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Yellow Cake hails robust market fundamentals for uranium

"Rising demand and constrained supply, together with the steady run-off of long-term contracts has created a positive price environment"
Yellow Cake owns 9.62mln pounds of uranium

Physical uranium stockpiler Yellow Cake PLC (LON:YCA) said the recent pullback in spot prices presented a good buying opportunity as it remained confident in the long-term outlook for the radioactive metal.

The global spot uranium price softened to end the quarter at US$25.75 per pound of U3O8, from US$28.50/lb three months before.

After the US Department of Commerce submitted a report to the White House about the impact of the importation of foreign-source uranium, Yellow Cake chief executive Andre Liebenberg said: "Our confidence in the long-term outlook for uranium is unchanged despite the short-term uncertainty created by the Section 232 investigation in the US.”

The US government has 90 days to respond to the report and either take no action or legislate, which could take the form of tariffs or quotas.

Robust fundamentals

“We see robust market fundamentals regardless of the outcome of the Section 232 investigation, where rising demand and constrained supply, together with the steady run-off of long-term contracts has created a positive price environment,” Liebenberg said. “The recent pullback in the uranium price provided us with a good opportunity to acquire additional uranium at a competitive price.”

Since the end of the first quarter, the company raised £25.9mln in a placing to buy 1.175mln lbs of uranium from Kazakstan’s state-owned NAC Kazatomprom JSC at a price of US$25.88/lb.

Before the purchase, Yellow Cake’s estimated net asset value stood at 224p at the end of the first quarter, compared to 253p at the end of December. The NAV is a premium of around 5% to the closing price on Thursday.

After the Kazatomprom deal, which was made as part of an option under a framework agreement that offers the option to hoover up to US$100mln each year until 2028, the company owns 9.62mln lbs of uranium, acquired at an average cost of US$21.68/lb.

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