Back in September last year, I talked about Uranium in my regular FT column.

You can read that column here: https://www.ft.com/content/75ddaef9-86e0-4fcd-b253-1682a7b5f16c

At the time I mentioned Yellow Cake which is “ a relatively new vehicle listed on Aim (and in which I have a holding, albeit a minuscule one). It is in effect a uranium physical tracker fund that holds uranium oxide at safe, secure locations, with its share price going up or down alongside the commodity price. At its listing in July 2018 it raised $200m and it currently holds 9.32m lbs of physical uranium, valued at a spot price of US$32.6 per lb, with an average purchase price of $21.71 per lb. The net asset value per share at the end of July was £2.77 but the share price is hovering around £2.19, prompting the company to run a series of share buybacks. Shareholders include well-known US value fund Kopernik, LGIM and Putnam Investments.”

Yesterday we got a trading update  – NAV on 22nd January was at £2.43. The total increase in the value of the Uranium held by Yellow Cake as of 31st December worked out at 38%, equivalent to $279.5m vs the acquisition cost of $202m.

The last time I looked, the share price was at £2.19, down a bit over the last month but up 15% over the last 12 months. I’m still fairly bullish on uranium prices and think that that 10% discount will tighten, especially if uranium prices carry on increasing.

On that subject, it’s worth noting a recent note from Canaccord Genuity (via Ocean Wall).

“Uranium – We expect 2021 to be an even stronger year: With 2020 experiencing a record supply deficit, and the market susceptible to further supply shocks (as evidenced by Cigar Lake), we believe prices will push higher in 2021 as utilities look to secure future supply for their reactors. We forecast a 27% increase in spot to $37/lb by year-end 2021 and have retained our LT outlook of $50/lb
=> Demand continues to push higher: We forecast demand reaching 250mlbs U3O8 per year (+46%) by 2035 driven by new and increasing commitments to nuclear power as a source of low emission energy to combat climate change. We highlight increasing demand for electricity (+50% by 2040 – IEA), recent commitments to carbon neutrality in China and Japan (by 2060 and 2050, respectively), a shift to bipartisan support for nuclear in the US (the world’s largest consumer), and advanced work on SMRs globally, all as positive indicators for demand
=> Primary supply under pressure: In our view, 2020 highlighted just how fragile and concentrated uranium supply is with primary mine supply falling to 111mlbs (CGe), a level not seen since 2008. COVID-19 supply cuts added to ~30% of primary mine supply that has already come offline since 2016 as major producers have curtailed production (CCO, KAP) in light of low uranium prices and increasing production costs. The market has now shifted into a sustained deficit (Figure 4); and with more mine shutdowns anticipated over the next 5-10 years (due to depletion), significant new sources of supply will be needed to meet growing reactor demand.
=> In the UK, our preferred exposure is Yellow Cake (YCA-AIM).”

Ocean Wall has related these numbers back to Yellow Cake – they reckon that the share price has moved from parity to NAV to a 10% discount.