NEW YORK, June 22, 2021 /PRNewswire/ -- There's plenty of prattle out there about global warming and sustainable energy, most of which is unrealistic and lacking in real-world achievability. As it stands now, the world is aligned to fall demonstrably short of a unitary goal to reach net zero emissions by 2050. Indeed, there are many noble intentions underscoring proposals to curb CO2 emissions, but the economic cost and technological challenges make it more platitude than practical. Last month, the International Energy Agency (IEA) issued a comprehensive and actionable plan to cap the global temperature rise to 1.5°C by mid-century without upending energy stability, accessibility or pricing. IEA covers it all and lays out how renewable energies in combination with nuclear power will become the dominant energy sources across the planet even amid a growing global population. The transition is inevitable for the planet's survival, and there are ways to capitalize on this titanic transformation in the energy sector. In the United States, Uranium Energy Corp. (NYSE American: UEC) (Profile) is a leading player in low-cost and environmentally friendly in-situ recovery (ISR) mining of uranium, the essential element that fuels nuclear energy. There are exchange-traded funds, namely iShares S&P Global Clean Energy Index Fund (NASDAQ: ICLN) and direct plays such as First Solar Inc. (NASDAQ: FSLR) and Tesla Inc. (NASDAQ: TSLA). For those preferring a different approach to the EV space, a close look at top copper producer Freeport-McMoRan Inc. (NYSE: FCX) may be in order.
- Research indicates that more than 20% of all energy worldwide will come from nuclear by 2050.
- Texas-based UEC is a pure-play American uranium company.
- UEC has the largest U.S. resource base of fully permitted and low-cost ISR projects in Texas and Wyoming.
- UEC also owns or has contracted for 2.305 million pounds of U.S. warehoused uranium and also has a large stake in Uranium Royalty Corp.
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IEA: Nuclear, Wind, and Solar Primary Future Energy Sources
IEA sees the pathway to net zero emissions in the next few decades as "narrow" but completely possible with prioritized actions that whittle down usage of fossil fuels. Investment, policy action, and international cooperation are all imperative to support electrification and decarbonization, all while the global population is expected to increase by another two billion people.
Per the IEA road map, almost 70% of electricity will come from renewable sources by 2050, and just over 20% will come from nuclear. It is interesting to consider just how big of a bullish influence the burgeoning EV market ultimately will have as the global fleet rises from 8.5 million in 2020 to 116 million by 2030. The World Nuclear Association sees the need for 25 additional nuclear reactors just to keep up with increased EV charging demand.
Interest and Diversification
Against this backdrop, interest in uranium has been on the climb, and shares of Uranium Energy Corp. (NYSE American: UEC) have gained strong interest. Texas-based UEC is a pure-play American uranium company with a portfolio of ISR projects, including hub-and-spoke operations anchored by its fully-licensed Hobson Processing Facility in Texas; Reno Creek, the largest permitted pre-construction ISR uranium project in America; and a pipeline of resource-stage uranium projects in Arizona, Colorado (uranium/vanadium), New Mexico, and Paraguay.
UEC has also diversified its uranium asset base by adding a large equity stake in Uranium Royalty Corp. and launching a program where it is buying physical uranium stored in the United States. With the projected demand for uranium, this should be like money in the bank for UEC. Elsewhere, in Paraguay, the company controls the Alto Parana project, one of the world's highest-grade and largest ferro-titanium deposits.
Use Money to Make Money
Uranium Energy acquired 15 million shares in Nasdaq- and TSX-listed Uranium Royalty Corp., giving UEC a sizable piece of a company currently valued at C$246 million and representing the only public uranium royalty company. UEC bought its position in Uranium Royalty for a cost basis of C$1.09 per share. Shares are currently at C$3.15.
As of April 30, 2021, its most recent quarter end, UEC owns or has contracts for 2.305 million pounds of U.S. warehoused uranium with delivery dates out to June 2023. During its quarterly report this month, Uranium Energy said its physical uranium inventory was worth $26.2 million. Based upon the total ownership to be delivered over the next couple of years, the uranium would have a market value nearing more than $49.3 million. With about C$48 million in cash on hand, the physical uranium, and the interest in Uranium Royalty, UEC management said total cash, equity, and physical holdings came in at $123.4 million as of April 30, 2021.
UEC: America's Emerging Uranium Producer
Nuclear energy is the second largest source of electricity and the largest source of carbon-free power generation in the United States. It's recognized as a safe and reliable source that will be integral in the energy mix for decades to come. Yet, despite operating the largest fleet of nuclear reactors in the world, the U.S. produces virtually zero uranium. This is going to change, with the new Strategic Uranium Reserve program passed by Congress meant to reduce the country's reliance on uranium imports.
UEC plans to be at the epicenter in the shift to domestic production, with its Palangana, Goliad, Burke Hollow and Reno Creek projects all fully permitted. These are near-term production projects with 32.6 million pounds in Measured & Indicated resources and 11 million pounds of Inferred resources. Cumulatively, the projects represent the largest U.S. resource base of fully permitted and low-cost ISR projects in Texas and Wyoming.
Also, of note is UEC's state-of-the-art Hobson processing plant with a capacity of 2 million pounds per annum. In total UEC's production profile is 4 million pounds of uranium production per year. And, the company specializes in ISR mining, which is far more environmentally friendly and typically lower cost compared to traditional hard rock mining
Stepping Outside Uranium
UEC is in an enviable position when it comes to uranium miners in the U.S. with its production-ready and delivery-ready uranium assets. That said, other companies are finding ways to gain exposure to the worldwide push for fewer carbon emissions.
iShares S&P Global Clean Energy Index Fund (NASDAQ: ICLN) provides exposure to companies around the world that produce energy from solar, wind and other renewable sources. Even in the face of the coronavirus pandemic, the IEA estimates that the world's power production capacity increased 280 gigawatts in 2020. Currently, the ETF is comprised of 114 components, primarily equities with a smaller mix of other cash-related assets, like forex trades.
First Solar Inc. (NASDAQ: FSLR) is a prime example of the mainstream adoption of solar energy systems. During the first quarter, the Tempe, Arizona-based company reported net sales of $803 million, up $194 million from the prior quarter, primarily due to an increase in systems revenue driven by U.S. project sales. This month, First Solar said it is using existing cash resources to expand its photovoltaic solar manufacturing capacity by 3.3 gigawatts with construction of its third U.S. manufacturing facility in Lake Township, Ohio.
Tesla Inc. (NASDAQ: TSLA) is the brand synonymous with electric vehicles. Elon Musk may have been a little optimistic with his initial sales and delivery predictions years ago, but the company is starting to roll now. In the first quarter, Tesla produced just over 180,000 vehicles and delivered nearly 185,000 vehicles as it ramps towards full capacity. China is becoming a big market, with the Tesla trumpeting "strong reception" of the Model Y in the country while the Model S and Model X have also been received "exceptionally well."
Freeport-McMoRan Inc. (NYSE: FCX) isn't a company that jumps immediately to mind when it comes to EVs, but perhaps it should be. The miner is a top copper producer, which is critical for battery-powered cars and trucks because they use two to three times as much copper in their wiring than an internal combustion engine. Freeport already produces more than 1 billion pounds of copper annually in the United States, for which nearly every ounce goes to domestic demand. The Phoenix-based company is expanding production at several of its mines in response to surging demand owed to electrification efforts to combat climate change.
For years, lawmakers, climate advocates, and world leaders have been talking about concerted efforts to lower emissions. There's little doubt that the IEA is right, diverting investment away from fossil fuels now and into cleaner technologies will be the inflection point that the energy sector and electrification markets need to reach a lower carbon future, and the sustainability of the planet may well depend on it.
For more information about Uranium Energy Corp (NYSE American: UEC), please visit Uranium Energy Corp.
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