Uranium miners posed to extend gains on supply crunch

The Sprott Uranium Miners ETF has climbed 16% to start the year, ahead of the S&P 500 Index, which is down 0.6% to start the year, following a 52% rise in 2023. The fund’s top performers include Premier American Uranium Inc., up 90% so far in January, and CanAlaska Uranium Ltd., up 55%. Similarly, the Global X Uranium ETF has climbed 11% to open 2024.

Larger, established miners are also up double digits. The largest North American uranium miner, Cameco Corp., has climbed 13% in Toronto, extending a run that has the stock up 95% over the last 12 months.

In a report Wednesday, Sprott market strategist Paul Wong and ETF product manager Jacob White described 2023 as “a blockbuster” year for uranium miners, one where the spot price of the reactive metal climbed 88.5% to end the year at $91.09. “The long-term fundamentals for uranium are bullish, and price momentum is likely to continue into 2024,” they wrote.

The bull case for the reactive metal, according to Wong and White: Demand has begun outstripping supply and “the era of inventory destocking, the primary source of secondary supplies, is over.”

They note 22 countries have pledged to triple nuclear capacity by 2050. At the same time, there are supply concerns. With the passage in 2023 of the Prohibiting Russian Uranium Imports Act by the US House of Representatives, Sprott expects utilities to steer clear of deals with Russian firms. Wong and White also point to the recent coup in Niger and Kazakhstan’s “chronic inability to meet production guidance” as adding to the uncertainty surrounding supply security.

“As these gain traction, uranium and uranium miners may be the ultimate beneficiaries, especially in light of the fundamental supply-demand deficit in the market,” they add.