Yellow Cake makes first uranium purchase

09 July 2018

Kazakh uranium producer NAC Kazatomprom has made its first delivery to London-based Yellow Cake plc under a long-term contract between the two companies. The sale follows Yellow Cake's floatation on the London Stock Exchange's AIM market and represents more than a quarter of Kazatomprom's 2018 uranium production.

Yellow Cake was founded by Bacchus Capital as a specialist company to operate in the uranium sector, holding physical uranium in the long term. It aims to offer shareholders "exposure to the uranium price, without the risks associated with investment in companies that explore for, develop, mine or otherwise process uranium". It also says it intends to exploit a "range of expected opportunities connected with owning U3O8". These include uranium trading, optimisation of logistics associated with uranium trading, "generating revenue" from the lending of uranium, and uranium-based ļ¬nancing initiatives such as commodity streaming and royalties.

The company's strategy is to be a "long term holder of uranium" and to increase its level of uranium ownership over time. The company says the "recent emerging theme of supply side discipline in the uranium market and the industry cost structure" will support its strategy.

Yellow Cake was admitted to AIM on 5 July, having raised GBP151 million (USD200) million through a share placing, funds it used to purchase 8.81 million pounds U3O8 (3488 tU) from Kazatomprom at a contract price of USD21.01 per pound.

Kazatomprom on 6 July confirmed the implementation of the ten-year contract, which was signed on 10 May and covers the annual delivery to Yellow Cake of up to USD100 million of uranium at market-related prices, subject to conditions.

Kazatomprom CEO Galymzhan Pirmatov said the company was pleased to sign the supply agreement for a "substantial proportion" of its product. "The listing of Yellow Cake helps meet the growing demand from investors seeking direct exposure to uranium prices," he said.

Riaz Rizvi, Kazatomprom's chief strategy and marketing officer, said Yellow Cake's successful offering was a "positive outcome" and the involvement of institutional investors indicated "confidence in the long term-prospects of the uranium market", he said.

"Due to an exceptional set of circumstances, uranium is one of the few commodities yet to recover from the recent commodities bear market and we believe that uranium is currently fundamentally and structurally mispriced," Yellow Cake CEO Andre Liebenberg said. The long-term supply contract with Kazatomprom has allowed the company to secure a "highly significant and strategic position in physical uranium, at a competitive price, and to offer that exposure to a potential resurgence in the uranium price to investors, while avoiding direct exposure to exploration, development, mining and processing risk," he added.

The material received from Kazatomprom is stored at Cameco Corporation's Port Hope-Blind River facility in Canada.

Kazakhstan has 12% of the world's uranium resources and has been the world's leading uranium producer since 2009. Its 2015 production of 24,560 tU accounted for 39% of world production, but in late 2017 it announced plans to cut production for the next three years. Kazatomprom produced 12,986 tU - about 21% of world uranium production - in 2016.

Researched and written by World Nuclear News