating, with its price expected to hit 39 Australian dollars. The stock yields attractive dividends to investors, and with the projected uranium price surge, BHP stock is well set up for exemplary performance.
There are 18 hedge funds in their list of shareholders. Fisher Asset Management, a hedge fund based in Washington, holds a whopping 8.3 million BHP shares, valued at $447 million.
5. Denison Mines Corp
Denison Mines is a Canadian firm concerned with uranium exploration and development. The company’s activities are divided into three segments: The mining segment, closed mine, and corporate and other segments.
The mining segment involves activities such as exploration, evaluation, mining, milling, and sale of uranium concentrates. The closed mine segment involves decommissioning of mines and other environmental impact services provided by the company. The corporate and other segments mainly involve the management services offered to the Uranium Participation Corp.
Notable projects include the Wheeler River project, McClean Lake uranium mill, and the Waterbury Lake project, just to mention a few. In total, the company’s mining interest covers an area of 310,000 hectares. In addition to their Canadian operations, they have mining stakes in Mongolia in Asia and Zambia, Africa.
The long and short of it
Uranium is a radioactive mineral used in the production of nuclear power. In the past, following disasters like the Chernobyl and Fukushima incidents, most countries shied away from nuclear power sources. Recently, with the steadily increasing global energy demand and the dwindling fossil fuel reserves, more and more countries are adopting nuclear as an alternate energy source. This is bound to increase uranium prices and, consequently, share prices of uranium mining companies.