Uranium ETF

The index tracks companies that have, or are expected to have, business operations or exposure to the uranium industry. These companies are defined by index provider Solactive based on research by Ux Consulting Company (UxC), a nuclear energy consultancy.

Each company is classified as follows, according to the extent to which it generates revenues from operations in the uranium industry:
•Pureplay: a company for which a significant part of the business operations is or is expected to be related to the uranium industry (in particular uranium mining, exploration for uranium, and technologies related to the uranium industry).
•Non-pureplay: has business operations that are related to the uranium industry, and in which it generates large revenues.

Nuclear component producer companies will be included in the list of index constituents.

Companies are weighted according to the lesser of their free float market capitalisation and the average daily trading value multiplied by 2,000:
•Non-pureplay and nuclear component producer companies will be capped at 2%.
•The maximum weight of a pureplay company is 22.50%.
•The aggregate weight of all pureplay companies with a weight larger than or equal to 5% will be capped at 47.50% whereas the remaining pureplay companies will be capped at 4.75%.
•The aggregate weight of the index constituents structured as Investments trusts, which provide exposure to physical uranium, is capped at 10%.
•The aggregate number of non-pureplay companies and nuclear component producer companies will be capped at 15.

ATOM is built as a feeder fund that invests directly in the NYSE Arca-listed Global X Uranium ETF (URA), which is managed by the Global X team in New York. Listed in 2010, URA is the largest uranium ETF in the world with more than US$1.6 billion in assets under management as of December 2022.

The price of uranium, like other commodities, is driven by fundamentals and speculative activity. The majority of uranium demand comes from nuclear power plants, where it is used to create low carbon electricity. Meaning the growth of nuclear power worldwide is a key driver of the uranium price.

Uranium supply depends heavily on Kazakhstan, which provides more than 40% of annual mined supply (mostly via a single listed company, Kazatomprom). This means Kazakhstani geopolitics can impact prices.

Speculators are also having an increasing influence on uranium prices. A key example is physical uranium trusts, which hold yellowcake on trust for investors. Their purchases have been known to affect prices.

While unused in Australia, nuclear energy is a major power source worldwide, producing 10% of global electricity. According to the International Energy Agency, nuclear and hydro power together provide three quarters of non-fossil fuel power worldwide. The IEA credits nuclear power with reducing global carbon dioxide emissions by over 60 gigatonnes the past 50 years – which equates to two years’ worth of global emissions. This makes nuclear power a crucial alternative to fossil fuels and a potential beneficiary of government policies and legislation supporting the energy transition.

A single uranium pellet, slightly larger than a pea, contains the energy equivalent of a ton of coal, three barrels of oil, or 17,000 cubic feet of natural gas. This means that nuclear power ranks among the cheapest sources of electricity in some countries, based on dollars spent per megawatt-hour of energy generated, due to the efficiency with which it scales. As such, uranium can benefit from increased energy demand.

Risks of investing in uranium companies include legislative and political risk – as many nuclear reactors are run by state-owned utilities companies. Nuclear accidents – such as Fukushima in 2011 – which cause global uranium prices to fall, are also a risk.

Risks are not limited to these.

https://www.iea.org/reports/nuclear-power-in-a-clean-energy-system
https://www.iea.org/data-and-statistics/data-tools/levelised-cost-of-electricity-calculator

Investors can use ATOM in two main ways. First, it can be used as a portfolio satellite for those wishing to invest in the energy transition and the related growth of the uranium market.

Second it can be used as a way to tactically trade uranium, which has few tradable proxies. Uranium pureplay business, which have pride of place in ATOM, correlate to varying degrees with the spot price of uranium.