The value of uranium mining equities has lately risen dramatically.
Due to enormous cost overruns, wrong public perception, and a succession of high-profile disasters like Chernobyl, Fukushima, and Three Miles Island, the nuclear energy industry has been viewed as the black sheep of the alternative energy market family for decades.
Last year, however, the industry received a much-needed boost when the Trump administration requested a $1.5 billion bailout to build up government uranium stocks for national security objectives.
But suddenly, the out-of-favour business has found its most potent ally: China. Beijing has announced ambitious plans to build 150 nuclear reactors at a startling cost of $440 billion over the next 15 years to achieve carbon neutrality by 2060.
Given the global energy crisis and the demands for action coming out of the COP26 Climate Summit, China’s nuclear plans resonate strongly with a cross-section of leaders and the investing community.
That many reactors constitute a third of the existing world fleet of 440 reactors, more than the entire planet has built in the last 35 years.
Uranium, which is currently in the spotlight, is where investors should be searching right now.
What took place?
Uranium mining firms Centrus Energy (NYSEMKT: LEU), Ur-Energy (NYSEMKT: URG), and Uranium Energy (NYSEMKT: UEC) all saw their stock prices rise on Monday as governments renewed their support for nuclear power.
After the United States House of Representatives passed an infrastructure plan that promotes additional atomic power investments, Centrus stock surged 19.4 per cent, Ur-Energy stock rose 10.5 per cent, and Uranium Energy stock rose 10.9 per cent.
Simultaneously, the sector is bolstered by last week’s COP26 global climate conference, which emphasised nuclear power as a component of the answer to the world’s rising climate change challenge.
So, what’s the deal?
You won’t find any comments regarding either new tailwind from any of these three uranium producers. This increase is solely due to traders’ own findings of nuclear energy’s role in a future that cannot yet be entirely powered by green renewables such as solar or wind. Those conclusions, of course, are quite correct.
The United States House of Representatives passed a $1 trillion infrastructure bill late Friday that includes (among other things) new research into advanced reactors that could modernise America’s nuclear power production and provide steady streams of baseload electricity that greener alternatives cannot yet offer.
President Joe Biden has received the measure, which he is scheduled to sign this week.
Although it’s not a stretch to believe that the Biden White House and the Democratic majority in the House of Representatives will continue to favour increasing usage of any energy source that isn’t a greenhouse-gas-emitting fossil fuel, the plan asks for $6 billion in nuclear power support.
Separately, but almost concurrently, the COP26 (Conference of the Parties) on climate change, held this week in Glasgow, Scotland, reinstated nuclear power as a valuable source of electricity that will aid the world’s transition away from fossil fuels.
As US Energy Secretary Jennifer Granholm stated at an International Atomic Energy Agency event conducted in connection with COP 26, the US is “all in on nuclear” to reduce greenhouse gas emissions.
So, what’s next?
In light of the recent developments, the knee-jerk purchase of Centrus, Ur-Energy, and Uranium Energy makes sense. However, all of this should come as no surprise to those who have been following the tale closely.
Before Monday’s spike, Uranium Energy shares had already risen 125 per cent from their August lows, while Ur-Energy had risen more than 80 per cent in the same period.
Since August, the claims of Centrus Energy had nearly quadrupled in value, while uranium prices had increased by more than 50%.
The purchasers got it right, in a sense. Still, their anticipation of this confluence of events might also represent a once-in-a-lifetime opportunity — the kind of circumstance that inspired the saying “buy the rumour, sell the news.”
To be clear, this may not be the right time. However, there’s enough reason to doubt that any other positive triggers will emerge shortly, so the smart money’s play right now would be to stay away for a few days rather than jump on the bandwagon.
Most recent price increases have been fuelled by speculation, which may deflate just as swiftly and readily as it inflates 50%.
