Uranium’s resurgence from 10 years of obscurity
Markets Reporter
Sep 10, 2021
Ten years ago, an earth-shattering magnitude nine earthquake sent a 15-metre tsunami crashing through the sea wall of the Fukushima Daiichi nuclear power plant, disabling the power supply and cooling of three reactors, and triggering a nuclear meltdown.
The chemical explosions that ensued sent radioactive material leaking into the atmosphere and Pacific Ocean, creating what is known as the second-worst nuclear calamity in history, behind the Chernobyl disaster 25 years earlier.

Weeds grow in the parking lot of an abandoned restaurant along Route 6, just outside the exclusion zone around the Fukushima plant. The Washington Post
Fukushima’s nuclear reactors were fuelled by uranium, which consequently suffered a demand shock and prolonged downturn as mines shut or entered care and maintenance. The spot price traded in a depressed range of $US20 to $US30 a pound – not nearly high enough to encourage production.
But after a decade in the shadows, the sector has been jolted back to life within just a few weeks thanks largely to the Sprott Physical Uranium Trust (SPUT). The vehicle is in the midst of a buying frenzy of physical uranium, taking supply out of the market and boosting the spot price to $US40.40 a pound – its highest level in seven years.
“There’s been so much fuel on the floor of the uranium market given it’s been such an undersupplied commodity,” the portfolio manager of Tribeca’s global natural resources fund, Ben Cleary, said. “The match to set this on fire has been Sprott buying spot [uranium].”
SPUT is the largest listed physical uranium fund and began trading on the Toronto Stock Exchange in July after Sprott Asset Management, a subsidiary of global precious metals investment manager Sprott Inc, purchased it from Uranium Participation Corp.
While the fund’s goal remained the same – buying and holding uranium to provide investors with exposure to movements in its spot price – SPUT’s new structure as a trust allowed it to launch a $US300 million at-the-market (ATM) offering on August 17, meaning it could issue units and raise cash to consistently purchase the commodity.
Sprott’s facility is creating tension in the spot market for the first time in years by removing that carry trade and creating a constant buyer of physical uranium.
— Jeremy Bond, chief of investment at Terra Capital
The strategy is similar to the London-listed Yellow Cake PLC, which has also been buying and holding physical uranium, albeit at a slower rate. The company holds 13.3 million pounds of the commodity in storage in Canada and France as of its latest quarterly update in August.
SPUT has purchased 6 million pounds of uranium in the spot market and deployed more than $US200 million of its ATM in the past month.
With SPUT targeting a listing on the US sharemarket next year, strategists expect it will initiate another ATM program, potentially much higher than its current $US300 million ($400 million), which will fuel more uranium purchases in 2022.
Carry trade complacency
The issue SPUT has resolved is a carry trade that had plagued the uranium market for years.
It allowed utilities, or buyers, to avoid entering into long-term contracts to purchase uranium because they could buy it from carry traders, who would acquire the commodity in the spot market using cheap debt.
Carry traders would hold the uranium for a utility for a set period, profiting from storage and shipping costs and a profit margin, while utilities could avoid committing to long-term contracts at cheap spot prices.
Strategists believe the sense of complacency that permeated utilities has now been smashed as the SPUT facility buys physical uranium at an aggressive rate the market has not experienced for years.
“Sprott’s facility is creating tension in the spot market for the first time in years by removing that carry trade and creating a constant buyer of physical uranium,” the chief of investment at Terra Capital, Jeremy Bond, said.
“This is forcing utilities to come to the party for long-term contracts which will now have to be signed at higher prices because SPUT is taking supply out of the market, which is pushing the spot price up.”
Artificial rally?
Long-time investors in the uranium sector will be all too familiar with the commodity’s chequered history, underscored by the infamous price bubble 14 years ago.
After a burst of exponential growth that took uranium to $US137 a pound in 2007, the price swiftly plunged and has fallen every year since.
With the present rally arguably being driven by mass hoarding of the commodity, there are questions regarding the sustainability and legitimacy of the move.
“We are incredibly bullish in the near term on this commodity,” Mr Bond said. “That enthusiasm is tempered somewhat on a medium-term time frame as more production will come online.”
This could come from two of the largest uranium producers in the world, Kazakhstan’s Kazatomprom and Canada’s Cameco Corp, ramping up operations or bringing more online.
“In the short term though, there is a very real risk that the price could spike aggressively,” Mr Bond said.
This year has been a watershed year for uranium as a baseload power for the green economy and a decarbonising world.
— Ben Cleary, portfolio manager of Tribeca’s global natural resources fund
Mr Cleary agreed that an immediate peak was imminent, saying he was confident that the spot price could reach $US100 a pound in the next 12 months. Tribeca’s global natural resources fund has a near 20 per cent exposure to uranium.
“The marginal cost of uranium production is still well above current spot prices,” Mr Cleary said. “So while this rally may be driven by a financial player in Sprot, fundamentally, the price can sustain this rally and much higher prices because there’s not a mine on the planet that makes money with uranium at $US40 a pound, or even $US50.”
Another factor strategists expect will contribute to a sustainable rally is the critical role nuclear energy is expected to play in countries achieving their decarbonisation goals.
Uranium is the fuel most widely used by nuclear plants for nuclear fission – a reaction involving splitting an atom into two or more smaller parts to release energy – because its atoms are easily separated.
A presentation by Tribeca highlighted that nuclear energy uses a fraction of the carbon emissions of coal and oil. It also uses less equivalent carbon emissions per gigawatt hour than wind, solar and hydro energy sources.
Earlier this year, China recommitted to its development of nuclear power in its five-year plan by setting a target for 70 gigawatts of nuclear power capacity by 2025, a significant increase from the 51 gigawatt capacity reached in 2020, according to S&P Global.
The world’s largest energy consumer expects to reach 200 gigawatts by 2035, with six to eight new plants being approved every year from 2021 to 2025.
“This year has been a watershed year for uranium as a baseload power for the green economy and a decarbonising world,” Mr Cleary said.
Earlier this week, Taro Kono, who is a candidate to become the next prime minister of Japan, said restarting nuclear power plants was needed for the country to reach its net zero goals.
Local players
The surge in uranium’s spot price has sparked widespread upgrades for miners of the commodity that have already rallied this year.
In a sector report this week, Shaw & Partners upgraded its long-term price forecast from $US52 to $US60 a pound. It assumes a multi-year price spike at $US85 a pound.
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