Uranium prices are ripe for a rerating to the upside.

They have been for years now. And the impact of COVID-19 on the industry, coupled with a renewed acceptance of nuclear as “clean reliable energy” has kicked off events that are already seeing the uranium spot-price and related equities ratcheting higher.

Currently, the price of uranium is around $32 per pound. It’s likely headed north of $50 per pound in the not too distant future — and this report details precisely why.

Over the next ten years, the world will need ~200 million pounds of uranium annually. But there is only about 150 million pounds per year globally with all-in sustaining costs (AISC) below US$50 per pound — and 20% or more of that was knocked offline because of COVID-related disruptions.

At today’s spot price, only about 100 million pounds of supply per year is economic or only about half of what the world needs. A spot price above $50 per pound will be needed — and is expected — over the next few years.

That would trigger a new bull market in select uranium stocks — including Uranium Royalty Corporation.

A Flood of Gains

Uranium’s last bull market kicked off in 2006 when Cameco’s Cigar Lake Mine — which provides ~7% of global annual uranium supply — flooded while it was being built prompting a run on uranium that sent the spot price to a jaw-dropping US$138 per pound.

It simultaneously sent uranium stocks significantly higher in percentage terms with some like UEX Energy, Energy Fuels, Laramide Resources, and International Enexco delivering a few thousand to +100,000% returns.

The commodities sector is known for the stocks within it offering leverage to the underlying price of the commodity. The uranium subsector epitomizes this.

Small World, Big Leverage

The uranium market is tiny.

Kazakhstan alone produces ~40% of global supply. It does this through Kazatomprom, its national uranium company, which listed 25% of its shares on the London Stock Exchange in 2018. Those shares had a market capitalization of US$4.75 billion in early-2021.

The next largest public pure-play is Cameco Corporation (NYSE: CCJ), which produces ~10% of annual global supply and has a market capitalization of around US$7.5 billion.

In other words, half of the world’s uranium production is represented by less than US$30 billion in market cap. In contrast, Amazon has a market capitalization of nearly US$2 trillion.

From there, the pure-plays get small very quickly. The “largest” uranium producer in the United States, for example, is Energy Fuels (NASDAQ: UUUU).

Largest is in quotes given it will only produce around 30,000 to 60,000 pounds of U3O8 this calendar year. Its market cap is around US$800 million but has mostly been below that for years.

Yet, if you were to look up the top holdings of the Global X Uranium ETF (NYSE: URA), you would see that these three companies make up three of the top five holdings.

The other two are Nexgen Energy with its world-class but undeveloped Arrow project in Saskatchewan and Denison with its large but also undeveloped Wheeler River project on the other side of the basin.

Those five companies make up over 50% of the sector ETF.

So the uranium world is very small which is why even small new inflows into the sector create such stark leverage reflected in the equities.

Over a Barrel

The biggest and most important buyers in the uranium space are the utilities. And here’s where it gets interesting.

For years, the utilities have been able to lock up uranium supplies at depressed prices, signing long-term contracts that guaranteed the biggest buyer stayed out of the market for years.

That’s about to change. And the combination of supply cuts from the highest-margin producers and utilities coming back into the market might create the greatest uranium bull market anyone has ever seen.

You see, the utility company's price is secondary to securing supply. That’s because the price they pay for uranium makes up a very small portion of the total cost of operating a nuclear reactor.

Uranium prices need to be north of $50 per pound. That’s the incentive price to build a new uranium mine in the world. And it goes up to $75. No developer can bring a new uranium mine at $32 uranium. We’re guaranteed to see higher contract prices.

That’s why uranium bull markets are so powerful and why the profits can truly be life-changing. Whether they pay $25 per pound or $150 per pound… they HAVE TO BUY!

With nuclear power providing some 15% of global baseload — and clean — electricity… either the utilities buy uranium at higher prices… or the lights go out!

When you look at the levels of uncovered reactor requirements starting next year and the year after that... every year, it gets larger and larger and larger. The utilities' last major contracting cycle was in 2010.

Not only is the biggest buyer about to rush back into the market… but governments that just years ago vowed to move away from nuclear energy are now realizing that there isn’t a cleaner, safer, more economic option in the world.

Japan, China, India, South Korea, and even the US are now fully onboard with a cleaner energy future that will require uranium.

Then, there’s the retail speculator who, until now, hasn’t had a viable vehicle to buy uranium pounds with the press of a button or by placing a phone call.

That’s about to change. Sprott is basically launching a uranium ETF by taking over Uranium Participation Corp (TSX: U)(OTC: URPTF).

Sprott Asset Management taking over management of Uranium Participation Corp. is a big deal. We believe Sprott's 200,000-plus investors will look at this as a way to directly purchase physical pounds without having to take delivery, which Sprott will do for them.

They’ve done it with gold. They’ve done it with silver. And now they’re about to do it with uranium.

Although the gains in the uranium spot price will be incredible... the best juniors will make those gains look paltry in comparison.

In the precious metals space, it is the royalty group of stocks that outperformed in the last bull market for all of the reasons that are now becoming common knowledge:

• Leverage

• No commodity risk

• Sustainable dividends

• No cost risk

But uranium investors had no such option the last go-round, leaving them over a barrel to invest via the model that has performed so well with precious metals.

The entry of Uranium Royalty Corp. into the market changes that.

(NASDAQ: UROY)(TSX-V: URC)

For speculators, Uranium Royalty is the first company to apply the successful royalty and streaming business model exclusively to the uranium sector.

The model has the distinct advantage of providing exposure to rising uranium prices — via royalties, streams, and physical inventory — without having to own, develop, or operate any uranium mining projects.

In May 2021, Uranium Royalty completed the acquisition of royalty interests on Cameco’s McArthur River and Cigar Lake uranium mines in Canada’s prolific Athabasca Basin.

The transaction provides the company and its shareholders with exposure to the two largest high-grade uranium mines on the planet with ore grades upward of 100X the global average.

Combined, the mines have capacity equal to about one-fifth of global forecasted uranium demand.

The deal also includes a royalty on the high-grade Dawn Lake Uranium Mine, which has been active since 1977 with resources of approximately 18 million lbs U3O8.

Additionally in the Athabasca, Uranium Royalty owns a 1.97% net smelter royalty on Rio Tinto’s development-stage Roughrider Uranium Project.

The company also offers investors exposure to physical uranium via its 9.6% stake in London-listed Yellow Cake PLC.

Under its 10-year supply agreement with Yellow Cake PLC, Uranium Royalty is positioned to acquire between US$2.5 million and US$10 million of U3O8 per year up to a maximum aggregate amount of US$31.25 million worth of U3O8.

Uranium Royalty has now taken delivery of 348,068 pounds of U3O8, which is being held in an account at the Fuel Services facilities of Cameco in Ontario, Canada.

Uranium Royalty is the only uranium equity that gives speculators exposure to the price of uranium as well as participation in exploration upside with fixed operating costs and NO development or sustaining capital costs.

And shares of UROY/URC are undervalued right now.

Trading around US$2.50 per share with a market cap around US$200 million… a case can be made for a half-billion-dollar valuation based on the current trading value of other companies in the space and by looking at comparable companies in the precious metals space.

In addition to the high-profile royalty acquisitions, Uranium Royalty recently uplisted to the NASDAQ, announced a C$25 million bought deal financing, and, as mentioned, has begun taking delivery of physical uranium from London-based Yellow Cake PLC.

The company currently has around C$70 million in cash and listed securities, which is almost unheard of in the junior space.

As the uranium sector comes out of a prolonged bear market and related equities start to rise, we think Uranium Royalty Corp. (NASDAQ: UROY)(TSX-V: URC) will become a go-to name in the space, leading to a re-rating of its shares at much higher prices.

Now is the time to be taking a look at the company.

Our own Gerardo Del Real sat down with Uranium Royalty president & CEO Scott Melbye. Scott has worked for the largest producers in the uranium space and knows the industry like the back of his hand.

He lays out the case for Uranium Royalty in a new uranium bull market below.

Uranium: The Next Cycle of Capital Investment Begins

Looking for near-term production and cash flow

with Uranium Royalty Corp.

Exclusive Interview with President & CEO Scott Melbye

The Opportunity

For speculators, Uranium Royalty Corp. (NASDAQ: UROY)(TSX-V: URC) is the first company to apply the successful royalty and streaming business model exclusively to the uranium sector — and, by all accounts, they’re off to a highly impressive start.

So far, UROY/URC’s strategy has been primarily focused on acquiring existing royalties with the next wave of acquisitions anticipated to focus on new royalties, streams of physical uranium, and other uranium interests.

With uranium back above US$30 per pound and likely heading significantly higher in the coming quarters — now is a good time to be taking a closer look at Uranium Royalty Corporation as the company continues to build its balance sheet and its portfolio of uranium royalties in Tier-1 jurisdictions.

Learn more about the company’s current royalties and future plans by visiting the Uranium Royalty corporate website.

— Resource Stock Digest Research