Why uranium royalty stocks jumped 25% and pushed up other uranium stocks

What happened

Uranium stocks took off again on Wednesday, with some stocks reaching dizzying heights during the day. Here’s how the top performers closed on September 15:

A move from Uranium Royalty and a big analyst upgrade on Cameco (NYSE: CCJ) stocks have driven stocks at all levels.

So what

On September 15, Uranium Royalty announced that it had entered into three contracts to purchase 300,000 pounds of key uranium compound on the spot market at an average price of $ 38.17 per pound spot, with deliveries expected in September October. The spot price of uranium hovered around $ 45 a pound on September 14.

Why is this good news for the uranium market then, you might ask yourself, if Uranium Royalty will buy uranium at prices significantly below the spot price?

Well, the dynamics of the uranium industry are such that any purchase should strengthen the market and support uranium prices. More importantly, there is a much, much bigger buyer who is loading more and more uranium with each passing day: the world’s largest physical uranium exchange fund, the Sprott Physical Uranium Trust Fund (OTC: SRUU.F).

Image source: Getty Images.

By now, investors in uranium stocks are probably already aware of the story unfolding so far: the aggressive spot uranium purchases by the Sprott uranium fund since mid- July is largely the reason uranium prices have risen 49% in the past five weeks.

Also on September 14, the Sprott Physical Uranium Fund bought £ 1.25million, raising £ 26.2million that day, up from just £ 18.3million on July 31.

Bulls in uranium stocks found another reason to cheer on September 15 when TD Securities raised its price target on the largest uranium stock in the United States, Cameco, to $ 35 per share from $ 25 per share. Cameco shares closed Wednesday up 1.7% at a price of $ 24.7 apiece.

Now what

Sprott is unlikely to stop buying uranium anytime soon, no matter what critics say.

The point is, the Sprott Uranium Fund uses the proceeds from the sale of units to buy uranium and was originally set up to sell units worth $ 300 million. Strong investor interest meant the fund had already issued units worth $ 244.7 million as of September 10, forcing the fund to file a new supply of units worth $ 1 billion.

Once the fund obtains approval to issue new units, it will buy even more uranium in the market and continue to support uranium prices. It’s icing on the cake if companies like Uranium Royalty go into buying uranium in between.

Uranium Royalty also revealed that global uranium demand has now exceeded levels before the Fukushima Daiichi nuclear disaster in 2011 which closed the doors to the nuclear industry and, as a result, the nuclear industry. uranium (uranium is a key fuel for nuclear reactors). Uranium Royalty believes that “the global mega-trend towards decarbonization provides a major catalyst for carbon-free, safe and reliable nuclear energy”. This is a sentiment widely held in the uranium markets at the moment, and which will largely decide the future of uranium stocks.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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