It might be time to give your portfolio a white-hot glow. I’m talking about the incredible potential that uranium miners offer. [In this article] I’ll show you why and…[name] the two U.S. miners on the launch pad.
Reason #1: National Security
Nuclear power supplies about 20% of total electricity generation in America…[and] gets 40% of the uranium used…from “unfriendly” countries: primarily Russia, Kazakhstan and Uzbekistan. Meanwhile, U.S. law requires that any uranium used for national defense purposes — including in nuclear-powered naval vessels — be mined, refined and processed domestically.
The market for uranium in the defense industry isn’t big so U.S. producers need commercial customers, too. The two U.S. uranium producers say they need commercial customers to survive and so, they did something about it which brings us to point No. 2.
Reason #2: Section 232
In January of last year, Energy Fuels Inc. (NYSE: UUUU) and Ur-Energy (NYSE: URG) filed a petition with the Commerce Department…stating that foreign, state-owned and subsidized companies in Russia, Kazakhstan and Uzbekistan were dumping uranium on the U.S. market, making it impossible for…[them] to compete. The Commerce Department announced a study of the petition, and it should deliver its findings this week.
To be sure, utilities don’t want ANY change to the uranium market. They like cheap fuel. They also point out that UUUU and URG, together, supply just 2% of the uranium needed by U.S. electric utilities. In other words, they say it’s not feasible. The miners say a phased-in quota system that gives them time to ramp-up production — or something else — would be the way to go.
Reason #3: The Cure for Low Prices is Low Prices[As the chart below shows,] uranium prices have suffered a brutal bear market since 2011.
You can see that uranium fell hard and fast from the high of $73 per pound it hit in early 2011. Now, though, the trend has shifted. It’s getting stronger, and this was happening even BEFORE those two miners filed their Section 232 petition.
Why? Well, long years of a bear market saw 14 major uranium mines shut down. Meanwhile, utilities got fat and lazy, and they fell into the habit of pushing off their uranium purchases as far as possible…[believing that] they could always buy it cheaper.
Reason #4: Supply Squeeze Looms
This chart from Cameco shows how much of their uranium requirements utilities have left uncovered:
Via Cameco, we learn that UxC, which publishes nuclear fuel prices and tracks the market, said at the end of last year that utilities’ cumulative uncovered uranium requirements are about 1.9 billion pounds to the end of 2035. Wow, and that was before China announced this month that it was going to accelerate the number of reactors it is adding to its fleet. This sure looks like a supply/demand squeeze in the making, no matter what happens with Section 232…
Reason #5: The Smart Money is Already Buying
Look at what’s happened in the market in the past month:
You can see that URG is up 33.95%. UUUU is up 27.3%. These both blow away the 6.95% gains made by Global X Uranium ETF (NYSE: URA), or the 5.16% gains made by the S&P 500.
…[It should be noted here] that I own both of these miners…[so] do your own research [and] be aware that the Commerce Department could rule against these miners, and send them plunging but there’s also the potential that this is just the start of something big for uranium stocks in general, and these two U.S. uranium miners in particular.
They are hot. They could get a lot hotter.