Energy-related exchange-traded funds (ETFs) provide a rich vein of innovation for advisors who want to tap into emerging investment opportunities to serve their clients effectively. Specifically, with the increasing demand for clean and reliable energy and the rise of data centers, uranium mining companies are gaining attention for providing entrée to this sector.
The Sprott Uranium Miners ETF (NYSE Arca: URNM) is designed to deliver thoughtful, diversified exposure to the industry through both equities and physical uranium. Steven Schoffstall, Sprott Asset Management’s Director of ETF Product Management, joined Wealth Advisor Managing Editor Scott Martin to discuss URNM and its role in both the ongoing energy transition and the expanded use of artificial intelligence (AI).
Uranium has reemerged as a critical component in the global energy landscape, says Schoffstall. The Sprott Uranium Miners ETF offers pure-play* exposure to uranium mining companies, with a notable 17–18% physical uranium component in its portfolio. This ETF stands out by focusing on companies with at least 50% of their revenue or assets tied to uranium production.
The resurgence of nuclear power is pivotal as nations strive to achieve net-zero carbon targets. Although renewable energy sources such as wind, solar, and hydro are essential, they may not suffice to meet ambitious global energy conservation goals. Nuclear energy provides a dependable power source, Schoffstall adds, making it a vital part of the energy mix.
Nuclear power has a historical presence, but its growth stagnated in recent decades, especially in the United States. However, as countries aim for net-zero carbon targets, nuclear energy is regaining prominence. It offers a clean, sound energy source, operating almost continuously with minimal downtime for refueling. This reliability makes it an attractive option for meeting increasing energy demands.
The uranium industry faced underinvestment in the past decade, but this trend is reversing, Schoffstall points out. He believes that a prolonged bull market for nuclear energy and uranium miners is on the horizon, driven by the energy transition and technological advancements. Global electricity demand is projected to increase by 86% by 2050, partly fueled by the rise of artificial intelligence (AI) and the associated large data centers requiring substantial power. Companies such as Amazon are investing in data centers adjacent to nuclear power plants to meet their clean energy goals.
The demand for uranium is rising, but the supply side has lagged. In 2023, the United Nations Climate Change Conference (COP 28) highlighted the urgency of increasing renewable and nuclear energy capacities. More than 120 nations pledged to triple renewable energy capacity by 2030, and 20 countries, including the United States, aim to triple nuclear energy capacity by 2050. This shift has doubled the projected uranium deficit from 1.1 billion pounds to 2.2 billion pounds by 2040.
The price of uranium, which plummeted from $140 per pound to $20 per pound over the past decade, is recovering. It recently reached $106 per pound and has stabilized at about $92 per pound. Schoffstall expects to see tiered price increases, not a single jump, which aligns with the projected long-term growth in uranium demand.
For advisors, the Sprott Uranium Miners ETF offers a compelling opportunity. This ETF not only includes uranium miners but also holds physical uranium, providing diversified exposure to the uranium market. Sprott’s expertise in metals and mining, combined with its focus on pure-play investments, ensures a clean and targeted portfolio.
Additionally, Sprott launched the Sprott Junior Uranium Miners ETF (URNJ) to cater to advisors interested in smaller, exploration-focused companies. The URNJ ETF grew to more than $400 million in assets within a year, reflecting the increasing interest in uranium investments.
Advisors can integrate uranium investments into client portfolios in various ways. As a component of the energy sector, uranium miners can diversify traditional energy portfolios, which often lack significant exposure to uranium. Given the expected growth in uranium demand, it can also fit into a growth or thematic sleeve, particularly for clients focused on clean energy and sustainability.
The URNM ETF offers a unique advantage with its international exposure, primarily in Canada, a stable and reliable mining jurisdiction, Schoffstall notes. This exposure enhances portfolio diversification and reduces geopolitical risks associated with other uranium-producing regions.
The global landscape of nuclear reactors is evolving. Although the number of reactors has fluctuated, projections indicate significant growth by 2050. Countries such as Japan, which scaled back nuclear power after the Fukushima disaster, are restarting reactors and planning new ones. This renewed focus on nuclear energy aligns with the broader goal of achieving net-zero carbon emissions.
Given this positive outlook for nuclear energy, the uranium market presents a promising investment opportunity as the world transitions to cleaner energy sources. The Sprott Uranium Miners ETF provides targeted exposure to this critical sector, backed by Sprott’s expertise in metals and mining. Advisors can leverage this opportunity to enhance client portfolios, aligning investments with the growing demand for sustainable and reliable energy.
Understanding the dynamics of the uranium market and its role in the energy transition is essential for advisors seeking to navigate the evolving investment landscape. By incorporating uranium investments into portfolios, advisors can position their clients to benefit from the long-term growth potential of this critical mineral.
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Additional Resources
- Contact Sprott Asset Management
- Sprott Uranium Miners ETF (URNM) Overview
- Nuclear Revival: A Resurgence for Uranium Miners
- Sprott Uranium Report:
Miners Ignore Softer Uranium Price
Uranium Bull Market Takes a Healthy Pause - Sprott Energy Transition Materials Monthly:
AI's Critical Impact on Electricity and Energy Demand
Global Investment Pours into Renewable Energy
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*The term “pure-play” related directly to the exposure that the Fund has to the total universe of investable, publicly listed securities in the investment strategy.
Important Disclosures
Before investing in the Sprott ETFs, you should consider each Fund’s investment objectives, risks, charges and expenses. Each Fund’s prospectus contains this and other information about the Fund and should be read carefully before investing.
A prospectus can be obtained by calling 888.622.1813 or by visiting these links: Sprott Energy Transition Materials ETF Prospectus, Sprott Uranium Miners ETF Prospectus, Sprott Junior Uranium Miners ETF Prospectus, Sprott Copper Miners ETF Prospectus and Sprott Junior Copper Miners ETF Prospectus.
The Funds are not suitable for all investors. Investors in the Funds should be willing to accept a high degree of volatility in the price of the Funds’ shares and the possibility of significant losses. An investment in the Funds involves a substantial degree of risk. The Funds are non-diversified and can invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
Brokerage commissions will reduce returns. “Authorized participants” may invest directly with the Fund, typically in blocks of 10,000 shares. These costs, which are not reflected in annual fund operating expenses, affect the Fund’s performance.
Sprott Asset Management USA, Inc. is the Investment Adviser to the Sprott ETFs. Sprott Asset Management LP is the Sponsor of the Funds. ALPS Distributors, Inc. is the Distributor for the Sprott ETFs and is a registered broker-dealer and FINRA Member.
ALPS Distributors, Inc. is not affiliated with Sprott Asset Management LP.
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