It’s been a tough time for the uranium market over the last ten years following the Fukushima nuclear meltdown in 2011, with governments, institutions and the public alike coming to see it as a toxic resource. Prices plummeted and stayed low.

However, we are now seeing a confluence of events which is positioning nuclear as the solution to what most are seeing as the single most important factor driving inflation at the moment, energy prices.

The world’s heaviest element is in vogue once again, creating conditions for an investment win, so long as you can identify those companies with strong fundamentals.

Uranium’s cause has been helped by:

  • The launch in July 2021 of the Sprott Physical Uranium Trust (SPUT), the world’s largest physical uranium fund, which is bringing in new demand and new capital inflows. More such funds will follow;
  • The ongoing conflict in Ukraine, which has brought huge energy insecurity to Europe and further afield, marked by supply shortages of and massive price increases in natural gas and oil, and a return to reliance on mothballed fossil fuel facilities;
  • Sanctions on Russia, coupled with an unwillingness to trade with the world’s new pariah on even those areas not covered by sanctions, due to political and corporate reputational risk. This is putting at risk access to Russia’s uranium enrichment services, where it is the global market leader;
  • A cessation of uranium production by Kazatomprom and Cameco, the world’s two largest uranium producers; initially this was driven by covid related supply chain issues and employee safety concerns. But the worsening economic climate and lack of engagement by energy utility companies has given no encouragement or     incentivisation for producers or developers to rush back into production.
  • Scarcity of enriched uranium and ultimately uncertainty of access of uranium supply
  • Insatiable appetite for and mass buying power of existing uranium resources from China;
  • Momentum from Western Governments for home-grown clean energy solutions and energy security that limit the need to trade with and be in bondage to unfriendly nations;
  • Political, institutional, and corporate commitments to combat climate change and transition to net zero, meaning all alternatives to fossil fuels must now be     considered;
  • A shift in attitude towards and perception of nuclear power from Western electorates, who increasingly accept its place in a clean energy future as they stare into the abyss of what energy insecurity actually looks like;
  • Technological advancements around Small Modular Reactors (SMRs), creating scope for secure, affordable decarbonised energy systems.

The general consensus is there’s going to be a massive deficit in supply as everyone looks for solutions – any solutions - to the profound global energy shortage and rising energy prices. It means nuclear is back in the room, not least for its baseload capacity – meaning, a reliable and consistent provider of energy through all weather conditions.

It’s enough for a company like American Lithium to diversify beyond its core business and acquire a large uranium resource, Macusani, in Peru, a country so new to the uranium game, export regulations have yet to be properly codified to ensure that uranium produced complies with global regulations and ends up in friendly hands.

Meanwhile, in Canada, the Government’s recent National Statement on Nuclear Energy recognised that the country is home to the largest deposit of high-grade uranium on earth and acknowledged real opportunity, which the country was ready to seize. Coming from somewhere with a centre-left administration, this is a great sign for investors.

In the US, there is talk of building strategic reserves of uranium in line with a desire to double the amount of nuclear energy generated there by 2050, which currently stands - as it has for sometime - at 15%.

The uranium market is rather anomalous in that utility companies that need it to buy directly from producers or traders. These utilities are currently fixated on security of supply and beginning to look beyond the producers to the most promising developers – those that are at an advanced stage, with scale and well-funded. Companies like Energy Fuels, Peninsula Energy, Bannerman Energy, Lotus Resources and Global Atomic.

The World Nuclear Association forecasts that uranium demand from the world’s nuclear reactors will almost double over the next twenty years. Yet, currently, on the supply side, things are moving in the opposite direction. It is hard to see how this could do anything but create price rise in uranium and resulting boost for the share prices some of those well-positioned companies.

It may not be an overnight win, but fortune is likely to reward those with patience over a 1-2 year horizon.

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