Yellow Cake raises $150M to buy more uranium amid its tight supply
(Kitco News) - Yellow Cake, a specialist company operating in the uranium sector with a view to holding physical uranium for the long-term, today announced its intention to conduct a non-pre-emptive placing of new ordinary shares in the company to raise gross proceeds of approximately US$150 million.
The company said it intends to use the proceeds of the placing to fund purchases of physical uranium ("U3O8") of approximately 3 million lb of U3O8.
According to a press-release, Yellow Cake will purchase approximately 1 million lb of U3O8 from Kazakhstan's Kazatomprom, the world's largest uranium producer, at a price of US$47.58/lb.
"This purchase will be above and beyond the company's 2021 option under its agreement with Kazatomprom, which has already been fully exercised earlier this year," the company noted.
In addition, the company will purchase approximately 2 million lb of U3O8 from Curzon Uranium Limited at a price of US$46.32 /lb.
"Curzon is sourcing the U3O8 from China's CGN Global Uranium, who has agreed to deliver the U3O8 directly to the company's account at Cameco's Port Hope / Blind River facility in Ontario," the company said in its statement.
Yellow Cake added it believes that the current level of the uranium price offers a compelling buying opportunity. Overall, as the trend for decarbonisation continues globally, uranium demand growth is expected to outpace supply, the company pointed out.
"Despite the significant price rally in the U3O8 spot market during August to October of this year, third-party research suggests an incentive price in excess of US$60 would be required to bring significant new capacity on line," the company noted.
Importantly, Yellow Cake stressed out that uranium supply is projected to continue its decline without a further and sustained significant increase in the uranium price that would enable mines to restart or be newly commissioned to produce in future years.
The company also mentioned that the Sprott Physical Uranium Trust has been active on the sport market, purchasing 16.5 million lb of material from the market since its at-the-market facility went live on 17 August 2021, and said it is expected to continue to deplete the tight spot market.