Yellow Cake swings to profit as uranium holdings grow

Uranium investor Yellow Cake reported physical uranium holdings of 20.16 million pounds in its interim report on Wednesday, up from 18.81 million pounds.

The AIM-traded firm also noted a 45.1% increase in the spot price of triuranium octoxide, rising from $50.65 per pound to $73.50.

As a result, the value of its holdings surged from $952.5m on 31 March to $1.48bn by 30 September.

Yellow Cake’s net asset value also grew substantially, rising from $1.04bn to $1.49bn over the same period.

The net asset value per share increased from 423p to 618p.

Regarding profitability, Yellow Cake reported a profit after tax for the half-year of $458.8m, swinging from a loss of $145.5m in the same period in 2022.

The company said it executed its 2022 uranium purchase option during the period, taking delivery of 1,350,000 pounds of triuranium octoxide on 30 September at $48.90 per pound, totalling $66m.

It said the purchase was financed through an oversubscribed share placing in February, which raised gross proceeds of £61.8m.

Subsequently, Yellow Cake conducted another oversubscribed share placement on 2 October, raising gross proceeds of £103m at 550p per share.

Yellow Cake exercised its 2023 uranium purchase option under the framework agreement with Kazatomprom, committing to purchase 1,526,717 pounds of triuranium octoxide at $65.50 per pound, totalling $100m.

The company expected to take delivery in the first half of 2024, increasing its holdings to 21.68 million pounds.

All triuranium octoxide owned by Yellow Cake was stored at the Cameco storage facility in Canada and the Orano facility in France.

The firm said it remained unaffected by geopolitical events in Ukraine, maintaining its operations, financial condition, and ability to purchase and take delivery of triuranium octoxide.

As of 4 December, Yellow Cake’s estimated pro forma net asset value stood at 658p per share, based on 21.68 million pounds of triuranium octoxide valued at a spot price of $81.45 per pound.

That included cash and other current assets and liabilities of $12.7m as of 30 September and net placing proceeds of $120.6m received on 2 October, offset by a cash consideration of $100m to be paid to Kazatomprom following the expected delivery of 1.53 million pounds of uranium in the first half of next year.

“The uranium price has recently hit a 15-year high, driven by the same supply-demand characteristics that we have consistently highlighted since our listing,” said chief executive officer Andre Liebenberg.

“Specifically, we are seeing higher demand as nuclear energy is increasingly accepted as the critical choice to meet our future net zero ambitions.

“Notably in France, we have seen plans to reduce nuclear’s share of electricity generation to 50% jettisoned, while China’s nuclear capacity target is expected to increase significantly from previous targets.”

Liebenberg said that at the same time, supply was still constrained despite steadily rising prices, partly due to mining challenges and geopolitical factors - risks that did not impact Yellow Cake.

“We have continued to deliver against our stated strategy to buy and hold physical uranium, giving our shareholders the opportunity for direct exposure to the commodity.

“Our ten-year framework agreement with Kazatomprom, which allows us to acquire $100m of uranium every year until 2027, is key to our investment case.”

Yellow Cake recently raised funds through an oversubscribed share placing and purchased a further $100m of triuranium octoxide at $65.50 per pound, which Andre Liebenberg said boosted the company’s holding to almost 22 million pounds of uranium.

“We remain very confident in our strategy and the long-term outlook for uranium.”

At 0929 GMT, shares in Yellow Cake were down 0.35% at 584.93p.

Reporting by Josh White for Sharecast.com.