15 Aug (NucNet): An investment fund designed to profit from the rising price of uranium has acquired a large shipment of uranium from Kazakhstan for $8.2m.
Yellow Cake, which raised $200m in a successful float on the London Stock Exchange earlier this summer, said it has bought 350,000 lb of uranium from Kazakh supplier Kazatomprom and will store it with the rest of its holding at a Cameco facility in Ontario, Canada.
The move means that Yellow Cake is now sitting on 8.4m lb of uranium, more than 5% of global supply.
Yellow Cake chief executive Andre Liebenberg said the purchase of the additional uranium is consistent with Yellow Cake’s intention of not holding additional cash on the balance sheet which is surplus to the company’s working capital needs. “We would like to thank Kazatomprom for its continued strong support as a reliable long-term strategic supplier to Yellow Cake,” he said.
Yellow Cake was created by Bacchus Capital Advisers to hold long-term physical uranium. The company said this approach offers exposure to the uranium price without the risks associated with investing in companies that explore for, develop, mine, or process the metal.
The thinking behind the timing of Yellow Cake’s entry into the uranium market is that uranium is “fundamentally and structurally mispriced”, and one of the few resources yet to recover from the commodities bear market, the company said.
Yellow Cake said it hopes to use a long-term supply contract with Kazatomprom to offer exposure to a potential resurgence in the uranium price to investors. It believes that a recent emerging theme of supply-side discipline in the uranium market and the industry structure will support future costs.
Uranium prices were severely hit in 2011 when an earthquake and tsunami triggered the worst nuclear accident since Chernobyl at the Fukushima-Daiichi nuclear power station in Japan.
Prices have failed to recover from the accident, but many analysts say they appear to have bottomed around the $20/lb mark, where they have more or less remained for some time.
