Sprott’s John Kinnane and Steve Schoffstall explore the growing opportunities in the uranium and nuclear energy markets. They discuss how pure-play uranium miners, supply-demand dynamics and shifting geopolitical policies are positioning this sector as a promising investment frontier for 2025 and beyond.
For the latest standardized performance, please visit the individual website pages: URNM and URNJ. Past performance is no guarantee of future results.
Video Transcript
John Kinnane: Investors have some interesting options for participating in the nuclear investing universe. We are spending a lot of time discussing how clients can get access to not only the physical market but also equity exposure.
Steven Schoffstall: For us, that’s been a theme throughout the year. There are a couple of different ways to play nuclear energy, and we focus on those pure-play miners. When describing pure play, we’re talking about companies with at least half of their revenue or assets dedicated to uranium. That’s a place where we think that there’s a real opportunity as we head into 2025.
If you were to look at this past year, uranium miners have underperformed, and that’s been in the face of very strong fundamentals. And we’ve seen, as we talked about AI, even from a geopolitical standpoint where we’ve seen Russia announce that they’re going to stop sending enriched uranium to the United States. We see the ongoing issues with the coup in Niger.
All these things are impacting the global uranium markets, and we think we’re going to see a crowding in of funding in many Western countries as they look to bring those supply chains back to the United States, Australia, Canada, places that are friendly to the United States. As we go through 2025, we think there will be the potential for a catch-up trade on the miner side.
John Kinnane: Steve, could you tell us a little bit about some of the investor profiles that are interested in this area of the market?
Steven Schoffstall: We are seeing a lot more interest in uranium investments. If you were to look a few years back at nuclear-related investments, it was just a couple billion dollars or so invested. Now, if you start looking at the physical side and the equity side, we’re up around the $10 to $11 billion range. There has been strong activity from investors coming into this space. We generally hear that investors look at the uranium markets in one of two ways.
One, if they’re invested in broader base-type indexes, think like the S&P 500 and Russell 2000, they are very much underweight in their uranium or nuclear exposure. These investors could potentially benefit from some increased diversification. As they start looking at their oil and gas or traditional energy exposure, again, that’s an area where their portfolio tends to be underweight. The second type of investor is interested in the potential volatility of this growing industry and might elect to put it into their growth sleeve. We are starting to see a lot of investors consider that to potentially add alpha to more of a traditional portfolio. Uranium-related investments do sit alongside things like gold and regular equities, and that’s something that we think investors are starting to gravitate to.
John Kinnane: What’s a compelling case for investing in the nuclear and uranium markets?
Steven Schoffstall: Our focus at Sprott ETFs has traditionally been on miners, and I’d say the key reason for that is once you start looking at the investment opportunity, we tend to favor the upstream side of the supply chain, and that would be the miners that have their revenue and assets tied directly to uranium. Once you start moving downstream to areas like utilities or architecture or construction-type firms, they start to lose, in many cases, a good portion of their exposure to the nuclear industry or uranium industry. I think the greatest parallel I could draw to that would be if you were to look at the copper industry. If you look at the 10 largest copper miners, only four of those are actually predominantly copper miners or publicly traded. Similar thing in the uranium space, where once you start moving downstream, you start to dilute your exposure. By staying upstream, we think that the miners are well positioned to benefit from the increase in nuclear energy.
On top of that, we have this huge uranium supply and demand gap that’s expected going out through 2040, where we could have a cumulative 1.1-billion-pound deficit in uranium. What that tells us is that miners are likely to be incentivized to increase production, so they have to start bringing more material out of the ground. But in order to do that, we need higher prices. We’re at this point in time where we have this overall overhanging supply deficit going out for the next two decades or so, but at the same time, prices aren’t quite high enough to incentivize the increased production. We think as that starts to move its way through the market that the miners are likely to benefit.
John Kinnane: Steve, could you talk a little bit about the supply-demand dynamics of the nuclear market and how it’s unique versus some of the other commodities?
Steven Schoffstall: The uranium market is a very interesting one. We have had nuclear energy now for decades, but at the same time it’s been underinvested in for so long. We came out of the Cold War with a large secondary supply of uranium that was able to feed the market. We’re now at a point where that’s been exhausted, and we must increase production, the primary production, as we call it. To get new permits and go through the permitting process and go from a greenfield project where we discover uranium to getting it to production and starting to have any meaningful output can take a decade or longer. I think what we need, from a policy standpoint, not just in the United States, but we see in every mining jurisdiction, is we need to have policymakers understand that we need to get more uranium out of the ground now if we’re going to rely on nuclear energy down the road.
And as we look at government policies, we just came out of the COP29 conference last month, we’re now up to 31 countries that have signed on to triple nuclear energy capacity out through 2050. We see governments moving toward increasing their reliance on uranium and nuclear energy. We just need the policy to come alongside that so we can boost the supply. That’s another reason why we like the miners. It’s another way we expect to see the investment get crowded in, and we think the miners will be well-positioned to take advantage of that.
John Kinnane: Given that there’s a new administration that will be in place in Washington in January, are there any short-term projections of what we’ll see in the uranium market?
Steven Schoffstall: I think one of the things that’s different than in years past, and it was very evident over the last 12 to 18 months, is that Democrats have now gotten much more nuclear friendly. We’ve seen things like the ADVANCE Act and Inflation Reduction Act, which have now incentivized domestic production of uranium. It’s also providing some financial incentives for nuclear reactors to stay in operation longer. Traditionally, this was a Republican issue. The fact that both parties are on board with nuclear energy, and with the new Trump administration coming in, we don’t expect to see a change in course as it relates to nuclear energy or uranium.
John Kinnane: For our viewers who are just tuning in, is any part of the American energy supply today already nuclear?
Steven Schoffstall: Yes, we’re the largest producer of nuclear energy in the world. Might be surprising to some because we did have a long period of time when we just built a few reactors.
When we look at where a lot of the current demand is coming from, it’s China. They’re not the largest nuclear power yet. They’re looking to get there. They’re adding somewhere in the neighborhood of eight to 10 permits a year to build new reactors and it’s a very aggressive way for China to build out its energy profile. There are two reasons for that. One. Given the population of China and the technological advances that we see in the West, it’s a very potent energy source. Nuclear energy has that high baseload power, meaning that it doesn’t deal with the intermittency that we see with wind, solar and hydropower, and other forms of cleaner energy. And nuclear is a very clean form of energy, and because of that, it’s starting to be favored by governments to meet net zero decarbonization goals. It kind of hits on both of those fronts.
John Kinnane: Are there any major pitfalls to the uranium industry or things that investors should be worried about?
Steven Schoffstall: I’d say probably the biggest thing would be volatility. It is a relatively small and emerging industry, even though it’s been around for decades.
We do have two ETFs that we provide. One offers an all-cap exposure, so the large uranium miners, mid- and small-caps, as well as a physical uranium component. The ticker is URNM. And then we have ticker URNJ, which is just focused on the junior uranium mining space, which is typically those exploration type and development companies. We tend to tell investors that if you’re new to the space, URNM might make more sense. It tends to be a little less volatile. It does provide some exposure to the uranium spot market, which is a little less volatile. And then as well as the larger miners in the space.
John Kinnane: And when advisors or investors use nuclear energy as part of their portfolios, where does it fit?
Steven Schoffstall: The main place that we see is in a growth sleeve. If they’re looking to add a little volatility or potentially a little alpha to their portfolio, nuclear energy and uranium investments can fit well there or also alongside traditional investments as part of the energy exposure, or just as a way to diversify an overall portfolio.
John Kinnane: Steve, that was great. I really enjoyed having this conversation with you, and I look forward to doing it again soon.
Steven Schoffstall: It’s always great to catch up with you, John. You always have great insights from the field.
Source: Sprott
