What Fund Manager Is Saying About Uranium Stocks as Nukes Are Back
Investors are loading up on uranium stocks as nuclear energy appears to be making a comeback, despite the controversial nature of the topic.
Uranium demand has been lifted by governments seeking energy independence by extending the lifetime of the existing fleet of nuclear reactors as they contemplate building new plants.
The World Nuclear Association (WNA) estimates that more than 140 reactors could operate longer than previously expected, and about 60 reactors are under construction in 15 countries, notably China, India and Russia. The world's nuclear-power industry is on track to expand capacity by three quarters in the coming decades.
The nuclear comeback has jolted the $10 billion uranium market after a decadelong bust that deterred mining companies from producing the fuel. There are pinch points along the complex supply chain, from mining to enrichment. Some worry that the West will eventually sanction fuel from Russia, the world's largest enricher of uranium. Adding to the angst: the recent coup in uranium-rich Niger.
Uranium prices have surged to their highest level in 12 years to $65.50 per pound over the past month, breaching last year's peak to reach heights not seen since 2011.
"There's a crunch for the next couple of years," said Per Jander, director at WMC Energy. "Not only are we going back to pre-Fukushima levels, we are exceeding it," he added, referring to the pace of nuclear developments globally led by China.
Don't be too bullish
Romano Sala Tenna, fund manager at Katana Asset management cautioned investors about being too bullish on uranium stocks, explaining he "likes the uranium macro" but struggles with individual equity valuations.
He said uranium had a strong demand profile, and on the supply side, there was not a lot of coming onto the market: "Traditional sources of uranium being the reclamation from warheads, has largely run its course. Which means there's a need for uranium mining as many countries are looking to go nuclear."
The theme was hard to translate into uranium stocks, he said, because measuring operational metrics was often difficult.
Uranium miners have already benefited from higher uranium prices. Shares of Cameco and NexGen Energy have jumped 78% and 41%, respectively, so far this year.
Source: Financial Times, WSJ
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