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Why Denison Mines, Energy Fuels, and Uranium Energy Stocks Soared More Than 10%

By Neha Chamaria – Nov 23, 2021 at 3:12PM

Key Points

  • The Sprott Physical Uranium Trust Fund could start another round of aggressive uranium buying.
  • Kazatomprom is also inching closer to starting a physical uranium fund.
  • Meanwhile, utilities are showing interest in signing uranium contracts.

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Uranium stocks sizzled as some big news hit the industry.

What happened

Uranium stocks are back in action. Stocks across the industry soared on Tuesday on the back of two big developments that have the potential to send uranium prices soaring. Here's how much the top-performing uranium stocks had rallied at their highest points by around 10:05 a.m. ET, Nov. 23:

  • Uranium Energy (UEC 0.49%): 12.2%.
  • Denison Mines (DNN 2.08%): 10%.
  • Energy Fuels (UUUU -0.80%): 10.9%.

So what

If you look at the dizzying rally in uranium prices between July and September, you could easily single out the Sprott Physical Uranium Trust (SRUU.F -0.35%) exchange-traded fund (ETF) as the one behind the run-up.

The thing is, global demand for uranium was painfully low until the Sprott Physical Uranium Trust Fund launched in July. The Fund started buying up physical uranium from the spot market to meet demand for its units from investors betting on the physical uranium ETF. By Nov. 22, the Fund had amassed almost 40 million pounds of uranium versus only 18.3 million pounds on July 31.

The Fund's pace and frequency of uranium purchases, however, has decelerated considerably since October, triggering a lot of volatility in utility stocks. However, I urged investors in uranium back in September to keep an eye out for one major potential development -- the Sprott Physical Uranium Trust Fund filing for a new offering of units that should give it the leeway to buy more uranium.

A person raising his hands in celebration while looking at stock price charts on a computer screen.

Image source: Getty Images.

On Nov. 23, the Sprott Physical Uranium Trust Fund made an amended filing with the regulatory authority to seek approval to issue units worth up to a whopping $3.5 billion during the 25-month period commencing Aug. 10, 2021. On Sept. 10, the Fund filed for an offering of only $1.3 billion worth in units.

In short, investor interest in the Sprott Fund is so high that it now wants to issue additional units worth almost $2.2 billion. As you may have guessed, all of that money will go into buying more uranium from the spot market, and that's great news for uranium prices and uranium stocks.

In another big development today, the world's largest uranium producing and marketing company, Kazatomprom, formally signed an agreement to invest in ANU energy, a new physical uranium fund to be established in Kazakhstan. Its sole purpose is "to store physical uranium as a long-term investment." The fund is expected to be a mini-Sprott that will buy uranium from the spot to meet demand for its units. Investors in emerging markets are expected to buy these units in order to gain exposure to uranium markets.

Both of these, particularly the Sprott Physical Uranium Trust Fund's massive proposed unit offering, are huge developments that could significantly boost demand for and prices of uranium in the coming months. Uranium prices are currently hovering around $47 per pound as per, close to the nine-year price of $50.8 a pound hit in September.

Now what

Wait. I'll give you two more reasons why uranium stocks are surging today.

First, utilities are finally reportedly showing greater interest in signing long-term uranium contracts now that prices of uranium are rising again, according to a report from S&P Global. Uranium is the key fuel that powers nuclear reactors, which means utilities are also the most important end consumers for uranium producers. Eventually, demand from end markets is imperative to support uranium prices in the long run.

In another recent development, the Sprott Physical Uranium Trust Fund is now buying the North Shore Global Uranium Mining ETF. The company plans to turn it into a Sprott Uranium Miners ETF, an equity ETF that will give its investors an option to invest in uranium beyond physical uranium.

All of these developments come at a time when more nations are pledging to decarbonize and reconsidering nuclear energy as a viable alternative fuel source. Since some uranium stocks are also making notable moves to make the most of the rebound in the uranium markets, it's not surprising to see uranium stocks surging.  

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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