Uranium equities are experiencing a significant uptick, driven by recent flooding in Kazakhstan, a leading nuclear fuel producer, alongside positive analyses from financial institutions such as Goldman Sachs Group Inc. This surge marks a notable period of success for the sector.
The energy sector has seen a spotlight with uranium spot prices soaring by approximately 40% over the past year. This comes as Kazatomprom, the top miner, faces production challenges, and the US contemplates restricting Russian uranium imports. The growing demand for nuclear power globally, seen as a cleaner energy alternative, further amplifies these supply concerns.
This week, the sector witnessed an additional boost in demand. The Global X Uranium ETF, valued at $3.2 billion, has risen by about 6.5%, marking its most significant weekly gain since early February. The ETF's performance is bolstered by advancements in companies such as NuScale Power Corp., which focuses on developing small modular reactors, and smaller mining entities like Mega Uranium Ltd. Meanwhile, Cameco Corp., North America's largest uranium mining firm, saw a 15% increase this week, enhancing its market value by C$1.7 billion ($1.3 billion).
The uptrend in the uranium ETF was fueled early in the week by news of flooding in Kazakhstan, which positively impacted shares of rival miners. Additionally, Goldman Sachs initiated coverage on Cameco with a buy rating and a $55 price target for its US shares on April 1, citing a potential 60% increase in global uranium demand by 2040.
Michael Alkin of Sachem Cove Partners, which invests in uranium mining and physical uranium, noted the sector's growing appeal. Since starting his fund in 2018, he observes a shift in investor interest towards medium and exploratory mining enterprises. Sachem Cove's investments include Cameco and Denison Mines, and it supported Premier American Uranium's initial public offering in 2023, which has since surged almost 70%.
Analysts are expanding their coverage to a broader array of uranium stocks, including those in the developmental stage. For instance, Scotia Capital commenced coverage on NexGen Energy Ltd. on April 1, assigning an outperform rating as the company prepares to develop Canada's next uranium mine.
Scotia analyst Orest Wowkodaw anticipates a prolonged net deficit in the uranium market, fueled by extensive reactor construction in China and the Western pursuit of decarbonization and energy independence.
