Investing in uranium stocks

The negative stigma that’s attached to nuclear power seems to be changing. Many countries see nuclear power plants as a valid option to meet anti-climate change ambitions, and power plants need uranium to generate energy. As new nuclear power plants are constructed and the uranium industry grows, so do the investment opportunities.

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What is uranium?

Uranium is a metallic gray material. It is mainly extracted in open pit mining or underground tunnels where ore is brought to the surface. It is often found as a by-product in gold or copper mines. There are also ways to extract uranium from the ground by pumping water deep into the ground. Adding oxygen to this water causes uranium to rust. This rusty water is pumped up and uranium is then extracted from it.

Enriching uranium

Kazakhstan produces the most uranium by far. The commodity is also mined in Australia, Namibia, Canada, Uzbekistan, Niger and Russia. About 99.3% of uranium consists of the so-called uranium-238 isotope, and the remaining 0.7% consists of the uranium-235 isotope. To successfully get a nuclear reactor up and running, the U-235 content of uranium bars needs to be between 3 and 5%. Raising the U-235 level is called 'enriching' uranium. Through large centrifuges, the isotope is raised step by step until enriched uranium remains.

Making atomic bombs with uranium

Atomic bombs have a content of about 90% uranium-235. It is not easy to enrich uranium with such a high concentration of U-235. In some countries, it is often feared that they are using their nuclear program to manufacture nuclear weapons. For this reason, the IAEA (International Atomic Energy Agency) regularly inspects nuclear facilities. In the process, centrifuge facilities are well inspected. The construction of these facilities quickly shows whether very highly enriched uranium making is possible.

Supply and demand of uranium

Unlike other commodities, uranium is not freely traded on the open market. Buyers and producers make private agreements with each other. Producers may only sell uranium to companies or governments of countries that have signed the Treaty on the Non-Proliferation of Nuclear Weapons. In theory, uranium is only sold to power companies, hospitals, laboratories and the military.

The World Nuclear Association, an international organisation that promotes nuclear energy and supports the companies that make up the global nuclear industry, predicts that by 2030 demand for uranium will increase to 79,400 tons. By 2040, it is expected to reach 112,300 tons. Demand in 2021 was 62,500 tons. This increase is mainly based on the expectation that more uranium will be needed for nuclear power production.

In 2021, the price of uranium increased significantly. However, in the years before, partly due to the Fukushima nuclear disaster, the commodity price was so low that several uranium producers shut down production. The cost of mining uranium at that time was higher than the profit that could be obtained from it. Now that the price of uranium is on the rise again, uranium producers are scaling up their capacities.

What is uranium?

Uranium is a metallic gray material. It is mainly extracted in open pit mining or underground tunnels where ore is brought to the surface. It is often found as a by-product in gold or copper mines. There are also ways to extract uranium from the ground by pumping water deep into the ground. Adding oxygen to this water causes uranium to rust. This rusty water is pumped up and uranium is then extracted from it.

Kazakhstan produces the most uranium by far. The commodity is also mined in Australia, Namibia, Canada, Uzbekistan, Niger and Russia. About 99.3% of uranium consists of the so-called uranium-238 isotope, and the remaining 0.7% consists of the uranium-235 isotope. To successfully get a nuclear reactor up and running, the U-235 content of uranium bars needs to be between 3 and 5%. Raising the U-235 level is called 'enriching' uranium. Through large centrifuges, the isotope is raised step by step until enriched uranium remains.

Atomic bombs have a content of about 90% uranium-235. It is not easy to enrich uranium with such a high concentration of U-235. In some countries, it is often feared that they are using their nuclear program to manufacture nuclear weapons. For this reason, the IAEA (International Atomic Energy Agency) regularly inspects nuclear facilities. In the process, centrifuge facilities are well inspected. The construction of these facilities quickly shows whether very highly enriched uranium making is possible.

Unlike other commodities, uranium is not freely traded on the open market. Buyers and producers make private agreements with each other. Producers may only sell uranium to companies or governments of countries that have signed the Treaty on the Non-Proliferation of Nuclear Weapons. In theory, uranium is only sold to power companies, hospitals, laboratories and the military.

The World Nuclear Association, an international organisation that promotes nuclear energy and supports the companies that make up the global nuclear industry, predicts that by 2030 demand for uranium will increase to 79,400 tons. By 2040, it is expected to reach 112,300 tons. Demand in 2021 was 62,500 tons. This increase is mainly based on the expectation that more uranium will be needed for nuclear power production.

In 2021, the price of uranium increased significantly. However, in the years before, partly due to the Fukushima nuclear disaster, the commodity price was so low that several uranium producers shut down production. The cost of mining uranium at that time was higher than the profit that could be obtained from it. Now that the price of uranium is on the rise again, uranium producers are scaling up their capacities

Reasons for investing in uranium shares

Resistance to nuclear power seems to be partly fading. For example, the French government has indicated that it wants to invest heavily in nuclear power plants. Globally, there are similar noises from countries that want to commit to nuclear power. To fuel all these nuclear power plants, more uranium will be needed than is currently being used. For investors, this may therefore be an opportunity to jump aboard and invest in uranium stocks.

The 4 most traded uranium stocks

Since investing in uranium is becoming more popular, here are the most traded uranium stocks of 2022 via our platform:

Uranium Energy (US9168961038) is a small player in the uranium producer market. The company does not currently produce uranium because the uranium price has been below $50 per ounce for a long time. When the price sits at that level, it’s is not profitable for the company to mine the commodity. The same is true for many other uranium producers who, in times when the uranium price was low, wrote off projects and got into financial trouble. Uranium Energy has taken advantage of this in the past by buying up projects from other uranium companies.

With all the assets it owns, the company says it can quickly pick up uranium production if the uranium price allows it. According to CEO Amir Adnani, the future of the company looks bright. This is because the company has no debts, and he says demand for uranium will increase and that demand for uranium produced in the US will see more deductions.

Uranium Royalty (CA91702V1013) is a royalty company that invests in uranium companies and, in return, shares in future revenues. In addition, the company buys up uranium lots, and we are talking about the physical commodity itself. When the uranium price is low, uranium is bought and stored. When the price goes up, it is sold again.

Uranium Royalty Corp is a relatively young company founded in 2017. Its business model focuses on the resurgence of nuclear power and the rising demand for uranium that may accompany it. The success of the company will depend on the revival of nuclear power.

Cameco (CA13321L1085) is the world's largest publicly traded uranium company and controls about 20% of total uranium production. Cameco's market capitalisation is about $9.5 billion. The company went public in 1996 and since then has experienced high volatility, reflecting the volatility of uranium.

Like most uranium companies, the company is not making a profit. Cameco expects the energy transition and the construction of new nuclear power plants to change this. As soon as the price of uranium increases, Cameco will ramp up production.

Energy Fuels (CA2926717083) is an American uranium company founded in 2006. Shares of the company came on the market for about $60 in 2006 and increased to as much as $230 in 2007. Today (May 2022), a share costs less than $6.50. This sharp drop can be reflected by the price of uranium and the fact that the company has not been profitable in years. The company expects to ramp up uranium production once uranium prices rise. It remains a risk to invest in Energy Fuels. However, its 2007 stock price shows that the market value can rise significantly if nuclear energy becomes booming again.

Investing in uranium through DEGIRO

At DEGIRO, you can invest in a wide range of stocks in the uranium industry. Open an account and make the most of your investments with our incredibly low fees. For details, see our Fees page.

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Note: Investing involves risks. You can lose (a part of) your deposit. We advise you to only invest in financial products which match your knowledge and experience.

Note:
Investing involves risks. You can lose (a part of) your deposit. We advise you to only invest in financial products which match your knowledge and experience.

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