Last week’s first-half results from Yellow Cake read very well, as net asset value shows healthy gains, buoyed by higher uranium prices and well-timed additions to the company’s stockpiles of triuranium octoxide (U3O8) in its specialist warehouses in France and Canada.
Ish, ish. Technically it is triuranium octoxide, but that’s not what anyone calls it. It’s the sort of description used by someone looking it up rather than anyone with industry knowledge. But there we are.
But this story is a fast-moving one and further purchases and advances in the commodity price, thanks in no small part to Dubai’s Cop28 summit, mean that net asset value is already higher still.
Yellow Cake could therefore prove to be particularly well-positioned as nuclear power starts to really grab the attention of policymakers.
During the six months from April to September, the value of Yellow Cake’s holdings of U3O8 rose by 56pc, amid a 45pc surge in uranium spot prices to $73.50 per pound and an increase in the company’s physical stock, thanks to purchases from Kazakhstan’s Kazatomprom.
And, you know, -ish, -ish.
The actual point of the company, Yellow Cake, is to be a method of allowing the individual investor to speculation uppon the uranium price. Here’s one I prepared earlier:
Yellow Cake Exists To Allow Speculation On The Uranium Price
And in more detail:
As it happens we’d rather than random economic actors – you know, speculators, folk like us – didn’t get their hands on piles of uranium. We’re all a bit funny that way. So, to trade anything in this world you need to have a license. I actually had one once and it took about 6 months to get. Never used it but I just want to point out that it’s not something easily handed out.
This requirement for a license means that there are no terminal markets. It’s not like aluminum, or nickel, where you can sell a future, deliver into warehouse and that’s it, you’re paid. The transaction has to go to the actual user, that end user – they’re the only people with licenses to be able to buy.
There are brokers in this market but they tend to be working on commission rather than taking ownership.
So, we’ve no terminal market, no futures- how could we have physical delivery if you must have a license? and if only the few hundred people with a license could take physical delivery then how can you have a futures market? – so price discovery is pretty hazy. We have guidance as to what prices are but every actual deal is large and individually priced.
So, you can’t speculate in the uranium price
This means that it’s not possible to speculate in the uranium price. We can do so indirectly, through stock in miners, or processors (Energy Fuels being an obvious candidate). There are several ETFs which hold baskets of exactly these sorts of companies. That’s great, but that’s always indirect. Energy Fuels might be driven either way by its adventures in rare earths for example, rather than by the uranium price. Indirect proxies for prices are, well, they’re indirect and thus not perfect.
It’s possible that you might want to be able to hedge against the uranium price. If you were a reactor company, for example. But the real thing is that many speculators – sorry, investors – would like to be able to play that uranium price. But as above, that’s difficult.
So, Yellow Cake
This is what Yellow Cake PLC (the company) is about. The whole of the thing is to have a structure that allows people to speculate on the uranium price. If a company owns a pile of that yellow cake then the company valuation will vary as does the yellow cake price. Folk can buy and sell shares in the company and there we are, we’ve our desired ability to speculate on the uranium price.
This is why the company was created. They’ve got the necessary licenses to be able to sit on a pile of uranium. We don’t need a license to be able to trade the stock. Great there we are, the job’s done.