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Yellow Cake PLC (YCA-LN) has completed the previously announced $75M financing and though undisclosed, we assume that the vast majority of the proceeds have been allocated to the purchase of ~1.3M lbs of uranium, purchased directly from Kazatomprom (KAP-LN). As communicated earlier, the removal of this much primary material may spur additional spot buying or the signing of additional LT contracts by the utilities in the weeks ahead. Yellow Cake maintains a contractual agreement with Kazatomprom which allows for the purchase of up to $100M of uranium inventory (at near spot pricing) every year. The anticipated 1.3M lbs (our estimate) was very likely purchased at just below $50/lb when announced earlier in February. The 1-year YCA chart is below:
Though physical delivery from Kazatomprom is expected later in 2023, the latest purchases have bumped Yellow Cake’s inventory from 18.8M pre-capital raise to the current ~20.1M lbs, as estimated. That said, factoring the current spot price ($50.60/lb), an updated net working capital estimate and a current USD/GBP exchange rate of 0.83, we see YCA trading at a slight 0.95x discount to NAV. Our estimates and sensitivities are illustrated below:
Note that all of Yellow Cake’s inventory is stored at a facility located either at Cameco’s (CCJ) Blind River/Port Hope facilities (Canada) or at Orano’s storage facilities located in France. Note that this latest uranium purchase pertains to contract year 2022 - that said an option for an additional $100M in 2023 buying remains open. Given our LT $70/lb price objective for the spot and a constant USD/GBP foreign exchange rate, our 0.95x NAVPU valuation of £620 remains.