MW What a new uranium-trading platform says about investor interest in nuclear energy
By Myra P. Saefong
There's 'clearly a lot of interest in uranium among investors, and this includes retail investors': analyst
Investor interest in nuclear energy is running hot and leading to new products, including the launch this week of a blockchain-based platform that allows traders to buy and sell a tokenized version of uranium.
There's "clearly a lot of interest in uranium among investors, and this includes retail investors," said Jonathan Hinze, president at UxC, a nuclear-fuel market information and analysis firm. "With the outlook for nuclear power and fuel demand growth continuously improving, it's no surprise that investors want to capture the upside potential in this market."
Read: AI and crypto use lots of energy. Nuclear power and uranium look like the perfect fix.
Still, liquidity and ease of trading on the new platform will be key to its success for investors, he told MarketWatch.
The Uranium.io platform launched on Tuesday, and users can directly trade U3O8, a uranium compound also referred to as yellowcake, in the form of a digital token on the Tezos blockchain.
"The appetite for nuclear power is definitely increasing, so there's an uptrend to catch here in terms of interest for and visibility of the assets," said Arthur Breitman, co-founder of Tezos, an open-source blockchain.
President-elect Donald Trump expressed support for nuclear power during his first term, calling nuclear energy "critical to United States national security." During the 2024 campaign, he said that, among his efforts to support nuclear-energy production, he would work to keep existing power plans open and invest in innovative small modular reactors.
See: How Trump's second presidency could fuel nuclear energy and uranium demand
All of that boosts the prospects for strength in nuclear energy and the uranium that fuels it.
Investment options
Retail investors looking to invest in uranium and the nuclear-energy sector have some options.
'With the outlook for nuclear power and fuel demand growth continuously improving, it's no surprise that investors want to capture the upside potential in this market.'Jonathan Hinze, UxC
The only way investors could access physical uranium was "through an equity-based vehicle," such as Yellow Cake PLC (UK:YCA) (YLLXF) and Uranium Royalty Corp. (UROY), said Hinze.
Some exchange-traded funds, such as the Global X Uranium ETF URA and VanEck Uranium & Nuclear ETF NLR, offer exposure to companies involved in the uranium and nuclear-energy industries. The Sprott Physical Uranium Trust SRUUF invests and holds substantially all of its assets in uranium in the form of U3O8.
Another option for investing in uranium is the financially settled UX futures contract on Comex that anyone can trade in, Hinze said. Data on CME Group $(CME)$, however, show that UxC uranium U3O8 futures contracts are barely traded.
Last year, a token backed by physical uranium called Uranium3o8 opened for trading on Uniswap, a decentralized crypto exchange.
However, the tokens decoupled from physical uranium prices and fell to near zero a few months after its launch, CoinDesk reported, citing data from CoinGecko. CoinDesk said that underscored the difficulties in creating a workable tokenization structure.
The Uranium3o8 tokens are backed by forward sales agreements between a mining company and a financial advisory firm.
Uranium.io, however, is "a spot market that enables audiences to purchase physical uranium that is currently stored at a depository in Canada," said Tezos' Breitman. In other words, its tokens are "anchored to the ounces of uranium oxide the tokens represent, as the token-holders are beneficial owners of that amount of uranium oxide, which is held in trust for them at Canada-based uranium provider Cameco Corp. $(CCJ.AU)$.
How the marketplace works
Uranium.io users must go through regulatory compliance measures to access the platform and then use a stablecoin, specifically USDC, that is in their wallets to conduct transactions. USDC is a fiat-backed stablecoin - a cryptocurrency that is pegged in value to the U.S. dollar and backed by reserve assets such as U.S. dollars or dollar-denominated assets.
The uranium market has been previously restricted to institutional investors in the form of over-the-counter trades with minimum lot sizes of 50,000 pounds and an associated purchase price of around $4.2 million, Breitman said. Hinze said U3O8 prices currently stand at around $77 a pound.
By tokenizing physical uranium, the new marketplace removes barriers to entry into the market presented by minimum lot size requirements. When an investor owns the token, they own the underlying uranium directly - with no management fees and no tracking errors, Breitman said.
Purchases can be made in small amounts - in increments of one ounce, so the minimum purchase would be around $5, he said.
That's aimed at making uranium more tradable for retail investors, although it's a product they're not likely to take physical delivery of given that U3O8 is radioactive and toxic if inhaled or ingested and that actually taking delivery of the physical uranium oxide would require a high degree of verification, said Breitman. The U.S. government allows certain commercial and industrial companies to legally possess up to 15.4 pounds of uranium and thorium, another radioactive metal, for research and education purposes, for example.
U3O8 purchased via Uranium.io will be maintained at a regulated depository owned and operated by Cameco.
Pros and cons
Any investors trying to play in the physical uranium space will "need to do so through some kind of vehicle" like this marketplace, UxC's Hinze said, given that it takes millions of dollars to be directly involved in the physical uranium market.
So the new marketplace "could be a really nice idea for smaller investors to access this market," he said. "But the proof will be in the pudding."
Read: The 'nuclear renaissance' is upon us. What investors need to know about uranium.
"A lot will depend on the liquidity in this blockchain market and ability to enter [and] exit smoothly. Obviously, time will tell to see if it takes off," Hinze said.
-Myra P. Saefong
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December 05, 2024 14:47 ET (19:47 GMT)
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