In June 2007, the price of uranium shot up to $136 per pound, up more than 1000% since 2000, when it was the most hated investment on the planet.  Unfortunately for uranium investors, this price spike was short-lived and the price crashed to the $30 level a year later.  Recently, however, uranium has gained momentum and is currently selling for $52 pound, up more than 20% since this summer.

The price rise is due to a change in the structure of the market.  On the supply side, the "Megatons for Megawatts" program, which dismantles Russian nuclear warheads and then sells the uranium to US nuclear power plants, is coming to an end in 2013.  This program has supplied approximately 15% of the global demand for uranium since the mid-1990s.  On the other side of the equation, demand for uranium will be increasing rapidly over the next decade.  China alone is expected to increase it's nuclear generating capacity from 9 gigawatts to over 100 gigawatts by 2020.  This would mean China alone would demand nearly 50% of the 130 million pounds of uranium produced this year.    Moreover, this doesn't include the other 40 countries that are either constructing or have plans to construct new nuclear reactors.  From Armenia to Vietnam, countries across the world are making nuclear energy a bigger part of their electrical production.

So, are uranium mining companies a good investment?  All I can say for certain is that they were a better investment a few weeks ago.  The combination of China announcing increased future demand for uranium and Cameco's strong earnings report have pushed many uranium mining companies to multi-year highs in the past week.  As you can see in the charts below, the stock prices of Uranium Energy Corp. (UEC) and Uranium Resources (URRE) have had major moves to the upside.  This is representative of the industry. 





A less volatile investment may be buying the uranium metal itself, which can be accomplished by purchasing the stock Uranium Participation (U.TO or URPTF).  URPTF is an investment holding company that invests strictly in uranium oxide with the objective of gaining appreciation in the value of its uranium holdings.  If you're impressed with the future supply/demand dynamics of the uranium market, uranium might be a good long-term investment for a small portion of your portfolio. 

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Full disclosure: I own shares of Uranium Participation in my personal portfolio.