Uranium stocks were on fire today. While Uranium Energy (UEC 4.83%) and Denison Mines (DNN 4.74%) had popped 12.5% each by 3:35 p.m. EDT, NexGen Energy (NXE 2.89%) and Energy Fuels (UUUU 5.85%) were up 5.2% and 6.5%, respectively, by that time. Thank a potentially game-changing new uranium exchange traded fund (ETF) that began trading on Canada's Toronto Stock Exchange.
So what
The Sprott Physical Uranium Trust fund, which was formed by Sprott Asset Management after it took over uranium asset investment manager Uranium Participation, started trading on the Toronto Stock Exchange on July 19.
Here's why it's such a big deal: The Sprott Physical Uranium Trust is the world's largest uranium fund that invests in physical uranium. The entry of such a large, actively managed fund could prove to be a game changer for the uranium market as the fund will provide investors looking for exposure to uranium with an easy, liquid option to park their money into. That should spur demand for physical uranium, which could go a long way in boosting the metal's price. For perspective, the fund purchased 100,000 pounds of uranium compound on its first day of trading.
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Uranium miners have been plagued with low prices for years, even forcing some of the world's largest uranium miners like Cameco (CCJ 6.37%) to curtail production in a bid to support uranium prices. Junior miners like Denison Mines and Uranium Energy have also been buying physical uranium in recent months instead of mining it all in a bid to sell it later when prices improve.
Needless to say, uranium stocks soared today as the prospects of a recovery in uranium markets now appear stronger than ever with the entry of the Sprott Physical Uranium Trust fund.
Cameco even discussed this during its first-quarter earnings conference call. Cameco management sees "real potential upside" in uranium prices with the entry of this actively managed ETF and believes it could create much-needed transparency in the spot market.
Sprott Asset Management has been tracking the uranium market for years. In an interview with Mining Journal, CEO John Ciampaglia said fundamentals for uranium looked "very good," and that he believes more governments across the world will commit to climate targets and consider nuclear energy to meet those goals, as other sources of renewable energy like solar may not be enough. Uranium is the key fuel used to power nuclear reactors.
Now what
This ETF couldn't have come at a better time. Uranium prices have edged higher in recent months, and large miners like Cameco are already seeing an improvement in end market demand. More importantly, President Joe Biden's infrastructure plan, which includes significant investments in clean energy including nuclear, has raised hopes for uranium.
In short, today was a huge day for the uranium markets, and it could hold the key to the industry's recovery. Don't miss out Cameco's comments on this development during its upcoming quarterly earnings report later this month.
