The Many Ways to Access Uranium

If RBC is correct, investors can get the jump on the impending bull market in a variety of ways, including futures. Although no physical exchange exists yet for uranium, you can still trade monthly yellowcake futures on NYMEX, which uses prices from The Ux Company's Ux U₃O₈ index.

Or you could invest in a holding company that stockpiles uranium, like Uranium Participation Corp (TSE:U) or Nufcor Uranium Limited (LON:NU). In fact, rumors that these companies had begun purchasing more yellowcake is one of the reasons prices started to rise last month.

But perhaps the most promising way to access uranium right now is to look to the source: producers. Lately, uranium miners haven't been doing half bad, having regained some of the ground they lost in 2007's U₃O₈ price drop and last year's credit crunch. The same RBC report noted that overall, uranium stocks have rebounded almost 225% from their lows, and that the market could reclaim its previous peaks within the next two years.

This recovery in miners has been driven in part by good discovery news out of Africa. New drilling results from the Rössing South mine in Namibia suggest that the newly discovered source is not only the country's highest-grade uranium deposit, but could be one of the largest in the world. (Extract Resources (TSX: EXT), which owns the mine, and Kalahari Minerals (LSE: KAH.L), which owns a large stake in Extract, have both seen their share prices soar). Meanwhile, in Niger, French nuclear power giant Areva has teamed up with local officials to lay foundations for a new mine in Imouraren, which when completed, will be Africa's largest uranium mine and the second largest in the world.

Uranium Miners: The Cast Of Characters

Many diversified resource companies like Cameco (NYSE: CCJ), BHP Billiton (NYSE: BHP) and Rio Tinto (NYSE: RTP) dig for uranium along with coal, copper and iron ore. In particular, shares of Cameco, the world's largest uranium supplier, have more than doubled in price since last December's lows. While the company's first-quarter profits declined 38%, CEO Jerry Grandey revealed that this was because the company is snatching up uranium at above-production prices in order to resell later. "Down the road, we will realize additional revenue and earnings as we deliver the purchased material to our customers," he said.

Both BHP Billiton and Rio Tinto have announced expanded relationships with China; in particular, BHP is investigating the possibility of expanding its operations at the Olympic Dam mine in Australia (the world's largest known uranium deposit) in order to meet Chinese demand.

Other miners doing particularly well are First Uranium (TSX: FIU) and junior miner Deep Yellow (ASX: DYL), which have both seen strong price increases (174% and 87%, respectively). In fact, First Uranium recently announced it would offer $92 million in new stock, using the proceeds not only to speed up new development, but also to sow the seeds for potential acquisition.

Even beleaguered miner Uranium One (TSE: UUU) is looking a bit chipper: In the first quarter, the company doubled production to 700,900 lbs, with lower-than-expected production costs. Although Uranium One has had its share of troubles - from last year's shutdown of its Dominion Mine in South Africa to crippling shortages of sulphuric acid at its Kazakhstan mine - the company appears to be stabilizing, and revenues nearly doubled over the same quarter last year.

And if you don't want to make the individual calls, there are three solid nuclear-centric ETFs in the marketplace now: the Market Vectors Nuclear Energy ETF (NYSE Arca: NLR), the iShares S&P Global Nuclear Energy Fund (NASDAQ: NUCL) or the PowerShares Global Nuclear Energy ETF (NYSE Arca: PKN). Each takes substantial equity positions in the major minors, along with reactor manufacturers and service companies.

One final footnote for the uranium bulls: Now-defunct investment bank Lehman Brothers is apparently sitting on a 500,000 lb stockpile of yellowcake, large enough to make a nuclear bomb. Should they dump that uranium on the market, it could depress prices, although Chief Executive Brian Marsal has said the firm plans to gradually sell the supply "over the next two years."

For a more in-depth explanation of uranium's supply/demand fundamentals, check out Jennifer Barry's "The Bull Case for Uranium."

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