Nov. 21, 2022
The world is in the middle of an energy revolution right now.
For generations, we’ve relied on the burning of fossil fuels for things like heating and powering our homes and keeping our cities running.
We’ve mined the Earth and cleared the forests to keep this up. As the world’s population grew, so did demand. That meant more mining and clearing, and more pollutants being pumped into the air, worsening climate change.
And it’s because of climate change that nuclear power entered into the conversation.
Fossil fuels have long been the de facto method for generating electricity at the scale needed to keep the world running. Even when we learned just how damaging it all was, no other power source could generate the amount of energy needed to keep things going to the extent people expect.
Nuclear power for generating electricity first appeared in the 1950s and expanded slowly over time. Throughout the 70s and 80s, rising economic costs, alongside falling prices of fossil fuels, kept nuclear power squarely at niche status.
Add in concerns from the scientific community, plus the spread of anti-nuclear activism on top of all that, and you have a power source that is now faced with increased regulation, making it longer to set up and more expensive to install.
And then, of course, there were a number of widely-publicized disasters like Chernobyl, Three Mile Island, and, most recently, Fukushima.
Accidents like that have made it so that governments have, at the very least, been hesitant to use nuclear power. Some countries have banned it outright.
But even with its history, nuclear power is seen as the future if we want to continue generating electricity without sacrificing capacity.
More so, nuclear power is pretty much the only way we’re going to be able to do something about the climate crisis. That’s why more countries are looking into adding nuclear power to their grids or expanding what they already have.
But in order to add that nuclear power to the grid, these countries all need to invest in uranium, the yellow metal that makes generating that power possible.
Where the Uranium Is
Uranium isn’t a particularly hard element to find, and it’s believed that there is enough supply available to meet demand for at least the next 80 years.
Instead, the problem with getting to that supply is really a matter of location.
Uranium can be found all over the world but a large chunk of the world’s supply is in Kazakhstan. This central Asian country shares a border with Russia and is a former Soviet satellite state.
Even though the country is independent today, it still has close ties with Russia. Those ties are so strong that Kazakhstan is left playing a delicate balancing act. You see, Kazakhstan’s government is working at establishing closer ties with the European Union but Russia’s war in Ukraine makes that hard to do without angering Moscow.
And angering Moscow is a legitimate concern for Kazakhstan because, even though it can offer uranium to other countries, that uranium usually travels through Russian conversion plants before it can be sold to the rest of the world.
In fact, Russia has around 40% of the world’s uranium conversion infrastructure, so a good chunk of the yellow metal going out into the world has to pass through a country that’s a global pariah at the moment.
Delicate situations like that are just one reason why we’re seeing this worldwide shift in where countries get their uranium as they push for more nuclear power.
And while Kazakhstan and Russia aren’t the only two suppliers of uranium, they have the advantage of having the infrastructure in place.
Other countries with large deposits such as the United States, Australia, and Canada are potential options but investment in uranium and nuclear infrastructure still has a way to go for the supply chain to be completely secure.
Steps are being taken to get there but it’s going to take some time for suppliers in friendly nations to get to the point where they are viable options for uranium investing.
In that regard, Australia and Canada are two places to watch for future uranium investing.
Australia has two mines currently in operation but more could come online as prices rise and as countries seek to get away from any supply that could be under Russian influence. As a country, Australia has been pulling uranium from the ground since 1954, and mining makes up a large part of the country’s GDP. So it already has the know-how and infrastructure in place to scale up as uranium investing takes off and more money floods into the sector.
Australia itself doesn’t use any nuclear power. It has only one plant, and that’s used to produce medical radioisotopes and to provide services for the mining industry. Some politicians are asking that the adoption of nuclear power be considered to avoid blackouts in parts of the country and to lessen reliance on coal. But that’s a long shot. And even if it did happen, it would take years to fully implement. But the fact that it’s been mentioned at all shows just how trends are changing.
Canada is another source of large amounts of uranium. It accounts for roughly 13% of the world’s output, and the industry itself is worth around $800 million a year. Unlike Australia, Canada does use nuclear power to provide electricity to some of its populace so it has the knowledge and the expertise to expand both its mining industry and its nuclear power industry.
With much of the world looking away from the Russian sphere of influence, Canada is set to benefit massively from coming uranium investing. One way to get in on that trend is the Sprott Uranium Miners ETF (NYSE: URNM), which has holdings in a number of uranium mining companies that are at the forefront of the industry.
So anyone looking to get into uranium investing can use that play just as Canada is poised to be one of the gateways through which the world gets much of its uranium supply.
How Countries Are Going Nuclear
All over the world, there are 437 nuclear reactors in operation. There are another 57 under construction and 102 planned. On top of that, 325 more are proposed.
So you can see why uranium is in demand and will continue to be for the foreseeable future.
But with this nuclear power renaissance we’re experiencing, many people picture nuclear plants with those very distinctive cooling towers popping up in every backyard.
In reality, new technology is going to help usher in this trend and help change the perception of what having a nuclear power plant in your area will look like.
A lot of this will be thanks to what are called Small Modular Reactors (SMRs). These are a new class of reactor that can be built in one place and then shipped and operated somewhere else.
They only have a power output of 300 MW (as opposed to around 700 MW for a traditional reactor) but come with advantages that make the tradeoff worth it. The biggest advantage is that they can go in places traditional reactors can’t.
Additionally, as demand increases, more modules can be added to help meet that demand, hence the ‘modular’ in the name.
All of this comes at a lower cost than traditional reactors and with the added benefit of being able to be coupled with other energy sources to ensure continuity of power.
It’s for these reasons that many of the countries interested in adding nuclear power or expanding existing capacity are taking an interest in the technology. No one has one yet but plans have been announced for these kinds of reactors to be constructed in countries like Canada, Poland, and China by the end of the decade. There are also proposals for reactors in the US and the UK.
The Future of Uranium Investment
Because countries see nuclear power as the best way to deal with the climate crisis and attain energy independence, the future of nuclear investing looks bright.
It’s something that’s going to take time because reactors take years to build and mines take years to explore, approve, and begin drilling. That means now is the best time to invest in uranium because it’s set to be one of the fastest-growing sectors of the next decade.
Prices have been holding steady for much of the past year, in the $45-$50/ounce range. A lot of producers are holding off on getting their operations going until the price of the metal gets closer to the $60-$70 range. The potential price of the element is much higher thanks to all of the catalysts outlined above.
With it only being a matter of time before prices reach that point, you’ll want to make sure you get in sooner than later. Uranium stock prices are only going to go up.
Countries like the US, which is the largest nuclear electricity producer in the world, are going to need more uranium.
On the other side of that, you have Poland, which just signed agreements to have its first nuclear power plant built. So now they’re going to need all the uranium they can get.
Other countries won’t be far behind, and there are only a few places in the world that can help meet the coming demand.
So uranium stocks are going to take off. And the miners who can provide the crucial element that power-plants and reactors need to keep running will be the ones that make their investors rich.
Editor, Daily Profit Cycle