The prices raise a close supply and increasing demand. (Symbol image, photo: Freepik, Haritonovstock)
In recent years there have been hardly any incentives for mining projects to fix the prevailing offer deficit to uranium because the prices were too unattractive. For this reason, prices have increased in the past 5 years. But they are still not attractive enough for many producers. Another increase in uranium prices is therefore necessary to advance uranium production and eliminate the deficit.
Uran production is currently not economical
The range of uranium is affected by various factors, including production bottlenecks in the largest uranium producers and the increasing costs for mining. Kazatomprom, the world’s largest uranium producer, has reduced its production forecast due to challenges in the cost structure and profitability.
The Kazatomprom production forecast, reduced by 17 percent, has a significant impact on global uranium resources. These offer bottlenecks are tightened by uranium prices that are always too low, which make it difficult for the producers to finance new projects. As long as the prices do not increase sufficiently to ensure the profitability of new mines, the uranium offer remains scarce. With increasing demand, these bottlenecks will lead to higher prices in the future.
Textualization of demand by 2050
Experts forecast a tripling of the primal questionnaire by 2050. The main driver for the future increasing uranium requirement is the increasing demand for electricity. The world population is growing, the global gross domestic product is increasing and developing countries have increasing need for electricity. The nuclear energy is considered one of the most promising options to cover the increasing energy requirement and at the same time achieve the climate goals.
Numerous countries are increasingly relying on nuclear power and investing in the expansion of capacities. This will continue to increase the demand for the tight uranium. Another significant factor is the increase in energy requirement through new technologies, in particular through data centers and electric vehicles. In the United States, for example, the electricity consumption of data centers will increase from 3 percent to 8 percent of total electricity consumption by 2030. This development could additionally fuel the demand for uranium, since nuclear energy is considered one of the most reliable and emission -poor energy sources.
Rising uranium prices are essential
Numerous new mines have been shut down because production at current uranium prices is not economical. There is no fair evaluation of the uranium price. The massive dysbalance between supply and future demand will lead to significantly higher uranium prices.
Additional driver: inflation
Inflation and high state deficits support the demand for scarce real assets, especially uranium, as it is difficult to promote and without a replacement. Nuclear power plants need uranium, and operators will pay at any price to keep the power plants into operation. A standstill would be associated with extremely high fixed costs. The cost share of uranium, on the other hand, is only a small percentage of the total costs.
Uranium as an investment
The nuclear energy faces a renaissance: power plants are expanded, new power plants are opened and old power plants are reactivated in order to meet the increasing electricity requirements and achieve the climate goals. The uranium market will benefit from a dramatic increase in needs, because production is only economical if the corresponding uranium price is paid for it. The largest listed companies are Kazatomprom and Cameco.
World largest uranium producer: Kazatomprom
Kazatomprom From Kazakhstan is the world’s largest uranium producer and is supported by the state. Kazatomprom has particularly low conveying costs and pursues a flexible production strategy. This enables Kazatomprom a lot to exercise the uranium market and its prices. As a Kazakh company, it is always rated cheap. While the gross margin is 52.6 percent and the return on 23.4 percent, Kazatomprom has only one KGV of 7 and a KCV of 10. In addition to the favorable evaluation and growth prospects, there is currently a dividend of 6 percent.
Long -term delivery contracts: Cameco
Camecois another listed uranium producer from Canada. Cameco has long -term delivery contracts with nuclear power plant operators. With a participation in Westinghouse, Cameco is also expanding into the nuclear fuel sector. With extensive reserves and a solid balance sheet, the company is well positioned to benefit from long -term uranium trend. However, the gross margin is only 34 percent and the evaluation is significantly higher compared to Kazatomprom due to the geographical location, although the company has grown significantly more slowly in the past.
License and streaming model: Uranium Royalty Corp.
Is the third investment option in the uranium sector Uranium Royalty Corp. to mention. In contrast to traditional mine operators, Uranium Royalty Corp. on a license and streaming model in which the company participates in the sales of existing uranium mines without operating mines. This eliminates operational risks and high investment costs.
Uranium Royalty Corp. Holds shares in some of the world’s leading uranium projects, including Cigar Lake and McArthur River (operated by Cameco). The company benefits from rising uranium prices and new license fees from future min projects. With a strong financial position (high cash and uranium stock) and the growing demand for nuclear energy, Uranium Royalty Corp. A diversified, less risky way to participate in the uranium market.
Disclaimer:
No investment advice. No call to buy or sell securities.