• Physical uranium trader tagged with nickname of the radioactive metal

  • Owns around 9.62mln pounds of uranium

  • Contract to buy up to an additional US$100mln of U3O8 each year for the next nine years from Kazatomprom

What Yellow Cake does:

Yellow Cake PLC (LON:YCA) is a physical uranium trader with a moniker that is a nickname for the radioactive metal, U3O8.

The group floated on AIM in July 2018 after raising US$200mln (£151mln) from the sale of 76mln new shares at 200p apiece in an initial public offering.

The firm is backed by Bacchus Capital, the corporate finance boutique set up in 2016 by a group of senior bankers led by Peter Bacchus.

The cash raised was used to buy 8.1mln pounds of uranium from Kazakstan’s state-owned firm, NAC Kazatomprom JSC, one of the world’s largest uranium producers. Yellow Cake paid US$21.01/lb (per pound), a discount of about 8% to the then spot price.

A uranium pile of that size, which cost around US$170mln, was equal to one quarter of Kazatomprom‘s annual production and approximately 5% of 2016 global marketed production.

In addition, the Kazatomprom contract allows Yellow Cake to buy up to an additional US$100mln of U3O8 each year for the next nine years.

How it’s doing 

Results for the quarter to 31 December showed an estimated net asset value of 211p per share, a significant premium on the current share price.

Total assets amounted to US$245.3mln, comprising largely of 9.62mln pounds of physical uranium (U3O8) valued at a spot price of US$25.00 per pound.

What the boss says: Andre Liebenberg, chief executive

 “Uranium spot market volumes recovered to near 2018 levels in the last quarter, despite the continued uncertainty as to the findings and recommendations of the US Nuclear Fuels Working Group, though volumes were down over the year.

“With this uncertainty remaining, the spot price has stayed locked in a narrow range.

“The long term case for uranium remains sound, in particular as the world increasingly recognises the need for the clean baseload energy nuclear provides.

“We expect demand to rise as the new nuclear fleet currently under construction comes on stream over the next two years and we see a sustainable return to buying from the major utilities.”

Inflexion points

  • Shares are trading at a substantial discount to NAV
  • Yellow Cake has begun a share buyback programme.to narrow the gap
  • New reactors to come onstream in next two years

What the broker says

Berenberg’s analysts said the current discount of Yellow Cake’s stock in relation to their 280p target price represented “an attractive buying opportunity”, adding that the firm could work to close the discount through a share buyback.