Uranium ETF Monthly Report: Key Takeaways
The uranium spot price fell from $52.85 to $47.73, declining -9.67% in May. Uranium performed in line with many other industrial metals in what was a difficult month for most asset classes. In May, liquidity and market depth deteriorated while the Federal Reserve ("Fed") maintained its hawkish rhetoric. Global growth indications continued to slow and the Russia-Ukraine war continued to show no resolution, while its impact on commodities, especially energy and grain supplies, worsened. May's rapid deterioration of market depth or trading liquidity exacerbated price movements in virtually every asset class. 
For the uranium market, the Russia-Ukraine war had broader implications. Russia only accounted for approximately 5.9% of mined uranium production in 2021 per UxC, but it is a major player in both the conversion and enrichment of that uranium. Due to this, utilities have shifted their focus from long-term uranium contracting to sourcing their conversion and enrichment needs. This led to a divergence in the performance of the uranium spot price (decreasing) and enrichment prices (increasing).
The Sprott Physical Uranium Trust (SPUT) holds approximately 55.6 million pounds of U3O8 as of month end and has transacted regularly in the uranium spot market since August 2021. SPUT has become a key player in the uranium spot market by both increasing volume in the market and enabling further price discovery. May was a quiet month for SPUT, with approximately 100,000 lbs of uranium purchased. 
Exploration-focused and smaller-cap uranium miners were responsible for a larger drag on fund performance in May than uranium producers and physical holdings. In general, uranium miners benefit (or are disadvantaged) from a higher (lower) uranium price because of their inherent operating leverage. A strengthening uranium price helps to increase profit margins for producers. Further, smaller-capitalization uranium miners are more sensitive to changes in the uranium spot price than senior miners.
Boss Energy, an Australian listed uranium developer, has announced a final investment decision to restart production at the Honeymoon uranium project. Operations had begun in 2011, but the mine was put on care and maintenance in 2013. 
Please remember that past performance is not an indicator of future performance.
Over the short term, uranium miners have been negatively impacted by reasons we believe to be transitory. Current conversion and enrichment demand can be seen as a precursor for uranium spot demand once utilities refocus their buying. In the last week of May, the uranium spot price stabilized and increased, allowing SPUT to resume its capital raising after a quiet period. 
Government policies are likely to increase the demand for uranium going forward. In May, U.S. Energy Secretary Jennifer Granholm said that the Energy Department is working on a broad uranium strategy to ensure a steady supply for U.S. nuclear requirements. Nuclear energy has also been included in the EU's repowering plan, REPowerEU, which aims to specifically and rapidly reduce Russian fossil fuel dependence. Finally, per The Mainichi, "Japan ruling party pushes for nuclear energy use amid Ukraine crisis." Overall, uranium is crucial to the world's energy needs and even more so in the turmoil of these current events.
Although it may be in a short-term pause, we believe a new uranium bull market is underway that is likely to continue to benefit uranium miners. Over the long term, increased demand and decreased uranium supply are supportive of a sustained bull market. Uranium miners have exhibited a low/moderate correlation to major asset classes, providing diversification potential.
We believe that uranium miners are well positioned to take share within the energy sector as energy security and decarbonization take center stage globally. With the number of nuclear reactors planned to increase by 35%, governments are signaling the need to embrace the reliable, efficient, clean, and safe energy produced by nuclear to meet ambitious decarbonization goals. At the same time, a uranium supply deficit is looming on the horizon, and uranium miners are likely to be the beneficiaries of increased investment. Uranium and nuclear energy may be critical to the clean energy transition and help countries achieve energy security — reliable and affordable electricity.
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