Market conditions halt company offering
07 October 2008
As the uranium price slides below $50 per pound, uranium investment company Nufcor Uranium Limited has withdrawn a proposed equity offering, citing adverse market conditions and recent equity market volatility.
Guernsey-registered Nufcor Uranium provides investors with exposure to the uranium price by investing in uranium, which it then holds for the long term rather than actively speculating on short-term uranium price movements. Nufcor International provides custodian services for the uranium owned by Nufcor Uranium.
In theory, the share price of a company such as Nufcor Uranium should reflect the uranium price, and by and large this is what has happened in the past, a market specialist told World Nuclear News. However, as the spot market uranium price has slid from around $90/lb U3O8 at the beginning of the year to around $49/lb as of 6 October, London-traded Nufcor Uranium's share price has fallen even more rapidly, from around £3 per share to its current level around £1 per share. The company has found itself in a position where its net asset value per share - basically, the worth of its uranium holdings - is almost double its share price, another factor it has cited as a reason behind the withdrawal of the equity offering.
Nufcor Uranium announced in June that it had filed a preliminary long form prospectus in each of the Canadian territories and provinces for the purpose of an offering of new ordinary shares for sale to the public. The offer was due to close in the third quarter of 2008, and the company said at the time that it intended to use the proceeds to finance the acquisition of more uranium. The company has now withdrawn that offer but is still proceeding with an application to become listed on the Toronto Stock Exchange.
Nufcor Uranium had previously agreed to acquire 237,000 kg UF6 in the fourth quarter of 2008, and has now announced that it will pay for the uranium from inventory sales and its existing cash reserves, rather than the equity offering. The company has announced that it has entered into provisional agreements to sell a total of 575,000 lbs U3O8 and has contracted to sell 25,000 kgU as UF6 for a total of $34 million, for payment and delivery in the fourth quarter of 2008. Nufcor Uranium said the sales were equivalent to approximately 640,321 lbs U3O8 at an inferred price of $52.75/lb (assuming a conversion service price of $9.50/kg). The sales leave Nufcor Uranium with assets of physical holdings of 1.725 million lbs U3O8 and 412,000 kgU as UF6.