Yellow Cake NAV per share narrows as uranium prices slip

30th Jul 2024 13:30

(Sharecast News) - Uranium investor Yellow Cake said in an update on Tuesday that during the June quarter, the spot price of uranium saw a slight decline of 1.8%, from $87.00 per pound on 31 March to $85.50 on 28 June.

The AIM-traded firm said the spot price had fluctuated between $82.00 and $86.00 per pound since the quarter ended, and was currently trading at $82.00.

Spot market volumes for the quarter were 12.5 million pounds of triuranium octoxide equivalent, an increase from 9.6 million pounds in the first quarter, driven by increased activity from a junior producer in May.

However, year-to-date monthly average spot volumes remained significantly below historical averages from late 2019 to early 2022.

A key legislative development during the quarter was the signing of the 'Prohibiting Russian Uranium Imports Act' by US president Joe Biden on 13 May.

The board said the law, effective from 11 August, would ban the importation of Russian-sourced uranium, potentially increasing demand for non-Russian nuclear fuel and raising the risk of pre-emptive supply terminations by Russia.

Yellow Cake's uranium holdings increased from 20.16 million pounds of triuranium octoxide to 21.68 million pounds during the quarter.

That growth was partly due to the delivery of 1.53 million pounds of triuranium octoxide from Kazatomprom at Orano's storage facility in France on 3 June.

The purchase was part of the company's exercise of its 2023 uranium purchase option under its framework agreement, at a price of $65.50 per pound, totaling $100m.

Yellow Cake funded the acquisition through an oversubscribed share placing in October last year, which raised around £103m ($125m).

As of 30 June, the value of Yellow Cake's uranium holdings increased by 5.7% to $1.85bn million from $1.75bn at the end of March.

The increase was due to the additional 1.53 million pounds of triuranium octoxide acquired, partially offset by the decline in the uranium spot price.

It said its estimated net asset value per share decreased slightly, by 0.3%, from 688p per share at the end of March to 686p per share at the end of June.

The board said the decrease reflected the impact of the 1.8% drop in uranium prices, countered by the value gain of the uranium purchased from Kazatomprom.

As of 29 July, Yellow Cake's estimated net asset value was 647p per share, or $1.81bn, based on a current spot price of $82.00 per pound and taking into account cash and other current assets and liabilities.

All triuranium octoxide owned by Yellow Cake is held at Cameco's storage facility in Canada and Orano's facility in France.

"We continue to believe the same supply demand fundamentals that have driven the rise in the price of uranium remain as valid today as they have been for five years and this period of consolidation presents a new opportunity for investors to gain exposure to the commodity," said chief executive officer Andre Liebenberg.

"The uranium price remains significantly below historical highs, despite the overwhelming case for the commodity, driven by a marked acceleration in global demand for nuclear energy as a proven, reliable source of clean baseload power and continued constrained supply.

"In particular, we note the COP28 commitment to triple nuclear capacity by 2050 and highlight that globally, 152 nuclear reactors are currently either under construction or planned."

Liebenberg said another key development in the period was the decision in May by the US government to ban Russian uranium imports, alongside a new commitment to building US enrichment capacity and investing in nuclear energy.

"Combined with continued challenges faced by the big producers in increasing output to meet demand, we therefore see further upwards pricing pressure on the uranium price.

"We remain confident in our strategy and ability to deliver value for our shareholders."

At 1309 BST, shares in Yellow Cake were down 0.38% at 527p.

Reporting by Josh White for Sharecast.com.