The Sprott Physical Uranium Trust has been buying the metal on the spot market since August, which signals the start of a bull run for uranium. At the moment, Sprott holds more than 23 million pounds of uranium, which equates to roughly 14% of international reactor consumption. This move to amass huge amounts of the metal brings the potential bull market period a few years closer to now.
Uranium is popularly used by nuclear plants for nuclear fission, and while it can be found in various parts of the globe, it is considered a nonrenewable energy source. Nuclear plants use uranium for fuel because its atoms can be split apart easily.
Horizon ETFs portfolio manager Nick Piquard expects the price of uranium to exceed $60 per pound in the near future, which would be roughly 40% more than its current price. Piquard explained that with the supply of the metal declining and demand increasing, there was no reason why the metal shouldn’t be in a bull market.
The demand outlook of uranium is improving as optimism that nuclear energy may play a role in the push for a clean energy future grows. This, in conjunction with the Sprott Uranium Fund, has pushed the metal’s futures up, with purchases in uranium firms sending stocks to their highest levels in years.
At the start of this week, uranium futures rose to about $44 per pound on Nymex. This is the metal’s highest level in more than a decade. The surge was primarily driven by the Sprott Uranium Fund, which has been purchasing physical supply at a rate that’s nearly twice the daily liquidity for the spot market.
The recent rally is a significant turnaround for the metal, whose prices have been low for the last couple of years, as investors and governments tried to avoid using the nuclear fuel after the 2011 nuclear disaster that occurred in Japan’s Fukushima prefecture. Currently, there exists about 50 reactors under construction globally. This is the lowest number of reactors since the 2011 tsunami and earthquake in Japan that prompted nations across the globe to reconsider their approach to nuclear energy.
Investors are now wagering that the international effort to stop climate change will revive carbon-free nuclear energy, which will in turn, increase the demand for uranium.
With almost 14% of global uranium tied up in the uranium fund at a time when nuclear plants are scheduled to begin operations soon, the bull market is a huge possibility. Once that prediction takes shape, uranium mining companies such as Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) will benefit from the increase in demand for this energy metal.
NOTE TO INVESTORS: The latest news and updates relating to Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) are available in the company’s newsroom at http://ibn.fm/UUUU
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