for the year ended 31 March
ANNUAL
REPORT
2020
What
is yellowcake?
Yellowcake is a solid form of mixed uranium
oxide that is generally yellow in colour. It is
produced from uranium ore from mining or
in-situ leaching. Yellowcake is shipped from
the mine and processed at licensed facilities
for conversion, enrichment and fabrication
into nuclear fuel.
B
Yellow Cake Annual Report 2020
*Yellowcake photography contained within this report is courtesy of Kazatomprom.
Contents
Section 1
Section 2
Section 3
Section 4
2 YELLOW CAKE AT
A GLANCE
Investment case
3
4 STRATEGIC
REPORT
Highlights
4
5 What we do
6
8
Chairman’s statement
Our strategy
14 Our business model
15 Environmental, social and
governance
18 CEO statement
20 CFO’s review
22 Risk management
29 Viability
58 FINANCIAL
STATEMENTS
59 Financial statements
79 Corporate information
30 GOVERNANCE
30 Board of directors
32 Corporate governance report
40 Report of the Audit Committee
42 Directors’ remuneration report
44 Annual report on Directors’
remuneration
50 Directors’ report
53 Directors’ responsibility
statement
54 Independent auditor’s report
Yellow Cake Annual Report 2020
1
Yellow Cake at a glance
Yellow Cake plc is a
London-listed company that
provides investors with direct
exposure to the uranium
market through our physical
holding of uranium oxide
concentrate (U3O8).
Yellow Cake was established to create an
opportunity for investors to profit from an
anticipated rise in the uranium price arising
from the short- and medium-term supply
and demand asymmetry.
The Company has a long-term Framework
Agreement for supply of U3O8 with
Kazatomprom, the world’s largest uranium
producer. This enables Yellow Cake to access
up to USD100 million of uranium annually
from Kazatomprom at the spot price until
2027.
The Company has a low-cost outsourced business model
that provides access to corporate functions and industry
expertise.
We also aim to exploit opportunities arising from uranium
ownership and uranium-based financial initiatives such as
commodity location swaps, streaming and royalties and
believe we are well positioned to do so.
2
Yellow Cake Annual Report 2020
Key points
London-listed on AIM
Headquarters in Jersey
Holds 9.62 million lb of U3O8
as at 31 March 2020 acquired at an
average cost of USD 21.68/lb
URANIUM PRICE (USD/lb)
35
30
25
20
Mar 19
Jun 19
Sep 19
Dec 19
Mar 20
Section 1 / Yellow Cake at a glance 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
nuclear energy demand.
Strong board and
management.
Creates liquidity for
investors in a traditionally
illiquid commodity.
Low-cost outsourced
business model.
Long-term Framework
Agreement for the supply
of U3O8 with Kazatomprom,
the world’s largest
uranium producer.
Yellow Cake Annual Report 2020
3
Section 1 / Yellow Cake at a glance
Strategic
report
4
5
6
8
14
18
20
22
Highlights
What we do
Chairman’s statement
Our strategy
Our business model
CEO statement
CFO’s review
Risk management
4
Yellow Cake Annual Report 2020
Raised
GBP25.9
million
(approximately USD33.8 million)
through a placing of shares in April
2019 and acquired an additional
1.175 million lb of U3O8 at a price of
USD25.88/lb
Continued improvement in the
market for U3O8, with the spot price
increasing
6%
from USD25.75/lb on 31 March 2019
to USD27.40/lb1 on 31 March 2020
Acquired
Net asset value of
309,788
ordinary shares in the Company
(now held in treasury) at a cost of
USD726,320 and a volume weighted
average price of GBP1.82 per share in
a share buyback scheme. The shares
were acquired at a volume weighted
average discount to net asset value of
15%, effectively acquiring exposure
to uranium at a discount to the
commodity spot price
USD3.042
(GBP2.45)
per share as at 31 March 2020
(2019: USD2.93 (GBP2.25) per share)
Profit after tax of
USD12.5
million
for the year ended 31 March 2020
(2019: USD29.7 million)
The value of the Company’s U3O8
holding has increased by
26%
to USD263.51 million as at 31 March
2020 relative to the average
acquisition cost of USD208.6 million
(USD21.68/lb)
After year end, the U3O8 spot price continued to rise as a result of the impact of
COVID-19 on uranium production, increasing to USD32.80/lb on 6 July 2020, and the
value of the Company’s U3O8 holding increased a further
16%
to USD305.63
million
1 Based on the month end spot price of US$27.40/lb
published by UxC LLC on 30 March 2020.
2 Net asset value per share on 31 March 2020 is
calculated assuming 88,215,716 ordinary shares
in issue less 309,788 shares held in treasury, the
Bank of England’s daily USD/ GBP exchange rate of
1.2403 on 31 March 2020 and the month-end spot
price published by UxC LLC on 30 March 2020.
3 Based on the weekly spot price published by UxC
LLC on 6 July 2020 and 9,316,385 lb U3O8 held by
the Company after the sale of 300,000 lb U3O8 on
30 June 2020.
What we do
Yellow Cake plc (the “Company”) is a London-listed company, headquartered in Jersey,
established in 2018 to offer investors exposure to the uranium commodity at a time when
the supply/demand fundamentals strongly suggested a resurgence in uranium prices.
U3O8
The Company’s business model minimises
cost leakage by outsourcing administrative
services and securing access to industry
knowledge and expertise. This includes a
services contract with 308 Services Limited
and competitive storage contracts with
licensed converters.
At 31 March 2020, the Company owned
9.62 million lb of uranium oxide concentrate
(U3O8) which was stored at Cameco’s
Port Hope/Blind River facility in Ontario,
Canada, a licensed conversion facility.
Since April 2020, some of the Company’s
holding is now held at Orano Cycle’s
Malvési/Tricastin storage facility in France.
In May 2018 the Company entered into a ten-year
Framework Agreement for supply of U3O8 with
Kazatomprom, the world’s largest uranium producer
and one of the world’s lowest cost uranium producers,
which enables Yellow Cake to access uranium at an
undisturbed spot price. The Framework Agreement
confers the right to purchase up to USD100 million of
U3O8 each year to 2027 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 a price that is not disturbed by
market anticipation of a significant purchase and that the
Company’s shareholders will benefit from any subsequent
uranium price uplift.
Yellow Cake Annual Report 2020
Yellow Cake Annual Report 2020
5
5
Chairman’s statement
The Lord St John
of Bletso
The unprecedented global lockdown following the
COVID-19 pandemic has posed massive short- and
medium-term challenges. As a Company, we are mindful
of the significant impact COVID-19 is having on families and
friends around the world and express our heartfelt thanks
to those who are working to keep us safe and well.
In this challenging and uncertain environment, Yellow
Cake is well-positioned to absorb the immediate impact.
The Company has only two employees (the CEO and CFO)
and no operating assets. Our balance sheet has no debt
or hedges, and has sufficient working capital (excluding
the proceeds from the post-year-end sale of uranium) for
approximately 18 months before the need may arise to raise
additional funds for working capital.
The benefits of only participating in the uranium market by
holding and transacting in physical U3O8 have become very
evident as all the other elements of the uranium production
cycle have been impacted – exploration, development,
mining and processing. The pandemic has highlighted
the concentration of uranium supply with a significant
curtailment in production as a result of the lockdowns in
certain producing countries. In contrast, the demand side
is very distributed and, while there is expected to be a
reduction in demand for electricity as economies contract,
nuclear only provides about 10% of global electricity supply
and generally forms part of the baseload requirement.
Yellow Cake provides liquid exposure
to the uranium spot price
Yellow Cake provides investors with long-term exposure
to the uranium spot price through a liquid, publicly-listed
vehicle with strict governance structures, practices and
policies. The low-cost outsourced business model minimises
cost leakage and risk exposure as we do not participate in
the uranium production chain. The Company’s long-term
partnership with Kazatomprom is a key strategic advantage
that provides access to material volumes of uranium at the
prevailing market price.
Increasing holdings of U3O8
In April 2019, the Company placed 12 million new
ordinary shares, the proceeds of which were used
to purchase 1.175 million lb of U3O8 at a price of
USD25.88/lb during a pullback in the uranium price.
Yellow Cake is mindful of the significant
impact COVID-19 is having on those around
us and on the global economy. Our low-cost,
defensive business model positions the
Company to ride out the immediate impact.
The skewed nature of the pandemic’s
impact on uranium supply and demand
is likely to support our investment thesis
in the short term, while the long-term
drivers for increased uranium demand
continue to strengthen.
6
Yellow Cake Annual Report 2020
Section 2 / Strategic report While Yellow Cake’s share price declined over the course
of the year, it remained relatively resilient compared to the
rest of the market, demonstrating the defensive nature of
our business. With the share price trading below its net
asset value, the Board took advantage of this discount
and implemented a share buyback programme in January
2020. This programme is an effective way to increase
shareholders’ exposure to U3O8 at a discount to the
commodity spot price, supporting our broader strategy to
deliver value to shareholders. By the end of the financial
year, the Company had acquired 309,788 of its ordinary
shares and, after year-end, the buyback programme was
extended. At the end of June 2020, after year end, the
Company announced a substantially increased buyback
programme to purchase up to USD10 million of the
Company’s shares, financed by the disposal of 300,000lb
of U3O8.
Governance
Yellow Cake’s Board of Directors is committed to maintaining
high ethical standards as reflected in our Code of Conduct
and governance framework. The Company has applied the
principles and provisions of the UK Corporate Governance
Code 2018 (the “Code”) to the degree appropriate to the size
and nature of its business. The simplicity of the organisation
limits the number of points of interface and improves
governance and oversight. We regularly review and update
our compliance policies and, during the year, we updated
all of our governance policies to align with the principles in
the new Code. Effective policies and measures are in place
to prevent the opportunity for bribery or inducements.
We conduct diligence on our suppliers and business partners
to ensure that their business practices meet our standards
and have a whistleblowing policy in place.
The Board plays an active role in overseeing the Company’s
activities and met ten times during the year to 31 March
2020. Meetings were also held by the Audit, Remuneration
and Nomination Committees during the period to discharge
their duties as set out in their terms of reference. James
Keating resigned as an Independent Non-Executive
Director with effect from 31 May 2019 and Alexandra
Nethercott-Parkes joined the Board as an Independent
Non-Executive Director with effect from 18 July 2019.
We thank James for his contribution to the Company during
his tenure and welcome Alexandra to the Board.
Stable demand in the face of
constrained supply
While the disruption caused by COVID-19 has impacted
every country, nuclear power’s important role in the global
energy supply is expected to remain intact as a means of
generating reliable baseload energy at a low operating cost.
As a low-carbon energy source, nuclear is likely to form an
integral part of future energy plans as countries seek to meet
their carbon emission reduction commitments and limit
global warming. Advances in new technologies including
small modular reactors could speed the deployment of
nuclear power solutions and broaden their acceptance.
Early indications are that the pandemic is significantly
disrupting uranium production. In the medium- to long-term,
the underinvestment in uranium resources and concentration
of production suggests continued constraints in supply.
New reactors currently under construction and those
planned represent a 37% increase in the global reactor fleet
from the current position1. The longer-term forecast shows a
net growth in the reactor fleet of 30% to 2040.
The conclusion of the US Department of Commerce
Section 232 investigation and release of the report of the
US Nuclear Fuels Working Group removes a great deal of the
uncertainty that has affected the uranium market for the last
two years.
These factors demonstrate the continued asymmetry in
uranium supply and demand, which was the fundamental
principle upon which Yellow Cake was established.
This dynamic has been exacerbated in the short term by
COVID-19, but looks set to persist into the medium- and
long-term.
Dividend policy
Since one of the Company’s objectives is to realise a return
on investment from the appreciation in the value of its
U3O8 holdings, the Company does not currently expect
to issue dividends on a regular or fixed basis. The Board
reserves the right to declare a dividend, as and when
deemed appropriate.
Acknowledgements and thanks
In closing, I would like to express my appreciation to
my fellow Board members for their participation and
contribution during the year. The Company’s relationship
with Kazatomprom, our strategic supplier, is an important
aspect of our ability to create value for shareholders
and we thank them for their support. The share issue in
April 2019 received strong interest from investors and
shareholders, with the majority of the Company’s top-ten
holders increasing their holdings. We thank them for their
support and welcome our new shareholders to the Company.
The Lord St John of Bletso
Chairman
1 https://www.world-nuclear.org/information-library/facts-and-figures/world-nuclear-power-reactors-and-uranium-requireme.aspx
Yellow Cake Annual Report 2020
7
Our strategy
Yellow Cake was established to provide investors with liquid
exposure to the uranium commodity, given relatively limited
opportunities available to investors to hold the physical
commodity. At the time of Yellow Cake’s initial listing in
July 2018, supply-demand fundamentals implied a strong
recovery in the market price of uranium over time.
Our strategy is to hold physical U3O8 and enter into
other physical related uranium activities such as
location swaps, royalties and streams. Yellow Cake does
not have any operating assets and does not trade its
uranium holdings or enter into hedging arrangements.
The Company’s low-cost model aims to minimise cost
leakage by outsourcing administrative services, supported
by the significant cost savings negotiated into the
uranium storage contracts.
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. Executive management possess significant
expertise and market knowledge and are supported by
308 Services Limited, which has considerable experience
in the uranium market.
Yellow Cake seeks to leverage its expertise and market
knowledge, as well as that of its service providers, to
generate additional value through the purchase of uranium.
We also continue to assess other operational and financial
transactions to secure exposure to uranium, including
locations swaps, streaming and royalties.
As discussed in the section that follows, the supply/demand
dynamics in the uranium industry suggest a longer-term
shortfall in supply.
8
Yellow Cake Annual Report 2020
level (0.7%) to the level required for use as a fuel in nuclear
reactors (3.5% – 5%). Uranium enrichment is a sensitive
technology from a nuclear non-proliferation standpoint and
is tightly controlled. Around 90% of the world’s enrichment
capacity is located in China, France, Russia, the United
Kingdom and the United States5.
Fuel fabrication6 converts the enriched UF6 into UO2 that is
used in the manufacture of nuclear fuel bundles, which are
specifically designed to the standards required by particular
types of reactors. Most fuel fabricators are owned by reactor
vendors, which usually supply the fuel assemblies for the
reactors they produce. Significant fuel fabrication is located
in China, France, Russia, the United Kingdom, the United
States, Japan, Canada and India.
Secondary supply sources are a material supply of uranium
and include material from commercial and government
inventories, enricher underfeeding, and depleted uranium
tails recovery7.
The nuclear fuel value chain
The value chain from uranium mine to nuclear reactor is
complex and can take up to 18 months1. Supply of uranium
is relatively concentrated with 52%2 of the world’s uranium
resources found in Australia, Kazakhstan and Canada.
Together these countries produce two thirds3 of global
uranium mined production.
U3O8 price (USD/lb)
$150
$120
$90
$60
$30
$0
Yellow Cake listing
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
0
2
0
2
Uranium leaves the mines as yellowcake (U3O8) and is further
refined before conversion into a gas (uranium hexafluoride
– UF6) at five facilities in the USA, Canada, France, Russia
and China4. Enrichment facilities use centrifuges to raise
the concentration of the U-235 isotope from the natural
1 OECD-NEA, The Economics of the Nuclear Fuel Cycle (1994)
2 OECD-NEA & IAEA, Uranium 2018: Resources, Production and Demand
3 World Nuclear Association: www.world-nuclear.org/information-library/nuclear-fuel-cycle/mining-of-uranium/world-uranium-mining-production (Updated August 2019)
4 World Nuclear Association: www.world-nuclear.org/information-library/nuclear-fuel-cycle/conversion-enrichment-and-fabrication/conversion-and-deconversion
(Updated December 2019)
5 World Nuclear Association: www.world-nuclear.org/information-library/nuclear-fuel-cycle/conversion-enrichment-and-fabrication/uranium-enrichment (Updated January 2020)
6 World Nuclear Association: www.world-nuclear.org/information-library/nuclear-fuel-cycle/conversion-enrichment-and-fabrication/fuel-fabrication (Updated April 2020)
7 World Nuclear Association: www.world-nuclear.org/information-library/nuclear-fuel-cycle/uranium-resources/supply-of-uranium (Updated August 2019)
Section 2 / Strategic report
Mining
Conversion
Enrichment
Fuel Fabrication
• Mining methods include
in-situ leaching, open pit
and underground mining
• Mines produce uranium
oxide concentrate U3O8
• Physical U3O8 converted
from powder form
into natural uranium
hexafluoride gas (UF6)
• Commercial conversion
plants located in USA,
Canada, France, Russia
and China
• Commercial process
for enrichment involves
gaseous uranium (UF6)
in centrifuges
• Uranium-235 isotope is
raised from the natural level
of 0.7% to about 3.5% to 5%
• Enriched UF6 is converted
to uranium dioxide powder
which is fabricated into
fuel rods and then fuel rod
bundles
• Fuel bundles are placed into
nuclear reactors owned by
utility companies
Yellow Cake Annual Report 2020
9
Our strategy continued
The Uranium Market
Demand-side drivers
Nuclear energy remains a key and growing element of
global energy supply
Uranium is primarily used for the production of electricity
in nuclear power plants, with the US accounting for nearly
a third of global uranium requirements8 for these facilities.
Nuclear energy is recognised as a reliable, low operating
cost and clean source of baseload energy, and reactors are
being built or planned in China and many emerging markets
including Bangladesh, Belarus, Egypt, Jordan, Poland, Saudi
Arabia, Turkey and the UAE8.
Global energy demand continues to increase as the
economies of non-OECD countries develop and electricity
consumption increases in developed markets as a result
of trends such as the increased use of electric vehicles.
Nuclear power is likely to remain a key contributor to global
power supply and the World Nuclear Association’s (WNA)
reference case forecasts a 43% increase in nuclear power
globally by 20409.
There are currently 440 reactors operating worldwide with
an additional 163 reactors under construction or planned8.
Forecast growth is particularly strong in China, Russia, India
and the Middle East. While the retirement of old reactors
(89) largely offset the growth in new units commissioned
(98) from 1998 to 2018, the WNA has concluded that there
are currently no firm projections for retirements in the next
two decades10. The World Nuclear Association’s reference
case conservatively estimates 154 reactors closing by
2040 compared to 289 coming online9.
As a low-carbon source of energy, nuclear power is well
placed to contribute to the goal of limiting global warming to
+1.5C by 2050 in terms of the Paris Agreement on climate
change. While high new-build costs and lengthy construction
schedules of traditional nuclear power facilities have
constrained growth in some developed markets, significant
investments are being made in developing small modular
reactor (SMR) solutions. SMRs typically have generation
capacities below 400 MW per unit and are less technically
challenging to construct, quicker to build, easier to fund and
could be sited on existing approved nuclear power facilities
due to their relatively small size.
Uranium requirements percentage of world demand
Current and future reactors
Utility long-term contracts need to be replaced
Most of the 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 (forward
requirements held in the event of supply disruption).
Nuclear power utilities secure the majority of their uranium
purchases through long-term contracts, with the balance
purchased in the spot market (defined as delivery within
a year). Typically, around 80% to 85% of utilities’ uranium
purchases are contracted, however currently only around
67%11 of European and 47%12 of US utilities’ 2024 uranium
requirements are contracted.
The delay in long-term contracting could be related to the
uncertainty created in the uranium market by a number of
US policy issues over the past 18 months.
Future Contracted Coverage Rate of US & European Utilities
120%
100%
80%
60%
40%
20%
0%
2019
2020
2021
2022
2023
2024
2025
2026
2027
30
25
20
15
10
5
0
29%
14% 13%
21%
7%
7%
3%
3%
3%
USA
China
France
South
Korea
Russia
Japan
Ukraine United
Kingdom
Other
150
120
90
60
30
0
USA
France
China
Russia
Japan
South
Korea
India
Canada
United
Kingdom
UAE
Other
US UTILITIES COVERAGE
EU UTILITIES COVERAGE
8 World Nuclear Association: www.world-nuclear.org/information-library/
facts-and-figures/world-nuclear-power-reactors-and-uranium-requireme.aspx (May 2020)
9 World Nuclear Association: The Nuclear Fuel Report, Global Scenarios for Demand
CURRENT
UNDER CONSTRUCTION
PLANNED
and Supply Availability 2019-2040
Source: World Nuclear Association 8
Source: World Nuclear Association 8
10
Yellow Cake Annual Report 2020
10 World Nuclear Association: www.world-nuclear.org/information-library/current-and-
future-generation/plans-for-new-reactors-worldwide (Updated March 2020)
11 Euratom Supply Agency Annual Report 2018 (21 March 2019)
12 US Energy Information Administration: 2019 Uranium Marketing Annual Report
(May 2020)
Section 2 / Strategic report
• USDOC Section 232 investigation
The most significant of these issues was the launch in July
2018 of a Section 232 investigation by the United States
Department of Commerce (USDOC) into the national
security aspects of high levels of foreign uranium importation
by US nuclear reactor operators. Two US uranium production
companies requested government-mandated purchase
requirements equating to 25% of annual domestic uranium
consumption (11 – 12 million lb of U3O8/year) in order to
support an economically-viable domestic nuclear fuel cycle.
The Section 232 investigation concluded in July 2019 with
no actions taken. However, the US President did establish a
US Nuclear Fuel Working Group (NFWG)13 to examine the
state of US domestic nuclear fuel production. The NFWG
was given a 90-day period to report back to the White House
advising of its findings and making recommendations to
further enable domestic nuclear fuel production, if needed.
The NFWG submitted its report late in 2019, but it was not
released publicly.
The NFWG “Strategy to Restore American Nuclear Energy
Leadership” report was released on 23 April 202014.
The report outlines a strategy to re-establish capabilities
in, and provide direct support to, the front end of America's
nuclear fuel cycle, including direct purchases of uranium
for a strategic Uranium Reserve. The report includes
policy recommendations on Executive, Congressional
and regulatory actions that could be taken to enhance the
positive attributes of nuclear power, revive the capabilities
of the uranium mining, milling and conversion industries in
the US, strengthen US technology supremacy, and drive US
exports, while assuring consistency with US non-proliferation
objectives and supporting national security. In support of
the NFWG proposals, the US President’s Budget Request
for Fiscal Year 202115 included USD150 million to purchase
domestic uranium and conversion services in fiscal year
2021 (commencing 1 October 2020) and a similar annual
budgetary amount was included in the ten-year forward
federal budget planning document.
• US-Iran Economic Sanctions Waivers
The US’s withdrawal from the Joint Comprehensive Plan
of Action with Iran (the Iran Nuclear Deal) in 2018 led
to the US imposing sanctions on Iran. Since that time,
the US Department of State has issued waivers on three
non-proliferation-related projects to allow certain of Iran’s
trading partners to continue working with Iran on civilian
nuclear programmes without being subject to American
sanctions. The companies active in these facilities are
primarily from Russia, China and Europe.
In October 2019, the US Department of State granted
90-day extensions for economic sanction waivers, but
on 18 November 2019 (effective 15 December 2019) the
sanction waiver for the Fordow Enrichment Plant was
terminated due to actions taken by Iran to recommence
uranium enrichment. In January 2020, the US Department
of State announced that the remaining sanction waivers had
been extended for a 60-day period and these were renewed
again in March for a further 60 days. Russia is a significant
supplier of enriched uranium to the US and failure to renew
these waivers would create a significant supply-side event
for domestic US utilities. On 27 May, US Secretary of State
Pompeo terminated the three remaining nuclear waivers
related to Iranian nuclear projects. Secretary Pompeo
extended a waiver for the Bushehr nuclear power plant for
90 days.
• Russian Suspension Agreement
In 1992, the US Department of Commerce signed an
agreement with the Russian Federation’s Ministry
for Atomic Energy suspending the antidumping duty
investigation on uranium enrichment from Russia and
effectively establishing an annual quota limiting the supply
of nuclear fuel into the US from Russia. This agreement
has been extended five times since then and the current
extension expires at the end of 2020. The agreement
is currently under review and could be extended on
the existing basis, amended or allowed to expire. If it
expires, Russian-sourced uranium products and services
would enjoy unrestricted access to the US market.
The recommendations in the NFWG strategy include
support for extending the agreement to prevent dumping of
Russian uranium in the US market.
The persistent market uncertainty, particularly relating to
the Section 232 Investigation and formation of the NFWG,
contributed to a noticeable reduction in the total volume
of uranium traded on the spot market in 2019 compared
to 2018. Total 2019 spot market volumes approximated
65 million lbs of U3O8, a decline of just under 30% compared
to the record levels recorded in 2018. Much of this demand
was related to buying and selling between intermediary
parties rather than end-user buying, which limited any
positive impact on the spot price.
With the release of the NWFG report, much of the
uncertainty around the policy issues has reduced and we
expect pent up demand to drive the market, particularly
given the need for US and European utilities to secure
long-term contract coverages.
The long-term case for uranium demand remains sound,
in particular as the world increasingly recognises the need
13 www.whitehouse.gov/presidential-actions/memorandum-effect-uranium-imports-national-security-establishment-united-states-nuclear-fuel-working-group
14 Restoring America’s Competitive Nuclear Energy Advantage: A strategy to assure U.S. national security
15 A Budget for America’s Future – President’s Budget FY 2021 – Appendix: Department of Energy www.whitehouse.gov/wp-content/uploads/2020/02/doe_fy21
Yellow Cake Annual Report 2020
11
Our strategy continued
for the clean baseload energy nuclear provides. We expect
demand to rise as the new nuclear fleet currently under
construction comes on stream over the next two years
and we see a sustainable return to buying from the
major utilities.
Since 2016, producers have shown increasing supply-side
discipline and selected operations have been shut down
or suspended. 2019 primary production remained broadly
unchanged from 2018 and around 14% lower than
2016 production. 2019 primary production represented
around 79% of market demand (2018: 80%)17.
currently being covered by secondary supply, largely from
underfeeding at enrichment facilities 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.
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Supply-side drivers
Primary production and market demand (mmIb)
200
150
100
50
0
2015
2016
2017
2018
2019
2020
MARKET DEMAND
PRIMARY PRODUCTION
Source 17,18,19
Below USD34/lb, a significant portion of production
is thought to be loss-making
At a spot price of USD34/lb of uranium, an estimated
one-third of worldwide production operations are believed
to be loss-making on an estimated total cost basis16.
The uranium spot price consistently traded below
USD30/lb from the first quarter of 2016 until early April
2020. The incentive price for the majority of new uranium
mining projects is also likely to be above USD50/lb,
discouraging exploration and development, and leading to a
potential future supply gap. While higher cost producers have
had the benefit of long-term supply contracts set at higher
prices, these contracts are now expiring.
12
Yellow Cake Annual Report 2020
Recent supply-side responses include:
COVID-19
• Paladin’s suspension at Langer Heinrich in May 2018;
• Cameco’s shut down of Rabbit Lake in 2016, and
suspension at McArthur River in July 2018;
• Kazatomprom’s announcement20 in August 2019 of a 20%
production reduction for three years compared to the
planned levels under Subsoil Use Contracts; and
• A suspension at Cameco’s Cigar Lake mine21 of
indeterminate duration and a reduction of production at
Kazatomprom22 announced after year end, both related
to COVID-19.
Given the significant supply-side cuts that have been
announced, producers have had to turn to the spot market
to source uranium to cover existing long-term supply
contract commitments. The thinness of the spot market
means that any material producer purchase has the
potential to create a rapid tightening of the spot market and
potentially lead to pricing spikes.
Without a material increase in the long-term uranium price,
supply deficits are projected to continue. The supply gap is
The impact of the COVID-19 pandemic in the first quarter
of 2020 exacerbated the supply-side pressures already
emerging in the uranium market. Government-imposed
social distancing restrictions and the remote locations of
several uranium mining districts led to the announcement of
temporary shutdowns and significantly reduced production
at mines in Canada, Kazakhstan and Namibia that together
represented 66% of 2019 production17,23. Activity at the
conversion, enrichment and fuel fabrication stages of
the nuclear fuel cycle could also be affected, as could the
logistical links between these stages.
On the demand side, early indications are that nuclear
energy production has been minimally affected to date,
although this could change depending on the severity of the
economic downturn and how quickly the global economy
recovers. On 30 April, the International Energy Agency
(IEA) released its latest global energy assessment and
forecast, “Global Energy Review 2020”.24 In that report,
the IEA assessed recent energy trends concluding that total
electricity demand was 2.5% lower in the first quarter of
2020 compared with the same period in 2019 while demand
16 Company analysis based on SRK Consulting Global Operating Cost Curve for Primary Uranium Production, Section 232 Investigation of Uranium Imports dated 16 January 2018
17 World Nuclear Association www.world-nuclear.org/information-library/facts-and-figures/uranium-production-figures (Updated May 2020)
18 World Nuclear Association www.world-nuclear.org/information-library/facts-and-figures/world-nuclear-power-reactors-and-uranium-requireme (Updated April 2020)
19 UxC LLC forecast 2019 demand and supply
20 www.londonstockexchange.com/exchange/news/market-news/market-news-detail/KAP/14195200
21 www.cameco.com/media/news/cameco-restarting-production-at-ontario-operations-cigar-lake-status-unchanged
22 www.kazatomprom.kz/en/media/view/covid19_obnovlenie_v_otnoshenii_operatsionnoi_deyatelnosti_kazatomproma
23 Kazatomprom 2018 Integrated Annual Report
24
International Energy Agency, “Global Energy Review 2020” 30 April 2020, www.iea.org
Section 2 / Strategic report
over the entire year could decrease by 5%. However, due
to its base-load characteristics, the IEA concluded “In our
estimate, nuclear power declines by 2.5% from 2019 due
to lower demand and delays for planned maintenance and
construction of several projects.”
While utility interest in long-term uranium purchase
agreements appeared to be increasing early in this
calendar year as formal requests for offers and off-market
discussions between utilities and producers increased,
utility interest abated as a result of COVID-19.
Uranium prices rose rapidly in March 2020 as a
consequence of the producer curtailments and this
price increase continued into April, with the spot price
exceeding USD33/lb and averaging above that level
throughout May and June.25
As a company, Yellow Cake is currently unaffected
by COVID-19, both operationally and financially.
The executive team is already home-based and the
Company has no physical operations. We have a
strong capital position with sufficient working capital
(excluding the proceeds from the post-year-end sale
of uranium) for more than 18 months before needing
to take any measures to access additional funds.
The Company has no debt or hedges on its balance sheet.
Yellow Cake is uniquely positioned to benefit from
supply-side pressure and the resulting uranium price
increases. We remain confident in the long-term outlook
for the commodity, as demand is expected to continue
to exceed supply.
25 Based on spot prices published by UxC LLC.
The Uranium Market
Miners
Production of 139 mmlb uranium
oxide (U3O8) in 20191
Producers bought 9.9 mmlb
from the 2019 spot market2
Secondary supplies
Spot Market
64.3 mmlb traded on the spot
market in 20192
Traders and
financial buyers
Utilities
Utilities consumed 169 mmlb of U3O8 in 20193
– 2019 average uranium price paid by US utilities was US$36/lb4
– Long-term contracts accounted for 85% of purchases
– 22.9 mmlb purchased from the spot market2
Sources
1 UxC LLC 2019 U3O8 Production Review, May 2020
2 UxC LLC 2019 Uranium Spot Market Review, February 2020
3 World Nuclear Association, World Nuclear Power Reactors & Uranium Requirements (August 2019)
4 U.S. Energy Information Administration 2019 Uranium Marketing Annual Report (May 2020)
Yellow Cake Annual Report 2020
13
Section 2 / Strategic report
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 uranium supply, intellectual capital, expertise and storage facilities.
This model is built on key strategic and contractual relationships with industry players.
Kazatomprom Framework Agreement
The world’s largest producer of uranium and one
of the lowest cost producers of uranium.
Yellow Cake’s long-term Framework Agreement with Kazatomprom
gives the Company the right to purchase up to USD100 million of
U3O8 each year to 2027 at a price agreed prior to announcing the
purchase to the market. In the financial year ended 31 March 2020,
Yellow Cake exercised USD30.4 million of its option for 2019.
The Company can also source uranium from other producers if
advantageous.
Orano Cycle Storage Contract
In April 2020, 100,000lb of U3O8 was transferred into a storage
account at Orano Cycle’s Malvési/Tricastin storage facility in France
as part of a location swap agreement. The Company enters into
transactions such as location swaps from time to time, when this is
commercially advantageous.
14
Yellow Cake Annual Report 2020
308 Services Ltd
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.
Cameco Storage Contract
Most of Yellow Cake’s current holding of
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.
Environmental, social and
governance highlights
An important participant
in the transition to a low
carbon economy.
Strong female representation
at the management and
board level.
A skilled, committed
and independent board.
The highest levels of safety
in the storage of uranium.
Yellow Cake Annual Report 2020
15
Environmental, social and governance
After year-end, a small amount of U3O8 (100,000lb)
was transferred into a storage account at Orano Cycle’s
Malvési/Tricastin storage facility in France as part of
a location swap agreement. The Company exchanged
100,000lb of U3O8 it held in Canada for 100,000lb of
U3O8 located in France. This transaction did not involve
the physical transportation of uranium and was effected by
book transfer.
Radiation monitoring and safe working practices are in place
at Kazatomprom, where Yellow Cake has sourced its current
holding of U3O8. Cameco’s Port Hope/Blind River facilities
and Orano’s Malvési/Tricastin facilities have OHSAS
18001-aligned occupational health and safety management
systems and ISO 14001-aligned environmental management
systems in place. Kazatomprom is implementing systems
aligned with these standards.
External ESG assessment
In line with Yellow Cake’s commitment to responsible ESG
practices, the Company commissioned an external and
independent assessment of our adherence to ESG principles.
The assessment was conducted by PRISM, an independent
emerging and frontier market risk consultancy with extensive
experience in the oil and gas and mining industries.
The assessment included a review of Yellow Cake’s practices
against the following ESG frameworks:
• The Sustainability Accounting Standards Board standards
(SASB): SASB sets standards on sustainability issues that
are likely to affect the financial condition or operating.
Given Yellow Cake’s relatively unique business model,
the Company does not align with the 77 industries
covered by dedicated SASB standards and the assessment
consequently focused on the SASB sustainability issues
relevant to our operations. These were:
– Social Capital – Human Rights and
Community Relations
– Human Capital – Employee Engagement, Diversity
And Inclusion, Employee Health and Safety
– Leadership and Governance - Business Ethics,
Competitive Behaviour, Management of the Legal and
Regulatory Environment
• The UN Global Compact Sustainable Development Goals
(UN SDGs)
• The Task Force on Climate-related Financial
Disclosures (TCFD)
The Board recognises that long-term value can only
be created by taking an approach that looks beyond
financial performance to consider the Company’s broader
environmental, social and governance (ESG) performance.
In its deliberations, the Board considers the impact of
the Company’s activities on society, the environment and
Yellow Cake’s reputation.
Due to the size and nature of the Company’s activities,
its direct social and environmental impact is minimal.
The key sources of ESG risk for Yellow Cake relate to its
uranium supply and storage contracts. These risks are
managed through the due diligence conducted on suppliers
and business partners to ensure that they take a responsible
approach to governance and environmental, social and
ethical practices. Yellow Cake has a zero tolerance approach
to bribery and corruption and expects its suppliers and
business partners to share these commitments.
Product responsibility
The environmental and social impacts of uranium mining
are similar to those of most metal or mineral mines, and are
regulated according to the relevant social, environmental,
safety and occupational health regulations relevant to the
country of operation .
Uranium ore and U3O8 are mildly radioactive and can
cause damage from prolonged exposure. Uranium is toxic
chemically and is handled and contained to prevent inhalation
or ingestion. Radioactivity and toxicity increase further
along the nuclear fuel value chain through concentration
and enrichment. As at 31 March 2020, the U3O8 owned by
Yellow Cake was stored in metal drums in a storage account
at Cameco’s Port Hope/Blind River facility.
16
Yellow Cake Annual Report 2020
Section 2 / Strategic report Environmental, social and governance continued
Key findings from the report include:
ENVIRONMENT
SOCIAL
GOVERNANCE
• Yellow Cake’s primary business serving the nuclear power
industry makes it an important participant in the global
transition to a carbon-free economy.
• While Yellow Cake does not engage in mining activities or
directly handle inventory, it is committed to the reduction
of the risk to the environment among its chief supplier and
main contractors.
• In the 2020 financial year, Yellow Cake commissioned an
independent review of the environmental risks related to
its primary supplier, Kazakhstan’s state uranium mining
company Kazatomprom.
• Kazatomprom’s use of in-situ recovery for uranium
extraction is a non-invasive form of production that limits
the impact on the environment.
• Yellow Cake stores its uranium inventory with Cameco
(Canada) and Orano (France), both of which have
ambitious environmental goals which meet global
standards and extend beyond legislative or regulatory
requirements.
• Yellow Cake has put in place a range of policies to ensure
employee and stakeholder protection and wellbeing,
including on equal opportunities, health and safety, and
whistleblowing.
• Yellow Cake regularly monitors its partners using the
Sustainability Accounting Standards Board (SASB)
standards and United Nations Sustainable Development
Goals (SDG) to ensure the health, safety, and wellbeing of
partner employees.
• Yellow Cake commissioned a review of the social policies
of its primary supplier, Kazatomprom, which found the
company to be compliant with SDG 3 on the health and
wellbeing of employees.
• Yellow Cake partners Cameco and Orano have well
developed standards for the health, safety, and wellbeing
of employees, which are regularly assessed by both
regulators and independent agents.
• Independent directors comprise 71% of Yellow Cake’s
Board of Directors. There is also strong female
representation at Board and management level.
• Yellow Cake’s Board is active and engaged with the
company, with a high frequency of meetings and strong
attendance.
• Yellow Cake has strong policies that minimise the risk of
misconduct, including on bribery and corruption as well as
anti-competitive behaviour.
• Yellow Cake also commissioned independent reviews
of the governance at Kazatomprom and political risks
associated with the entity.
Yellow Cake Annual Report 2020
17
CEO statement
Andre
Liebenberg
Yellow Cake’s 2019/2020 year saw the
resolution of much of the industry-specific
uncertainty relating to US policy issues that
has overshadowed the uranium market and a
strengthening of the sector themes that were
the basis of the Company’s formation. While
the emergence of the COVID-19 pandemic
introduces a new and broader uncertainty, the
strong position in which the Company finds
itself at the start of our new financial year
demonstrates the resilience of our
business model and strategy.
18
Yellow Cake Annual Report 2020
Yellow Cake was established two years ago at a time when
supply-side issues in the uranium market began to emerge
as a central theme, with the world’s two largest producers
announcing supply reductions. With production declining
since 2016, the onset of the COVID-19 pandemic crystallised
the supply-side risk with almost 35%1 of the remaining global
supply impacted within a short space of time.
There are currently 4402 operating reactors around
the world supplied from six major production centres,
making for an extremely skewed supply/demand dynamic.
Even before the pandemic, the majority of current uranium
supply was thought to be loss making at the uranium
spot prices of the last two years. The extended period
of low uranium prices has meant that the necessary
investment into new supply has not taken place while
existing mines are exhausting their deposits. We believe
the COVID-19 pandemic and likely ensuing global recession
will further restrict finance available to fund new uranium
projects and to also impact on future exploration activity.
We believe that the visible demand growth and future
supply risks set a powerful platform for Yellow Cake.
Resolution of the US Department of
Commerce Section 232 investigation
During Yellow Cake’s 2020 financial year, the uranium market
continued to be affected by uncertainty arising from the
US Department of Commerce Section 232 investigation
and the establishment of the US Nuclear Fuels Working
Group (“NFWG”). The release of the NFWG’s report3 in April
2020 removed the uncertainty which weighed heavily on the
uranium market over the past two years. That uncertainty
has limited longer-term contracting and market activity by US
nuclear utilities in particular.
Developments in the uranium market
The uranium spot market price ended calendar 2019 at
USD25.00/lb U3O8 (a deterioration of 12% over the year),
and averaged USD25.68/lb over the period, trading in a
narrow range. The price declined further early in 2020,
reaching a low of USD24.10/lb in the middle of March.
Spot market volumes in calendar 2019 were approximately
26% down on 2018 and trading volumes remained low in
the first two months of 2020. The onset of COVID-19 saw
a dramatic rise in the price of over 40% in a ten-week
period.4 Transactional volumes increased significantly in
March with a monthly record number of transactions (76).
The uranium price ended March at USD27.40/lb, continued
to rise on strong volumes and averaged above USD33/lb
throughout May and June.
Section 2 / Strategic report The current supply-side shutdowns have already reduced
supply and there is the potential for disruption in the broader
uranium value chain, which takes up to 18 months to process
uranium ore from mines to the point where it can be used as
fuel for a nuclear power plant. Producers are also expected to
increase market purchases significantly to meet contracted
volumes, given the production cuts.
The long-term fundamentals supporting our view that
uranium is currently under-priced remain intact and
COVID-19 is worsening the short-term supply/demand
imbalance.
Andre Liebenberg
Chief Executive Officer
Increased value in Yellow Cake’s
U3O8 holdings
Yellow Cake traded at a discount to its net asset value
during the year, providing the opportunity to initiate a share
buyback programme that effectively increases shareholders’
exposure to uranium at a discount to the spot price. Although
the Company’s shares closed the year 15% down on the prior
year, this still represents a relatively resilient performance
given that the rest of the UK market was down more than
20%5 for the same period.
The fair value of the Company’s holding of U3O8 increased
by USD15.7 million in the year to 31 March 2020, and at
year-end Yellow Cake’s net asset value increased 9% to
GBP2.45 per share. The Company delivered a net profit after
tax for the year of USD12.5 million and ended the year with
cash and cash equivalents of USD6.5 million on the balance
sheet, with no debt. The CFO’s Review on page 20 provides
more information regarding the Company’s financial results
for the period.
Uranium price (USD/lb), Yellow Cake share price (GBP) and
NAV (GBP/share)
50
40
30
20
10
3,0
2,5
2,0
1,5
1,0
0,5
0,0
Jun 18
Sep 18
Dec 18
Mar 19
Jun 19
Sep 19
Dec 19
Mar 20
U3O8
YCA
NAV
source for graph:
UxC LLC, LSE, Yellow Cake calculations
After year end, we disposed of approximately 3% of our
holding of U3O8 to finance a significantly enlarged and
extended buyback programme.
Stakeholder relationships
We held a large number of active engagements with
shareholders during the year through roadshows,
conferences, conference calls and investor briefings
with industry experts to improve investor and analyst
understanding of the industry. We also utilised media
briefings and interviews as well as retail shareholder
platforms to actively engage with retail shareholders.
Our retail shareholder base has pleasingly increased
from zero at the time of the IPO to around 22% currently.
In particular, the COVID-19 related uranium price rise
provided a unique opportunity to engage broadly with
potential new shareholders as uranium was one of the few
commodities to rise significantly as the pandemic unfolded.
Outlook
Nuclear energy has a resilient future in the long-term global
energy mix as a low carbon, low operating cost, reliable and
sustainable source of energy. Demand for uranium since the
start of COVID-19 has so far remained steady. The release
of the NWFG report is anticipated to contribute to improved
uranium market conditions as the pressure on US utilities
to return to contracting to address future uncovered
uranium requirements is becoming more urgent. Medium- to
long-term drivers of demand include the restart of reactors
in Japan and the facilities planned and currently under
construction in China, India and the Middle East.
1
Industry analysis, Numis Securities, 7 April 2020
2 https://www.world-nuclear.org/information-library/facts-and-figures/world-nuclear-power-reactors-and-uranium-requireme.aspx
3
“Restoring America's Competitive Nuclear Energy Advantage - A Strategy to Restore American Nuclear Energy Leadership”
4 16 March 2020 to 25 May 2020
5
FTSE All Share -21.9%; FTSE AIM All Share -25.6%
Yellow Cake Annual Report 2020
19
CFO’s review
Carole
Whittall
Yellow Cake delivered a uranium related
profit of USD15.9 million during the year,
attributable to an increase in the underlying
price of U3O8 which ended the year
at USD27.40/lb.
20
Yellow Cake Annual Report 2020
Yellow Cake’s annual financial statements for the year
to 31 March 2020 reflect a positive performance in
challenging times.
It is my pleasure to report the following audited financial statements for the year to 31 March 2020, beginning with some
highlights:
An increase in the
Company’s uranium
holding of
USD46.1 million from
USD217.4 million to
USD263.5
million
Proceeds of USD33.8 million
from the share placing
in April 2019, of which
USD30.4 million was applied
to the purchase of
1.175 million
lb of U3O8 at a price of
USD25.88/lb
Profit after tax of
Cash of
USD12.5
million
(2019: USD29.7 million)
USD6.5
million
at 31 March 2020.
(2019: USD8.8 million)
Uranium-related profit
The fair value of Yellow Cake’s U3O8 investment increased
by USD15.7 million (2019: USD39.2 million) during the
year, which translated into a uranium-related profit of
USD15.9 million after taking into account the decrease in fair
value of the uranium derivative liability of USD0.2 million.
The derivative liability relates to the Kazatomprom repurchase
option, which was valued at USD2.6 million at the end of the
period (2019: USD2.8 million) and is detailed in note 7 to the
financial statements.
This fair value gain in the value of the inventory arises from
the increase in the underlying price of U3O8 which ended the
year at USD27.40/lb (2019: USD25.75/lb). Yellow Cake held
8.442 million lb of U3O8 at the beginning of the period and
acquired a further 1.175 million lb at a price of USD25.88/lb
from Kazatomprom on 30 May 2019. At the end of the period,
Yellow Cake held 9.616 million lb of U3O8.
Operating Performance
We are pleased to report profit after tax for the year of
USD12.5 million (2019: USD29.7 million). Expenses for the
year of USD3.5 million (2019: USD6.1 million) included the
following costs:
• USD0.5 million in costs related to Yellow Cake’s share
placing; and
• USD0.2 million in service fees payable to 308 Services
Limited in relation to the purchase by Yellow Cake of U3O8.
Section 2 / Strategic report Operating costs of a recurring nature comprised:
Balance sheet and cash flow
• Procurement and market consultancy fees
paid to 308 Services Limited of USD1.0 million
(2019: USD0.7 million) in respect of the year (detailed
in note 12); and
• Other operating costs (comprising operating and salary
costs) of USD1.8 million (2019: USD1.0 million).
Operating expenses of a recurring nature of USD2.8 million
represent approximately 1.0% of the Company’s net asset
value at 31 March 2020.
The Board approved a share buyback programme to
purchase up to USD2 million of the Company’s ordinary
shares, starting on 22 January 2020 for an initial period of
three months. The duration of the programme was extended
in April to the earlier of the incurrence of the USD2 million
expenditure and 21 July 2020. By 31 March 2020, the
Company had acquired 309,788 shares at a volume weighted
average price of GBP1.82 per share, for a total cost of
USD726,320 and at a weighted average discount to net asset
value of 15%. The shares repurchased are held in treasury.
On 30 June 2020, the Company announced its intention
to implement a further share buyback programme to
replace the previously extended programme. The enlarged
programme is expected to entail the purchase of up to
USD10 million of the Company’s outstanding ordinary shares
and will be mostly financed from the proceeds of the disposal
of 300,000lb of U3O8. The disposal generated proceeds of
USD9.9 million after costs and commission.
The share placing in April 2019 raised USD32.3m net of
costs of USD1.4m, of which USD30.4 million was applied to
purchasing U3O8.
Yellow Cake’s U3O8 investment increased by 21% to
USD263.5 million at year-end compared
to USD217.4 million at the end of the 2019 financial year.
As at 31 March 2020, Yellow Cake had cash of USD6.5 million
(2019: USD8.8 million).
Net Asset Value (NAV) and NAV per share
USDm
300
250
200
150
100
50
0
200
2.00
237.5
246.6
222.9
243.7
252.2
245.3
2.39
2.53
2.25
2.18
2.32
2.45
2.11
267.1
GBP
4
3
2
1
0
Listing
2018/
09/30
2018/
12/31
2019/
03/31
2019/
06/30
2019/
09/30
2019/
12/31
2020/
03/31
NET ASSET VALUE (USDm)
NET ASSET VALUE PER SHARE (GBP)
Yellow Cake’s estimated net asset value at 31 March
2020 was GBP2.45 per share or USD267.1 million,
consisting of 9,616,385 lbs of U3O8 valued at a spot price
of USD27.40/lb, a uranium derivative liability of liability of
USD2.6 million, cash and cash equivalents of USD6.5 million
and other net liabilities of USD0.3 million.
The Company does not propose to declare a dividend for
the year.
Carole Whittall
Chief Financial Officer
Yellow Cake Annual Report 2020
21
Risk management
How we manage risk in our business
The Board determines the Company’s business strategy and
has overall responsibility for risk assessment. While risk can
never be fully eliminated, Yellow Cake’s approach to risk
management aims to mitigate risk to an acceptable level to
execute the Company’s strategy and create value for
all stakeholders.
The Board has mandated the Audit Committee to keep the
Company’s internal control and risk management systems
under review and to report to the Board. The committee
reviews the system of internal controls and regularly
assesses its effectiveness. These reviews are supplemented
with feedback from the external auditor regarding issues
identified during its engagement, particularly those relating
to any control weaknesses, as well as the responses from
management to these issues.
The Executive Directors undertake a regular risk 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 reviews the risk
assessment and risk management processes carried out by
the Executive Directors for completeness and accuracy,
carefully considers the Company’s risk register at regular
intervals and receives regular updates from management.
Short-term incentives for Executive Directors include a
weighting for risk management to align employee rewards
with shareholder returns.
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.
Operational Risks
Corporate Risks
Social, Safety and
Environmental Risks
Financial Risks
1
2
3
4
Counterparty risk
Cash flow risk
Operating risk
COVID-19
5
6
Key personnel
Key service providers
7
8
9
10
11
Regulatory regime
Political and country
Bribery and corruption
Environmental risk
ESG risk
12
13
14
Uranium price risk
Foreign exchange risk
Taxation risk
22
Yellow Cake Annual Report 2020
Section 2 / Strategic report The table below shows the principal risks currently facing the Company, including those that could threaten its business model, future performance, solvency or liquidity. Risk levels are
determined based on an evaluation of the probability and consequence of individual risks.
NATURE AND IMPACT OF RISK
HOW WE MANAGE THE RISK
Risk Level
OPERATIONAL RISKS
1. Counterparty risk
While considered unlikely, the counterparties to the Company's key contracts
may become insolvent or otherwise unable to fulfil their contractual obligations.
(a) 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 ten days after taking delivery of the uranium. This ensures the
company is better able 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 at an undisturbed market
price under that agreement. If that occurred, if Yellow Cake wished to purchase further
uranium, it would need to enter into new supply contracts for uranium with producers and/or
to purchase uranium in the spot market. Yellow Cake recognises that any new contracts or
spot market purchases may not provide equivalent access to undisturbed uranium prices or
volumes as provided by the Kazatomprom contract.
As the remaining term of the Kazatomprom Framework Agreement reduces, the contract
risks reduce.
(b) The Company has contracts in place for the storage of its U3O8 with Cameco
for storage at Cameco's Port Hope/Blind River facility and with Orano for
storage at Orano’s Malvési/Tricastin storage facility in France. There is a risk
that Cameco or Orano could become insolvent.
The Company retains ownership of the U3O8 while in storage and would therefore retain
ownership through any potential insolvency event in relation to Cameco or Orano (although it
cannot be guaranteed that, in the event of a Cameco or Orano insolvency event, a third party
would not seek to challenge the Company’s title to its U3O8).
(c) There is a risk that the storage facilities could be destroyed.
(d) 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.
Yellow Cake maintains a watching brief on the credit rating and financial health of Cameco
and Orano.
Cameco and Orano have contractual undertakings to either provide replacement U3O8 or
pay Yellow Cake the replacement volume of such U3O8 in the event of a loss of Yellow Cake’s
inventory. As such, Yellow Cake does not have third party insurance arrangements in place to
insure this risk. Cameco and Orano are not liable for consequential losses.
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.
Medium
Medium
High
Medium
Yellow Cake Annual Report 2020
23
Risk management continued
NATURE AND IMPACT OF RISK
2. Cash flow risk
Yellow Cake may, in the future, have insufficient funds to pay operating
expenses.
3. 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 choose to proceed with such opportunities, be
exposed to certain operating risks to which the counterparties to the
Company in such agreements are themselves exposed.
The Company's operating risk relates primarily to the execution of purchase
and sale transactions and other commercial contracts.
4. COVID-19
The short- to medium-term impact of the COVID-19 pandemic on the uranium
value chain is uncertain. An extended shutdown could affect the Company’s
business model, ability to access capital and continue in business.
24
Yellow Cake Annual Report 2020
HOW WE MANAGE THE RISK
Risk Level
The Company continues to review and evaluate opportunities related to the ownership
of uranium and other uranium-related activities, and may, from time to time, enter into
transactions or arrangements which generate cash to support the Company's business.
The Company is unlevered 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 of uranium in a manner which would provide cash to
support its operations.
Medium
During the review and diligence phase of evaluating potential opportunities the Company
considers potential risks and identifies ways 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.
Low
While uranium supply has been significantly impacted in the short term, early indications
are that the impact on global demand for nuclear energy is likely to be less material. Nuclear
energy is generally viewed as base load electricity supply. Demand for U3O8 could, however,
be impacted if the pandemic subsequently impacts logistics and transportation involved in
the nuclear fuel cycle chain.
The Company’s day-to-day operations are currently unaffected by COVID-19, given that it
has no physical operations and the executive team is already home-based. Yellow Cake has
sufficient working capital (excluding the proceeds from the post-year-end sale of uranium)
for approximately 18 months before it would need to raise additional funds for working
capital and has no debt or hedges on the balance sheet.
High
Section 2 / Strategic report
NATURE AND IMPACT OF RISK
HOW WE MANAGE THE RISK
Risk Level
CORPORATE RISKS
5. Key personnel
The Company is reliant on its Executive Directors, 308 Services Limited and
other key personnel. Any change to the Company’s management and service
providers may have a negative impact on its business.
The Company believes that its executive team, as well as the Board of Directors and its
advisers 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.
6. Key service providers
The Services Agreement with 308 Services Limited may be terminated by
either party on one year’s notice.
SOCIAL, SAFETY AND ENVIRONMENTAL RISKS
7. Regulatory regime
Changes in laws around the ownership of uranium, or increased regulation or
change in government policy around uranium and nuclear power generation
could adversely affect the Company's business.
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 has the benefit of, and is the direct counterparty to its
purchase contract with Kazatomprom and its storage contracts with Cameco and Orano.
308 Services is not a party to these agreements.
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 will occur. Additionally, as the Company's exposure is focused
in Western Europe (where the Company is based and where some of the Company’s
U3O8 inventory is held) and North America (where the rest of 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.
Low
Low
High
Yellow Cake Annual Report 2020
25
Risk management continued
NATURE AND IMPACT OF RISK
8. Political and country
HOW WE MANAGE THE RISK
The Company has a long-term contract with Kazatomprom, a company with
operations located in Kazakhstan. Kazakhstan may be at risk of political
and/or social instability.
The Company does not have any assets in Kazakhstan and any political event in Kazakhstan
is only likely to impact the future of its uranium supply contract.
As the Company's physical uranium is stored in Canada and France, 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 in Kazakhstan.
9. Bribery and corruption
Risk Level
Medium
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 conducts due diligence on its suppliers from time-to-time to ascertain risk.
Since the Company warehouses its inventory in Canada and France, and has a framework
supply agreement with Kazatomprom, but does not have any operations in Kazakhstan, such
risks are more likely to affect Yellow Cake indirectly and may be of a reputational nature.
Medium
10. Environmental
The Company's operations are focused around uranium and uranium-related
activities. Nuclear accidents could impact the future prospects for nuclear
power, the 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.
High
There are limited steps that the Company can undertake to impact the activities of other
companies.
11. Environmental, social and governance (ESG) concerns
The Company operates in the resources sector, which is under increasing
scrutiny from investors and other stakeholders with regards to how it
manages its ESG responsibilities. Poor ESG management could cause a
significant withdrawal of capital from the resources sector and affect the
share prices of listed companies in the sector and their ability to access equity
capital markets.
Yellow Cake does not carry out exploration, development or mining operations and has an
insignificant ESG footprint. However, the Company is exposed to ESG issues via its suppliers
and customers, particularly through its contract with Kazatomprom. 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 have strong ESG
credentials and will continue to monitor the performance of Kazatomprom in this regard with
the assistance of third party advisors. The Company will also monitor the ESG performance
of its storage providers, Cameco and Orano.
High
26
Yellow Cake Annual Report 2020
Section 2 / Strategic report
NATURE AND IMPACT OF RISK
HOW WE MANAGE THE RISK
Risk Level
FINANCIAL RISKS
12. Uranium price
The uranium price is volatile and affected by factors beyond the Company's
control.
A protracted period of weak uranium prices may limit the company's ability to
raise capital or fund itself.
The Company believes that uranium is structurally under-priced, and while the price may
be volatile in the short term, over a longer time frame the Company believes the price of
uranium will increase.
The Company retains sufficient working capital to support its operations through short-term
fluctuations. If necessary, the Company could realise some of its uranium inventory to fund
working capital.
Medium
13. Foreign exchange
The Company raises funds in Sterling while its functional currency is the
US Dollar.
14. Taxation
Changes in the tax position of the Company and its subsidiaries could
adversely affect the Company. There is a risk that a country in which
the Company operates changes its tax legislation, rules or policies to the
detriment of the Company.
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.
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 on its tax position of, any changes
in regulation.
Low
High
Yellow Cake Annual Report 2020
27
Risk management continued
y
t
i
l
i
b
a
b
o
r
P
Very Likely
(5)
Likely
(4)
Possible
(3)
Unlikely
(3)
Rare
(2)
High Risk
10
11
14
4
7
Environmental risk
ESG risk
Taxation risk
COVID-19
Regulatory regime
1 c Counterparty risk
28
Yellow Cake Annual Report 2020
12
9
Medium
1
a
1
b
1
d
High
14
8
2
Extreme
10
11
4
7
1
c
6
3
5
13
Low
Very Minor (1)
Minor (2)
Moderate (3)
Major (4)
Extreme (5)
Consequence
Medium Risk
9
12
8
Bribery and corruption
Uranium price risk
Political and country
1 a Counterparty risk
1 b Counterparty risk
1 d Counterparty risk
2
Cash flow risk
Low Risk
3
5
13
6
Operating risk
Key personnel
Foreign exchange risk
Key service providers
Section 3 / Governance Viability
COVID-19
While the COVID-19 pandemic is a developing situation and
it is difficult to predict its ultimate impact on Yellow Cake,
the Company’s operations are not currently affected as it
has no physical operations and the executive team is already
home-based. Key service providers have implemented
business continuity plans that, to date, have been effective in
enabling them to continue to provide all key support services
that were provided to the Company prior to the pandemic
outbreak.
The Company’s working capital is sufficient (excluding the
proceeds from the post-year-end sale of uranium) to meet
approximately 18 months of operating expenses before it
would need to raise additional funds for working capital.
These additional funds would be raised through the placing
of shares, or, if this option is not available or cost effective, by
way of debt or the realisation of a portion of inventory.
The Company’s operating expenses are in part linked
to the underlying price of uranium. A 10% increase in
the U3O8 price would increase the Company’s operating
expenses by 3% and reduce the Company’s estimated
working capital balance by less than a month. The Company
has no debt or hedges on its balance sheet.
While global uranium supply has been significantly impacted,
early indications are that the impact on global demand for
nuclear energy is likely to be less material. Yellow Cake
believes that it is well positioned to benefit from the supply
side pressure that has manifested since March 2020 and the
resulting uranium price increase. The spot price of uranium
has increased significantly since the middle of March,
reflecting this imbalance.
The short- to medium-term impact of the COVID-19
pandemic on society and the uranium value chain remains
uncertain. Demand for U3O8 could be impacted if the
pandemic subsequently affects logistics and transportation
involved in the nuclear fuel cycle chain. An extended
shutdown could affect the Company’s business model and
its ability to access capital.
Notwithstanding the extraordinary circumstances brought
about by the COVID-19 pandemic, the Directors are satisfied
that the Company’s cash flow forecasts and projections,
together with its cash position, absence of borrowings and
ability to realise a portion of its inventory in the absence
of other sources of capital, support the conclusion that
the Company can reasonably be expected to continue in
operation for the next three years.
Viability statement
The Directors conducted an assessment of the Company’s
viability over a three-year period to March 2023.
The Company prepares detailed annual budgets against
which performance is assessed, and regularly reviews its
medium-term working capital projections. The Company aims
to retain cash balances sufficient to cover at least three years’
working capital requirements, following a placing of shares or
other capital raise.
The ultimate success of Yellow Cake depends on its ability
to continue to grow its uranium holdings. However, the
focus of the viability statement is on the existing business
of the Company and its ability to meet existing contractual
commitments and operating costs from current cash
balances and, in “severe but plausible” scenarios, by realising
or borrowing against a portion of its uranium holdings.
The viability assessment takes account of the Company’s
current financial position, operations and contractual
commitments. The financial position includes the Company’s
cash balances, unleveraged balance sheet and realisable
uranium holdings. Potential financial and operational impacts
of the principal risks and uncertainties set out on pages 22 to
28 in severe but plausible scenarios were assessed. These
included the impact of movements in the uranium price,
foreign exchange fluctuations and operating risks, including
the impact of COVID-19. 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 2023.
Yellow Cake Annual Report 2020
29
Board of Directors
Non-Executive Directors
The Lord St John
of Bletso
Independent
Non-Executive
Director and
Chairman
Age: 62
Sofia Bianchi
Independent
Non-Executive
Director
Age: 63
The Hon Alexander
Downer
Independent
Non-Executive
Director
Age: 68
Alan Rule
Independent
Non-Executive
Director
Age: 58
Anthony St John has been a long-standing
Crossbench Independent Member of the House
of Lords. He has served on many Parliamentary
Select Committees and is Vice Chairman of both
the All Party Parliamentary Africa Group and
the All Party South Africa Group. He qualified as
a Solicitor in South Africa and worked for over
twenty years in the City of London. He serves as
a Director and Advisor to several UK listed and
unlisted companies, including IDH plc, Smithson
Investment Trust and Albion Ventures.
Amongst his business interests, his expertise
has focused on corporate governance, financial
restructuring and disruptive technologies.
In addition to Yellow Cake plc, he is also Chairman
of Strand Hanson.
Lord St John holds a Master of Law (LLM)
in Chinese and Maritime Law from London
University as well as degrees in BA, BSocSc and
BProc in South Africa.
Sofia Bianchi is the Founding Partner of Atlante
Capital Partners, an advisory and turn-around
specialist in emerging markets. She was
previously Head of Special Situations, as well
as a Member of the Investment Committee for
Debt and Infrastructure, at the CDC Group plc,
a development finance institution. Prior to this,
she was Head of Special Situations at BlueCrest
Capital Management.
Sofia Bianchi served as a Deputy Managing
Director of the Emerging Africa Infrastructure
Fund with Standard Bank London. From
1994 to 2002 Sofia held senior positions with
the European Bank for Reconstruction and
Development. 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. She is currently an
independent non-executive director of Endeavour
Mining Corporation.
Sofia Bianchi holds a Bachelor of Arts in
Economics from George Washington University
and a Master in Business Administration (MBA)
from the Wharton School.
30
Yellow Cake Annual Report 2020
The Hon Alexander Downer AC served as
Australian High Commissioner to the United
Kingdom from 2014 to 2018. He has had a long
and distinguished political career in Australia,
serving as Australia’s Minister for Foreign Affairs,
from 1996 to 2007, making him Australia’s
longest-serving Foreign Minister. Mr Downer
also served as Opposition Leader and leader of
the Australian Liberal Party from 1994 to 1995,
and he was Member of the Australian Parliament
for Mayo for over 20 years. He was appointed a
Companion of the Order of Australia in 2013 and
was awarded the Centenary Medal in 2001.
Alexander Downer holds a Bachelor of Arts (BA)
(Hons) in Politics and Economics from Newcastle
University.
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
ASX-listed Australian lithium producer, Galaxy
Resources Limited. 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.
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.
Section 3 / Governance Alexandra Nethercott
Parkes
Independent
Non-Executive
Director
Age: 37
Executive Directors
Andre Liebenberg
Executive Director and
Chief Executive Officer
Age: 58
Carole Whittall
Executive Director and
Chief Financial Officer
Age: 48
Alexandra Nethercott-Parkes has over 16 years'
experience in the Finance Industry, and has a
wealth of experience in the administration of
large real estate companies, UK REITs and capital
markets deals. Alexandra acts as a Client Director
of Langham Hall Fund Management (Jersey)
Limited and holds directorships on a number
of SPV boards of client companies focused on
private equity and real estate. Having acted on
the boards of both listed and regulated companies
in her previous role as Assistant Vice President
Deutsche Bank within the corporate services
division in Jersey, Alexandra brings to the Board
comprehensive knowledge of listing rules, EU
regulation, capital markets and alternative
investments.
Alexandra Nethercott-Parkes has been a Principal
Person with the Jersey Financial Services
Commission since 2016 and holds a BA (Hons) in
Psychology with Economics, and is an Associate
of the Institute of Chartered Secretaries. She was
appointed to the Yellow Cake Board effective
18 July 2019.
Andre Liebenberg is an experienced mining
industry professional and has extensive investor
marketing, finance, business development and
leadership experience. He has spent over 25 years
in private equity and investment banking, and
held 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 Specialty 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 is a non-executive director
of Danakali Limited and Zeta Resources
Limited. He 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. She has 25 years’ management,
corporate finance and mergers and acquisitions
experience in the metals and mining sector.
Most recently, she was Vice President, Head of
M&A at ArcelorMittal Mining and a 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) Geology from the University of Cape Town
and a Master in Business Administration (MBA)
from the London Business School.
Note: James Keating was an Independent Non-Executive Director
from the start of the financial year to his resignation effective
31 May 2019. Details about Mr Keating’s qualifications and
experience are available in the 2019 Yellow Cake Annual Report.
Board Composition
2
5
EXECUTIVE DIRECTORS
NON-EXECUTIVE DIRECTORS
Board Diversity
3
4
MALE
FEMALE
Yellow Cake Annual Report 2020
31
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 issued in July 2018
(the “Code”) insofar as appropriate given the Company’s
size, business, stage of development and resources. During
the 2020 financial year, the Company reviewed and updated
its governance policies and terms of reference to align with
the requirements of the revised Code, which applied to the
Company from the beginning of the 2020 financial year.
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”).
The Company will seek to ensure that, as the Company’s
business continues to evolve, its governance processes
and procedures evolve appropriately and in a manner that
protects the interests of the Company and its shareholders.
Compliance with the Code
The Company considers that it was compliant with the
majority of the provisions of the 2018 Code during the year
to 31 March 2020.
References to how the Company has applied the
principles contained in the Code as well as any areas
of non-compliance are shown in the table that follows.
Areas of non-compliance mainly 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.
32
Yellow Cake Annual Report 2020
Part 1: Board leadership and company purpose
References
Areas of non-compliance
See the section entitled “Governance
structure” on pages 34 to 39,
which contains information on the
members, structure and activities of
the Board.
Provision 5 – Yellow Cake’s workforce is currently limited to its two Executive
Directors and, as such, it is not considered appropriate to have any formal mechanism
in place for engagement with the Company’s workforce. Yellow Cake’s Remuneration
Committee has been mandated to monitor the size and nature of the Company’s
workforce in order to determine, amongst other things, the appropriate level of
engagement required by the Company with its workforce and whether the role and
responsibilities of that committee should be expanded to include consideration of
additional workforce related matters. Should the size of Yellow Cake’s workforce
increase significantly in the future, Yellow Cake would favour mandating one of its
Non-Executive Directors with responsibility for representing the interests of the
workforce (alongside his or her other duties).
Part 2: Division of responsibilities
References
Areas of non-compliance
See the section entitled “Division of
responsibilities” on page 37, which
contains information on the division
of responsibilities among the Board.
Provision 12 – Given the scale and complexity of the Company’s activities, the
Board does not consider it necessary or desirable to appoint a Senior Independent
Director at this stage. Accordingly, those actions set out in the Code to be taken by a
Senior Independent Director, including the recommendation that the non-executive
directors should meet at least annually with the Senior Independent Director without
the chair present to appraise the chair’s performance, will be taken by the Board as
a whole.
Provision 13 – The Chairman will hold 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.
Provision 15 – Given the nature and extent of the Company’s activities,
the Company’s policy is not to require individual Directors to seek prior approval of
the Board before undertaking additional external appointments. Such appointments
are, however, required to be disclosed to the Board. As the Company’s business
develops, the Board will periodically assess whether such policy continues to be
appropriate.
Section 3 / Governance Part 3: Composition, succession and evaluation
References
Areas of non-compliance
The Board’s composition, succession
and evaluation are discussed in the
“Governance structure” section
on pages 34 and 35 as well as in
the discussion of the Nomination
Committee on page 39.
Part 4: Audit, risk and internal control
Provision 21 – The Directors are currently completing evaluation questionnaires to appraise the performance of the Board as a whole. Feedback
from the results will be implemented, where relevant. This appraisal process will be conducted annually in future. Given the Company’s size, stage
of development and the scale and complexity of its activities, the Company does not consider it necessary at this point to conduct an externally
facilitated board evaluation. 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.
References
Areas of non-compliance
Provision 25 – 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 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 role of the Board in this area is
primarily shown in the Report of the
Audit Committee on page 40, with
further detail on the Company’s
strategic objectives and key risks
to the business being set out in the
Strategic Report on pages 4 to 29.
Part 5: Remuneration
References
Areas of non-compliance
The Company’s remuneration policy
and the Report of the Remuneration
Committee are found on pages 42 to
49.
Provision 33 – Yellow Cake’s workforce is currently limited to its two Executive Directors and, as such, it is not necessary for the Remuneration
Committee to separately review workforce remuneration and related policies and the alignment of incentives and rewards with culture. Yellow Cake’s
Remuneration Committee has been mandated to monitor the size and nature of the Company’s workforce in order to determine, among other things,
whether the role and responsibilities of the Remuneration Committee should be expanded to include consideration of additional workforce-related
matters.
Yellow Cake Annual Report 2020
33
Corporate governance report continued
Governance structure
The Board is collectively responsible for promoting and
safeguarding the long-term sustainable success of the
Company, and for setting the Company’s purpose, strategy
and values. The Board assesses the basis on which the
Company generates and preserves value over the long term.
The Board delegates certain authorities to the Board
Committees and to the CEO and CFO, who are responsible
for the day-to-day management of the business.
Certain decisions are reserved for the Board to ensure it
retains proper direction and control of the Company, and
monitors delivery against the Company’s strategy.
These include:
• The approval of financial statements, dividends and
significant changes in accounting practices;
• Board membership and powers including the appointment
and removal of Board members, determining the terms
of reference of the Board and establishing the overall
control framework;
• Senior management and subsidiary Board appointments
and remuneration;
• Key commercial matters;
• Risk assessment;
• Financial matters including the approval of the budget
and financial plans, changes to the Company’s capital
structure, the Company’s business strategy, acquisitions
and disposals of businesses and capital expenditure; and
• Other matters including health and safety policy,
insurance and legal compliance.
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).
34
Yellow Cake Annual Report 2020
Directors
The Lord St John of Bletso (Chairman)
Sofia Bianchi
The Hon Alexander Downer
Alexandra Nethercott-Parkes
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
Further detail on the Board members and their skills and experience can be found on pages 30 and 31.
The Board meets formally at least four times a year and is supported by the Audit, Remuneration and
Nomination Committees. In the year to 31 March 2020, the Board met 10 times.
Meeting attendance
Date of
appointment
Number of meetings
The Lord St John of Bletso† (Chairman)
Sofia Bianchi†
The Hon Alexander Downer†
Alan Rule†
James Keating†1
Alexandra Nethercott-Parkes†2
Andre Liebenberg‡ (CEO)
Carole Whittall‡ (CFO)
Attendance percentage
1 June 2018
1 June 2018
1 June 2018
1 June 2018
18 January 2018
18 July 2019
1 June 2018
1 June 2018
e
e
t
t
i
m
m
o
C
t
i
d
u
A
2
N/A
2/2
2/2
2/2
N/A
1/1
N/A
N/A
100%
d
r
a
o
B
10
10/10
9/10
9/10
10/10
3/4
5/5
10/10
10/10
96%
n
o
i
t
a
r
e
n
u
m
e
R
e
e
t
t
i
m
m
o
C
3
3/3
2/3
3/3
3/3
0/1
2/2
N/A
N/A
87%
n
o
i
t
a
n
m
o
N
i
e
e
t
t
i
m
m
o
C
2
2/2
2/2
1/2
2/2
N/A
N/A
N/A
N/A
89%
e
c
n
a
d
n
e
t
t
A
e
g
a
t
n
e
c
r
e
p
100%
88%
88%
100%
67%
100%
100%
100%
94%
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 on 31 May 2019.
Alexandra Nethercott-Parkes was appointed to the Board on 18 July 2019 and to the Audit, Remuneration and Nomination Committees on 11 December 2019.
At such meetings, any Director who has concerns which cannot be resolved about the running of the Company, or a
proposed action, will ensure that their concerns are recorded in the Board minutes.
Section 3 / Governance
Board focus areas in 2019/2020
The primary focus of Board deliberations during the
2020 financial year included:
• Review and approval of the 2019 financial statements and
the decision to not declare a dividend for the year;
• Review and approval of the changes to the Company’s
various governance policies and terms of reference to
align with the requirements of the revised Code;
• Review and approval of the decision to place 12 million
shares to acquire 1.175 million lb of U3O8 in May 2019;
• Approval of the nomination of Alexandra
Nethercott-Parkes to the Board;
• Review and approval of a share buyback programme that
commenced in January 2020; and
• Review and approval of the executive share
incentive scheme.
Board appointments and succession planning
Appointments to the Board and succession planning for
both the Board and senior management are overseen by
the Nomination Committee and are based on merit and
objective criteria. Appointments and succession planning
include an assessment of the balance of skills, knowledge,
experience and diversity of the Board. All Directors
voluntarily submit themselves for re-election on an annual
basis, notwithstanding the provisions in the Articles, which
state that they shall be required to retire at the first Annual
General Meeting after appointment and, thereafter, every
three years.
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 set aside time at least once annually at their
regular Board meetings for supplementary training and
updates. Upon appointment, Directors undergo a formal
induction process. All Directors have access to the Company
Secretary (whose appointment and removal 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.
Towards the end of the financial year, the Directors
commenced an evaluation process to appraise the
performance of the Board. The evaluation questionnaire
covers areas including the Board’s role and responsibilities,
the appointment process, Board effectiveness, Board
meetings, the Board Chairman and the Company’s ethics.
This assessment will be conducted annually and the Board
will monitor whether an externally facilitated appraisal
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 reviews its effectiveness annually.
Ethics and integrity
It is intended that the Chairman should not remain in his
post for a period of more than nine years from the date of his
appointment to the Board.
The Board sets the Company’s values, which
are set out in its Code of Conduct (available at
www.yellowcakeplc.com/about/code-of-conduct/).
The Directors seek to uphold those values in their dealings
with each other and when dealing with third parties on the
Company’s behalf. As Yellow Cake’s business evolves, the
Board is mindful of the need to ensure that its values and
culture are maintained. The Board will continue to assess
and monitor the Company’s culture, taking or seeking
assurances as to corrective action where necessary.
Conflicts of interest
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
A share-dealing code is in place 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
relation to conduct regarding the use of 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 Company’s
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
Yellow Cake Annual Report 2020
35
Corporate governance report continued
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.
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.
Diversity and inclusion
Yellow Cake values diversity and inclusion. 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.
36
Yellow Cake Annual Report 2020
Risk management
The Board has established a system of prudent and effective
controls to enable risk to be assessed and managed and has
implemented appropriate procedures for whistleblowing
and the management of conflicts of interest. The Board has
overall responsibility for the Company’s risk management
and determines the nature and extent of the principal
risks the Company is willing to take in order to achieve its
long-term strategic objectives. The Audit Committee has
been mandated to keep under review the Company’s internal
control and risk management systems and to report to the
Board.
The Executive Directors undertake a regular assessment
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 reviews the risk assessment and
risk management processes carried out by the Executive
Directors for completeness and accuracy, and receives
regular updates from management.
More information on the Company’s risk management
processes, the primary risks and opportunities facing the
Company and the internal control system is available on
pages 22 to 28.
Shareholders and other stakeholders
As a Jersey-registered company, Yellow Cake is not required
to prepare a s172 statement in accordance with UK
legislation. However, it remains the policy of the Company
to comply with high standards of corporate governance
and we have voluntarily chosen to report how we take our
stakeholders into consideration in running the business.
The Board seeks to ensure effective engagement with its
stakeholders and values its dialogue with them. Yellow Cake’s
stakeholders include its shareholders, investors, analysts,
employees (the Company’s two Executive Directors),
regulators, suppliers and customers. In performing their
duties, the Directors consider and aim to act in a way they
consider, in good faith, would be most likely to promote the
success of the Company for the benefit of its members as a
whole (having regard to the stakeholders and matters set out
in s172(1)(a-f) of the UK Companies Act, 2006 and Article
74(1) of the Companies Law of Jersey).
The Company proactively facilitates opportunities for
engagement with its stakeholders, particularly with
shareholders, investors and analysts, by participating in
investor roadshows and conferences, and at presentations,
the Annual General Meeting and industry updates.
In particular, the Board considers the following:
• the likely consequences of any decision in the long term.
As set out in the Viability Statement on page 29, the
Company prepares detailed annual budgets against
which performance is assessed, and regularly reviews its
medium-term working capital projections. The Company
aims to retain cash balances sufficient to cover at least
three years’ working capital requirements following a
placing of shares or other capital raise.
• the interests of the Company’s employees. Our talented,
experienced and motivated Executive Directors (being
the only employees of the Company) are key to the
success of our Company. Our commitment to employing a
diverse and balanced team enables us to build an effective
and talented workforce at all levels of the organisation,
including the Board. The value we place on equal
opportunities and diversity of ideas, skills, knowledge,
Section 3 / Governance experience, culture, ethnicity and gender is evident in
our daily operations as well as formalised in our policies
and procedures. Our recruitment policy is to appoint
individuals based solely on their skills, experience and
suitability to the role.
• the need to foster the Company’s business relationships
with suppliers, customers and others. Long-term strategic
thinking, and fostering close working relationships with
our key strategic suppliers and advisers, in particular
Kazatomprom, enable Yellow Cake to build deep and
valuable relationships that help us to fulfil our strategy.
Further information can be found on page 14.
• the impact of the Company’s operations on the community
and the environment. The Directors consider the impact
of the Company’s activities on society, the environment
and Yellow Cake’s reputation. Due to the size and
nature of the Company’s activities, its direct social and
environmental impact is minimal. However, the Board also
conducts due diligence on the Company’s suppliers and
business partners to ensure that they take a responsible
approach to governance and environmental, social and
ethical practices. Further information can be found on
pages 15 to 17.
• the importance of the Company maintaining a reputation
for high standards of business conduct. Yellow Cake is
a Jersey-incorporated, Jersey tax domiciled Company
which is listed on AIM. Notwithstanding the reduced
requirements of an AIM listing, we are committed to
complying with the regulatory requirements in both
Jersey and the UK, and operating to high standards of
corporate governance. This Corporate Governance report
illustrates how the Board and its Committees support
business activities while maintaining a strong governance
culture.
• the need to act fairly between members of the Company.
Annual General Meeting
The Board of Directors’ ambition is to behave responsibly
toward our shareholders and treat them fairly and equally,
so they too may benefit from the successful delivery of
our strategy. The Chairman and Non-Executive Directors
meet regularly as part of the Board responsibility to
ensure all shareholders are treated equally.
Day-to-day queries raised by stakeholders are addressed by
either the CEO or the CFO. This year, as shareholders will
not be able to attend the Annual General Meeting because
of the COVID-19 pandemic, shareholders will instead be
given the opportunity to submit written questions to the
Company. The Chairman is also available to the Company’s
major shareholders to discuss governance, strategy and
performance as required, and ensures that the views of
shareholders are clearly communicated to the Board.
The chairs of the Board Committees will seek engagement
with shareholders on significant matters related to their
areas of responsibility. 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. Should 20% or
more of shareholder votes be cast against the Board’s
recommendation for a resolution, the Company will follow
the consultation and other requirements set out in the
Code. At the 2019 Annual General Meeting held on 17 July
2019, all resolutions were passed with more than 90%
shareholder approval.
Yellow Cake’s 2020 Annual General Meeting (AGM) will be
held at 10:00 a.m. on 2 September 2020 at the Company’s
offices at 3rd Floor Liberation House, Castle Street, St Helier,
Jersey, JE1 2LH. Due to COVID-19, the AGM will be closed
to participation. 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.
Division of responsibilities
The Chairman leads the Board and is responsible for its
effectiveness, including by facilitating active participation
by all members of the Board and ensuring effective
communication between the Directors more generally
in order to promote a culture of openness and debate.
His responsibilities include ensuring that the Board has
the necessary information to fulfil its duties, that Board
meetings are effectively run, and promoting and overseeing
the highest standards of corporate governance. The Chair
provides support and counsel to the CEO and CFO if
requested, and has a key role in representing the Company in
its communications with shareholders.
The roles of Chairman and CEO of Yellow Cake are
separate and clearly delineated, 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 was approved by the Board.
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 2020
37
Corporate governance report continued
The CEO is responsible for setting corporate strategy and
the direction of the Company, in conjunction with the Board.
He is responsible for organising the day-to-day operations
of the Company, overseeing risk management, managing
corporate actions and ensuring that the Company maintains
compliance with all relevant regulatory bodies. The CEO
has a key role in stakeholder engagement in the Company,
including managing investor relations and engagement with
investors, and engaging with suppliers, prospective suppliers,
regulators and prospective providers of capital.
The CFO has overall responsibility for financial reporting,
including budgets, monthly reports and annual accounts,
and sets the Company’s tax policy. She is responsible for
maintaining adequate control procedures and supports the
CEO regarding risk management, compliance and corporate
actions. The CFO also plays a key role in stakeholder
engagement initiatives.
Company Secretary
LHJ Secretaries Limited provides company secretarial
services to the Company and advises the Board on all
governance matters. Directors have unfettered access to the
Company Secretary and removal of the Company Secretary
is a matter for the Board as a whole.
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 reviews its effectiveness annually.
Audit Committee
Audit Committee members
Alan Rule (Chairman)
Sofia Bianchi
The Hon Alexander Downer
Alexandra Nethercott-Parkes
Independent
Non-Executive Director
Independent
Non-Executive Director
Independent
Non-Executive Director
Independent
Non-Executive Director
The Audit Committee comprises the Independent
Non-Executive Directors (not including the Board
Chairman). The committee assists the Board in fulfilling
its responsibilities by, inter alia, reviewing and monitoring
the integrity of the financial statements of the Company,
ensuring that the Company’s financial statements comply
with the requirements of the Code and overseeing the
Company’s relationship with its external auditor. The Audit
Committee is also mandated to keep under review the
Company’s internal control and risk management systems
and to report to the Board.
The Chief Financial Officer and external auditor are 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. Attendance at the committee’s meetings is shown on
page 34.
More information on the roles and responsibilities of
the Audit Committee and its activities during the year
to 31 March 2020 is available in the Report of the Audit
Committee on pages 40 and 41.
Remuneration Committee
Remuneration Committee members
The Hon Alexander Downer
(Chairman)
The Lord St John of Bletso
Sofia Bianchi
Independent
Non-Executive Director
Independent
Non-Executive Director
Independent
Non-Executive Director
Alexandra Nethercott-Parkes Independent
Alan Rule
Non-Executive Director
Independent Non-
Executive Director
The Remuneration Committee comprises the Independent
Non-Executive Directors. It is intended that any person who
is appointed as the Chair of the Remuneration Committee in
the future should have at least 12 months’ experience serving
on a remuneration committee prior to appointment.
The Remuneration Committee has responsibility for,
among other things, setting the remuneration policy for
Executive Directors and for determining the total individual
remuneration package of the Chairman, Executive Directors
and senior management. In determining remuneration policy,
the committee takes account of the need to align executive
remuneration to the Company’s purpose and values and to
clearly link this to the successful delivery of the Company’s
long-term strategy.
The Remuneration Committee met twice during the year
under review and attendance at these meetings is shown on
page 34.
38
Yellow Cake Annual Report 2020
Section 3 / Governance More information on the roles and responsibilities of the
Remuneration Committee and its activities during the
year is available in the Director’s Remuneration Report on
pages 42 and 43.
Nomination Committee
Nomination Committee members
The Lord St John of Bletso
(Chairman)
The Hon Alexander Downer
Sofia Bianchi
Independent
Non-Executive Director
Independent
Non-Executive Director
Independent
Non-Executive Director
Alexandra Nethercott-Parkes Independent
Alan Rule
Non-Executive Director
Independent
Non-Executive Director
The Nomination Committee comprises the Independent
Non-Executive Directors. It assists the Board in fulfilling
its responsibilities by, inter alia, reviewing the structure,
size and composition of the Board, as well as the Board
Committees. When evaluating the composition of the Board,
the committee considers the length of service of the Board
as a whole and any requirements as to tenure set out in the
Code.
The committee oversees appointments to the Board and is
responsible for overseeing a diverse pipeline for succession
to both the Board and senior management. Under the terms
of reference of the Nomination Committee, its chair will not
chair the committee when dealing with the appointment of
his successor. The Nomination Committee meets at least
twice each year.
Appointments and succession plans are based on merit and
objective criteria and new appointments to the Board are
subject to a rigorous approval process. Within this context,
the committee aims to promote diversity of gender, social and
ethnic backgrounds, cognitive and personal strengths.
It is intended that open advertising or an external search
consultant will generally be used for the appointment of
the Chairman or a non-executive director, although the
Nomination Committee may deviate from this where
appropriate in order to ensure, for example, that an
incoming appointee has at least the equivalent skill set of an
outgoing appointee.
The Nomination Committee met twice during the year
under review and attendance at these meeting is shown
on page 34.
The duties of the Nomination Committee include:
– 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 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.
Nomination Committee focus areas
in 2019/2020
During the year under review the primary focus areas of the
Nomination Committee included:
• regularly reviewing the structure, size and composition
• reviewing the leadership needs of the Company;
(including the skills, knowledge, experience and diversity)
of the Board and making recommendations to the Board
with regard to any changes;
• reviewing the requirements for annual re-election of
Directors under the revised Code for the financial year
commencing 1 April 2019;
• 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
• reviewing candidates for appointment to the Board
following the resignation of James Keating and
recommending Alexandra Nethercott-Parkes to the
Board for appointment; and
vacancies for the approval of the Board when these arise;
• reviewing the amendments to the committee’s terms
• 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;
of reference in order to align with the provisions of the
revised Code.
The Nomination Committee recommended to the Board
that each of the Directors be submitted for re-election at the
Annual General Meeting on 2 September 2020.
Yellow Cake Annual Report 2020
39
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, all of whom have relevant financial
experience through the various leadership roles they have
held. The Chairman of the committee is a Fellow of the
Institute of Accountants of Australia. The committee gives
due consideration to applicable laws and regulations, the
provisions of the 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 meets at least twice a year and
details of the committee members and their record of
attendance at meetings during the year are available on
page 34. 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 makes himself available at the Annual General
Meeting to answer questions concerning the committee's
work.
The Audit Committee conducts an annual review of
its effectiveness as well as its constitution and terms
of reference to ensure it is operating at maximum
effectiveness. Changes arising from these reviews are
recommended to the Board for approval.
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;
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.
• 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 year, including its half-year report,
results announcements and this Annual Report. This
review included, where appropriate, 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 considered the Company's accounting policies,
particularly in relation to the uranium investment, and the
accounting estimates and judgements as described on
page 66.
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.
40
Yellow Cake Annual Report 2020
Section 3 / Governance Internal audit
The Audit Committee considers annually whether there is a
need for an internal audit function in the context of 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 oversees the Company’s relationship
with the external auditor, RSM UK Audit LLP, who have
been the Company’s external auditor since its listing in
2018. The 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 year to 31 March 2020,
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 year ended 31 March 2020 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.
Risk management and internal control
Given the size of the Company’s business, the Audit
Committee is able to work directly with the auditor to
assess its effectiveness, and also received feedback from
the CFO. Given that the year under review is the Company’s
second financial year, there are no current plans to put the
appointment of its auditor through a formal tender process.
Non-audit services
The supply of non-audit services by the external auditor is
governed by a formal policy 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 the
circumstances where a proposed engagement should be
subject to a tender process.
In the current year, fees for non-audit services paid to the
RSM group totalled USD5,581 for tax advisory services,
which represents 8% of the total audit fee paid.
Whistleblowing
Yellow Cake’s whistleblowing policy aims to provide
staff with a channel through which they 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 Audit Committee receives reports regarding
any significant allegations made, details of investigations
and the outcomes. There were no whistleblowing reports
received during the year.
The Board has mandated the Audit Committee to keep
the Company’s internal control and risk management
systems under review. The Company’s internal controls
and risk management systems 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 51 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 its 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.
Alan Rule
Audit Committee Chair
7 July 2020
Yellow Cake Annual Report 2020
41
Directors’ remuneration report
Dear Shareholder,
I am pleased to present the Company’s Directors’ Remuneration Report for the year ended 31 March 2020.
Yellow Cake plc has only two employees; its CEO and CFO. The management culture is to focus on successful outcomes.
The Company’s business strategy is to achieve successful outcomes by investing in long-term holdings of U308.
The remuneration policy described on pages 44 and 49 was developed in the 2019 financial year with the assistance of independent
remuneration consultants, MM&K Limited. MM&K provides no other services to, and has no other connection with, the Company.
The committee’s policy is to openly engage with shareholders on Directors’ remuneration.
We will continue to consult with our principal shareholders on future material changes to our remuneration policy.
The 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.
It is consistent with the Company’s values, culture, remuneration philosophy and business strategy. Above all, it has been
designed to be simple and to retain cash.
The policy comprises a base salary component, an annual bonus to reward achievement of key performance indicators in the
form of nil-cost or nominal-cost share options and a long-term incentive in the form of market-priced share options. The short-
and long-term incentives have been designed to reward growth and take account of risks through equity participation, and to
align employee rewards with shareholder returns.
The year under review is the first year in which the remuneration policy has been applied. The Board evaluated the performance
of the Executive Management of the Company against the corporate objectives agreed by the Board at the beginning of the
financial year. The annual bonuses are based on the executive performance measured against a scorecard of performance
targets, a summary of which was included in the 2019 annual report.
The Remuneration Committee assessed the performance outcome of the Executive Management at 70% against these
scorecard measures. In light of the current economic circumstances brought about by the COVID-19 pandemic, the
Remuneration Committee took the decision to only award half of the bonus options after the release of the Company’s
2020 financial results and to defer the balance of the award until after the Company’s annual general meeting and having regard
to the COVID-19 situation.
The annual bonus and long-term incentive awards are shown
in the tables on pages 73 to 75.
The Remuneration Committee reviewed the base salary of
the Executive Directors and proposed no increase for the
financial year ending 31 March 2021.
Alexander Downer
Remuneration Committee Chair
7 July 2020
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 meets at least twice a year. Details of the
committee members and their record of attendance at
meetings during the year are available on page 34.
The full terms of the reference for the committee are
available on our website at www.yellowcakeplc.com/
investors/the-board/board-committees.
42
Yellow Cake Annual Report 2020
Section 3 / Governance Key duties of the Remuneration Committee include:
Activities during 2019/2020
• determining and agreeing with the Board the policy for
the remuneration of the Chairman of the Board 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;
During the year to 31 March 2020, the Remuneration
Committee discharged its duties by:
• reviewing and approving the Executive Directors’ annual
bonus performance scorecard for the 2020 financial year;
• engaging with our principal shareholders regarding
the short-term and long-term incentive plan for the
Executive Directors;
• implementing an executive incentive plan;
• reviewing the Company’s remuneration policy and its
effective implementation during the year;
• monitoring the size and nature of the Company’s
• reviewing the amendments to the committee’s terms
workforce in order to determine the appropriate levels of
engagement required by the Company with its workforce,
and whether the role of the Remuneration Committee
should be expanded to include consideration of additional
workforce-related matters, including those specified in
the Code; and
of reference in order to align with the provisions of the
revised Code; and
• reviewing relevant provisions of the Code.
2020/2021 focus areas
• reviewing the operation of share option schemes and the
granting of such options.
The main objectives for the Remuneration Committee in the
financial year ended 31 March 2021 will be to:
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.
• Review and approve the Executive Director annual bonus
performance scorecard for the 2021 financial year; and
• Maintain an ongoing review of remuneration levels and
structures for Executive Directors and the Chairman.
The CEO’s and CFO’s remuneration were reviewed and
benchmarked by external remuneration consultants, MM&K,
as part of the overall review of the Company’s remuneration
practices in the 2019 financial year. It was not considered
necessary to repeat the benchmarking exercise in the
current year.
Yellow Cake Annual Report 2020
43
Annual report on Directors’ remuneration
This report describes the Company’s
remuneration policy and remuneration
outcomes for Executive Directors for the year
ended 31 March 2020.
Remuneration Committee membership
during the year
The members of the Remuneration Committee, their dates
of appointment and the number of meetings attended during
the year are shown on page 34.
Remuneration policy and practices
In determining the remuneration policy, the committee
takes account of the need to align executive remuneration
to company purpose and values and to clearly link this to
successful delivery of the Company’s long-term strategy.
The policy and the Company’s remuneration practices have
been designed to address the following factors: clarity,
simplicity, risk, predictability, proportionality and alignment
to culture.
Under its terms of reference, the Remuneration Committee
is required to ensure that the Company’s remuneration
schemes and practices allow the Remuneration Committee
discretion to override formulaic outcomes. When reviewing
the Company’s remuneration schemes and practices, the
Remuneration Committee is required to consider, inter alia,
vesting and holding periods, post-employment shareholding
requirements for both unvested and vested shares, malus
and clawback provisions.
No Directors are involved in any decisions as to their
own remuneration.
44
Yellow Cake Annual Report 2020
The table below describes the components of the Company’s remuneration policy for Executive Directors.
Remuneration
element
Purpose, link to strategy
and operation
Opportunity and
performance metrics
Remuneration Committee discretion
Salaries may be reviewed annually by
the committee.
Salaries are benchmarked
to the relevant market
median, taking account of the
individual’s time commitments
to the Company.
Salary
Benefits
Pension
Annual
Bonus
Essential to attract and retain
key executives.
Reviewed annually based on:
• role, experience and individual
performance;
• external market practices; and
• the 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.
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 upwards
and downwards adjustments to bonus
awards to ensure they 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.
Malus and clawback provisions.
The Remuneration Committee retains
the discretion to impose performance
conditions on the vesting of incentive
awards, should it wish to do so.
Section 3 / Governance
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.
Chief Executive Officer
Chief Financial Officer
Annual bonus
Implementation of the remuneration policy in 2019/2020
The base salaries for the current year and proposed salary for the financial year ending 31 March 2021 are shown in the table
below. Given the current socioeconomic environment, no increases in base salaries are proposed in the financial year ending
31 March 2021.
2020
Base salary
USD’000
215
172
Proposed
2021
Base salary
USD’000
215
172
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.
Non-Executive Directors’ appointment
and remuneration
The remuneration of Non-Executive Directors is determined
by the Board in accordance with the Company’s articles
of association and does not include performance-related
incentives. Non-Executive Directors are engaged by letter
of appointment terminable on three month’s written notice
from either the individual or the Company.
The annual bonus awarded for the financial year ending on 31 March 2020 is based on commercial targets and may be up to
100% of base salary, subject to performance, as determined by the Board. The bonus awards are in the form of nil-cost or
nominal cost options, which will vest and become exercisable not earlier than one year after grant. The annual bonus award in
relation to a financial year is usually granted following publication of the Company’s audited annual results for that financial
year.
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.
Yellow Cake Annual Report 2020
45
Annual report on Directors’ remuneration continued
Based on the performance scorecard for the 2020 financial year, the Remuneration Committee resolved at its discretion
to make the following annual bonus awards in the form of nil-cost share options. The following options will be granted on
8 July 2020.
Chief Executive Officer
Chief Financial Officer
Face value of first
tranche of 2020
annual bonus award
USD’000
75
60
Face value of
award as a %
of base salary
35%
35%
Vesting date
8 July 2021
8 July 2021
The grant of the following options will be deferred until after the Company’s annual general meeting and having regard to the
COVID-19 situation.
Chief Executive Officer
Chief Financial Officer
Face value of
second tranche of
2020 annual bonus
award (contingent)
USD’000
Face value of
award as a % of
base salary
75
60
35%
35%
Vesting date
8 July 2021
8 July 2021
The number of annual bonus options to be granted will be
equal to the face value in the table at the award date, divided
by the average of the mid-market closing price (converted to
its USD value) of the ordinary shares of the Company on AIM
over the five consecutive dealing days immediately preceding
the grant date.
The Remuneration Committee reviewed the annual bonus
performance scorecard and, for the 2021 financial year,
added additional measures regarding management of the
discount to net asset value and ESG. The annual bonus
calculation for the 2021 financial year will accordingly assess:
• Corporate performance, comprising:
– cost effective growth in the Company’s uranium
inventory;
– management of the discount to net asset value;
– effective capital raising and funding of uranium
purchases;
–
–
–
financial control and risk management;
reporting and budgeting; and
implementation of an ESG framework, policies
and reporting.
46
Yellow Cake Annual Report 2020
• 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
The long-term incentive is in the form of options granted to
acquire shares in the Company that will become exercisable
not earlier than three years after grant and the option
exercise price is the market value at the grant date of the
shares placed under option. The options are subject to
a post-vesting holding period of not less than two years
(although permission may be granted to sell shares in order
to meet tax liabilities). The face value of shares subject to the
grants may be up to 125% of salary. Each option gives the
right to acquire one share in the Company. The long-term
incentive award relating to a financial year is usually granted
at the beginning of that financial year.
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, are currently placed on the
exercise of options, although the Remuneration Committee
retains the discretion to impose performance conditions on
the vesting of incentive awards, should it wish to do so.
Section 3 / Governance
The following long-term incentives were awarded on 24 February 2020 in relation to the 2020 financial year. Refer to Note 10 to the Financial Statements for more details:
Chief Executive Officer
Chief Financial Officer
Total
Face value of
2020 long-term
incentive award
USD
215,000
172,000
387,000
Face value of
award as a %
of base salary
100%
100%
Share options
awarded
84,480
67,584
152,064
Value at
award date
USD
31,748
25,399
57,147
Vesting date
24 February 2023
24 February 2023
The intention to make the above awards was disclosed in the Company’s 2019 annual report. During the year under review, the Company was in an extended closed period due to inside
information relating to the sale of material blocks of shares by some of the Company’s significant shareholders and the decision to implement a share buyback programme. These awards were
subsequently granted on 24 February 2020 and not at the beginning of the 2020 financial year, as would be usual practice.
The Remuneration Committee resolved to award the following long-term incentive in relation to the 2021 financial year.
Chief Executive Officer
Chief Financial Officer
Face value of
2021 long-term
incentive award
USD’000
215
172
Face value of
award as a %
of base salary
100%
100%
Vesting date
8 July 2023
8 July 2023
The number of long-term incentive options to be granted will be equal to the above face value at the award date, divided by the average of the mid-market closing price (converted to its USD
value) of the ordinary shares of the Company on AIM over the five consecutive dealing days immediately preceding the grant date.
Yellow Cake Annual Report 2020
47
Annual report on Directors’ remuneration continued
Directors’ total combined remuneration for the year ended 31 March 2020
Director
Executive Directors
Andre Liebenberg
Carole Whittall
Non-Executive Directors
The Lord St John of Bletso
Sofia Bianchi
Alexander Downer
Alan Rule
Alexandra Nethercott-Parkes
James Keating*
Total
Note 1:
Salaries and
Fees
USD’000
(A)
Annual Bonus
USD’000
(B)
LTIP
USD’000
(A)+(B)
Total
Variable Pay
USD’000
215
172
50
40
40
40
Note 1
Note 1
557
-
-
-
-
-
-
-
-
-
1
1
-
-
-
-
-
-
2
1
1
-
-
-
-
-
-
2
Total
USD’000
216
173
50
40
40
40
Note 1
Note 1
559
Mr Keating’s and Ms Nethercott-Parkes’ 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 in the year ended 31 March 2020
is GBP127,804 (USD164,149) (2019: GBP101,900 (USD132,776)).
* James Keating resigned as a Director of the Company on 31 May 2019.
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.
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 financial year to 31 March 2020 is shown in the graph
below:
%
10
5
0
-5
-10
-15
-20
-25
-30
-35
-40
-15%
-26%
Mar 19
Jun 19
Sep 19
Dec 19
Mar 20
FTSE AIM ALL-SHARE INDEX (%)
YELLOW CAKE PLC (%)
48
Yellow Cake Annual Report 2020
Section 3 / Governance
Statement of Directors’ share interests
The number of shares held by each Director in the Company as at 31 March 2020 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
Alan Rule
Alexandra Nethercott-Parkes
Andre Liebenberg
Carole Whittall
Number of
ordinary
shares
26,302
13,186
29,925
18,837
–
73,207
11,302
% of share
capital
(excluding
treasury
shares)
0.03%
0.01%
0.03%
0.02%
–
0.08%
0.01%
Share options
N/A
N/A
N/A
N/A
N/A
84,480
67,584
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.
Alexander Downer
Remuneration Committee Chair
7 July 2020
Yellow Cake Annual Report 2020
49
Directors’ report
The Directors of Yellow Cake plc
(the “Company”) present their report
and the audited financial statements
for the Company for the year ended
31 March 2020. The financial statements
of the Company have been prepared in
accordance with International Financial
Reporting Standards (“IFRS”) as adopted by
the European Union.
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 U3O8 and 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 year are set out on
pages 59 to 78.
Business review and
future developments
The Strategic Report on pages 4 to 29 provides a review of
the year’s activities, operations, future developments and key
risks.
50
Yellow Cake Annual Report 2020
Directors
Directors’ indemnities
The Directors who held office during the period and
subsequently were as follows:
The Company maintains appropriate insurance cover in
respect of legal action against its Directors.
• The Lord St John of Bletso (Chairman)
• Sofia Bianchi
• The Hon Alexander Downer
• James Keating1
• Alan Rule
• Alexandra Nethercott-Parkes2
• Andre Liebenberg
• Carole Whittall
1 Mr Keating resigned as a Director with effect 31 May 2019
2 Ms Nethercott-Parkes was appointed to the Board effective 18 July 2019
Directors’ interests
The Audit and Remuneration Committee reports are
available on pages 40 and 42 respectively.
Details of the Directors’ interests in the Company’s shares
can be found in the remuneration report on page 49.
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 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.
Dividends
The Directors do not recommend an ordinary dividend for
the year.
Events after the reporting date
On 20 April 2020 the Company transferred 100,000 lb of its
9,616,385 lb inventory from Cameco’s Port Hope/
Blind River facility in Canada to Orano Cycle’s storage facility
at Malvési/Tricastin in France, pursuant to a location swap
agreement. This transaction did not involve the physical
transportation of uranium and was effected by book transfer.
On 30 June 2020 the Company announced that it had
concluded an agreement to sell 300,000lb of U3O8 to
finance an enlarged share buyback programme. The disposal
generated proceeds of USD9.9 million after costs
and commission.
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 year.
Section 3 / Governance 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.
The controls in place are appropriate to the size and nature
of the business, and to the risks relevant to it. They include
controls over financial, operational and compliance risks.
The Audit Committee reviews the system of internal controls
together with reports from the external auditor regarding
issues identified during its 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 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 year ended
31 March 2020 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
year 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 2021 financial year.
The key elements of the control system in operation are
as follows:
Corporate governance
• 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 corporate governance report on pages 32 to 39 forms
part of this Directors’ report.
Going concern
COVID-19
The COVID-19 pandemic is a developing situation.
The assessment of this situation will need continued
attention and will evolve over time. The rapid development
and fluidity of the COVID-19 virus means that it is difficult
to predict the ultimate impact on the Company at this stage.
In line with most experts, the Directors are of the view
that the virus outbreak will have a material impact on the
world economy.
The Company’s operations are currently unaffected by
COVID-19, given that it has no physical operations and
the executive team is already home-based. Yellow Cake’s
key service providers have put in place effective business
continuity plans to date that have enabled them to continue
with the provision of all key support services that were
provided to the Company prior to the pandemic outbreak.
Should the Company decide to acquire additional uranium
from Kazatomprom under its Framework Agreement, the
Company expects to be able to lock in price and volumes in
the normal course under the terms of the Agreement with a
delivery schedule to be agreed between the Company and
Kazatomprom.
Yellow Cake has sufficient working capital (excluding the
proceeds from the post-year-end sale of uranium) to meet
approximately 18 months of operating expenses before it
would need to raise additional funds for working capital.
COVID-19 may impact the Company’s ability to raise capital
through the placing of shares or access to debt. The Company
has no debt or hedges on its balance sheet. In the absence
of other sources of capital, the Company can reasonably
be expected to be able to realise a portion of its inventory
if necessary.
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
Yellow Cake Annual Report 2020
51
Directors’ report continued
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
On 22 January 2020, the Company initiated a share buyback programme to purchase up to US$2 million of the Company’s
Ordinary Shares over a three-month period. On 30 April 2020, the duration of the buyback programme was extended to the
earlier of 21 July 2020 or the date on which US$2 million had been incurred in aggregate in the purchase of the Company’s
shares. As at 31 March 2020, the Company held 309,788 shares in treasury. On 30 June 2020 the Company announced that
it had concluded an agreement to sell 300,000lb of U3O8, generating net processed of USD9.9 million. These proceeds will be
used to finance an enlarged share buyback programme to purchase up to USD10 million of the Company’s outstanding ordinary
shares. As at 6 July 2020, the Company held 621,806 shares in treasury.
Substantial shareholdings
As at 18 June 2020, 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:
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 its 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 the auditor during the year under
review 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.
Shareholder
Uranium Royalty Corporation
Kopernik Global Investors
Putnam Investments
Tribeca Investment Partners
Brandes Investment Partners
azValor Asset Management
Hargreaves Lansdown, stockbrokers (EO)
Interactive Brokers (EO)
Extract Advisors
Armor Advisors
Legal & General Investment Management
Dolfin Financial (UK)
Russell Investments
Amitell Capital
Note 1:
Calculated based on the number of shares in issue less shares held in treasury
52
Yellow Cake Annual Report 2020
Number
of shares
7,600,000
6,886,667
6,679,265
4,555,990
4,474,912
4,101,920
3,851,298
3,699,349
3,362,191
3,077,055
2,996,500
2,836,540
2,825,975
2,815,513
Shareholding1
8.67%
7.86%
7.62%
5.20%
5.11%
4.68%
4.40%
4.22%
3.84%
3.51%
3.42%
3.24%
3.22%
3.21%
Section 3 / Governance Directors’ responsibility statement
The Directors are responsible for preparing the Annual
Report and the Financial Statements in accordance with
applicable laws and regulations.
for safeguarding the assets of the Company and, accordingly,
for taking reasonable steps to further the prevention and
detection of fraud and other irregularities.
Jersey Company law requires directors to prepare Financial
Statements for each financial year in accordance with any
generally accepted accounting principles. The Directors have
elected to use International Financial Reporting Standards
(IFRS) as adopted by the European Union. 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
year-end and of the profit or loss for the year 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 the financial statements have been
prepared in accordance with IFRS;
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information; 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 the Company’s
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
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
7 July 2020
Yellow Cake Annual Report 2020
53
Independent auditor’s report
to the members of Yellow Cake plc
Opinion
We have audited the financial statements of Yellow Cake
plc (the ‘company’) for the year ended 31 March 2020 which
comprise the Statement of Financial Position, the Statement
of Comprehensive Income, 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:
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:
• give a true and fair view of the state of the company’s
affairs as at 31 March 2020 and of its profit for the year
then ended;
• the disclosures in the annual report set out on pages 22 to
28 that describe the principal risks and explain how they
are being managed or mitigated;
• 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
• the Directors’ confirmation set out on page 22 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 pages 63 and 64 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 29 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.
Summary of our audit approach
Key audit matters
• Investment in uranium
Materiality
• Overall materiality: $4,160,000
Scope
(2019: $3,610,000)
• Performance materiality:
$3,120,000 (2019: $2,710,000)
Our audit procedures covered
100% of total assets and 100% of
profit before tax.
Key audit matters
Key audit matters are those matters that, in our
professional judgment, were of most significance in our
audit of the 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
54
Yellow Cake Annual Report 2020
Section 3 / Governance of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Overall materiality
$4,160,000 (2019: $3,610,000)
Investment in uranium
Key audit
matter description
How the matter
was addressed in
the audit
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 2020;
• corroboration of the price used to value the investment at 31 March 2020 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 the users we take into account the
qualitative nature and the size of the misstatements. Based on our professional judgement, we determined materiality
as follows:
Basis for determining
overall materiality
Rationale for
benchmark applied
Performance
materiality
Basis for determining
performance
materiality
Reporting of
misstatements to the
Audit Committee
1.54% of total assets
The company’s business model
is for long term appreciation
of the investment in uranium,
which represents the majority
of total assets. Total assets is
therefore considered to be an
appropriate benchmark.
$3,120,000 (2019: $2,710,000)
75% of overall materiality
Misstatements in excess of
$208,000 and misstatements
below that threshold that, in our
view, warranted reporting on
qualitative grounds.
An overview of the scope of our audit
The company has been subject to a full scope 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.
Yellow Cake Annual Report 2020
55
Independent auditor’s report
to the members of Yellow Cake plc continued
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, except to the extent otherwise explicitly stated in
our report, 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 53 –
if the statement given by the Directors that they consider
56
Yellow Cake Annual Report 2020
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 40 and 41 –
if the section describing the work of the Audit Committee
does not appropriately address matters communicated by
us to the Audit Committee;
• Directors’ statement of compliance with the UK Corporate
Governance Code set out on pages 32 and 33 – 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 in relation to which 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 53, 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
Section 3 / Governance 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.
• 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
7 July 2020
Yellow Cake Annual Report 2020
57
Uranium
It’s the heaviest naturally occurring
element in the universe.
With a nucleus packed with 92 protons,
uranium is the heaviest of the elements.
That weight once compelled shipbuilders
to use spent uranium as ballast in ship
keels. Were it employed that way now,
sailing into port could set off defence
systems.
Financial
statements
58
79
Financial statements
Corporate information
Yellow Cake Annual Report 2020
A
Statement of Financial Position
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
Share capital
Share premium
Share-based payment reserve
Treasury shares
Retained earnings
TOTAL EQUITY
The financial statements of Yellow Cake plc and the related notes were approved by the Directors on 7 July 2020 and are signed on its behalf by:
Andre Liebenberg
Chief Executive Officer
As at
31 March 2020
USD’000
Notes
As at
31 March 2019
USD’000
4
5
6
7
8
9
9
10
11
263,489
263,489
89
6,481
6,570
217,366
217,366
16
8,750
8,766
270,059
226,132
(2,587)
(2,587)
(392)
(392)
(2,979)
267,080
1,164
224,437
2
(726)
42,203
267,080
(2,799)
(2,799)
(384)
(384)
(3,183)
222,949
1,007
192,248
–
–
29,694
222,949
Yellow Cake Annual Report 2020
59
Statement of Comprehensive Income
Uranium-related profit
Fair value movement of investment in uranium
Fair value movement of uranium derivative liability
Total uranium-related profit
Expenses
Share-based payments
Equity offering expenses
Commission on purchase of uranium
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 for the period after tax attributable to the equity owners of the Company
Earnings per share attributable to the equity owners of the Company (USD):
Basic and diluted (comparative period ended 31 March 2019 refers to the period since IPO)
Basic and diluted (comparative period ended 31 March 2019 refers to the period since incorporation)
Restated*
1 April 2019 to 18 January 2018 to
31 March 2020
31 March 2019
USD’000
USD’000
Notes
4
7
10
12
12
13
14
16
16
15,714
212
15,926
(2)
(547)
(152)
(1,017)
(1,756)
(3,474)
104
(47)
12,509
–
12,509
0.14
0.14
39,211
(2,799)
36,412
–
(2,589)
(1,782)
(709)
(1,018)
(6,097)
27
(648)
29,694
–
29,694
0.39
0.63
* Certain prior period comparatives have been reclassified for consistency with the current period presentation. “Commission on purchase of uranium” and “Procurement and market consultancy fees” have been presented separately, having previously been
disclosed as a single line item called “Procurement and market consultancy fees”. These reclassifications had no effect on the net result, Statement of Financial Position or Statement of Cash Flows for either period.
60
Yellow Cake Annual Report 2020
Section 4 / Financial statements
Statement of Changes in Equity
Attributable to the equity owners of the company
As at 18 January 2018
Total comprehensive income after tax for the period
Transactions with owners:
Shares issued
Share issue costs
As at 31 March 2019
Total comprehensive income for the year
Transactions with owners:
Shares issued
Share issue costs
Share incentive options
Purchase of own shares
Balance as at 31 March 2020
Notes
Share capital
USD’000
Share premium
USD’000
–
–
1,007
–
1,007
–
157
–
–
–
–
–
200,449
(8,201)
192,248
–
33,608
(1,419)
–
–
1,164
224,437
9
9
9
9
10
11
Share-based
payment
reserve Treasury shares Retained earnings
USD’000
USD’000
USD’000
–
–
–
–
–
–
–
–
2
–
2
–
–
–
–
–
–
–
–
–
(726)
(726)
Total equity
USD’000
–
29,694
201,456
(8,201)
222,949
12,509
33,765
(1,419)
2
(726)
–
29,694
–
–
29,694
12,509
–
–
–
–
42,203
267,080
Yellow Cake Annual Report 2020
61
Statement of Cash Flows
Cash flows from operating activities
Profit after tax
Adjustments for:
Change in fair value of investment in uranium
Change in fair value of uranium derivative liability
Change in fair value movement of incentive options
Foreign exchange losses
Interest income
Operating profit before changes in capital
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
Share buyback programme
Net cash generated from financing activities
Net (decrease)/increase in cash and cash equivalents during the year/period
Cash and cash equivalents at the beginning of the year/period
Effect of exchange rate changes
Cash and cash equivalents at the end of the year/period
62
Yellow Cake Annual Report 2020
1 April 2019 to 18 January 2018 to
31 March 2020
31 March 2019
USD’000
USD’000
Notes
4
7
10
4
9
9
11
12,509
(15,714)
(212)
2
47
(104)
(3,472)
(73)
14
(3,531)
104
(3,427)
(30,409)
(30,409)
33,765
(1,419)
(726)
31,620
(2,216)
8,750
(53)
6,481
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
Section 4 / Financial statements
Notes to the Financial Statements
For the year ended 31 March 2020
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 2LH.
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 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.
On 12 April 2019, the Company placed 12,000,000 new ordinary shares with existing and new institutional investors and certain of the Company’s directors subscribed for
39,086 new ordinary shares, raising approximately GBP25.9 million before expenses (c. USD33.8 million).
2. Summary of significant accounting policies
Basis of preparation
The financial information has been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and interpretations (collectively, ‘IFRS’) as
adopted by the European Union (‘IFRS as adopted by the EU’).
In accordance with Section 105 of The Companies (Jersey) Law 1991, the Company confirms that the financial information for the period ended 31 March 2020 is derived from the
Company’s audited financial statements and that these are not statutory accounts and, as such, do not contain all information required to be disclosed in the financial statements prepared
in accordance with International Financial Reporting Standards (“IFRS”).
The statutory accounts for the period ended 31 March 2020 have been audited and approved, but have not yet been filed.
The Company’s audited financial statements for the period ended 31 March 2020 received an unqualified audit opinion and the auditor’s report contained no statement under
section 113B (3) and (6) of The Companies (Jersey) Law 1991.
The financial information contained within this preliminary statement was approved and authorised for issue by the Board on 7 July 2020.
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.
Yellow Cake Annual Report 2020
63
Notes to the Financial Statements continued
For the year ended 31 March 2020
The COVID-19 pandemic is a developing situation. The assessment of this situation will need continued attention and will evolve over time. The rapid development and fluidity of the
COVID-19 virus means that is difficult to predict the ultimate impact on the Company at this stage. The impact of the pandemic will undoubtedly be material on the general economy
and a number of the Company’s counterparties.
The Company’s operations are currently unaffected by COVID-19, given that it has no physical operations and the executive team is already home-based. Yellow Cake’s key service
providers have put in place effective business continuity plans that have enabled them to continue with the provision of all key support services that were provided to the Company
prior to the pandemic outbreak.
Yellow Cake has sufficient working capital (excluding the proceeds from the post-year-end sale of uranium) to meet approximately 18 months of operating expenses before it would need to
raise additional funds. The Company has no debt or hedges on its balance sheet. In the absence of other sources of capital, the Company can reasonably be expected to realise a portion of
its inventory.
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 investment 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.
64
Yellow Cake Annual Report 2020
Section 4 / Financial statements 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.
Cash and cash equivalents comprise cash in hand and short-term deposits in banks with an original maturity of three months or less.
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.
The Company also recognised a uranium derivative liability in the scope of IFRS 9. 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.
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.
Treasury shares
The Company's treasury shares are classified as equity. Treasury shares are accounted for at cost and shown as a deduction from equity in a separate reserve.
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.
Equity-settled transactions are awards of shares, or options over shares that are provided to employees in exchange for the rendering of services.
Equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using Black-Scholes option pricing model that takes into account the exercise
price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest
rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive
payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is
calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that
market condition has been met, provided all other conditions are satisfied.
Yellow Cake Annual Report 2020
65
Notes to the Financial Statements continued
For the year ended 31 March 2020
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting
period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Company or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control
of the Company or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award
is forfeited.
If an equity-settled award is cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is
substituted for the cancelled award, the cancelled and new awards are treated as if they were a modification.
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 judgments and estimation uncertainty
The preparation of financial statements requires management to make judgments, 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 year in which the estimate is revised and in any future years affected.
The resulting accounting estimates will, by definition, seldom equate to the related actual results.
Accounting estimates
The accounting estimates in the year are the assumptions made in valuing the uranium derivative liability. These assumptions are set out in note 7 and the carrying value of the uranium
derivative liability is USD2,587,000 as at 31 March 2020 (31 March 2019: USD2,799,000).
Judgements
The directors have considered the tax implications of the Company's operations and have reached judgement that no tax liability has arisen during the year (period ended
31 March 2019: USDnil).
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Yellow Cake Annual Report 2020
Section 4 / Financial statements 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 uranium derivative
liability being held at fair value. The carrying amounts of all such instruments are as stated in their respective notes.
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 on 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 year-end, the profit after tax would decrease by USD13,174,447. Likewise, if the value rose by 5% the profit after tax would have
increased by USD13,174,447.
Economic risk
The COVID-19 pandemic is a developing situation. The assessment of this situation will need continued attention and will evolve over time. The rapid development and fluidity of the
COVID-19 virus makes it difficult to predict the ultimate impact on the Company at this stage. However, the Company does not underestimate the seriousness of the issue and the
inevitable effect it will have on the global economy and many businesses across the world.
In line with most experts, the Company believes that the impact of the virus outbreak will be material on the general economy and some central banks have already started to act by
reducing interest rates and taking other measures. Undoubtedly, this will have implications for the operations of the Company.
Liquidity risk
This is the risk that the Company will encounter 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 year-end, the liquidity of the Company is composed of either bank account or bank deposits, for a total amount of USD6,480,946 (31 March 2019: USD8,749,546).
Yellow Cake Annual Report 2020
67
Notes to the Financial Statements continued
For the year ended 31 March 2020
As at 31 March 2020
Cash and cash equivalents
Other creditors and accruals
As at 31 March 2019
Cash and cash equivalents
Other creditors and accruals
Carrying
amount
USD’000
6,481
(392)
8,750
(384)
< 1 year
USD’000
1 to 2 years
USD’000
2 to 10 years
USD’000
6,481
(392)
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 of an
input is assessed against 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 2020
Section 4 / Financial statements
The following table analyses within the fair value hierarchy the Company’s assets and liabilities (by class) measured at fair value:
Assets and liabilities
As at 31 March 2020
Investment in uranium
Uranium derivative liability
As at 31 March 2019
Investment in uranium
Uranium derivative liability
4.
Investment in uranium
As at 18 January 2018
Acquisition of U3O8
Change in fair value
As at 31 March 2019
Acquisition of U3O8
Change in fair value
As at 31 March 2020
Level 1
USD’000
263,489
–
Level 2
USD’000
–
(2,587)
217,366
–
–
(2,799)
Cost
USD’000
–
178,155
–
178,155
30,409
–
208,564
Level 3
USD’000
–
–
–
–
Fair Value
Movement
USD’000
–
–
39,211
39,211
–
15,714
54,925
Total
USD’000
263,489
(2,587)
217,366
(2,799)
Fair Value
USD’000
–
178,155
39,211
217,366
30,409
15,714
263,489
Yellow Cake Annual Report 2020
69
Notes to the Financial Statements continued
For the year ended 31 March 2020
The value of the Company’s investment in U3O8 is based on the month-end spot price for U3O8 of USD27.40/lb as published by UxC LLC on 30 March 2020 (2019: USD25.75/lb as published
by UxC LLC on 25 March 2019).
Acquisition of uranium
The Company has purchased a total of 9,616,385 lb of U3O8 at an average price of USD21.68/lb. The total cash consideration for the purchases was USD 208,564,000 made up as
follows:
• Purchase of 8,091,385 lb of 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”).
• A second purchase of 350,000 lb from Kazatomprom on 23 August 2018 for a cash consideration of USD8,155,000.
• A third purchase of 1,175,000 lb from Kazatomprom on 31 May 2019 under the Framework Agreement for a cash consideration of USD30,409,000.
The following table provides an analysis of the Company’s investment in U3O8 as at 31 March 2020 by location since incorporation:
Location
Canada
Quantity
lbs
9,616,385
9,616,385
Fair Value
USD’000
263,489
263,489
On 15 November 2019, the Company entered into an agreement with Orano Cycle to open a holding account in France. As at 31 March 2020, there was no holding in this account. Refer to
Note 17 to the Financial Statements.
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Yellow Cake Annual Report 2020
Section 4 / Financial statements
5. Trade and other receivables
Other receivables
6. Cash and cash equivalents
As at
31 March 2020
USD’000
As at
31 March 2019
USD’000
89
89
16
16
Cash and cash equivalents as at 31 March 2020 were banked with Citi Bank Europe plc in a fixed interest account with full access. Balances at the end of the period were USD6,480,061 and
GBP 714, a total of USD6,480,964 equivalent (31 March 2019: USD8,488,607 and GBP 200,260, a total USD8,749,546 equivalent).
7. Uranium derivative liability
As part of the Initial Purchase mentioned in note 3 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 of 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 year commencing on the delivery date for the Repurchase Option and ending on 30 June 2027.
The value of the option granted to Kazatomprom has been determined at USD2,587,000 (31 March 2019: USD2,799,000) as at 31 March 2020 based on the expected option payoff
using a Monte Carlo simulation.
A valuation date spot price of USD27.40 per lb, volatility of 22% and the one-year US risk-free rate of 0.14% were used to simulate spot price as at 4 July 2021 (date at which the option
may first be exercised). Monthly volatility of 6% and monthly US risk-free rate of 0.012% 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 2020 and 31 March 2019, as disclosed in note 3.
Yellow Cake Annual Report 2020
71
Notes to the Financial Statements continued
For the year ended 31 March 2020
8. Trade and other payables
Other creditors and accruals
9. Share capital
Authorised:
10,000,000,000 ordinary shares of GBP 0.01
Issued and fully paid:
Ordinary shares
Opening shares
Issued 18 January 2018
Issued 5 July 2018
Share capital as at 31 March 2019
Issued 12 April 2019
Share capital as at 31 March 2020
Opening share premium
Proceeds of issue of shares
Share issue costs
Share premium as at 31 March 2019
Proceeds of issue of shares
Share issue costs
Share premium as at 31 March 2020
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Yellow Cake Annual Report 2020
As at
31 March 2020
USD’000
As at
31 March 2019
USD’000
392
392
384
384
Number
GBP’000
USD’000
–
10,000
76,166,630
76,176,630
12,039,086
88,215,716
–
0.1
762
762
120
882
–
0.1
1,007
1,007
157
1,164
GBP’000
USD’000
–
151,591
(6,207)
–
200,449
(8,201)
145,384
192,248
25,764
(1,192)
33,608
(1,419)
169,956
224,437
Section 4 / Financial statements
On 12 April 2019 a total of 12,039,086 additional ordinary shares were issued at GBP2.15 per share. The Company incurred listing expenses comprising of commissions and professional
adviser fees totalling USD1,965,778 of which USD 1,419,206 have been taken to the share premium account. The remaining costs of USD546,572 have been recognised 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 advisers to the Company in lieu of cash payments for services rendered. The fair value of the services
received was USD160,000 which was recognised in Initial public offering expenses in the statement of comprehensive income in year ended 31 March 2019.
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 was also recognised in initial public offering expenses in the statement of comprehensive income in year ended
31 March 2019.
The Company operates an equity-settled share-based compensation plan which provides for the award of long-term incentives and an annual bonus to management personnel.
Annual bonus
The annual bonus awards are based on commercial targets and may be up to 100% of base salary, subject to performance, as determined by the Board. The bonus awards are in the
form of nil-cost options, which will vest and become exercisable not earlier than one year after grant. The annual bonus award in relation to a financial year is usually granted following
publication of the Company’s audited annual results for that financial year.
The Remuneration Committee resolved to make the following annual bonus award in the form of nil-cost share option. No annual bonus awards have been granted to date.
The following options will be granted on 8 July 2020.
Chief Executive Officer
Chief Financial Officer
Face value of first tranche of
2020 annual bonus award
USD ‘000
75
60
Face value of award
as a % of base salary
35%
35%
Vesting date
8 July 2021
8 July 2021
Yellow Cake Annual Report 2020
73
Notes to the Financial Statements continued
For the year ended 31 March 2020
The grant of the following options will be deferred until after the Company’s annual general meeting and having regard to the COVID-19 situation.
Chief Executive Officer
Chief Financial Officer
Face value of second tranche of
2020 annual bonus award (contingent)
USD ‘000
75
60
Face value of award
as a % of base salary
35%
35%
Vesting date
8 July 2021
8 July 2021
The number annual bonus options to be granted will be equal to the above face value at the award date, divided by the average of the mid-market closing price (converted to its USD
value) of the ordinary shares of the Company on AIM over the five consecutive dealing days immediately preceding the grant date.
Long-term incentive
The long-term incentive is in the form of options granted to acquire shares in the Company that will become exercisable not earlier than three years after grant (save in certain
circumstances including a change of control of the Company) and will expire 10 years after the date of grant. The option exercise price is the market value at the grant date of the
shares placed under option. The options are subject to a post-vesting holding period of not less than two years (although permission may be granted to sell shares in order to meet tax
liabilities). The face value of shares subject to the grants may be up to 125% of salary. Each option gives the right to acquire one share in the Company. The long-term incentive award
relating to a financial year is usually granted at the beginning of that financial year.
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, are currently placed on the exercise of long-term
incentive options, although the Remuneration Committee retains the discretion to impose performance conditions on the vesting of incentive awards, should it wish to do so.
Set out below is the summary of the long-term incentive options awarded on 24 February 2020 in relation to the 2020 financial year:
Grant date
Exercise date
Exercise price
Opening balance
24/2/2020
24/2/2023
GBP1.97
–
Granted
152,064
Exercise
–
Expired/forfeited/
other
Closing balance
–
152,064
All options awarded on 24 February 2020 have an exercise price of GBP1.9692 per share. The exercise price of GBP1.9692 per share represents the average of the mid-market closing
price of the ordinary shares of the Company on AIM over the five consecutive dealing days immediately preceding the grant date.
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Yellow Cake Annual Report 2020
Section 4 / Financial statements A Black-Scholes option pricing model was used to determine the fair value the long-term incentive options. The valuation model inputs used to determine the fair value at the grant
date are as follows:
Grant date
Exercise date
Share price at grant
date
Exercise price
Expected volatility
Risk-free interest
rate
Fair value at grant
date
Fair value at grant
date
24/2/2020
24/2/2023
GBP1.95
GBP1.97
25%
0.40%
GBP46,075
USD57,147
The fair value of the incentive options is recognised in the Statement of Comprehensive Income over the vesting period (31 March 2020: USD1,927).
During the year under review, the Company was in an extended closed period due to inside information relating to the sale of material blocks of shares by some of the Company’s
significant shareholders and the decision to implement a share buyback programme. These awards were subsequently granted on 24 February 2020 and not at the beginning of the
2020 financial year, as would be usual practice.
11. Treasury shares
Treasury shares as at 31 March 2019
Purchased in the year
Treasury shares as at 31 March 2020
Number
GBP ‘000
USD ‘000
–
309,788
309,788
–
565
565
–
726
726
On 22 January 2020, the Company initiated a share buyback programme to purchase up to USD2 million of the Company’s ordinary shares (the “Programme”) during an initial period of
three months.
At the Programme’s inception, the Company’s shares were trading at a material discount to its underlying net asset value. The Yellow Cake Board therefore took the decision to
implement a share buyback programme as a means of effectively acquiring exposure to uranium at a discount to the commodity spot price and delivering value to its shareholders.
As at 31 March 2020, the Company had acquired 309,788 shares (held in treasury) at a volume weighted average price of GBP1.82 per share, for a total cost of USD726,320 (including
USD2,380 in transactional costs) and at a weighted average discount to net asset value of 15%.
As at 29 April 2020, the Company had purchased 413,067 shares (held in treasury) at a volume weighted average price of GBP1.87 per share, for a total cost of USD985,868 and at a
volume-weighted average discount to net asset value of 16%.
Given that the Company’s shares continued to trade at a significant discount to net asset value, on 30 April 2020 the Yellow Cake Board decided to extend the Programme to the earlier of
21 July 2020 or the date on which US$2 million has been incurred in the purchase of the Company’s shares.
On 30 June 2020, the Company announced its intention to conduct an enlarged share buyback programme to purchase up to USD10 million shares, replacing the earlier extended
programme. All shares repurchased are held in treasury. At 3 July 2020, the Company held 621 806 shares in treasury.
Yellow Cake Annual Report 2020
75
Notes to the Financial Statements continued
For the year ended 31 March 2020
12. Procurement and market consultancy fees
In consideration for the services rendered by 308 Services Limited, the Company paid a commission of 0.5% of the consideration paid for the purchase of U3O8 on
31 May 2019 amounting to USD 152,045 (2019: USD1,781,550). Additional fees of USD1,017,413 (2019: USD708,735) payable to 308 Services Limited were also incurred during the
year from 1 April 2019 to 31 March 2020 in consideration for its services to the Company in relation to the purchasing of U3O8 and in securing competitively priced converter storage
services in terms with the services agreement signed on 30 May 2018.
13. Other operating expenses
Professional fees
Management Salaries and Directors’ fees
Other expenses
Auditor’s fees
14. Taxation
Tax expense for the year/period
1 April 2019 to 18 January 2018 to
31 March 2020
31 March 2019
USD’000
USD’000
682
557
470
47
1,756
501
293
137
87
1,018
1 April 2019 to 18 January 2018 to
31 March 2020
31 March 2019
USD’000
USD’000
–
–
–
–
As the Company is managed and controlled in Jersey it is liable to be charged tax at a rate of 0% under schedule D of the Income Tax (Jersey) Law 1961 as amended.
76
Yellow Cake Annual Report 2020
Section 4 / Financial statements
15. Related party transactions
During the year, the Company incurred USD161,317 (31 March 2019: USD155,083) of administration fees payable to Langham Hall Fund Management (Jersey) Limited (“Langham
Hall”). Alexandra Nethercott-Parkes is an employee of Langham Hall and has served as a Non-Executive Director of the Company since 18 July 2019 for which she has received no
Directors’ fees. As at 31 March 2020 there were no amounts due to Langham Hall (31 March 2019: USDnil).
The key management personnel are the directors and as there are no other employees, their remuneration is represented by “management salaries and director fees” in the Statement
of Comprehensive Income as disclosed in note 13.
The following Directors own ordinary shares in the Company:
Name
The Lord St John of Bletso*
Sofia Bianchi
The Hon Alexander Downer
Alexandra Nethercott-Parkes
Alan Rule
André Liebenberg
Carole Whittall
Total
Number of
ordinary shares
% of
share capital
26,302
18,838
29,925
–
18,837
73,207
11,302
178,411
0.03%
0.02%
0.03%
0.00%
0.02%
0.08%
0.01%
0.20%
* 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 2020
77
Notes to the Financial Statements continued
For the year ended 31 March 2020
16. 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 attributable to the equity owners of the Company (USD):
Basic and diluted (comparative period ended 31 March 2019 refers to the period since IPO)
Basic and diluted (comparative period ended 31 March 2019 refers to the period since incorporation)
* The weighted average number of shares excludes treasury shares.
The Company’s share options are not dilutive at the reporting date.
17. Events after the reporting date
1 April 2019 to 18 January 2018 to
31 March 2020
31 March 2019
USD’000
USD’000
12,509
87,823,408
–
29,694
76,176,630
46,958,197
0.14
0.14
0.39
0.63
On 20 April 2020, the Company transferred 100,000 lbs of U3O8 from the Cameco facility to the Orano facility in satisfaction of its obligations under a location swap agreement.
On 30 June 2020, the Company announced that it had concluded an agreement to sell 300,000lb of U3O8 to finance an enlarged share buyback programme. The disposal generated
proceeds of USD9.9 million after costs and commission which will be used to purchase up to USD10 million of the Company’s outstanding ordinary shares.
The impact of the ongoing COVID-19 pandemic on the drivers of the uranium market continued to unfold after year-end. While there is little indication of reduced demand for uranium,
the disruption to uranium production, which is very concentrated, appears to be strengthening. Kazatomprom announced in April that production would be reduced as a result of the
pandemic. In May, Cameco indicated that the suspension of operations at their Cigar Lake facility would remain in place for an undetermined duration. Increasing COVID-19 cases in
Kazakhstan raise the risk of further production disruptions at Kazatomprom.
The price of uranium continued to rise after year-end (31 March 2020: USD27.40/lb) on strong volumes, averaging USD30.49/lb in April, USD33.55/lb in May and USD33.03/lb in
June 20201.
1 Monthly average prices published by UxC LLC respectively on 27 April 2020, 25 May 2020 and 29 June 2020.
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Yellow Cake Annual Report 2020
Section 4 / Financial statements
Corporate Information
Head Office and Registered Office
3rd Floor, Liberation House
Castle Street
St Helier
Jersey, JE1 2LH
Company Secretary
LHJ Secretaries Limited
3rd Floor, Liberation House
Castle Street
St Helier
Jersey, JE1 2LH
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 2020
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Yellow Cake Annual Report 2020
Section 4 / Financial statements www.yellowcakeplc.com