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John Ciampaglia, Sprott Asset Management
John Ciampaglia, Sprott Asset Management

Uranium enjoys its day in the sun

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Geo-political tensions and concerns about hitting clean energy targets have brought the focus back onto nuclear power in recent months, and as a result, uranium, essential in the process of creating nuclear power, is back in demand. 

John Ciampaglia is CEO, Sprott Asset Management and Senior Managing Partner, Sprott Inc, a firm that specialises in investment in precious metals and energy transition investment strategies and also manages the Sprott Uranium Miners UCITS ETF (URNM), from HANetf, which recently saw assets under management go over USD100 million on the back of renewed interest in the element. The US version of the fund has some USD1.25 billion under management.

Ciampaglia explains that nuclear power began to go out of fashion back in 2011, when concerns were raised about nuclear reactors post the Tsunami and earthquake, with Japan leading the charge and closing all its reactors. 2023 saw Germany close all its reactors which, Ciampaglia says were: “perfectly safe and functioning”.

“There was a political windshift away from nuclear and the sector was neglected,” he says. “Part of it was political in nature because if you think of the safety record of nuclear power plants – it’s really good.”

The change in attitude started two years ago at COP26 when there was the first public acknowledgement from the world’s governments that they couldn’t hit their targets if they phased out nuclear energy, Ciampaglia says.

“Then came the shock of the invasion of Ukraine which created an energy crisis for countries that are not resource independent, and the second real catalyst has been a realisation that nuclear energy has to be part of the mix as it provides incredible energy security.”

Ciampaglia explains that it is difficult to store energy such as gas and electricity but you can store huge amounts of energy at a nuclear power station, which can hold enough to run for up to four years.

“This is a similar situation that has been unfolding as happened in the 1970s when the Opec oil shock caused a number of governments to shift to nuclear. A number of countries have rethought their plans to phase out nuclear energy and there is no substitute for uranium in creating nuclear energy.”

Research from Sprott highlights that uranium’s price momentum is approaching a pivotal juncture as it recently rose above its USD63.77 peak in 2022, yet the firm anticipates even more growth potential in the near-term, with the focus moving to reopening previously shut down uranium mines.

Uranium is a plentiful element found in sea water and granite but there are not many high concentration deposits with just a few places in the world such as Kazakhstan, which controls 45 per cent of the global reserves, dominating, although the element is also mined in Niger, Namibia, Canada and Australia.

“There are increasing geo-political tensions in the non-western countries,” Ciampaglia says. “It’s fair to say that like oil and natural gas, uranium is another commodity that gets tangled up in geo-political relationships.”

Uranium mining as an industry has not been explored as there didn’t seem to be a need for it but the World Nuclear Association’s long-term forecast for uranium demand has gone up 15 per cent since its last forecast two years ago.

“There is growing physical demand and a lost decade in terms of developing new mines which is creating a supply mismatch and looming deficit which will become apparent in five years from now,” he says. 

Higher demand should incentivise new production and higher commodity prices, which have more than doubled in the last two years, as they need to raise the capital.

The ETF provides exposure to the uranium mining sector, the largest uranium producer in the world, companies producing new mines and exploration companies, plus companies that physically hold uranium in trust, which includes Sprott Asset management.

“It’s a unique way to play the sector,” Ciampaglia says, and the US version of the ETF is up over 30 per cent this year.

In Europe, he has found a mixed response to the product with high levels of understanding in the UK, but a different response from continental Europe where ESG concerns are high.

“It does fit within the ESG framework in terms of power generation as it is zero greenhouse emitting – when you generate nuclear energy it does not emit greenhouse gas – so it has a 

clean carbon footprint,” Ciampaglia says.

“Historically people have focused on ‘is nuclear power safe?’ and ‘what happens with the spent fuel?’. There are lots of misunderstandings about that and the solution is largely political as we have been storing the fuel very safely and the industry has a good track record for dealing with it.”

He does note a high level of appetite for uranium investment from family offices and hedge funds with either energy transition mandates or clean technology mandates. 

“There is a wide gamut of investors and a very large and growing retail audience that is interested in uranium,” he says.

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