It would have surprised many to see conflict break out in the Middle East but uranium stocks outperform their traditional oil and gas peers. However, very different bullish fundamentals were at play here:
- Global uranium stocks rose on Monday after the Sprott Physical Uranium Trust announced the raise of $US100mn, which was ultimately up-sized to $US200mn overnight, with the proceeds to be used to buy physical uranium = a bullish tailwind.
The Sprott Physical Uranium Trust (SPUT) is the world’s largest physical uranium fund. SPUT is an investment company that was established in 2021 to buy up physical uranium on the spot market and take it out of circulation. SPUT currently holds around 66mlb of U308 with a value of US$4.65b.
What’s changed is that in recent weeks the SPUT share price has moved to a small premium to NTA, allowing the fund to issue $200m new units and buy physical spot uranium. The turn in sentiment is driven by announcements from the tech sector about large scale AI driven data centre needs and the role nuclear power will have to play in the energy mix. The Trump Administrations nuclear renaissance rhetoric is also helping sentiment.
With uranium a thinly traded market this is a meaningful raise which is well timed after the commodities’ ~40% pullback, although it felt worse looking at the ASX miners! Estimates suggest that if Sprott uses the entirety of the capital raise to purchase physical uranium, it would equate to more than 2.8 million pounds of nuclear fuel, which is around 1 month of total volume in spot. The move was understandably felt straight away in the spot Uranium market, up ~10%.
New term price contracts get reported with a lag, but we’re hearing term contracting is being done well above spot. If spot continues to rally, expect the heavily shorted ASX stocks to follow suit. Overnight in the US, uranium stocks followed their ASX peers higher with Denison Mines (DNN US) +14% and Uranium Energy Corp (UEC US) +12%.
- We believe the medium-term path for uranium is very bullish as global adoption increases at a rapid pace, a break of $US100/lb through 2025/6 wouldn’t surprise.
