The Power of Nuclear Energy

Nuclear energy and uranium are in the thick of global climate conversations as international governments aim to reduce fossil fuel reliance and reach net-zero by 2050.

Over 70 countries, including the biggest polluters, China, the US, and the European Union, have set net-zero targets, prompting demand for low-emission energy materials such as uranium. With more than 480 nuclear power reactors currently under construction, planned or in proposal stages, the industry is set to be worth upwards of US$677 billion by 2030, compared to US$271 billion in 2011.1

Given this increasing interest in nuclear energy and uranium, many investors may wonder how to enter the market. So, let’s take a look at some of the most prominent uranium companies and how they stand to benefit from the shift to a cleaner global economy.

The World’s Uranium Giants

More than half of the world’s uranium production comes from just 10 mines. Canada is the second biggest uranium producer globally and hosts the largest mine, McArthur River, with one of the most prominent uranium miners, Cameco, owning 70% of operations.2

Cameco has several tier-one mines as well as uranium refining, conversion and fuel manufacturing. As a result, the Canadian-based company has benefited from increasing interest in uranium, with gross profits increasing from CA$2 million in 2021 to CA$233 million in 2022.3

Cameco’s annual report notes that the Russia-Ukraine war was a key factor in the surging demand for uranium production outside Russia, which previously dominated the global nuclear reactor and fuel supply. As a result, Cameco’s uranium contract book grew upward of 97522 tonnes in the first quarter of 2023, its strongest in almost a decade.

But Cameco wasn’t the only miner to profit from favourable industry conditions. Kazakhstan’s Kazatomprom, the world’s largest uranium producer, reported a 115% increase in 2022 full-year earnings, thanks to a 31% increase in the average uranium price. Yerzhan Mukanov, CEO of the Kazakhstani company, recently told Bloomberg that they are “preparing our reserves for production, so we will be able to respond to market requests”.4

Pre-operational Uranium Players

Global mining companies aren’t the only players set to benefit from supply and demand dynamics. Turning our attention closer to home, Australia is the next uranium producer for several small caps preparing to capitalise on an expanding industry.

Though still pre-operational, Boss Energy may become a top uranium producer in the southern hemisphere. With over 32 million estimated tonnes of uranium in its South Australian Honeymoon site, Boss has announced plans to mine its first batch by December 2023. The company has already seen a notable uptick in activity, with 2022 profits jumping to $31.1 million, compared to $864,749 in 2021.5

Another potential giant on the nuclear value chain is Deep Yellow, a pre-operational uranium explorer and project developer. It merged with Vimy Resources in 2022 to take over its Mulga Rock site in West Australia, with the goal to expand its mining capacity and compete in the global market. Now with mining fields in Australia and Namibia, Deep Yellow hopes to be the largest pure-play uranium producer listed in Australia. CEO John Borshoff said Deep Yellow has the expertise to do so through its current operations and further mergers and acquisitions to build scale and long-term opportunities.

Enriching Uranium

There’s more to nuclear energy than just mining. Enrichment is a key part of the process which enables uranium to be used to generate power, and although reliable, current enrichment methods are becoming obsolete. Hence, companies like Silex Systems are looking to change the game.

Silex Systems is developing the third generation of uranium enrichment with its cutting-edge laser technology. The project is a joint venture with Cameco, and once commercialised, the tech will cut costs, environmental impacts and make nuclear reactors more efficient – potentially revolutionising the global nuclear energy supply chain. Furthermore, uranium isn’t the company’s only focus; they also enrich silicon for quantum computers.

Nuclear Exposure Without the Nonsense

With investors recognising the power of nuclear energy, incorporating a uranium-focused ETF into a portfolio may provide relative strength in years to come.

Targeted ETFs, for example, the Global X Uranium ETF (ASX Code: ATOM), baskets global stocks in uranium and nuclear energy to help minimise single-stock risk and provide exposure to the entire value chain. A weapons filter is also used over the underlying index to screen out organisations involved in nuclear weapons.

Editor’s Note: This does not constitute financial product advice nor a recommendation to invest in the securities listed. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking appropriate financial advice before investing.