As the global energy landscape transitions towards cleaner, more sustainable power sources, nuclear energy is emerging as a critical solution. The key fuel driving nuclear power—uranium—is becoming increasingly valuable as both supply constraints and rising demand create an ideal environment for long-term price growth. The uranium mining sector, especially in stable regions like Canada, offers a compelling investment opportunity due to persistent supply shortages, robust demand from nuclear power expansion, and emerging technologies like Small Modular Reactors (SMRs).
One of the most pressing issues in the uranium market is the long-term supply shortage. Despite the recent price rise to around $80 per pound, the supply of uranium remains limited. The world's number 1 & 2 producers respectively, Kazatomprom and Cameco have both cut their production forecasts for 2025, and new mining projects face long lead times due to regulatory, environmental, and logistical hurdles. The geopolitical landscape further complicates the current situation, with Kazakhstan’s uranium increasingly directed towards China and countries within Russias sphere of influence, reducing availability for Western markets.
Simultaneously, global demand for nuclear power is accelerating and we're experiencing a 2nd nuclear renaissance. Countries like China, the U.S., and many in Europe are investing heavily in nuclear energy as a stable, low-emission baseload power source to complement renewable energy and meet decarbonisation goals. The introduction of SMRs and the growing energy requirements of large AI data centres is further amplifying the potential for sustained uranium demand growth.
With these supply-demand imbalances, uranium prices are expected to continue rising in the coming years, presenting a significant long-term opportunity for uranium miners. Despite the undoubtedly strong fundamental landscape, uranium stocks have faced heavy losses in recent works, with the Global X Uranium ETF (URA) losing approximately 30% of its Global X Uranium ETF (URA) lost approximately 30% of it's value from highs in May 2024.
Global Supply Shortages and Geopolitical Shifts
Despite the rising price of uranium — global supply remains constrained. The worlds biggest producers have reduced their production forecasts for 2025 due to a range of factors including supply chain disruptions and geopolitical challenges. Kazatomprom, the world's largest uranium producer, has been facing significant challenges due to a shortage of sulfuric acid, a critical chemical used in the uranium extraction process. Sulfuric acid is essential for in-situ recovery (ISR) mining, the primary method employed by Kazatomprom to extract uranium. ISR involves injecting a solution, usually sulfuric acid, into the ground to dissolve uranium ore, which is then pumped to the surface for processing.
Beyond this, Kazatomprom’s output is increasingly directed toward China and Russia, leaving Western markets more reliant on Canadian producers to meet their uranium needs. The US has already committed to slowly weening itself off Russian uranium by 2028, but in recent days, Vladimir Putin has added to concerns by suggesting that Russia could ban uranium exports to the west even sooner.
Russian President Vladimir Putin in Moscow, Russia, September 10 2024. Picture: Sputnik/Vyacheslav Prokofyev/Reuters
Bringing new uranium mines online takes years due to the complex regulatory and environmental hurdles involved. This means that the current supply deficit is likely to persist well into the 2030s according to the majority of industry analysts. As supply remains constrained and demand grows, the uranium market is positioned for long-term price appreciation.
Increasing Global Demand for Nuclear Power
The push for clean, reliable energy is driving a global revival of nuclear power. Nuclear energy is not only a key solution to reducing carbon emissions, but it also provides stable baseload power, which is crucial as more countries seek to decarbonise their energy grids. This makes uranium an increasingly important commodity.
China is leading the charge with plans to build 8 to 10 new nuclear reactors annually over the next decade. In addition to China, countries in Europe and North America are also expanding their nuclear power capacity, with the U.S. and European nations extending the life of their reactors and planning new projects to replace fossil fuels.
This surge in nuclear activity is driving significant demand for uranium, and discussions of long-term utility contracts with price ceilings of up to $130 per pound were being discussed at the recent World Nuclear Symposium.
The Impact of Small Modular Reactors (SMRs)
One of the most transformative developments in the nuclear energy space is the rise of Small Modular Reactors (SMRs). These reactors are smaller than traditional nuclear reactors and can be deployed more flexibly, making them ideal for regions with smaller grids or in areas where space is limited. SMRs offer several advantages, including reduced capital costs, faster construction timelines, and the ability to be placed in remote or off-grid locations.
SMRs are poised to play a major role in the future of nuclear power. Several countries, including the U.S., Canada, and the UK, are actively investing in SMR technology. For instance, Canada has committed to building multiple SMR units in the coming decade, while the U.S. is exploring the use of SMRs for military bases and remote locations. Notable companies investing in SMR technologies are Rolls Royce SMR and NuScale Power Corp. The flexibility of SMRs makes them well-suited for pairing with renewable energy sources, helping to stabilise energy grids that increasingly rely on intermittent solar and wind power.
The scalability of SMRs also opens up new opportunities in emerging markets, where traditional nuclear reactors may be too large or expensive to deploy. As SMRs become more widespread, the demand for uranium is expected to increase even further, benefiting uranium miners who can supply the fuel for these reactors.
Growing Energy Demands from AI Data Centres
Another key driver of energy demand is likely to be the rapid expansion of AI-driven data centre. These facilities require massive amounts of stable, uninterrupted electricity to power machine learning algorithms and process enormous datasets. Traditional renewable energy sources like solar and wind often struggle to provide the 24/7 reliability needed for data centres, making nuclear power an attractive alternative. The energy requirements of these data centres are so large that they pose a risk to the public energy grid, but SMRs have been posed as a viable solution to provide reliable, independent energy sources for data centres.
The rise of AI and data centre infrastructure is expected to significantly boost global electricity consumption. According to the International Energy Agency (IEA), global electricity demand is projected to increase by over 50% by 2040. Nuclear power, with its ability to provide reliable, carbon-free energy, is well-positioned to meet this growing demand. As more companies and governments invest in AI and data centres, the demand for uranium to fuel nuclear reactors is likely to rise accordingly.
Uranium Prices and Long-Term Outlook
Uranium prices have been rising steadily for 26 consecutive months, currently hovering around $80 per pound. Industry experts expect these prices to continue climbing, with some forecasts suggesting they could surpass $100 per pound within the next year. The underlying reasons for this price increase are persistent supply shortages, growing demand from both traditional reactors and SMRs, and the geopolitical risks that have constrained production in countries like Kazakhstan.
Spot & Long-Term Uranium Prices per Lb (Cameco, Aug 24)
One of the critical advantages of uranium is that even significant price increases have a minimal impact on the overall cost of nuclear energy production. According to the Nuclear Energy Institute, fuel costs—including uranium—represent only about 20% of a nuclear power plant’s total operating expenses(Nuclear Energy Institute). This contrasts sharply with fossil fuels like oil and gas, where fuel costs can account for a much larger portion of energy production costs. As a result, even if uranium prices were to double or triple, the impact on the cost of nuclear-generated electricity would be minimal compared to the price volatility of fossil fuels(Nuclear Energy Institute).
This economic resilience means that utilities can absorb higher uranium prices without passing on significant cost increases to consumers, ensuring stable demand for uranium even as prices rise. This makes the uranium market a unique investment opportunity, offering both price stability and growth potential.
One to Watch: Denison Mines
Denison Mines is one of the most promising companies in the uranium sector, currently advancing major projects in Canada’s Athabasca Basin. At the forefront of their efforts is the development of the Wheeler River project, which includes the Phoenix deposit—one of the first to use in-situ recovery (ISR) technology in the Athabasca Basin. ISR is a low-cost extraction method that leaches uranium from underground ore deposits and pumps it to the surface, reducing both operational costs and environmental impact. The Wheeler River project is expected to begin production by 2027/2028, positioning Denison as one of the lowest-cost uranium producers globally.
In addition to its innovative extraction technology, Denison Mines is in a strong financial position, which is unusual for a pre-operational mining company. While the company has yet to begin mining, it is already generating revenue from its stakes in other projects in the region, including its 22.5% ownership in the McClean Lake uranium mill. Additionally, Denison made a strategic investment several years ago in a large stockpile of physical uranium, which has significantly appreciated in value over the past two years due to rising uranium prices.
Denison has also secured important agreements with local Indigenous communities to advance the Wheeler River project. These partnerships are crucial for ensuring the project's long-term success and maintaining strong relationships with stakeholders, enabling Denison to move forward with environmental assessments and permitting.
The company is expected to make a final investment decision on the Wheeler River project by 2025, with construction likely to follow soon after. Impressively, the company’s existing assets are already worth around 100% of the estimated build cost, which further de-risks the project. With a strong balance sheet, low production costs, strategic partnerships, and a proactive approach to community relations, Denison is well-positioned to become a key player in the uranium industry as global demand for nuclear energy continues to rise.
Conclusion: A Long-Term Bet on Uranium Miners
The uranium mining sector is poised for significant long-term growth. With persistent supply shortages, rising demand driven by nuclear power expansion, and the advent of SMRs, uranium is set to become an even more critical resource in the global energy mix. The rapid growth of energy-intensive industries like AI-driven data centres further underscores the need for reliable, carbon-free power sources, positioning nuclear energy as a key solution.
As uranium prices continue to rise, the sector offers investors more upside potential. Companies like Denison Mines, with their low-cost production methods and rich uranium deposits, are well-positioned to capitalise on these trends. For long-term investors, uranium miners present a compelling opportunity to profit from the global shift toward cleaner, more reliable energy.
References:
Cameco: Spot & Long-Term Uranium Prices
World Nuclear Association: Global Uranium Demand Outlook
Canadian Mining Journal: Denison completes field testing in-situ recovery at Midwest uranium project
Mining Journal: Sulphuric acid shortage to weigh on Kazatomprom production next year
Nuclear Energy Institute: Economic Impact of Uranium
Canadian Mining Journal: Denison signs Wheeler River agreements with Kineepik Métis Local #9 and Pinehouse Lake Village
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