Uranium: Changing of the Guard

Ever since the Chernobyl nuclear disaster in 1986, uranium has been a somewhat controversial and relatively misunderstood commodity. While climate activists generally play the “not in my backyard” card as far as new supply of nuclear reactors is concerned, it is becoming increasingly evident that nuclear power is not as nasty as perhaps feared and is set to underwrite the energy transition as the world progresses towards net zero emissions.

When people think about clean energy or the transition to net zero, attention is quite often directed towards solar, wind and battery-related inputs. Popular commodity exposures to play this thematic include lithium, copper, nickel and rare earths and companies exposed to these commodities have done very well in recent years. However, what has become clear is that the lofty net zero targets set by corporations and governments are not able to be achieved with solar, wind and battery power alone. At the recent COP28 summit, a number of countries including the USA, UK, France, Finland and South Korea committed to tripling their nuclear energy consumption by 2050. Accordingly, it is estimated that global uranium supply will need to triple by 2050 to meet demand forecasts.

Nuclear reactors are an incredible source of power because they produce zero carbon dioxide while in operation, and the output is a very high amount of power for very little input. Nuclear fuel is an incredibly durable source of energy as it is used to produce electricity for about 5 years. Once the fuel has gone through its lifecycle it is converted to waste and stored. Nuclear waste storage has historically been an issue however scientists are constantly working on use cases for recycled nuclear waste and we expect this to be a continuing theme going forward.

With nuclear energy production, there is the risk of accidents or disasters like Chernobyl in 1986 and Fukushima in 2011. In the Fukushima disaster, the reactors were poorly designed and below sea level. An earthquake and subsequent tsunami damaged the reactors and caused radiation in the atmosphere. Importantly, there was no loss of life directly as a result of radiation because the appropriate precautions were taken in the recovery efforts. More modern nuclear reactors are much more robust in their design and such accidents are less likely to occur in the future.

While the demand side of the nuclear energy equation is growing, the supply side has never been more fragile. The uranium sector has gone through more than a decade of underinvestment in new mines and many existing sources are nearing the end of their mine life. Approximately 40% of current global supply is either in Russia or Russian-influenced jurisdictions. Just this week, Joe Biden signed into law a ban on the import of Russian uranium. Of the mines that are currently in production, there is a steep decline in supply forecasts beyond 2030. There comes the changing of the guard, as there will need to be a new wave of suppliers to take over from the old and tired mines and keep up with the growing demand.


We are finding some interesting investment opportunities in uranium companies with large-scale projects in first world countries that are set to make up a significant portion of the expected supply shortfall. The impending supply shortfall and rising demand bodes well for the medium to long-term price outlook for uranium and high-quality businesses that are able to successfully scale up production stand to take a big piece of what is set to be an enormous pie.

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