Uranium Investing: Don’t Miss This Opportunity!
Something big is brewing in the uranium market…
Word came in early November that Japan is restarting its nuclear energy program. As you may know, most of Japan’s nuclear fleet has been idled ever since the earthquake induced Fukushima meltdown in 2011.
But now, two reactors operated by Kyushu Electric Power are set to reopen early next year. Japan desperately needs inexpensive energy to prop up its faltering economy. Electricity prices have risen 20% since 2011 due to the country’s dependency on imported fuels.
In response to the news, uranium has surged from $28 a pound to $44 in just the past few weeks.
But the recent rally is likely just the beginning of a larger bull move…
You see, the price of uranium has been depressed for years thanks to Japan’s idled nuclear fleet. Global demand simply hasn’t been strong enough to support prices.
This year’s $28 low was painful for the uranium industry. New mining projects have been mothballed until global demand rebounds enough to support prices.
Speaking of global demand…
While Japan is historically one of the largest users of nuclear energy, other countries are catching up quickly. According to the World Nuclear Association, there are 71 new reactors under construction worldwide, 27 of which are in China.
And keep in mind, there are still 435 operable civil nuclear power reactors worldwide.
With all these new reactors coming online, along with the likely restart of Japan’s nuclear fleet, uranium demand is set to rebound.
What can you expect for uranium prices going forward?
Even after this month’s rally to $44, the commodity is still considered cheap by historical standards. Believe it or not, uranium traded over $130 in 2007. While a return to this level in unlikely anytime soon, the commodity may jump to $70 once global demand picks up.
You see, according to industry insiders, the marginal cost of uranium production lies in the $65-$70 range.
What’s the best way to play a rebound in the nuclear industry?
Small-cap miners like Dennison Mines (DNN), Uranium Resources (URRE), and Uranium Energy (UEC) have all jumped in response to the recent news. But it’s very important to note that of these three companies, only DNN has ongoing revenues from mining operations. URRE and UEC hold uranium reserves, but aren’t producing.
Instead of taking outsized risks on small-cap uranium miners, the easiest way to profit from a multi-year nuclear bull market is through the Market Vectors Uranium+Nuclear Energy ETF (NLR).
NLR holds 53 companies with exposure to uranium mining and/or nuclear power. As the nuclear industry heals from the Fukushima disaster, NLR may enjoy a multi-year bull market.
Until Next Time,
Justin Bennett
Category: Commodities
