Yellow Cake announces next uranium purchase

12 April 2019

Yellow Cake plc is to purchase 1.175 million pounds of uranium (45 tU) from KazAtomProm under an existing framework agreement after raising GBP25.9 million (USD33.9 million) through a share placement.

Yellowcake (Image: KAP Technology/Kazatomprom)

London-based Yellow Cake operates in the uranium sector with a view to holding physical uranium in the long term. On 11 April, it announced its intention to raise about GBP22.9 million through the placement which today it said it had increased owing to "strong investor demand".

"We welcome the support from both our existing and new shareholders to enable us to increase the size of our fundraising, and consequentially to now purchase 1.175 million pounds of uranium at the firm price of USD25.88 per pound," Yellow Cake CEO Andre Liebenberg said. "The recent pullback in the uranium price has provided us with an excellent window to add to our uranium inventory at an attractive price. We are very confident in the long-term fundamentals of the uranium market, where a combination of constrained supply, the run-off of long-term contracts and growing demand outlook means we remain confident on the outlook for the uranium price," he said.

The placement is conditional on, among other things, admission of the shares to trading on the AIM market of the London Stock Exchange. This is expected to take place from the start of trading on 16 April.

Yellow Cake was founded by Bacchus Capital on the premise that uranium, as a commodity, is "structurally mispriced". The company said it believes the current uranium price level "represents a compelling buying opportunity, taking advantage of utility companies' recent cautious approach to purchasing U3O8 in the run-up to the determination of appropriate action under the US Department of Commerce's current Section 232 investigation into uranium imports."

Uncertainty around the ongoing investigation into uranium ore and product imports in the USA has resulted in reluctance from utilities to enter into new uranium purchases in the near term, the company said. That uncertainty is likely to be removed following the completion of the investigation in the coming months, and "it is expected that utilities and other end users of uranium will need to re-enter the market, with a corresponding impact on the uranium price," it said.

Following its July 2018 floatation on the AIM market, Yellow Cake last year completed two purchases of uranium from KazAtomProm, giving it ownership of a total of 8.4 million pounds of uranium. A framework agreement signed with KazAtomProm in 2018 gives Yellow Cake the right to purchase up to USD100 million of U3O8 per year this year and for the subsequent eight years. The balance of the 2019 option will remain available for further purchases by the company this year, it said.

Yellow Cake's uranium is stored in Canada, at Cameco's Port Hope /Blind River facility.

Researched and written by World Nuclear News