TIDMGCL TIDMTTM
RNS Number : 9697X
Geiger Counter Ltd
27 December 2023
27 December 2023
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 2023, which
are included as an attachment to this announcement.
http://www.rns-pdf.londonstockexchange.com/rns/9697X_1-2023-12-27.pdf
CHAIRMAN'S STATEMENT - FOR THE YEARED 30 SEPTEMBER 2023
Introduction
The Company's financial year to 30 September 2023 started weakly
as high inflation and interest rates worried investors in equities
generally. The net asset value fell from 47.46p at the start of the
financial year to 41.76p as at 31 March 2023. The second half of
our financial year has been more positive with a strong rally in
both the physical spot price of uranium as well as the uranium
miners themselves. The Company's net asset value rose to 64.66p at
the end of the financial year which is an overall return of 36.2%.
The Company's share price rose from 46.0p on 30 September 2022 to
52.0p a year later giving an overall return of 13.0% for the year.
This was weaker than the NAV return as the discount to net asset
value widened from 3.1% at the start of the period to a figure of
19.6% at the end of September 2023. The Company bought back shares
during the year as set out below.
Investment
The uranium sector has seen positive news flow in the last year
which has encouraged utilities to enter into longer-term contracts
at prices higher than we have seen for a number of years. We have
also seen China planning to accelerate its new reactor programme
and both France and Japan commit to extend the life of their
nuclear fleet and add capacity. At the end of 2022 the US signed
several long-term contracts with several US based uranium companies
to supply the newly formed US strategic energy reserves which in
turn has supported the share prices of several US and Canadian
miners. Government support recognising the significant benefits of
nuclear power in order to meet carbon emission goals has continued
in Europe and Asia. Reflecting the improved demand outlook, the
World Nuclear Association increased its annual demand growth
estimates to 4.1% out to 2040 in its latest report on the industry
supply-demand balance. Your investment managers have done a good
job in selecting the stocks for the portfolio and ensuring that the
Company continues to prosper. Their report on pages 12 to 14 sets
out the investment position more fully.
Share Capital
At the end of April 2023, the second Annual Subscription Right
event took place and I am sorry to report that the net asset value
at that time was substantially below the exercise price of 51.52p
and therefore no new shares were issued. The third Subscription
Right price will be 37.74p per share with the expected date being
30 April 2024.
In common with many listed investment companies the discount to
net asset value widened over the financial year. During the
financial year the Board has utilised its share buyback powers to
repurchase 1,760,000 ordinary shares at a cost of GBP0.7m. Since
the end of September the Company has continued to utilise the share
buyback authority and has repurchased a further 3.6 million shares
at a cost of GBP1.8m
Outlook
Your Board and the Investment Managers remain confident over the
long-term outlook for uranium. Pro-nuclear government policies have
seen nuclear power being included in most "green" policy frameworks
encouraging wider use. The US has made available zero emission
credits and nuclear deployment incentives to uranium companies and
China is accelerating its new nuclear building programme. In Japan,
higher prices for fossil fuels have increased support to restart
the nation's nuclear fleet. and momentum is gathering pace in this
regard after completion of more stringent reactor upgrades.
Expected demand for uranium is higher than the available supply and
with such structural impetus, we believe the outlook for nuclear
energy is bright. At the time of writing the Company's net asset
value stands at 65.13p and the ordinary share price is 56.00p with
the ordinary shares trading at a discount of 14.02%.
I would like to thank Shareholders for their continuing support
for the Company.
Ian Reeves CBE
Chairman
December 2023
INVESTMENT ADVISER'S REPORT - FOR THE YEARED 30 SEPTEMBER
2023
Performance and Outlook
After a decade of contracting below replacement rates, which has
depleted buffers of surplus fuel inventory together with secondary
sources of supply, nuclear fuel prices have been buoyed by the
return of purchasing by utilities as they seek to secure long-term
supply. This has been reflected in significant utility buying over
the year. Much of this has been driven by reactor life extensions
which has prompted significant demand for nuclear fuel over the
remainder of this decade. Against a backdrop of ongoing political
tensions in Russian and the Niger coup, the more vocal adoption of
pro-nuclear government policies aimed at growing net generating
capacity over the longer-term has also played a major part in
prompting this increased activity. This all points to continued
strong outlook for the nuclear power sector and continued uranium
market tightness over the coming decades.
The U3O8 price increased 48% to $71.25/lb over the financial
year to end-September 2023, though equities did not keep pace and
the Geiger Counter NAV returned +36.2% over the year, similar to
the 41% sterling return registered by the Solactive Uranium Pure
Play Index. At the time of writing the spot U3O8 price has since
risen to over $80lb while the Fund NAV has gained 8.3% to a
post-Fukushima high of 68.47p versus a post-year-end sterling
return of 1.5% registered by the Solactive Index. Returning 32% in
sterling terms, the share price of the Sprott Physical Uranium
Trust also lagged the rise in the uranium price over the 12 months
to end-September and despite rising around 7% since it remains at a
5% discount to NAV.
Though uranium mining equities have seen improved performance
further re-rating potential remains, underpinned by the strong
utility contracting. With this in mind and with the share price
remaining above the 37.74p per share strike price for the exercise
of embedded rights, in May next year, the Fund is well placed for
further strong returns and growth in assets.
Contracting tightens market
At the time of writing latest World Nuclear Association (WNA)
data, to mid-November, indicates utility uranium purchases exceeded
200Mlbs, the first time over the last decade buying has risen
appreciably beyond annual consumption requirements of approximately
170Mlbs. Within this the proportion of U3O8 bought under long-term
contracts has also risen to the highest level seen over the same
period, as shown below, indicative of the need to secure material
over the longer-term.
Having started the financial year at $48.25/lb the U3O8 spot
price traded in a range between $43-51/lb over the interim period.
Indeed, while the spot U3O8 price stood at approximately $72/lb at
end-September at the time of writing it had risen above $81/lb,
while the year-ahead price stands at over $86/lb rising to $93/lb
by end-December 2025. Enrichment services are expected to rise at a
similar rate over the same period.
Despite fuel price rises following the July coup in Niger and
price sensitivity arising after minor reductions in Cameco's
expected output in the second half of this calendar year, the
continued price strength bares testament to much tightened market
conditions and shift in market risks from producers to utility
consumers, as price takers. Both Cameco and Kazatomprom, the two
largest U3O8 producers both significantly raised medium
term-production targets: Cameco indicated increased output guidance
from McArthur River from the 18Mlbs level indicated for 2024
towards its nameplate capacity of 25Mlbs, assuming forward
contracts can be priced at a satisfactory level to do so; while
Kazatomprom will seek to increase production towards levels
allowable under regulated subsoil use limits, with an ambitious
target of 80.6Mlbs (100% basis) set as an exit rate for 2025,
equivalent to a 26Mlbs rise in production from this year's target.
Notwithstanding execution risks, particularly for Kazatomprom it is
important to highlight that additional volumes produced by these
players, amounting to a combined 35Mlbs pa, will be used to fulfil
recently signed contracts, implying incremental production has
already been spoken for.
Most recent estimates by the World Nuclear Association,
published in September this year, indicate annual uranium demand is
expected to rise 48Mlbs (+28%) by 2030 from current annual
requirements of approximately 170Mlbs and nearly double by 2040.
Having already sold forward much of this expected output, very
little uncommitted production is available to meet uncovered
utility requirements and it is becoming increasingly difficult to
ignore the need to bring additional greenfield supply on stream and
the additional upward pressure this will put on prices.
COP28 pro-nuclear push highlights government support
Symbolic of the ever more important role nuclear power may play
in electricity generation globally, on 1(st) December the US, UK,
France, Sweden, Finland and South Korea (collectively representing
over half global generating capacity, nearly 200GW) are expected to
sign an initiative at the COP28 climate conference aimed at
tripling installed generating capacity by 2050. They are also
expected to request financial institutions, such as the World Bank,
include nuclear in lending policies in the effort to achieve
net-zero goals. Even deducting scheduled reactor retirements,
expected to total approximately 220GW globally over the same
timeframe, such plans nevertheless represent an ambitious increase
in scale. Building on expansion plans and occurring alongside the
ongoing industry build-out across Asia, led by China, this adds yet
more impetus to the industry's growth prospects: 62 are reactors
currently under construction, 111 planned and a further 318
proposed according to the latest WNA data.
Behind the headline target increase in generating capacity,
expansion is also taking place within the nuclear fuel supply
chain. As example, enricher Urenco plans to increase capacity at
all its facilities located across the US, UK, Netherlands and even
Germany. Elsewhere, French state-owned uranium fuel supplier Orano
announced plans to expand its Tricastin processing facility, which
will lift capacity at the Georges Besse II enrichment plant by more
than 30%. However, it is noticeable that details of such process
capacity expansions substantially lag proposed reactor growth. A
consequence of this is an increased possibility of overfeeding,
whereby conversion and enrichment constraints require more U3O8 to
be processed for a shorter period of time, to derive sufficient
enriched fuel, which would drive incrementally higher demand for
raw U3O8 feedstock. As stated all these factors point to a
continued robust outlook for the sector.
Portfolio positioning
Portfolio position remains focussed on NexGen's Tier 1 Rook I
project, located in the Athabasca Basin, production from which is
scalable and could potentially surpass that of the world's largest
mine, Cigar Lake. Importantly, having recently received its
provincial environmental permits (the first company in more than 20
years to receive full Provincial EA approval for a uranium project
in Saskatchewan) and having all of its First Nations benefits
agreements the development of the project has de-risked
considerably and the equity has been a leading performer
registering a 50% rise in sterling terms over the year to
end-September and a further 10% since. Along with neighbours
Fission Energy, Pure Point and latterly Fission 3, which has
discovered some exciting high-grade mineralisation the Fund's
exposure to these western Athabasca projects currently stands at
around 33%.
Mindful of the need to improve its supply security we retain a
healthy exposure to US based assets via holdings in former
producers UrEnergy, UEC and Energy Fuels that collectively
represent around a quarter of assets. US exposure has been further
bolstered following a recent all share acquisition of US assets by
IsoEnergy, which already has a high quality Canadian project. Held
back by the late September acquisition the share rose only 6% in
sterling terms over the financial year and have declined 11% since.
Though the most significant of the acquired assets, Coles Hill in
Virginia, has yet to receive permitting we believe the US approvals
process may ease somewhat: conspicuous by its absence, US
authorities have yet to make meaningful inroads into building a
strategic fuel reserve despite the Nuclear Regulatory Commission
issuing an order preventing the export of special nuclear material
and this may add political expedience to ease permitting
requirements for domestic assets while the permitting experience of
majority shareholder NexGen, lends further credibility to a
methodical approach to the permitting process.
In addition to near-term production from in-situ developer
UrEnergy the Fund holds a 9% position in ASX-listed Paladin which
is restarting its Langer Heinrich mine in Nambia, whose share price
rose 33% in sterling terms over the year to September.
The Fund has also reduced some exposure to Cameco, which
currently represents around 12.5% of assets. Following the strong
rerating post the strategic acquisition of downstream service
provider Westinghouse uranium forward sales agreements have already
started to act as a drag to earnings. While liquidity is expected
to improve markedly over the remainder of the decade the group will
have to assess investment in life-of-mine extension at Cigar Lake,
restart of its mothballed US Smith Ranch assets and/or mine
acquisitions to underpin continued full value capture of its new
integrated business beyond the end of this decade. Given
geopolitical machinations the Trust also retains a low weighting in
state controlled Kazaktomprom.
Elsewhere, the Fund has latterly reduced exposure to physically
backed investments including the Sprott Uranium Trust and Yellow
Cake with a view to reinvesting into future producing assets. This
has included some investment into previously mentioned Fission 3
along with IsoEnergy and in preparation for equity raises by
earlier stage development projects.
Robert Crayfourd and Keith Watson
New City Investment Managers
December 2023
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
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