Geiger Counter Regulatory News (GCL)

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 YEAR ENDED 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 £9.66m 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 £6.73 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 £0.23m.

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 YEAR ENDED 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