Why Ur-Energy, Uranium Royalty and Denison Mines shares erupted on Monday

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What happened

Uranium stocks were back in action on Monday after a troubling period last week, with most stocks surging on September 27 before settling a little lower at the close of the market. Denison Mines (NYSEMKT: DNN) and Ur-Energy (NYSEMKT: URG) each erupted during the day and closed up 8.3% and 4.3%, respectively. Uranium royalty (NASDAQ: UROY) climbed 11.6% at market close.

Investors saw an opportunity in searing uranium stocks after falling prices last week, especially with soaring natural gas prices.

So what

After an exhilarating rally that saw uranium prices rise nearly 60% in less than a month, prices paused last week and pushed most uranium inventories down.

The Sprott Physical Uranium Trust Fund (OTC: SRUU.F) appears to have taken a break from aggressive uranium buying – it last announced a £ 1.45million purchase on September 17. This worries investors, as the purchase of Sprott was the main trigger for uranium prices which have been languishing for years.

In mid-September, Uranium Royalty fueled the fire by announcing uranium purchase contracts. As a uranium royalty company, Uranium Royalty can take advantage of higher uranium prices without bearing the risks or costs of uranium mining: it simply buys uranium from miners and resells it to pocket the difference.

Image source: Getty Images.

Sprott may have halted shopping to avoid regulatory attention because he explicitly said The Financial Times last week that he has no plans to “corner” the uranium market. This further dampened investor sentiment towards uranium stocks.

Over the weekend, however, Europe’s energy crisis worsened – so much so that natural gas prices hit multi-year highs on Monday as supplies continued to decline. With China already grappling with an electricity shortage, industry experts believe the situation will force global energy think tanks to renew their interest in nuclear power plants to supplement energy supply. electricity.

September 24, You’re hereElon Musk also spoke out in favor of nuclear power during Italian Technology Week, suggesting the world should build more nuclear power and at least not shut down existing nuclear power plants.

Developments have spurred the purchase of uranium stocks today, as uranium is the primary fuel used to power nuclear reactors. Uranium Royalty and Ur-Energy are the smallest uranium stocks by market cap, and small cap stocks can generally see frantic investor activity on either side. Investor interest in Denison Mines, on the other hand, was strong. The stock also got a price upgrade of Canaccord Genuity last week, at three Canadian dollars per share against 2.50 CAD per share.

Now what

Investors in uranium stocks need to be prepared to handle the volatility, but I still think the uranium price rally is here to stay, at least for the short term. The point is, Sprott has already laid out plans to offer more units, which should mean he will have to buy more uranium. It might take slowly from here, but that doesn’t mean the fund will go out of business and buy more uranium.

Long-term investors, however, should pay more attention to developments in the electricity sector, as the uranium industry will ultimately need the support of the nuclear power industry to survive and thrive. .

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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool owns shares and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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