Why did the Peninsula (ASX:PEN) share price leap 5% on Tuesday?

The company’s shares have been on fire lately…

| More on:
Graphic showing yellow arrow above vertical columns indicating a rising share price

Image source: Getty Images

The Peninsula Energy Ltd (ASX: PEN) share price had a strong Tuesday, further adding to its weekly gain.

At market close, the energy producer’s shares are up 5.46% to 29 cents apiece. This means that over the past week, its shares have now zipped more than 25% higher.

What’s driving Peninsula shares higher?

Investors have been buying up Peninsula shares along with its peers, as the uranium sector is up. A strong uptick in oil and gas prices has led nuclear energy to be a possible solution as a secure, emission-free power source.

France, which uses 70% of its electricity from nuclear energy, recently announced plans to build small nuclear reactors by 2030. The government sees nuclear power as a key to reducing global carbon emissions and be used for export to neighbours.

In addition, Japan is seeking to restart its nuclear power plants to achieve its net-zero goal of eliminating greenhouse gases. During this year, the country rebooted the first nuclear reactor since the Fukushima disaster.

In September, the International Atomic Energy Agency upgraded its projection for nuclear energy. The organisation now expects global nuclear-generating capacity to double by 2050.

As a result, the spot price for uranium has soared through the roof to reach US$48.10 a pound this month. This brings it in striking distance to break its 9-year high of US$50.80 achieved last month.

Peninsula owns the Lance Uranium Projects in Wyoming, in the United States. The company is currently transitioning its production method from alkaline to an industry-leading low pH in-situ recovery process.

This comes as the United States Government has ramped up efforts in restoring its competitive advantage in nuclear energy.

Under the American Nuclear Infrastructure Act (ANIA), the US Department of Energy will be restricted to only buy uranium recovered from facilities licensed by the Nuclear Regulatory Commission. This in turn not only strengthens the domestic uranium market but also preserves the US’ nuclear fuel supply chain.

While only a handful of companies will be able to supply material into the uranium reserve, Peninsula’s wholly-owned US subsidiary, Strata Energy is one of them.

Peninsula share price snapshot

It’s been an outstanding 12 months for Peninsula investors, with its shares accelerating over 350%. In 2021, the company’s share price has been just as impressive, jumping 160% across the period.

On valuation grounds, Peninsula commands a market capitalisation of roughly $296.3 million, with approximately 996 million shares on its books.

Should you invest $1,000 in Peninsula right now?

Before you consider Peninsula, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Peninsula wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Aaron Teboneras 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.

More on Energy Shares