REG - Yellow Cake PLC - QUARTERLY OPERATING UPDATE

Yellow CakeAnnouncement

02/02/2023 16:45

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RNS Number : 7897O  Yellow Cake PLC  02 February 2023

2 February 2023

Yellow Cake plc ("Yellow Cake" or the "Company")

QUARTERLY OPERATING UPDATE

Yellow Cake, a specialist company operating in the uranium sector holding
physical uranium for the long term, is pleased to report its performance for
the quarter ended 31 December 2022 (the "Quarter").

Highlights

Market Highlights

·    The uranium spot price decreased from US$48.25/lb (#_ftn1) 1 on 30
September 2022 to US$48.00/lb (#_ftn2) 2 on 31 December 2022. Total spot
market volume during the Quarter represented about 50% of the level during the
comparable period in 2021.

·      The uranium spot price has begun to show strengthening in January
breaking through US$50.00/lb. The spot price trend through the next quarter is
expected to continue to be dictated by global economic conditions as well as
investor confidence in the emerging role of nuclear power as a clean energy
source.

·     Term contracting is expected to continue at levels above those
experienced in the post-Fukushima era as nuclear utilities strive to diversify
sources in order to reduce future dependence on nuclear fuel supplies from
Russia and support Western fuel supply sources.  Increased uranium term
prices can be anticipated as term contract demand rises.

Company Highlights

·      Estimated net asset value as at 31 December 2022 of £4.15 per
share (#_ftn3) 3 or US$914.8 million, comprising 18.81 million lb of
U(3)O(8) valued at a spot price of US$48.00/lb(2) and cash and other current
assets and liabilities of US$12.2 million.

·     Decrease in the spot price over the Quarter of 0.5% from
US$48.25/lb (#_ftn4) 4 to US$48.00/lb(2), resulting in a corresponding
decrease in the value of U(3)O(8) held by Yellow Cake over the Quarter from
US$907.4 million (#_ftn5) 5 as at 30 September 2022 to US$902.7 million as
at 31 December 2022 (#_ftn6) 6.

·     Decrease in estimated net asset value per share over the Quarter
of 8% from £4.50 per share (#_ftn7) 7 as at 30 September 2022 to £4.15 per
share(3) as at 31 December 2022, as a result of the decrease in the uranium
price and appreciation of Sterling over the Quarter.

·    Yellow Cake's estimated net asset value on 1 February 2023 was
£4.27 per share or US$966.5 million, assuming 18.81 million lb of U(3)O(8)
valued at a spot price of US$50.75/lb (#_ftn8) 8 and cash and other current
assets and liabilities (#_ftn9) 9.

·     Yellow Cake's operations, financial condition and ability to
purchase and take delivery of U(3)O(8) from Kazatomprom, or any other party,
remain unaffected by the geopolitical events in Ukraine. All U(3)O(8) to which
the Company has title and has paid for, is held at the Cameco storage facility
in Canada and the Orano storage facility in France.

 

Andre Liebenberg, CEO of Yellow Cake, said:

"The outlook for uranium remains positive and the long term investment case
remains compelling. This confidence is based on the on-going supply demand
fundamentals which will continue to put upwards pressure on the uranium price,
as well as the growing acceptance of the role nuclear power will have in the
future energy mix. Perhaps more importantly we are seeing a new emerging theme
in the uranium sector. We expect to see utilities look to diversify their
sources in order to reduce future dependence on nuclear fuel supplies from
Russia and support Western fuel supply sources. These new long-term contracts
at higher price levels will be required to support new production and project
expansions throughout the fuel cycle. Overall, this presents another strong
rationale for the long term holding of uranium."

 

Uranium Market Developments and Outlook

 

Global Uranium Market

The uranium spot price decreased from US$48.25/lb (#_ftn10) 10 on 30 September
2022 to US$48.00/lb (#_ftn11) 11 on 31 December 2022.  During the Quarter,
the price strengthened in response to monthly spot market volumes of 5.6 Mlb
reaching US$52.30/lb (#_ftn12) 12 at the end of October 2022. (#_ftn13) 13
However, the spot price retreated during the rest of the Quarter, reaching
US$49.50/lb at the end of November and US$48.00 by the end of December, as
spot market volumes declined noticeably (4.2 Mlb in November (#_ftn14) 14 and
only 3.2 Mlb during December (#_ftn15) 15). Total spot market volume during
the Quarter represented about 50% of the level during the comparable period in
2021.

A major contributing factor to the decline in spot market activity was the
significantly reduced purchasing by the Sprott Physical Uranium Trust
("SPUT").  SPUT reported acquiring 12.1 Mlb during 4Q2021 but bought only
700,000 lb during the last quarter of CY2022 reflective of the trust's units
trading at a discount to NAV for 80% of the 2022 trading days. (#_ftn16) 16

Contracting activity in the long-term market rose substantially during 2022 as
nuclear utilities refocused on security of supply and deliverability.  UxC
reported that total 2022 volumes contracted in the long-term uranium market
reached 114 Mlb(15) as compared to 72 Mlb in 2021.  Recently, a Cameco senior
executive stated that the company had secured aggregate future deliveries
totalling 77 Mlb during 2022. (#_ftn17) 17

Long-term uranium price indicators responded to that contracting volume
throughout 2022 with incremental improvement during the Quarter. The Ux 3-yr
Forward price rose from US$54.50/lb (end of September) to US$56.50/lb at the
end of the year and the 5-yr Forward price increased from US$58.25/lb to
US$60.00/lb.  The Ux Long-Term Price reported at US$49.00/lb at the end of
the third quarter and then strengthened to US$51.00/lb at the end of December.

The U.S. Department of Energy / National Nuclear Security Administration
("NNSA") announced the awarding of uranium purchase agreements with several
U.S. uranium production companies; EnCore Energy, Energy Fuels, Peninsula
Energy, Ur-Energy and Uranium Energy.  The NNSA committed to purchase an
estimated total of 1.1 million lb U(3)O(8) to be supplied by the domestic
uranium sources at prices ranging from US$59.50/lb (Uranium Energy) up to
US$70.50/lb (EnCore Energy).  The Request For Proposals stipulated that the
offered material must have been produced at a domestic uranium recovery
facility since 1 January 2009 and must be from inventory already in storage in
the USA." (#_ftn18) 18

 

Nuclear Generation / Uranium Demand

Sweden's newly-elected centre-right coalition government has adopted
pro-nuclear energy policies including the possible restart of Ringhals Units 1
and 2 (closed at the end of 2020 and 2019, respectively) as well as preparing
for the construction of new reactors.  The government has changed its energy
policy goal from "100% renewable" to "100% fossil-free."  The country has
shifted from a total nuclear phase-out policy (1980 / repealed 2010) to
allowing certain reactors to operate for defined periods (1997). (#_ftn19) 19

Poland announced (28 October) that the government had selected Westinghouse
Electric to build their initial nuclear power plant.  The Polish government
has been seeking partners to develop 6-9 Gwe of nuclear capacity by the early
2040s and may ultimately order a total of six Westinghouse AP-1000 reactors.
(#_ftn20) 20

Turkish President, Recep Erdogan, reported during a live broadcast (8
November) that Turkey's commercial nuclear program continues to progress with
the first unit at Akkuyu to enter commercial operation in late 2023 or early
2024 with an additional three reactors to follow.  Talks with Rosatom
regarding the Sinop NPP continue and that another NPP is under consideration
at an alternative site. (#_ftn21) 21

Subsequently, the Turkish government announced on22 December that the initial
reactor located at the Akkuyu NPP would, in fact, enter commercial operation
at the end of 2023 and that additional nuclear power projects would be
necessary over the next 10 to 20 years.  The Akkuyu NPP is being constructed
in the southern province of Mersin by Rosatom and consists of four
VVER-1200/V-509 reactors, all of which are in various stages of
construction.  Additional identified sites include Sinop (Black Sea) and
Igneada (Kirklareli Province; Black Sea). (#_ftn22) 22

The lower house of the Dutch Parliament, the Tweede Kamer, adopted a proposal
to pursue the construction of two nuclear power reactors which the Dutch
Cabinet hopes to be in operation by 2035.  Currently, the country operates a
single NPP (482 Mwe) which entered commercial operation in 1973, located at
Borssele, the likely site for expansion. (#_ftn23) 23

A new nuclear power plant to be built at Sizewell C in Suffolk has been
approved by the United Kingdom government.  The UK government has pledged to
invest GBP700 million in the project (50% stakeholder) which also includes
Electricite de France as well as committing to advancing additional nuclear
power projects as incorporated in the proposed Energy Bill.  Great British
Nuclear is being established to oversee nuclear new builds. (#_ftn24) 24

The Japanese government adopted an energy strategy which maximizes the
utilization of existing nuclear reactors by implementing a more comprehensive
restart program as well as prolonging operating lifetimes of eligible reactors
beyond the current 60-year timeframe. Furthermore, the government will develop
advanced reactors to replace those older units planned for decommissioning.
Under regulations approved in 2013, reactor operating licenses could be
extended from 40 years up to as much as 60 years.  Under the recent draft
amendment released by the Nuclear Regulation Authority, reactor operators with
units in operation more than 30 years must formulate a long-term rector
management plan and secure regulatory approval at least once every ten years
for continued operations. (#_ftn25) 25

The Indian Government presented that government's road map to attain net-zero
carbon emissions by 2070 at the recent UN Convention on Climate Change.  The
national plan calls for a focus on renewable energy sources including solar,
wind and hydro power supplemented by a "three-fold rise in nuclear installed
capacity by 2032." (#_ftn26) 26

 

Uranium Supply

Kazatomprom reported that Kazakh uranium production for the January-September
period totalled 40.2 million lb, a decrease of 3% from the comparable period
of 2021, principally due to the impact of Covid-19 on wellfield development in
2021 as well as supply chain disruptions resulting in a shortage of certain
production materials, such as reagents and piping. The company anticipated
that aggregate uranium output for 2022 would reach 54.6-57.2 million lb, while
its production forecast for 2023 was subsequently lowered. Furthermore,
Kazatomprom reported that "during the third quarter, several transactions to
purchase material in the spot market were carried out." (#_ftn27) 27

Kazatomprom successfully completed a delivery of natural uranium concentrates
utilising the "Trans-Caspian International Transport Route (TITR)" which has
proven to be a viable alternative to the company's primary shipment routing
via the Port of St. Petersburg.  Kazakh-owned uranium and Cameco material
from Inkai were loaded on a chartered vessel at the Port of Poti (Georgian
seaport on the Black Sea) and then transported to Canada. (#_ftn28) 28

During the Quarter, Cameco reported the first packaged uranium from McArthur
River/Key Lake following the February 2022 announcement that the production
complex would be restarted after a four year shutdown. (#_ftn29) 29

Cameco held its Third Quarter 2022 investor conference call on 27 October 2022
reporting the McArthur River/Key Lake restart is expected to yield 2 million
lb this year and attain 15 million lb in 2024.  During the third quarter of
2022, 2 million lb were produced at Cigar Lake while the company purchased a
further 4.6 million lb. Regarding year-to-date long-term uranium contracting,
Cameco reported that the company has "added to our long-term contract
portfolio more than 50 million pounds in our uranium segment" while, in
addition, "we have advanced contracting discussions for about 27 million
pounds of long-term uranium business." (#_ftn30) 30

 

Nuclear Power Forecasts

The latest World Energy Outlook assessment, published 27 October 2022, by the
International Energy Agency (IEA), underscores the crucial role which nuclear
power must assume over the next three decades.  Nuclear power increases under
all three of the IEA government policy-related scenarios (Stated Policies
Scenario; Announced Pledges Scenario, and; Net Zero Emissions by 2050
Scenario).  The report observes that "As markets rebalance, renewables,
supported by nuclear power, see sustained gains."  Under the Net Zero
Emissions by 2050 Scenario, an average of 24 Gwe/year must be added over the
2022-2050 period, more than doubling current nuclear capacity (compounded
average annual growth rate = 2.6 percent). (#_ftn31) 31

 

Market Outlook

The spot price trend through the next quarter is expected to continue to be
dictated by global economic conditions as well as investor confidence in the
emerging role of nuclear power vis-à-vis climate change.  The uranium spot
price has begun to show strengthening in January breaking through
US$50.00/lb.

Importantly, term contracting is expected to continue at levels above those
experienced in the post-Fukushima era as nuclear utilities strive to diversify
sources to reduce future dependence on nuclear fuel supplies from Russia and
support Western fuel supply sources.  Increased uranium term prices can be
anticipated as term contract demand rises.

 

 

Net Asset Value

Yellow Cake's estimated net asset value on 31 December 2022 was £4.15 per
share or US$914.8 million, consisting of 18.81 million lb of U(3)O(8), valued
at a spot price of US$48.00/lb (#_ftn32) 32 and cash and other current assets
and liabilities of US$12.2 million. (#_ftn33) 33

   Yellow Cake Estimated Net Asset Value as at 31 December 2022
                                                                                                Units
   Investment in Uranium
   Uranium oxide in concentrates ("U(3)O(8)")                                 (A)               lb                18,805,601
   U(3)O(8) fair value per pound ((32))                                       (B)               US$/lb            48.00
   U(3)O(8) fair value                                                        (A) x (B) = (C)   US$ m             902.7

   Cash and other net current assets/(liabilities) ((33))                     (D)               US$ m             12.2
   Net asset value in US$ m                                                   (C) + (D) = (E)   US$ m             914.8

   Exchange Rate (( (#_ftn34) 34))                                            (F)               USD/GBP           1.2039
   Net asset value in £ m                                                     (E) / (F) = (G)   £ m               759.9
   Number of shares in issue less shares held in treasury (( (#_ftn35) 35))   (H)                                 183,104,399

   Net asset value per share                                                  (G) / (H)         £/share           4.15

 

Yellow Cake's estimated net asset value on 1 February 2023 was £4.27 per
share or US$966.5 million, based on 18.81 million lb of U(3)O(8) valued at a
spot price of US$50.75/lb (#_ftn36) 36 and cash and other current assets and
liabilities of US$12.2 million.(33)

   Yellow Cake Estimated Net Asset Value as at 1 February 2023
                                                                                             Units
   Investment in Uranium
   Uranium oxide in concentrates ("U(3)O(8)")                               (A)              Lb               18,805,601
   U(3)O(8) fair value per pound ((36))                                     (B)              US$/lb           50.75
   U(3)O(8) fair value                                                      (A) x (B) = (C)  US$ m            954.4

   Cash and other net current assets/(liabilities) ((33))                   (D)              US$ m            12.2
   Net asset value in US$ m                                                 (C) + (D) = (E)  US$ m            966.5

   Exchange Rate                                                            (F)              USD/GBP          1.2360
   Net asset value in £ m                                                   (E) / (F) = (G)  £ m              784.4
   Number of shares in issue less shares held in treasury(( (#_ftn37) 37))  (H)                               183,104,399

   Net asset value per share                                                (G) / (H)        £/share          4.27

 

ENQUIRIES:

 Yellow Cake plc
 Andre Liebenberg, CEO                Carole Whittall, CFO
 Tel: +44 (0) 153 488 5200

 Nominated Adviser and Joint Broker: Canaccord Genuity Limited
 Henry Fitzgerald-O'Connor            James Asensio
 Gordon Hamilton

Tel: +44 (0) 207 523 8000

 Joint Broker: Berenberg
 Matthew Armitt                       Jennifer Lee
 Detlir Elezi
 Tel: +44 (0) 203 207 7800

 Financial Adviser: Bacchus Capital Advisers
 Peter Bacchus                        Richard Allan
 Tel: +44 (0) 203 848 1640

 Communications Adviser: Powerscourt
 Peter Ogden                          Molly Melville
 Tel: +44 (0) 7793 858 211

ABOUT YELLOW CAKE

Yellow Cake is a London-quoted company, headquartered in Jersey, which offers
exposure to the uranium spot price. This is achieved through its strategy of
buying and holding physical triuranium octoxide ("U(3)O(8)"). It may also seek
to add value through other uranium related activities. Yellow Cake seeks to
generate returns for shareholders through the appreciation of the value of its
holding of U(3)O(8) and its other uranium related activities in a rising
uranium price environment. The business is differentiated from its peers by
its ten-year Framework Agreement for the supply of U(3)O(8) with Kazatomprom,
the world's largest uranium producer. Yellow Cake currently holds 18.81
million pounds of U(3)O(8), all of which is held in storage in Canada and
France.

 

FORWARD LOOKING STATEMENTS

Certain statements contained herein are forward looking statements and are
based on current expectations, estimates and projections about the potential
returns of the Company and the industry and markets in which the Company will
operate, the Directors' beliefs and assumptions made by the Directors. Words
such as "expects", "anticipates", "should", "intends", "plans", "believes",
"seeks", "estimates", "projects", "pipeline", "aims", "may", "targets",
"would", "could" and variations of such words and similar expressions are
intended to identify such forward looking statements and expectations. These
statements are not guarantees of future performance or the ability to identify
and consummate investments and involve certain risks, uncertainties and
assumptions that are difficult to predict, qualify or quantify. Therefore,
actual outcomes and results may differ materially from what is expressed in
such forward looking statements or expectations. Among the factors that could
cause actual results to differ materially are: uranium price volatility,
difficulty in sourcing opportunities to buy or sell U(3)O(8), foreign exchange
rates, changes in political and economic conditions, competition from other
energy sources, nuclear accident, loss of key personnel or termination of the
services agreement with 308 Services Limited, changes in the legal or
regulatory environment, insolvency of counterparties to the Company's material
contracts or breach of such material contracts by such counterparties. These
forward-looking statements speak only as at the date of this announcement. The
Company expressly disclaims any obligation or undertaking to disseminate any
updates or revisions to any forward looking statements contained herein to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statements are
based unless required to do so by applicable law or the AIM Rules.

 1            Daily spot price published by UxC, LLC on 30 September
2022.

 2            Daily spot price published by UxC, LLC on 31 December
2022.

 3            Estimated net asset value per share as at 31 December
2022 is calculated assuming 187,740,730 ordinary shares in issue less
4,636,331 shares held in treasury, the Bank of England's daily USD/ GBP
exchange rate of 1.2039 and the daily spot price published by UxC, LLC on 31
December 2022.

 4            Daily spot price published by UxC, LLC on 30 September
2022.

 5            Based on the daily spot price of US$48.25/lb published
by UxC, LLC on 30 September 2022 and 18,805,601 lb U₃O₈ held by the
Company as at 30 September 2022.

 6            Based on the daily spot price of US$48.00/lb published
by UxC, LLC on 31 December 2022 and 18,805,601 lb U₃O₈ held by the Company
as at 31 December 2022.

 7            Estimated net asset value per share as at 30 September
2022 is calculated assuming 187,740,730 ordinary shares in issue less
4,636,331 shares held in treasury, the Bank of England's daily USD/ GBP
exchange rate of 1.1170 and the daily spot price published by UxC, LLC on 30
September 2022.

 8            Daily spot price published by UxC, LLC on 1 February
2023.

 9            Estimated net asset value per share as at  1 February
2023 is calculated assuming 187,740,730 ordinary shares in issue, less
4,636,331 shares held in treasury, a USD/ GBP exchange rate of 12360 and the
daily spot price published by UxC, LLC on  1 February 2023 and cash and other
current assets and liabilities of US$12.2 million as at 31 December 2022.

 10         Daily spot price published by UxC, LLC on 30 September
2022.

 11         Daily spot price published by UxC, LLC on 31 December 2022.

 12         Daily spot price published by UxC, LLC on 31 October 2022.

 13         Ux Weekly vol 36 no 34, 31 October 2022.

 14         Ux Weekly vol 36 no 49, 5 December 2022.

 15         Ux Weekly vol 37 no 01, 2 January 2022.

 16         Sprott.com; "Daily and Cumulative Pounds of Uranium (U3O8)
Acquired by Trust".

 17         Grant Isaac, Senior Vice-President and CFO, Cameco
Corporation, 26th CIBC Western Institutional Investor Conference-2023; 18
January 2023.

 18         Source:  World Nuclear News; "US uranium producers
announce contracts and production ramp-ups"; 20 December 2022.

 19         World Nuclear News; "New Swedish government seeks expansion
of nuclear energy"; 17 October 2022.

 20         Power Technology; "Westinghouse Electric to build nuclear
power plant in Poland"; 31 October 2022.

 21         Nuclear Engineering International;  "Turkey considers
contraction of third NPP"; 8 November 2022.

 22         Hurriyet Daily News; "Turkiye aims for more nuclear power:
Minister"; 22 December 2022.

 23         NL Times; "Gov't wants to open two nuclear plants by 2035,
likely in Borssele"; 30 November 2022.

 24         United Kingdom Government Press Release; "UK government
takes major steps forward to secure Britain's energy independence"; 29
November 2022.

 25         World Nuclear News; "Japan adopts plan to maximize use of
nuclear energy";  23 December 2022.

 26         Ministry of Environment, Forest and Climate Change -
Government of India; "India's Long-Term Low-Carbon Development Strategy; 14
November 2022.

 27         Kazatomprom Press Release; "Kazatomprom 3Q2022 Operations
and Trading Update"; 26 October 2022.

 28         Kazatomprom Press Release; "Kazatomprom Announces
Trans-Caspian Delivery"; 20 December 2022.

 29         Cameco Corporation Press Release; "Cameco Produces First
Packaged Pounds Following McArthur river/Key Lake Restart"; 9 November 2022.

 30         Cameco Corporation; "Management Discussion and Analysis for
the quarter ended September 30, 2022"; 27 October 2022.

 31         International Energy Agency; "World Energy Outlook 2022";
27 October 2022.

 32         Daily spot price published by UxC, LLC on
31 December 2022.

 33         Cash and cash equivalents and other net current assets and
liabilities as at 31 December 2022.

 34         Bank of England's daily USD/ GBP exchange rate as at 31
December 2022.

 35         Net asset value per share on 31 December 2022 is calculated
assuming 187,740,730 ordinary shares in issue less 4,636,331 shares held in
treasury on that date.

 36         Daily spot price published by UxC, LLC on 1 February 2023.

 37         Net asset value per share on 1 February 2023 is calculated
assuming 187,740,730 ordinary shares in issue, less 4,636,331 shares held in
treasury on that date.

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