Published: 1 May 2025 | Issue 649
Nuclear is one area that is niche and has had a rough time as the uranium price has fallen. But the stocks have spiked in the past couple of weeks and we believe that this momentum will continue, especially for those stocks at the quality end, which is where we are focused.
Bull Points
• Customers and nuclear power stations hearing positive news – adopting nuclear
• Term prices holding up – more contracting over next 12 months
• Not seeing many new mining projects – supply constrained
Bear Points
• Price response through spot price tentative
• Doubt on AI effect
• Industry is very early in its life cycle – SMRs yet to be a reality
A BOOM BUST COMMODITY
Uranium is a boom-bust commodity, being early in its industry life cycle. But events are proving that nuclear energy is going to be part of the energy mix.
This includes the conversation they are having in Spain following the full-scale power failure. The country was phasing out nuclear, but now is re-assessing this decision.
The national power grid operator Red Eléctrica warned earlier this year of the risks of excessive renewable energy while closing nuclear plants.
In recent days, Sprott, a global investment manager specialising in precious metals and critical materials, has been actively buying uranium equities, including Australian companies.
There has been confirmation that uranium will be exempted from import tariffs in the US. This potentially removes an area of concern for uranium producers and utilities.
INVESTMENT CONCLUSION
Existing uranium producers benefit from increasing demand and a shortage of new mining projects. This won’t always be the case, but demand seems more secure than we can remember as the energy transition to low-carbon fuels occurs.
When this translates to a higher price, there will be an incentive for new projects. New projects will not be operational for some years due to the lead time and political considerations.
Meanwhile, demand is heating up for uranium enrichment technology to replace Russian nuclear fuel, which is where over 70% comes from. This is where $SLX fits in, which also benefits from a higher uranium price.