Yellow Cake LON:YCA, a specialist company operating in the uranium sector, which holds physical uranium for the long term, has said that following the completion of its approximately £62 million share placing on 7 February 2023, it has informed JSC National Atomic Company Kazatomprom that it has elected to purchase 1,350,000 lb of U3O8 at a price of US$48.90/lb. This is part of its 2022 uranium purchase option under its agreement with Kazatomprom.
Yellow Cake said it expects to take delivery in the second half of 2023. The stock remains a long term holding of The Armchair Trader. We like the fact that it provides direct exposure to uranium via actual physical holdings rather than an index of uranium miners as offered by many of the uranium ETFs currently on the market. Our position was up +77% per our December 31 report.The Kazatomprom option
Under its Framework Agreement with Kazatomprom, Yellow Cake has the option to purchase up to US$100 million of U3O8 per year from Kazatomprom at an undisturbed spot price, through to 2027. The purchase price was proposed to Yellow Cake by Kazatomprom on 25 January 2023 (using spot market indicators), enabling Yellow Cake to subsequently complete its approximately £62 million share placing and then exercise the option at the agreed price under the Framework Agreement to purchase U3O8 as part of its 2022 option.
This represents 1.35 million lb of additional U3O8 which is to be delivered into storage as part of Yellow Cake’s long term buy and hold strategy, increasing its total holdings to approximately 20.2 million lb of U3O8. This material will be delivered to Yellow Cake’s storage accounts at either the Orano Cycle’s Malvesi / Tricastin facility in France or to Cameco’s Port Hope / Blind River facility in Ontario, Canada in the second half of 2023. The exact delivery date and location will be agreed between the parties.
What about the uranium market?
The uranium spot price decreased from US$48.25/lb1 on 30 September 2022 to US$48.00/lb2 on 31 December 2022. Total spot market volume during the quarter represented about 50% of the level during the comparable period in 2021.
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The uranium spot price has begun to show strengthening in January breaking through US$50.00/lb. Yellow Cake said the spot price trend through the next quarter is expected to continue to be dictated by global economic conditions as well as investor confidence in the emerging role of nuclear power as a clean energy source.
Yellow Cake said that term contracting is expected to continue at levels above those experienced in the post‐Fukushima era as nuclear utilities strive to diversify sources in order to reduce future dependence on nuclear fuel supplies from Russia and support Western fuel supply sources. Increased uranium term prices can be anticipated as term contract demand rises.
