Yellow Cake revved up before US decision

The US President has until 13 July to respond to the Department of Commerce's report into the US's reliance on uranium exports from Russia and its allies, which was requested by local uranium producers. The same law has been used to put tariffs on aluminium and steel. 

Yellow Cake has seen the value of its U₃O₈ (uranium compound) holding climb $36.4m (£29m) since its IPO in July, giving it pre-tax profit of $29.7m. This gain is due to uranium climbing 22 per cent between the 8.1m pound (Mlb) purchase at the time of the IPO and 31 March. 

While contracting has been slow since last year as the Section 232 process has continued in the US, Yellow Cake said the spot market had seen a 30 per cent volume increase on the average from the past decade. The spot market has been quieter in recent months because of 232, despite strength earlier in the year as major producer Cameco bought on the open market to fill contracts. Contracted uranium goes for a premium on the spot price.

Yellow Cake has continued its buying programme recently, adding 1.2Mlbs of U₃O₈ to its stocks at the end of May for $30.4m after raising the cash at 215p. The company said its net asset value (NAV) as of 31 May was 214p a share, putting its discount to NAV at 3.3 per cent.

Broker Numis forecasts an average uranium spot price for March 2020 of $33.8 a lb, which would see Yellow Cake’s NAV hit 294p a share with the current uranium holding and $6.4m in other assets.