The Sprott Physical Uranium Trust was established roughly six months ago and is the only publicly listed fund in North America to invest in physical uranium. Currently, the Canadian-listed fund holds about one-third of the global annual supply of uranium, which is set to increase as time goes by. The trust’s establishment and significant growth has been sending shockwaves through the nuclear fuels market, which has spurred a rally in the heavy metal this year.
Reports from Sprott show that its assets have risen in value to reach $1.9 billion, which has forced the product to increase its financing limit to $3.5 billion. This is the second time the fund has had to raise its limit in two months. Experts believe the race to bet on a nuclear-driven future is the primary cause of the surge, as virtually everyone from day traders to hedge funds jump on the bandwagon.
Awareness that nuclear energy may play a bigger role is increasing around the world as governments work to counter global warming. Despite the use of uranium being heavily opposed by environmentalists, given the hazards from radioactive waste and other concerns, advocates believe that the carbon-free power generated by nuclear energy hugely outweighs its drawbacks.
Since summer, the uranium trust has bought about 40 million pounds of uranium, which makes up about 30% of yearly production. Traders maintain that Sprott is restructuring the uranium market and enabling more transparent prices. For a long time now, the metal’s spot market lacked day-to-day price discovery, as the majority of the buyers, i.e., electrical utilities, bought uranium through long-term purchase agreements.
Sachem Cove Partners founder and chief investment officer Michael Alkin stated that the fund’s vehicle enables consistent price discovery from speculators, noting that this will help bring to light the real price of the metal. Data from UxC LLC shows that when the uranium trust was launched in July, the price of uranium was $30. Currently, the price of the radioactive metal is at $45, signifying a 50% jump.
UxC LLC is a leading nuclear fuel market research company. The research company’s president, Jonathan Hinze, noted that while the Sprott fund wasn’t the only buyer participating in the market at the time of its launch, the organization’s activity was the primary aspect to the market’s move. Hinze maintains that as long as the fund continues to raise money in the capital markets, it will be a consistent buyer of uranium.
He adds that the fund’s move to increase its limit again signals an appetite for uranium in the financial sector. This paints a rosy picture for the future of players in the uranium sector such as Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) since the flurry of interest in nuclear energy has even started swaying public opinion that had turned against this green form of energy.
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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