The green energy revolution is underway, and a seemingly unlikely source could be fueling the future for the transition away from fossil fuels: Nuclear energy.
Nuclear energy has been around for several decades, but it is being touted as a viable method to supplement renewable energy sources while transitioning away from traditional ones.
My guide to the best uranium ETFs in Canada can help you decide if it’s the right investment for you.
Is Uranium A Good Investment?
Investing in uranium could be an excellent approach for investors bullish on the long-term prospects of the element’s vital to the nuclear energy industry. The nuclear energy industry has been around for several decades.
The commodity goes through relatively long bear and bull cycles. The last several years have seen bearish environments for uranium, and the last peak for the commodity was back in 2007.
Several factors have contributed to the long bear run. The Fukushima nuclear disaster in 2011 was one such instance that put several global activities related to nuclear energy in limbo.
A source of clean energy
Many countries are shifting towards other renewable energy sources like solar and wind power. However, transitioning to these renewable energy sources has not been easy, and traditional energy sources have continued to remain important during this time.
The realization of the need for nuclear energy to supplement efforts to transition away from traditional energy sources has led to a sudden uptick in uranium demand. China has started building and exporting a more significant number of nuclear reactors rapidly, leading to a demand and supply problem for uranium.
The increasing global shift towards nuclear energy has effectively sparked a renaissance for the industry. Advanced technology and better safety regulations will play a critical role in mitigating concerns regarding the safety of nuclear facilities.
More people and governments realize the importance of nuclear energy, and the tide is turning in favour of nuclear energy, making it a possibly lucrative space for you to invest in right now.
Key Factors to Consider When Investing in Uranium ETFs
Before venturing into this space, you need to consider several key factors:
- Uranium Demand and Supply: Understand the current and projected global uranium demand. With countries like China ramping up their nuclear energy capacity, the demand is poised to grow.
- Geopolitical Stability: The location of uranium mines can play a crucial role. Countries with stable political environments are preferable as they present lower risks.
- Technological Advancements: The nuclear industry is evolving with better technology and safety measures. Investments in companies pushing these advancements can be beneficial.
- Regulatory Environment: The regulations surrounding nuclear energy differ from one country to another. It’s vital to understand the regulatory framework in countries where your chosen ETF has significant investments.
- Diversification: Ensure that the ETF has a well-diversified portfolio, spreading its assets across various uranium-related companies to mitigate risks.
The Best Uranium ETFs In Canada
When it comes to commodity ETFs that deal with the uranium market, there is only one Canada-listed fund that you can consider.
There are only four uranium ETFs worldwide, including the Canada-listed uranium ETF, and I will include them in this guide. This post will also list several uranium stocks that you could consider investing in as well.
- Horizons Global Uranium Index ETF (HURA.TO)
- Global X Uranium ETF (URA)
- Sprott Uranium Miners ETF (URNM)
- VanEck Uranium + Nuclear Energy ETF (NLR)
1. Horizons Global Uranium Index ETF (HURA)
Horizons Global Uranium Index ETF (HURA) is the latest pure-play uranium fund and the first uranium ETF listed on the TSX. Launched in May 2019, HURA ETF seeks to provide you with investment returns by tracking the performance of the Solactive Global Uranium Pure-Play Index before fees and expenses.
The underlying index is designed to provide you with exposure to the performance of a group of publicly-listed equity securities that are primarily involved in uranium mining and exploration or invest and participate directly in the spot price of uranium.
HURA ETF invests in several publicly-traded uranium-related securities, including NAC Kazatomprom JSC, the national operator in the Republic of Kazakhstan responsible for importing and exporting uranium and other rare materials.
It accounts for almost a quarter of the fund’s asset allocation. HURA ETF is the only Canada-listed uranium ETF.
2. Global X Uranium ETF (URA)
Global X Uranium ETF (URA) is a US-listed uranium fund that provides you with exposure to a basket of publicly-listed companies involved in uranium mining and producing nuclear components, including uranium extraction, refining, exploration, or manufacturing for uranium and nuclear industry equipment.
The fund tracks the performance of the Solactive Global Uranium and Nuclear Components Total Return Index.
URA ETF offers you globally diversified exposure to uranium-related equity securities, with Canadian equity securities accounting for almost half of its asset allocation, Australia comes in second with almost 14% of its asset allocation, and Kazakhstan comes in third, with 11.4% of its asset allocation, primarily through NAC Kazatomprom JSC.
3. Sprott Uranium Miners ETF (URNM)
The URNM ETF asset allocation is diversified across several equity securities.
NAC Kazatomprom JSC accounts for 17.00% of its asset allocation. Cameco Corp. stock is its second-most significant holding, accounting for 16.63% of its asset allocation, and Sprott Physical Uranium Trust is its third-most significant holding, accounting for 10.80% of its asset allocation.
4. VanEck Uranium + Nuclear Energy ETF (NLR)
VanEck Uranium + Nuclear Energy ETF (NLR) is the last uranium ETF on my guide to the best uranium ETFs in Canada. The fund seeks to provide you with investment returns by tracking the price and yield performance of the MVIS Global Uranium and Nuclear Energy Index before fees and expenses.
The underlying fund is designed to track the overall performance of companies involved in uranium mining projects or have the potential for such projects that could account for at least 50% of the company’s assets.
The fund also tracks securities involved in the construction, engineering, and maintenance of nuclear power facilities and nuclear reactors.
Additionally, it tracks the performance of companies involved in producing electricity from nuclear sources and is involved in providing equipment, tech, or services to the nuclear power industry.
NLR ETFs most significant holdings include Dominion Energy Inc. at 8.53% of its asset allocation. Duke Energy Corp. is its second-most significant holding at 8.42% asset allocation.
Public Service Enterprise Group is its third-most significant holding, accounting for 7.15% of its asset allocation.
- Cameco Corp. Stock (CCO.TO)
- NexGen Energy Ltd. Stock (NXE.TO)
- Denison Mines Corp. Stock (DML.TO)
- Fission Uranium Corp. Stock (FCU.TO)
- Global Atomic Corp. Stock (GLO.TO)
- Uranium Royalty Corp. Stock (URC.TO)
Cameco Corp. Stock (CCO)
- Ticker: CCO.TO
- Forward Dividend Yield: 0.24%
- Dividend Payout Ratio: 54.55%
- Dividend Yield (12-Month Trailing): 0.19%
- Upcoming Dividend Date: Dec 15, 2023
- Market Cap: $26.80 Billion
- Forward P/E Ratio: 42.01
- Average Analyst Rating: 1.8 - Buy
Cameco Corp. stock is a Saskatoon-based $12.89 billion market capitalization company that was the second-largest uranium producer worldwide in 2015, accounting for 18% of the world’s uranium production. Founded in 1988, it is the world’s largest publicly-traded uranium company.
The company’s tier-one operations have the licensed capacity to produce over 53 million pounds of uranium concentrates each year, backed by 455 million pounds of proven and probable mineral reserves. It is also a leading supplier of uranium refining, conversion, and fuel manufacturing services.
NexGen Energy Ltd. Stock (NXE)
NexGen Energy Ltd. stock is a $2.60 billion market capitalization exploration and development company with a portfolio of high-impact projects across the Athabasca Basin, where the company holds almost 200,000 hectares of land.
The company is headquartered in Vancouver and is led by a team of experienced uranium industry professionals who specialize in exploration, corporate finance, and mine development.
The company’s discovery, Arrow, holds the largest development-stage heavy metal deposits in the country. Its Arrow deposit boasts an estimated maximum mill capacity to produce 1,300 tons of uranium ore per day, making it a company well-positioned to benefit from the surging uranium demand.
Denison Mines Corp. Stock (DML)
Denison Mines Corp. stock is a Toronto-based $1.26 billion market capitalization company that is responsible for uranium exploration, development, and production.
Founded in 1985, the company is best known for its uranium mining projects in Blind River and Elliot Lake. While it has diversified its operations into coal, potash, and other projects, uranium mining is still its primary revenue stream.
Denison’s exploration and development portfolio consists of several projects covering an estimated 280,000 hectares located in the Athabasca Basin region, focusing on the infrastructure-rich eastern section of the basin.
With significant operations in the world’s largest and highest-grade uranium mining and milling operations, it is well-positioned to benefit from the latest boom in uranium markets.
Fission Uranium Corp. Stock (FCU)
Fission Uranium Corp. stock is a British Columbia-based $507.30 million mineral exploration company. Fission Uranium is engaged in exploring and developing uranium assets.
It is a significantly smaller company than others on this list, and its sole project is the Patterson Lake South Project in the mineral-rich Athabasca Basin.
The company is developing high-grade, near-surface Triple R uranium deposits in the Athabasca Basin.
PLS hosts the longest mineralized trend in the region, and the Triple R is the only existing high-grade deposit in the region found near the surface, presenting Fission Uranium with a competitive edge in the industry.
Global Atomic Corp. Stock (GLO)
Global Atomic Corp. stock is a $633.87 million market capitalization company headquartered in Toronto. Founded in 1994, Global Atomic is a Canadian resource company advancing the large high-grade Dasa uranium deposit located in the Republic of Niger.
Global Atomic also enjoys benefits from the dividend stream generated by the company’s shares in the Turkey-based Befesa Silvermet zinc concentrate production facility.
The company offers geographically diversified exposure to uranium assets. It has a production capacity projected at 44 million pounds per year, and it has access to a long-life uranium mine with a 12-year operational lifespan based on current projections.
Its operations being based outside of Canada and the US makes it an attractive option to consider since the company is not competing with most other uranium producers with operations focused on the Athabasca Basin region.
Uranium Royalty Corp. Stock (URC)
Uranium Royalty Corp. stock is a Vancouver-based $369.04 million market capitalization company focused on gaining exposure to uranium prices by making strategic investments across several uranium interests.
These uranium interests include royalties, streams, debt, and equity in uranium companies. Uranium Royalty also generates revenue through physical uranium transactions.
Uranium Royalty is the only pure-play uranium royalty stock in the country. Uranium royalty is a unique method to gain exposure to the performance of the physical heavy metal, giving it far more flexibility than companies involved directly in uranium mining and production operations.
While it is a smaller company compared to the other equity securities listed in the guide, Uranium Royalty Corp. stock is a company uniquely positioned to provide you with relatively safer exposure to the performance of uranium prices.
Leveraged 3X ETFs are funds that track a wide range of asset classes, including stocks, bonds, and commodity futures. The fund manager then applies leverage to offer three times the daily or monthly investment returns based on the performance of the underlying index.
Unfortunately, there aren’t any 3X leveraged Uranium ETFs listed on Canadian or international stock exchanges that you could capitalize on enhanced investment returns for the performance of the rare earth metal.
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Investing in the best uranium ETFs in Canada could be a viable way for you to gain hands-free exposure to this essential radioactive material. It is a commodity that is likely to play a critical role in the energy industry’s shift toward clean energy.
As the demand for clean energy grows, a surge in uranium demand could provide you with stellar long-term returns.
If you are an investor who wants more control over the uranium-related assets you hold in your portfolio, you could consider creating a self-directed portfolio by picking individual uranium stocks.
The hydrogen market will also play a crucial role in the green energy revolution. Check out my guide to the best hydrogen ETFs in Canada to explore the investment vehicles you could purchase for this purpose.