Here’s why the Deep Yellow (ASX:DYL) share price has surged 45% in a month

Deep Yellow shares are in the hot seat as uranium prices surge to multi-year highs.

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The uranium sector is heating up and the Deep Yellow Limited (ASX: DYL) share price is no exception.

Shares in the uranium explorer have added another 6.38% to $1 on Wednesday, lifting its performance for the past month to an impressive 47%.

Why the Deep Yellow share price is almost vertical

Uranium spot prices have managed to climb to six year highs of US$35/lb.

This has sparked broad-based buying across the uranium sector, from large cap players like Paladin Energy Ltd (ASX: PDN) to newly listed explorers such as 92 Energy Ltd (ASX: 92E).

Uranium prices have been supported by the Sprott Physical Uranium Trust, the world’s largest actively managed uranium fund that invests in physical uranium.

The fund began trading on Canada’s Toronto Stock Exchange in July this year, but only recently began to aggressively buy uranium off the spot market.

The Motley Fool US reported that the fund purchased 900,000 lb of uranium on August 21, and then added another 1.1 million pounds by the end of August.

The aggressive buying continued, with the ETF adding 400,000 on 2 September.

The momentum is likely to continue with the Fool US saying that ” there’s been massive investor buying in the fund on big volumes this week. The higher the investor interest in the ETF, the larger the quantity of uranium it’ll buy.”

The sudden buying activity in the spot market has driven prices to multi-year highs, which in turn, is propping up the Deep Yellow share price.

What’s next for Deep Yellow?

Deep Yellow has been undergoing exploration activities at its Tumas Project in Namibia since 2017.

Back then, the Deep Yellow share price was fetching around 40 cents.

More recently, the company completed drilling at the Tumas 1 East site, delivering an impressive 102% direct conversion of existing inferred mineral resources to indicated mineral resources category.

The company believes its robust resource base will support and optimise its upcoming definitive feasibility study, which is expected to be completed by the end of calendar year 2022.

Should you invest $1,000 in Deep Yellow right now?

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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