Specialist uranium holding company Yellow Cake (LON:YCA) has said it has concluded an agreement to sell 300,000 lbs of uranium at an aggregate price of $3.20/lb. The transaction is expected to generate net proceeds of $9.9 million after costs and commission. Proceeds are expected to be received on or about 7 July.
The funds will be used to conduct an enlarged share buyback program in which Yellow Cake expects to buy $10 million in outstanding ordinary shares. It expects to do this following its full results on 8 July.
Yellow Cake will be participating in The Armchair Trader’s upcoming uranium investment online seminar on 9 July.
Uranium does not trade on the open market like other commodities – buyers and sellers negotiate contracts privately. Prices are generally published by independent market consultants. The uranium price has been heading up steadily since late February, when it stood at around $24/lb. At the time of writing the uranium spot price stood at $33.93 with the long term price at $35,50. The market last saw these prices in 2016.
Yellow Cake is a specialist uranium investment company offering investors direct exposure to the uranium price. It holds physical uranium via a secure storage contract with Cameco (NYSE:CCJ) in Canada (at the Port Hope / Blind Valley facility in Ontario).
Yellow Cake will keep an additional 9.32 million pounds of uranium in storage, which it acquired at a price of $21.68/lb.
“Yellow Cake has noted the recent persistent discount to NAV in the Yellow Cake share price,” said Andre Liebenberg, Chief Executive of Yellow Cake. “We believe now is the right time to take more aggressive action and significantly enlarge our share buyback programme. This effectively enables us to acquire exposure to uranium at a discount to the spot price, creating value for all shareholders.”
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Liebenberg added that by taking this decisive action now, the company would be better placed to capitalise on its purchase agreement with Kazatomprom “at the appropriate time.”
Yellow Cake plc’s previous share buy back program
Yellow Cake started its previous share buyback program on 22 January when it announced its intention of acquire up to $2 million in ordinary shares. To date it has acquired 611,806 shares for a total consideration of £1.2 million at a volume weighted average price of £1.96/share and a volume weighted discount to NAV of 20%. Under its Jersey company Existing Authority it can still buy around 8,200,000 shares.
Yellow Cake confirmed its January share buyback program would be cancelled when the new one starts in July. Yellow Cake’s share price had been trading at around GBX 198 on the London market before the virus-inspired crash in March. Since then it has rallied to trade in the area of GBX 220-230.
Uranium remains an area of interest for investors, as the price has been driven up as several of the world’s key uranium mining operations have been taken off-line via a mixture of flooding and the COVID-19 pandemic over the past few months. Yellow Cake is selling some of its uranium at the higher spot price in order to benefit from its strategic purchase agreement already in place with Kazatomprom.