CRITERION: Uranium’s got that healthy glow… but here’s why you need to handle it with care

In all due immodesty your columnist declares himself a true visionary, having predicted the uranium recovery more than five years ago.

Unlike the US evangelist who foresaw the end of the world on May 21 2011 – later revised to May 27 2012 – he was prudently opaque on the timing: “with a number of false dawns since the 2011 Fukushima disaster that smashed demand, no-one should be holding their breath.”

Indeed, the uranium true believers held their breath for so long they almost expired. Now, they can exhale with relief as the energy material surges past $US100 a pound – an unthinkable scenario in 2016 when it bottomed to under $US20/lb.

For what it’s worth, Shaw & Partners predict the price will hit $US150/lb. That value exceeds the previous zenith of $US140/lb in 2007, when more than 500 ASX resource explorers purported to be looking for the element (before turning to hunting for lithium or growing cannabis).

Betashares’ senior investment strategist Cameron Gleeson notes that 22 countries – including the US, Canada, the UK and France – have pledged to triple nuclear energy generation capacity by 2050, to provide reliable base load power to meet net-zero emission mandates.

Remarkably, the US – the biggest uranium consumer – has little uranium of its own and depends on Russian and Kazakhstani supply. Not surprisingly, Washington is keen on fostering domestic production, especially for the high-assay low-enriched uranium used in “next generation” modular nuclear reactors.

In the short term, supply has been constrained by production problems in the key producing nations of Canada and Niger.

A key feature of current demand is that exchange traded funds (ETFs) have been inactive, which suggests that the pricing is supported by ‘real’ supply and demand.

But this is changing. The biggest ETF player, Canada’s Sprott, stepped back into the market in September last year, having been an aggressive buyer in 2021 and 2022.

Globally, uranium ETFs globally hold $US5.7 billion of assets, having attracted $US1.3 billion in calendar 2023.

Locally, Betashares’ ASX-listed Global Uranium ETF (ASX:URNM) has passed the $100 million mark for the first time and now sits at $114 million, having attracted $47m of net flows last year ($22m in the final quarter).

URNM invests in just under 50 global uranium companies, with its second-biggest holding is in the Sprott Physical Uranium Trust. As its name implies, this vehicle invests directly in the commodity, rather than the producers.

In a similar vein, Global X’s ATOM (ASX:ATOM) has $18 million invested in entities including Cameco, Sprott and our very own BHP (ASX:BHP), owner of the Olympic Dam mine (the world’s largest uranium deposit).

A notable ASX uranium exponent is developer Global Uranium and Enrichment (ASX:GUE), which has won consent to explore its flagship Tallahassee project in Colorado, one of the biggest undeveloped uranium deposits in the US.

GUE also has dibs on a chemical-based uranium enrichment tech that makes the process safer and more efficient. Because the Australian government has classified the know-how, it’s all hush-hush.

Further north, lithium explorer White Cliff Minerals (ASX:WCN) has acquired a historical uranium project near the Arctic Circle in Canada, called Radium Point.

It’s a hot prospect in frosty territory.

Gleeson warns against investors picking single uranium plays, but diversifying their exposure across several countries (many of which have elevated sovereign risk).

Oh – and they should not put all their glowing eggs into the uranium basket.

As with lithium, the uranium price is unlikely to increase in a linear fashion and Morgan Stanley warns of the risk of “overshoot”.

Still, the long term fundamentals mean another price meltdown is unlikely and patience will continue to be rewarded.

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.

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