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Canada is one of the resource rich countries in the world. This is why it is not surprising that our major stock index, the Toronto Stock Exchange, is primarily composed of cyclical companies such as oil, gold and uranium companies.
In this article, we are going to focus on why the world is enriching uranium, what it is used for and some of the other things that end up with uranium. Best Uranium Stocks to Buy Today it is located here in Canada.
How big is Canada a uranium player?
Currently, Canada is the world’s second largest uranium producer, accounting for 13% of total global production. It also has the world’s largest deposits of high-grade uranium. In fact, the quality of its uranium deposits is 100 times higher than the world average.
Remember that what we talk about is important High quality deposits, not bulk deposits. Canada ranks third behind countries like Australia and Kazakhstan.
As Canada is one of the largest producers, you might think this is a very popular commodity. However, the industry is much smaller than you might think.
In fact, the Government of Canada states that mining and milling uranium is an $800M a year industry, employing 2000 Canadians.
Compare this to the oil and gas industry, which employs more than 80,000 Canadians, and you’ll see that while Canada is one of the world leaders in uranium production and exploration, it’s still a small industry. Why?
The slow adoption of nuclear power is weighing on uranium reserves, but not for long
Uranium is primarily used to generate nuclear power. Nuclear power has faced some harsh criticism from environmentalists over the years, and for good reason. The 2011 Fukushima nuclear accident, the worst nuclear accident since Chernobyl, affected nuclear power generation in many countries.
In fact, many countries kept nuclear reactors and power plants on standby after the incident, which are still not operating today. However, lately it seems to be regaining its footing.
Although Canada is one of the largest uranium producers and has the largest deposits in the world, 85% of our uranium is exported. In fact, we only use nuclear power for 15% of our total electricity generation. This is the counter-strategy of a country like Argentina, which does not produce uranium, which imports its entire requirement.
The main thesis for uranium and nuclear power in general is to provide a step away from fossil fuels to renewable energy. Many don’t believe an immediate switch is possible, and since nuclear power has a relatively low carbon footprint, it makes sense.
A case in point for Canadian uranium stocks
There is one main reason investors are looking forward Buy shares Canadian Uranium should be suitable for companies. This is the massive power of nuclear power.
As mentioned above, an atom is a Green energy It has not received the attention of other eco-friendly energy solutions. Yes, nuclear power plants are expensive to build initially, but they are an incredibly efficient way to produce energy for decades once the property is available.
However, nuclear power has two major downfalls. First we went up and it risked melting. However, this is something that has been reduced by the increase in technology over the years. I won’t argue that nuclear power is 100% safe, but it’s pretty close.
Another downfall is nuclear waste, but today’s efficient reactors produce no waste. Even with these downfalls – which have improved significantly over the past two decades – nuclear power is still a great energy source that doesn’t get the attention it deserves.
Is this the long-term solution to our energy woes? No, not necessarily. But when we move away from dirtier forms like coal, it certainly looks attractive from the early to the medieval period.
Are there Uranium ETFs?
Selecting individual uranium reserves, particularly those in the pre-revenue and definitive exploration stages, carries significant risks.
If you are wrong about the horse you bet on, you could face significant capital losses. Therefore, many people decide to invest in a uranium ETF to gain exposure to the entire uranium mining sector.
What I like to look at is the Global X Uranium ETF, which trades under the ticker URA. There aren’t enough uranium producers in Canada to warrant an ETF. So, we have to go south of the border.
But just because it’s a US-listed ETF doesn’t mean it doesn’t have some great Canadian uranium stocks. In fact, it owns most of the stocks listed below, including some additional stocks like Denison Mines, Global Nuclear Corp, and Energy Fuels. Feel free to check it out if you like.
But if you’re interested in picking up individual uranium stocks, here are some of the best opportunities in Canada today. For the most part, we’ll arrange this list going from most speculative to least speculative.
Best Uranium Stocks to Buy Now
- Fissile Uranium (TSE:FCU)
- NexGen Energy (TSE:NXE)
- Spratt Physical Uranium Trust (TSE:UU)
- Cameco (TSE:CCO)
The company is still pre-revenue, so it is a speculative investment. As the company continues down the path to production on PLS assets, you should be accustomed to share dilution and a highly volatile share price.
The company’s Canadian manufacturing capabilities certainly allow it to benefit from very high-quality reserves, and why the company trades at a $500M valuation before even turning over a percentage of revenue. In fact, its uranium project is expected to generate an internal rate of return of more than 25%, highlighting the quality of the asset.
Fissile uranium is not for the faint of heart. With a beta of 3, this company is highly volatile, and investors who buy now should not only have a high risk tolerance, but long-term confidence in demand for uranium and the success of the company’s flagship asset.
NextGen Energy (TSE:NXE)
Its Rooke I project is the world’s largest development-stage uranium deposit at the time of writing and has an expected mine life just shy of 11 years. The mine will produce just under 29 million pounds of uranium per year and is projected to generate after-tax cash flows of approximately $930M. Considering the company currently has a market cap of around $2.5B, $930M in cash flow from one asset is certainly an attractive proposition.
In fact, if the property can achieve 28-30M pounds a year in production, it could represent 15-20% of global production.
The only problem with NextGen is that it’s a highly speculative investment, just like Split. You’re paying a $2.5B valuation for a company that doesn’t expect any revenue in the next few years. With shares outstanding going from 140M in 2014 to 480M in 2022, stock dilution is a problem and you have to be very patient for this company to move forward.
The company has some strong assets, but the investment now is the belief that those assets will prove to be profitable in the future. Nothing is guaranteed, especially with volatile mining companies. So to invest in such a company you need not only appropriate risk tolerance but also patience.
Spratt Physical Uranium Trust (TSE:UU)
If you want to buy Sprott’s Uranium Trust, you want direct access to uranium price fluctuations. Such a fund may not be linked to exploration, development, mining or marketing and sales expenses. It simply holds the underlying commodity and its main objective is to benefit from the appreciation of that commodity.
I don’t need to say much more about this than I already have, it’s relatively simple!
Cameco (TSE:CCO)
With uranium prices rising, it looks like one of the company’s most valuable assets is about to come back online. Its MacArthur River operation in northern Saskatchewan is set to reopen after a long period of closure due to low uranium prices. Production at the plant is expected to exceed 15 million pounds per year.
The notice to reopen the facility was sent in February 2022, and it noted that it would take some time to get the plant from maintenance and upkeep to full-scale production. But when it does, Cameco will no doubt benefit.
Cameco is cheaper. In light of rising uranium prices, valuations have risen sharply. At the time of writing, the company trades at nearly 32x expected earnings. However, with the company expected to post triple-digit revenue and EBITDA growth over the next few years, investors are willing to forgo the premium right now.
In my view, if you’re looking for a blue-chip uranium producer, Cameco fits the bill. However, it is important to understand that while Cameco is considered a “blue chip” in the uranium industry, it is not sustainable. We can expect the company to be very volatile, especially if the price of uranium fluctuates wildly.
Also, if the company fails to meet lofty estimates of triple-digit underlying growth by analysts, the earnings multiple could be downgraded. You could say that Cameco is the most dangerous of the bunch on this list So far from without danger. Do not mix the two.
Uranium Stocks Bottom
A large increase in nuclear power would be required for these uranium stocks to be a good investment.
Fortunately, it certainly looks like it’s coming. However, there are still plenty of controversial statements and environmentalists who think the path to a greener future does not go through nuclear power.
But it is a perfect transition away from fossil fuels on the way to zero carbon energy sources. If the plan is implemented, there is no doubt that the demand for uranium miners will increase, as will the refining, production, sale, and drilling of uranium.
Understand that these investments are not for the defensive investor. A company like Cameco is cash flow positive but not reliable. You really need to do a prior earnings study on this list and find out if speculative investments like mining companies fit your risk tolerance.
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