Growing global interest in nuclear power as a carbon-free source of energy has driven up prices for uranium used as fuel for nuclear power plants as well as shares of companies that mine and process uranium. There is no commodity market for the radioactive ore, so investors who want to profit from the rise in uranium must invest in stocks and exchange-traded funds. Here’s what you need to know.
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Fundamentals of Uranium Investing
Uranium is mainly used as fuel to power nuclear fission plants which produce around 10% of the world’s electricity. It represents an emission-free alternative to fossil fuels while being more reliable than renewable energy sources such as wind and solar.
Uranium is a non-renewable resource mined in many countries. Kazakhstan, Canada and Australia are the main producers of uranium, while the United States is the largest user. Uranium prices fell sharply after the 2011 accident at Japan’s Fukushima nuclear power plant. However, demand for uranium is now reliving and is expected to continue, in part, as nations attempt to meet the requirements of international agreements aimed at reducing global warming.
How to Invest in Uranium Companies
Although uranium is a commodity, because it is radioactive it is not sold as less dangerous raw materials such as gold and oil. The the most popular way to invest in uranium is through the purchase of shares of companies involved in the production and processing of uranium. Shares Uranium companies can be purchased through an online or traditional brokerage account. Here are six leading companies in the uranium sector:
Cameco Corp. (CCJ) is one of the largest producers of uranium. The Canadian company is active in exploration, mining and fuel fabrication and has reserves of over 464 million pounds of uranium. Its shares are traded on the New York Stock Exchange and the Toronto Stock Exchange.
Kazatomprom (KAP) is the national uranium company of Kazakhstan and the world’s largest producer of uranium. It explores and exploits uranium deposits and manufactures fuel for power stations. Its shares are traded on the Astana International Stock Exchange in Kazakhstan as well as on the London Stock Exchange.
BHP Group Limited (BHP) is the world’s largest mining company and a major producer of uranium. It is based in Australia and its shares are traded on the Australian Stock Exchange, London Stock Exchange and Johannesburg Stock Exchange. The New York Stock Exchange lists BHP’s American Depositary Receipts.
Rio Tinto (RIO) is a large diversified mining company that extracts a relatively small amount of uranium and other minerals from its mines around the world. Shares of the London-based company trade on the London Stock Exchange and the Australian Stock Exchange. Its American Depositary Receipts are listed on the New York Stock Exchange.
Uranium Energy Corp (UEC), based in Corpus Christi, Texas, operates uranium mines in several US states as well as other countries. He also built up a large stockpile of uranium purchased from others in expectation of continued increases in the prices of the raw material. Uranium Energy trades on the New York Stock Exchange.
Yellow Cake PLC (YCA) is a trading company that buys an unrefined form of uranium ore known as yellowcake, primarily in Kazatomprom, and sells it to companies that process it into fuel. Shares of the UK-based company trade on the London Stock Exchange.
Investing with uranium ETFs
exchange traded funds that invest in baskets of uranium-related companies offer investors a convenient way to acquire diversified portfolios operations in the sector. Uranium ETFs generally track an index of uranium stocks. Here are three main ETFs:
Global X Uranium ETF (URA) invests in uranium mining companies as well as companies producing equipment for the uranium and nuclear industries. It is managed to track the Solactive Global Uranium & Nuclear Components Total Return Index. The shares trade on the New York Stock Exchange.
Sprott Uranium Miners ETF (URNM) invests primarily in stocks of companies included in the North Shore Global Uranium Mining Index. These companies may mine uranium, store uranium or invest in uranium royalties. The shares trade on the New York Stock Exchange.
VanEck Vectors Uranium + Nuclear Power ETF (NLR) attempts to track the MVIS Global Uranium & Nuclear Energy Index of uranium miners as well as companies that build, maintain or generate electricity from nuclear power plants. Its shares trade on the New York Stock Exchange.
Investing in uranium allows investors to participate in and potentially profit from a perceived global shift toward nuclear power, driven in part by concerns about global warming. Uranium cannot be traded like other commodities, but investors can buy shares in a number of public companies involved in mining, processing and trading the ore. Exchange-traded funds that invest in baskets of uranium and nuclear-related companies offer a convenient way to acquire a diversified uranium portfolio.
Although uranium prices are generally believed to be on the rise over the long term, the risks associated with investing in uranium remain. The field has been marked by ups and downs and its direction may change drastically depending on shifts in public policy and sentiment towards nuclear energy, especially in the wake of disasters such as the Fukushima meltdown in 2011.
Investment tips for beginners
A Financial Advisor can help you tailor an investment in uranium to your long-term investment goals. SmartAsset’s free tool connects you with up to three financial advisors who serve your area, and you can interview your advisors at no cost to decide which one is best for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.
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