Uranium Trader Yellow Cake Debuts on AIM

Uranium trader Yellow Cake (LSE:YCA) made its debut on the AIM market of the London Stock Exchange on Thursday (July 5). Shares of the UK-based company opened at GBX 199.95 and grew slightly throughout the trading day.

The company, which is named after a synonym for uranium, is financed by Bacchus Capital, the boutique-style corporate finance firm established by Peter Bacchus.

In order to facilitate Yellow Cake’s AIM-listing, the company raised £151 million through an initial public offering (IPO), with an oversubscribed placing and subscription of 76.2 million ordinary shares, priced at GBX 200 a share.

The company used the proceeds raised from the IPO to purchase 8.1 million pounds of uranium at US$20.01 a pound from Kazatomprom, a Kazakhstan-based uranium company and one of the world’s largest producers. The deal saw Yellow Cake secure the valuable metal for 7.5 percent below the current market spot price.

The Kazatomprom contract also features a caveat allowing Yellow Cake the opportunity to buy up to an additional US$100 million of uranium annually for the next nine years.

“Yellow Cake’s long-term supply contract with Kazatomprom has allowed us to secure a highly significant and strategic position in physical uranium, at a competitive price, and to offer that exposure to a potential resurgence in the uranium price to investors, while avoiding direct exposure to exploration, development, mining and processing risk,” Yellow Cake CEO Andre Liebenberg said.

The massive purchase accounts for 25 percent of Kazatomprom’s annual production and approximately 5 percent of 2016 global production.

Yellow Cake will store its load of uranium in Canada at Cameco’s (TSX:CCO) Port Hope and Blind River sites.

Despite depressed uranium prices, Yellow Cake is betting on the long-run when it comes to the energy metal.

“Due to an exceptional set of circumstances, uranium is one of the few commodities yet to recover from the recent commodities bear market and we believe that uranium is currently fundamentally and structurally mispriced,” added Liebenberg.

Company chairman and CEO Peter Bacchus believes Yellow Cakes IPO, AIM-listing and uranium purchase are strong indicators of the UK’s growing appreciation of resource companies.

“The highly successful initial public offering of Yellow Cake demonstrates the depth and breadth of interest emerging in uranium as a commodity, and reflects the U.K. market’s continued strong support for the natural resources sector where an opportunity presented is on-theme, clearly articulated and compelling in nature,” Bacchus said.

Yellow Cake shares grew by 5 percent on its first trading day, closing at GBX 204.00.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.