On May 13, President Biden signed the Prohibiting Russian Uranium Imports Act.
The U.S. imports 90% of the enriched uranium we use, worth around $1 billion a year. 27% comes from Canada. Kazakhstan and Russia are tied with a 25% market share. All told, the U.S. spends $1 billion a year on enriched uranium.
Roughly 45% of the world’s enriched uranium comes from Russia. The security issue of Russia’s market share is pretty obvious. And the sorry state of America’s own enrichment capacity means that the U.S. can’t just cut off Russian supply – waivers will be granted to U.S. companies to continue buying Russian uranium until 2028.
Why it Matters
There’s a surge in plans for new nuclear power plants around the world. Bloomberg says:
Today, there are 61 nuclear power plants under construction globally. Another 90 or so are in the planning stage and more than 300 have been proposed.
With the recent completion of Southern’s (NYSE: SO) Vogtle 3 & 4 reactors that we discussed yesterday, there are now 95 working nuclear reactors in the U.S.
The Nuclear Regulatory Commission has issued 30 permits for new construction and expansion of existing sites in the U.S.
The Department of Energy has already lent $1.5 billion to Holtec International to restart its Palisades reactor in Michigan. Constellation (NYSE: CEG) is considering re-opening Three Mile Island in Pennsylvania.
This is why uranium prices have surged over the last five years:
Uranium is expected to fall into a deficit over the next few years. Global supply is currently around 50,000 tons. Demand is expected to hit 83,000 tons in 2030. And if you take Russian supply off the board, the supply/demand imbalance looks even worse.
Uranium stocks should be a pretty good bet. Here are a few to consider…
Uranium Stocks You Should Know
Canada has the biggest opportunity to ramp up uranium production and potentially become the world’s largest producer. That’s because of the Athabasca Basin in Saskatchewan.
Uranium production in the Athabasca basin is dominated by Cameco (NYSE: CCJ). Cameco shares have run from $39 back in March to as high as $55 recently.
Cameco is on the expensive side. It’s valued at $22 billion and did $2.35 billion in trailing 12-month revenue. But analysts expect a surge in earnings in fiscal year 2025. From $0.69 a share in fiscal 2024 (which ends in September), earnings are expected to nearly double to $1.31 a share for 2025.
That’s massive growth for sure, but it still implies a forward Price-to-earnings ratio of 39. Cameco is one to buy on a dip.
On the left of the map above, you’ll see NexGen Energy (NYSE: NXE).
NexGen bought the mineral rights to a plot of land on Patterson Lake for a reported $3 million right after the Fukushima disaster crushed uranium prices. One analyst estimates NexGen’s mine could supply 13% of global demand.
NexGen is not cheap either. It carries a $3.9 billion market cap and has no revenue. On its latest corporate presentation, it said it has $400 million in cash to develop its mine. (You can check that presentation out here.)
Now, there’s just one American company that has the know-how to enrich uranium so that is actually useful.
Centrus Energy (NYSE: LEU) is headquartered in Bethesda, Maryland, and operates a uranium enrichment plant in Piketon, Ohio.
At $43 a share Centrus has a market cap of $681 million on $297 million in trailing twelve-month revenue. That gives it a price-to-sales ratio of just over 2X, which is not expensive.
The reason it is something of a value stock is that analysts expect virtually zero growth from 2024 to 2025. That’s because the company is somewhat dependent on Russian uranium supply for its enrichment process. And also, Centrus is investing in a large expansion of centrifuges to boost its production a few years down the road.
There is another company that enriches uranium in the U.S. It’s a consortium formed by the British, German, and Dutch governments called Urenco. It has operations in 15 countries and runs an enrichment plant in New Mexico. Its shares are listed in London.
Centrus is the better investment because of its focus on the U.S. and, as a domestic company, it will benefit from government spending to support the American uranium market.
Godspeed,
Briton Ryle
Chief Investment Strategist
Outsider Club
X/Twitter: https://twitter.com/BritonRyle
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