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Yellow Cake reports NAV uplift on Uranium price rise

Yellow Cake reports NAV uplift on Uranium price rise

Yellow Cake reports NAV uplift on Uranium price rise – Yellow Cake plc (YCA), a specialist company operating in the uranium sector with a view to holding physical uranium for the long term, has released an operating update for the quarter ending third calendar quarter of 2018.

The company’s NAV has increased by 21% to £2.42 /share relative to IPO price of £2.00 per share.

This is the company’s first quarterly operating update since it came to market in July 2018.  At IPO, which was over subscribed, the company raised £151 million (US$200 million).  The update reports on progress of the company to use the capital to acquire underlying physical uranium reserves.  Yellow Cake invests in Triuranium octoxide (chemical symbol U3O).  U3O is  is a compound of uranium, makes up about 70% of what is referred to as ‘yellow cake’ and is the form in which uranium is commonly stored, transported and processed, as it is relatively stable and straightforward to handle. It is converted into Uranium hexaflouride before it is enriched and used in the nuclear power industry (or for military purposes).

Purchases by Yellow Cake include, to date:

  • Purchase of 8.1 million lb U3O8 from NAC Kazatomprom JSC at IPO, at a price of US$21.01 /lb under a ten-year framework agreement. 
  • Purchase of an additional 350,000 lb by Yellow Cake from Kazatomprom on 23rd August 2018 at a price of US$23.30 /lb.

The total holding of uranium by Yellow Cake are 8.44 million lb, which have been acquired at an average cost of US$21.10 /lb against a current spot price of $27.35 /lb.

  • The value of underlying U3Oheld by Yellow Cake has increased by 29.6% to US$230.9 mm relative to acquisition cost of US$178.2 mm.

Recent changes in the uranium market

There has been a steady improvement in the market fundamentals for U3O8.   The spot market price increasing from US$22.85 /lb to US$27.35 /lb since IPO. 

The company reports that there has been strong trading in the commodity in the quarter which has been an equivalent average per month of approximately 12.0 million lb U3O8.

Supply-side slowing

In the update, the company reports that a number of operators have slowed down their output.  They refer to Kazatomprom and Cameco as having reduced supply. In the report, Yellow Cake writes that it estimates that the supply reductions from the largest producers of uranium alone will take c. 30 million lb out of the market, resulting in a shortfall in 2019 of c. 40 million lb U3O8 based on expected global demand of 174 million lb.”

Strong and supportive demand-side

The company notes that the demand for the commodity remains strong, which supports the price.  Japan has a major nuclear power development plan and China has “a total of 43 operating reactors (40.7 GWe) and an additional 15 units (15.2 GWe) under active construction.”

Outlook

The combination of reducing supply and supportive demand, leads the company to expect the buying of uranium in the spot market to continue. The company writes; “Looking forward, during the fourth quarter, current market trends are anticipated to continue as investments in physical uranium, trader purchasing and producer buying dominate the near-term market”.

To find out more by visiting Yellow Cake’s website – click here

YCA : Yellow Cake reports NAV uplift on Uranium price rise

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