Geiger Counter Ltd Geiger Counter Ltd : Half-year Report
June 13 2018 - 10:56AM
UK Regulatory
TIDMGCS
GEIGER COUNTER LIMITED
Date of Announcement: 13/06/2018
RELEASE OF INTERIM REPORT AND FINANCIAL STATEMENTS
The Directors announce the release of the Interim Report and Financial
Statements for the Six Months to 31 March 2018.
CHAIRMAN'S STATEMENT
We saw both sides of the uranium market at work over the last reporting
period. Spot prices and uranium focussed equity prices rose during
October and November as production cuts and mine closures drove market
sentiment higher. Sadly the promised production cuts did not materialise
in full and other technical factors caused market sentiment to fall
sharply as we moved into 2018. The spot price of uranium (as measured by
the U3O8 price) initially rose from US$20.25 at the end of September
2017 to US$22.32 in December 2017 before falling to US$21 at the end of
March 2018.
For the six months to 31st March 2018 the Company's net asset value fell
by 23 per cent and was affected by the rebalancing of the Global Uranium
ETF. The investment managers' report on the following page explains this
in more detail and outlines the background to the supply and demand
factors in the uranium sector. On a positive note it is encouraging to
see that globally nuclear power output has recovered to pre-Fukushima
levels at over 2,500TWh per annum.
The Company's ordinary share price fell by 4 per cent over the six
months and traded at a strong premium at the end of March. The
subscription share price was 4.75p at the end of March 2018.
Your Board is pleased to see that the subscription shares are trading
well in the market and also want to thank Shareholders for supporting
the continuation of the Company at the recent AGM.
Since the end of March we have seen an improving net asset value and
demand for the Company's shares has seen them trade at a consistent
premium for the last few months. We believe this supports our belief
that at some time in the relatively near future the uranium price is due
for a substantial increase. In response to this the Company has begun to
issue modest amounts of new ordinary shares at a premium. We are
confident that improving sentiment will see increasing demand for the
shares as we move positively into the new future.
George Baird
Chairman
June 2018
INVESTMENT ADVISER'S REPORT
We remain optimistic about the improving backdrop for the uranium price
and believe deep value offered by equity investments in the sector
offers significant investor opportunity. This has begun to gain
recognition as illustrated by the premium attributed to the physically
backed uranium ETF, Uranium Participation, which has been able to raise
equity in order to acquire material. At the time of writing proceeds
from the proposed IPO of Yellow Cake will be used to acquire U3O8
locking up a substantial amount of material and further tightening the
market. Also evidencing improving investor sentiment the Fund's share
price has traded at a premium to NAV for the last six months which has
allowed the board to issue new equity in addition to the subscription
shares listed at the turn of the year.
Geiger remains a uranium focused vehicle
The Solactive Global Uranium Index (Global X Uranium ETF) announced that
it is reweighting its constituents from 100% Uranium equities to 50%,
with the remaining constituents constituting companies such as Barrick
Gold, Rio Tinto and BHP, which weighed on the sector in March, although
will officially complete in July. This saw technical selling of
positions such as Nexgen, which hit a recent low on the last day of the
month and Geiger Counter used this as an opportunity to add. We believe
this was undertaken following a request from the URA equity ETF which
had outgrown the underlying liquidity, following significant inflows
since the late-2016 production cuts announced by Kazakhstan and latterly
by Cameco. Geiger Counter now stands out as the purist as play from a
uranium focused equity fund.
Supply adjustment continues
Cameco's December announcement to place its McArthur River mine into
care and maintenance in 2018 removed around 14Mlb, equivalent to nearly
8% of forecast uranium production for the year, having a significant
impact on spot prices. Following the earlier 5Mlb per annum production
cuts announced by Kazakhstan's state mining company Kazatomprom, in
January the market returned to balance and as a result the uranium price
rose sharply from US$20/lb to US$26/lb in December. Prices did, however,
retrace as Kazatomprom revealed its cuts would not be deepened around
the turn of the year, which weighed on sentiment. In addition, two US
uranium miners filed a joint petition to the US Department of Commerce
seeking industry protection from cheap imports in particular of "state
subsidised" product from Russia, Kazakhstan and Uzbekistan prompting
utilities to step away from the market as they wait to see what, if any,
policy changes are forthcoming.
Unsurprisingly the Fund NAV followed the uranium price, rising 24% into
mid-December before subsequently slipping to close the year down nearly
19%. However, spot prices have once again begun to recover US$23.4/lb as
it has become more obvious that commercial producers such as Cameco and
Rio Tinto will fulfil contracts from existing inventory and purchasing
material on the spot market, rather than mine their resources
unprofitably. This has driven 30% improvement in NAV to 20.9p since
end-March.
Without high prices, output cuts by Kazakhstan and most recently Cameco
seem unlikely to be reversed, as currently forecast by some industry
commentators. Major supply adjustments that have taken place in the
uranium market seem likely to continue helping to drive this dynamic, as
high priced legacy contracts run-off and unprofitable operations close.
With the market rebalancing incremental output cuts should soak up the
overhang of excess inventory and lift pricing.
Demand improving
At the same time the re-election of the pro-nuclear Abe government in
Japan has coincided with a pick-up in momentum of reactor restarts in
the region prompting utilities such as Kensai to resell LNG, an
alternative fuel used to generate power in the region. Importantly Abe
has backed the role of nuclear power and reiterated proposals for it to
have a 20-22% share of the market by 2030. Japanese generating capacity
is reaching more meaningful levels, currently 5.5GW, and globally
nuclear power output has recovered to pre-Fukushima levels at over
2,500TWh. China's continues its nuclear power development programme,
which is integral to its "blue sky" policy with 19 reactors currently
under construction while other regions such as India and Saudi Arabia
are also rolling out significant new capacity. Increasing marginal
demand for enriched fuel will help reduce secondary supply from
underfeeding as spare enrichment capacity is utilised, removing another
source of excess U3O8. In the short term clarification of US policy may
remove the temporary buyers' strike which has
latterly been evident following the joint 232 Petition filed by
UR-Energy and Energy Fuels could see a
return of utility buying later in the year.
Robert Crayfourd and Keith Watson
New City Investment Managers
June 2018
For further information please contact:
Craig Cleland - CQS (UK) LLP - 020 7201 5368
Lisa Neil - R&H Fund Services (Jersey) Limited - 01534 825 336
Interim Report and Financial Statements 31.03.2018:
http://hugin.info/140465/R/2199167/852698.pdf
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Geiger Counter Ltd via Globenewswire
(END) Dow Jones Newswires
June 13, 2018 11:56 ET (15:56 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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