There's an entire nuclear fuel chain with dozens of companies across the world taking part at various stages. Importantly, these companies are poised for potential private and public capital infusions to expand their production capacity in an effort to keep up with the nuclear renaissance.

Initial Uranium Processing

The uranium pulled from the ground in places like Canada and Kazakhstan [1] is nearly useless in its mined form. The ore pulled from the ground is sent to a mill and processed into “yellowcake”, a solid material yellow in color and mostly made of triuranium octoxide (U3O8). At this stage, the uranium is roughly 0.7% U-235, while the other 99.3% is a mix of U-238 and some other uranium isotopes.

The specific distinction of how much of the isotope population is U-235 is important, as the majority of reactors utilized in the world today were designed around the fission of U-235. Without getting too technical, note that other isotopes of uranium are comparatively useless to a traditional reactor. 

At 0.7% U-235, yellowcake can actually be fabricated into reactor fuel and used in heavy-water reactors like Canada’s CANDU. But, for the rest of the world’s reactors, the uranium needs to be enriched until the U-235 content is 3-5% of the mixture. This level is called low-enriched uranium (LEU). To prepare the yellowcake for enrichment to this higher percentage, the material must first be converted from a solid to a gas. 

Conversion

Outside of Russia and China, there are only three conversion facilities in the entire Western world. Cameco (CCJ) operates the Port Hope facility in Canada, Solstice Materials (SOLS) operates the Converdyn facility in Illinois, and Orano operates a facility in France. Conversion capacity is a noted bottleneck in the fuel chain as SOLS has recently announced an expansion of over 20% of current capacity at their facility in Illinois [2]. 

In short, the changing of uranium from yellowcake to its next form is a bit of a chemical odyssey. Multiple complex chemical methods are used at different sites for turning the solid uranium yellowcake into the enrichable uranium hexafluoride (UF6) gas. From here, the UF6 gas is cooled into a liquid, and then a crystalline solid, and shipped to an enrichment facility to raise the level from 0.7% to the desired final value. 

Enrichment
Uranium enrichment today relies on the energy-efficient gas centrifuge technology in use across the world. Uranium gas is fed into a series of centrifuges that spin to separate and collect U-235 isotopes, increasing their percentages in a given quantity. The process is run for as long as necessary to achieve the desired output [3]:

~0.7% → Natural Uranium
3-5% → LEU
5-8% → LEU+
8-20% → High-assay LEU (HALEU)
20%+ → Highly Enriched Uranium (HEU)

As mentioned earlier, the majority of reactors in the world operate on LEU fuel. LEU+ offers potentially longer operating cycles for the existing commercial fleet. As a result, some enrichment companies, like Urenco, owned by a consortium of European nations, have started producing LEU+ for testing in commercial reactors. On the other end of the spectrum, HEU is only utilized in special research reactors and defense applications.  

HALEU tends to be the hottest topic in the nuclear fuel chain today. Similar to the benefits of LEU+, HALEU offers longer operation periods and potentially smaller core sizes. This is the reason why many of the smaller core reactor developers intend to use the fuel for their advanced designs. The only problem is there is no commercial HALEU production capacity outside of Russia, so Western producers are scrambling to finance and expand their facilities.

The US government is wasting no time on addressing this issue. The Department of Energy recently issued almost $3 billion worth of funding to four companies working towards expanding production capacity in the US [4]. Centrus Energy (LEU) and General Matter were awarded money for HALEU production, while French government-backed Orano was awarded funding for LEU production. Silex Systems (SLX AU), through their subsidiary Global Laser Enrichment, was also awarded funding to continue the development of their next-generation uranium enrichment technology, which utilizes lasers instead of gas centrifuges. Additional companies, such as ASP Isotopes (ASPI), are also developing laser enrichment technology. 

Even after reaching this stage of the fuel chain, there are still two important steps to go prior to fueling a reactor.

Deconversion and Fabrication

After reaching the desired enrichment level, the UF6 gas is returned back to its solid state as uranium dioxide, UO2. From here, a fuel fabrication company such as Westinghouse, GE Vernova (GEV), or Framatome will form the UO2 into small cylindrical pellets, which are eventually stacked into rods and inserted into a reactor core. Companies like BWX Technologies (BWXT) are also researching and developing more advanced fuel forms. 

How to capture the nuclear fuel chain?

The Range Nuclear Renaissance Index ETF (NUKZ) was designed to be a completely nuclear-focused ETF. The ETF intends to own companies that represent the entire nuclear fuel chain within an easy-to-trade, single-ticker solution. Some examples of companies across the nuclear supply chain include:

• Solstice Advanced Materials (SOLS) and Cameco Corp (CCJ) for uranium conversion exposure
• Centrus Energy (LEU) and ASP Isotoles (ASPI) for enrichment exposure
• BWX Technologies (BWXT) and GE Verona (GEV) for fabrication exposure

Companies involved in the construction of new nuclear facilities are also represented in the fund, including Fluor (FLR), Jacobs Solutions (J), and Amentum (AMTM). We believe that an allocation to NUKZ can provide investors access to this important part of the nuclear supply chain sometimes overlooked by strategies more focused on more commodities- or energy- adjacent components of this important clean energy story.

See rangeetfs.com/nukz for a full list of current holdings. Holdings subject to change.

Sources: 
[1] US Energy Information Administration
[2] Solstice Advanced Materials Announces Expansion of Uranium Conversion Production
[3] Uranium Enrichment, Explained
[4] U.S. Department of Energy Awards $2.7 Billion to Restore American Uranium Enrichment

Disclosures:
Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated investment objectives. Carefully consider the investment objectives, risks, charges, and expenses. This and other important information can be found in the Funds' prospectuses, which should be read carefully before investing and can be obtained by visiting www.rangeetfs.com/investor-materials, or by calling 1-800-617-0004.

Investments in the energy industry are subject to significant volatility due to changes in commodity prices. Additional risks include changes in exchange rates, government regulation, world events, economic and political conditions in the countries where energy companies are located or do business, and risks for environmental damage claims.

The Fund is non-diversified. Its concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors.

Nuclear companies may be subject to substantial government regulation and contractual fixed pricing, which may increase the cost of doing business and limit the earnings of these companies. A significant portion of revenues of nuclear companies depends on a relatively small number of customers, including governmental entities and utilities. As a result, governmental budget constraints may have a material adverse effect on the stock prices of companies in this sub-industry.

International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Investments in smaller companies typically exhibit higher volatility.

The Fund may invest in securities denominated in foreign currencies. Because the Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if currencies of the underlying securities depreciate against the U.S. dollar or if there are delays or limits on repatriation of such currencies. Currency exchange rates can be very volatile and can change quickly and unpredictably.
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