Uranium – How To Invest

Gaining exposure to the price of uranium can be acheived in a variety of ways, all with advantages and disadvantages.

Mainstream Methods

Physical Proxys

For obvious reasons it is not practicable to hold physical uranium like silver, gold, or plantinum. And although futures are available on uranium, ETF and Trust vehicles are not typically synthetic and gain exposure by owning physical uranium (i.e. buying and paying for storage). Examples of such vehicles are:

  • Yellow Cake Plc (YCA)
  • Sprott Physical Uranium Trust (U), (previously Uranium Participation Corp)

This is a good option for low risk investors who want pure exposure to the underlying commodity without any financial or operational leverage. The downside is a linear relationship of returns, i.e. if uranium price doubles your holdings value should approximately double

Stock ETFs

Due to the intinsic financial and operating leverage of uranium mining companies (producers, developers, and explorers), the share priceses of the companies primarily exposued to uranium could (and have in the past) increased many multiples of the uranium price increase (which is also the case on the downside). Therefore a ‘diversified’ basket of uranium companies, gained via a stock ETF, should give outsides returns in a uranium bull market.

The four primary uranium stock ETFs are:

  • North Shore Global Uranium Mining ETF (URMN)
  • Global X Uranium ETF (URA)
  • Horizons Global Uranium Index ETF (HURA)
  • VanEck Vectors Uranium & Nuclear Energy ETF (NLR)

Stock ETFs, however, are the ‘dumb’ way to gain exposure to uranium. This is as these ETFs are market capitalisation based, which means they buy based on company ‘size’ and not on quality, value, or most imporantly, financial and/or operational leverage exposure to uranium and the potential for capital appreciation.

Royalty Companies

Less mainstream, although an excellent model in some other asset classes (particularly gold and silver), the implementation is relatively new in the space and of questionable durability and exposure. At present there is only one:

  • Uranium Royalty Corp (UROY / URC)

Individual Stocks – ‘build your own ETF’

It is easy to show that a small (e.g. c. 10 stock) selection of the right stocks on quality and exposure to uranium price moves can move many times that of a ETF.

Such a portfolio is comprised of three main elements:

Producers (or On-Standby Producers)

Coming in two main flavours:

  • Large – Kazatomprom, Cameco, CGN Mining
  • Mid-Tier – UEC

Juniors (Developers / Explorers)

This is the higher risk / higher exposure area, also coming with some distinction between development and/or exploration stage with NexGen, Fission, Denison being three examples in the Athabasca basin that have deposits being advanced though exploration, permitting, and development.

Derivatives

An optional use of derivatives (e.g., long-dated in-the-money calls used as equity proxies) can leverage the use of capital compared to owning stocks outright and with relatively little increase in comparative financial exposure.


Last updated: Mar 7, 2022

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