Managers such as Matthew Langsford of hedge fund Terra Capital, Arthur Hyde of Segra Capital, and Renaud Saleur of Anaconda Invest are bettingUranium mining stocks such as Energy Mining Inc. (UUUU.N), Ur-Energy Inc. (URG.N), and NexGen Energy Ltd. (NXE.N).

Langsford, fund manager of Terra Capital, operates a natural resources fund worth 175 million Australian dollars (110 million US dollars). He said,The outlook for uranium prices means “the stock prices of these uranium mining stocks may rise sharply, and the increase may reach 50%, 100%, or even more.”

The Fukushima nuclear accident has led many countries to re-examine their dependence on nuclear power. For more than a decade, nuclear power has become an important pillar in the transition to a low-carbon future.This has boosted uranium valuations, and the price of uranium has risen 125% since 2020.

(Title: Uranium mining related ETF assets increased 20 times within three years; Source: Bloomberg)

The International Energy Agency (IEA) estimates,By the middle of this century, global nuclear power capacity will need to double from 2020.To help the world meet its commitment to net zero emissions. This goal is based onDemand for nuclear reactors in Europe, Asia, and Africa.The life of old facilities is being extended, and China's nuclear capacity continues to be built, all of which have spurred demand for the uranium needed to power these nuclear power plants.

This type of investment remains controversial.After 2011, then-German Chancellor Angela Merkel responded to the global “trauma” caused by the Fukushima nuclear accident, and Germany cut back on its nuclear energy program. The decision drew criticism, and Germany later discovered that the country was heavily reliant on high-emission fossil fuels supplied by Russia.

Since the Russian-Ukrainian conflict, Europe has tried to get rid of its dependence on Russian gas, and the attractiveness of uranium has continued to increase. However,Russia has about 8% of the world's available conventional uranium resources, and Western countries need to find a larger supply of uranium energy other than Russia.In an interview, Segra Capital's portfolio manager Hyde said:

“We are most concerned about open market uranium miners. To balance supply and demand in this market, we need new assets to come online... if the US, Europe, and Canada want to be isolated from the global fuel cycle, andThe cycle is largely dependent on Russia and China.Then the best way is to build new mines, new transformation capabilities, and new concentration capabilities.”

While solar and wind energy may account for a dominant share of electricity generation in a net-zero emissions world, nuclear energy may play a small but significant role.

Nuclear power emits no carbon dioxide, and is even defined in the EU's sustainable asset classificationgreen energy。 But it also comes with many risks. Bloomberg NEF's Nilushi Karunaratne said

“In the net zero emissions race, nuclear energy is seen as a strong contender, butThere are two main barriers:Questions about the safety of nuclear reactors and radioactive waste treatment, and costs.”

As a result of this kind of questioning“Since the Fukushima nuclear accident in 2011, there has been almost no increase in the number of reactors in operation, and the rate of decommissioning has exceeded the rate at which new facilities have been put into operation.”

Uranium goes through several stages of processing before it is ready to be used as fuel for nuclear power plants. After mining and grinding, uranium ore is converted to fluorine gas, then concentrated and made into fuel rods. These fuel rods are loaded into the reactor and then fission to release energy.

The entire process is known as the nuclear fuel cycle, can take years, and may depend on supply chains across several countries. Hyde said,The political sensitivities surrounding these supply chains will drive the West to seek new ways to achieve independence.

However, opinions on uranium stocks are not entirely consistent. The Global X Uranium ETF recorded an increase of nearly 30% this year, and some hedge funds began to seek short opportunities. They chose companies they thought were unlikely to perform well. For example, Anaconda's Saleur said,He is now considering hedging Cameco Corp. (CCJ.N) because the company's stock price has risen by more than 70% this year.But he saidIt has bullish positions on mining companies, including Energy Mining Inc., and Ur-Energy Inc.

Segra's Hyde said that some “relatively lazy capital invests in compelling macro-stories without doing much company-level work.” He said that as the number of buyers increases, some will target the wrong stocks,“Many of the nuances of the nuclear fuel market are still misunderstood”.

(Title: Ranking of the top 5/5 of nuclear fuel companies' stock price performance, source: Bloomberg)

According to Bloomberg Intelligence, “Nuclear energy could be a key driver of the decades-long energy transition. The new demand for nuclear reactors in Europe, Asia and Africa, and the extension of the service life of old reactors are in line with governments' wishes for net zero emissions. Coupled with the continued construction of China's nuclear capacity, the spot uranium price has risen 125% since 2020.”

(Title: U308 spot price trend, January 2018 to September 2023, USD/pound, Source: Bloomberg, UxC LL Data)

Terra's Langsford has been increasing the positions of NEXGEN Energy Ltd. and Denison Mines Corp. (DNN.N.). NexGen is exploring a new uranium mine in Canada, which could produce 25% of the global supply. According to Langsford,This will be critical to “the nuclear industry in the 2023s and may eventually become a golden age for nuclear power.”