Yellow Cake reports solid September quarter performance

Specialist uranium investor Yellow Cake described a solid performance for the September quarter on Tuesday, reporting that the uranium spot price experienced a notable increase of 31.3% from $56 per pound on 30 June to $73.50 on 30 September.

The AIM-traded firm said, according to the most recent data, the spot price stood at $74 per pound.

It attributed the upward trajectory to several factors, including the limited availability of near-term uranium inventory for sale, growing concerns within the nuclear utility sector regarding future uranium production, and geopolitical risks associated with uranium-producing nations such as Russia and Niger.

The prevailing market conditions suggested the potential for continued upward pressure on uranium prices, both in the spot and long-term markets.

As annual volumes under newly negotiated term uranium contracts increased, associated prices could need to rise to incentivise the necessary uranium development, adding further pressure on near-term uranium prices, Yellow Cake explained.

Regarding its own performance, the firm said it took delivery of 1,350,000 pounds of triuranium octoxide on 30 September, with the acquisition part of the 2022 uranium purchase option agreed under the framework agreement with Kazatomprom.

The purchase was executed for $48.90 per pound, totalling $66m.

Yellow Cake said the funding for the acquisition was generated through an oversubscribed share placing in February, which raised £61.8m ($74.3m).

The delivery occurred at the Cameco storage facility in Ontario, Canada, bringing Yellow Cake’s total triuranium octoxide holdings to 20.16 million pounds at the end of the quarter.

Furthermore, the significant 31.3% increase in the spot price of uranium during the quarter, combined with a 7.2% increase in the volume of triuranium octoxide held by Yellow Cake, resulted in a substantial 40.7% increase in the value of triuranium octoxide held during the same period.

The value rose from $1.05bn on 30 June to $1.48bn as of 30 September.

Yellow Cake also noted a 37.2% increase in its estimated net asset value per share during the quarter, climbing from £4.50 per share on 30 June to £6.18 per share as of the end of September.

After the end of the quarter, Yellow Cake conducted another successful, oversubscribed share placing on 2 October, raising gross proceeds of £103m.

Following that, the company exercised its 2023 uranium purchase option under the framework agreement with Kazatomprom, purchasing 1,526,717 pounds of triuranium octoxide for $65.50 per pound, totalling $100m.

Delivery for the purchase was expected in the first half of 2024, which would increase Yellow Cake’s total triuranium octoxide holdings to 21.68 million pounds.

As of 30 October, Yellow Cake said its estimated pro forma net asset value stood at £6.21 per share, or $1.64bn, based on the assumption of holding 21.68 million pounds of triuranium octoxide valued at a spot price of $74 per pound, along with cash and other current assets and liabilities.

“We continue to deliver against our strategy to buy and hold physical uranium giving our shareholders direct exposure to the commodity,” said chief executive officer Andre Liebenberg.

“During the quarter, the price of uranium rose by a third and has risen ever since.

“This higher price, combined with our recent uranium purchases, has taken the value of our holdings to over $1.5bm - another significant milestone for our company.”

Liebenberg said the supply-demand fundamentals the company previously set out remained as relevant today as ever.

“Supply remains constrained, while demand is growing worldwide, driven by both what is now a general acceptance of nuclear as key to achieving our global net zero ambitions, but also more recently concerns about the short-term viability of renewables.

“We continue to be confident in the long-term outlook for uranium.”

At 1020 BST, shares in Yellow Cake were up 0.73% at 551.5p.

Reporting by Josh White for Sharecast.com.