2 Uranium Stocks Fueling Growth From the Nuclear Power Surge

Key Points

• Uranium Royalty doesn't mine or produce uranium but owns minority stakes in royalty-producing assets.
• Uranium Royalty is like a mini uranium ETF with stakes in 22 projects.
• Denison Mines is waiting on permitting approval for its Phoenix deposit in its Wheeler River Project but was prudent enough to purchase 2.2 million pounds of uranium in 2021 for $29.60 per pound.

Uranium stocks have been surging thanks to the Constellation Energy Co. NASDAQ: CEG and Microsoft Co. NASDAQ: MSFT deal for the largest power-purchasing deal in history. The large hyperscalers are committed to sustainable and clean energy solutions to power their data centers. The electricity will be supplied by restarting the Three Mile Island Unit 1 nuclear reactor pending regulatory approval by the United States Nuclear Regulatory Commission (NRC). Uranium is required to power this and other nuclear reactors, which is why uranium stocks in the oils and energy sector have been rising sharply.

Here are two more uranium stocks that are gaining from the movement to fuel nuclear power plants.

Uranium Royalty Gains Access Without the Risk of Mining and Processing

While Uranium Royalty Co. NASDAQ: UROY doesn't produce nor intends to produce uranium, it believes itself to be a pure-play uranium company. The word 'royalty' in its name doesn't refer to monarchs or bloodlines but to royalty payments it receives from its portfolio of geographically diversified uranium assets. They basically make money off of partially owning uranium assets by collecting royalty payments without having to bear the capital expenditure (CAPEX) and risk that comes from operating a mining company.

A Portfolio of Royalty-Bearing Uranium Assets

Uranium Corp.’s portfolio of 22 uranium assets for which it has minor and royalty interests. The interests range in project stage from exploration like the Rio Tinto Group NYSE: RIO owned Russell Lake project for which it can receive a 1.9766% of the net smelter return (MSR) to the 2% to 4% gross value return royalty (GVR) of the Energy Fuels Inc. NYSE: UUUU owned Whirlwind project to the 10% to 20% net profits interest (NPI) royalty from the Cigar Lake/Waterbury project operated by Cameco Co. NYSE: CCJ. The stock can be considered a mini-ETF of tiny stakes in uranium assets. Uranium Royalty also owns 2.8 million pounds of physical uranium. The company is still in the process of generating revenue.

Denison Mines' Wheeler River Project: A Uranium Powerhouse in the Making

Denison Mines NYSEAMERICAN: DNN is a speculative uranium exploration and development company based in Toronto, Canada. It holds a 95% interest in its flagship Wheeler River Project, located in Saskatchewan’s Athabasca Basin. The project spans roughly 300,000 hectares and includes the Gryphon and Phoenix deposits.

The Phoenix Deposit

While the Wheeler River Project isn't yet producing uranium, the Phoenix deposit is currently undergoing the permitting process for In-Situ Recovery (ISR). The Phoenix deposit has a 10-year mining life with probable resources of $56.7 million tons of U3O8 uranium. Approval is expected in 2025. The all-in-sustaining cost (AISC) is around $16.00 per pound, with $318.10 million in initial costs, making it extremely lucrative at current uranium spot prices above $80 per pound.

The Gryphon Deposit

The Gryphon deposit is several years behind Phoenix in development, with a mine life of 6.5 years and 49.7 million pounds of probable uranium resources. Its AISC is $25.47, but initial capital costs are higher, estimated at $564.2 million.

Denison’s Uranium Inventory and Revenue Generating Interests

While Denison doesn’t yet produce uranium, it owns 2.2 million pounds of it that it purchased for $29.60 per pound in 2021, worth around $178 million. It also generates revenue from its 22.5% stake in McClean Lake, which has a licensed mill for an annual production capacity of 24 million pounds. Dennison collects revenues from the toll milling. The mill processes ore from the Cigar Lake mine, where Cameco Corp operates.

Denison generated $964,000 in Q2 2024 with an EPS loss of 1 cent, matching consensus estimates. Incidentally, Denison is debt-free and has working capital and investments valued at nearly 70% of its market cap. This prompted BMO to upgrade its rating to Outperform from Market Perform with a $2.22 price target. CIBC started coverage on Denison with a Sector Outperform rating. MarketBeat has seven analyst Buy ratings with an average consensus price target of $2.93 and a high target of $3.25.