PRESS RELEASE
from Yellow Cake PLC (isin : JE00BF50RG45)
Yellow Cake PLC: Annual Results for the year ended 31 March 2024
Yellow Cake PLC (YCA) 19 July 2024 Yellow Cake plc ("Yellow Cake" or the "Company") Annual Results for the year ended 31 March 2024 Highlights
Andre Liebenberg, CEO of Yellow Cake, said; "The uranium price continued to rise steadily over the course of the year, reaching a 16-year high in February. Yellow Cake's strategy is to provide our investors with direct exposure to uranium through the buying and holding of the physical commodity and commercial activities related to our inventory. We remain confident in our strategy and the opportunities to deliver value for our shareholders. This is based on the fact the same supply-demand market fundamentals that have driven the stronger uranium price are even more entrenched today than they were at the time of our IPO. A significant highlight for us during the year was the value of our holdings reaching USD 2 billion. Simply put, uranium supply continues to lag demand following years of underinvestment and mine closures, further exacerbated by the rapid expansion of the global nuclear reactor fleet, with China alone planning to add up to as many as 150 new reactors by 2040. We look forward with confidence." ENQUIRIES:
ABOUT YELLOW CAKE Yellow Cake is a London-quoted company, headquartered in Jersey, which offers exposure to the uranium spot price. This is achieved through its strategy of buying and holding physical triuranium octoxide ("U3O8") and adding value through other uranium related activities. Yellow Cake seeks to generate returns for shareholders through the appreciation of the value of its holdings of U3O8 and its other uranium related activities in a rising uranium price environment. The business is differentiated from its peers by its ten-year Framework Agreement for the supply of U3O8 with Kazatomprom, the world's largest uranium producer. Yellow Cake currently holds 21.68 million pounds of U3O8, all of which is held in storage in Canada and France. FORWARD-LOOKING STATEMENTS Certain statements contained herein are forward looking statements and are based on current expectations, estimates and projections about the potential returns of the Company and the industry and markets in which the Company will operate, the Directors' beliefs and assumptions made by the Directors. Words such as "expects", "anticipates", "should", "intends", "plans", "believes", "seeks", "estimates", "projects", "pipeline", "aims", "may", "targets", "would", "could" and variations of such words and similar expressions are intended to identify such forward-looking statements and expectations. These statements are not guarantees of future performance or the ability to identify and consummate investments and involve certain risks, uncertainties and assumptions that are difficult to predict, qualify or quantify. Therefore, actual outcomes and results may differ materially from what is expressed in such forward-looking statements or expectations. Among the factors that could cause actual results to differ materially are: uranium price volatility, difficulty in sourcing opportunities to buy or sell U3O8, foreign exchange rates, changes in political and economic conditions, competition from other energy sources, nuclear accidents, loss of key personnel or termination of the services agreement with 308 Services Limited, changes in the legal or regulatory environment, insolvency of counterparties to the Company's material contracts or breach of such material contracts by such counterparties. These forward-looking statements speak only as at the date of this announcement. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based unless required to do so by applicable law or the AIM Rules. CHAIRMAN'S STATEMENT Yellow Cake is committed to its stated strategy and has delivered considerable value to our shareholders through the buying and holding of physical uranium, while continuing to explore further opportunities to realise additional value from these holdings. The Board of Directors (the "Board") is proud of the significant milestone achieved by Yellow Cake during the year, with the Group's market value passing USD2 billion, a noteworthy increase from the USD200 million value at listing in 2018. At the time, uranium had traded for an extended period at around USD20/lb, a price significantly below that implied by the disconnect between future requirements and producers' ability to easily meet this demand. The recognition of nuclear energy's important role in meeting future low-carbon energy requirements and increasing global focus on energy security continued to strengthen during the year under review. This was evident in positive policy shifts towards nuclear in many countries, announcements of new builds, operating life extensions for existing facilities and ongoing restarts in Japan. At the same time, the vulnerability of the uranium supply chain came more sharply into focus, with key producers announcing difficulties in ramping up projects and delays in bringing new resources into production. Western nations are formalising ways to work together to reduce dependence on Russian sourced nuclear fuel and support non-Russian capacity, with related legislation approved by the US during the year. These developments saw U3O8, trade at over USD100/lb for the first time in 16 years, peaking at USD107/lb in February. In May 2024, President Biden signed into law regulations to limit the import of Russian nuclear fuel into the US[4]. Supporting positive returns for investors Yellow Cake provides investors with an opportunity to realise value from long-term exposure to the uranium spot price and related uranium opportunities in a low-risk, low-cost and publicly-quoted vehicle. The Group actively pursues strategies to support positive returns for investors. In October 2023, Yellow Cake took advantage of a market opportunity, placing 18.7 million new ordinary shares in an oversubscribed placing with existing and new institutional investors. We were delighted with the strong response, which highlighted the growing interest in, and understanding of, the uranium investment case. The proceeds were used to acquire a further 1.53 million lbs of U3O8, which was received in June 2024. Following receipt, Yellow Cake's total holdings of 21.68 million lbs represent approximately 15% of 2023 global annual uranium production. The Board constantly reviews the Group's strategy to grow the business, improve shareholder value and address any discount to net asset value. Following the commencement of trading of Yellow Cake's shares on the OTCQX Best Market last year, we were very pleased at the Group's inclusion in the 2024 OTCQX® Best 50, a ranking of top performing companies traded on the market last year. Yellow Cake's Board reserves the right to declare a dividend, as and when deemed appropriate, however, the Group does not currently expect to declare dividends on a regular or fixed basis. The Board is not declaring a dividend for this financial year. Ensuring responsible business practices The Board is committed to good governance and high ethical standards, and recognises that responsible management of the Group's environmental, social and governance impacts and performance are integral to long-term value creation. Yellow Cake has zero-tolerance for bribery, corruption and unethical practices. Policies and measures are in place to prevent bribery, modern slavery, inducements and money laundering, and to ensure compliance with economic sanctions. These include a whistleblowing policy. The Code of Conduct promotes the Group's key values of dignity, diversity, business integrity and accountability. It also sets operational and performance requirements for employees, directors, business partners, contractors and advisers. Effective governance and oversight Yellow Cake applies the principles and provisions of the UK Corporate Governance Code 2018 (the "Code") to the degree appropriate to the size and nature of Yellow Cake's business. The Group's small scale and simplicity supports effective governance and oversight and facilitates good communication. Compliance policies are regularly reviewed and updated to ensure continued alignment with the latest developments in corporate governance requirements and guidelines. The Board plays an active role in overseeing the Group's activities and met seven times during the year to 31 March 2024. The Audit and Remuneration Committees also met during the period to discharge their duties as set out in their terms of reference. The direct social and environmental impacts of the Group's activities are minimal. We conduct appropriate due diligence on suppliers and business partners to ensure that we are comfortable that they share our commitment to responsible business practices. This is supplemented by an annual external and independent assessment of our ESG practices and those of our primary suppliers. Stakeholder engagement The Group values its relationships with key stakeholders and proactively facilitates opportunities for dialogue. Feedback from these engagements is regularly communicated to the Board. The Chairman is available to the Group's major shareholders to discuss governance, strategy and performance. Day-to-day stakeholder queries are addressed by the Executive Directors. When required, the chairs of the Board Committees seek engagement with shareholders on significant matters related to their areas of responsibility. During the year, Yellow Cake engaged with shareholders and consulted the Group's remuneration advisors regarding concerns about the Group's long-term incentive programme. Appreciation I would like to thank my fellow Directors for their contribution and diligence during the year. On behalf of the Board, I thank our shareholders and investors for their continued strong support for the Group. We believe the compelling supply-demand fundamentals underpinning Yellow Cake's investment case are as relevant today as they were in 2018, with rising production costs and utilities re-stocking representing additional drivers. The Lord St John of Bletso Chairman CHIEF EXECUTIVE OFFICER'S REVIEW The uranium market is currently characterised by five key themes - four supporting demand and a fifth relating to the constraints on supply. These themes were forming when Yellow Cake listed and have continued to strengthen since then. Nuclear's key role in the low-carbon energy transition Nuclear power is now widely accepted as having an essential role to play in meeting growing global energy demand while supporting decarbonisation goals. Its low carbon lifecycle emissions, small operational footprint and reliable baseload profile make it an excellent complement to renewable energy sources. The International Energy Agency Net Zero Emissions Scenario forecasts nuclear power generation to more than double by 2050, requiring an average of 26 GW of new nuclear capacity to be added each year compared to the 56 GW which was brought online in the last decade. In December 2023, more than 20 countries signed a pledge at COP28 to triple nuclear energy by 2050[5] and in March 2024 representatives from 32 nations met at the inaugural Nuclear Energy Summit to discuss the role of nuclear energy in addressing climate change[6]. Forecast growth in nuclear generation capacity Theme two is the resulting steps many countries are taking to rapidly increase available nuclear capacity following positive policy shifts towards nuclear. These efforts include halting plans to decommission existing facilities, extending operating lifespans, restarting idled reactors and accelerating nuclear build programmes. There are 60 reactors currently under construction worldwide and more than 90 planned, with 53 of these in China and India alone[7]. Advanced reactors and Small Modular Reactors ("SMRs") are receiving strong support from governments and investors, and making encouraging progress towards commercialisation. These technologies promise reduced upfront costs, operational footprints and construction times. While smaller than existing reactors, their upfront fuel requirements to support longer refuelling cycles suggest increased uranium demand in the medium term. A new emphasis on energy security and energy independence The third theme is the global reassessment of the importance of energy security and accelerating shift away from fossil fuels following Russia's invasion of Ukraine. While this has raised nuclear's profile as a source of secure and affordable energy, it also added risk to the global uranium fuel cycle and has driven a de-globalisation of demand between Russian and non-Russian sources. Russia supplies approximately 5% of global uranium concentrates, 20% of conversion and 46% of enrichment[8], highlighting the security of supply risk in the context of the growing primary supply gap and shrinking secondary supplies. Western nations are working together to reduce dependence on Russian sourced nuclear fuel and support non-Russian capacity, with the US in particular committing significant funding to securing supply of high-assay low-enriched uranium for SMRs and advanced reactors. In May 2024, the US banned imports of Russian nuclear fuel from August 2024, although with certain waivers until 2027[9]. Since the start of the war, utilities in the US, Europe and elsewhere have sought to source from non-Russian suppliers. This has seen prices in the back end of the nuclear fuel cycle rise dramatically, with the price of enrichment and conversion tripling, compared to the doubling in the uranium spot market. Given its strong position in conversion and enrichment, there is also a risk that Russia could disrupt the market by unilaterally cutting supplies in response to the new US Act, other policy developments or sanctions. There remain concerns about disruptions to uranium deliveries from Kazakhstan that transit Russian territory and delays to maritime deliveries from Australia that may be affected by attacks on ships in the Red Sea. Long-term contracting by utilities For many years, global uranium consumption has run well ahead of production, with the shortfall being made up from stockpiles and secondary supplies. With these alternative sources now largely depleted, demand for mid and long-term contracts to cover future uranium requirements is pushing term uranium prices higher. Contracted volumes in 2023 more than doubled from 2021 and the negotiated terms in term offers reportedly reflect the shift from a buyer's market to a seller's market. Uranium supply remains challenged In the face of the trends driving demand, the ability of producers to easily increase production and bring new resources online remains constrained. The extended period of low uranium prices saw major producers idling uneconomic operations or curtailing production, and disincentivised investment in new resources. In the past few years, several significant operations closed permanently and the coup in Niger last year has disrupted around 4% of global production. Ongoing supply chain challenges following COVID-19 have exacerbated delays and limited access to key equipment and materials. While several producers have announced restarts of idled production, these will take time to reach full capacity and are insufficient to meet the shortfall. Over the past year, Kazatomprom and Cameco, the two largest global uranium producers, both announced delays in planned ramp ups due to shortages of key inputs and other industry complexities. This may require both companies to buy from an already thin spot market to meet contractual commitments. Sustained higher uranium prices will be required to incentivise more capital-intensive greenfield developments to support a meaningful rise in long-term global production. These new mines are also likely to experience similar challenges in reaching sustainable production and would only start to contribute towards the end of the current decade. Spot and term market volumes continue to diverge Spot market volumes decreased by 8% in the 2023 calendar year to 56.3 million lb (CY2022: 60.8 million lb), well below the record volumes in CY2021 (102.4 million lb), but still above historical averages[10]. Only US utilities and hedge funds increased purchases during the year, with decreased activity by investment funds, producers, junior miners and non-US utilities resulting in the net decrease in volumes year on year. The uranium spot market price started 2023 at USD48.00/lb and ended the year 90% up at USD91.00/lb. Early in February 2024, the price peaked at USD107/lb, before retreating to USD87.00/lb on 31 March 2024, 72% higher than the close on 31 March 2023 of USD50.65/lb. Term uranium volume contracted rose by 29% to 160.8 million lb (CY2022: 114 million lb), more than double the annual average of around 77 million lb over the past decade[11]. This was mainly driven by European utilities that previously sourced uranium from Russian suppliers shifting to Western sources, which offset decreased contracting by US utilities. Three and five-year forward prices increased by 70% and 77% respectively over the year to 31 March 2024. Conversion and enrichment prices increased by 44% and 27% respectively over the year to 31 March 2024, reflecting concerns about the possibility of bans on US imports of Russian fuel and ongoing capacity constraints as utilities move away from Russian sources. Additional conversion and enrichment capacity will take several years to come to market if higher prices are sustained, although a short-term switch from underfeeding to overfeeding could help to meet demand, but will require additional UF6 and U3O8. Increased holdings of U3O8 In September, Yellow Cake took delivery of a further 1.35 million lb of uranium contracted in the 2023 financial year. In October, we took the opportunity to raise approximately USD125 million (before costs), which was applied to fully utilise the 2023 Kazatomprom option and contract for a further 1.53 million lb, which was delivered in June 2024. This brings our total holdings after receipt to 21.68 million lb. Despite the continued improvement in the uranium market fundamentals, Yellow Cake traded at a discount to net asset value for a significant part of the year. We believe this was much more due to macroeconomic factors impacting the risk appetite in the broader equity market rather than specifically the uranium spot market. During the course of the last calendar year equity markets were impacted by the Silicon Bank failure in the United States, the second wave of COVID-19 in China and flattening of interest rate expectations as investors priced in a "higher for longer" federal funds rate. Outlook We expect the existing trends in the uranium market to remain in place in the year ahead, with continued spot price volatility on an upward price trend in the near- to medium-term with a strong bias towards the upside as the lack of mobile inventory takes hold, constraining near-term uranium supply availability. Term contracting volumes are anticipated to increase as utilities secure future supplies. Increased activity in the uranium market could also unlock opportunities to realise further value from commercial opportunities related to our U3O8 holdings. The market will be watching progress in producer ramp-up plans and new uranium projects closely as indicators of producers' ability to meet the growing primary supply gap. We remain confident in the outlook for uranium and Yellow Cake's ability to deliver on our stated strategy of realising opportunities to create value for investors by increasing our U3O8 holdings when the share price is trading above net asset value and adding value from commercial opportunities. Andre Liebenberg Chief Executive Officer CHIEF FINANCIAL OFFICER'S REPORT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||