Uranium will rally in the next 5 years as a shift to nuclear energy is inevitable
Welcome to Kitco News' 2022 outlook series. The new year will be filled with uncertainty as the Federal Reserve looks to pivot and tighten its monetary policies. At the same time, the inflation threat continues to grow, which means real rates will remain in low to negative territory. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2022.
(Kitco News) - Uranium surged this year making it one of the hottest commodities in 2021. Uranium spot prices hit a nine year high in September and are up about 50 percent year to date. "We are starting to see countries around the world accepting nuclear energy. Those countries realize if they want to reach a carbon neutral future, nuclear energy has to be part of the equation," emphasized Jon Bey, President and CEO of Standard Uranium.
Bey spoke to Michelle Makori, Lead Anchor and Editor-in-Chief of Kitco News at the Mines and Money London conference. Standard Uranium is a Canadian uranium exploration company.
Also, uranium prices skyrocketed this year, because of the launch of the Sprott Physical Uranium Trust this summer. Sprott purchased millions of pounds of uranium this year. Uranium
equites and uranium ETF's also rallied significantly in 2021.
"The spot price of uranium was trailing around $34 for a long time, and then Sprott unexpectedly came into the market. Sprott started buying uranium off the spot market, which led it to a nice rally from $34 up to $51," Bey said. "Uranium has come back down to about $46, but it's got a long way to go. The fundamentals, the big picture for the uranium market is strong. There is not enough supply out there to meet demand."
Bey explained why he expects there will be big moves to the upside for uranium prices in 2022. "There's demand coming from all over the world. China has just announced 150 nuclear reactors to be built in the next 15 years. And that's only one region. The U.S. has 95 nuclear reactors in operation," Bey said. "We now have bi-partisan support from both sides of government wanting nuclear reactors to stay operational longer, which is going to drive more demand."
|Do Investors Really Care about ESG?|
Bey discussed his short and long-term outlook on uranium. "Currently, the spot price of uranium is about $46, but in the next six to 12 months, the spot price could be trading in the mid $50's to the mid $60's," Bey said.
"I would love to see it trading in the $80's to $90's over the next five years. It would allow our uranium companies to continue to finance, to do our work, and allow those mines to produce for many years and be profitable," he continued.
"I don't know if uranium will hit its all-time high of $137 per pound like it did in 2007. There were a couple of major incidents that occurred that caused the price to go up then. A flooding of a mine took away a lot of available supply," Bey added. "Realistically, I would love to see the spot price hit the high $70's or $80's and stay there for the long term. This is quite sustainable for many mines."
Bey stressed that the need for clean energy will take precedence over the stigmas of nuclear energy disasters. "Climate change, and the growing need for nuclear energy is taking over. For example, in Germany, the price of electricity has gone through the roof for reliance on solar and wind, while their carbon output has not really improved that much," he explained. "Countries around the world are comparing Germany to France. France has gone all in on nuclear energy, they are building more large reactors and moving to small modular reactors. They are producing clean energy and selling that to Germany. As climate change is tackled, nuclear has to be part of the solution."
It was recently announced at the United Nations Climate Change Conference (COP26),
that nuclear energy will be included in Environmental, Social, and Governance (ESG) investing. This means for the first-time nuclear energy will be part of EU Taxonomy -- which is a classification system of the European Union, establishing a list of environmentally sustainable economic activities. "This will allow funds to invest in nuclear energy when they are investing in ESG. This is a big change," Bey emphasized. "It hasn't happened yet, but it should happen in the immediate future."
Bey pointed out that investing in nuclear energy will drive more capital into the uranium space. "It's going to drive more money into ETFs and equities. Hopefully, we will see uranium equities increase along with equities of companies like ours," he said.
Bey spoke about how mining investors can benefit from the trend of people aggressively pushing for nuclear energy. "Investors should examine their portfolios on multiple levels.
Producers make money when their mines are in production. The next level is the developers, who are trying to get their projects into development. Then you have companies like ours which are exploration companies," he explained.
"Investors should have a little bit of exposure to a company like Standard Uranium, because when we make a discovery, the share price can take off astronomically," Bey continued. "That's when you get a lot of torque on your investments. Investors should have a basket of some exploration companies, developers and producers. That's the way to go!"
For more on Bey's views on uranium, please watch the full video above. Follow Michelle Makori on Twitter: @MichelleMakori