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3 Uranium Stocks To Heat Up Your Portfolio

Published 08/22/2022, 07:20 AM
Updated 09/29/2021, 03:25 AM

The passage of the Inflation Reduction Act (IRA) places a huge spotlight back on global decarbonization efforts promoting the use of clean and renewable energy sources. The law provides for $430 billion for investment in clean energy technologies and the reduction of greenhouse gas emissions.

Nuclear energy is arguably the cleanest zero-emission energy source producing electricity by splitting uranium atoms to create heat that generates steam to spin turbines. Fears of major nuclear disasters of the past, including Fukushima in 2011, Chernyobl in 1986, and Three Mile Island in 1979, deter many from embracing the benefits.

There are also extremely high barriers to entry from a regulatory standpoint. The U.S. has no reprocessing or recycling locations. The country has only a single operating uranium mill founded decades ago. The U.S. generates more than 30% of the world’s nuclear energy. Nuclear energy provides 20% of the country’s electricity through 93 operating commercial nuclear reactors at 55 nuclear plants in 28 states. Two new reactors in Georgia are expected to come online by 2023.

Russia Stoking Action

The Biden Administration is pushing to support a $4.3 billion plan to purchase enriched uranium from domestic producers to wean off Russian importers. Germany is considering postponing the closures of three nuclear plants ahead of possible energy shortages stemming from Russia’s lowered gas supplies.

The Most Efficient Clean Energy

According to the Nuclear Energy Institute (NEI), the U.S. could avoid the equivalent of 100 million cars worth of carbon dioxide emissions or over 471 million metric tons in 2020 by using nuclear energy. It produces more energy on less land than any other clean air source, has 360 times less land area than wind turbines, and has 75 times less land than solar photovoltaic plants.

In comparison, three million solar panels or 430 wind turbines would be needed to generate the same power from a typical nuclear reactor. For believers in nuclear energy investment, here are three uranium stocks to consider to heat your portfolio.

1. Cameco Energy

This Canadian company is the blue chip play in uranium. Cameco (NYSE:CCJ) is the world’s largest uranium miner and producer selling its products to nuclear plants throughout the Americas, Europe, and Asia. The company raised its 2024 production target citing the growing demand for nuclear fuel.

The company reported Q2 2022 earnings of CC$0.18, beating analyst estimates for CC$0.01 by CC$0.17 as revenues rose 55.4% to CC$558 million versus CC$494.8 million analyst estimates. The company added 45 million pounds to its long-term uranium contracts in 2022.

It also has 455 million pounds of proven and probable mineral reserves and $1.4 billion in cash and cash equivalents with an untapped $1 billion revolver. Cameco Energy CEO Tim Gitzel commented on its conference call, “In the drive for a clean energy profile, policymakers and business leaders must recognize a need to balance affordability and security.

Too much focus on intermittent, weather-dependent, renewable energy has left some jurisdictions struggling with power shortages, spiking energy prices, or dependence on Russian energy supplies. The good news is that many are turning to nuclear – which provides safe, reliable, affordable, carbon-free baseload electricity while offering energy security and independence.”

2. Energy Fuels

Based out of Colorado, Energy Fuels (NYSE:UUUU) owns and operates projects located in Wyoming, Texas, and the only licensed uranium mill in the country in Utah, the White Mesa Mill. It claims to be the largest uranium producer in the U.S since 2017. The company is also interested in uranium properties in New Mexico, Arizona, and Colorado. In addition to uranium, Energy Fuels also specializes in rare earth materials.

Its White Mesa Mills plant separates the radioactive material from monazite to extract uranium and rare earth materials and is licensed to store the radioactive waste. This is a clean energy play that also includes rare earth elements (REE), which are essential in electric vehicle (EV) batteries, fiber optics, cell phones, and wind turbine magnets.

In December 2020, President Trump allocated $75 million to begin the process of building a U.S. uranium reserve under a 10-year implementation plan. Energy Fuels CEO Mark Chalmers commented,

“Any funds used through a Department of Energy program to purchase uranium from the White Mesa Mill can have a ‘multiplier effect’, by not only supporting the domestic uranium mining industry, but also by advancing other important clean energy priorities, including rare earth production.”

The company has 28.6 million in inventories, including uranium and vanadium, with $86.4 million in cash and zero debt. Between Cameco (25 million Lbs.) and Energy Fuels (15.6 million Lbs.), 86% of all U.S. uranium is produced by assets owned by the two companies.

3. Uranium Energy Corp

This is the most speculative of the bunch. Texas-based Uranium Energy (NYSE:UEC) owns interests in mines in the U.S., Canada, and Paraguay. It holds 1.7 million pounds of uranium inventory and an estimated 42 million pounds at its 118,000-acre Wyoming projects.

The uranium was not mined but acquired through various acquisitions like the American arm of Russia’s Uranium One in December 2021 for $112 million in cash. The company has not actively started up its mining operations.

It recently announced on Aug. 5, 2022, its intention to acquire UEX Corp. of Canada with a higher offer than Denison (NYSE:DNN). UEX is an exploration and development company with only eight employees but owns the West Bear property measuring nearly 7,983 hectares in the Wollaston Lake area of northern Saskatchewan. With no mining revenues or operations, this one is more of an asset play.

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