Small-cap mining companies have the potential to make pronounced moves to the upside when the associated commodity is pushing higher. That’s exactly what the Sprott Junior Uranium Miners ETF (URNJ) is doing after the United States banned Russian uranium.
The ETF is up 20% after President Biden officially banned imported uranium from Russia. It’s a move that’s been two years in the making. But it may not have established high-enough priority at the time of Russia’s invasion of Ukraine over two years ago.
The U.S. government was swift to act on banning oil and gas from Russia. But the uranium ban took much longer. As reported by the Washington Post, the U.S. is reliant on about 20% of nuclear fuel from Russia. That could potentially lead to a disruption of 93 nuclear reactors in the U.S. if an all-out ban were to take place. Nonetheless, the ban is now official. The U.S. will have to rely on other sources to fill the void in the uranium supply.
“It’s kind of ridiculous that it took as long as it did to get to this stage,” said Scott Melbye, executive vice president of mining company Uranium Energy and president of the Uranium Producers of America, a trade group. “But we’re just glad that we got here.”
Domestic Mining to Increase
Of course, one of the ways to bolster uranium supply in the U.S. is to increase its own mining activities. An Environmental Health Sciences report noted that in addition to the ban, President Biden also allowed for $2.7 billion to support domestic uranium mining.
“Our nation’s clean energy future will not rely on Russian imports. We are making investments to build out a secure nuclear fuel supply chain here in the United States,” said Jennifer Granholm, Secretary of Energy.
In turn, the added funding could potentially boost URNJ, which adds country exposure to U.S. uranium mining companies. It also offers added diversification by investing in mining companies outside U.S. borders.
As mentioned, the small-cap growth focus of URNJ means the fund can provide amplified moves that complement the bullishness in uranium prices. So rather than create a small uranium mining portfolio of individual stocks, an easier way is to get broad exposure is via URNJ. The ETF tracks the total return performance of the Nasdaq Sprott Junior Uranium Miners Index, which tracks mid-, small-, and micro-cap companies in the metal’s mining business.
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