Geiger Counter Ltd Geiger Counter Ltd : Half-year Report

 
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)

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