Canaccord Genuity raises target price on Yellow Cake

Analysts at Canaccord Genuity nudged up their target price on Jersey-based uranium-focused company Yellow Cake from 635.0p to 645.0p on Tuesday following the exercise of the group's 2023 uranium purchase option with Kazatomprom.

Canaccord pointed out that Yellow Cake raised $125.0m, with $100.0m allocated to the KAP option and the remainder to be used for various purposes, including "opportunistic" spot market purchases. The analysts now estimate that Yellow Cake will have a total of roughly $40.0m in cash available.

In its most recent market update, Canaccord noted that additional buying by physical funds could also push spot prices rapidly higher, evidenced by price movements in the last month with a jump from roughly $61 a pound to approximately $74 per pound.

Recent market participant commentary from Canaccord's LatAm Resources Conference indicated that buying roughly 1.0m pounds in the current market "would take months" and require prices north of $70 a pound.

"With this in mind, the estimated ~$40m in cash available to YCA and a further ~$250m authorised for deployment by SPUT, we see market conditions resembling a 'tinderbox' with a price move to $80/lb (or beyond) likely in the short term," said Canaccord.

"We have revised our estimates to incorporate the most recent raise and financial reporting. We previously set our target price using our long-term price assumption of $75/lb; however, given the lack of spot material and the capital available from physical funds, in our view, short-term pricing could easily shoot past this level."

Reporting by Iain Gilbert at Sharecast.com