Uranium fundamentals remain strong due to tightening supply and growing demand. The uranium space is seeing more M&A activity than exploration. Debates continue over nuclear power policies and the increased influence of China and Russia over the market.
At the same time, gold is also experiencing a surge. Because gold is almost indestructible, the 6.7 billion ounces already mined remain in the world as jewelry, bars and coins. Further demand comes as some central banks have again begun buying gold.
Analysts forecast a uranium supply deficit, as more reactors are brought online while uranium production has stalled.
On the demand side, there is growing recognition of nuclear power for providing reliable, carbon-free electricity as countries chase decarbonization targets. As a result, governments across the world are pushing to increase their nuclear energy capacity.
Chinese, Russian and western actors compete in Africa, which hosts numerous undeveloped uranium deposits. Niger and Namibia are between opposing spheres of influence. The Niger coup added uncertainty because the new regime hasn’t announced its intentions for uranium development and exports.
For western governments, the challenge is balancing energy security and economic reality. Russian nuclear fuel has been inexpensive. Switching to other supplies will be expensive. There’s also insecurity over the speed with which western suppliers can produce enough if Russian material is prohibited.
As for gold, the consumer price index doesn’t include taxes for North Americans. And yet taxes are the largest cost of living — larger than shelter, food, transportation and energy, combined. Gold provides a hedge.
Although uranium prices have been soaring, this phenomenon does not necessarily change the supply dynamic, at least not immediately. Large uranium producers — especially Kazatomprom in Kazakhstan — have moved from maximizing volume to reducing production in bids to raise prices.
The industry needs investments in new mining projects to meet the growing demand for uranium. Current uranium prices, however, do not warrant the initial capital expenditures necessary for those projects. Hence, many companies focus on M&A instead of new developments, which suggests prices have further room to climb before new supply becomes available.
The uranium market offers investment opportunities from exploration and mining to fuel fabrication and utilities. One way to invest in uranium is through publicly traded mining companies.
Junior exploration companies search for new deposits or advance early stage projects and offer high risk and rewards. Potentially volatile stocks yield substantial returns upon successful discoveries.
Advancing projects toward production offers midrange risk and reward. Development-stage companies have defined resources while looking for financing and building mines.
Half of the global uranium supply comes from Cameco in Saskatchewan and Kazatomprom in Kazakhstan. Both have signalled that operating challenges have reduced uranium production below expected output. That may have contributed to rising prices, which have motivated small producers to reopen previously uneconomical mines shuttered after the 2011 Fukushima disaster, when uranium prices fell and countries began closing nuclear reactors.
On the gold front, lower interest rates make this precious metal more attractive. Bonds currently provide higher yields, thanks to central bank interest rates.
As two of the best-performing mineral resources on the market, the spotlight is certainly on uranium and gold. As a result, it has put increased focus on prospective projects with the potential for impacting the supply dynamic for these minerals.
Current global economic and geopolitical factors are converging to create strong prospects for gold and uranium. The mining industry is leveraging this trend to advance high-potential projects and ultimately impact global supply.
This INNSpired article was written according to INN editorial standards to educate investors.
INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.
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