TIDMGCL TIDMTTM
RNS Number : 2265K
Geiger Counter Ltd
19 December 2022
19 December 2022
GEIGER COUNTER LIMITED
(THE "COMPANY")
RELEASE OF REPORT AND FINANCIAL STATEMENTS
The Directors announce the release of the Annual Report and
Financial Statements for the year ended 30 September 2022, which
are included as an attachment to this announcement.
http://www.rns-pdf.londonstockexchange.com/rns/2265K_1-2022-12-19.pdf
CHAIRMAN'S STATEMENT - FOR THE YEARED 30 SEPTEMBER 2022
Introduction
After a strong first half of the Company's financial year, the
second half saw the uranium market fall back as geopolitical and
inflation worries unsettled investors. The Company's net asset
value rose from 46.44p at the start of the financial year to 58.45p
as at 31 March 2022, but fell back to end the financial year at
47.46p which is an overall return of 2.2% for the year. The NAV
return was affected by the exercise of subscription rights details
of which are set out below. The dilution effect reduced the NAV
return by 3.8%. The Company's share price traded at premium levels
for the first half of the financial year but fell to a discount in
the latter part of the year. The Company issued, and bought back
shares, and issued shares from subscription rights during the year
as set out below.
Investment
The uranium sector rose sharply in late 2021 and early 2022 as
climate related government policies, following on from the UN
COP-26 climate conference, recognised the significant benefits of
nuclear power in order to meet carbon emission goals. We had seen
earlier in 2021 several new funds had been established in order to
purchase physical supplies of uranium product. In late 2021 and
early 2022 these funds increased their purchasing which helped the
market. The tragic events witnessed in February and the following
months in Ukraine contributed to all forms of energy markets rising
sharply as investors focused on potential shortages of gas, oil and
coal - uranium prices also rose as Russia is a key supplier of both
U308 and enriched uranium. Although positive news for the uranium
sector continued to be seen in summer 2022 as the US announced
plans to purchase uranium as part of its strategic energy reserves,
high inflation and the resultant expectations of higher interest
rates weighed on investor risk appetites, and markets fell.
September 2022 saw a sharp sell off as investors were concerned
about Russian activities around the Zaporizhzhia nuclear reactor in
Ukraine. The investment adviser's report on pages 12 to 14 sets out
the investment position more fully.
Share Capital
The Company's ordinary shares traded at a premium to their
underlying net asset value for significant periods during the
financial year. The Company utilised the share issuance powers
granted by shareholders and has issued 16,266,750 new shares, which
has raised GBP9.66m of new capital.
At the end of April 2022, the first Annual Subscription Right
event took place and all the available Subscription rights were
either taken up or, exercised by the Trustee. 17.8 million new
shares were issued raising GBP6.73 million of new capital. The
Second Subscription Right price will be 51.52p per share with the
expected date being 2 May 2023.
The Company's ordinary shares also traded at a discount to their
underlying net asset value towards the end of the Company's
financial year, and the Board utilised its share buyback powers to
repurchase 505,000 ordinary shares, at a cost of GBP0.23m.
Outlook
Your Board and the Investment Managers remain confident over the
long-term outlook for uranium. Rising energy costs, which have
accompanied the global energy crisis, have focused governments'
minds on the inherent value of existing base load power generating
capacity; particularly from the low-carbon-emitting nuclear sector.
With good reason, established Western markets are now keener than
ever to maintain nuclear power in the energy mix. The EU commission
confirmed the inclusion of Nuclear and Natural Gas in the EU
taxonomy, a classification system that helps investors determine
which economic activities are environmentally sustainable. This
should attract cheaper debt financing options, and further support
from governments and green focused capital. Such policy changes
have proved extremely beneficial, allowing utilities to invest and
sustain output from existing operations, while also providing
optimism for future development of new capacity. The Asia nuclear
market has improved markedly with Japan announcing nuclear
restarts, and China expanding its nuclear plan rollouts.
At the time of writing the Company's net asset value stands at
43.97p and the ordinary share price is 41.75p with the ordinary
shares trading at a discount of 5.3%.
Ian Reeves CBE
Chairman
December 2022
INVESTMENT ADVISER'S REPORT - FOR THE YEARED 30 SEPTEMBER
2022
Over the financial year ending September 2022 energy markets
have remained at the forefront of market thinking. The strongest
commodities were all in the energy sector with the post-covid
global economic recovery driving momentum.
Russia's invasion of Ukraine earlier in the year saw energy
prices spike even higher, to recession inducing levels. The most
extreme are European gas prices which have risen to nearly six
times the average over the preceding decade. Even if hostilities
were to cease the markets expect European gas prices to remain
historically elevated thereafter. The outlook is similar in Asia
and the US. Other fuels have seen similarly extreme moves with
previously shunned thermal coal prices doubling in the calendar
year. The uranium U3O8 spot prices trends have followed a similar,
if less pronounced, trajectory ending the financial year up
12.2%.
The Fund NAV, having risen 43% to 67.1p prior to the
subscription rights issue, subsequently pulled back and ended the
year up 2.1% at 47.46p having absorbed the dilution effect of 3.8%
from issuing subscription shares at a discount to NAV.
Governments are at last embracing the value in a nuclear power
generation, exposing flawed energy policies. As reported with the
interim update, the energy crisis has spurred a pragmatic,
pro-nuclear policy rethink around the world. Not only has its cost
competitiveness improved markedly, given the sustained upward move
in traditional fossil fuels, but its recognition as a zero carbon
source of base load power is now being much more widely
appreciated. Crucially, in recognising energy vulnerabilities and
the benefits of a more balanced power generation mix governments
have implemented meaningful actions providing more confidence in
the outlook for strong sector returns: the EU has included nuclear
power in its Taxonomy for Sustainable Activities; the US nuclear
power industry has been granted clean energy subsidies as part of
the newly legislated Inflation Reduction Act; Japan's reinvigorated
nuclear restart programme has received local prefecture backing.
Meanwhile nuclear power juggernaut, China, has indicated it has the
capacity to accelerate its build out from 6-8 reactors a year to
10.
Asia outlook improves markedly
A prime recent example has been Japan's decision to accelerate
its reactor restart programme alongside much improved local
community backing. The country aims to have 17 of its 33 operable
reactors back online by next summer. 10 are already operational and
another 15 are at various stages in the restart process. The lives
of Japan's existing reactors are also to be extended and investment
in next generation plants expanded. As of June 2022, Japan is
targeting nuclear power to contribute at least 20% of the country's
power generation by 2030. After multiple blackout alerts in Tokyo
this year, public sentiment has also tilted in favour of nuclear,
with the International Energy Agency highlighting in summer that
public support for a nuclear restart stood at over 60%. This has
since been evidenced by the approval from governor of Shimane
prefecture to restart the namesake reactor, marking the completion
of the final process to gain local community consent.
Having previously announced the reversal of its nuclear power
phase out policy in June, the South Korean government announced
plans to start construction of new capacity in 2024. Its initial
focus will be recommencing construction of reactors 3 and 4 at the
Shin Hanul power station, whose development was suspended in 2017
due to uncertainties about government energy policy. This follows
last month's grid connection for reactor 1 at the power station
with connection of unit 2 expected to enter commercial production
later this year.
China has also announced plans to accelerate its reactor build
out. In Early September, authorities sanctioned two new reactor
developments taking the total number of reactor approvals this year
to 10, the highest level since 2008.
Widespread support confirmed in established western markets
Amid extreme rises in energy costs, the EU rubber stamped
nuclear power's inclusion in the EU Green Taxonomy, which should
improve access to lower cost development capital. Pertinently,
Germany also confirmed intentions to keep its three remaining
nuclear reactors operating, a policy volte face typifying the shift
in perceptions towards this sector.
Meanwhile the US Inflation Reduction Act has been passed into
law, providing support for existing and new nuclear power projects.
Regional investment in domestically sourced fuel together with its
plans to encourage existing commercial groups to increase
processing capacity, via development of additional conversion and
enrichment facilities, will help reduce the the US' dependence on
Russia which still supplies upwards 15% of US reactor fuel. The
government indicated that it would contract with commercial
operators in the sector to deliver new facilities. Nevertheless,
fuel security will remain a risk for the country until new
enrichment capacity comes on-line, scheduled for 2025.
Cameco's recent acquisition of a 49% stake in nuclear service
provider Westinghouse, consolidating a position as an integrated
one-stop-shop fuel supplier, reflects the heightened interest being
paid to the sector.
Supply from restarted production absorbed
There has been little news on incremental supply since the last
interim report. As outlined then, an estimated 30Mlbs pa of
additional production is expected in the next few years from the
combined increases announced by Kazatomprom, Cameco and Paladin.
Utilities have easily absorbed this with a period of term
contracting over the turn of the year preceding the McArthur River
and Kazakh mine restarts, taking place between $45-50/lb U3O8.
However, estimates still put the U3O8 supply deficit
considerably higher than these combined output increases by 2030
and incremental greenfield developments will therefore be required
to fill the supply deficit. With much improved confidence in fuel
demand and a requirement for higher prices to incentivise the
greenfield developments needed to address the supply deficit
projected towards the end of this decade, the outlook continues to
support strong sector returns. Much of this increase will dovetail
with the scheduled timeline for development of the US processing
infrastructure.
Market sentiment and Company premium
Reminiscent of the 1970's, extreme energy price moves started to
hobble growth expectations with monetary policy tightening, to
temper energy led inflationary pressures, acting as a further drag.
This resultant rise in recessionary risks has notably impacted
broader investor sentiment and the performance of uranium equities
since June. As illustrated by having traded at a premium through
much of the period to end-March this year, the share prices of
physically backed investment vehicles such as the Sprott Physical
Uranium Trust subsequently slipped to discounts which reached
nearly 20% mid-year.
Trading Activity and Performance
The Company returned 2.2% for the year and absorbed over 3.8%
dilution resulting from the embedded rights issue.
Proceeds raised over the year were invested in Nexgen and
Fission, which retain core positions in the portfolio. In addition,
the Company added back to its holding in Denison which continues to
progress low cost, in-situ mining methods on its high-grade
projects. As previously outlined the Company also invested in
Paladin's financing to restart its Langer Heinrich mine.
Holdings were also added to low-cost US producers, including
Ur-Energy and to a lesser extent Energy Fuels. The recent USD
strength appears to have held back the relative performance of US
located assets which also represent a significant exposure for the
Company.
For further information, please contact:
Craig Cleland - CQS (UK) LLP - 020 7201 5368
Jane De Barros-Sousa - R&H Fund Services (Jersey) Limited -
01534 825 259
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END
FR EAXANFENAFFA
(END) Dow Jones Newswires
December 19, 2022 12:20 ET (17:20 GMT)
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