Physical uranium trader tagged with nickname of the radioactive metal
Owns around 9.62mln pounds of uranium
Contract to buy up to an additional US$100mln of U3O8 each year for the next nine years from Kazatomprom
What Yellow Cake does:
The group floated on AIM in July 2018 after raising US$200mln (£151mln) from the sale of 76mln new shares at 200p apiece in an initial public offering.
The firm is backed by Bacchus Capital, the corporate finance boutique set up in 2016 by a group of senior bankers led by Peter Bacchus.
The cash raised was used to buy 8.1mln pounds of uranium from Kazakstan’s state-owned firm, NAC Kazatomprom JSC, one of the world’s largest uranium producers. Yellow Cake paid US$21.01/lb (per pound), a discount of about 8% to the then spot price.
A uranium pile of that size, which cost around US$170mln, was equal to one quarter of Kazatomprom's annual production and approximately 5% of 2016 global marketed production.
In addition, the Kazatomprom contract allows Yellow Cake to buy up to an additional US$100mln of U3O8 each year for the next nine years.
- In October, the company reported a net asset value (NAV) of 232p per share, derived primarily from its uranium holdings which were worth US$25.65 per pound at prevailing spot prices,
- Net assets were worth US$252mln (£197mln) compared to a market value of £168mln.
- Yellow Cake said it is mulling a buyback of its shares given the large discount to NAV
What the broker says
Berenberg’s analysts said the current discount of Yellow Cake’s stock in relation to their 280p target price represented “an attractive buying opportunity”, adding that the firm could work to close the discount through a share buyback.
“This is not yet planned or announced, but feels logical and is within the company’s mandate of optimising its uranium/share ratio”, the broker added.
What the boss says: Andre Liebenberg, chief executive
"Trading activity in the uranium market remains subdued as we await the findings of the US Nuclear Fuels Working Group.
“Though this uncertainty continues to weigh on the uranium price in the near term, we are positive about the medium and long term outlook for uranium.”