FINAL RESULTS FOR THE YEAR ENDED 30 JUNE 2007
5 OCTOBER 2007
CHAIRMAN’S STATEMENT
Highlights:
- Yellowcake declares its maiden pre-tax profit – GBP 192,169 for the year
- Achieves excellent portfolio performance - up 374% since commencing investment in September 2005
- Completes direct ownership strategy with the Grease River Option Agreement
- Positioned for further growth in the forthcoming year
This has been an eventful and progressive year for your Company.
During the period under review, the forces that led us to form and launch Yellowcake plc on PLUS in July 2005 have continued to meet and exceed our vision at that time.
Energy generation is responsible for about 40% of global carbon dioxide emissions. Nations are trying to develop a less carbonised energy mix. Nuclear power already avoids about 2.6 billion tonnes of carbon dioxide pollution around the world each year. By comparison, 26 billion tonnes are emitted globally by the transportation, power generation and industrial sectors.
Global warming, a low cost of electricity generation and the need for nations to achieve security of energy production have combined to accelerate the ordering and planning of new nuclear stations. This has ensured substantial future increases in the demand for uranium.
At the same time, actual production of uranium has languished, in part due to floods encountered in Cameco/Areva’s Cigar Lake mine in Canada in October 2006 and ERA’s Ranger mine in Australia in March 2007. The result of all these factors has been further hikes in the spot price of U3O8 (uranium oxide), from US$45.50 per lb at 30 June 2006 up to US$135 per lb a year later.
In the trading period being reported, our investment portfolio saw a rapid growth in value, as uranium stocks around the world rose in response to market forces and the international investment community has become more aware of the attractions of investing in uranium companies.
With our first strategic objective of creating and developing a global portfolio of uranium equities realised, we have been able to move to implement our declared intention to invest in direct uranium exploration properties. Using our Chief Executive’s widespread contacts in the uranium mining industry, we reviewed many propositions and eventually managed to select a first-class property in which to invest.
The Grease River project is located on the northern rim of the Athabasca Basin in Saskatchewan, Canada, the most prolific uranium province in the world which currently produces some 30% of global supply. As an additional advantage, securing an Option Agreement with leading explorer CanAlaska Uranium has provided us with a first class geological and operations team to exploit the potential in the project.
Our business model evolved further when we planned to transfer the principal
funding commitment on Grease River to a newly floated company, Uranium Prospects
Plc, in which we subscribed for a 16.51% equity stake.
Yellowcake now has a 9% carried interest in the project, a reduction of risk
in its implementation, and has earned fees for sourcing and development. We
foresee this model as providing us with a new income stream and at the same
time a low-risk entry into further projects in the future.
Although the uranium spot price has moved lower during the period since our year-end, uranium mining continues to be a highly profitable activity. We remain very confident about its progress in the months ahead and we also believe we can expect further gains in our quoted portfolio. With this background, we will be looking for further investments of funds to significantly enhance the value of our Company.
Mark Watson-Mitchell
Executive Chairman
Chief Executive’s Review
During the year under review, our overheads continued to be minimised and the value of our portfolio continued to rise. Additionally, in connection with the initial funding of the Grease River project, we crystallised some of our gains during the latter half of the year enabling us to declare a maiden pre-tax profit of GBP192,169 for the year. Taking account of the prior year losses brought forward, the corporation tax liability for the year amounted to GBP14,141.
The world market for uranium has been stimulated by both the number of new nuclear stations being forecast and the rise in the spot price of U3O8. The latest figures from the World Nuclear Association show that on 30 August 2007 there were 338 nuclear stations under construction, planned or proposed, in addition to the 439 nuclear reactors currently deployed worldwide. That is a projected 77% increase in global station numbers, up 35% since January of this year.
NUCLEAR GROWTH ILLUSTRATION:
| Date of WNA report |
Operable reactors | Under construction | On order or planned with funding | Proposed |
|---|---|---|---|---|
| 29 January 2007 | 435 | 28 | 64 | 158 |
| 30 August 2007 | 439 | 34 | 81 | 223 |
| Increase | +0.9% | +21.4% | +26.6% | +41.1% |
Total additional stations are 250 (Jan 07) and 338 (Aug
07). An increase of 35%.
World Nuclear Association (WNA) figures
Perceived shortages in the supply of uranium over the period to 2020 prompted a rise in its spot price to US $135 at 30 June 2007. This has encouraged over 500 companies worldwide to be formed or reformulated in the field of uranium exploration and development. Analysing the quoted participants has therefore been made more complicated.
Some 85% of the world’s uranium is currently mined by just six companies. Of these we have invested to a minor extent in Cameco and Areva but not in BHP Billiton and Rio Tinto, which are diversified miners, nor in the two Russian producers.
Our portfolio has been primarily concentrated on the near-term uranium production companies and what we see as the explorers most likely to discover and develop substantial new sources of uranium. The table below gives details of our ten largest holdings at the year-end and their performance gains since acquisition:
YELLOWCAKE'S TOP TEN HOLDINGS BY VALUE AT MARKETS CLOSE ON 30 JUNE 2007| Company | Area of operations | % of Portfolio | Year purchased | % gain over cost¹ |
|---|---|---|---|---|
| Uramin Inc | Africa, Canada | 21.64 | 2005 | 616.74 |
| Uranerz Energy | USA | 6.15 | 2006 | 149.61 |
| Cue Capital Corp | Paraguay | 4.92 | 2007 | 13.78 |
| Denison Mines² | Canada, USA, Africa, Mongolia | 4.78 | 2005 | 79.34 |
| Paladin Resources² | Namibia, Malawi, Australia | 4.69 | 2005 | 338.31 |
| Centram Exploration | Australia, Africa | 4.15 | 2007 | 178.61 |
| Pitchstone Exploration | Canada, Africa | 3.91 | 2005 | 137.74 |
| Altius Minerals Corp | Canada | 3.25 | 2005 | 383.11 |
| Strateco Resources | Canada | 3.10 | 2006 | 59.95 |
| Uranium One² | Canada, Australia, Kazakhstan, S Africa | 3.06 | 2005 | 134.64 |
| Overall portfolio gain on net funds invested | 373.61 | |||
| Uranium spot price | Sep 05 - US$31.25 Jun 07 - US$135.00 |
332.00 |
¹ Gains stated are in sterling and before brokerage charges
² Uranium producing companies at 30 June 2007
The year has seen substantial mergers and acquisition activity in the uranium mining industry stimulated by the need to establish larger entities in a rapidly expanding sector. Benefits to Yellowcake’s selected portfolio constituents during the year include the takeovers of UrAsia by Uranium One, of International Uranium Corporation by Denison Mines, of Summit Resources by Paladin Resources and, at the year-end, of UraMin by Areva.
Another beneficial factor has been the selection of certain junior exploration companies as partners by the majors who have bought shares and injected capital to develop their projects to fruition. Companies within the Yellowcake portfolio which have benefited from this type of activity include Pitchstone, Western Uranium and most recently, Cue Capital which on 6 September 2007 announced a letter of agreement with Cameco under which a Strategic Alliance will be formed providing Cue with up to US$135m from Cameco if certain exploration targets are met.
Update from the Year-end
July and August saw the first reductions in the spot price of uranium for over four years, down to a price of US$75 in recent weeks. The factors involved included a continuing “buyers strike” as utilities have held off exacerbating the price still further, followed by the announcement of a sale of US Government secondary stocks.
Additionally, as a result of the credit markets crisis in mid-August, many institutions sold off their holdings in uranium equities in a flight to liquidity. Accordingly, there were falls of up to 50% in the prices of most uranium stocks before they began to recover.
The developments with our Option Agreement with CanAlaska Uranium over the Grease River project outlined in the Chairman’s Statement above involved the payment to Yellowcake of a total of GBP209,066 by Uranium Prospects. The takeover of UraMin by Areva for cash has provided us with another GBP180,000 in cash.
We have therefore had the opportunity to purchase the shares of several of our best quoted targets in the last month at what we see as extremely low prices while we still retain cash of some 16% in our portfolio to take up further such opportunities for investment as they arise.
The majority of our investments are in companies quoted on the Toronto Stock Exchange. During the period covered by these financial statements the Canadian dollar weakened against Sterling from C$2.05 on 3 July 2006 to C$2.14 on 29 June 2007. However, since that date it has strengthened to C$2.04, providing a further benefit to our portfolio valuation in Sterling.
Given the attractions of nuclear power and the need to supply the electricity generating industry with the uranium it needs, we confidently expect both the uranium spot price and the share prices of our selected portfolio constituents to rise again over the months ahead.
Robert Wallace
Chief Executive
Further information:
Yellowcake Plc
Robert Wallace, Chief Executive
Email: robert@yellowcakeplc.co.uk
Tel: 020 7638 8750
St Helen’s Capital Plc
Barry Hocken, Director
Email: barry.hocken@sthelenscapital.com
Tel: 020 7628 5582
Notes To Editors
Yellowcake plc (PLUS:YEL) is the world's first portfolio company specialising wholly in investing in uranium explorers, developers and producers. Founded in February 2005, it floated on London's PLUS Markets in July 2005. Yellowcake commenced investing in quoted and unquoted uranium companies in late September 2005 and currently its portfolio includes 32 companies, with operations in Africa, Australia, Canada, Kazakhstan, Mongolia, Paraguay and the United States. Its strategy also includes sourcing uranium projects and it has a 9% carried interest in the Grease River Option Agreement with CanAlaska (40%) and Uranium Prospects (PLUS: URPP) (51%).
www.yellowcakeplc.co.uk.
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 2007
Notes 2007 2006
GBP GBP
---------------------
TURNOVER 531,196 170,221
Cost of sales (217,903) (154,390)
---------------------
GROSS PROFIT 313,293 15,831
Administrative expenses (121,694) (141,443)
---------------------
OPERATING PROFIT/(LOSS) 191,599 (125,612)
Interest receivable 570 2,231
---------------------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE 192,169 (123,381)
TAXATION
Tax on profit/(loss) on ordinary activities (14,141) -
---------------------
PROFIT/(LOSS) FOR THE FINANCIAL YEAR 178,028 (123,381)
---------------------
PROFIT/(LOSS) PER SHARE
Basic profit/(loss) per share 7 0.3p (0.3p)
Fully diluted profit/(loss) per share 7 0.2p (0.3p)
All of the Company's operations are classed as continuing. There
were no gains or losses in the year other than those included in
the above profit and loss account.
BALANCE SHEET AS AT 30 JUNE 2007
Notes 2007 2006
GBP GBP
--------------------
FIXED ASSETS
Investments at lower of cost or net
realisable value 6 395,951 289,919
CURRENT ASSETS
Current asset investments 6 120,634 23,021
Cash at bank 6,735 5,395
Debtors and prepayments 4,084 -
--------------------
Total current assets 131,453 28,416
--------------------
TOTAL ASSETS 527,404 318,335
CREDITORS: amounts falling due within one
year (36,750) (27,299)
--------------------
NET ASSETS 490,654 291,036
--------------------
CAPITAL AND RESERVES
Called up share capital 145,625 144,375
Share premium account 272,924 261,674
Outstanding warrant costs 17,458 8,368
Profit and loss account 54,647 (123,381)
--------------------
SHAREHOLDERS' FUNDS 490,654 291,036
--------------------
Notes to the Accounts:
- The above audited results cover the year to 30 June 2007. The comparative figures for 2006 cover the period from incorporation on 21 February 2005 to 30 June 2006.
- The directors do not recommend the payment of a dividend.
- The financial information in this release has been extracted from the audited accounts.
- The financial information set out above does not constitute the Company’s statutory accounts for the year ended 30 June 2007, but is derived from those accounts. Statutory accounts for 2007 will be delivered to the Registrar of Companies following the Company’s annual general meeting, which is due to be held on 12 November 2007. The auditors have reported on these accounts, their report was unqualified and did not contain statements under section 237(2) or 237(3) of the Companies Act 1985.
- Copies of the full accounts will be filed on the Company’s website and mailed to shareholders as soon as they are produced.
- Fixed and current asset investments:
2007 2006 GBP GBP ----------------- Fixed assets: listed investments at lower of cost and net realisable value 395,951 289,919 Current assets: Cash deposits held at broker for long term investment purposes 120,634 23,021 ----------------- Total fixed and current asset investments 516,585 312,940 -----------------Listed investments analysed by functional category comprise:
2007 2007 2006 2006 Cost 1 Value 2 Cost 1 Value 2 GBP GBP GBP GBP --------------------------------- Exploration & development 249,850 523,607 149,539 181,609 Direct exploration 89,766 98,077 Near production 4,893 11,011 49,799 64,924 Production 51,442 113,282 90,581 122,437 --------------------------------- 395,951 745,977 289,919 368,970 --------------------------------- 1: amounts stated at lower of cost or realisable value 2: amounts stated at market value.
As at 30 June 2007 the aggregate market value of listed investments was GBP745,977 (30 June 2006: GBP368,970) making total investments, including cash deposits, of GBP866,611 (2006: GBP391,991), resulting in an unrecognised gain of GBP350,026 as at 30 June 2007 (30 June 2006: GBP79,051). If this gain were to be realised this would result in a potential tax charge, subject to available tax losses, of GBP105,008 (2006: GBP23,715) being incurred by the Company, based on a corporation tax rate of 30%. Market value is based on published price quotations where applicable.
As a result of the post balance sheet events referred to in Note 8 below, the Company’s assets were increased by GBP450,000 before tax in respect of its investment in Uranium Prospects plc at the flotation price of that company and GBP25,000 before tax in respect of the management fee received under the assignment of part of the Grease River Option Agreement.
- Profit per share
The basic profit per share is based upon a profit of GBP178,028 (2006: loss of GBP123,381) and the weighted average number of shares of 57,813,014 (2006: 43,650,095) in issue during the relevant period. Taking into account the number of potentially dilutive shares under warrant (15,000,000), the weighted average number of ordinary shares for the purpose of dilutive earnings per share is 72,813,014 (2006: 58,650,095).
- Post balance sheet events:
On 27 July 2007 Uranium Prospects plc (“UP”), a company in which Yellowcake had purchased 10,000,000 shares, was floated on PLUS. The subsequent market mid price of UP has varied between 4.75p and 5.5p per share and was valued at a mid price of 5.125p on 3 October 2007.
On 3 August 2007, following an EGM of the Company, the Grease River Option Agreement between Yellowcake and CanAlaska Uranium Ltd (“CanAlaska”) was renegotiated. As a result a revised Option Agreement between Yellowcake, UP and CanAlaska was entered into. In connection with this revised Agreement:- Yellowcake agreed terms with UP under which UP acquired an option to acquire a 51% interest in the Grease River Project and Yellowcake will retain a 9% carried interest, subject to the obligation to transfer shares as stated in v) below.
- UP assumed liability to pay option fees, previously due to be paid by the Company, of C$75,000 per annum for a further three years to CanAlaska and repaid to the Company C$75,000 in respect of the first-year option fee already paid.
- UP assumed the liability to pay the balance of C$5,000,000 of exploration expenditures on the Grease River Project, previously due to be paid by the Company and repaid to the Company exploration expenditures already paid totaling C$399,200.
- UP paid to the Company the sum of GBP25,000 as a contribution towards the cost of management time and expenses which the Company had incurred over the last year in negotiating the Option with CanAlaska.
- In addition to the 500,000 ordinary shares of 0.25p each in the Company already issued to CanAlaska, the Company will, as a condition of the Option, remain obliged to issue further tranches of shares to CanAlaska over the period to 31 March 2010 - being 500,000 before 31 August 2007, 500,000 before 31 March 2008, 500,000 before 31 March 2009 and 500,000 before 31 March 2010. CanAlaska may, at its option, elect to be issued with an equivalent value in the form of shares of UP owned by the Company. In respect of the shares issued on 31 August 2007, CanAlaska opted to be issued with UP shares, and consequently Yellowcake transferred 286,355 UP shares to CanAlaska at a cost to the Company of GBP1,432.
The Directors of Yellowcake plc accept responsibility for this announcement.