This article aims to educate Nugget’s News readers on the fundamentals of uranium, both as a chemical element and a traded commodity. It is intended for informational purposes only and should not be construed as investment or financial advice.
Uranium’s century-long origin story
Discovered in 1789 by German chemist Martin Klaproth, uranium represents a metallic, silver-grey chemical element that harnesses naturally occurring radioactive properties. For more than a century following Klaproth’s breakthrough, uranium’s radioactivity was unknown to the world. That is, until French physicist Henri Becquerel made the discovery in 1896 by exposing a photographic plate to uranium.
“One pound of uranium is worth about 3 million pounds worth of coal or oil.” – James Lovelock, Ph.D.
Nuclear fission and uranium
In the case of uranium, almost all its naturally occurring isotopes are uranium-238. Accounting for less than one percent of natural uranium, though, is uranium-235, a so-called fissile nuclide (i.e., it’s capable of sustaining a nuclear fission chain reaction).
Not to be confused with nuclear fusion, nuclear fission refers to a nuclear reaction in which the nucleus of an atom splits into smaller, lighter nuclei. As for how nuclear fission ties in with uranium and chain reactions, the below graphic published by World Science Festival explains:
Uranium tied to multiple humanitarian disasters
From the layperson’s perspective, uranium has become increasingly synonymous with nuclear power in the decades gone by. Indeed, when the phrase ‘nuclear’ or ‘radioactive’ is uttered, the majority of people almost instantly recall unpleasant memories related to some of the past century’s most devastating events.
The atomic bombings of Hiroshima and Nagasaki in 1945; the Chernobyl disaster of 1986; the more recent Fukushima Daiichi nuclear disaster; there is no denying uranium – and, more broadly, nuclear energy – remains the cause of heartbreak for untold amounts of people.
Nuclear as an electricity source: which country tops the list?
Despite its scarred history vis-à-vis humanitarian crises, there remain staunch proponents of nuclear power generation; espousing its superiority as a power source in terms of fuel required, waste production, and land area required.
Referring to data from the World Nuclear Association, 2017 saw thirteen countries produce at least one-quarter of their electricity from nuclear. Of these thirteen, France was the only nation to get “around three-quarters of its electricity from nuclear energy.” Also, for each of Hungary, Slovakia, and Ukraine, nuclear accounted for over half the electricity produced.
“Around 11% of the world’s electricity is generated by about 450 nuclear power reactors. About 60 more reactors are under construction, equivalent to about 15% of existing capacity.” – World Nuclear Association
What surprises many is the fact the world’s largest producer of nuclear power is not one of the thirteen countries refenced above. Indeed, the United States – equipped with 98 operable nuclear reactors – account “for more than 30% of worldwide nuclear generation of electricity,” according to the World Nuclear Association. In 2017, the U.S. saw just one-fifth of its electricity come from nuclear.
In terms of uranium specifically, 39 percent of the world’s supply comes from Kazakhstan, followed by Canada (22 percent) and Australia (10 percent).
World uranium production and reactor requirements (tonnes U)
Investing in uranium: bulls vs. bears
Just as public attitudes toward uranium have soured in recent years, so too has the commodity price of uranium. Per pound (lbs), uranium was trading at as much as $US140/lbs during the mid-2007. At the time of the Tōhoku earthquake in March 2011 – which triggered the tsunami responsible for the Fukushima Daiichi nuclear disaster – uranium had slumped to roughly $67/lbs. By late-2016, the price had decreased all the way to a measly $17.8/lbs; trending upward ever since.
Like any market, there exists a bullish and bearish case vis-à-vis the underlying asset’s value over a given timeframe. For uranium, arguments often put forward by the bulls – such as this U.K.-based uranium investment company who are stockpiling nearly 8.5 million pounds of uranium oxide in Canada – relate to the sheer amount of nuclear power reactors that are either under construction, planned, or proposed across the globe; indicative of an industry on the precipice of a sustained growth phase.
Of course, the price of uranium hasn’t plummeted by some 80 percent over the course of a decade for no apparent reason. Investors who shy away from the uranium sector tend to point to a number of obstacles including the ever-growing resources being allocated to the research and development of alternative, renewable energy sources such as solar, wind, and hydropower. Those dubious on uranium’s future also often highlight the fact a sizeable number of nuclear reactors are scheduled for shut-down over the coming decade.
Uranium sentiment nosedives as cannabis stocks light up
No better is the recent trend in uranium investor sentiment illustrated than when it’s compared to the booming cannabis industry. As seen in the below search data obtained from Google Trends, public interest in uranium investing has been severely lacking for the best part of a decade, at least in relation to 2005-2007.
When paired against cannabis – a similarly speculative industry that has enjoyed regulatory tailwinds in recent years – the extent to which investor sentiment surrounding uranium has dwindled becomes abundantly clear.
The material contained in this writeup is based on Alex Saunder’s research-driven video presentation previously uploaded to the Nugget’s News YouTube channel. For those interested, the fifteen-minute-long clip can be viewed below.