Taos, New Mexico
Uranium stocks are an interesting play. They are a bet on the future of energy or at least a small to medium portion of the future of energy.
Yet, as with any market out there in the world today, uranium stocks and the industry in general face a great deal of risks.
Investors have to be aware of the risks before they invest in something. After all, the idea of investing is to perpetuate and grow capital, not to lose it. Investing correctly and accounting for risks in the industry is beneficial for all involved. It can help to steer the right companies, affect consumers and create a thriving and better environment overall.
To help you know about those factors, we’ll cover some of the risks that investors can face in the uranium production industry in this brief guide.
Security Concerns in the Uranium Production Industry
A big headline that may have pumped the brakes in the uranium production industry would be the incident in Japan. The incident in Japan was that of the Fukushima Daiichi plant. The event took place in 2011 but it did cause waves throughout the world.
The Fukushima Daiichi plant was affected due to a series of unfortunate incidents. First, an earthquake hit the region where the plant was located. This earthquake led to the lack of power for several reactors which affected the temperature of the plant, which led to the accident. Significant releases of radiation were experienced in the incident and several reactors had to be disabled afterwards.
The costs of disablement and relocation were significant. There were no casualties from the radiation, but many had their lives disrupted in more ways than one. They had to move from their homes and have yet to return due to the site being unsafe.
While most of the security concerns have been addressed or are in the process of being addressed, full containment procedures will be required to raise the confidence of the uranium production industry overall. With that being said, the uranium mining and production industry is slowly back on the rise, so one can be sure that demand is on the horizon.
Demand is always a significant problem in the uranium mining industry across different sectors, the price of the asset has to be viable for mining to take place and be effective for the investors and stakeholders involved.
Confidence of countries to switch to more nuclear energy production and spur the need for uranium production is very important in the uranium sector. The lack of confidence can lead to a lack of demand, a lack of demand can lead to a lack of necessary pricing needed to mine, and that can have a significant effect on the viability of the uranium production company.
Uranium Stock Risks Come with Deep Value As Well
Yet, know that there is potential deep value in the uranium sector. Companies in the US such as Energy Fuels Inc are leading the way on producing for the demand in the US. They are striving to make it to where a percentage of demand will be supplied by US producers only. This potential legislation (section 232 of Trade Expansion Act of 1962) would mandate utilities to buy a certain percentage of their inputs for the energy production process from US based uranium production companies.
Nuclear energy and renewable forms of energy is just getting started. One has to pay attention the needs and wants of the developing nations and figure out who is committed to what and why.