Which Stocks Could Benefit from the Rise of Uranium?

There are two main worldwide issues that have dominated our collective rhetoric in 2023: alternative energy and war. Interestingly, a naturally occurring yellow element called Uranium is in the middle of both these debates.

Uranium is arguably environmentally friendly and can fuel nuclear power plants to provide cheap energy; however, as we all know, it is also the main ingredient used to make weapons of mass destruction. But it is also making headlines right now for another reason: its price has risen to just over $80 USD per pound, soaring from a low of $50 USD earlier this year to highs not seen since 2008. What may not be widely known is that Uranium also plays a crucial role in various industries, such as zapping cancer cells in radiation therapy to estimating the age of rocks.

What is causing the price of Uranium to rise strongly?

Nuclear proliferation, supply chain vulnerabilities and strategic resource control are current buzzwords around Uranium that affect its price. There is also the concentration of Uranium production in just a few countries, including Kazakhstan, Canada and Australia, which only serves to increase concerns about supply chain vulnerabilities and geopolitical tensions.

Part of the surge in price can be attributed to an increasing appetite for nuclear power to achieve ‘net zero’ and supply disruptions at the Cigar Lake mine, Key Lake mine, and McArthur. The recent coup in Niger, a significant uranium producer, has also added to supply uncertainties, particularly for Western Europe.

Australia is the world’s third-biggest producer of Uranium, with many ASX-listed companies involved in Uranium mining, production, and supply. The largest include BHP, Rio Tinto and Paladin Energy, although others you may not have heard of include Boss Energy, which is focused on restarting the Honeymoon Uranium Project in South Australia. Deep Yellow is also working towards becoming a multi-mine company.

The company’s Tumas and Mulga Rock projects in Namibia and Western Australia position it as a key player with significant growth potential. Silex Systems is also innovating Uranium enrichment technology in partnership with Global Laser Enrichment LLC.

The way I see it, as the world grapples with transitioning to cleaner energy sources, the role of Uranium is becoming increasingly significant. Whether we go down the nuclear energy path or not is still being debated, but we know that Uranium will continue to make headlines.

What were the best and worst-performing sectors last week?

The best-performing sectors included Energy, up 2.07 per cent, followed by Financials, up 0.92 per cent, and Materials, up 0.20 per cent. The worst-performing sectors included Information Technology, down 2.96 per cent, followed by Real Estate, down 1.93 per cent and Consumer Discretionary, down 1.54 per cent.

The best-performing stocks in the ASX top 100 include Bellevue Gold, up 10.65 per cent, followed by Whitehaven Coal, up 8.01 per cent and AMP, up 6.43 per cent. The worst-performing stocks included Virgin Money, down 12.03 per cent, followed by Technology One, down 7.18 per cent, and Iluka Resources, down 6.76 per cent.

What's next for the Australian stock market?

Earlier last week, the All Ordinaries Index was edging its way higher up around 0.5 per cent, which was a promising start. However, as has occurred many times this year and indeed something that has become more common in recent years, the market reversed, and the Australian stock market ended the week slightly in the red, down just 0.23 per cent.

This suggests that market psychology is still more negative and quite nervous; however, as an educator and trader, these conditions get me excited. Most investors shy away when markets are not overly bullish. However, this is where you can grab many bargains when the inevitable rise occurs.

All too often, investors wait for strong, bullish markets and, in doing so, miss a lot of the gains. Now is a great time to skill up and do the research to set your portfolio up. So, while we still can’t confirm the down move is over, what we can do is get prepared for the next rise.

While I am more positive about our market, I am still cautious, given we need to see the All Ordinaries Index continue to rise this week and beyond. That said, if the market does fall for one to two more weeks from now, it will not be too much of a concern.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.