Yahoo Finance Investment fund Yellow Cake snaps up more uranium after float success
An investment vehicle designed to profit from the rising price of uranium is to snap up another £8m-worth of the mineral.
Yellow Cake, which raised £200m in a successful float on the London Stock Exchange earlier this summer, said it would buy another 350,000 lb of uranium from Kazakh supplier Kazatomprom and store it with the rest of its holding at a special facility in Canada.
The move means that Yellow Cake is now sitting on 8.4m lb of uranium, more than 5pc of global supply. The latest tranche was bought at below spot prices using excess funds left over from the company’s initial public offering, which raised slightly more than it had anticipated.
Yellow Cake has proven a hit with London investors; having floated at 200p a share it is now worth 226.35p, valuing it at £172m.
The company’s proposition is that uranium, used in nuclear reactors, is due to rebound in price in the coming years. It hopes to capitalise on this by selling its uranium stash to energy companies at a certain point in the future.
The price of uranium, dubbed “yellow cake” because of its distinctive colour in its powdered form, has been in the doldrums since the Fukushima accident in Japan in 2011. But supply is now under pressure as producers such as Kazatomprom and Cameco of Canada cut back production. Meanwhile China is building a rash of new nuclear reactors and Japan is bringing its own power plants back into service, creating fresh demand.
Andre Liebenberg, Yellow Cake's chief executive, said that “market sentiment towards uranium continues to improve” and noted that the purchase was “consistent with Yellow Cake's stated intention of not holding additional cash on the balance sheet which is surplus to the company's working capital needs”.
All of Yellow Cake’s supply has come from Kazatomprom, the state-owned company that is the world’s largest producer of uranium. The Kazakh government is looking to float Kazatomprom as part of a wider plan to privatise some of its largest companies, with shares expected to be listed on the newly launched Astana stock exchange and abroad.
London is thought to be a likely destination for the listing, with Yellow Cake having paved the way for investors unfamiliar with the uranium industry.
Yellow Cake is the brainchild of Peter Bacchus, a former Jefferies and Morgan Stanley banker, who now serves on its board.
