Geiger Counter benefits from uranium production cuts – Geiger Counter says that, for the year to 30th September 2017 its net asset value fell by 7.3 per cent which was in line with the fall in the spot uranium price. The share price rose by 15.9 per cent over the year with the discount being 3.3 per cent at the end of September.
The manager says that the most significant influence on the sector was the mid-January announcement by the Kazakh state-owned uranium mining company, Kazatomprom, that it would cut production during the calendar year 2017 and that it was willing to make further cuts if necessary to rebalance the market. While the company’s NAV gained a substantial 70% on the year after the Kazakh announcement, outstripping sterling returns from the Solactive Uranium Index and URA uranium ETF of 62% and 52% respectively, sector performance subsequently reversed.
However, the decline drew a further more pronounced response from Kazatomprom and also from Cameco. In November Cameco announced plans to mothball its largest McArthur River mine, removing around 14Mlb of forecast output in 2018 (equivalent to 8% of global production). Cameco also stated that the operations would only be reopened when it was able to sign higher priced contracts, a level we would infer to be around US$40/lb. Kazakhstan then announced, in early December, that it would extend its production cuts to over 11Mlbs pa (approximately 20%) for a sustained three year period commencing January 2018. Following these supply reductions the market is now projected to be in deficit. As a result the spot uranium price at the time of writing has risen 31% to US$26.55/lb, above the previous peak achieved earlier in the year.
GCL : Geiger Counter benefits from uranium production cuts