(Kitco News) – A global energy crisis that threatens to get worse and ongoing climate change issues mean there is plenty of upside potential for nuclear energy, according to the world’s biggest uranium investment firm.
In a telephone interview with Kitco News, John Ciampaglia, CEO of Sprott Asset Management, noted that in less than a year, the Sprott Physical Uranium Trust, which gives investors direct access to physical metal, has seen significant growth. The fund started with initial holdings of 18.1 million pounds of uranium, valued at $630 million, and now holds 55.5 million pounds, valued at $3 billion dollars. At the same time, the price of uranium has jumped from $28 a pound to around $53 a pound.
“We think there is still a lot of runway left in the uranium price. There is a serious supply and demand imbalance in the market that can only be fixed with higher prices,” said Ciampaglia.
In the long-term, Ciampaglia said that prices have the potential to double from current prices to $100 a pound.
The comments come as the investment firm recently added to its uranium portfolio, launching the Sprott Uranium Miners ETF, after buying certain assets relating to the North Shore Global Uranium Mining ETF. The company said that the new exchange-traded fund adds more than $1 billion of value to its uranium portfolio.
Ciampaglia said that uranium is still at the early stages of a bull market as nations worldwide look for new energy sources to wean them off fossil fuels. The European economy, in particular, is at risk of falling into a recession as energy prices rise out of control. European energy prices have dramatically increased due to Russia’s ongoing war in Ukraine.
The energy crisis could worsen as the European Union proposed sanctioning Russia’s oil because of the invasion.
Along with the immediate impact of the conflict in Eastern Europe, Ciampaglia said the growing concern about climate change adds further demand for clean energy, which nuclear can provide.
“Two years ago, you couldn’t have a conversation about nuclear energy. There was still a lot of fear in the market,” said Ciampaglia. “Now everyone wants to talk about it. The conversation is just getting started as governments want clean, secure, and reliable energy.”
Although renewable energy like solar power and wind power has seen significant growth in the last few years, Ciampaglia said that many governments are starting to recognize that these sectors won’t be able to meet the growing energy demands.
“There is a growing realization that nuclear power is needed as a base-load energy supply. If the world is going to decarbonize, nuclear needs to be part of the energy mix,” said Ciampaglia.
Ciampaglia said that the biggest issue in the uranium market is that there is not nearly enough supply to meet the growing demand, specifically coming from China and Europe. With uranium prices above $50 a pound, some producers have restarted production at some mines; however, Ciampaglia explained that if long-term demand is to be met, the market needs new greenfield production to come online.
“If new uranium mines are going to come online, then prices need to be much higher, maybe closer to $80 a pound,” he said. Even then, it’s still going to take time to get production online. We continue to position ourselves to take advantage of this long-term bull market.”