The uranium trader is using the money raised to buy up 8.1mln pounds of the radioactive metal, which it believes is “fundamentally mispriced”
Yellow Cake – a nickname for uranium – is backed by Bacchus Capital, the corporate finance boutique set up in 2016 by a group of senior bankers led by Peter Bacchus.
The company reckons Uranium is structurally mis-priced and will make its money from stockpiling the radioactive metal, commodity streaming and royalties.
It sold 76mln new shares at 200p apiece in its initial public offering, raising US$200mln (£151mln) which it has used to buy 8.1mln pounds of uranium from Kazatomprom, one of the world’s largest uranium producers.
Yellow Cake paid US$21.01 per pound, a discount of about 8% to the current spot price.
A uranium pile of that size, which cost around US$170mln, is equal to one quarter of Kazatomprom’s annual production and approximately 5% of 2016 global marketed production.
In addition, the Kazatomprom contract allows Yellow Cake to buy up to an additional US$100mln of U3O8 each year for the next nine years.
“We are delighted with the outcome of this offering and the strong support from investors for Yellow Cake,” said chief executive Andre Liebenberg.
“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.”
He added: “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.”
Shares were trading at 194p early on Thursday morning, just below the IPO issue price.
Source: Proactive Investors UK