Top 5 Renewable Energy Stocks for Uranium Independence
Renewable energy stocks are hot this year and one part of the market could be about to jump higher. In this video, I’ll show you why uranium mining stocks need to be in your clean energy portfolio. We’ll look at the fundamentals for supply and demand then I’ll reveal the top five energy stocks to watch right now.
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Nation, a few years ago the buzzword used to be energy independence and we all knew that meant Drill Baby Drill! But now that drive to independent energy production means something completely different, being able to create it through renewable energy.
And despite the endless movies of the 70s warning us of a meltdown and deformed children, half of which starred Jane Fonda, renewable energy and that independence includes nuclear power.
Nuclear as Most Efficient Form of Renewable Energy
Nuclear capacity at America’s 58 power plants is just 9% of total U.S. energy capability but accounts for 20% of actual power generation because reactors are used more intensely. Nuclear is one of the most efficient forms of renewable energy and it’s about to become an even larger part of that dream to energy independence.
The proposed $2 trillion green infrastructure plan could mean a surge in construction and the Biden plan specifically calls on nuclear energy to reach its carbon-free target from renewables.
But there’s just one problem…the U.S. imports 95% of the uranium used in these reactors, the critical fuel used in nuclear fission. A full 80% of the world’s uranium mining is done by state-owned companies, much of it in Kazakhstan, Russia and Africa.
Global production shutdowns last year laid bare the weakness in this system. As foreign operations shut down, governments prioritized their own demand and the U.S. came dangerously close to supply shortage.
Now globally, there are 52 reactors under construction, most of them in Asia. That’s not only going to drive the demand picture for uranium for years but could create a huge supply shortage as countries fight for uranium resources.
So in this video, I want to highlight five of the top renewable energy stocks in this theme, uranium producers that could be in one of the strongest themes over the next several years. We’ll cover what to look for in these companies and then highlight the five uranium mining stocks to buy right now.
Top 5 Uranium Mining Stocks to Buy Right Now
Currently the U.S. accounts for just 3% of global uranium production though Canada is a large producer at 22% so we’ll be focusing on companies with assets here in North America. Uranium spot prices have been volatile from year to year but are still less than half the 2011 peak and a fifth the 2007 highs. The federal government devoted $75 million last year to creating the first ever national strategic reserve of uranium. That combined with growing demand should help drive prices for the next few years.
And for our five stocks to watch in uranium producers, I want to start with something different, Uranium Royalty Corporation, ticker URCCF in the U.S. and URC in the Canadian market.
URC is the first to apply the royalty model to uranium assets, so it has a partnership interest in uranium projects, receives the cash flows and passes that through to investors through a dividend distribution.
The company has a diversified portfolio across North America and in every stage of development from permitted projects, production and exploration. It’s partners include some of the largest uranium miners in the market like Cameco, RioTinto and UEC. And you can see how this is set up. For example, the company has a 9% interest and 1% gross overriding royalty in the McArthur River project run by Cameco in Canada. The project is licensed to produce 25 million pounds a year with proven and probable reserves of almost 392 million pounds.
The company has a strong balance sheet with $38 million in cash and securities for acquiring assets. And while I’ll highlight operating companies for our other four stocks, I like this one as an overall play on the theme for a couple of reasons. First, you’re going to get a higher cash yield because of that royalty structure. Also though, the company is like a fund of projects and benefits from the investor interest in assets without the operational mining costs. So URC has fixed operating costs, no development or capital costs, just a steady cash flow from that diversified portfolio of assets.
Now I want to highlight those individual mining stocks in the theme, many of which have partnership agreements with URC.
Our first miner is by far the largest, $6.3 billion Cameco Corporation, ticker CCJ.
Like most of the miners, Cameco has had to shut down production at some locations due to COVID but was still able to produce 30 million pounds last year at an average realized price of $46 per pound. The company operates assets mostly in North America though it also has fields in Europe, Kazakhstan and Australia. It operates the world’s largest uranium mine at McArthur River and all told, has over 460 million in proven and probable reserves.
Outside of mining, Cameco also operates its fuel services and marketing divisions so this is a vertically-integrated company that can take advantage of the trend in nuclear renewable energy.
With Cameco’s size and integration across the supply chain, it’s able to get economies of scale and efficiencies a lot of the other miners just can’t touch. For example, it’s able to produce uranium at an average of 15 Canadian dollars per pound, well under the industry average and nearly half the current spot price.
Next is Energy Fuels, ticker UUUU, a much smaller miner in fact all the rest of these mining stocks are under a billion-dollar market cap.
Energy Fuels is more diversified across critical elements. It’s the largest U.S. producer of uranium and vanadium along with business in other rare earth elements and recycling. It operates three production facilities in Utah, Wyoming and Texas and the recent move into rare earth element used in electric vehicle batter production could be a game-changer.
It’s White Mesa mill in Utah is the only facility in the U.S. licensed and capable of processing monazite for recovery of rare earth elements and uranium. The recent supply agreement with Chemours sets it up to begin processing with less than a million in capital upgrades.
Besides that diversification across mining, Energy Fuels has one of the cleanest balance sheets in the industry. The company has over $28 million in balance sheet cash against no long-term debt.
Uranium Energy, ticker UEC, is another smaller penny stock in the theme and a pre-production miner with the potential for up to four million pounds a year with three projects in the United States, an interest in the Athabasca Basin in Canada and a portfolio of projects in Paraguay.
The company’s Hobson Processing Plant in Texas is critical to its mines in South Texas and gives it a processing advantage over other miners. There’s still more development that needs to be done to get these assets to production but it’s sitting on over 58 million pounds of measured and indicated resources. With balance sheet cash of $16.7 million against $18 million in long-term debt, it’s almost cash neutral so a solid financial position to take these assets to production.
The smallest mining stock on the list, UR-Energy, ticker URG, has a $230 million market cap. The company produces out of its Lost Creek, Wyoming project with a total production of 2.6 million pounds so far. The site is expected to product up to an additional 13.8 million pounds through 2031.
URG also owns the Shirley Basin project, an older field producing 71 million pounds over three decades through the 90s and estimated to hold another 6.3 million pounds left to produce.
The balance sheet is a little shakier here with just $6.6 million in cash against $13.2 million in debt. It’s the riskier of the five uranium stocks but still possibly one to watch.
Renewable energy stocks are going to be the theme for investors over the next several years. It’s not too late to invest in these clean energy companies that will change the way we produce energy and one segment is primed to outperform.