Uranium is a common metallic element found in rocks and soil with radioactive properties. It is used in commercial and military applications, and is mined in greater quantities than gold or silver. Investors can capitalize on this natural resource by investing in uranium stocks, or buying it directly in the commodity market.
Uses of Uranium
Common applications of this element are for use in fueling nuclear power plants, creating destructive ammunition with DU, or depleted uranium, and in science for geologic uses. This commonly occurring resource has been in use for over forty years.
Uranium Stocks
With the push towards clean energy and the construction of nuclear reactors to produce it, this is a resource with a bright future. It is also endorsed by the Obama administration, which is supporting the building of these plants with large federal funding over the next few years. The positive indicators for this industry include high job growth, and worldwide increases in power from nuclear energy.
One can look for companies who mine uranium, such as A1 Mineral, Ltd., or American Uranium Corporation, Inc.; to those who build nuclear plants, such as French firm Areva, for good investment ideas. Take note, however, these plants are very expensive and time-consuming to build. Buying into a company who builds reactors may require a long time horizon before realizing a return on the capital.
Mining Companies
The market pays close attention to mining permits when valuing these stocks. A good example is ‘Uranium Energy Corp’ whose stock price appreciated rapidly once mining permits where officially issued. Other companies, such as Uranerz, had several positive indicators of future success, even when permits were pending on their latest venture.
Success of Uranerz can be attributed to the key factors of any good business; strong managers, an excellent scientific team, and with 25 projects in the U.S. and abroad, potential for high future earnings. They also have investor’s confidence; the company has demonstrated the existence of high-grade uranium in their mines in Wyoming, which has the greatest amount of this resource in the U.S.; in addition to this, they have secured large sales contracts with two large United States nuclear fleets.
The list of companies who explore, develop, and mine precious metals, including uranium, is a long one. To narrow the list down, utilize the fundamentals for analyzing the business, and consider the experience of the technical team as well. Companies such as ‘Uranium Resources,’ ‘Ultra Uranium Corp’ and many others have strong potential.
However, mining uranium and other precious metals is an expensive operation; an investor needs to be sure the company owns proven sources of the metals, and has a history of accurately estimating and producing enough to make a profit.
A good time to buy stock in uranium is before permits are acquired, but after a large source has been discovered. Always consider the amount of liability the company carries on its balance sheet, and favor businesses with a history of good production and profits. Be wary of penny stocks in this industry, and avoid putting up too much capital during the speculating process.
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