George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here.
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Agreed interesting idea. The only major difference is size and the fact that UPC also holds a small amount of UF6. I would say overall given market presence and size it is likely that UPC always has the edge over YCA but not at this steep a price differential. Personally I am bullish enough to be patient and sit long in either or both without off-setting one against the other but it is a very good idea to implement if someone's risk tolerance changed.
The other is Uranium Participation I believe, listed on the TSE. Their last reported discount to NAV was 14.67% on the last trading day of May.
That's actually a really good idea to play the arbitrage in discounts. I'm quite bullish on the spot price of uranium in general over the mid to long term, so going short on Uranium Participation doesn't feel necessary, but it would almost completely remove any risk that I could think of, so I might consider it and up the stakes to still see a decent return. I will set up the same calculations to monitor the discount to NAV for Uranium Participation as Yellow Cake and post on this board over the next few months if there's interest. Let's see if Yellow Cake does indeed close the gap as we suspect it should.
Thats very interesting.What is the other uranium pure play?.It might be an idea to play one against the other.i.e. go long yca and short the other ,so as to cancel the direction of the uranium price out of the equation.In effect gain from the closing of the discount between the two different plays ,and therefore not having to worry about the dirction of the uranium price.Could be a sure thing for any spare cash with very little risk involved?
I am still getting a higher discount for some reason over 30%. Perhaps the shares outstanding I am using is wrong. However, even if we take yours at closer to 30%, it is still attractive when you consider it is one of the only two direct options globally for retail investors to hold the commodity. Furthermore, the other vehicle trades at half the discount currently.
It is one of the few attractive non-leveraged plays out there currently in this environment.
Discount to NAV I now make to be 29.59%*. The highest I calculate it has ever been is 31.1% on the 20th March 2020 during the market meltdown. Looks like a good time to buy and arguably the safest way to play the uranium market. If spot doesn't reach $45 to $50 /lb, no new supply will come on the market.
*Calculated on the closing share price yesterday of 204p and yesterday's reported spot bid price of 33.25$/lb from numerco.
Yes all very good points. There is also an interesting $3-$4 price arbitrage opened up on Cameco’s Port Hope (“CMC”) in Canada and the other two converter facilities ConverDyn’s Metropolis (“CVD”) in the United States and Orano’s Comurhex (“CHX”). Whether that is an arbriatge Yellow Cake PLC could play I dont know, but could be an option. Interesting none the less.
I believe the spot price will at least consolidate, but hoping it will push on still. I doubt Cameco have any intention of letting the spot price fall again. They clearly say they will only reopen if the price warrants it. They closed cigar lake because of safety but that doesn't mean they will open again when the virus permits... far from it. It's costly to restart a mine and it only makes sense to do so if economic. Cameco will no doubt utilise the spot market until the price of uranium reaches a point where they can sign profitable long term contracts with utilities.
>Nice safety margin to have before we even start talking about the uranium price rising further.
I agree. Seems like a good risk/reward opportunity.
If the bull case of a $55 uranium spot price comes good then very good gains to be had with YCA's NAV moving up to nearly £5.
If the bull case doesn't materialise any time soon, all the mines re-open, then we should trend back to the pre-virus situation with the SP perhaps 10% to 15% down from here with the discount trending back from the current 29% discount to NAV to something more like the 5.8% pre-virus average discount.
Although not my field, I do think the bull case makes sense with it looking like a sellers market and the utilities may well have to enter into long term contracts that provide profits for the miners.
Also something that crossed my mind. YCA hold all of their raw material in Cameco's facility. Cameco were talking about borrowing yellow cake to fulfill contracts while the mines are closed. YCA could well be a beneficiary there.
Discount creeping up again to 28%. To put that into perspective, at the end of last year the discount to NAV was 8%.. big disconnect here that should close over time. Nice safety margin to have before we even start talking about the uranium price rising further.