Uranium Unleashed: How Mining Stocks Fuel the Nuclear Comeback
There are some really interesting options for investors to participate in the nuclear investing universe, and we're spending a lot of time talking about how clients can get access to not only the fiscal markets but equity exposure as well. For us, that's one of those spots that's been a kind of theme throughout the year. We've really seen there's a couple different ways to play nuclear energy, and for us, we focus on those pure play miners.
When we describe pure play, we're talking about those companies that have at least half of their revenue or assets dedicated to uranium. That's a place where we think that there's a real opportunity as we head into 2025. If you were to look at this past year, the uranium miners have underperformed, and that's been in the face of very strong fundamentals.
We've seen, as we talked about AI, even from a geopolitical standpoint, where we've seen Russia announce that they're going to stop sending enriched uranium to the United States. We see the ongoing issues with the coup in Niger. All of these things are impacting the global uranium markets, and we think what we're going to see is a crowding in of funding in many Western countries as they look to bring those supply chains back to the United States, Australia, Canada, places that are friendly to the United States. As we go through 2025, we think that there's going to be the potential for a catch-up trade on the minor side.
Steve, could you tell us a little bit about some of the investor profiles that are interested in this style of the market? We're seeing a lot more interest as it relates to uranium. If you were just to look a few years ago, as it relates to nuclear investments, it's just a couple billion dollars or so invested. Now, if you start looking at the fiscal side and the equity side, we're up around that 10 billion, 11 billion range, so a lot of activity from investors coming into the space.
What we generally hear is the way investors look at it one of two ways. If they're invested in broader-based type indexes, think like the S&P 500, Russell 2000, they're very much underweight their uranium or nuclear exposure. Those are investors that could potentially benefit from some increased diversification. As they start looking at their oil and gas or traditional energy exposure, again, that's an area that their portfolio tends to be underweight.
The second type of investor is interested in the potential volatility of this growing industry and might elect to put it into their growth sleeve. We're starting to see a lot of investors consider that as a way to add alpha to more of a traditional portfolio. It does sit alongside things like gold and regular equities, and that's something that we think investors are starting to gravitate to. Our focus traditionally has been on miners, and I'd say the key reason for that is once you start looking at the investment opportunity, we tend to favor the upstream side of the supply chain, so that would be the miners, those miners that have their revenue and assets tied directly to uranium.
Once you start moving downstream to things like utilities or architecture or construction-type firms, they start to lose, in many cases, a good portion of their exposure to the nuclear industry or uranium industry. I think the greatest parallel I could draw to that would be if you were to look at the copper industry. It's a great example. If you look at the 10 largest copper miners, only four of those are actually predominant copper miners or publicly traded. Similar thing in the uranium space where once you start moving downstream, you start to dilute your exposure.
By staying upstream, we think that the miners are well positioned to benefit from the increase in nuclear energy. On top of that, we have this huge supply and demand gap that's expected going out through 2040 and actually out as far as all projections go, where we could have a cumulative 1.1 billion pound deficit in uranium. What that tells us is that miners are likely to be incentivized to increase production, so they have to start bringing more material out of the ground, but in order to do that, we need higher prices. We're at this point in time where we have this overall overhanging supply deficit going out for the next two decades or so, but at the same time, prices aren't quite high enough to incentivize the increased production. We think as that starts to move its way through the market that the miners are going to stand a benefit.
Steve, could you talk a little bit about the supply demand dynamics of the new nuclear market and how it's unique versus some of the other commodities? Uranium market is a very interesting one, and it's one of those things where we've had nuclear energy now for decades, but at the same time, it's been underinvested in for so long. We came out of the Cold War, where we had this period of a large secondary supply of uranium that was able to feed the market. We're now at a point where that's pretty much been exhausted, and we have to increase production, the primary production as we call it.
With that, to get new permits and go through the permitting process and go from Greenfield project where we discover uranium to getting it to production and starting to have any meaningful output can take a decade or longer. I think what we need from a policy standpoint, not just in the United States, but we see this in every mining jurisdiction, is we need to have policy makers understand that we need to get more uranium out of the ground now if we're going to rely on nuclear energy down the road.
As we look at government policies, we just came out of the COP 29 conference last month. We're now up to 31 countries that have signed on to triple nuclear energy capacity out through 2050. We see the governments moving in that way of increasing their reliance on uranium and nuclear energy. We just need the policy to come alongside that so we can boost that supply. That's another reason why we like the miners, as that it's another way we expect to see the investment get crowded in, and we think the miners will be well positioned to take advantage of that.
Given that there's a new administration that will be in place in Washington in January, are there any short-term projections of what we'll see in the uranium market? I think one of the things that's different than we've had in years past, and it was very evident over the last 12 to 18 months, is that Democrats have now gotten much more nuclear friendly. We've seen things like the advance act and inflation reduction act, which have now incentivized domestic production of uranium. It's also providing some financial incentives to nuclear reactors to stay operating longer. Traditionally, that was a Republican issue, so the fact that both parties are on board with that, we think now that the new Trump administration is coming in, we don't expect to see a change in course as it relates to nuclear energy or uranium for our viewers that are just tuning in.
Part of the American energy supply today already is nuclear. We're actually the largest producer of nuclear energy in the world. Might be surprising to some because we did have a long period of time where we've just built a few reactors. When we look at where a lot of the current demand is coming, a lot of that is coming from China. They're not the largest nuclear power yet. They're looking to get there. They're adding somewhere in the neighborhood of 8 to 10 permits a year to build new reactors, so a very aggressive way for them to build out their energy profile.
There's two reasons for that. One, given the population of China and technological advances that we see in the West, it's a very potent energy source. It has that high base load power, meaning that it doesn't worry about intermittency that we see with wind and solar and hydro and other forms of cleaner energy. The other aspect is it is a very clean form of energy, and because of that, it's starting to be favored by governments to meet net zero decarbonization goals, so it really does kind of hit on both of those fronts.
Are there any major pitfalls to the uranium industry or things that investors should be worried about? I'd say probably the biggest thing would be volatility. It is a relatively small industry and still an emerging industry, even though it's been around for decades. Getting comfortable with some volatility because of that. We do have two ETFs that we provide. One provides an all-cap exposure, so the large uranium miners, mid and small caps, as well as a physical uranium component, and then that ticker is URM. We have ticker URJ, which is just focused on the junior junior uranium mining space, which is typically those exploration type companies and development companies.
We tend to tell investors if you're new to the space, URM might make more sense. It's a little less volatile. It does provide some exposure to the spot market, which is a little less volatile, and then as well as the larger miners in the space. When you're seeing advisors or end investors use nuclear energy as part of their portfolios, where does it fit? A main place that we see is in a gross sleeve, so if they're looking to add a little volatility or potential a little alpha to their portfolio can fit well there or also alongside traditional investments as part of the energy exposure or just as a way to diversify an overall portfolio.
Steve, that was great. I really enjoyed having this conversation with you, and we look forward to doing it again soon. It's always great to catch up with you, John. You always have great insights from the field.
