This article covers:

• What is Uranium?

• What Tailwinds are Supporting Uranium Stocks?

• Is Nuclear Power Viable?

• How to Invest in Uranium Stocks

One of the major investment themes in recent times, uranium has become a hot commodity as investors place their bets on what the path towards a future of renewable energy looks like. 

A number of catalysts have sparked interest in uranium, and investors have no shortage of options available to invest in this growing segment of the market.

Here is everything you need to know about investing in uranium stocks.

What is Uranium?

Uranium is the heaviest element that occurs in nature in large quantities. 

Today, it is mostly used as an energy source for nuclear power, although it also has applications spanning the medical diagnostics field, space and aeronautics, weapons, among other end uses.

One uranium fuel pellet creates as much energy as one tonne of coal. During fission, one kilogram of uranium-235 - an isotope of uranium making up about 0.72% of natural uranium - is equivalent to 2.7 million kilograms of coal.

Uranium has a half-life that spans as high as 4.5 billion years, which tells you everything you need to know about the time taken for its radioactivity to fall to half its original value.

Although Australia does not use nuclear power in our energy mix, the country does play host to the world largest uranium deposit, representing approximately one-third of all uranium. Australia exports the entirety of its uranium production to overseas users.

More than 30 countries operate nuclear power to some extent. As of 2021, nuclear energy accounts for about 10% of total global electricity generation, and more than 25% of the world's low-carbon electricity generation. Some of the countries that operate nuclear power plants include the US, France, China, Russia, and Japan.

What Tailwinds are Supporting Uranium Stocks?

Since the start of the war in Ukraine, the global energy mix has been flipped on its head due to energy security issues. In April, 2022, uranium prices hit their highest level in more than a decade, at one stage sitting around US$65 per pound.

With a significant number of countries shifting away from Russian-sourced energy, including gas, oil, and coal, demand for nuclear energy has ramped up. Uranium prices were trading far lower in the preceding decade, so miners held off investing in new exploration and production, leading to low inventory levels.

What more, with governments around the world bolstering their efforts to reduce carbon emissions, nuclear energy is re-emerging as a solution to ensure the global energy mix aligns with long-term net-zero goals.

Countries like India and Japan have signalled that they are looking to boost their nuclear power capabilities. Back in 2011, Japan turned sour on nuclear energy following the catastrophe at the Fukushima nuclear power plant. 

The world third largest economy, which is heavily exposed to soaring energy prices by way of its dependence on fossil fuel imports, is looking to reopen up to seven dormant nuclear plants, and potentially develop a series of new power plants as well.

Elsewhere, Germany is considering postponing the closure of its last three nuclear power plants, with the country facing a potential energy crisis ahead. Even locally, Australia politicians have discussed the prospects of nuclear energy, although the major parties are currently offering different stances.

Is Nuclear Power Viable?

The debate over nuclear power centres largely on perceptions around the safety and environmental risks, and it has also become a hot button issue in the political realm.

Nuclear power plants are associated with considerable development timelines, and enormous costs, however, as many countries look to phase out or decrease their dependency on fossil fuels, more discussions will emerge regarding the energy mix required to achieve net-zero by 2050. 

To date, even some countries with the most nuclear-friendly programs and policies are utilising other energy sources to meet peaks in demand, but the reliability, low emissions, and lifetime economies of scale of nuclear power have often been cited as drawcards in their favour. 

Nuclear plants designed in more recent times have sought to improve upon some of the inherent safety issues, and add flexibility as well, which have been key considerations among countries that witnessed the nuclear disaster in Japan back in 2011.

Electricity demand is only tipped to grow steadily over the coming years in regions like Asia, and this is why hundreds of nuclear power reactors are either in planning, or have been proposed across the region.

There may well be improvements in nuclear plants over the coming decades, as there no doubt will be for renewables as well, but it would appear the future of nuclear power will largely depend on its effectiveness in terms of balancing an energy mix that tilts towards renewables over time. 

How to Invest in Uranium Stocks

Both the ASX and US share markets provide investors with the opportunity to invest in uranium stocks, which are directly leveraged to the resurgence in nuclear energy.

Some of the most popular uranium stocks on the ASX include:

• Paladin Energy (ASX: PDN)

• Boss Energy (ASX: BOE)

• Deep Yellow (ASX: DYL)

• NexGen Energy (ASX: NXG)

• Bannerman Energy (ASX: BMN)

• 92 Energy (ASX: 92E)

Meanwhile, the highest profile uranium stocks in the US include:

• Global X Uranium ETF (NYSE: URA)

• Cameco (NYSE: CCJ)

• Uranium Energy (NYSE: UEC)

• Energy Fuels (NYSE: UUUU)

• Denison Mines (NYSE: DNN)