North Shore Launches New Uranium ETF, Offers Kazakhstan Exposure
Exchange Trades Concepts LLC and North Shore Indices Inc have announced the launch of a new exchange traded fund (ETF), the North Shore Global Uranium Mining ETF (ticker: URNM), on the New York Stock Exchange.
The ETF will track the performance of its benchmark index, the North Shore Global Uranium Mining Index (the “Index”), and will offer exposure to companies that are “involved in the mining, exploration, development and production of uranium, as well as companies that hold physical uranium or other non-mining assets.” It is currently tilted towards junior miners and has a nearly pure play focus.
The largest constituents in the ETF are Cameco Corp (14.34%), KazAtomProm (13.67%) and Uranium Participation Corp (11.87%). These three make up an aggregate weight of just under 40% in the ETF.
One notable feature is the ETF’s 13.67% exposure to Kazakhstan via KazAtomProm, the world’s largest producer and miner of natural uranium. This is a contrast to another established ETF, the Global X Uranium ETF (URA), which does not have any exposure to Kazakhstan. KazAtomProm is one of many state-owned companies (including KazMunayGas, Air Astana and Kazakhtelecom) that have had their shares floated on the market in a bid to open up the market to investors. The company also posted a 48% increase in third-quarter profits to $98.4 million.
Kazakhstan is also strengthening trade relationships in the resource with multiple countries. India sources also 80% of its uranium requirement from Kazakhstan and has recently renewed a uranium supply contract for 2020-2024. There are also talks and proposals in motion to increase uranium supply to China in order to help meet Chinese nuclear energy demands.
According to the prospectus, the universe of eligible index components includes exchange-listed equity securities of companies that have or are expected to have a sizable portion of the business operations related to uranium. Companies in this eligible universe are included in the Index subject to the following restrictions:
- A company level minimum market cap of $25 million.
- An aggregate weight of 82.% of the Index is assigned to companies that are involved in mining, exploration, development and production of uranium. An Aggregate weight of 17.5% of the Index is assigned to companies that hold physical uranium, uranium royalties of other non-mining assets.
- An aggregate weight og at least 90% is allocated to companies with a company level market cap greater than or equal to $100 million.
- An aggregate weight of at least 70% is allocated to companies with a minimum trading volume of 250,000 shares.
- A single security weight cap of 15% and a single security floor of 0.5%.
- A single security weight cap of 3.3% is applied to non-pure play uranium miners, explorers, developers and producers.
There has been a growing demand for uranium recently, with 54 additional reactors currently under construction around the globe, as well as another 111 planned reactors and 349 proposed reactors. Uranium prices have declined over 80% ($140/lb to $26/lb) since the highs seen in 2007, mainly due to oversupply.
Tim Rotolo, CEO & Founder of North Shore Indices, spoke to ETF Trends about the launch of the ETF. “The end goal of URMNX’s construction was maximizing participation in the ultimate recovery of uranium prices as the supply deficit causes physical uranium prices to revert back towards the marginal cost of production,” he said. “The end goal of URMNX’s construction was maximizing participation in the ultimate recovery of uranium prices as the supply deficit causes physical uranium prices to revert back towards the marginal cost of production, After a multi-year bear market, we believe that the uranium sector is at an inflection point. The fundamentals of the industry have improved on the back of strong nuclear power demand growth and global supply cuts which have pushed the market into a deficit. Given the current state of uranium mining economics, a considerable price rise will be required if new mines are to be brought on line to meet the future supply needs continued.”
The ETF and Index will be rebalanced on a quarterly basis in March, June, September and December. The ETF’s expense ratio is 0.85%.
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