As the world transitions towards cleaner energy sources, nuclear power is gaining adoption - and it's driving higher demand for uranium, a key fuel component in nuclear reactors. Besides nuclear energy, uranium also has applications in the medical, industrial, and military sectors.
Forecasts suggest that the global uranium market size could reach $11.39 billion by 2030. Moreover, a report by Statista indicates that global demand for uranium will be 209 million pounds by 2035 - even as the supply of uranium is expected to drop over time. Similarly, the World Nuclear Association expects uranium demand to reach 83,840 tons by 2030, and double to 130,000 tons by 2040. For context, the demand was 65,650 tons last year.
Against this backdrop, Kazatomprom (NATKY) - the world's largest uranium producer - just slashed its production target for 2025, due to project delays and sulphuric acid shortages. The Kazakh uranium giant just reduced its production target for the next year by 17% to a range of 5,000 tons to 26,500 tons, which should add pressure to an already tight uranium market.
For investors looking to add exposure to the uranium market, here's one low-priced stock that analysts think is set for substantial upside.
About Ur-Energy
Wyoming-based Ur-Energy (URG) is a uranium mining company founded in 2006. It focuses on unconventional mining techniques, such as the environmentally friendly in situ recovery (ISR) method to extract uranium from underground deposits.
Its market cap currently stands at $310.7 million, and Ur-Energy stock has dipped 26% over the past year.
Ur-Energy's Strong Cash Position
In Q2 of 2024, Ur-Energy reported stronger-than-forecast revenues of $4.65 million, a significant jump from the previous year's $39,000. Losses narrowed to $0.02 per share from $0.03 per share in the prior year, arriving in line with expectations.
A debt-free company, Ur-Energy closed the quarter with a cash balance of $61.3 million, up from $59.7 million at the start of the year.
Overall, the company sold 75,000 pounds of U3O8 in Q2 at an average price of $61.65 per pound with orders for delivery of 495,000 pounds in the year's second half.
The Russia Ban and HALEU
The recent ban on nuclear fuel imports from Russia, effective August 2024 through 2040, has provided a positive outlook for the company. This move follows an April commitment from G7 nations to reduce reliance on Russian nuclear fuel supplies, aiming to establish a diversified supply chain free from Russian influence. Support is also being offered to countries seeking to diversify their nuclear fuel sources.
In the U.S., many nuclear power plants are preparing to extend their operational lifespans, while others are considering resuming operations. The U.S. Department of Energy is advancing with requests for proposals under its HALEU and LEU programs, prioritizing domestic uranium suppliers.
"We continue to consider ways to expand our domestic production to respond to growing demand from utilities and active efforts by the Department of Energy to acquire both High Assay Low Enriched Uranium ("HALEU") and Low Enriched Uranium ("LEU") with a preference for domestic feed stock," said CEO John Cash in URG's press release.
Operational Strength
Ur-Energy's position as a low-cost uranium producer enables it to achieve higher margins. In the last two quarters of 2023, the average cost per pound sold was $28, while the average price under term contracts reached $60.45. This resulted in an average gross profit of $32.41 per pound sold, translating to a gross profit margin of nearly 54%.
The company’s excess production capacity also provides significant flexibility. Its active mine is licensed for 1.2 million pounds per year, while its processing plant has a capacity of 2.2 million pounds. This allows Ur-Energy to scale up production as needed and process uranium from other projects, such as Shirley Basin, or offer toll processing for other producers.
Additionally, Ur-Energy has secured all necessary permits and licenses to bring its high-grade Shirley Basin project online as a satellite operation to Lost Creek. Shirley is expected to come online in late 2025.
Analysts Expect This Penny Stock to Double
Wall Street is overwhelmingly bullish on this penny stock, as all 4 analysts in coverage have unanimously deemed URG a “Strong Buy.”
The mean price target for URG stock is $2.15, implying expected upside potential of 104.7% from Friday's closing price.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
