Yellow Cake LON:YCA, the AIM-listed uranium trading company, published its annual results for the year ending 31st March 2024, last Friday (19th July).
As previously reported, Yellow Cake has had a strong year, as uranium prices rose to a sixteen-year high of USD107 per pound in February and at the close of 1Q24 was pricing at USD87/lb, some 72% ahead of where it was the year before.
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This saw Yellow Cake’s profit after tax of USD727m up more than 800% from a loss of USD102.9m the year previously. A lot of this was directly attributable to a 72% increase in spot prices, which led to a USD735m increase in Yellow Cake’s uranium holdings, which in 2023 saw a USD96.9m fall.
Yellow Cake builds up its uranium holdings
In all Yellow Cake’s uranium holdings were worth USD1.75bn ay the end of the financial year as Yellow Cake bought more uranium, increasing its holdings from 18.8mlbs to 20.1mlbs over the year.
As previously reported, the Jersey-headquartered firm offers investors exposure to uranium as a commodity, buying and holding the material. It has a long-standing arrangement with Kazatomprom, the national uranium production company of Kazakhstan, and world’s largest producer of raw uranium, and storage facilities in Canada and France.
The firm acts like a specialist uranium fund, with physical uranium as its asset. Unlike other uranium plays, Yellow Cake isn’t a miner, it is a commodity buyer and as such it doesn’t come with exposure risk to the mining cycle – exploration, development and mining – and all the cost and time delays that entails. Instead, the firm has negotiated the ability to buy raw uranium at spot price with producers, letting them carry the cost and time pressures of the supply chain
Market finds business model attractive
The business model and that fact that Yellow Cake offers investors exposure to physical uranium – not just derivatives or uranium miner shares – has been seen as an alternative and attractive investment proposition, and the commodity trader easily rose more than GBP100m from investors through a share placement in October 2023 to buy more stores of uranium. In total Yellow Cake held 20.16mlbs of uranium as at end-March 2024 buying 21.7mlbs at an average cost during July 2024 at USD34.64/lb, which was 15% of global production.
Andre Liebenberg, Yellow Cake’s chief executive said in a statement to the market: “[Our] 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.”
Yellow Cake’s shares closed last week (19th July) at 539.5p, up 33% from a year ago. Over the year-to-date, although the uranium fund saw its share price fall 14% over the year-to-date. The company has a market capitalisation of GBP1.16bn.
Yellow Cake’s strong financial performance reflects the surge in uranium prices. The company’s unique business model offering direct exposure to physical uranium positions it well to benefit from a sustained bull market in uranium.
