Could this UK uranium stockpile rise in nuclear power?

Many uranium stocks have delivered good gains recently. This is because the material plays a major role in the nuclear power industry and this is hot. Here, I will highlight UK stocks that offer exposure to uranium. I wonder if it would be a good play on the nuclear energy boom?

The nuclear power revolution

Before I highlight the stock, it’s worth touching on the nuclear power industry and how uranium will play a role in it.

The nuclear power market is booming today because Big Tech companies are looking for new (cleaner) ways to power their data centers.

Microsoftfor example, you just met Constellation Power to help restart the Three Mile Island nuclear reactor in Pennsylvania.

Amazon Currently, we have recently signed three agreements to support the development of small modular reactors (SMRs) – nuclear reactors that are much smaller than conventional nuclear power plants.

Now, the interest in nuclear power has an impact on uranium because it is used to create this type of energy.

In a nuclear reactor, uranium atoms are attacked by small neutron particles and this releases heat energy, which is used to heat water and create steam. This steam then spins a turbine, which generates electricity.

Therefore, uranium could be in high demand in the coming years if the nuclear power market continues to grow.

It is important to note that the supply may be very tight. Recently Russia – a major producer of uranium – threatened to limit exports in retaliation for Western sanctions.

UK uranium stocks

That brings me to the stock I’m focusing on today, ie Yellow Cake (LSE: YCA). It has a market capitalization of £1.1bn CHECK– A listed company that offers investors direct exposure to the uranium market through the physical holding of uranium oxide concentrate (U3O8).

As of 30 June 2024, the company held 21.7m kilograms of uranium oxide concentrate. That is equivalent to about 15% of 2023 global uranium production.

This company has an interesting business model. Unlike uranium producers, it does not face the major risks that come with uranium exploration and building and operating a mine. At the same time, it can benefit from any increase in the price of goods as it has a truck load of goods.

Therefore, it may have to be considered a commodity game. If uranium prices rise in the coming years, this stock could do well.

Of course, the danger here is that uranium prices are falling. This will result in the company being undervalued and the share price falling.

This danger should not be ignored. Uranium is a very volatile commodity and its price can fluctuate wildly at times as the 25 year chart below shows.

Overall though, I think the stock looks interesting. If I wanted exposure to the uranium or nuclear energy markets, I might have a nibble here.