Yellow Cake (LSE:YCA) was up nearly 3% on Wednesday morning after releasing a quarterly operating update indicating its Net Asset Value (NAV) had increased to £2.53 per share. The company purchases physical uranium with a view to holding long-term and today highlighted a steady improvement in market fundamentals. The spot price for uranium has increased by 25% to $28.50 /lb since Yellow Cake listed on the London Stock Exchange in July 2018.
2018 was a very strong year for uranium with its rally from the US$18 / lb lows of 2017 picking up the pace. During the final quarter of 2018, India officially announced plans to expand its nuclear power use which would bring an additional 21 reactors into operation by 2031. The Department of Atomic Energy advised the National Parliament of its plans to implement a Strategic Uranium Reserve of 15,000 tonnes of uranium to underpin the security of the country's commercial nuclear power program. A number of other countries have made recent announcements that are supportive of the spot price including France which has delayed its target to decrease nuclear dependency from 75% to 50% from 2025 to 2035.
Uranium Spot Price
The value of the underlying physical uranium held by Yellow Cake has increased by 35% to $240.6m, and the organisation believes the long-term outlook for uranium remains positive. An option to purchase further uranium became available to Yellow Cake at the beginning of this year under its agreement with Kazatomprom. It’s not yet clear whether the company will take up the option with the board simply stating it will ‘continue to consider all options available to it and act in the best interests of its shareholders, with a view to narrowing the continued discount to Net Asset Value.’
Andre Liebenberg, CEO of Yellow Cake, said:
"It has been encouraging to see the uranium spot price continue to rise since our IPO, with the spot price hitting a three-year high in late November. Yellow Cake's performance has been solid, with NAV up 5.9% over the quarter. We look to the future with optimism as countries around the world implement new uranium programmes and extend the lifecycle of existing projects. Our investment thesis remains sound and we are confident in the long-term outlook for the uranium price."
Author: Stuart Langelaan
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