Saefong reported on January 20, 2022 that nuclear energy has a proven record of reliability in a world that’s struggling to accept less dependable sources of renewable energy. That brightens the outlook for the uranium that fuels nuclear power plants.
“The world needs more energy from renewable sources, but recent weather events have highlighted one of the key issues: intermittency,” says John Ciampaglia, chief executive officer of Sprott Asset Management. “If wind blows less, or it rains less, or a freak winter storm freezes wind turbines, you need another source of reliable base load power,” he says. “Nuclear power plants operate, on average, 93% of the time.”
Europe was left scrambling for energy sources amid a shift to renewable energy, a shortage of natural gas, and a lack of wind-driven electricity production, during a particularly hot 2021 summer season. Prices for uranium, which fuel nuclear power plants, rose by roughly 40% last year through December, at $42 a pound, according to nuclear-fuel consulting firm UxC.
Ciampaglia cites renewed interest in the industry for the price rise, along with an “ongoing structural supply deficit” spurred by production capacity curtailments by the world’s largest miners. Governments in the U.S., U.K., France, and Japan have announced “favorable policy and financial support for nuclear power,” he says.
“There is a growing realization that nuclear has to be part of the energy mix if countries have any chance of achieving their decarbonization targets, while continuing to provide reliable baseload electricity,” Ciampaglia says.
In the U.S., the bipartisan infrastructure deal’s $65 billion investment is described as the largest investment in clean energy transmission and the electric grid in American history, and includes research hubs for advanced nuclear reactors. The European Union is moving ahead with an approach that includes nuclear power as part of its “‘green finance taxonomy,’ which would potentially give a boost to utilities in Europe looking to invest in maintaining existing nuclear plants as well as building new ones,” says Jonathan Hinze, president at UxC.
Recent unrest in Kazakhstan has emphasized how important nuclear power is to the world’s energy mix, even as many nations have moved to reduce the number of nuclear power plants in the wake of Japan’s 2011 Fukushima nuclear disaster.
The uranium spot market has been active this year, due partly to concerns over future supplies coming out of Kazakhstan, as 2021 preliminary results show the country’s uranium output represented about 45% of the fuel’s total world production, says Hinze. There haven’t been indications of uranium output disruptions in Kazakhstan but there are possible issues down the road as transportation and supply chain constraints could be exacerbated by security restrictions, he says.
The uranium sector suffered from “significant underinvestment over the past few years as the price of uranium fell to levels that failed to incent” existing production or exploration, says Ciampaglia. He’s bullish on nuclear energy likely to be part of the low greenhouse gas energy mix for many countries seeking to decarbonize and provide reliable energy. Investment choices include physical uranium, uranium producers, and exploration and development companies, Ciampaglia says.
Among those are the Sprott Physical Uranium Trust, a closed-end trust that holds 43 million pounds of uranium valued at $2 billion. The Northshore Global Uranium Mining exchange-traded fund (URNM), meanwhile, offers exposure to a basket of uranium producers, developers and exploration companies.
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