As oil and gas prices skyrocket, many governments around the world are searching for alternative forms of power. As interest in nuclear power increases, investors are seeking greater exposure to uranium stocks. I think I’ve found two such companies that could provide long-term growth for my portfolio in this sector. What exactly is uranium and why am I attracted to these two firms? Let’s take a closer look.
What is uranium and why do we need it?
Uranium is a chemical element. As a metal, it is found in a number of different countries around the world. These include the US, Canada, Kazakhstan, and Russia.
In a civilian context, it can be used in nuclear power. Recently, governments have started pursuing alternatives for the production of energy, including nuclear. These policies could have nuclear plants on the grid by the early 2030s, thus I’m looking at uranium stocks as long-term investments.
Indeed, the UK government released its Energy Security Strategy this month, promising £2bn for nuclear power.
Additionally, China gave the green light for the construction of 150 nuclear plants. This will come at a cost of $440bn.
Uranium stock #1: Yellowcake
The first firm is physical uranium trader Yellowcake (LSE:YCA). Based in Jersey, it buys, sells, and holds uranium. It currently trades at 451.2p.
Between 2020 and 2021, its profit before tax increased from $12.51m to $29.91m. In addition, revenue rose from $15.93m to $33.92m.
Furthermore, in the three months to 31 December 2021, the value of the company’s assets grew by 12%. This is not particularly surprising, considering that the uranium spot price has doubled over the past year.
During that final quarter of 2021, the firm took the opportunity to purchase a further 8m pounds of uranium.
In April, it announced a $3m share buyback scheme, showing the strong position in which the company finds itself.
A risk, however, is that events in Russia and Kazakhstan impact its ability to take delivery of physical uranium.
Uranium stock #2: Cameco
The second business is uranium miner Cameco (NYSE:CCJ). It operates three projects in Canada and Australia. It currently trades at $30.22.
Throughout 2021, the company added around 70m pounds of uranium in long-term contracts. Furthermore, it ended the year with a cash balance of $1.3bn. Its long-term debt stood at $996m.
Additionally, it is investing to increase production at its McArthur River and Key Lake operations in Australia and Canada, respectively. This could be completed by 2024.
One risk may be that the business fails to meet this deadline. Despite this, these two operations should produce around 5m of uranium in 2022.
The Cigar Lake project in Canada may yield around 15m of uranium this year, which would bolster the firm’s production figures.
The company also recently announced a 50% increase in its dividend to ¢12 per share in 2022. This is another indicator that the business is currently strong.
Overall, I think nuclear power is going to become even more central to our lives. With that in mind, I want to gain exposure through these two uranium stocks. I will be buying shares in both soon and holding until at least 2030, when nuclear power may produce much more of our energy.
