Sprott's investment in uranium is paying off and it's just the start
(Kitco News) - Sprott Inc's foray into the uranium market appears to be paying off as prices have recently climbed to new decade highs with an increase in trading activity.
According to some analysts, the Sprott Physical Uranium Trust (TSX: U.U US$, U.UN C$), which began trading July 19, is a critical factor behind the recent push in the energy metal's price. The Trust gives investors direct access to physical metal.
According to TradeTech, which tracks uranium, the price is currently trading around $33.80 per pound. In 2008 the metal was trading around $136 a pound.
In an interview with Kitco News, when the Trust first launched, Peter Grosskopf, CEO of Sprott Inc., said he saw this as a game-changer for the Uranium market. He added that he expects to see growing investment demand for the physical metal as industrial demand picks up.
"We think uranium is entering a new bull market as the world looks for a mix of clean energy in the new green energy revolution," he said. "If you want a low carbon grid, you can achieve it by spending an enormous amount of money and having a highly inefficient grid, which is inherently unstable, or you include nuclear as a core part of the power base. We think uranium has been underplayed for the last 15 years."
Grosskopf said that one of the reasons the market has been lackluster for the last 13 years is because investors have had no direct access.
"A lot of investors have been frustrated because they only, especially in the U.S., only had a very few stocks to choose," he said. "We definitely sensed there was a dislocation between the amount of investor interest and the amount of investment in the industry and that we could help bridge that gap."
Not only is the new fund bringing investors back to the uranium market, but Grosskopf said that it would also improve transparency in what has traditionally been a small opaque market. There is no official spot market for uranium, and contracts are negotiated privately.
As the Trust grows and liquidity builds, Grosskopf said it could be an important pricing mechanism in the market.
While Sprott is currently focused on uranium, Grosskopf said this isn't the end of Sprott spreading its wings in the commodity space. He added that the firm is looking at creating a similar fund for battery metals and rare earth metals.
"This is going to be a start for us, not a finish line," he said. "Once we find a mineral that we like, we then have to find a way to invest and build a market."