Yahoo Finance Nuclear-powered rally: Soaring uranium prices 'hit another inflection point'
With the spot price of uranium at its highest level since 2007, the Canadian owner of more than 60 million pounds sees more room for nuclear fuel to run in 2024.
Uranium hit US$91 per pound this week, inching towards the triple-digit prices of 16 years ago. Last year, the price climbed from US$48. Data firm UxC estimates utilities contracted more than 160 million pounds in 2023, the most since 2012.
“With the spot price of uranium recently reaching US$90 per pound, we believe we have hit another inflection point in this bull market,” John Ciampaglia, CEO of Sprott Asset Management, which runs the Sprott Physical Uranium Trust (U-UN.TO), wrote in a blog post on Wednesday. “While 2023 was a momentous and rewarding year for nuclear energy, uranium and the miners, we remain bullish on the long-term prospects for the sector.”
Ciampaglia says he's encouraged by nuclear power taking centre stage at the recent United Nations COP28 climate summit in Dubai, where 22 countries pledged to triple their capacity by 2050 in a bid to limit harmful emissions. It was a major shift from 2021, when he says the industry merely “peeked out of the backstage shadows” as it attempted to shed lingering stigma from Japan’s 2011 Fukushima disaster.
“Who would have thought that in just two years, public sentiment and government support would have shifted this strongly?,” Ciampaglia wrote.
“I often refer to the period from 2011 to 2020 as the lost decade for uranium and nuclear energy,” he added. "If we want to expand our nuclear capacity over the coming decades, we are going to need to produce a tremendous amount of uranium."
Sprott is joined by a number of hedge funds reportedly stockpiling fuel for nuclear reactors with the expectation that prices are set to spike.
According to UxC data cited by Saskatchewan-based producer Cameco (CCO.TO)(CCJ), utilities have a cumulative uncovered requirements of about 2.3 billion pounds through 2040.
“There is a scarcity premium for western supply like Cameco’s, as having a Canadian product is an advantage in contract negotiations post Ukraine invasion,” CIBC Capital Markets analyst Bryce Adams wrote in a Dec. 19 note to clients. “We already prefer uranium commodity exposure, and rate Cameco Outperformer and Top Pick in our coverage universe.”
Adams maintains a $72 price target on Toronto-listed shares.
The stock has climbed more than 80 per cent over the past 12 months. Meanwhile, TSX-listed Sprott Physical Uranium Trust units have risen nearly 73 per cent.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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