The Uranium Miners Opportunity

Key Takeaways

• Uranium Market Consolidation: Thus far in 2024, the uranium spot price has stabilized between $80 to $90 per pound after a significant 88.54% increase in 2023. This phase indicates a healthy correction within a bullish market cycle.

• Miners' Catch-Up: Uranium miners have shown improved performance, catching up to gains in the spot price. 

• Long-Term Contracting Trends: Long-term uranium contract prices point to higher uranium prices as contract ceilings reach $130 per pound.

• Geopolitical Impacts and Demand: Geopolitical tensions and supply uncertainties persist, influencing uranium supply dynamics. Despite these challenges, global demand remains robust, driven by nuclear reactor restarts and new builds, supporting a sustained bullish outlook for uranium.

Artificial Intelligence and the Need for Electricity

Global electricity demand is estimated to increase by 165% by 2050.² Surging energy consumption in the East is driven by the urbanization and industrialization of developing countries, while the rise of artificial intelligence (AI), data centers, electrification and reshoring is driving demand in the West.

Figure 1. 

Globally, data centers’ electricity demand is forecasted to grow 258% from 2023 to 2030.³ Growing demand from global data centers is expected to increase from 1.2% of global electricity supply to 4.1%.⁴ AI data centers require much more electricity for computing, cooling and other IT infrastructure compared to traditional data centers because of:

• Higher computational demands from complex algorithms and large datasets
• Increased workloads and demand for real-time data from continuous, intense computational workloads running 24/7
• Densely packed servers requiring significant power for cooling requirements

To support the growth of AI, Silicon Valley is increasingly turning to nuclear energy. Firms like Google, Amazon and Microsoft have signed deals to purchase power from nuclear energy providers.⁵ The benefits of such arrangements are twofold. First, data centers will have access to the reliable baseload power provided by nuclear energy to run their energy-intensive operations. Second, nuclear energy is one of the cleanest forms of energy, and by going nuclear, tech companies can still progress towards their corporate net zero carbon emissions pledges, even as their energy footprints expand.

Why Uranium Miners?

We believe we are in the early stages of a sustained uranium bull market. An already positive outlook was given an additional boost at the COP28 conference in December 2023, where more than 20 nations agreed to triple nuclear energy capacity by 2050. The pledge grew to 31 countries after the COP29 conference in November 2024. Uranium miners stand to benefit from the growing acceptance of nuclear energy.

We anticipate that the uranium supply-demand imbalance will continue through at least 2040. Demand for uranium may outstrip supply and reach a cumulative deficit of 1 billion pounds by 2040. The uranium market may see a cumulative deficit of 2.1 billion pounds when factoring in global net zero pledges.

Figure 2. Uranium Supply and Demand Estimates (2008-2040E)

Source: UxC and Cameco Corp. Data as of 9/30/2024.

Higher uranium prices and more investment in uranium miners are needed to reduce the expected supply shortfall and meet current and future demand. Our focus is on uranium miners, which are upstream in the supply chain. Miners may be less susceptible to some geopolitical risks and may benefit as Western governments seek to secure critical supply chains by incentivizing domestic expansion for uranium miners.

In November 2024, Russia imposed restrictions on the export of enriched uranium to the U.S. This development has the potential to meaningfully impact downstream nuclear companies, such as utilities and enriched uranium importers, as Russia controls about 44% of global uranium enrichment capacity.⁶

Figure 3. Uranium Miners' Market Capitalizations Have Grown with Increased Investment⁷ (2020-2024)

2025 May Provide an Attractive Entry Point for Uranium Miners

After years of growth, uranium miners took a healthy pause amidst the broader uranium bull market. Off recent highs, spot uranium prices spent much of 2024 between $80 and $90 per pound before moving lower to $75 to $80 in Q4. Uranium miners tend to offer leverage to the price of uranium (see Figure 4), outperforming in rising markets while underperforming in falling markets. However, as a group, uranium miners showed resiliency in 2024, having outperformed the spot market as of the time of this writing.

Figure 4. Uranium Miners vs. Spot Uranium (2014-2024)

Source: Bloomberg and TradeTech LLC. Data from 1/30/2004 to 9/30/2024 reflecting longest available data. World Uranium Equities measured by URAX Index, which tracks the performance of stocks globally that conduct business with uranium. URAX and Uranium Spot denominated in U.S. dollars.

Despite the bull market pause, the underlying fundamentals for uranium improved with positive support from technology companies, accelerating supply and demand constraints, and continued advancement on the political front. Among market developments in 2024 were:

• The ban of importing Russian-enriched uranium by the United States by no later than 2027. This action was met with a preemptive Russian ban on exporting enriched uranium to the United States.
• The announcement of plans to restart the Palisades Nuclear Plant in Michigan⁸ and Three Mile Island in Pennsylvania.⁹ 
• Talen Energy’s announcement of its sale of a nuclear-powered data center to Amazon.¹⁰
• Meta’s requests for proposals to identify nuclear energy developers to help the company meet its AI innovation and sustainability objectives.¹¹

We believe 2025 may represent an attractive buying opportunity for investors amid increasingly positive fundamentals.

Sprott Uranium Miners ETF (Ticker: URNM)

URNM provides focused pure-play¹² exposure to uranium mining equities. Pure-play companies devote at least 50% of their assets to the uranium mining industry, including mining, exploration, development and production of uranium, holding physical uranium, owning uranium royalties or engaging in other non-mining activities supporting the uranium mining industry.

• Only¹³ U.S.-listed ETF to provide targeted pure-play exposure to senior and junior uranium miners and physical uranium
  • Aggregate weight of 82.5% of the index is assigned to uranium miners, explorers, developers and producers
  • An aggregate weight of 17.5% of the index is allocated to entities that hold physical uranium, uranium royalties or other non-mining assets
• Traditional market portfolios may provide very little, if any, exposure to uranium miners. Investors may consider adding URNM to existing portfolios to:
  • Diversify energy exposure traditionally allocated to the oil and gas sector
  • Provide growth potential as part of a thematic or growth allocation

URNM is Part of the Sprott Critical Materials Suite of ETFs

Footnotes