Uranium mining ETFs poised for re-rating

Jun 18th, 2012 | By | Category: Equities

Indications that Japan is preparing to restart a pair of idled nuclear reactors this month, coupled with some positive newsflow out of China with regard to the potential issuance of new reactor licenses, could be the catalyst for a turnaround in fortunes for uranium mining stocks.

Uranium mining ETFs poised for re-rating

Uranium mining stocks are starting to see a turnaround in their fortunes. Shares in Cameco, the world's largest listed uranium miner, whose McArthur River high-grade uranium mine is pictured above, gained 7.5% last week.

Recent moves to fire-up a couple of Japan’s dormant nuclear reactors have already had a positive impact on the price of uranium, which rose last month for the first time since January 2011.

This is good news for uranium mining stocks, which are currently trading at discounted prices having languished in the doldrums since the Fukushima meltdown in March 2011.

Edward Sterck, a mining analyst at BMO Capital Markets, in an interview with The Energy Report, said: “The main things keeping a brake on uranium prices are the current supply-demand balance and also some residual uncertainty regarding Japanese reactor restarts and the issuance of new reactor licenses in China, which were suspended after the Fukushima accident. I think we could see some positive news on both fronts in the not-too-distant future.”

Sterck added: “It looks increasingly likely that Japan will begin to restart reactors. Local opposition to reactor restarts was overcome last week, and the government appears to be getting closer to a definite restart decision, although the exact timeframe remains unknown.


Global X Uranium ETF (URA)

– Tracks the Solactive Global Uranium Index providing
diversified exposure to the global uranium mining sector

– Comprised of companies that are engaged in some
aspect of the uranium mining industry, such as mining,
refining, exploration and equipment

– Major holdings include Cameco, Paladin Energy,
Uranium One, Denison Mines, ERA, USEC, Uranium
Energy Corp, UR-Energy, Uranerz Energy and Rockgate

– Physically replicated with full transparency to underlying
portfolio holdings

– NYSE listed, UK Reporting Status, eligible for SIPPs,
TER 0.69%

“In China, some nuclear regulators have come out publicly over the course of the last few months, saying that they will begin to issue new reactor licenses again, potentially as early as June. We could possibly see those licenses issued fairly shortly. In addition, at the beginning of June, the Chinese cabinet reportedly reconfirmed the country’s commitment to its nuclear programme, although exact details are yet to be released.

“In summary, Japan and China’s unfolding nuclear policies are potential catalysts we may see in the near future. These two short-term catalysts may not necessarily result in an increase in the uranium price, but I view them as being potentially positive for uranium stocks. Such events may de-risk the outlook for the nuclear industry in the investment community, and therefore for uranium demand. This could draw capital back into uranium stocks and potentially result in a re-rating of the market valuation multiples applied to them.”

Sterck’s comments are prescient. Uranium mining stocks such as Cameco, Uranium Energy Corp and USEC are already on the move. Cameco, the industry giant, added 7.5% last week; small-cap player USEC rocketed 51.3% over the week; while Uranium Energy Corp, another small cap, jumped 21.8% on Friday.

Moreover, it’s not just China and Japan who are important to the nuclear industry. Countries such as India, Russia and South Korea are major nuclear players and remain committed to the energy source.

For investors wishing to invest in uranium mining stocks or indeed the wider nuclear industry without taking on too much stock-specific risk, there are a number of innovative ETFs to choose from. There is even an ETC tracking the price of uranium.

Global X Uranium ETF (URA)
The Global X Uranium ETF is designed to reflect the performance of the uranium mining industry. It is comprised of selected companies globally that are primarily engaged in some aspect of the uranium mining industry, such as mining, refining, exploration, and manufacturing of equipment for the uranium industry. (NYSE: URA, TER: 0.69%)

Note to UK investors: The Global X Uranium ETF has been registered with HM Revenue & Customs’ UK Fund Reporting regime, meaning it is treated on a similar tax basis to UK funds as opposed to a punitive tax treatment which can apply to offshore funds outside the regime.

Market Vectors Uranium+Nuclear Energy ETF (NLR)
The Market Vectors Uranium+Nuclear Energy ETF seeks to track the movements of securities of companies engaged in the nuclear energy industry that are traded on leading global exchanges. (NYSE: NLR, TER: 0.57%)

Note to UK investors: The Market Vectors Uranium+Nuclear Energy ETF has been registered with HM Revenue & Customs’ UK Fund Reporting regime.

ETFX WNA Global Nuclear Energy ETF (NUKE)
The WNA Nuclear Energy ETF is designed to track the performance of approximately 65 companies engaged in the nuclear energy industry with representation across reactors, utilities, construction, technology, equipment, service providers and fuels. (LON: NUKE, TER: 0.65%)

iShares S&P Global Nuclear Energy Index ETF (NUCL)
The iShares S&P Global Nuclear Energy Index ETF seeks to track approximately 24 of the largest publicly-traded companies in the global nuclear energy business from developed or emerging markets. The constituents are equally distributed between the nuclear materials, equipment and services and nuclear energy generation industries and the Fund is concentrated in those industries. (NASDAQ: NUCL, TER: 0.48%)

PowerShares Global Nuclear Energy ETF (PKN)
The PowerShares Global Nuclear Energy ETF is designed to track the overall performance of globally traded companies which are engaged in the nuclear energy industry with representation across reactors, utilities, construction, technology, equipment, service providers and fuels. (NYSE: PKN, TER: 0.75%)

db Uranium ETC (XURA)
The db Uranium ETC tracks the Uranium Index (TradeTech U3O8 Weekly Spot Price Indicator) and offers the most direct exposure to the underlying uranium price. The index is determined by TradeTech, based on their judgement of the price at which spot and near-term transactions for significant quantities of natural uranium concentrates can be concluded as of the end of each Friday. Unlike other commodity indices in the market, the Uranium Index is not calculated with reference to a specific calculation methodology. The level of the Uranium Index is based on data from recently completed transactions, data from pending transactions, firm bids to buy or borrow, firm offers to sell or lend and other factors. (LON: XURA, TER: 3.60%)

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