What happened

Uranium Energy (UEC 2.97%) surged in early trading on Monday, jumping by 9.4% to hit a 52-week high of $4.28 a share before losing some of that ground. The uranium mining stock closed the trading session up by 3.1%.

Uranium Energy got fired up last week and continued its rally Monday thanks to a sudden jump in uranium prices.

So what

After a dizzying rally that began in mid-August sent uranium prices to a nine-year high of $50.8 per pound in September, the rally fizzled out, and the commodity slid to almost $34 a pound on Oct. 8.

It wasn't random, though, when uranium prices started to rise again from Oct. 8 onwards. That was also the day when the Sprott Physical Uranium Trust (SRUU.F 5.85%) announced it had bought 300,000 pounds of uranium, three days after buying 500,000 pounds, following a dry spell that had lasted more than two weeks. Those two weeks when Sprott didn't announce any fresh uranium purchases were also when the commodity's price plunged.

A person looking at a rising stock price chart on a smartphone.

Image source: Getty Images.

In short, it's not an exaggeration to say that the Sprott fund's aggressive spot uranium purchases since its inception in mid-July have almost single-handedly driven the direction of uranium prices, and therefore, uranium stocks, over the last few months. That is, they did so until a big development last week set uranium stocks on fire: On Oct. 18, Kazatomprom, the world's largest uranium miner, announced plans to launch its own uranium fund in Kazakhstan. The prospect of another fund joining Sprott to scoop up the commodity from the market triggered a frenzy of buying activity in uranium stocks.

On Oct. 25, uranium inched higher to $49 per pound, fueling hopes that it could surpass its recent peak and potentially even reach $70 per pound -- the price it commanded in 2011, before the Fukushima Daiichi nuclear disaster nearly killed the nuclear power and uranium industries.

Now what

With uranium prices rebounding, investors are growing more excited about uranium stocks. In Uranium Energy's case, the company's recent agreements to purchase nearly 2.5 million pounds of uranium for $75.9 million have investors excited, as rising prices should mean greater returns for the company on its inventory.

However, those agreements call for delivery dates out to 2023, as last reported. Moreover, Uranium Energy is still in the exploration stage, but its market capitalization is already close to $1 billion. That makes the miner a speculative and risky small-cap stock for now.