ANNUAL
REPORT
2019
for the period ended 31 March
A
Yellow Cake Annual Report 2019
Meaning of yellowcake
Yellowcake is a solid form of mixed uranium
oxide, produced from uranium ore in the
uranium recovery (milling) process.
The material is a mixture of uranium oxides
which is generally yellow in colour (depending
upon level of impurities) following drying.
Yellowcake is then shipped from the mine to
licensed processing facilities for conversion,
enrichment and fabrication into nuclear fuel.
Yellow Cake Annual Report 2019
Contents
YELLOW CAKE AT A GLANCE
2
*Yellowcake photography contained within this report is courtesy of Kazatomprom.
STRATEGIC REPORT
Highlights
What we do
Chairman’s statement
Our strategy
Our business model
CEO statement
CFO’s review
Risk management
GOVERNANCE
Board of directors
Corporate governance report
Report of the Audit Committee
Directors’ remuneration report
Annual report on Directors’ remuneration
Directors’ report
Directors’ responsibility statement
Independent auditor’s report
FINANCIAL STATEMENTS
Financial statements
Corporate information
4
5
6
8
11
12
14
16
20
22
28
30
32
36
39
40
44
57
Yellow Cake Annual Report 2019
1
YELLOW CAKE
AT A GLANCE
Yellow Cake is a London-listed
company that offers investors
direct exposure to the uranium
market through our physical
holding of triuranium octoxide
(U3O8).
Yellow Cake was created with
a fundamental philosophy
that uranium was structurally
mispriced and set for a
period of price growth,
based on clear supply and
demand fundamentals.
We also aim to exploit
opportunities arising from
uranium ownership and
uranium-based financial
initiatives such as commodity
streaming and royalties.
Key points
London-listed
on AIM
Headquarters
in Jersey
2
Yellow Cake Annual Report 2019
The Company aims to access uranium from
the most advantageous sources and has a
10-year Framework Agreement for supply
of U3O8 with Kazatomprom, the world’s
largest uranium producer. This agreement is
designed to enable Yellow Cake to access up
to USD100 million of uranium annually from
Kazatomprom on demand, in volume and on an
undisturbed (pre-announcement) pricing basis.
The Company listed in July 2018 and acquired
8.4 million lb of U3O8 at an average price of
USD21.10/lb during the period, which was at
the lower end of the range of prices over the
last 15 years.
Our outsourced business model and
contractual relationships provide access to
strategic resources and industry expertise
while minimising costs.
8.4 million lb U3O8
as at 31 March 2019
stored in Canada,
increasing to
9.6 million lb U3O8
as at 31 May 2019
Relationship with
Kazatomprom,
the world’s largest
uranium miner
URANIUM PRICE (USD/lb)
80
60
40
20
2010
2012
2014
2016
2018
Investment case
Offers investors exposure to the
uranium spot price without the
operating risks associated with
exploration, development, mining
or processing.
Positioned to benefit from
emerging supply side discipline
and increasing energy demand.
Strong board and
management, with
dedicated advisors.
Creates liquidity for
investors in a traditionally
illiquid commodity.
Low cost outsourced
business model.
Ten-year Framework Agreement
for the supply of U3O8 with
Kazatomprom, the world’s
largest uranium producer.
Yellow Cake Annual Report 2019
3
STRATEGIC
REPORT
Highlights
What we do
Chairman’s statement
Our strategy
Our business model
CEO statement
CFO’s review
Risk management
4
5
6
8
11
12
14
16
Highlights
Value of underlying
U3O8 has increased by
22%
to USD217.4 million
as at the end of
March 2019 relative
to acquisition cost of
USD178.2 million
Successful
USD200 million
(GBP151 million)
capital raise in an
oversubscribed IPO on
the AIM market of the
London Stock Exchange
in July 2018
Purchase of
8,441,385 lb
U3O8 from National
Atomic Company
Kazatomprom JSC
("Kazatomprom")
during the period at
an average cost of
USD21.10/lb against
a spot price as at the
end of March 2019 of
USD25.75/lb
Steady improvement
in the market for U3O8,
with the spot price
increasing
13%
from USD22.85/lb at
IPO to USD25.75/lb at
the end of March 2019
Profit after tax of
USD29.7 million for
the period ended
31 March 2019
Net asset value
of USD2.93 (GBP2.25)
per share
as at 31 March 2019
Since the end of March 2019, the Company has raised an additional GBP25.9 million
(approximately USD33.9 million) through a placing of shares and acquired an additional
1.175 million lb U3O8
4
Yellow Cake Annual Report 2019
What we do
Yellow Cake plc (the “Company”) is a
London-listed company, headquartered in
Jersey, established to offer investors exposure
to the uranium market at a time where a
resurgence in uranium prices is expected.
The Company’s business
model aims to minimise cost
leakage through outsourcing
of administrative services and
securing access to industry
knowledge and expertise,
formalised in:
At 31 March 2019, the
Company owned 8.4 million
lb of triuranium octoxide
(U3O8) which is stored at
Cameco's Port Hope/Blind
River facility in Ontario,
Canada, a licensed
conversion facility. This
increased to 9.62 million lb
U3O8 on 31 May 2019.
In May 2018, the Company
entered into a 10-year Framework
Agreement for supply of U3O8 with
Kazatomprom, the world’s largest
uranium producer and one of the
lowest cost uranium producers,
which is designed to enable Yellow
Cake to access uranium on demand
and in volume. The Framework
Agreement confers the right to
purchase up to USD100 million
of U3O8 each year, starting in
2019 and for the next eight years,
at a price to be agreed prior to
announcing the purchase to the
market. This ensures that any
future purchases of uranium from
Kazatomprom may be conducted
at an undisturbed price and that
the Company’s shareholders will
benefit from any subsequent
uranium price uplift.
A services contract with
308 Services Limited.
A competitive storage
contract with a
licensed converter.
A strategic relationship
with Uranium Royalty Corp,
which is designed to provide
potential opportunities in
relation to uranium-based
royalties and streams, access
to new sources of physical
uranium supply and entry into
the North American market.
Yellow Cake Annual Report 2019
5
Chairman’s statement
We have been hugely encouraged with
the positive reception to the business by
investors and welcome their continued
support. Recent market developments
have only served to strengthen the
Board’s belief in our long-term thesis,
and we look forward with confidence.
The Lord St John of Bletso
It gives me great pleasure to present Yellow Cake plc’s first Annual
Report and to reflect on the steps taken during the period to execute
on our stated strategy. Our objective is to create a liquid, publicly listed
vehicle through which investors can acquire long-term exposure to
the uranium spot price without the operating risks associated with
exploration, development, mining or processing.
The Company utilises a low-cost outsourced business
model that minimises cost leakage while securing access to
additional expertise through strategic partnerships with
suppliers and other relevant industry players. These include
the ability to access uranium on demand, in volume and at the
prevailing market price through our Framework Agreement
with Kazatomprom, the world’s largest uranium producer.
Our business model enables us to access additional revenue
opportunities, including royalty streams, through our
relationship with Uranium Royalty Corp.
A further 350,000 lb of U3O8 was purchased on 23 August
2018 at a price of USD23.30/lb, in accordance with the
strategy set out at IPO. These purchases allowed the
Company to build up a significant volume of uranium in
a relatively short period at what proved to be attractive
prices and brought the Company’s total holding of U3O8 to
8.44 million lb at 31 March 2019, acquired at an average
cost of USD21.10/lb. Prices rallied strongly towards the end
of 2018 before settling back in March 2019 on political and
economic uncertainties.
A successful IPO
We were delighted with the successful listing of Yellow
Cake plc on the London Stock Exchange (AIM) in July 2018.
We are grateful to our financial advisors associated with the
capital raise and IPO for their hard work. Investors were very
receptive to the Company’s business model, strategic vision,
management team and governance structure.
The Company used the proceeds of the IPO
(USD200 million/GBP151 million) to purchase 8.1 million lb
of U3O8 from Kazatomprom under our 10-year Framework
Agreement. The purchase was well timed, with the price of
USD21.01/lb at the lower end of the range of uranium prices
for the last 15 years.
After period-end, the Company placed a further 12 million
new ordinary shares with investors to raise GBP25.9 million
before expenses (approximately USD33.8 million before
expenses of USD1.6 million). This enabled us to take
advantage of a pullback in the uranium price to purchase an
additional 1.175 million lb of U3O8 at USD25.88 in May 2019.
The Company now holds 9.6 million lb of U3O8. We greatly
appreciate the support from existing and new shareholders.
Commitment to high standards of
corporate governance
Yellow Cake’s Board of Directors recognises the importance
and value of ensuring high standards of corporate governance
and accountability. We adhere to strict governance structures,
6
Yellow Cake Annual Report 2019
We remain of the opinion that the uranium spot price is
fundamentally and structurally mispriced and the Company
will continue to adhere to the core principles and strategy set
out at IPO: buying and holding U3O8 for the long term, with
no hedging or material leverage while also seeking to exploit
opportunities arising from uranium ownership and uranium
based financial initiatives.
I would like to close by thanking my colleagues on the Board
for their commitment and diligence during the period. We are
grateful for the strong support we have received from our
strategic supplier, Kazatomprom, which has enabled us to
build up a significant holding of uranium in a short time and
at an attractive price. The Board also welcomes all our new
shareholders and thanks them for their support.
The Lord St John of Bletso
Chairman
practices and policies. We have adopted the principles and
provisions of the UK Corporate Governance Code, in so
far as is appropriate to the size and nature of the Company
(for further details, please see pages 22 and 23). The Board
has met 11 times since it was convened in its current form
and meetings were held by each of the Audit, Nomination
and Remuneration Committees. Yellow Cake’s governance
structures and their activities during the period are discussed
in detail in the Governance Report that starts on page 22.
Market momentum
The underlying uranium market fundamentals remain
supportive of our thesis that uranium prices are structurally
undervalued and that this is an opportune time to invest
in physical U3O8. Nuclear power is the least expensive
low-carbon power option in terms of cost per megawatt hour
(MWh) and, according to the World Nuclear Association,
remains one of the lowest sources of lifecycle carbon
emissions per MWh, producing lower carbon emissions than
both solar and biomass energy sources. With global demand
for clean and cheap energy continuing to grow, nuclear power
is expected to remain a key component of the global energy
mix. Uranium production has been curtailed at a number of
operations and current uranium prices disincentivise new
mining investments, which is expected to translate into a
growing mine supply gap over time.
These trends are discussed further in the Strategy section of
this report (page 8) and in the CEO statement on page 12.
The oversubscribed IPO and the demand for the additional
placement of shares after period-end demonstrate investment
market appetite for exposure to physical U3O8. Yellow Cake’s
net asset value rose from GBP2.00 per share at IPO to
GBP2.25 per share as at the end of March 2019.
Yellow Cake Annual Report 2019
7
Our strategy
Yellow Cake was established to
provide investors with exposure to
uranium at an opportune time when
multiple external catalysts imply
a strong recovery in the uranium
market.
At current prices, spot uranium is near its lowest levels since
the mid-2000s and, unlike most other commodities, has yet to
fully respond to the turning commodity cycle. In the Company’s
view, structural developments on both the supply and demand
side represent a confluence of events that have the potential
to drive a dramatic resurgence in the uranium market and
uranium price.
URANIUM PRICE (USD/lb)
150
120
90
60
30
0
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
8
Yellow Cake Annual Report 2019
Demand-side drivers
Nuclear energy
remains a key
and growing
element of
global supply
Long-term
contracts need
to be replaced
The primary use of uranium is the production of electricity. Increased demand
for energy is being driven by growing economies in non-OECD countries and the
increased electrification of OECD economies, including trends such as the increased
use of electric vehicles.
Nuclear power’s low operating cost and carbon emissions are likely to ensure it
remains a strategic element of global power supply and the US Energy Information
Administration reference case forecasts a 29% increase in nuclear power by 2030.
2016 saw the largest commissioning of new capacity in over 25 years and the
number of reactors currently under construction is at one of the highest points
in the past two decades. Additional reactors equivalent to almost 47% of the
current operating reactor fleet are either planned or under construction. Growth
is expected to be particularly strong in China, India and the Middle East.
Nuclear energy is favoured by emerging markets as a source of clean, reliable
baseload energy in an era of rising global power consumption, and reactors are
being built or planned in many new jurisdictions including Bangladesh, Belarus,
Egypt, Jordan, Poland, Saudi Arabia, Turkey and the UAE.
Typically, around 80% of nuclear power utilities’ uranium purchases are covered
by long-term contracts with the balance purchased in the spot market (defined
as delivery within one year). Currently only around 67% of European1 and 28%
of US2 utilities’ 2024 uranium requirements are contracted, indicating a near-term
requirement for utilities to engage in fresh long-term contracts. US demand is likely
to rebound once the uncertainty relating to the US Department of Commerce
investigation into uranium importation is resolved.
Large segments of uranium inventories at utilities are not readily available for use or
sale, as large proportions are either classified as working inventory (being enriched,
or fabricated into fuel) or held as strategic inventory (one to two years of forward
requirements held in the event of supply disruption).
Given the current thin uranium spot market, China’s aggressive planned build-out
programme and the expected significant volumes of uncontracted usage up to
2025, US and European utilities are likely to be focused on securing contracted
supply. The thinness of the spot market means that any material contract covering
has the potential to create a rapid tightening of the spot market, rebalancing towards
the current contract price and potentially leading to pricing spikes.
1
Euratom Supply Agency Annual Report 2018 (21 March 2019).
2 U.S. Energy Information Administration 2018 Uranium Marketing Annual Report (May 2019).
Yellow Cake Annual Report 2019
9
Our strategy continued
Supply-side drivers
At current prices,
the majority
of uranium
production is
thought to be
loss-making
At current spot uranium prices, nearly half of production operations are believed
to be loss-making on an estimated total cost basis and the incentive price for the
majority of new projects is likely to be well above current levels.
Higher cost producers have been protected by long-term supply contracts set at
higher prices, which are now expiring.
Suppliers are showing increased discipline and selected operations have been shut
down or suspended leading to significant cuts that represent around a quarter of
2017 production.
There is a
growing mine
supply gap in the
uranium market
Over a decade of declining uranium prices has seen minimal investment in uranium
exploration and development, leading to a potential near-term supply gap.
Supply deficits are projected unless there is a material increase in the uranium
price. The supply gap is currently being covered by secondary supply, largely
from enrichment providers underfeeding and utility/producer inventory
draw-down. But secondary supplies are declining and may not be sufficient to
fill the supply deficit while new uranium mines are under development.
Yellow Cake purchases and holds physical U3O8 to provide an entry for investors
wishing to participate in developing trends in the uranium market. In 2018 the
Company purchased 8.4 million lb of U3O8 equivalent to approximately 27%
of Kazatomprom’s 2018 annual production, or approximately 6% of global
2018 marketed production. This purchase reinforces the emerging supply side
discipline recently exhibited in the uranium market.
Yellow Cake will seek to leverage its expertise and market knowledge, as well as
that of its advisors, to generate additional value through the purchase and sale of
uranium. The synergistic and mutually beneficial strategic relationship with Uranium
Royalty Corp (URC) opens up opportunities for other revenue streams and is based
on value creation for both Yellow Cake and URC shareholders.
The Company’s low cost model aims to minimise cost leakage by outsourcing
administrative services, supported by the significant cost savings negotiated into
the storage contract.
Yellow Cake’s Board of Directors comprises an experienced team committed to
ensuring high standards of corporate governance, with a focus on creating and
protecting value for shareholders. The Company’s executive management possess
significant expertise and market knowledge and are supported by 308 Services
Limited, which has employees and consultants with considerable experience in the
uranium market.
10
Yellow Cake Annual Report 2019
Our business model
Yellow Cake aims to maximise investor exposure to uranium, ensure
high standards of corporate governance and minimise costs through an
outsourced business model that provides cost-effective access to the
necessary uranium supply, intellectual capital, expertise and storage
facilities. This model is built on key strategic and contractual relationships
with industry players.
SERVICE CONTRACT
308 Services Limited
A uranium specialist
company focused on
the uranium commodity
markets.
308 Services complements Yellow
Cake’s executive management with
significant expertise and market
knowledge to enable the Company
to pursue its strategy.
FRAMEWORK AGREEMENT
Yellow
Cake plc
Kazatomprom
The world’s largest
producer of uranium
and one of the lowest
cost producers of
uranium.
Yellow Cake’s 10-year
Framework Agreement with
Kazatomprom gives the
Company the right to purchase
up to USD100 million of U3O8
each year from 2019 to 2027
at a price agreed prior to
announcing the purchase to
the market. The Company can
also source uranium from any
other producer if advantageous.
(Following the end of the
period, Yellow Cake exercised
USD30.4 million of its 2019
option).
STORAGE CONTRACT
Storage provider
Yellow Cake’s current
holding of approximately
9.62 million lb of U3O8 is
held in a storage account at
Cameco’s Port Hope/Blind
River facility in Ontario,
Canada.
Storage rates have been negotiated
to achieve significant cost savings
and support the Company’s low cost
operating structure.
Yellow Cake Annual Report 2019
11
CEO statement
Our successful listing was the key highlight
for the period. I am delighted with the
progress we have made on the delivery
of our strategy since then. The strong
support for the capital raise after period-
end demonstrates that investors share
our confidence regarding the long-term
outlook for the uranium price.
Andre Liebenberg
The period since January 2018 has witnessed a number of significant
milestones for Yellow Cake. After the IPO and listing on the AIM market
of the London Stock Exchange in July 2018, we conducted two purchases
of U3O8 and ended the period with a holding of 8.4 million lb. These
purchases were made at an average cost of USD21.10/lb and were well
timed considering the spot price at our financial period-end of 31 March
2019 of USD25.75/lb.
The timing of our listing and the first two purchases of uranium
were definite highlights as the uranium price increased nearly
40% to USD29.10/lb at the end of November 2018 from its
lows in April 2018. While the uranium price did soften in the
first quarter of 2019, we believe the potential for long-term
price appreciation remains intact, particularly given that the
price required to incentivise new mines is estimated to be
above USD50/lb.
In April 2019, shortly after our financial period-end, the
Company raised GBP25.9 million (c.USD33.9 million) through
a share placement to add a further 1.175 million lb of U3O8 to
our uranium inventory at a price of USD25.88/lb. After the
strong rise in the uranium price during the latter half of 2018,
the recent pullback in the price provided us with an excellent
window to add further uranium inventory cost effectively.
We continue to investigate opportunities to access more
U3O8 at favourable prices as these present themselves,
including through our strategic relationship with
Kazatomprom.
As is evident in the financial results discussed in the CFO
report on page 14, our low-cost outsourced business model
provides the Company with access to relevant administrative
capacity and industry expertise, while managing
costs responsibly.
Uranium Market Developments
Monthly spot market transactions reached record volumes
in 2018 with around 88 million lb traded in the calendar
year, more than 30% above the average annual volumes
over the last decade. Volumes remained higher early
in the first quarter of 2019 but then moderated as the
United States Department of Commerce (“USDOC”)
Section 232 investigation1 progressed.
This 2018 activity reflects a number of market factors,
including increasing demand for physical product by
investment entities, especially by Yellow Cake, as well as
buying by producers and traders to offset production
cutbacks. Despite some buying by nuclear utilities at recent
prices, long-term contracting in the uranium market remains
at low levels and will have to rebalance in time.
In the Company’s view, one of the principal reasons for the
lack of term market contracting was the July 2018 launch by
the USDOC of a Section 232 investigation into the national
security aspects of high levels of foreign uranium importation
by US nuclear reactor operators. Two U.S. uranium production
companies requested government-mandated purchase
requirements equating to 25% of annual domestic uranium
consumption (11 – 12 million lb U3O8/year) in order to
support an economically-viable domestic nuclear fuel cycle.
1 U.S. Department of Commerce initiated the 232 Petition investigations on 18 July 2018.
12
Yellow Cake Annual Report 2019
Successful
listing on the
London Stock
Exchange
in July 2018
9.62 million lb
of U3O8 purchased
to date at an
average price of
USD21.68/lb
GBP25.9 million
(approximately
USD33.9 million)
raised through a
share placement
after period-end
The USDOC submitted its findings and recommendation
to the United States Administration in April of this year
and the United States Administration is due to issue a final
determination within 90 days. We believe the uncertainty
around the likely outcome of the investigation has reduced
activity in the market and this points to pent up demand that
may drive the market once the uncertainty has been removed.
The reactor restart programme in Japan continues to progress
with nine reactors now operating and a further six units
approved for operations by the Nuclear Regulatory Authority.
Subject to all governmental requirements being satisfied,
a total of 30 reactors would need to be operating by the
late-2020’s in order to meet the government target of 20 –
22% nuclear generation by 2030.
The Chinese commercial nuclear power programme is
expanding with a total of 45 operating reactors (43 Gigawatt
Electrical (“GWe”)) as of May 2019 and an additional 13 units
(12.8 GWe) under active construction. The current official
plan is to reach total installed nuclear generating capacity of
150 GWe by 2035. India will also add to the pipeline of new
builds with the recent announcement of a six reactor build
programme.
The supply-side restrictions discussed in our interim results
release continue and are likely to support prices going
forward. These include the announcements by Kazatomprom
that annual uranium output will be reduced to a target level
20% below previously planned 2018 – 2020 production2 and
Cameco extending the suspension of operations at the
McArthur River/Key Lake facility (18 million lb U3O8/year)
for an indeterminate period. Recently, Cameco announced
a revision to its market purchases program which will
now total a minimum 19 – 21 million lb U3O8 through
2019 in order to meet existing contractual delivery
commitments3. In November last year Rio Tinto announced
the sale of its Rossing Mine in Namibia to China National
Uranium Corporation Limited, which will leave the group with
a single remaining uranium mine (Ranger) that is in the process
of reducing operations and scheduled for rehabilitation
commencing no later than 2021.
Our strategic partner Kazatomprom, the largest, and one
of the lowest cost, uranium producers in the world, listed
its Global Depositary Receipts (“GDRs”) on the London
Stock Exchange and ordinary shares and GDRs on the
Astana International Exchange in November 2018. We view
Kazatomprom’s IPO as a positive development for the sector
which should generate further interest and introduce new
investors to the uranium market in the UK.
Outlook
Looking forward, we expect the resolution of the
USDOC 232 investigation to result in a return to contracting
in the long-term uranium market, particularly for US utilities,
and an increase in spot market activity. While investments in
physical uranium, nuclear fuel trader activity and producer
buying are likely to continue to dominate the near-term
market, the long-term fundamentals for nuclear energy remain
compelling and the uranium industry supply and demand
dynamics suggest support for the uranium price. The strong
support from existing and new shareholders for the capital
raise in April 2019 demonstrates that we are not alone in
our confidence regarding the long-term outlook for the
uranium price.
Andre Liebenberg
Chief Executive Officer
2
3
Announcement by Kazatomprom of 20% reduction in production initially made 4 December 2017 and then reiterated at industry conferences on 18 April 2018
(World Nuclear Fuel Cycle), 4 June 2018 (World Nuclear Fuel Market) and 5 September 2018 (World Nuclear Association Annual Symposium).
Cameco initially announced a 10-month shut-down of McArthur River/Key Lake on 8 November 2017. On 25 July 2018, Cameco announced the indefinite suspension
of McArthur River/ Key Lake operations as well as its plans to make additional market purchases of 2 – 4 million lb in 2018 and a further 9 – 11 million lb in 2019.
Yellow Cake Annual Report 2019
13
CFO’s review
Yellow Cake delivered a uranium related
profit of USD36.4 million during the
period, attributable to an increase in the
underlying price of U3O8 which ended
the period at USD25.75/lb.
Carole Whittall
Yellow Cake’s first annual financials for the period to
31 March 2019 reflect a pleasing appreciation in the value
of the Company’s U3O8 inventory.
It is my pleasure to report the following audited financial statements for the period from incorporation to 31 March 2019,
beginning with some highlights:
An increase in the value of
the Company’s uranium
holding of
USD39.2 million
from USD178.2 million to
USD217.4 million
Net IPO proceeds of
USD193.1 million
of which USD178.2 million
was applied to purchasing
U3O8
Profit after tax of
USD29.7 million
Cash of
USD8.8 million
at 31 March 2019
14
Yellow Cake Annual Report 2019
Foreign exchange losses of USD0.6 million arose primarily
due to the impact of exchange rate movements on certain
receivables (a portion of IPO proceeds) which were
denominated in Sterling.
Profit after tax of USD29.7 million includes the fair value of
the uranium derivative liability of USD2.8 million related to the
Kazatomprom repurchase option.
The Company does not propose to declare a dividend for the
period.
Balance sheet and cash flow
Yellow Cake received net proceeds from its initial public
offering of USD193.1 million, of which USD178.2 million was
applied to purchasing U3O8.
The value of Yellow Cake’s U3O8 investment increased by 22%
to USD217.4 million at the end of the period compared with
the acquisition cost of USD178.2 million. As at 31 March 2019,
Yellow Cake had cash of USD8.8 million.
Carole Whittall
Chief Financial Officer
Uranium-related profit
Yellow Cake enjoyed a net unrealised gain of USD36.4 million
during the period, comprising an increase in the fair value
of its inventory of USD39.2 million less the fair value of a
uranium derivative liability of USD2.8 million related to the
Kazatomprom repurchase option (detailed in note 7).
This gain is attributable to the increase in the underlying price
of U3O8 which ended the period at USD25.75/lb. Yellow Cake
acquired 8,091,385 lb of U3O8 at a price of USD21.01/lb on
5 July 2018 and a further 350,000 lb of U3O8 at a price of
USD23.30/lb on 23 August 2018 from Kazatomprom, for an
average acquisition price of USD21.10/lb.
Operating Performance
We are pleased to report profit after tax for the period of
USD29.7 million.
Expenses for the period of USD6.1 million included the
following one-time costs:
• USD2.6 million in costs related to Yellow Cake’s initial
public offering; and
• USD1.8 million in service fees payable to 308 Services
Limited in relation to the initial purchase by Yellow Cake of
U3O8 for a consideration of USD178.2 million.
Operating costs of a recurring nature were comprised of:
• administration costs (comprising operating and salary
costs) of USD1.0 million; and
• additional services fees paid to 308 Services Limited
of USD0.7 million in respect of the period from 5 July
2018 to 31 March 2019 (detailed in note 11).
Yellow Cake Annual Report 2019
15
Risk management
How we manage risk in our business
The Board determines the Company’s business strategy and has overall responsibility for risk assessment.
The Audit Committee is mandated to keep the Company’s internal control and risk management systems under review and to
report to the Board. The Board monitors the Company’s risk management and internal control systems, including the controls
over financial, operational and compliance risks, and regularly reviews their effectiveness. More information on the key elements
of the Company’s system of internal controls is available on page 37 of this report.
Principal risks and uncertainties
The Board has carried out a robust assessment of the principal risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity.
The Company’s principal risks and uncertainties listed below were originally identified as part of the process of admission to AIM
and updated by the Executive Directors for review by the Board prior to the period-end. The Board will discuss, review and revise
the risk register at least quarterly, but more frequently if appropriate.
OPERATIONAL RISKS
HOW WE MANAGE THE RISK
Counterparty risk
While considered unlikely, the counterparties
to the Company’s key contracts may become
insolvent or otherwise unable to fulfil their
contractual obligations.
• The Company engages in the
purchase of U3O8 from third parties,
in particular Kazatomprom.
Under the Kazatomprom Framework Agreement, the Company is
required to pay for any purchases of physical uranium 10 days after taking
delivery of the uranium, so as to manage any potential credit exposure.
A force majeure event under the Kazatomprom Framework Agreement,
would adversely impact Yellow Cake's ability to procure future purchases
of uranium on demand and in volume. In such an event, Yellow Cake would
seek to enter into new supply contracts for uranium with producers and/or
to purchase uranium in the spot market.
While the Company’s U3O8 holdings are stored in Cameco's Port
Hope/Blind River facility, the Company retains ownership of the U3O8 and
would retain ownership through any potential insolvency event by
Cameco (although it cannot be guaranteed that, in the event of a Cameco
insolvency, a third party would not seek to challenge the Company’s title to
its U3O8).
Yellow Cake maintains a watching brief on the credit rating and financial
health of Cameco.
• The Company has a contract in place with
Cameco for the storage of its U3O8 at
Cameco's Port Hope/Blind River facility.
• There is a risk that the storage facility could
be destroyed. Cameco has a contractual
undertaking to make Yellow Cake whole
in the event of a loss of Yellow Cake's
inventory and Yellow Cake does not have
third party insurance arrangement in place
to insure this risk. Cameco is not liable for
consequential losses.
16
Yellow Cake Annual Report 2019
OPERATIONAL RISKS continued
HOW WE MANAGE THE RISK
Cash flow risk
Yellow Cake may, in the future, have insufficient
funds to pay operating expenses.
Operating risk
The Company does not currently have any
operating risk associated with the development
or operation of primary or secondary mining
operations, nor does the Company face risks
associated with the transportation of uranium.
As the Company reviews streaming, royalty
or other opportunities, the Company may,
should it participate, be exposed to certain
operating risks to which the counterparties
to the Company in these agreements are
themselves exposed.
The Company's operating risk relates
primarily to the execution of sale and purchase
transactions and other commercial contracts.
The Company continues to review and evaluate opportunities related to
the ownership and long-term value of uranium and may, from time to time,
enter into transactions or arrangements to generate cash to support the
Company's business.
The Company is unleveraged and seeks to maintain sufficient working
capital to fund its ongoing operations. The Company has the right to sell,
trade, lend or otherwise commercialise some of its holdings in a manner
which would provide cash to support its operations.
During the review and diligence phase of evaluating potential
opportunities the Company will consider potential risks and identify
opportunities to mitigate these potential risks.
Where potential risks are identified the Company will use appropriate
contractual mechanisms to protect its interests. Additionally, the Company
may choose to price in risk which cannot be mitigated in order to ensure
that the risk/reward balance is appropriate.
The Company maintains cash balances in its
current accounts in amounts that are material
to the Company. The risk exists that the bank
may not be able to repay the Company’s cash or
a fraud event occurs.
Cash balances are held with Citibank, a major global financial institution.
Current accounts are operated by Langham Hall Fund Management
(Jersey) Limited. The risk of fraud and embezzlement of funds is mitigated
by multiple signatory and authorisation protocols in place with Langham
Hall Fund Management (Jersey) Limited.
CORPORATE RISKS
HOW WE MANAGE THE RISK
Key personnel
The Company is reliant on its Executive
Directors, 308 Services Limited and other key
personnel. Any change to the management and
service providers may have a negative impact
on business.
The Company believes that its executive team, as well as the Board of
Directors and its advisors in 308 Services Limited are dedicated to the
long-term growth of the Company. However, in the event that any of these
persons elects to leave the Company or discontinue provision of services,
the Company is confident in its ability to find suitable replacements.
Yellow Cake Annual Report 2019
17
Risk management continued
CORPORATE RISKS continued
HOW WE MANAGE THE RISK
Key service providers
The Services Agreement with 308 Services
Limited may be terminated.
SOCIAL, SAFETY AND
ENVIRONMENTAL RISKS
Regulatory regime
Changes in laws around the ownership
of uranium, or increased regulations or
government policy around uranium and nuclear
power generation could adversely affect the
Company's business.
Political and country
The Company has a long-term Framework
Agreement with Kazatomprom, a company
with operations located in Kazakhstan.
Kazakhstan may be at risk of political and/or
social instability.
The Company does not expect that 308 Services Limited will elect to
terminate its contract; however, in the event that such an event were to
occur, the Company is confident in the ability of its executive management
to find a suitable replacement. Additionally, the Company is the direct
beneficiary and counterparty in respect of offtake and storage contracts
in place with suppliers of these services.
HOW WE MANAGE THE RISK
The Company believes it is unlikely in the near to medium-term that a
significant change to the laws or regulations around the ownership or
transfer of ownership of uranium or generation of nuclear power would
occur. Additionally, as the Company's exposure is focused in Western
Europe (where the Company is based) and North America (where the
Company’s U3O8 inventory is held), any changes, however unlikely, would
be expected to be transparent and conducted in a legal manner which
would have limited impact on the Company's value.
The Company keeps a watching brief, with the advice of counsel
and 308 Services Limited, on changes of legislation that may impact
its business.
The Company does not have any assets in Kazakhstan and any
political event in Kazakhstan is only likely to impact the future of its
Framework Agreement.
As the Company’s physical uranium is stored in Canada, and its operations
are maintained in Jersey, there is little risk that its day to day operations
would be impacted by any political and/or social instability.
Bribery and corruption in the geographical
regions in which the Company conducts
business could materially adversely affect
its business, results of operations and
financial condition.
The Company will conduct reasonable due diligence on its suppliers from
time to time to assess risk. Since the Company warehouses its inventory in
Canada and has a framework supply agreement with Kazatomprom, rather
than any operations in Kazakhstan, such risks are more likely to affect
Yellow Cake indirectly and be of a reputational nature only.
Environmental
The Company's operations are focused around
uranium and uranium-related activities.
Nuclear accidents could impact the future
prospects for nuclear power, a key source of
demand for U3O8.
The nuclear industry operates with one of the highest margins of safety
in the world, with a number of safeguards and redundancies built into
processes in order to reduce public health and safety risks.
There are limited steps that the Company can undertake to impact the
activities of other companies. However, the Company will continue to only
partner or contract with companies that it discerns as operating with a
pre-eminent focus on health and safety.
18
Yellow Cake Annual Report 2019
FINANCIAL RISKS
Uranium price
HOW WE MANAGE THE RISK
The uranium price is volatile and affected by
factors beyond the Company’s control.
The Company believes that uranium is structurally underpriced, and while
the price may be volatile in the short term, over a longer timeframe the
price of uranium should increase.
A protracted period of weak uranium prices
may limit the Company's ability to raise capital
or fund itself.
The Company intends to retain sufficient working capital to support
operations through short-term fluctuations. The Company may realise
some of its uranium inventory to fund working capital.
Foreign exchange
The Company raises funds in Sterling while its
functional currency is the US Dollar.
The Company maintains the majority of its cash resources in US
Dollars and converts funds raised in Sterling to US Dollars as soon as
practicable. However, prior to funds from a capital raise being settled, the
Company is exposed to fluctuations in the GBP/USD exchange rate, but
only for short durations.
Taxation
Changes in the tax position of the Company
and its subsidiaries could adversely affect
the Company.
The Company manages this risk through complying with all tax regulations
and ensuring that its local accounting policies are in line with regional
requirements.
The Company receives regular tax advice and opinions from its advisors
and accountants to ensure it is aware of and can mitigate the effects of any
changes in regulation on its tax position.
Viability statement
The Directors have assessed the Company’s viability over a three-year period to March 2022. In addition to detailed annual
budgeting, the Company regularly reviews its medium-term working capital projections. The Company aims to retain sufficient
cash balances to cover at least three years’ working capital requirements, following a placing of shares or other capital raise.
Although the ultimate success of Yellow Cake will depend on its ability to continue to grow its uranium holdings, the focus of the
viability statement is on the existing business of the Company and its ability to meet its existing contractual commitments and
operating costs from current cash balances and, in “severe but plausible” scenarios, by realising or lending against a portion of its
uranium holdings.
In making their assessment, the Directors took account of the Company’s current financial position, including its cash balances,
unleveraged balance sheet and realisable uranium holdings, and its operational positions and contractual commitments. They also
assessed the potential financial and operational impacts of the principal risks and uncertainties set out on pages 16 to 19 in severe
but plausible scenarios, including the impact of fluctuations in the uranium price, foreign exchange and operating risks. Risk can
never be fully eliminated, but can be mitigated to a level which the Directors are prepared to accept as necessary to execute the
Company’s strategy.
Based on this assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and
meet all liabilities as they fall due up to March 2022.
Yellow Cake Annual Report 2019
19
Governance
Board of Directors
Non-Executive Directors
The Lord St John of Bletso
Independent Non-Executive
Director and Chairman
Age: 61
Sofia Bianchi
Independent Non-Executive
Director
Age: 62
Anthony Tudor St John is a crossbench independent member of
the House of Lords of the United Kingdom. He was a member of
the Select Committee on Communications and until recently the
sub-committee on Artificial Intelligence. He is Vice Chair of the
All-Party Parliamentary Group on South Africa and All-Party Africa
Group. He is currently a non-executive director of Albion Ventures
LLP, and Chairman of IDH plc (Integrated Diagnostic Holdings),
as well as Strand Hanson. Anthony was Chairman of Spiritel PLC
between 2004 – 2012 and has also been a non-executive director
of Regal Petroleum plc, Sharp Interpak Limited and Pecaso Group
Inc. He has also served on the advisory boards of Infinity SDC,
Chayton Capital and Ariya Capital with a focus on agriculture and
African business opportunities.
The Lord St John of Bletso holds a Master of Law (LLM) in Chinese
and Maritime Law from the University of London, a Baccureus
Procurationis (B.Proc) from the University of South Africa, and a
Bachelor of Art (BA) and Bachelor of Social Science (B.SocSc) in
Psychology from Cape Town University.
Sofia Bianchi is the Founding Partner of Atlante Capital Partners,
which specialises in investing in structurally undervalued businesses
in emerging markets. Previously, she served as a Portfolio Manager of
BlueCrest Capital Management. Sofia served as a Deputy Managing
Director of the Emerging Africa Infrastructure Fund with Standard
Bank London. From 1987 to 1992 Sofia held senior positions
with the European Bank for Reconstruction and Development,
where she was a member of its global M&A advisory team. She has
extensive experience in banking, fund management and mergers and
acquisitions and served as an independent non-executive director of
Kenmare Resources plc from 2008 to 2017.
Sofia Bianchi holds a Bachelor of Arts in Economics from the George
Washington University and a Master in Business Administration
(MBA) from the Wharton School.
The Hon Alexander Downer
Independent Non-Executive
Director
Age: 67
Alan Rule
Independent Non-Executive
Director
Age: 57
The Hon Alexander Downer AC was appointed Australian High
Commissioner to the United Kingdom in March 2014. Alexander has
had a long and distinguished political career in Australia, and was until
recently the United Nations Special Adviser to the Secretary-General
on Cyprus. He joined the Department of Foreign Affairs in 1976 and
served at the Australian Embassy in Belgium before moving into
federal politics. He served as Australia’s Minister for Foreign Affairs,
from 1996 to 2007, making him Australia’s longest-serving Foreign
Minister. Mr Downer was appointed a Companion of the Order of
Australia in 2013 and was awarded the Centenary Medal in 2001.
Alan Rule has more than 20 years’ experience as a Chief Financial
Officer and Company Secretary in the mining industry in Australia
and Africa. He has considerable experience in international debt and
equity financing of mining projects, implementation of accounting
controls and systems, governance and regulatory requirements,
and mergers and acquisitions. He currently serves as Chief
Financial Officer of Australian lithium producer, Galaxy Resources.
His previous positions have also included CFO of uranium producer
Paladin Energy Limited, Sundance Resources Limited, Mount Gibson
Limited, Western Metals Limited and St Barbara Mines Limited.
Alexander Downer holds a Bachelor of Arts (BA) (Hons) in Politics
and Economics from Newcastle University.
Alan Rule holds a Bachelor of Commerce (B.Com) and a Bachelor of
Accountancy (B.Acc) from the University of the Witwatersrand and is
a Fellow of the Institute of Chartered Accountants (FCA) in Australia.
20
Yellow Cake Annual Report 2019
Board Diversity
2
5
Male
Female
5
2
Non-executive Directors
Executive Directors
James Keating1
Independent Non-Executive
Director
Age: 44
James Keating is a Client Director at Langham Hall Fund
Management (Jersey) Limited. He has worked in the global fund
administration business for a number of years, holding directorships
on various fund structures. He is presently a director on a number
of boards which invest in a variety of underlying assets, notably
commercial and residential real estate predominantly in the UK.
James Keating holds a Diploma in Fund Administration from the
University of Manchester Business School.
1
James Keating resigned as a Director of the Company post period-end,
on 31 May 2019. As announced by the Company on 31 May 2019, the
Board intends to appoint Alexandra Nethercott-Parkes as an Independent
Non-Executive Director of the Company following completion of due diligence
by the Company's Nominated Advisor. Alexandra Nethercott-Parkes is
a Client Director at Langham Hall Fund Management (Jersey) Limited.
Her appointment is anticipated to become effective on 18 July 2019,
following the AGM.
Executive Directors
Andre Liebenberg
Executive Director and Chief
Executive Officer
Age: 56
Carole Whittall
Executive Director and Chief
Financial Officer
Age: 47
Andre Liebenberg is an experienced mining industry professional
and has extensive investor marketing, finance, business development
and leadership experience. Andre has spent over 25 years in private
equity, investment banking, senior roles within BHP Billiton and
most recently at QKR Corporation, where he was Chief Financial
Officer. Andre’s previous roles within BHP Billiton included Acting
President for BHP Billiton’s Energy Coal division, Chief Financial
Officer for the Energy Coal division, the Head of Group Investor
Relations and Chief Financial Officer for the Diamonds and Speciality
Products division. These roles were based in London, Melbourne and
Sydney. Prior to joining BHP Billiton, Andre worked for UBS in London
and the Standard Bank Group in Johannesburg.
Andre Liebenberg holds a Bachelor of Science (B.Sc) Elec. Eng. from
the University of Cape Town and a Master in Business Administration
(MBA) from the University of Cape Town.
Carole Whittall is a director and co-founder of Mining Strategies
Limited, which provides M&A and transaction advisory services to
the metals and mining sector. Most recently, she was Vice President,
Head of M&A at ArcelorMittal Mining and member of its Mining
Executive Team, responsible for global M&A, government relations
and corporate and social responsibility and served as a board member
of subsidiary companies and joint ventures. Previously, she was with
Rio Tinto where she held various senior commercial and business
development roles. Her prior career was with JP Morgan and
Standard Corporate and Merchant Bank in corporate finance.
Carole Whittall holds a Bachelor of Science (B.Sc) (Hons) from the
University of Cape Town and a Master in Business Administration
(MBA) from the London Business School.
Yellow Cake Annual Report 2019
21
Corporate governance report
Yellow Cake is committed to ensuring high standards of
corporate governance, with a focus on generating and
protecting value for shareholders. As such, the Company
has elected to comply with the principles and provisions of
the UK Corporate Governance Code in so far as appropriate
given the Company’s size, business, stage of development and
resources.
Under Jersey law, the directors of a Jersey company have a
range of obligations and responsibilities placed upon them.
These arise principally under Jersey customary law, under the
Jersey Companies Law and under the Company’s articles of
association (the “Articles”).
As the Company’s business evolves, the Company will seek to
ensure that its governance processes and procedures continue
to evolve appropriately and in a manner which protects the
interests of the Company and its shareholders.
The Company applied the principles and provisions of the
UK Corporate Governance Code published in April 2016
(the “2016 Code”) in the period from its admission to trading
on AIM (“Admission”) to 31 March 2019. The Company
considers that it was compliant with most of the provisions
of the 2016 Code during such period. A detailed discussion
of the areas of and reasons for non-compliance is set out
below. Generally speaking, the areas of non-compliance
arose from and reflect the Company’s current size,
stage of development and the scale and complexity of its
activities. The Company’s Board of Directors (the “Board”)
continues to keep any instances of non-compliance under
review.
The Board supports the new UK Corporate Governance
Code (the “new Code”), published in July 2018, which will
apply to the Company’s reporting period beginning on 1 April
2019. The Company will report against the new Code in the
Corporate Governance Statement available on its website at
www.yellowcakeplc.com/investors/aim-rule-26 and in its next
annual report.
Compliance with the 2016 Code
Details on how the Company has applied the principles contained in the 2016 Code in the period from Admission to period-end
can be found in this Annual Report as follows:
Section A: Leadership
Section B: Effectiveness
See the section entitled “Board composition and responsibilities” on pages 23 to 27, which
contains information on the members of the Board and the structure of, and division of
responsibilities among, the Board.
See the section entitled “Board composition and responsibilities” on pages 23 to 27, which
contains information on the meetings of the Board and its committees and the approach
taken to directors’ development.
Section C: Accountability
The role of the Board in this area is primarily shown in the Report of the Audit Committee on
pages 28 and 29, with further detail on the Company’s strategic objectives and key risks to
the business being set out in the Strategic Report on pages 8 to 10.
Section D: Remuneration
The Company’s remuneration policy and the Report of the Remuneration Committee are
found on pages 30 to 35.
Section E: Relations
with shareholders
Please see page 27.
22
Yellow Cake Annual Report 2019
The Company considers that it was compliant with the
provisions of the 2016 Code in the period from Admission to
period-end, save as set out below:
• A.2.1. The Board adopted a formal statement of the
division of responsibilities between the Chairman and the
CEO in October 2018 (but did not have such a statement
in place between Admission and October).
• A.4.1, A.4.2 and E.1.1. Given the stage of the
Company’s development, the Board did not consider
it necessary or desirable to appoint a senior
independent director. Accordingly, those actions set out in
the Code to be taken by a senior independent director will
be shared between the Non-Executive Directors.
• A.4.2. The Chairman held meetings with the
Non-Executive Directors without the Executive Directors
present as and when appropriate and required. Given the
scale and complexity of the Company’s activities, it is not
currently anticipated that such meetings will take place on
a regular basis.
• B.6.1, B.6.3 and B.7.2. Given the Company’s size, stage
of development and the scale and complexity of its
activities, the Company has not yet implemented a formal
appraisal system for the Directors individually (including
the Chairman) or for the Board as a whole. The Board
will continue to monitor whether such appraisal systems
should be implemented as the Company’s business
develops. In addition, the Board may undergo periodic
informal assessment processes. In accordance with their
terms of reference, each of the Audit, Remuneration and
Nomination Committees will review its effectiveness
annually.
• B.7.1. Given the Company’s stage of development,
there are currently no requirements for Non-Executive
Directors who have served for longer than nine years to
be subject to annual re-election. Going forward, in order
to reflect the requirements of the new UK Corporate
Governance Code (applicable to the Company from
1 April 2019) it is intended that all Directors voluntarily
submit themselves for re-election on an annual basis,
notwithstanding the provisions in the Articles that they be
required to retire at the first Annual General Meeting after
appointment and, thereafter, every three years.
• B.4.2 and B.7.2. The Company has not devised a formal
training plan for its Directors. The Directors are able to
review their training requirements with the Chairman
on an ad hoc basis. However, it is not currently intended
that the Chairman meet with Directors individually on a
regular basis for these purposes given the Company’s size,
business, stage of development and resources and the
experience of its Directors.
• C.3.2 and C.3.6. Given the scale and complexity of the
Company’s activities, the Company does not currently
have an internal audit function. The decision as to whether
or not to establish an internal audit function shall be made
by the Board upon the recommendation of the Audit
Committee. The Audit Committee shall consider annually
whether there is a need for an internal audit function,
taking into account the growth of the Company, the scale,
diversity and complexity of the Company’s activities and
the number of employees, as well as cost and benefit
considerations.
• B.3.3 and D.1.2. Due to the scope and nature of the
Company’s activities, the Board does not currently
consider that the Company’s CEO and CFO roles
necessitate a full-time commitment. The CEO and CFO
are required by the terms of their service agreements to
dedicate sufficient time to the Company to satisfy their
duties as Directors of the Company and are permitted
to pursue other board appointments. In this context, the
Company does not consider it appropriate to disclose the
outside earnings of the CEO and CFO in its annual reports
(including this Annual Report).
Board composition
and responsibilities
The Board is collectively responsible for promoting and
safeguarding the long-term success of the Company, and for
formulating, reviewing and approving the Company’s strategy,
budgets and corporate actions. A range of decisions are
reserved for the Board to ensure it retains proper direction
and control of the Company, including key commercial
decision-making and risk assessment. The Board delegates
certain authority to its committees and to the CEO and
CFO, who are responsible for the day to day management
of the business.
Yellow Cake Annual Report 2019
23
Corporate governance report continued
Directors
• The Lord St John of Bletso (Chairman)
• The Hon Alexander Downer
• Sofia Bianchi
• James Keating1
• Alan Rule
• Andre Liebenberg
• Carole Whittall
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Executive Director and CEO
Executive Director and CFO
The Board is led by the Chairman and comprises two Executive Directors (the CEO and the CFO) and five Independent
Non-Executive Directors (including the Chairman). The roles of Chairman and CEO of Yellow Cake are separate and the Chairman
meets the independence criteria set out in the Code. A written statement of the division of responsibilities between the Chairman
and the CEO is in place and was approved by the Board in October 2018, following Admission.
All of the Directors who are in office as at the Annual General Meeting on 17 July 2019 will retire and will be subject to re-election
by the Company’s shareholders at such meeting.
Further detail on the Board members and their skills and experience can be found on pages 20 and 21.
The Board meets formally at least four times a year and is supported by the Audit, Remuneration and
Nomination Committees. In the period to 31 March 2019, the Board met 14 times.
At such meetings, any Director who has concerns which cannot be resolved about the running of the Company, or a proposed
action, ensures that their concerns are recorded in the Board minutes, in accordance with the UK Corporate Governance Code.
Meeting attendance
Date of appointment
Number of meetings
The Lord St John of Bletso† (Chairman)
Sofia Bianchi†
The Hon Alexander Downer†
James Keating† 1
Christopher Marshall2
Alan Rule†
Andre Liebenberg‡ (CEO)
Carole Whittall‡ (CFO)
Attendance percentage
1 June 2018
1 June 2018
1 June 2018
18 January 2018
18 January 2018
1 June 2018
1 June 2018
1 June 2018
t
i
d
u
A
e
e
t
t
i
m
m
o
C
n
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i
t
a
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e
n
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m
e
R
e
e
t
t
i
m
m
o
C
n
o
i
t
a
n
m
o
N
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e
e
t
t
i
m
m
o
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e
c
n
a
d
n
e
t
t
A
e
g
a
t
n
e
c
r
e
p
2
2
1
2/2
2/2
1/1
2/2
2/2
1/1
2/2
2/2
0/1
2/2
2/2
1/1
N/A
N/A
N/A
2/2
2/2
1/1
N/A
N/A
N/A
N/A
N/A
N/A
86% 100% 100%
94%
81%
75%
100%
75%
88%
100%
91%
d
r
a
o
B
14
10/11
8/11
8/11
14/14
3/4
9/11
11/11
10/11
88%
Independent Non-Executive Director.
Executive Director.
†
‡
N/A Not applicable as not a member of the committee.
1
2
James Keating resigned as a Director of the Company post period-end, on 31 May 2019.
Christopher Marshall was a Non-Executive Director of the Company from 18 January 2018 to 18 June 2018. Christopher Marshall is the Managing Director of Langham
Hall Fund Management (Jersey) Limited.
24
Yellow Cake Annual Report 2019
Appointments to the Board are overseen by the Nomination
Committee and include an assessment of the current and
targeted balance of skills, knowledge, experience and
diversity. The Directors are required to devote sufficient time
to the Company to discharge their duties to the Company and
are subject to re-election at the first Annual General Meeting
of the Company following their appointment and, thereafter,
every three years under the Articles. Going forward, in
order to reflect the requirements of the new UK Corporate
Governance Code (applicable to the Company from 1 April
2019) it is intended that all Directors voluntarily submit
themselves for re-election on an annual basis, notwithstanding
the requirements in the Articles.
The Non-Executive Directors’ service agreements are
terminable on 90 days’ notice (by either party) and are
available for inspection at the Company’s registered office.
Directors’ development
The Board has adopted a comprehensive set of policies and
manuals on regulatory and compliance matters. The Directors
received training on regulatory and compliance matters ahead
of the Company’s admission to AIM and intend to set aside
time at least once annually at their regular Board meetings for
supplementary training and updates. All Directors undergo
a formal induction process upon appointment. All Directors
have access to the Company Secretary (whose appointment
is a matter for the Board as a whole) and are entitled to seek
professional advice at the Company’s expense in connection
with the affairs of the Company or the discharge of their
Directors’ duties.
A formal training plan has not yet been developed for
Directors. The Directors are able to review their training
requirements with the Chairman on an ad hoc basis, however,
it is not currently intended that the Chairman meet with
Directors individually on a regular basis for these purposes
given the Company’s size, business, stage of development and
resources and the experience of its Directors.
The Company has not yet implemented a formal appraisal
system for the Directors individually (including the Chairman)
or for the Board as a whole. The Board will continue
to monitor whether such appraisal systems should be
implemented, as the Company’s business develops. In addition,
the Board may undergo periodic informal assessment
processes. In accordance with their terms of reference, each
of the Audit, Remuneration and Nomination Committees will
review its effectiveness annually.
Annual General Meeting
Yellow Cake’s Annual General Meeting (AGM) will be held
at 10:30 a.m. on 17 July 2019 at the Pomme d’Or Hotel,
Liberation Square, St Helier, Jersey, JE1 3UF. The notice of
the AGM is available on our website and includes the full
text of the separate resolutions proposed in respect of each
substantive issue, together with accompanying explanatory
notes and important information.
All shareholders have the opportunity to attend and vote, in
person or by proxy, at the AGM and the Board will be present
to answer any questions from shareholders.
Directors’ conflicts of interests
The Articles restrict the ability of the Directors to vote
on certain contracts and arrangements in which they are
interested and contain certain other provisions governing
conflicts of interest. The Directors’ service agreements
require the Directors to devote sufficient time to fulfil their
duties to the Company.
The Directors hold external directorships and/or are partners
in various partnerships, and the Board is comfortable that
these external positions do not negatively affect the time
they devote to the Company.
Regulatory matters
The Company has adopted a share-dealing code for Directors
and employees that aligns with the provisions of the Market
Abuse Regulation relating to dealings in the Company’s
securities. The code sets out clearance procedures and
additional provisions for persons discharging managerial
responsibilities. The Company’s dealing policy lays out the
obligations of Directors and employees in terms of their
conduct regarding confidential and inside information, and
provides a summary of applicable laws and possible sanctions
in terms of the market abuse regime. The Company will take
all reasonable steps to ensure compliance with the code and
policy.
Yellow Cake’s disclosure policy sets out the key internal
procedures, systems and controls that aim to ensure that
the Company complies with its obligations relating to inside
information under the Market Abuse Regulation, the guidance
set out in the Disclosure Guidance and Transparency Rules
of the Financial Conduct Authority and the Company’s
obligations relating to price-sensitive information under the
AIM Rules for Companies.
Board committees
The Board is supported by, and delegates certain matters
to, the Audit, Remuneration and Nomination Committees.
The terms of reference of these committees are available
for inspection at the Company’s registered office and on our
website at www.yellowcakeplc.com/investors/the-board/
board-committees.
In accordance with their terms of reference, each of the
committees review its effectiveness annually.
Yellow Cake Annual Report 2019
25
Corporate governance report continued
Audit Committee
Audit Committee members
• Alan Rule (Chairman)
• The Lord St John of Bletso†
• Sofia Bianchi
• The Hon Alexander Downer
• James Keating1
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
†
Retired from the Audit Committee on 28 March 2019 in compliance with the new Code.
The Audit Committee assists the Board in fulfilling its responsibilities by, inter alia, reviewing and monitoring the integrity of the
financial information provided to shareholders, the Company’s system of internal controls and risk management, and the external
audit process and auditor. The Audit Committee oversees the whistleblowing policy.
The Chief Financial Officer and external auditor will be invited to meetings of the Audit Committee on a regular basis and other
non-members may be invited to attend all or part of any meeting as and when appropriate.
The Audit Committee meets at least twice each financial year and has unrestricted access to the Company’s auditor. As the
Company only began operations part way through the financial year, the Audit Committee met once during the period under
review and attendance at this meeting is shown on page 24.
More information on the roles and responsibilities of the Audit Committee and its activities during the period to 31 March
2019 is available in the Report of the Audit Committee on pages 28 and 29.
Remuneration Committee
Remuneration Committee members
• The Hon Alexander Downer (Chairman)
• The Lord St John of Bletso
• Sofia Bianchi
• James Keating1
• Alan Rule
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
The Remuneration Committee assists the Board in fulfilling its responsibilities by, inter alia, determining and agreeing with the
Board the policy for the remuneration and benefits for all Directors of the Company. The Remuneration Committee intends to
meet at least twice each year. The Remuneration Committee met twice during the period under review and attendance at these
meetings is shown on page 24.
More information on the roles and responsibilities of the Remuneration Committee and its activities during the period is available
in the Director’s Remuneration Report on pages 30 and 31.
Nomination Committee
Nomination Committee members
• The Lord St John of Bletso (Chairman)
• The Hon Alexander Downer
• Sofia Bianchi
• James Keating1
• Alan Rule
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
The Nomination Committee assists the Board in fulfilling its responsibilities by, inter alia, reviewing the structure, size and
composition of the Board. It also considers succession planning for Directors as part of its work. The Nomination Committee
intends to meet at least twice each year.
1
James Keating resigned as a Director of the Company post period-end, on 31 May 2019.
26
Yellow Cake Annual Report 2019
The Nomination Committee met twice during the period
under review and attendance at these meeting is shown on
page 24. During such meetings, the Nomination Committee
reviewed the leadership needs of the Company, the required
retirement from office of all the Directors at the Annual
General Meeting on 17 July 2019, the future requirements
in relation to annual submission for re-election under
the revised UK Corporate Governance Code for the
financial year commencing 1 April 2019 and other relevant
provisions of the revised UK Corporate Governance
Code. The Nomination Committee recommended to the
Board that each of the Directors be submitted for re-election
at the Annual General Meeting on 17 July 2019.
No Director appointments or changes have been made in the
period from the Company’s admission to trading to AIM in July
2018 to period-end.
The duties of the Nomination Committee include:
•
regularly reviewing the structure, size and composition
(including the skills, knowledge, experience and diversity)
of the Board and making recommendations to the Board
with regard to any changes;
• succession planning for Executive and Non-Executive
Directors and in particular for the key roles of Chairman
and Chief Executive;
•
•
identifying and nominating candidates to fill Board
vacancies for the approval of the Board when these arise;
reviewing the leadership needs of the Company, both
Executive and Non-Executive; and
• making recommendations to the Board regarding:
– membership of Board committees in consultation with
the chairpersons of those committees;
– the re-appointment of any Non-Executive Director at
the conclusion of their specified term;
– the re-election by shareholders of any Director
under the re-election provisions of the UK Corporate
Governance Code or the "retirement by rotation"
provisions in the Articles; and
– matters relating to the continuation in office of any
Director including the suspension or termination of
service of an Executive Director as an employee of the
Company subject to the provisions of the law and their
service contract.
Diversity
Yellow Cake values diversity and inclusion. This means that:
• The Company is committed to promoting equal
opportunities in employment and complies with all
relevant anti-discrimination laws.
• Employees and job applicants receive equal treatment
regardless of age, disability, gender reassignment, marital
or civil partner status, pregnancy or maternity, race, colour,
nationality, ethnic or national origin, religion or belief, sex
or sexual orientation.
• Recruitment and promotion will be conducted on
the basis of merit, against objective criteria that
avoid discrimination.
Yellow Cake has adopted an equal opportunities policy, to
be complied with in all aspects of its operations, including
recruitment, pay and conditions, training, appraisals,
promotion, conduct at work, disciplinary and grievance
procedures, and termination of employment.
Anti-money laundering, anti-bribery
and corruption policy
Yellow Cake recognises the importance of preventing
money laundering and terrorism financing and is committed
to the highest standards of anti-money laundering and
combating terrorist financing. The Directors are committed
to acting honestly and in good faith and the Company
has a zero-tolerance for bribery and corrupt activities.
The Company is committed to acting professionally, fairly and
with integrity in all business dealings and relationships.
Shareholders
The Company values its dialogue with its shareholders.
Day to day queries raised by shareholders are dealt with by
either the CEO or the CFO. The Chairman is also available
to the Company’s major shareholders to discuss governance
and strategy as required, and ensures that the views of
shareholders are communicated to the Board. The outcomes
of meetings between members of the Board and shareholders
are regularly communicated to the Board (including the
Non-Executive Directors), including at Board meetings.
Shareholders have the opportunity to meet and ask questions
of the Board at the Annual General Meeting.
The responsibilities of the senior independent director are
shared between the Non-Executive Directors. The Board
does not presently consider it necessary or desirable to
appoint a senior independent director, given the stage of the
Company’s development.
Yellow Cake Annual Report 2019
27
Report of the Audit Committee
The Audit Committee was constituted at a full meeting of the
Board on 8 June 2018 with effect from admission to trading
on AIM on 5 July 2018.
The Audit Committee comprises four Independent
Non-Executive Directors and meets twice a year. Details of
the committee members and their record of attendance at
meetings during the period are available on page 24.
The members of the Audit Committee have relevant financial
experience through the various leadership roles they have
held, and the Chairman of the committee is a Fellow of the
Institute of Accountants of Australia.
The Audit Committee has access to sufficient resources in
order to carry out its duties, including access to the Company
Secretary for assistance as required. The committee gives
due consideration to applicable laws and regulations, the
provisions of the UK Corporate Governance Code, the
requirements of the Companies (Jersey) Law 1991 and the
requirements of the London Stock Exchange's rules for AIM
companies as appropriate.
The Audit Committee will review its effectiveness periodically
and will conduct an annual review of its constitution and
terms of reference to ensure it is operating at maximum
effectiveness. Changes arising from these reviews are
recommend to the Board for approval.
The Chairman of the committee reports formally to the Board
on its proceedings after each meeting on all matters within
its duties and responsibilities, and how it has discharged its
responsibilities. The Chairman of the Audit Committee will
make himself available at the Annual General Meeting to
answer questions concerning the committee's work.
Responsibilities of the
Audit Committee
The full terms of reference for the committee are available on
our website at www.yellowcakeplc.com/investors/the-board/
board-committees.
Key duties of the Audit Committee include:
• monitoring the integrity of the Company’s financial
reporting;
•
reviewing the consistency of, and any changes to,
accounting policies both on a year-on-year basis and
across the Company and reviewing whether the Company
has followed appropriate accounting standards and made
appropriate estimates and judgements, taking into account
the views of the external auditor;
•
reviewing the Company’s internal financial controls and
internal control and risk management systems;
•
•
reviewing the adequacy and security of the Company's
whistleblowing facilities for employees and contractors,
and ensuring that these facilities allow for investigation
and appropriate follow up action in respect of any reports
made;
reviewing the Company's systems, procedures and
controls for detecting fraud, the Company’s bribery and
money laundering systems and controls, and the adequacy
and effectiveness of its compliance function;
• considering annually whether there is a need for an
internal audit function, taking into account the growth of
the Company, the scale, diversity and complexity of the
Company’s activities and the number of employees, as well
as cost and benefit considerations;
• making recommendations to the Board (to be put to
shareholders for approval at the Annual General Meeting)
in relation to the appointment of the external auditor;
• managing and overseeing the relationship with the
external auditor, including their terms of engagement and
remuneration; and
• meeting regularly with the external auditor and reviewing
their findings.
Financial reporting
The Audit Committee reviewed and assessed the Company’s
financial reporting in the period, including its half-year report,
results announcements and this Annual Report. This review
included an assessment of the consistency of, and changes to,
accounting policies, estimates and judgements; the methods
used to account for significant or unusual transactions;
the appropriateness of the accounting standards used;
the clarity and completeness of disclosures and the context
in which statements are made; and a review of material
disclosures regarding audit and risk management in the
financial statements, including in the strategic report and this
corporate governance statement.
In reviewing the Company’s financial statements, the Audit
Committee has considered the Company's accounting
policies, particularly in relation to the uranium investment,
and the accounting estimates and judgements as described
on pages 49 and 50.
In addition to the publicly released reports, the committee’s
review covered management reports as well as reports
from and discussions with the external auditor. The Audit
Committee provided comment and feedback on this Annual
Report before finalisation and approval.
The review concluded that, taken as a whole, this Annual
Report is fair, balanced and understandable and provides
the information necessary for shareholders to assess
the Company’s position, performance, business model
and strategy.
28
Yellow Cake Annual Report 2019
Internal audit
The Company does not currently have an internal audit
function. The Audit Committee considers annually whether
there is a need for an internal audit function taking into
account the growth of the Company, the scale, diversity and
complexity of the Company's activities and the number of
employees, as well as cost and benefit considerations.
The Audit Committee has concluded that, at present, it is not
necessary for the Company to have an internal audit function
given that the business operates from a single site and has a
high degree of senior oversight by the CEO and CFO.
External auditor
The Audit Committee is responsible for overseeing the
Company’s relationship with the external auditor.
The Board appointed RSM UK Audit LLP as the Company’s
auditor in the period and the Audit Committee has
recommended to the Board that shareholders be asked to
approve the re-appointment of RSM UK Audit LLP as auditor
at the Annual General Meeting.
The Audit Committee discharged its duties, in accordance
with its terms of reference during the period to 31 March
2019, including:
• approving the engagement of the external auditor,
reviewing and approving the annual audit plan;
• meeting regularly with the external auditor. The committee
also met with the external auditor without management
being present, to discuss their remit and any issues arising
from the audit;
•
•
reviewing the findings of the audit of the financial
statements for the period ended 31 March 2019 with the
external auditor;
reviewing the management representation letter
requested by the external auditor before it was signed by
management and management’s response to the auditor’s
findings and recommendations; and
•
reviewing the effectiveness of the audit process.
Given the size of the Company’s business, the Audit
Committee has been able to work directly with the auditor
in order to assess their effectiveness, and has also received
feedback from the CFO. As the Company is a new company
which has completed one financial year, there are no current
plans to put the appointment of its auditor through a formal
tender process.
the circumstances where a proposed engagement should be
subject to a tender process.
In the current period, following the appointment of RSM UK
Audit LLP as statutory auditor, fees for non-audit services
paid to the RSM group totalled USD24,215 for tax advisory
services, which represents 28% of the total audit fee paid.
Whistleblowing
The Company has adopted a whistleblowing policy to ensure
that staff are able to raise concerns about malpractice or
impropriety without fear of reprisals. The policy encourages all
staff to maintain high standards in their work and to report any
wrongdoing which falls short of these standards and commits
the Company to treat all such disclosures in a confidential and
sensitive manner. The committee receives reports regarding
any significant allegations made, details of investigations and
the outcomes.
There were no whistleblowing reports received during
the period.
Risk management and internal control
The Audit Committee is mandated to keep the Company’s
internal control and risk management systems under
review. Internal controls and risk management systems are in
place to support the integrity of the financial reporting process
and the preparation of accounts. These systems include
policies and procedures to ensure that adequate accounting
records are maintained and transactions are recorded
accurately and fairly to permit the preparation of financial
statements in accordance with IFRS. The key elements of
the Company’s system of internal controls are discussed on
page 37 of this report.
The Audit Committee’s review of the system of internal
controls is supplemented by reports from the external
auditor regarding issues identified during their engagement,
particularly those relating to control weaknesses, and the
responses from management.
2019/2020 focus areas
The primary focus areas for the Audit Committee in the year
ahead will be:
•
•
•
financial reporting;
risk management; and
internal controls.
Non-audit services
A policy is in place to govern the supply of non-audit services
by the external auditor, in order to safeguard independence
and objectivity. The policy sets out the recommended
maximum fees that should be payable for non-audit services
as a percentage of the audit fee and contains guidelines as to
Alan Rule
Audit Committee Chair
17 June 2019
Yellow Cake Annual Report 2019
29
Directors’ remuneration report
Dear Shareholder,
I am pleased to present the Company’s first Directors’
Remuneration Report following admission to AIM in
July 2018.
Yellow Cake plc has only two employees; its CEO and CFO.
In December 2018, independent remuneration consultants,
MM&K Limited were appointed to advise the committee and
recommend a remuneration policy for Executive Directors,
consistent with the Company’s culture, remuneration
philosophy and business strategy. MM&K provides no other
services to, and has no other connection with, the Company.
The policy which has emerged from that process is described
on pages 34 and 35.
The management culture is to focus on successful outcomes.
Business strategy is to achieve successful outcomes by
investing in long-term holdings of U308. Our intended future
directors’ remuneration policy is designed to attract, retain
and motivate the quality of Directors and employees required
to develop and implement the Company’s business strategy
and run a successful and sustainable business for the benefit
of all stakeholders. Above all, it has been designed to be simple
and to retain cash. Incentives have been designed to reward
growth and take account of risks through equity participation,
and to align employee rewards with shareholder returns.
We are currently engaging with our principal shareholders
prior to implementation of the remuneration policy.
The committee’s policy is to openly engage with shareholders
on Directors’ remuneration and we will consult with our
principal shareholders on future material changes in policy.
Yours sincerely,
Alexander Downer
Remuneration Committee Chair
17 June 2019
30
Yellow Cake Annual Report 2019
Responsibilities of the
Remuneration Committee
The responsibilities of the Remuneration Committee include
determining the total individual remuneration package of the
Chairman and the Executive Directors in accordance with the
terms of the Company’s remuneration policy, determined in
conjunction with the Board.
The Remuneration Committee was constituted at a full
meeting of the Board on 8 June 2018 with effect from
admission to trading on AIM on 5 July 2018. The committee
comprises five Independent Non-Executive Directors.
The committee intends to meet at least twice a year. Details
of the committee members and their record of attendance at
meetings during the period are available on page 24.
The full terms of the reference for the committee are available
on our website at www.yellowcakeplc.com/investors/the-
board/board-committees.
Key duties of the Remuneration Committee include:
• determining and agreeing with the Board the policy
for the remuneration of the Company’s Chairman and
the Executive Directors, including pension rights and
compensation payments;
•
recommending and monitoring the level and structure of
remuneration for senior management;
• within the terms of the agreed policy and in consultation
with the Chairman and/or CEO as appropriate,
determining the total individual remuneration package
of the Chairman, each Executive Director, the Company
Secretary and other senior executives; and
•
reviewing the operation of share option schemes and the
granting of such options.
The remuneration of Non-Executive Directors is a matter
for the Board or the Shareholders, within the limits set in the
Articles. No Director or senior manager is involved in any
decisions as to their own remuneration.
The time commitment required of the CEO and CFO
since admission has been significant and differs materially
compared to what had been anticipated prior to IPO. In this
context, the Company appointed MM&K as external
remuneration consultants to carry out a review of the CEO
and CFO’s remuneration and to conduct a benchmarking
exercise. The Remuneration Committee has reviewed the
report of MM&K and has made recommendations to the
Board based on its review.
Activities during 2019
During the period to 31 March 2019, the Remuneration
Committee discharged its duties by:
• determining, in conjunction with the Board, the
remuneration policy for the Company’s Executive
Directors and the Chairman;
• appointing MM&K as remuneration consultants in order
to review the remuneration of the CEO and CFO and to
conduct a benchmarking exercise;
•
•
reviewing the report prepared by MM&K and making
recommendations to the Board; and
reviewing relevant provisions of the revised UK Corporate
Governance Code for the financial year commencing
1 April 2019.
2019/2020 focus areas
The main objectives for the Remuneration Committee in the
financial year ended 31 March 2020 will be to:
• Review and approve the Executive Director annual bonus
performance scorecard for the 2021 financial year;
•
Implement the proposed short-term and long-term
incentive plan for the Executive Directors subject to
feedback from our principal shareholders; and
• Maintain an ongoing review of remuneration levels and
structure for Executive Directors and the Chairman.
Yellow Cake Annual Report 2019
31
Annual report on Directors’
remuneration
This page describes remuneration outcomes for Executive Directors for the period ended 31 March 2019. The Company’s future
remuneration policy is described on the following pages.
Remuneration Committee membership during the period
The members of the Remuneration Committee, their dates of appointment and the number of meetings attended during the
period are shown on page 24.
Directors’ remuneration for the period ended 31 March 2019
Director
Executive Directors
Andre Liebenberg
Carole Whittall
Non-Executive Directors
The Lord St John of Bletso
Sofia Bianchi
Alexander Downer
Alan Rule
James Keating
Total
Salaries and
Fees
USD’000
Pension
USD’000
Benefits Cash Bonus
USD’000
USD’000
LTIP
USD’000
Total
USD’000
93
74
37
30
30
30
Note 1
293
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
93
74
37
30
30
30
Note 1
293
Note 1: Mr Keating’s services are supplied pursuant to an administration agreement between the Company and Langham Hall Fund Management (Jersey) Limited dated
18 December 2017 and amended on 7 January 2019. The annual administration fee payable by the Company under such agreement is GBP101,900 (USD132,776).
No share options or share incentive arrangements were in place for the period under review. No Director received any non-cash
benefits or pension provision.
There were no payments to past Directors and no payments of compensation for loss of office.
32
Yellow Cake Annual Report 2019
Total shareholder return (TSR) performance
The performance of the Company’s ordinary shares compared with the FTSE AIM All Share Index (the “Index”) for the period
from its IPO on 5 July 2018 to 31 March 2019 is shown in the graph below:
25%
20%
15%
10%
5%
0
( 5%)
( 10%)
( 15%)
( 20%)
( 25%)
8%
( 15%)
Jul-2018 Aug-2018
Sep-2018
Oct-2018 Nov-2018 Dec-2018
Jan-2019
Feb-2019 Mar-2019
Yellow Cake plc
FTSE AIM All-Share Index
Source: CapIQ, Company data.
Statement of Directors’ share interests
The number of shares held by each Director in the Company as at 31 March 2019 is shown in the table below. There is no
shareholding requirement for Directors.
Name
The Lord St John of Bletso*
Sofia Bianchi
The Hon Alexander Downer
James Keating
Alan Rule
Andre Liebenberg
Carole Whittall
Number of
ordinary shares
Share capital
26,302
18,838
26,372
–
18,837
37,674
11,302
0.03%
0.02%
0.03%
–
0.02%
0.05%
0.01%
The Lord St John of Bletso’s shares are held through African Business Solutions Limited, in which he holds 100% of the Ordinary Shares.
*
While the Non-Executive Directors hold shares in the Company, the holdings are considered sufficiently small so as not to impinge on their independence.
Yellow Cake Annual Report 2019
33
Annual report on Directors’ remuneration continued
Future remuneration policy table
The table below describes the Company’s intended future directors’ remuneration policy.1
Remuneration
element
Purpose, link to strategy and
operation
Opportunity and performance
metrics
Remuneration Committee
discretion
Salary
Essential to attract and retain key
executives.
Benefits
Pension
Annual Bonus
Reviewed annually based on:
•
role, experience and individual
performance;
• external market; and
• general economic environment.
Directors will not be entitled to any
non-cash benefits.
Directors will not be entitled to any
company pension contributions.
Rewards achievement of annual
key performance indicators.
Initially, bonus awards will be
made wholly in the form of nil-cost
or nominal-cost share options.
Bonus awards are determined
after the relevant year-end based
on the committee’s assessment of
achievement against targets.
Salaries are benchmarked to the
relevant market median, taking
account of the individual’s time
commitments to the Company.
Salaries may be reviewed annually by
the committee.
Up to 100% of salary for
exceptional performance; targets
and weightings are set annually by
the committee and performance
is measured over a single
financial year.
The committee may make
adjustments up and down to ensure
bonus awards are consistent with
the underlying performance of the
business or to give effect to malus
or clawback provisions.
Performance targets may be
amended if there is a significant
event which causes the committee
to believe that the original targets
are no longer achievable or
appropriate.
Long-Term
Incentive
Aligns the interests of management
and shareholders and encourages
retention. Long-term incentives
may be granted annually and will
take the form of market-priced
share options.
Up to 125% of salary.
1
The Chairman of the Remuneration Committee is currently engaging with shareholders in relation to the proposed policy and the policy may be amended based on the
feedback received from shareholders.
34
Yellow Cake Annual Report 2019
Executive Directors’ recruitment policy
Remuneration packages for new Executive Directors
will be determined by the Remuneration Committee and
designed in accordance with the approved remuneration
policy, provided that the committee, in consultation with the
Nomination Committee, may exercise its discretion to depart
from the policy described above if necessary to secure the
recruitment of a new Executive Director.
Terms of the Executive Directors’
service contracts
Executive Directors are engaged on rolling service contracts,
which provide for three months’ written notice of termination
from either the individual or the Company.
Non-Executive Directors’ letters of appointment
Non-Executive Directors are engaged by letter of
appointment terminable on three month’s written notice from
either the individual or the Company.
Termination policy
Any compensation payment made to an Executive Director
for termination of employment will be determined with
reference to the terms of the individual’s service agreement
and the rules of any incentive plan in which the individual is
a participant.
Implementation of the future
remuneration policy in 2019/2020
If the proposed future remuneration policy is adopted without
amendment, the intention is to implement it as follows:
Base salaries and benefits
Following the policy and market practice review undertaken
by MM&K and a re-assessment of the time commitment by the
Executive Directors, base salaries for the financial year ending
31 March 2020 will be:
Chief Executive Officer
Chief Financial Officer
USD215,000
USD172,000
Directors are not entitled to any non-cash benefits or
company pension provision.
Annual bonus
Bonus awards for the financial year ending on 31 March
2020 will be based on commercial targets. Initial bonus awards
will be made in the form of nil-cost or nominal cost options,
which will vest and become exercisable not earlier than one
year after grant, subject to performance. The Company will
adopt a share option scheme to facilitate the grant of nil-cost
options. The first options will be granted after the audited
results for the 2020 financial year are available.
The value of the grant may be up to 100% of base salary,
subject to performance, as determined by the Board.
The performance scorecard for the evaluation of the executive
team during the 2020 financial year is summarised as follows:
• Corporate performance, comprising:
– cost effective growth in the Company’s
uranium inventory;
– effective capital raising and funding of
uranium purchases;
– financial control and risk management; and
– reporting and budgeting.
• Reputation, stakeholder engagement and investor
relations, comprising:
– implementation of an effective investor
relations programme;
– engagement with equity and debt providers; and
– engagement with suppliers, prospective suppliers
and regulators and other stakeholders and potential
stakeholders as appropriate.
Long-term incentive
Following the current shareholder engagement on the
proposed remuneration policy, it is intended that each
Executive Director will be granted options to acquire shares in
the Company. Ordinarily, the options will become exercisable
not earlier than three years after grant and the option
exercise price will be the market value at the grant date of the
shares placed under option. Such options will also generally
be subject to a post-vesting holding period of not less than
two years (shares may be sold in order to meet tax liabilities).
The face value of shares subject to the initial grants will be
100% of salary.
The committee believes that market-priced options align the
interests of management and shareholders and represent
an appropriate form of long-term incentive and retention
for the Executive Directors at this stage in the Company’s
development. No conditions, other than continued
employment by the Company, will be placed on the exercise
of options.
This Directors’ Remuneration Report was approved by the
Board on 17 June 2019 and signed on its behalf by:
Alexander Downer
Remuneration Committee Chair
17 June 2019
Yellow Cake Annual Report 2019
35
Directors’ report
The Directors of Yellow Cake plc (the “Company”) present
their report and the audited financial statements for the
Company for the period ended 31 March 2019. The financial
statements of the Company have been prepared in accordance
with International Financial Reporting Standards (“IFRS”)
issued by the International Accounting Standards Board.
Principal activities
The Company was incorporated in Jersey, Channel Islands on
18 January 2018. Yellow Cake operates in the uranium sector
and was created to purchase and hold U3O8 and to exploit
other uranium-related opportunities. The strategy of the
Company is to invest long term in holdings of U3O8and not to
actively speculate with regards to short-term changes in the
price of U3O8.
The Company was admitted to list on the London Stock
Exchange AIM market (“AIM”) on 5 July 2018.
Results for the period
The results of the Company for the period are set out on
pages 44 to 54.
Business review and future developments
The Strategic Report on pages 4 to 19 provides a review of the
period’s activities, operations, future developments and key
risks.
Directors
The Directors who held office during the period and
subsequently were as follows:
• The Lord St John of Bletso (Chairman)
• Sofia Bianchi
• The Hon Alexander Downer
• James Keating1
• Christopher Marshall2
• Alan Rule
• Andre Liebenberg
• Carole Whittall
Directors’ interests
The Remuneration and Audit Committee reports are available
on pages 30 and 28 respectively.
Details of the Directors’ interests in the Company’s shares can
be found in the remuneration report on page 33.
There are no outstanding loans granted by any member of the
Company to the Directors or any guarantees provided by the
Company for the benefit of the Directors.
No Director has or has had any interest in any transaction
which is or was unusual in its nature or conditions or which is
or was significant in respect of the business of the Company
and which was effected by any member of the Company during
the current or immediately preceding financial year, or which
was effected during an earlier financial year and remains in any
respect outstanding or unperformed.
Directors’ indemnities
The Company maintains appropriate insurance cover in
respect of legal action against its Directors.
Dividends
The Directors do not recommend an ordinary dividend for
the period.
Events after the reporting date
On 12 April 2019, the Company placed a further 12 million
new ordinary shares to raise GBP25.9 million (approximately
USD33.9 million). The funds raised were used to purchase an
additional 1.175 million lb of U3O8 at a price of USD25.88/lb.
On 31 May 2019, James Keating resigned from the Board.
James Keating was an Independent Non-Executive Director
of the Company and a Client Director of Langham Hall Fund
Management (Jersey) Limited. The Board would like to express
its sincere gratitude to James for his contributions to Yellow
Cake during his tenure of office.
As announced by the Company on 31 May 2019, the
Board intends to appoint Alexandra Nethercott-Parkes as
an independent non-executive director of the Company
following completion of due diligence by the Company's
Nominated Advisor. Alexandra Nethercott-Parkes is a Client
Director at Langham Hall Fund Management (Jersey) Limited.
Her appointment is anticipated to become effective on 18 July
2019, following the AGM.
1
2
James Keating resigned as a Director of the Company post period-end, on 31 May 2019.
Christopher Marshall was a Non-Executive Director of the Company from 18 January 2018 to 18 June 2018. Christopher Marshall is the Managing Director of Langham
Hall Fund Management (Jersey) Limited.
36
Yellow Cake Annual Report 2019
Financial risk management
Details of financial risk management are provided in
note 3 to the financial statements.
Political and charitable contributions
The Company made no charitable or political contributions
during the period.
Internal control
The Board is responsible for the Company’s risk management
and internal control systems, and has mandated the Audit
Committee to keep these systems under review and to report
to the Board.
Controls include those over financial, operational and
compliance risks, and are appropriate to the size and nature
of the business, and to the risks relevant to it. The Audit
Committee reviews the system of internal controls and
supplements the review with reports from the external
auditor regarding issues identified during their engagement,
particularly those relating to any control weaknesses, and
the responses from management.
The Company’s system of internal control is designed to
provide the Directors with reasonable, but not absolute,
assurance that the Company will not be hindered in achieving
its business objectives, or in the orderly and legitimate
conduct of its business, by circumstances that may reasonably
be foreseen. However, no system of internal control can
eliminate the possibility of poor judgement in decision making,
human error, fraud or other unlawful behaviour, management
overriding controls, or the occurrence of unforeseeable
circumstances and the resulting potential for material
misstatement or loss.
The key elements of the control system in operation are
as follows:
• The Board meets regularly with a formal schedule of
matters reserved to it for decision.
• The Company has an organisational structure and has
put in place operating protocols and procedures ensuring
clear lines of responsibility and appropriate delegation of
authority.
• The Board monitors the Company’s financial performance
against budgets and forecasts.
• The Executive Directors undertake a regular assessment
process, to identify and quantify the risks that face the
Company’s operations and functions, and to assess the
adequacy of the prevention, monitoring and mitigation
practices in place for those risks.
• The Board is responsible for reviewing the risk
assessment and risk management processes for
completeness and accuracy.
• The Board receives regular updates from management
in addition to carefully considering the Company’s risk
register at regular intervals.
• There are no significant issues disclosed in the
report and financial statements for the period ended
31 March 2019 and up to the date of approval of the
report and financial statements that have required
the Board to deal with any related material internal
control issues.
The Directors confirm that the Board has reviewed the
effectiveness of the system of internal control during the
period and concluded that the controls and procedures are
adequate. The Board will continue to review the adequacy of
the Company’s internal controls and will test the controls and
procedures again during the 2020 financial year.
Corporate governance
The corporate governance report on pages 22 to 27 forms
part of this Directors’ report.
Going concern
The Directors, having considered the Company's objectives
and available resources along with its projected income and
expenditure for at least 12 months from the date of approval
of the financial statements, are satisfied that the Company
has adequate resources to continue in operational existence
for the foreseeable future. Accordingly, the Directors
have adopted the going concern basis in preparing these
financial statements.
Purchase of own shares
The Company does not hold any shares in treasury.
Yellow Cake Annual Report 2019
37
Director’s report continued
Substantial shareholdings
As at 10 June 2019, being the latest practicable date prior to the publication of this report, the Company has been advised of the
following interests in more than 3% of its ordinary share capital:
Shareholder
Tribeca Investment Partners
Dolfin Financial (UK)
Uranium Royalty Corp
Putnam Investments
Arrowgrass Capital Partners
TT International
Kopernik Global Investors
azValor Asset Management
Legal & General Investment Management
Number of
shares
8,369,008
7,600,000
7,600,000
6, 267,567
6,000,000
4,223,900
4,098,586
3,706,275
2,946,500
Shareholding
9.49%
8.62%
8.62%
7.10%
6.80%
4.79%
4.65%
4.20%
3.34%
Statement of disclosure to the auditor
The Directors have taken the necessary steps to make themselves aware of the information needed by the external auditor for
the purposes of their audit and to establish that the auditor is aware of that information. The Directors are not aware of any
relevant audit information of which the auditor is unaware.
Auditor appointment
RSM UK Audit LLP was appointed during the period and have expressed their willingness to continue as auditor of the
Company. A resolution for their reappointment will be proposed at the forthcoming Annual General Meeting.
38
Yellow Cake Annual Report 2019
Directors’ responsibility statement
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable laws
and regulations.
Jersey Company law requires directors to prepare Financial Statements for each financial period in accordance with any generally
accepted accounting principles. The Directors have elected to use International Financial Reporting Standards (IFRSs) as issued
by the International Accounting Standards Board. The Company’s financial statements are required by law to give a true and fair
view of the state of affairs of the Company at the period-end and of the profit or loss for the period then ended.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRSs;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial
performance; and
• make an assessment of the Company’s ability to continue as a going concern.
The Directors are responsible for keeping accounting records which are sufficient to show and explain its transactions and are
such as to disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the
financial statements prepared by the Company comply with the requirements of the Companies (Jersey) Law 1991. They are also
responsible for safeguarding the assets of the Company and, accordingly, for taking reasonable steps to further the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Information published on the website is accessible in many countries, and legislation in Jersey and the
relevant provisions of the AIM Rules for Companies governing the preparation and dissemination of financial statements may
differ from legislation and the rules in other jurisdictions. The Directors’ responsibility also extends to the continued integrity of
the financial statements contained therein.
The Directors have reviewed this Annual Report and have concluded that, taken as a whole, it is fair, balanced and understandable
and provides the information necessary for shareholders to assess the Company’s position, performance, business model
and strategy.
By order of the Board
Andre Liebenberg
Chief Executive Officer
17 June 2019
Yellow Cake Annual Report 2019
39
Independent auditor’s report
To the members of Yellow Cake Plc
Opinion
We have audited the financial statements of Yellow Cake Plc for the period ended 31 March 2019 which comprise the Statement
of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows,
and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion, the financial statements:
• give a true and fair view of the state of the Company’s affairs as at 31 March 2019 and of the Company’s profit for the period
then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been properly prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to principal risks, going concern and
viability statement
We have nothing to report in respect of the following information in the annual report, in relation to which, as a result of the
Directors voluntarily reporting on how they have applied the UK Corporate Governance Code, ISAs (UK) require us to report to
you whether we have anything material to add or draw attention to:
•
•
•
the disclosures in the annual report set out on pages 16 to 19 that describe the principal risks and explain how they are being
managed or mitigated;
the Directors’ confirmation set out on page 16 in the annual report that they have carried out a robust assessment of the
principal risks facing the Company, including those that would threaten its business model, future performance, solvency or
liquidity;
the Directors’ statement set out on page 48 in the financial statements about whether the Directors considered it appropriate
to adopt the going concern basis of accounting in preparing the financial statements and the Directors’ identification of any
material uncertainties to the Company’s ability to continue to do so over a period of at least 12 months from the date of
approval of the financial statements;
• whether the Directors’ statement relating to going concern required under the Listing Rules in accordance with Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
•
the Directors’ explanation set out on page 19 in the annual report as to how they have assessed the prospects of the
Company, over what period they have done so and why they consider that period to be appropriate, and their statement as
to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities
as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Company’s
financial statements of the current period and include the most significant assessed risks of material misstatement (whether
or not due to fraud) we identified, including those which had the greatest effect on the overall audit strategy, the allocation of
resources in the audit and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the Company’s financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.
40
Yellow Cake Annual Report 2019
Investment in uranium
The Company’s business model is based on holding a material investment in uranium. The Company’s accounting policy is that
uranium is held at fair value based on the most recent month-end spot rate price for U3O8 published by UxC LLC. The Company’s
holding of uranium is held by a third-party and valuation of the investment in uranium is considered to be a key audit matter
because errors in measurement of quantity or use of an inaccurate period-end price could result in a material misstatement of
the value of the Company’s investment in uranium. Details of the Company’s investment in uranium are disclosed in note 4 in the
financial statements.
Our response to the risk included:
• obtaining direct third-party confirmation of the quantity of uranium held at 31 March 2019;
• corroboration of the price used to value the investment at 31 March 2019 to published market price information and
recalculation of the fair value; and
• consideration of the appropriateness of the Company’s accounting policy and disclosures made in the financial statements.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent
of our audit procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements
as a whole, could reasonably influence the economic decisions of users we take into account the qualitative nature and the size of
the misstatements. During planning materiality for the financial statements as a whole was calculated as $3,610,000, which was
not changed significantly during the course of our audit. We agreed with the Audit Committee that we would report to them all
unadjusted differences in excess of $180,000, as well as differences below that threshold that, in our view, warranted reporting
on qualitative grounds.
An overview of the scope of our audit
The audit was scoped to ensure that we obtained sufficient and appropriate audit evidence in respect of the significant
business operations of the Company and the appropriateness of the going concern assumption used in the preparation of the
financial statements.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
In this context, as a result of the Directors voluntarily reporting on how they have applied the UK Corporate Governance Code,
we also have nothing to report in regard to our responsibility to specifically address the following items in the other information
and to report as uncorrected material misstatements of the other information where we conclude that those items meet the
following conditions:
• Fair, balanced and understandable set out on page 39 – if the statement given by the Directors that they consider the
annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s performance, business model and strategy, is materially inconsistent with
our knowledge obtained in the audit; or
• Audit Committee reporting set out on pages 28 and 29 – if the section describing the work of the Audit Committee does not
appropriately address matters communicated by us to the Audit Committee;
Yellow Cake Annual Report 2019
41
Independent auditor’s report continued
• Directors’ statement of compliance with the UK Corporate Governance Code set out on pages 22 and 23 – if the parts
of the Directors’ statement required under the Listing Rules relating to the Company’s compliance with the UK Corporate
Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not
properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to
you if, in our opinion:
• proper accounting records have not been kept by the Company or proper returns adequate for our audit have not been
received from branches not visited by us; or
•
the financial statements are not in agreement with the accounting records and returns; or
• we have failed to obtain any information or explanation that, to the best of our knowledge and belief, was necessary for our
audit.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 39, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
As part of an audit in accordance with ISAs (UK), we exercise professional judgement and maintain professional scepticism
throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the Directors.
• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Company to cease to continue as a going concern.
42
Yellow Cake Annual Report 2019
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and
performance of the Company audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, including the FRC’s Ethical Standard as applied to listed entities, and communicate with them
all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law
1991. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Graham Ricketts
For and on behalf of RSM UK AUDIT LLP, Auditor
Chartered Accountants
25 Farringdon Street, London, EC4A 4AB
17 June 2019
Yellow Cake Annual Report 2019
43
FINANCIAL
STATEMENTS
for the period ended 31 March 2019
Statement of financial position
As at 31 March 2019
ASSETS
Non-current assets
Investment in uranium
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
LIABILITIES
Non-current liabilities
Uranium derivative liability
Total non-current liabilities
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
NET ASSETS
Equity
Attributable to the equity owners of the Company
Stated capital
Share premium
Retained earnings
TOTAL EQUITY
Notes
USD ’000
4
5
6
7
8
9
9
217,366
217,366
16
8,750
8,766
226,132
(2,799)
(2,799)
(384)
(384)
(3,183)
222,949
1,007
192,248
29,694
222,949
The financial statements of Yellow Cake plc and the related notes were approved by the Directors on 17 June 2019 and are signed on its
behalf by:
Andre Liebenberg
Chief Executive Officer
44
Yellow Cake Annual Report 2019
Statement of comprehensive income
For the period 18 January 2018 to 31 March 2019
Uranium related profit
Fair value movement of investment in uranium
Fair value movement of uranium derivative liability
Total uranium related profit
Expenses
Initial public offering expenses
Procurement and market consultancy fees
Other operating expenses
Total expenses
Bank interest income
Loss on foreign exchange
Profit before tax attributable to the equity owners of the Company
Tax expense
Total comprehensive income after tax for the period attributable to the equity owners of the Company
Basic and diluted earnings per share attributable to the equity owners of the Company since IPO (USD)
Basic and diluted earnings per share attributable to the equity owners of the Company since incorporation (USD)
Notes
USD ’000
4
7
12
13
15
15
39,211
(2,799)
36,412
(2,589)
(2,490)
(1,018)
(6,097)
27
(648)
29,694
–
29,694
0.39
0.63
Yellow Cake Annual Report 2019
45
Statement of changes in equity
For the period 18 January 2018 to 31 March 2019
Attributable to the equity owners of the Company:
Stated capital
Share premium Retained earnings
Total equity
Notes
USD ’000
USD ’000
USD ’000
USD ’000
As at 18 January 2018
Total comprehensive income after tax for
the period
Transactions with owners:
Shares issued
Share issue costs
Balance as at 31 March 2019
9
9
–
–
1,007
–
1,007
–
–
200,449
(8,201)
192,248
–
–
29,694
29,694
–
–
201,456
(8,201)
29,694
222,949
46
Yellow Cake Annual Report 2019
Statement of cash flows
For the period 18 January 2018 to 31 March 2019
Cash flows from operating activities
Profit for the financial period
Adjustments for:
Change in fair value of investment in uranium
Change in fair value of uranium derivative liability
Foreign exchange losses
Interest income
Changes in working capital:
Increase in trade and other receivables
Increase in trade and other payables
Cash used in operating activities
Interest received
Net cash flow used in operating activities
Cash flows from investing activities
Acquisition of uranium
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Issue costs paid
Net cash generated from financing activities
Net increase in cash and cash equivalents during the period
Cash and cash equivalents at the beginning of the period
Effect of exchange rate changes
Cash and cash equivalents at the end of the period
Notes
USD ’000
4
7
4
9
9
29,694
(39,211)
2,799
403
(27)
(6,342)
(253)
389
(6,206)
27
(6,179)
(178,155)
(178,155)
201,457
(8,373)
193,084
8,750
–
–
8,750
Yellow Cake Annual Report 2019
47
Notes to the financial statements
For the period ended 31 March 2019
1. General information
Yellow Cake plc (the "Company") was incorporated in Jersey, Channel Islands on 18 January 2018. The address of the registered office
is Liberation House, Castle Street, St Helier, Jersey, JE1 1BL.
The Company operates in the uranium sector and was created to purchase and hold U3O8. The strategy of the Company is to invest in
long-term holdings of U3O8 and not to actively speculate with regards to short-term changes in the price of U3O8. The Company may
consider additional revenue opportunities, including the acquisition of uranium royalties and streams, and other uranium-related activities.
The Company was admitted to list on the London Stock Exchange AIM market ("AIM") on 5 July 2018, raising approximately
GBP151 million (c. USD200 million) before expenses through an oversubscribed placing and subscription of 76,166,630 ordinary shares.
2. Summary of significant accounting policies
Basis of preparation
These audited financial statements of the Company for the period from 18 January 2018 to 31 March 2019 have been prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
As this is the Company’s first accounting period, no comparative figures have been disclosed.
The principal accounting policies adopted are set out below.
New and revised standards
At the date of approval of these financial statements there are no new or revised standards that are in issue but not yet effective and are
relevant to the financial statements of the Company.
Going concern
The Directors, having considered the Company's objectives and available resources along with its projected income and expenditure for
at least 12 months from the date of approval of the audited financial statements, are satisfied that the Company has adequate resources to
continue in operational existence for the foreseeable future. Accordingly, the Directors have adopted the going concern basis in preparing
these audited financial statements.
Foreign currency translation
Functional and presentation currency
The financial statements are presented in United States Dollars ("USD") which is also the functional currency of the Company.
These financial statements are presented to the nearest round thousand, unless otherwise stated.
Foreign currency translation
Transactions denominated in foreign currencies are translated into USD at the rate of exchange ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into USD at the rate of exchange
ruling at the reporting date. Foreign exchange gains or losses arising on translation are recognised through profit or loss in the statement
of comprehensive income.
Investments in uranium
Acquisitions of U3O8 are initially recorded at cost net of transaction costs incurred and are recognised in the Company’s statement of
financial position on the date the risks and rewards of ownership pass to the Company.
After initial recognition, investments in U3O8 are measured at fair value based on the most recent month-end spot price for
U3O8 published by UxC LLC.
IFRS lacks specific guidance in respect of accounting for investments in uranium. As such the Directors of the Company have considered
the requirements of International Accounting Standard 1 "Presentation of Financial Statements" and International Accounting Standard
8 "Accounting Policies, Changes in Accounting Estimates and Errors" to develop and apply an accounting policy. The Directors of
the Company consider measuring the investments in U3O8 at fair value provides information that is most relevant to the economic
decision-making of users. This is consistent with International Accounting Standard 40 Investment Property, which allows for assets held
for long-term capital appreciation to be presented at fair value.
Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
The Company shall offset financial assets and financial liabilities if the Company has a legally enforceable right to set off the recognised
amounts and intends to settle on a net basis.
The carrying amount of the Company's financial assets and financial liabilities are a reasonable approximation of their fair values due to the
short-term nature of these instruments.
48
Yellow Cake Annual Report 2019
Financial assets
The Company's financial assets comprise loans and receivables. These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method, less any provision for impairment.
Financial liabilities
The Company's financial liabilities comprise trade and other payables. They are initially recognised at fair value and subsequently carried
at amortised cost using the effective interest method.
Uranium derivative liability
This derivative instrument is recognised at fair value and value changes are recognised in profit and loss. Fair value has been determined
based on the expected option payoff using a Monte Carlo simulation produced by an independent financial valuation company.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and short-term deposits in banks with an original maturity of three months or less.
Share capital
The Company's ordinary shares are classified as equity. Incremental costs directly attributable to the issue of shares are recognised in
equity as a deduction from proceeds of the share issue.
Share-based payments
Where the Company issues equity instruments to external parties or employees as consideration for services received, the statement of
comprehensive income is charged with the fair value of the goods and services received, except where services are directly attributable to
the issue of shares, in which case the fair value of such amounts is recognised in equity as a deduction from share premium.
Taxation
As the Company is managed and controlled in Jersey it is liable to be charged to tax at a rate of 0% under schedule D of the Income Tax
(Jersey) Law 1961 as amended.
Expenses
Expenses are accounted for on an accruals basis.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments and has
been identified as the Board of Directors of the Company.
The Company is organised into a single operating segment being the holding of U3O8 for long-term capital appreciation.
Critical accounting judgements and estimation uncertainty
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets, liabilities, income and expenses.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised in the period
in which the estimate is revised and in any future periods affected.
The resulting accounting estimates will, by definition, seldom equate to the related actual results.
Accounting estimates
The accounting estimates in the period are the assumptions made in valuing the uranium derivative liability. These assumptions are set out
in note 7 and the carrying value of the instrument is USD2,799,000 as at 31 March 2019.
Judgements
The Directors have considered the tax implications of the Company’s operations together with external tax advice and have reached
judgement that no tax liability has arisen during the period.
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49
Notes to the financial statements continued
3. Management of financial risks
Financial risk factors
The Company’s financial assets and liabilities comprise of cash, derivatives, receivables and payables that arise directly from its operations.
The accounting policies in note 2 include criteria for the recognition and the basis of measurement applied for financial assets and
liabilities. Note 2 also includes the basis on which income and expenses arising from financial assets and liabilities are recognised and
measured.
The Company’s assets and liabilities have been primarily categorised as assets and liabilities at amortised cost, with the exception of the
investment in uranium and derivative liability being held at fair value. The carrying amounts of all such instruments are as stated in their
respective notes.
Foreign exchange risk
The Company maintains the majority of its cash resources in US Dollars and converts fund raised in Sterling to US Dollars as soon as
practicable. However, prior to funds from a capital raise being settled, the Company is exposed to fluctuations in the GBP/USD exchange
rate, but only for very short durations.
As at 31 March 2019, the Company held USD0.3 million (GBP0.2 million) in Sterling and the balance of its cash (USD8.5 million) in United
States Dollars.
Market risk
The fair value or future cash flows of a financial instrument may fluctuate because of changes in market prices. This market risk comprises
two elements – interest rate risk and other price risk and arises mainly from the changes in values of the investment of uranium and
derivatives.
Interest rate risk
Any cash balances are held in variable rate bank accounts or in money market funds yielding rates of interest dependent on the base rate of
the applicable institution or fund return.
Price risk and sensitivity
If the value of the investment in uranium fell by 5% at the period-end, the profit after tax would decrease by USD10,868,283. Likewise, if
the value rose by 5% the profit after tax would have increased by USD10,868,283.
Liquidity risk
This is the risk that the Company will encounter challenges in realising assets or otherwise raising funds to meet financial commitments.
Prudent liquidity risk management involves maintaining sufficient liquidity and short-term investment securities, being able to raise funds
based on suitably adapted lines of credit and a capacity to unwind market positions.
At period-end, the liquidity of the Company is composed of either bank account or bank deposits, with a total amount of USD8,749,546.
As at 31 March 2019
Cash and cash equivalents
Other creditors and accruals
Carrying amount
USD ’000
< 1 year
USD ’000
1 to 2 years
2 to 10 years
USD ’000
USD ’000
8,750
(384)
8,750
(384)
–
–
–
–
Fair value estimation
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or liability, the Company takes into account the characteristics of the asset or liability
at the measurement date. IFRS 13 requires the Company to classify fair value measurements using fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
i Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
ii
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices) (level 2); and
iii
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The level to the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of
the lowest level input that is significant to the fair value measurement in its entirety. If a fair value measurement uses observable inputs
that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance
of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.
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Yellow Cake Annual Report 2019
The following table analyses within the fair value hierarchy the Company’s financial assets and liabilities (by class) measured at fair value at
31 March 2019.
Assets and liabilities
As at 31 March 2019
Investment in uranium
Derivative liability
Level 1
USD ’000
217,366
–
Level 2
USD ’000
–
(2,799)
Level 3
USD ’000
–
-
Total
USD ’000
217,366
(2,799)
4.
Investment in uranium
As at 18 January 2018
Acquisition of U3O8
Change in fair value
As at 31 March 2019
Cost
USD ’000
–
178,155
–
178,155
Fair value
movement
USD ’000
–
–
39,211
39,211
Fair value
USD ’000
–
178,155
39,211
217,366
The value of the Company’s investment in U3O8 is based on the month end spot price for U3O8 of USD25.75/ lb as published by UxC
LLC on 25 March 2019.
Uranium related profit of USD36.4 million has been recognised in the Statement of Comprehensive Income, comprising an increase in
the fair value of inventory of USD39.2 million less the fair value of a derivative liability of USD2.8 million related to the Kazatomprom
repurchase option.
Acquisition of uranium
During the period ended 31 March 2019, the Company purchased 8,441,385 lb of U3O8 at an average price of USD21.10/ lb. The total
cash consideration for the purchases was USD178,155,000 made up as follows:
• Purchase of 8,091,385 lb U3O8 from Kazatomprom at IPO on 5 July 2018 for a cash consideration of USD170,000,000 under a
10-year Framework Agreement (the “Initial Purchase”).
• An additional purchase of 350,000 lb from Kazatomprom on 23 August 2018 for a cash consideration of USD8,155,000.
The following table provides an analysis of the Company’s investment in U3O8 by location:
Location
Canada
Total
5. Trade and other receivables
Other receivables
As at 31 March 2019
6. Cash and cash equivalents
Quantity
lb
8,441,385
8,441,385
Fair value
USD ’000
217,366
217,366
USD ’000
16
16
Cash and cash equivalents as at 31 March 2019 were banked with Citi Bank Europe plc in a fixed interest account with full access,
previously Santander International up until 14 December 2018. Balances at the end of the period were USD8,488,607 and GBP200,260
(a total of USD8,749,546 equivalent).
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Notes to the financial statements continued
7. Uranium derivative liability
As part of the Initial Purchase mentioned in note 4 above, the purchase price was 2.5% below the spot price, resulting in the Company
receiving a discount of USD4,250,000. In exchange for this discount, the Company provided to Kazatomprom an option to repurchase
up to 25% of the Initial Purchase volume of 8,091,385 lb U3O8 at the prevailing uranium spot price less an aggregate discount of
USD6,525,000 (the “Repurchase Option”). The Repurchase Option can only be exercised if the U3O8 spot price exceeds USD37.50/ lb for
a period of 14 consecutive days, starting three years from the date at which the Company took delivery of the Initial Purchase inventory
(being the initial public offering date of 5 July 2018) and expiring on 30 June 2027.
The Company has the option to purchase from Kazatomprom all or a portion of the volume repurchased by Kazatomprom under the
Repurchase Option. The Company’s option may be exercised in whole or in part and in one or more separate exercises during the period
commencing on the delivery date for the Repurchase Option and ending on 30 June 2027.
The fair value of the Repurchase Option granted to Kazatomprom has been determined at USD2,799,000 as at 31 March 2019 based on
the expected option payoff using a Monte Carlo simulation.
A valuation date spot price of USD25.75 per lb, volatility of 29.24% and the two-year US risk-free rate of 2.23% were used to simulate spot
price as at 4 July 2021 (date at which the option may first be exercised). Monthly volatility of 8.11% and monthly US risk-free rate of 0.2%
were used to simulate monthly prices to 30 June 2027. The uranium derivative liability is classified within level 2 of the fair value hierarchy
as at 31 March 2019.
8. Trade and other payables
Other creditors and accruals
As at 31 March 2019
9. Share capital
Authorised:
10,000,000,000 ordinary shares of GBP 0.01.
Issued and fully paid:
Ordinary shares
Opening share capital
Issued 18 January 2018
Issued 5 July 2018
Share capital as at 31 March 2019
Share premium
Opening share premium
Proceeds of issue of shares
Share issue costs
Share premium as at 31 March 2019
USD ’000
384
384
Number
GBP ’000
USD ’000
–
10,000
76,166,630
76,176,630
–
0.1
762
762
–
0.1
1,007
1,007
GBP ’000
USD ’000
–
151,591
(6,207)
–
200,449
(8,201)
145,384
192,248
The Company was incorporated with an authorised share capital of GBP10,000 divided into 10,000 ordinary shares of GBP1.00 each.
On incorporation, 100 ordinary shares of GBP1.00 each were issued fully paid to the subscribers of the Company’s memorandum of
association. Such shares were then subsequently transferred to Bacchus Capital Advisers Limited, the Company’s investment advisor.
On 8 June 2018, the Company’s 100 existing ordinary shares of GBP1.00 each were sub-divided into 10,000 ordinary shares of
GBP0.01 each.
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Yellow Cake Annual Report 2019
On 26 June 2018, the Company resolved with effect from admission to AIM to increase the authorised share capital of the Company to
GBP100,000,000, divided into 10,000,000,000 Ordinary Shares of GBP0.01 each.
Following the Company’s listing on AIM on 5 July 2018 a total of 76,166,630 additional ordinary shares were issued at GBP2.00 per
share. The Company incurred listing expenses comprising of commissions and professional advisor fees totalling USD10,790,600 of which
USD8,201,221 have been taken to the share premium account. The remaining costs of USD2,589,379 have been recognised as initial
public offering expenses in the Statement of Comprehensive Income.
The Company has one class of shares which carry no right to fixed income.
10. Share-based payments
On admission to AIM the Company issued 60,275 ordinary shares to certain advisors to the Company in lieu of cash payments for services
rendered. The fair value of the services received was USD160,000 which has been recognised in initial public offering expenses in the
Statement of Comprehensive Income.
In addition, the Company issued 486,770 ordinary shares to Bacchus Capital, the Company’s investment advisor in settlement of services
provided in relation to the Company’s admission to AIM. The fair value of these services of USD969,315 has been recognised in initial
public offering expenses in the Statement of Comprehensive Income.
11. Procurement and market consultancy fees
In consideration for the services rendered by 308 Services Limited, the Company paid a commission of 1.0% of the consideration paid
for the first purchase of U3O8 amounting to USD1,781,550. Additional fees of USD708,735 payable to 308 Services Limited were
also incurred during the period from 5 July 2018 to 31 March 2019 in consideration for its services to the Company in relation to the
purchasing of U3O8 and in securing competitively priced storage services.
12. Other operating expenses
Professional fees
Management salaries and Directors' fees
Auditor's fees
Other expenses
For the period ending 31 March 2019
13. Taxation
Profit for the period ended 31 March 2019 before tax
Tax expense for the period
Profit for the period ended 31 March 2019 after tax
USD ’000
501
293
87
137
1,018
USD ’000
29,694
–
29,694
As the Company is managed and controlled in Jersey it is liable to be charged to tax at a rate of 0% under schedule D of the Income Tax
(Jersey) Law 1961 as amended.
14. Related party transactions
During the period, the Company incurred USD155,083 of administration fees payable to Langham Hall Fund Management (Jersey)
Limited. Christopher Peter Marshall, who served as a Director in the period, is the Managing Director of Langham Hall Fund Management
(Jersey) Limited and was a Non-Executive Director of the Company from 18 January 2018 to 18 June 2018 for which he received no
Directors’ fees. As at 31 March 2019 there were no amounts due to Langham Hall Fund Management (Jersey) Limited.
The key management personnel are the Directors and as there are no other employees, their aggregate remuneration during the period
was $292,733.
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Notes to the financial statements continued
15. Earnings per share
Profit for the period (USD ‘000)
Weighted average number of shares since IPO
Weighted average number of shares since incorporation
Earnings per share since IPO (USD)
Earnings per share since incorporation (USD)
29,694
76,176,630
46,958,197
0.39
0.63
The table above shows the earnings per share based on the weighted average number of shares in issue since the IPO on 5 July 2018 and
since incorporation on 18 January 2018.
The Company does not have any instruments which could potentially dilute basic earnings per share in the future.
16. Events after the reporting date
On 12 April 2019, the Company placed 12,000,000 new ordinary shares at a price of GBP2.15 per share (approximately USD2.81).
The Placing raised gross proceeds of approximately GBP25.9 million before expenses and GBP24.7 million after expenses (approximately
USD33.8 million before expenses and USD32.2 million after expenses at the USD/GBP exchange rate of 1.304494 prevailing on the share
issuance date of 16 April 2019).
On 31 May 2019, the Company purchased 1.175 million lb of U3O8 for a cash consideration of USD30.4 million from Kazatomprom and
took delivery of this material at Cameco’s Port Hope/Blind River facility in Ontario, Canada by book transfer.
On 31 May 2019, James Keating resigned from the Board. James Keating was an Independent Non-Executive Director of the Company
and a Client Director of Langham Hall Fund Management (Jersey) Limited.
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Yellow Cake Annual Report 2019
Notes
Yellow Cake Annual Report 2019
55
Notes
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Yellow Cake Annual Report 2019
Corporate information
Head Office and Registered Office
3rd Floor, Liberation House
Castle Street
St Helier
Jersey, JE1 1BL
Company Secretary
LHJ Secretaries Limited
3rd Floor, Liberation House
Castle Street
St Helier
Jersey, JE1 1BL
Nominated Advisor and Joint Broker
Numis Securities Limited
10 Paternoster Square
London, EC4M 7LT
Joint Broker
Joh. Berenberg, Gossler & Co. KG, London Branch
60 Threadneedle Street
London, EC2R 8HP
Financial Advisor
Bacchus Capital Advisers Limited
6 Adam Street
London, WC2N 6AD
Legal Advisors to the Company as to English and US Law
Milbank LLP
10 Gresham Street
London, EC2V 7JD
Jersey Solicitors to the Company
Mourant Ozannes
22 Grenville Street
St Helier
Jersey, JE4 8PX
Auditor to the Company
RSM UK Audit LLP
25 Farringdon Street
London, EC4A 4AB
Registrars
Link Market Services (Jersey) Limited
12 Castle Street
St Helier
Jersey, JE2 3RT
Principal Bankers
Citibank Europe
1 North
Wall Quay
Dublin 1, Ireland
Media Advisors
Powerscourt
1 Tudor Street
London, EC4Y 0AH
Yellow Cake Annual Report 2019
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www.yellowcakeplc.com