Horizons ETFs has launched Canada’s first ETF to provide pure-play thematic exposure to the global uranium sector.
Nick Piquard, Portfolio Manager and Options Strategist at Horizons ETFs.
The Horizons Global Uranium Index ETF (HURA CN) has listed on the Toronto Stock Exchange and comes with a management fee of 0.75%.
The fund is linked to the Solactive Global Uranium Pure-Play Index which covers relevant developed market companies globally that have market capitalizations greater than CAD 40 million.
The methodology selects firms with significant operations in mining, exploration, and technology development related to the uranium industry.
The index also contains investment companies with a primary focus on the uranium sector such as those that purchase and hold uranium oxide.
Constituents are weighted by market capitalization subject to an individual cap of 20% and a combined cap of 25% on uranium-focused investment companies.
Investment case
With a mass that makes up just 0.0002 % of Earth’s crust, uranium is a rare element. Its extraction process requires sophisticated machinery that can deal with the radiation emitted by this energetic commodity.
Uranium’s unique feature is its ability to keep self-sustaining nuclear fission – the only known material to do so – making it a valuable (albeit controversial) resource for energy production.
Uranium does not trade on an open market like other commodities. Buyers and sellers negotiate contracts privately, and prices are published by independent market consultants.
Since 2014, the price for this radioactive commodity is on a decline, falling from $37.0/lb in January 2014 to $25.2/lb at the end of April 2019. Horizons ETFs posits, however, that an undersupply of uranium is expected to put upward pressure on the element’s price in the near-term.
Nick Piquard, Portfolio Manager and Options Strategist at Horizons ETFs, commented, “There is a realization at the highest levels that wind and solar energy alone will not be able to ensure global carbon emission targets are met. Today, nuclear is the only viable solution to supply zero-emission-base-load-power, and currently, there is not enough uranium being mined to meet planned growth. These factors combined make for a very positive opportunity for the uranium mining sector.
“Global mining ventures can carry significant investment risks. By investing through a diversified ETF like HURA, you can potentially achieve greater stability and risk-mitigation to your uranium sector exposure. Our global basket approach to the uranium sector provides access to production happening across the globe – from the world’s largest in Kazakhstan to emerging mining operations in the United States.”