Uranium miners and the commodity itself performed exceedingly poorly in 2011. Shortly after the year started, the Japanese nuclear catastrophe slammed the industry. This was followed by Germany indicating that it was going to reduce its use of nuclear power and slowly curb the habit. The result of these concerns pushed most uranium mining equities down between 50 and 80 percent.
Nonetheless, several of these equities have started 2012 with a vengeance. Several have appreciated to a greater percent than days yet peeled off a word-a-day calendar. The substantial appreciation may be an indication that the uranium miners bottomed in Q4 of 2011.
Additionally, during the second half of 2011, a short-term bidding war broke out between Cameco Corp (NYSE:CCJ) and mining powerhouse Rio Tinto (NYSE:RIO) over Hathor (OTC:HTHXF), a Canadian uranium miner. These miners appear to be anticipating growing demand from around the globe, and specifically, regarding the growing emerging power needs of China and India.
Both nations have announced ambitious multi-year nuclear development plans during 2011. In particular, China announced plans to increase its nuclear capacity eight-fold before the end of the decade, while India plans to increase its nuclear power production thirteen-fold.
Cameco ended up backing out of the bidding war for Hathor, incapable of competing with the larger competitor. This combined interest in Hathor indicated that at least some industry members believed the recent lows indicated an appropriate time to accumulate key uranium assets for the longer term, in advance of that Chinese and Indian demand.
Below are listed several companies with business substantially relating to uranium mining and/or production, as well as their 1-month, 6-month and 12-month performance rates. I have also included Rio Tinto's performance data, as well as Cameco, Denison Mines (NYSEMKT:DNN), Uranerz Energy (NYSEMKT:URZ), Uranium Resources (NASDAQ:URRE) and USEC (USU).
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These stocks are now up an an average of 24.77% so far in 2012.
It appears almost inevitable that uranium demand from new and sizable locations such as China and India, among other wealthy Asian nations that may announce similar initiatives, will begin to outpace uranium supply, possibly creating dramatic shortages and price spikes to both uranium and the shares of uranium producers.
Such a trend may take another decade to occur, but miners must consider that time-frame and it is only getting more difficult and expensive to locate accessible mining assets and ramp up production.
In addition to these individual companies, some ETFs also allow investors to gain exposure to uranium pricing and demand. For example, the Global X Uranium ETF (NYSEARCA:URA) tracks the Solactive Uranium Index, which tracks the performance of the large players in the uranium mining industry. See the recent chart for URA, below:
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Another ETF option is the Market Vectors Nuclear Energy ETF (NYSEARCA:NLR), which also includes exposure to energy utilities with exposure to uranium pricing and nuclear power use. It should be expected that this industry will continue to exhibit high risk/reward characteristics, and that investment allocations should be limited accordingly.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.