ANNUAL 2021
REPORT
for the year ended 31 March 2021
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.
CONTENTS
Yellow Cake
at a glance
Strategic
report
Governance
Financial
statements
2
3
Yellow Cake at a glance
4
Highlights
36 Board of directors
67 Financial statements
Investment case
5 What we do
38 Corporate governance
90 Corporate information
6
9
Chairman’s statement
Our strategy
17 Our business model
18 Environmental, social and
governance
21 CEO statement
24 CFO’s review
28 Risk management
35 Viability
report
47 Report of the Audit
Committee
49 Directors’ remuneration
report
59 Directors’ report
61 Directors’ responsibility
statement
62 Independent auditor’s report
1
* Yellowcake photography contained within this report is courtesy of Kazatomprom.
Yellow Cake Annual Report 2021 YELLOW CAKE AT A GLANCE
Yellow Cake plc is a London-quoted company that provides
investors with direct exposure to the uranium market through
our physical holding of uranium oxide concentrate (U3O8).
U3O8 PRICE (USD/lb)
Bought 1.175m lb @ USD25.88
May 2019
Sold 348,068 lb @ USD28.73 April 2021 to
URC under option agreement
Sold 300 000 lb @ USD33.20
June 2020 to fund share buyback
Bought 343,053 lb @
USD29.15
May 2021
Bought 440,000 lb @ USD27.34
and 100,000 lb @ USD29.95
March 2021
Bought 3.5m lb @
USD28.95
June 2021
Bought 8.1m lb @ USD21.01
July 2018
Bought 350 000 lb @ USD23.30
August 2018
40
35
30
25
20
15
10
5
0
Jan-17
Apr-17 Jul-17
Oct-17
Jan-18 Apr-18 Jul-18 Oct-18
Jan-19
Apr-19
Jul-19
Oct-19
Jan-20 Apr-20 Jul-20
Oct-20
Jan-21 Apr-21 Jul-21
Jan-20 Apr-20
Jul-20
Oct-20
Jan-21 Apr-21
Jul-21
• Yellow Cake plc 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.
• 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.
• COVID-19 has disproportionately affected uranium
supply with limited impact on demand and nuclear
utilities are expected to re-enter the contract market.
• The Company’s long-term Framework Agreement for
supply of U3O8 with Kazatomprom, the world’s largest
uranium producer, enables Yellow Cake plc to access up to
USD100 million of uranium annually from Kazatomprom
at the prevailing spot price until 2027.
• The Company’s low-cost outsourced business model
provides access to corporate functions and industry
expertise while minimising cost leakage.
• Yellow Cake plc holds 13.3 million lb of U3O8 acquired at
an average cost of USD24.05/lb.
• Yellow Cake has concluded agreements to acquire an
additional 550,000 lb of U3O8 in the spot market and
expects to conclude an agreement with
Kazatomprom to purchase a further
2.0 million lb of U3O8 for delivery later in 2021.
If completed, these uranium purchases will take
the Company’s total holding to almost
16 million lb of U3O8.
2
KEY POINTS
London-quoted on AIM
Headquarters in
Jersey
13.3 million lb
of U3O8 held, acquired at an average cost of
USD24.05/lb
Yellow Cake Annual Report 2021 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 ongoing supply-side
constraints 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.
3
Yellow Cake Annual Report 2021 HIGHLIGHTS
Profit after tax of
Holding of
Raised
USD29.9 million
for the year ended 31 March 2021
(2020: USD12.5 million)
13.3 million lb
of U3O8 (including post year-
end purchases) acquired at an
average cost of USD24.05/lb
GBP62.5 million
(USD86.9 million) post year end through a placing of
shares in June 2021, the proceeds of which are partly
being applied to acquire a further 550,000 lb of U3O8
in the spot market at an average price of USD 32.35/lb
for delivery later in 2021. The Company also expects to
conclude an agreement with Kazatomprom to purchase a
further 2.0 million lb of U3O8 at a price of USD32.23/lb
The value of the Company’s holding of 9.86 million lb
of U3O8 has increased
39%
to USD302.14 million as at 31 March 2021 relative to the average
acquisition cost of USD217.3 million (USD22.05/lb)
Raised
Buyback of
Net asset value of
GBP99.3 million
(USD138.5 million) through a placing of shares in
March 2021 and applied the proceeds to acquire
0.5 million lb of U3O8 during the financial year and an
additional net 3.4 million lb of U3O8 post year end1
4,156,385
ordinary shares in the Company (now held in treasury)
between January 2020 and October 2020 for a total
consideration of USD11.5 million (GBP8.9 million) at a
volume weighted average price of GBP2.13 per share
(USD2.75 per share) in a share buyback scheme. The shares
were acquired at a volume weighted average discount to
net asset value of 21%, effectively acquiring exposure to
uranium at a discount to the commodity spot price
USD421.4 million
(GBP2.38 per share3)
as at 31 March 2021
(2020: USD267.1 million (GBP2.45 per share))
Continued improvement in the market for U3O8, with the
spot price increasing
12%
from USD27.40/lb on
31 March 2020 to
USD30.65/lb2 on
31 March 2021
After year end, the U3O8 spot price continued to rise,
increasing to USD32.35/lb on 12 July 2021, and the
value of the Company’s U3O8 holding increased a
further
42%
to USD430.4 million5
1 During the financial year, Yellow Cake purchased 540,000 lb of U3O8 for a cash consideration of
USD15.0 million and committed to purchase 3,454,231 lb of U3O8 from Kazatomprom for a cash
consideration of USD100.000 million and took delivery of the uranium on 21 June 2021. During
the financial year, Yellow Cake also committed to sell 348,068 lb of U3O8 to Uranium Royalty Corp.
for a cash consideration of USD10.0 million. The Uranium Royalty Corp. transaction completed on
28 April 2021. On 20 May 2021 Yellow Cake completed the purchase of 343,053 lb of U3O8 in the
market for a cash consideration of USD10.0 million.
2 Based on the month end spot price of USD30.65/lb published by UxC LLC on 29 March 2021.
3 Net asset value per share on 31 March 2021 is calculated assuming 132,740,730 ordinary shares in
issue less 4,156,385 shares held in treasury, the Bank of England’s daily USD/GBP exchange rate of
1.3796 on 31 March 2021 and the month-end spot price published by UxC LLC on 29 March 2021.
4 Based on 9.86 million lb of U3O8 held on 31 March 2021 and excludes net additional post
year-end purchases of 3.45 million lb of U3O8.
5 Based on the weekly spot price published by UxC LLC on 12 July 2021 and 13,305,601 lb of U3O8
held by the Company on that date.
4
Yellow Cake Annual Report 2021 As at 18 July 2021, the Company
owned 13.3 million lb of U3O8 which
was stored at licenced conversion
facilities at Cameco’s Port Hope/Blind
River facility in Ontario, Canada, and
Orano Cycle’s Malvési/Tricastin storage
facility in France.
U3O8
Yellow Cake’s ten-year Framework Agreement with
Kazatomprom, the world’s largest uranium producer
and one of the world’s lowest cost uranium producers,
enables Yellow Cake to access U3O8 at an undisturbed spot
price. The agreement confers the right to purchase up to
USD100 million of U3O8 each year from Kazatomprom
to 2027 at a price to be agreed before the purchase is
announced to the market so that the purchase price is not
disturbed by market anticipation of a significant uranium
purchase.
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.
WHAT WE DO
Yellow Cake plc
(the “Company”) is a
London-quoted company
on AIM, headquartered
and incorporated in Jersey,
established in 2018 to
provide investors with
exposure to the uranium
commodity at a time
when the supply/demand
fundamentals strongly
suggested a resurgence in
uranium prices.
5
Yellow Cake Annual Report 2021 CHAIRMAN’S STATEMENT
COVID-19 had a significant impact across the full uranium production cycle,
highlighting the concentrated nature of uranium supply, while global demand
remained relatively unaffected due to nuclear’s role as a reliable and consistent
baseload energy source. This resulted in a steady increase in the price of uranium
during the year, in line with our investment thesis.
Yellow Cake was established to provide investors with
long-term exposure to the uranium spot price through a
liquid and publicly-quoted vehicle. Our long-term partnership
with Kazatomprom is a key strategic advantage that provides
access to material volumes of uranium at the prevailing market
price. The Company’s strict governance structures, practices
and policies provide assurance to investors and the low-cost
outsourced business model minimises cost leakage and risk
exposure as we do not participate in the uranium production
chain.
6
The Lord St John of Bletso
The resilience of Yellow Cake’s business model was evident in the
year under review with minimal direct impact of the COVID-19
pandemic on the Company. Yellow Cake’s two employees (the
CEO and CFO) perform their duties remotely and the Company
has no operating assets and a balance sheet with no leverage.
Working capital is maintained at a level that provides sufficient
liquidity and resources to cover an extended period of operation.
However, the pandemic had a significant impact across the full
uranium production cycle, from exploration to development,
mining and processing, highlighting the concentrated nature
of uranium supply. Production was significantly curtailed as a
result of the initial lockdowns as well as the second closure at a
key producer later in the year due to resurgences in COVID-19
infection rates.
The equity market has warmed to the uranium story during the
second half of our financial year and uranium equities are up
significantly. A number of junior/developer companies have been
able to raise equity from a very supportive equity market.
Yellow Cake Annual Report 2021 NUCLEAR ENERGY HAS AN IMPORTANT
ROLE IN A LOW CARBON FUTURE
With the increasing focus on the urgent need to address
climate change, nuclear energy’s role in a low-carbon future
is becoming more widely accepted by governments around
the world. The recently released report from the European
Commission’s Joint Research Centre6 concluded that the
environmental and social impacts of nuclear energy over
its full lifecycle are comparable with hydropower and other
forms of renewable energy. Nuclear energy has proven to
be an excellent complement to renewables and currently
provides around 55% of the US’s carbon-free electricity and
53% of the European Union’s carbon-free electricity7. In the
world’s most populous and fastest growing nations, China
and India, which rely heavily on coal-fired electricity plants,
nuclear energy currently comprises less than 15% of carbon-
free electricity8.
While Yellow Cake’s direct social and environmental impact
is not significant, 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.
The Company conducts the necessary due diligence on
suppliers and business partners to ensure that they share our
commitment to responsible business practices and Yellow
Cake has a zero-tolerance approach to bribery, corruption
and unethical practices.
6 European Commission Joint Research Centre, Technical assessment of nuclear
energy with respect to the ‘do no significant harm’ criteria of Regulation (EU)
2020/852 (‘Taxonomy Regulation’), European Commission Joint Research
Centre
7 World Nuclear Association: The Nuclear Fuel Report 2019
8
International Energy Agency: www.iea.org/countries
SUPPLY IS CONSTRAINED WHILE DEMAND
LOOKS SET TO GROW
While the COVID-19 pandemic affected activity and energy
use in all countries, nuclear energy proved to be a resilient
electricity source. Nuclear’s role as a low-cost and non-
carbon energy source is likely to grow as energy intensity
increases. Additions to the current global reactor fleet
forecast strong growth in nuclear electricity generation
from facilities currently under construction (+15%),
planned (+27%) and proposed (+90%)9. Net of old plants
retired, total reactors are forecast to grow by 30% to 2040.
Significant investments are being made in advanced reactor
technologies including small modular reactors that can
reduce capital costs, shorten construction times, increase
safety and broaden acceptance.
Beyond the short-term disruption caused by the pandemic,
the sustained underinvestment in future uranium supply
and concentration of production suggests continued supply
constraints in the medium to long term.
This asymmetry in uranium supply and demand was
the fundamental principle upon which Yellow Cake was
established. Although the uranium spot price improved
over the last twelve months, it remains well below the price
required to support profitable investment in developing
new resources. The recent strong run in uranium stocks
suggests that these trends are becoming evident to a broader
audience. With the policy uncertainty that affected long-
term contracting for uranium supply largely resolved over
the last twelve months, the return of nuclear utilities to the
long-term contracting market could be the catalyst to the
necessary recovery in the uranium price.
9 World Nuclear Association, World Nuclear Power Reactors and Uranium
Requirements (May 2021)
INCREASING HOLDINGS OF U3O8
In early March 2021, the Company placed 44.5 million
new ordinary shares, the proceeds of which were used to
purchase a net 4.0 million lb of U3O8, during the
financial year and after year end, at an average cost of
USD28.83/lb during a pullback in the uranium price. We
were pleased with the strong reception that the share
placement received from both institutional and retail
investors, which resulted in the placement increasing to
circa USD140 million from the USD110 million originally
proposed. This enabled the Company to not only acquire
the full USD100 million U3O8 allotment in terms of the
Kazatomprom Framework Agreement but also to acquire a
further net 534,985 lb in the spot market.
We are pleased to report that at 31 March 2021
Yellow Cake’s share price closed at a 15% premium to net
asset value and the share price ended 45% up for the financial
year. The share buyback programme implemented in January
2020 and extended in June was instrumental in this regard
and proved to be an effective way to increase shareholders’
exposure to U3O8 at a discount to the commodity spot price.
The programme was financed by the disposal of 300,000 lb
of U3O8 in June 2020 and, at its conclusion in October 2020,
a total of USD11.5 million in value had been returned to
shareholders through the programme.
The Company held a General Meeting on 10 June 2021 at
which shareholders approved the renewal of the Board’s
authorities to allot up to 25 million new ordinary shares prior
to the Annual General Meeting in September 2021. This was
necessary to ensure that Yellow Cake remained in a position
to act opportunistically should new uranium purchase
opportunities present themselves prior to the meeting, as the
shares issued during the year had almost fully utilised the
authorities obtained at the 2020 Annual General Meeting.
7
Yellow Cake Annual Report 2021 CHAIRMAN’S STATEMENT CONTINUED
On 21 June 2021, the Company fully utilised this authority
and placed 25 million new ordinary shares. In July 2021,
the Company concluded agreements to purchase a further
550,000 lb of U3O8 in the spot market at an average price of
USD32.35/lb for a total consideration of USD17.8 million.
The Company expects to conclude an agreement with
Kazatomprom to purchase a further 2.0 million lb of
U3O8 at a price of USD32.23/lb for a total consideration
of USD64.5 million, pursuant to Kazatomprom’s offer of
12 June 2021. The purchase transactions and the proposed
purchase transaction are expected to complete later in
2021. The completion of these uranium purchases will
take the Company’s total holding to almost 16 million lb of
U3O8, which represents over 10% of current annual global
uranium mine production.
GOVERNANCE
Yellow Cake’s Board of Directors is committed to maintaining
high ethical standards as reflected in our governance
framework and Code of Conduct. The Code of Conduct
sets the operational and performance requirements for
Yellow Cake’s employees, directors, business partners,
contractors and advisers, and promotes the Company’s key
values of dignity, diversity, business integrity, compliance and
accountability.
Yellow Cake 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
small scale and simplicity of the organisation reduces the
number of points of interface, improves communication and
enhances governance and oversight. Compliance policies
are regularly reviewed and updated to ensure continued
alignment with the latest developments in corporate
governance requirements and guidelines. Effective policies
8
and measures are in place to prevent the opportunity for
bribery or inducements, and a whistleblowing policy is in
place.
The Board plays an active role in overseeing the Company’s
activities and met 14 times during the year to 31 March 2021.
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.
Alexandra Nethercott-Parkes, who acted as a Client
Director of Langham Hall Fund Management (Jersey)
Limited, resigned as an Independent Non-executive Director
with effect from 31 March 2021 and was replaced by Emily
Manning, who is also a client director of Langham Hall Fund
Management (Jersey) Limited. On behalf of the Board, I
would like to express our sincere gratitude to Alexandra for
her significant contribution to Yellow Cake.
The Board values its dialogue with stakeholders and
the Company proactively facilitates opportunities for
engagement with its stakeholders. Day-to-day queries raised
by stakeholders are addressed by the Executive Directors,
the chairs of the Board Committees will seek engagement
with shareholders on significant matters related to their
areas of responsibility and the Chairman is available to
the Company’s major shareholders to discuss governance,
strategy and performance as required. The outcomes of
these engagements are regularly communicated to the Board
and inform its deliberations. As the 2020 Annual General
Meeting was a virtual event, stakeholders were invited to
submit questions in written form. Further details of how the
Company engages with its stakeholders are available in the
Corporate Governance Report on pages 42 to 43.
DIVIDEND POLICY
One of Yellow Cake’s primary objectives is to realise a return
on investment from the appreciation in the value of its U3O8
holdings and 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
I would like to thank my fellow Board members for their
diligence and contribution during the year. The Framework
Agreement with Kazatomprom, our strategic supplier, is an
important asset of the Company that enables value creation
for shareholders and we thank them for their support. We
are grateful to our shareholders and investors for their strong
interest in the share issue during the year and welcome our
new shareholders to the Company.
The Lord St John of Bletso
Chairman
Yellow Cake Annual Report 2021 OUR STRATEGY
Opportunities for investors to
hold physical uranium are limited.
Yellow Cake was established to
provide liquid exposure to the
uranium commodity through a
low-cost structure that leverages
the expertise and market
knowledge of the Company’s
executive management and
service providers to generate
additional value through the
purchase of uranium.
Yellow Cake holds physical U3O8, has no operating
assets and does not enter into hedging arrangements.
The Company engages in uranium related transactional
activities, such as uranium location swaps. We continue
to assess other operational and financial transactions
to secure exposure to uranium, including streaming and
royalties.
Our 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 the highest standards of corporate governance,
with a focus on creating and protecting value for
shareholders.
9
U3O8 PRICE HISTORY (USD/lb)
U3O8 PRICE HISTORY (USD/lb)
$160
$140
$120
$100
$80
$60
$40
$20
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
1
2
0
2
Source: UxC LLC
At the time of Yellow Cake’s listing in July 2018, the supply-demand fundamentals implied a strong recovery in the market
price of uranium over time. The impact of COVID-19 and other market developments in 2020 and 2021 confirmed the
supply/demand imbalance and the U3O8 price adjusted accordingly. The longer-term trends, discussed below, suggest further
upside as supply remains constrained while demand for nuclear energy is forecast to continue to grow.
THE NUCLEAR FUEL VALUE CHAIN
The nuclear fuel value chain is complex and can take up to 18 months10 from uranium mine to nuclear reactor. Uranium leaves
the mines as yellowcake (U3O8) and is further refined before conversion into a gas (uranium hexafluoride – UF6) at five facilities
in the United States, Canada, France, Russia and China11.
Nuclear reactors produce energy by splitting the atoms of the U-235 isotope to release energy in the form of heat. U-235 is
the main fissile isotope of uranium. Uranium in its natural form contains around 0.7% U-235 and the enrichment process uses
centrifuges to increase the concentration of U-235 to around 3.5% to 5%, the level required for use as a fuel in most nuclear
reactors. 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 States12.
10 OECD-NEA, The Economics of the Nuclear Fuel Cycle (1994)
11 World Nuclear Association, Conversion Enrichment and Fabrication/Conversion and Deconversion
12 World Nuclear Association, Conversion Enrichment and Fabrication/Uranium Enrichment
Yellow Cake Annual Report 2021
OUR STRATEGY CONTINUED
The various types of reactors use different fuel assemblies specific to their design. In the fuel fabrication process13, enriched UF6 is converted into uranium dioxide (UO2) that is used in the
manufacture of nuclear fuel bundles. Most fuel fabricators are owned by reactor vendors, which usually supply the fuel assemblies for the reactors they produce. Significant fuel fabrication
capacity is located in China, France, Russia, the United Kingdom, the United States, Japan, Canada and India.
Mining
• Uranium is mined using in-
situ leaching, open pit and
underground mining
• Uranium ore is processed
to produce uranium oxide
concentrate U3O8
Conversion
• Conversion plants convert
physical U3O8 from powder
form into natural uranium
hexafluoride gas (UF6)
• Conversion plants are located
in the US, Canada, France,
Russia and China
Enrichment
• Gaseous uranium (UF6)
is enriched, raising the
uranium-235 isotope from the
natural level of 0.7% to the
range of 3.5% to 5% required
for use in nuclear reactors
Fuel Fabrication
• 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
13 World Nuclear Association, Conversion Enrichment and Fabrication/Fuel Fabrication
10
Yellow Cake Annual Report 2021 The Uranium Market
Miners
Production of 125 Mlb uranium oxide (U3O8) in 202014
Producers bought 29.6 Mlb from the 2020 spot market15
Secondary supplies
Spot Market
A record 92.3 Mlb of U3O8 traded on the spot market in 202015
Traders and
financial buyers
Utilities
Global
1. Utilities 2020 reactor requirements 177.4 Mlb of
U3O8
16
Combined US/EU Utilities (data from CY2020)
1.
Total US/EU uranium deliveries (spot/term) for
2020 – 81.6 Mlb17, 18
2. Expected 2021 reactor requirements 177.5 Mlb9
2. Uranium delivered under long-term/multi-year purchase
3. Total 2020 spot purchases by nuclear utilities
(global) – 17.8 Mlb (19% of average spot market
volume – 92.3 Mlb)15
agreements – 68.7 Mlb (84.2%)17, 18
3. Uranium delivered under spot purchase agreements –
12.9 Mlb (15.8%)17, 18
14 UxC Weekly “2020 U3O8 Production Review”
26 April 2021
15 UxC Weekly “2020 Uranium Spot Market
Review” 25 January 2021
16 World Nuclear Association, World Nuclear
Power Reactors and Uranium Requirements
(December 2020)
17 Euratom Supply Agency Annual Report 2020
18 US Energy Information Administration 2020
Uranium Marketing Annual Report
(May 2021)
11
Yellow Cake Annual Report 2021 OUR STRATEGY CONTINUED
Demand side drivers
Supply side drivers
URANIUM REQUIREMENTS (PERCENTAGE OF WORLD DEMAND) (%)
+
+
+
+
+
+
+
–
–
Long-term growth in global energy demand
Strong growth forecast for nuclear in the
large developing economies in Asia
Low carbon emission energy source supports
2050/2060 country emission targets
Low lifecycle cost energy source delivering
reliable and predictable electricity to
complement renewable sources
Advances in small modular reactor (SMR)
design reduce facility costs and footprint
Contracting by nuclear power utilities for
future uranium purchases is currently at low
levels and expected to increase
Resolution of recent US policy uncertainty
and bipartisan support for nuclear in the US
Declining share of nuclear in some developed
markets (US, Germany, Belgium, France)
Resistance regarding perceived potential
environmental and safety impacts
–
–
–
–
–
+
Concentrated resources (three countries
produce 66% of the world’s annual uranium)
increase the risk of supply disruptions due to
geopolitical events or other developments (e.g.
COVID-19)
Current uranium prices are below production
costs for a large proportion of producers
Exploration and development of new resources
is uneconomic at current uranium prices
Producers have shown discipline in reducing
supply at current prices
Closures due to COVID-19 reduced uranium
production by 12%14, while global energy
demand decreased 4% in 202019
Secondary supply from stockpiles and
enrichers offsets some of the production
shortfall
30
25
20
15
10
5
0
27
16
13
9
8
19
3
3
3
USA
China
France
Russia
South
Korea
Japan
Ukraine United
Kingdom
Other
Source: World Nuclear Association9
Global energy consumption is forecast to rise nearly 50% from 2018 to
205020 with almost all of the growth attributable to non-OECD countries as a
result of rapid population and economic growth. The majority of this growth
is forecast to come from China (35%) and India (27%). Energy consumption in
OECD countries is forecast to increase by 15% over the same period, driven
by trends such as the increased use of electric vehicles.
While most of the growth in electricity production is forecast to come from
renewable energy sources20, nuclear will continue to contribute around 10%
to total electricity production over this time and is forecast to grow 35% to
2050 from 2018, a compound annual growth rate of 1% a year.
The World Nuclear Association’s (WNA) reference case forecasts strong
growth of 55%21 in nuclear power to 2040, while the OECD and the
International Atomic Energy Agency jointly forecast a 58% increase in
installed nuclear generating capacity to 2040 in the high case and a decline of
11% in the low case22.
DEMAND-SIDE DRIVERS
Nuclear energy remains a key and growing element of global energy supply
Uranium is primarily used in the production of electricity in nuclear power plants. Currently, the US is the
largest user of uranium, accounting for 27% of global uranium demand and nuclear contributes 20% of the
country’s total energy compared to the global average of around 10%17.
19 IEA (2021), Global Energy Review 2021, IEA, Paris https://www.iea.org/reports/global-energy-
review-2021
20 US Energy Information Administration (EIA) International Energy Outlook (IEO) 2019
21 World Nuclear Association: The Nuclear Fuel Report, Global Scenarios for Demand and Supply
Availability 2019-2040
22 OECD Nuclear Energy Agency and International Atomic Energy Agency: Uranium 2020 Resources,
Production and Demand
12
Yellow Cake Annual Report 2021
There are currently 443 reactors operable worldwide with
an additional 155 reactors currently under construction
or planned9. 43% of the nuclear capacity currently under
construction is in China, Russia and India, and 74% of
capacity planned is in those countries. All three countries
are currently heavily reliant on fossil fuel energy sources and
nuclear is likely to have a strong role to play in their future
energy mix if they are to meet carbon emission reduction
targets. While nuclear makes up close to 20% of Russia’s
energy, India only derives 3% of its energy from nuclear and
China 5%. Reactors are also being built or planned in many
emerging markets including Bangladesh, Belarus, Egypt,
Turkey and the UAE9.
CURRENT AND FUTURE REACTORS (MWe)
120 000
100 000
80 000
60 000
40 000
20 000
0
USA
France
China
Japan
Russia
South
Korea
Canada Ukraine
United
Kingdom
India
Other
CURRENT
UNDER CONSTRUCTION
PLANNED
Source: World Nuclear Association9
Since 1998, new reactors coming online (105) have largely
balanced old plants being retired (103), although the larger
size of the new reactors installed has led to a slight increase
in capacity over this period9. In recent years, many nuclear
reactors have been uprated to increase their capacity and
operating licences have been extended beyond the initially
planned lives of various facilities. The WNA has concluded
that there are currently no firm projections for retirements
23 World Nuclear Association, Plans for New Reactors Worldwide (March 2021)
24 www.nytimes.com/2020/09/23/world/asia/china-climate-change
25 www.eia.gov/international/analysis/country/CHN
26 World Nuclear Association, Nuclear Fuel Cycle Overview
13
in the next two decades23, but the WNA’s reference case
conservatively estimates 154 reactors closing by 2040
compared to 289 coming online.
Nuclear power is also likely to be an important part of the
energy mix for countries that plan to reach the goal of
limiting global warming to +1.5C by 2050 in terms of the Paris
Agreement on climate change. Nuclear power is not only
an efficient, secure and very low carbon source of energy,
but its reliability and predictability make it an excellent
complement for renewable sources of energy that supports
grid stability. In September 2020, President Xi Jinping
announced China’s intention to achieve net zero emissions by
2060, with CO2 emissions peaking no later than 203024. With
China already the world’s largest producer and consumer of
energy25, nuclear could have a significant role in achieving this
aspiration.
Although nuclear energy has very low operating costs
relative to most other forms of energy, the high new-build
costs and lengthy construction schedules of traditional
nuclear power facilities have constrained growth in some
developed markets. To address this, significant investments
are being made in developing small modular reactor (SMR)
solutions that typically have generation capacities below
400 MW per unit. These reactors 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.
the spot market (defined as delivery within a year) which
generally trades at a discount to the term contract prices.
While utilities hold uranium inventories, most of these 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).
Typically, around 80% to 85% of utilities’ uranium purchases
are contracted, however currently only around 79%17
of European and 38%18 of US utilities’ 2025 uranium
requirements are currently contracted.
FUTURE CONTRACTED COVERAGE RATE OF
US & EUROPEAN UTILITIES (%)
120
100
80
60
40
20
0
98
98
116
103
104
84
72
61
93
55
70
71
42
39
67
21
57
14
2021
2022
2023
2024
2025
2026
2027
2028
2029
US UTILITIES COVERAGE
EU UTILITIES COVERAGE
Utility long-term contracts need to be replaced
The average refuelling cycle for nuclear power utilities is
around 18 months26 and these utilities secure the majority of
their uranium purchases through long-term contracts (three
to five years in advance and for delivery over an extended
period, usually five years). The balance is purchased in
Source: Euratom Supply Agency17, US Energy Information Administration18
The uncertainty around certain US policy issues that may
have contributed to the delay in long-term contracting
were resolved during 2020. These include the Section 232
investigation, Iran Sanctions Waivers and the Russian
Suspension Agreement discussed below.
Yellow Cake Annual Report 2021
OUR STRATEGY CONTINUED
Recent US policy appears to favour nuclear
The US Nuclear Fuel Working Group (NFWG) “Strategy to
Restore American Nuclear Energy Leadership” released in
April 2020 outlined 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 American Nuclear
Infrastructure Act (ANIA) bill, which provides the regulatory
framework for the establishment and operation of the
reserve, was released in December 2020 and initial funding
of USD75 million was approved by the US Congress.
The NFWG was established following the conclusion of
a Section 232 investigation in 2019 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.
A number of acts recently signed into law or currently under
discussion by the US House and Senate indicate bipartisan
support for nuclear energy and support further research
and development in the industry. These include the Nuclear
Energy Innovation Capabilities Act (2017), Nuclear Energy
Innovation and Modernization Act (2019), National Defense
Authorization Act for FY2021, National Energy Leadership
Act (2019) and Nuclear Energy Research and Development
Act (2020)27. In July 2020, the US International Development
Finance Corporation lifted its legacy prohibition on funding
nuclear energy projects, which should unlock significant
funding for US nuclear exports.
The administration under President Biden also appears
favourably disposed to nuclear and in February 2021, the
US re-entered the Paris Climate Change Agreement. In
April 2021, President Biden announced a new target for
the US to achieve a 50% to 52% reduction from 2005 levels
in greenhouse gas pollution in 2030. Nuclear currently
contributes 55%7 of non-carbon energy in the US and is
likely to play a key role in achieving the reduction target.
President Biden’s climate plan included the creation of an
Advanced Research Projects Agency on Climate to target
affordable, innovative technologies to help the US achieve
a 100 percent clean energy by 2035, a target that includes
advanced reactors and SMRs that are more efficient and cost
effective.
The US Department of Energy’s Office of Nuclear Energy
released its Strategic Vision in January 2021, outlining
its plans for continued technology innovation for existing
nuclear, advanced nuclear, nuclear waste and fuel cycles,
suggesting that nuclear energy will be pivotal to US
energy, environmental, and economic needs. At the end
of March 2021, US President Biden announced that the
proposed “American Jobs Plan,” (proposed to be budgeted
at USD2.25 trillion) would incentivise clean electricity,
providing funding for the development of advanced nuclear
reactors and supporting the existing US commercial nuclear
power fleet28.
US-Iran Economic Sanctions Waivers
The US imposed sanctions on Iran following the US’s
withdrawal from the Joint Comprehensive Plan of Action
with Iran (the Iran Nuclear Deal) in 2018. Up until May 2020,
the US Department of State issued waivers on three non-
proliferation-related projects that 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. 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.
In May 2020, US Secretary of State Pompeo terminated the
three remaining nuclear waivers related to Iranian nuclear
projects, providing a 60-day wind down period.
However, a 90-day extension of the waiver was provided to
cover ongoing international support for the Bushehr Nuclear
Power Plan Unit 1 to ensure safety of operations. This was
due for renewal in November 2020 and is expected to be
renewed, but no formal announcement has yet been made.
The Russian Suspension Agreement
The Russian Suspension Agreement (RSA) was signed in
1992 between the US Department of Commerce and the
Russian Federation’s Ministry for Atomic Energy to suspend
the antidumping duty investigation on uranium enrichment
from Russia. The agreement effectively established an annual
quota limiting the supply of nuclear fuel into the US from
Russia to around 20% of US enrichment demand and was
extended five times. The last extension was set to expire
at the end of 2020 and if it had expired, Russian-sourced
uranium products and services would have had unrestricted
access to the US market.
In October 2020, an amendment to the RSA was signed
extending the Agreement out to 2040 and limiting Russian
uranium enrichment services exports into the US to an
average of approximately 17% over the next 20 years, with a
further limit to below 15% from 2028. The amendment also
established protections for US uranium miners by limiting the
export of Russian-sourced uranium to the equivalent of 7%
of US enrichment services demand, decreasing to no higher
than 5% beginning in 2026.
27 https://www.atlanticcouncil.org/blogs/energysource/nuclear-energy-policy-represents-a-bipartisan-path-forward-on-climate-for-the-biden-administration/
28 White House, www.whitehouse.gov/briefing-room/statements-releases/2021/03/31/fact-sheet-the-american-jobs-plan/
14
Yellow Cake Annual Report 2021 SPOT VOLUMES HIT A NEW RECORD IN
2020
The total volume of uranium traded on the spot market in
2019 declined 28% to 64 million lb of U3O8 as a result of
the persistent market uncertainty, particularly relating to
the Section 232 Investigation and formation of the NFWG.
However, the supply disruptions caused by COVID-19 early
in 2020 helped to drive spot market volumes to a new
record of 92 million lb for the year, surpassing the previous
record set in 2018. Buying by utilities in the spot market
declined 22% in 2020 while buying by producers nearly
tripled as COVID-19 related disruptions affected mining
activities. While activity in the spot market in the first
two months of 2021 was muted, transactions increased
significantly in March.
With improved clarity around policy and bipartisan support
for nuclear energy in the US, we expect pent up demand
to drive the market, particularly given the need for US and
European utilities to secure long-term contract coverage.
The long-term case for uranium demand remains sound,
in particular as the world increasingly recognises the need
for the clean baseload energy nuclear provides. We expect
demand to rise as the new nuclear fleet currently under
construction comes on stream and we see a sustainable
return to buying from utilities.
SUPPLY-SIDE DRIVERS
The ability of the global supply of uranium to respond to
increases in demand is constrained by the nature of supply.
The world’s uranium resources are relatively concentrated
with 52%29 found in Australia, Kazakhstan and Canada.
Together these countries produce two thirds30 of global
uranium mined production. Interruptions as a result of
COVID-19 led to production in 2020 falling to the lowest
level in more than a decade at 125 million lb of U3O8.
PRIMARY PRODUCTION AND MARKET DEMAND (MLB U3O8)
200
150
100
50
0
2015
2016
2017
2018
2019
2020
2021E
MARKET DEMAND
PRIMARY PRODUCTION
PRIMARY SUPPLY DEFICIT
Source: World Nuclear Association
Primary production has consistently fallen below market
demand for uranium over recent years and the primary
supply deficit reached a new record in 2020.
In January 2021, Energy Resources of Australia Ltd (ERA)
(majority-owned by Rio Tinto) announced that the Ranger
Uranium Mine (Northern Territory, Australia) had ceased
processing stockpiled uranium ore and would now commence
decommissioning and reclamation, which is to be completed
by January 202631. ERA reported that uncommitted
production was being sold into the spot market. The Ranger
Uranium Mine commenced operations in 1981 and produced
291 million lb of U3O8 over its operational life. At the end of
29 NEA/IAEA (2021), Uranium 2020: Resources, Production and Demand, OECD Publishing, Paris, https://doi.org/10.1787/d82388ab-en.
30 World Nuclear Association, Uranium Production Figures
31 Energy Resources of Australia, "Processing Operations at ERA's Ranger Mine Conclude", 8 January 2021
32 Orano, "A New Stage Commences for the COMINAK Mine in Niger," 31 March 2021
33 World Nuclear Association, Supply of Uranium (August 2019)
34 Company analysis based on SRK Consulting Global Operating Cost Curve for Primary Uranium Production, Section 232 Investigation of Uranium Imports dated
16 January 2018
35 Kazatomprom, kazahstan-sokrashchaet-dobychu-urana-na-10
36 London Stock Exchange, www.londonstockexchange.com/exchange/news/market-news/market-news-detail/KAP/14195200
15
March 2021, Orano ceased operations at its majority-owned
Akouta underground uranium mine in Niger. Operated by
Compagnie Minière d’ Akouta (COMINAK), the facility
produced an estimated 195 million lb of U3O8 since entering
commercial operation in 197832.
Secondary supply sources include material from commercial
and government inventories, enricher underfeeding, and
depleted uranium tails recovery33. The supply gap is currently
being covered mainly by 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.
The current spot and term uranium prices do not incentivise
investment into developing new resources. While the spot
price of U3O8 briefly reached a five-year high of
USD34/lb in May 2020, even at this price an estimated one-
third of worldwide production operations are believed to be
loss-making on an estimated total cost basis34. 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 in
the face of rising demand. While higher cost producers have
had the benefit of long-term supply contracts set at higher
prices, these contracts are now expiring.
Producers have shown increasing supply-side discipline over
the last five years, shutting down or suspending selected
operations to manage supply. These include:
• 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; and
• Kazatomprom’s announcement in January 2017 of a
10% cut to planned production35 and their subsequent
announcement36 in August 2019 of a 20% production
reduction for three years compared to the planned levels
under Subsoil Use Contracts.
Yellow Cake Annual Report 2021 OUR STRATEGY CONTINUED
Without a material and sustained increase in the long-term
uranium price, supply deficits are projected to continue and
the continued ability for secondary supplies to cover the
shortfall remains uncertain.
After peaking at USD34 per lb of U3O8 in May 2020, the spot
price declined to around USD30 per lb, where it ended 2020.
In the first quarter of 2021, the price declined further, but
ended March at USD30.65/lb.
Yellow Cake is uniquely positioned to benefit from supply-
side pressure and the likely resulting uranium price
increases. We remain confident in the resulting long-term
outlook for the commodity, as demand is expected to
continue to exceed supply.
COVID-19
Although the COVID-19 pandemic affected both the demand
and supply sides of the market, the supply side took the brunt
of the impact. Global electricity demand decreased 1% and
nuclear power generation by 4% in 202014, while market
demand for U3O8 was broadly unchanged year on year at
177.416 million lb. 2020 primary production decreased by
12%14 and the primary supply deficit increased to 30% of
market demand.
COVID-19 interrupted production in most mining
jurisdictions during the lockdowns announced in response
to the pandemic at the end of the first quarter of 2020.
Kazatomprom stopped development drilling from April to
the end of July 2020. Cameco’s Cigar Lake mine, the largest
producing uranium mine in the world, suspended production
from March to September 2020 and then again from mid-
December as COVID-19 cases rose in the surrounding
area. Producers had to source uranium in the spot market
to cover existing long-term supply contract commitments.
The thinness of the spot market means that any material
a producer purchases has the potential to create a rapid
tightening of the spot market and potentially lead to pricing
spikes. Early in April 2021, Cameco announced that they are
restarting mining at Cigar Lake, stating in their press release37
that “the timing of production restart and production rate at
Cigar Lake will be dependent on how quickly we are able to
remobilize the workforce.” Cameco further said that it would
not be in a position to provide production outlook updates
for 2021 until production has resumed and advised that they
will continue to purchase material, as needed, to meet their
committed deliveries.
37 Cameco Corporation, “Cameco Restarting Cigar Lake Mine”, 9 April 2021
16
Yellow Cake Annual Report 2021 OUR BUSINESS MODEL
Yellow Cake aims to
maximise investor
exposure to the uranium
price, 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.
17
KAZATOMPROM FRAMEWORK
AGREEMENT
Kazatomprom is 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 2021, Yellow Cake exercised the full
USD100 million of its option for 2021, taking
delivery on 21 June 2021.
The Company can also source uranium
from other producers or the spot market if
advantageous.
ORANO CYCLE STORAGE
CONTRACT
In 2020, 600,000 lb of U3O8 was exchanged
from Cameco’s Port Hope/Blind River facility
in Canada to a storage account at Orano
Cycle’s Malvési/Tricastin storage facility in
France in a series of location swap agreements.
The Company enters into transactions such as
location swaps from time to time, when this is
commercially advantageous.
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, and
supports the Company in procurement
and other uranium transactions.
CAMECO STORAGE
CONTRACT
Most of Yellow Cake’s current holding of
13.3 million lb of U3O8 is held in a storage
account at Cameco’s Port Hope/Blind River
facility in Ontario, Canada.
Storage rates have been negotiated
to achieve significant cost savings and
support the Company’s low-cost operating
structure.
Yellow Cake Annual Report 2021 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.
The
highest levels
of safety
in the storage
of uranium.
A skilled,
committed and
independent
board
The Board recognises the
importance of environmental,
social and governance (ESG)
considerations in assessing
the Company’s performance
and the value it creates. In
its deliberations, the Board
considers the impact of the
Company’s activities on
society, the environment and
Yellow Cake’s reputation.
18
Due to the nature of Yellow Cake’s activities, the Company’s
direct social and environmental impact is minimal. The key
sources of ESG risk for Yellow Cake relate to its uranium
supply and storage contracts. Yellow Cake seeks to build
mutually beneficial working relationships with our suppliers
and shows preference for suppliers that can demonstrate
alignment with our standards and that promote such
standards among their own suppliers. The Supplier Standards
Policy sets out Yellow Cake’s standards in the areas of health
and safety, business integrity and legal compliance, labour
and human rights, environmental stewardship, treatment of
host communities, and reporting. Due diligence is 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 mining of the uranium that Yellow Cake holds has similar
environmental and social impacts to those of most metal
or mineral mines, and is regulated according to the social,
environmental, safety and occupational health regulations
relevant to the country of operation.
While uranium ore and U3O8 are only mildly radioactive,
prolonged exposure can cause damage. However, uranium is
toxic chemically and is therefore handled and contained to
prevent inhalation or ingestion. Later in the nuclear fuel value
chain, concentration and enrichment increases radioactivity
and toxicity.
The 13.3 million lb of U3O8 owned by Yellow Cake is stored
in metal drums in storage accounts at licenced storage
facilities at Cameco’s Port Hope/Blind River operation in
Canada and Orano Cycle’s Malvési/Tricastin site in France.
Yellow Cake occasionally enters into location swap
agreements and other uranium-based financial initiatives.
During 2020, the Company exchanged 600,000 lb of U3O8
it held in Canada for 600,000 lb of U3O8 located in France
in two transactions. These transactions did not involve
the physical transportation of uranium and were completed
by book transfer.
Yellow Cake Annual Report 2021 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
Radiation monitoring and safe working practices are
in place at Kazatomprom. The management systems at
Kazatomprom’s operations, Cameco’s Port Hope/Blind
River facilities and Orano’s Malvési/Tricastin facilities are
aligned with OHSAS 18001 or ISO 45001 (occupational
health and safety management systems) and ISO 14001
(environmental management systems). Kazatomprom
received certification in terms of ISO 14001 and ISO 45001
in 2020.
ESG REPORTING BOUNDARY AND
IDENTIFICATION OF MATERIAL ISSUES
Yellow Cake follows the UN “Guiding Principles on
Business and Human Rights” and the OECD “Guidelines for
Multinational Enterprises” in determining topic boundaries
for reporting ESG. In assessing the Company’s ESG impacts,
Yellow Cake takes into account both direct impacts and
indirect impacts arising from our business relationships with
suppliers.
EXTERNAL ESG ASSESSMENT
Yellow Cake commissioned PRISM to conduct an external
and independent assessment of the Company’s ESG risks,
both with regards to the Company itself and more widely
its supply chain adherence to ESG principles. PRISM is 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 operations.
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
19
− 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 assessment by PRISM included a materiality and
mapping exercise to identify the most material ESG topics for
the Company, according to Global Reporting Initiative (GRI)
principles. Material ESG topics are those that have a direct or
indirect impact on Yellow Cake’s ability to create, preserve
or erode economic, environmental and social value for itself,
its stakeholders and society at large.
Using the benchmarks and principles of leading ESG standard
setters and frameworks, Sustainability Accounting Standards
Board (SASB), Global Reporting Initiative (GRI) and United
Nations Sustainable Development Goals (UNSDGs), Yellow
Cake identified the following key topics to be reviewed and
monitored:
Supplier environmental compliance
Employee engagement, diversity and inclusion
Business Ethics and Exposure to political risk
Supplier human rights and community relations
Supplier employee health and safety
Legal and regulatory environment
Business model resilience and competitive behaviour
Yellow Cake Annual Report 2021 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
The review by PRISM in the 2021 financial year assessed
the ESG risks related to Yellow Cake’s primary supplier,
Kazakhstan’s state uranium mining company Kazatomprom,
as well as its storage suppliers, Cameco (Canada) and
Orano (France). The review was based on publicly available
information, as well as, in the case of Kazatomprom,
enquiries with industry and third sector sources, and direct
engagements with high-level managers at the Company in
relevant areas of responsibility.
The review indicated that sustainability is integrated into
Kazatomprom’s core strategic framework and encapsulated
in its Environmental and Social Action Plan (ESAP), and the
Company targets certain UN Sustainability Development
Goals (UNSDGs) to align its ESG performance with global
aims. Current leadership of the Company has prioritised
stakeholder engagement and ESG performance, and it is
a leader in these areas within the Republic of Kazakhstan
corporate sphere. Cameco and Orano both have ambitious
environmental and social goals which meet global standards
and extend beyond legislative or regulatory requirements.
The annual ESG review provides the Yellow Cake Board
with an independent assessment of the ESG performance of
Yellow Cake’s key suppliers, identifies trends and highlights
emerging ESG risks.
Yellow Cake’s direct and indirect ESG impacts are set out in the table below:
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 2021 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 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.
•
Independent directors comprise 71% of Yellow
Cake’s Board of Directors. There is also strong
female representation at Board (43%) and
management (50%) 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.
20
Yellow Cake Annual Report 2021 CEO STATEMENT
Recent market trends continue to highlight the long-term supply/demand
disconnect in the uranium market, while the regulatory uncertainty that was
more prevalent in 2019 is now largely resolved and there is a growing recognition
of nuclear power’s importance in meeting carbon emission reduction targets.
2020 was a transition year
for the uranium market in
that a number of factors and
uncertainties that were affecting
the uranium price were resolved
or reached a point where their
implications for higher prices
became undeniable.
The impact of COVID-19 emphasised the supply-side
risk in the uranium market with 76% of global production
concentrated in four countries. Disruptions due to the
pandemic led to the loss of approximately 20 million lb of
production that will not be recovered and production in
calendar 2020 fell 12% to 125 million lb of U3O8
14. This
follows three years of production declines from the peak in
2016 at 160 million lb of U3O8, while reactor demand has
stayed relatively steady around 175 million lb of U3O8 a year,
implying consistent inventory drawdowns. In February and
March of this year we also saw the permanent closure of
the Ranger mine in Australia and the Cominak mine in Niger.
Historically these mines in aggregate produced around nine
million lb per annum38.
Demand for uranium looks set to grow as the current global
fleet of 443 operating reactors is expanding with a further
155 reactors under construction or planned9, mainly in
China, Russia, India and the Middle East. The remarkable
improvement in air quality as activity decreased at the height
of the pandemic demonstrated the significant negative
impact of fossil fuels in countries that rely heavily on energy
from these sources, including China and India.
Andre Liebenberg
The perception of nuclear energy is becoming more positive
as more countries commit to carbon neutrality and support
for a “renewables plus nuclear” solution increases. For the first
time in many years, the nuclear industry in the US is receiving
bipartisan support, and President Biden’s pre-election policy
statements explicitly included nuclear in the energy policy. The
UK’s Ten Point Plan for Green Industrial Revolution includes
a commitment to nuclear energy and small modular reactors
continue to gain traction globally as cost-effective and small
footprint alternatives to traditional reactors.
Although nuclear energy currently accounts for nearly half
of the low-carbon electricity in Europe, its inclusion in the EU
taxonomy for sustainable finance has not yet been confirmed
and it would be a negative for the industry if it was excluded.
Recently the EU’s Joint research Centre (JRC) concluded
that nuclear energy does not cause any more harm than the
energy sources currently included in the taxonomy6. The
JRC report is still subject to review prior to implementation.
However, most of the growth in reactors is forecast to take
place outside the EU, so exclusion is not expected to have a
significant impact on the industry’s future growth.
38 World Nuclear Association, Country Profiles/Countries G - N/Niger, World Nuclear Association, Country Profiles/Countries A - F/Australia
21
Yellow Cake Annual Report 2021 CEO STATEMENT CONTINUED
The ability of producers to respond to the forecast increase
in demand is, in our view, limited. For several years the
majority of current uranium supply is thought to have been
loss making at prevailing uranium spot prices, disincentivising
investment in new resources even as current mines deplete.
Despite the increased current and planned activity around
nuclear builds, we have seen little progress in the uranium
mining projects in the market at the time of Yellow Cake’s
IPO in 2018. We believe that the lack of bankable long-term
off-take contracts are a key constraint to projects being able
to secure the necessary finance for construction. At the same
time, the main US policy issues that created uncertainty for
utility contracting over the last two years have been clarified.
These include the release of the recommendations of the
US Nuclear Fuels Working Group and the finalisation of the
Russian Suspension Agreement.
DEVELOPMENTS IN THE URANIUM
MARKET15
The uranium spot market price started 2020 at
USD25.00/ lb and ran up nearly 20% in April on record
volumes as COVID-19 forced the closure of mining
production around the world. The price peaked at
USD34.00/lb in May 2020 before trending down to around
USD30/lb where it ended the calendar year, closing 20%
up on 2019 and nearly 70% up since the 2016 low. In 2021,
after initially declining the price reached USD30.65/lb by
the end of March.
Spot market volumes reached record levels in the 2020
calendar year at 92.3 million lb of U3O8 (CY2019: 64.3
million lb) compared to the previous record of 88.7 million lb
of U3O8 in 2018. We believe that this activity was driven by
enhanced purchasing activity by primary uranium producers
that had reduced production or suspended their operations
due to the COVID-19 pandemic, as well as by market
intermediaries.
22
Aggregate term contracting in CY2020 amounted to only
around 56 million lb of U3O8 (equivalent) which includes
delivery/purchase commitments within the so-called
carry trade/mid-term market (1-3 years forward), as well
as the more traditional long-term contracting market (3-5
years or more). Term contracting levels in CY2020 were at
unprecedented lows (96.2 million lb of U3O8 (equivalent) in
CY2019 and 90.5 million lb of U3O8 (equivalent) in CY2018).
Uranium spot market activity decreased markedly in the
first two months of the 2021 calendar year, totaling slightly
more than 10 million lb of U3O8. We believe this decline may
be attributable to reduced purchasing by utilities as well as
limited market activity by uranium producers in the new
year. Spot market transactions rose significantly in March
with the acquisition of physical uranium by financial entities
(including Yellow Cake’s acquisitions discussed below) and
by several junior uranium companies. Aggregate transaction
volumes for March rose to 10.9 million lb of U3O8 under 68
separate transactions14.
INCREASE IN YELLOW CAKE’S U3O8
HOLDINGS
In the final quarter of 2020, we witnessed significant investor
interest in uranium equities on the back of the improving
uranium fundamentals highlighted above and this trend
continued into 2021. These market dynamics allowed Yellow
Cake to take advantage of the strong investor interest in
uranium and we were able to raise USD138.5 million at net
asset value in an oversubscribed equity offering.
The equity raise allowed us to fully exercise the
Kazatomprom 2021 option to acquire USD100 million
of U3O8 this year and to apply the surplus cash raised to
make additional uranium purchases for value. In June 2021,
the Company raised gross proceeds of USD86.9 million
and committed to further purchases of U3O8, which are
expected to bring the Company’s holding of U3O8 to more
than 15 million lb in the 2021 calendar year.
A number of other uranium companies have also taken
the opportunity provided by the improved sentiment
towards the commodity and since February 2021 around
USD930 million has been raised, including Yellow Cake’s
equity offerings. We are also seeing a new strategy by
uranium project companies that are using the funds
raised to purchase uranium in the spot market to enhance
financing options as they pursue the restart/development
of their projects. In 2021 to date, about 12.7 million lb
of U3O8 has been purchased (including Yellow Cake’s
3.5 million lb from Kazatomprom), which represents
approximately 10% of forecast 2021 primary production.
The share buyback programme Yellow Cake initiated last
year and extended during the current year took advantage
of the persistent discount between the Yellow Cake share
price and net asset value to effectively increase shareholders’
exposure to uranium at a discount to the spot price. The
Company’s shares ended the 2021 financial year 45% up on
the prior year and trading at a premium to net asset value.
The fair value of the Company’s holding of U3O8 increased
by USD33.4 million in the year to 31 March 2021. At year-
end Yellow Cake’s net asset value increased 58%, although
after accounting for the increased shares in issue, net asset
value per share declined marginally to GBP2.38 per share.
The Company delivered a net profit after tax for the year
of USD29.9 million and ended the year with cash and cash
equivalents of USD126.2 million on the balance sheet.
The CFO’s Review on page 24 provides more information
regarding the Company’s financial results for the period.
Yellow Cake Annual Report 2021 URANIUM PRICE (USD/LB), YELLOW CAKE SHARE PRICE (GBP)
AND NAV (GBP/SHARE)
USD
50
40
30
20
10
Jun 18
Sep 18 Dec 18 Mar 19 Jun 19
Sep 19
Dec 19
Mar 20
Jun 20
Sep 20
Dec 20
U3O8
YCA
NAV
GBP
3,0
2,5
2,0
1,5
1,0
0,5
0
Mar 21
STAKEHOLDER RELATIONSHIPS
While COVID-19 prevented face to face engagements,
we held a large number of virtual engagements with
shareholders, investors, analysts and the media through
investor conferences, conference calls, investor briefings
with industry experts, media briefings and interviews
to improve the understanding of the Company and the
industry. Our focus on broadening our retail shareholder
base continued and, very pleasingly, both the March and
June share placements included a retail component that
was very well supported. The Company’s retail shareholding
currently accounts for 25% of the share register, up from
zero at the time of the IPO in July 2018.
OUTLOOK
Demand for uranium is likely to continue with nuclear energy
playing a key role in the long-term global energy mix as a
low carbon, low operating cost, reliable and sustainable
source of energy that complements renewable sources of
energy. New supply of uranium is uneconomic without a
significant increase in prices from current levels and the
ongoing disruptions to supply from COVID-19 are resulting
in producers being increasingly active in the spot market to
meet contracted volumes.
The return of long-term contracting by utilities will be the key
trigger for a rebound in the market. Market sources, including
UxC39, indicate that nuclear utilities are beginning to focus
on the long-term uranium market and expectations remain
for long-term uranium contracting to increase during 2021 as
utility fuel managers pursue forward uranium coverage.
The long-term fundamentals supporting our view that
uranium is currently underpriced remain intact and Yellow
Cake is well placed to realise further value for shareholders
as a result.
Andre Liebenberg
Chief Executive Officer
39 UxC Weekly, 21 January 2021
23
Yellow Cake Annual Report 2021
CFO’S REVIEW
For the first nine months of the financial year, the Company’s shares continued to trade at a
significant discount to net asset value. Yellow Cake completed a share buyback programme in
2020 as a means of effectively acquiring exposure to uranium at a discount to the commodity
spot price. By March 2021, Yellow Cake’s shares were trading at a premium to net asset value,
putting the Company in a position to successfully complete an upsized share placing and apply
the proceeds to the purchase of an additional 4 million lb of U3O8.
In March 2021, the Company completed an upsized share
placing, raising gross proceeds of USD138.5 million at an
issuance price equal to net asset value at the time of the
placing. The proceeds were applied to fully exercise the
Company’s 2021 option to purchase USD100 million of
U3O8 from Kazatomprom under the Framework Agreement,
to purchase additional uranium for value and to fund related
expenses and working capital.
Carole Whittall
During the first nine months of the financial year, the
Company’s shares continued to trade at a significant
discount to net asset value. The Yellow Cake Board
therefore took the decision to continue with a share
buyback programme while this discount persisted as a
means of effectively acquiring exposure to uranium at
a discount to the commodity spot price and delivering
value to shareholders. The buyback programme was
largely financed through the sale of 300,000 lb of U3O8 in
June 2020 that generated cash proceeds of USD9.9 million
after costs and commission. Between January 2020 and
October 2020, the Company applied USD11.5 million
(GBP8.9 million) to purchasing its shares at a volume-
weighted average discount to net asset value of 21%. The
buyback programme completed in October 2020 and by the
end of 2020, the discount to net asset value had closed.
24
Yellow Cake Annual Report 2021 It is my pleasure to present the following audited financial statements for the year to 31 March 2021 and report a number of highlights for the year:
An increase in the Company’s
uranium holding of
USD38.6 million from
USD263.5 million to
USD302.1 million
Proceeds of USD138.5 million
from the share placing in
March 2021 of which
USD115.0 million was applied or
committed to net purchases of
4.0 million lb
of U3O8 at an average price
of USD28.83/lb
Returned
USD11.5 million
in value to shareholders through
a share buyback programme,
with shares purchased at a 21%
discount to net asset value
Profit after tax of
USD29.9 million
(2020: USD12.5 million)
URANIUM TRANSACTIONS
Yellow Cake started the financial year with a holding of
9.62 million lb of U3O8 and sold 300,000 lb of U3O8 in
June 2020 to finance the share buyback programme. In
March 2021, the Company acquired an additional 540,000 lb
of U3O8 to end the financial year with a total holding of
9.86 million lb of U3O8.
On 3 March 2021 Yellow Cake exercised the Kazatomprom
option to acquire a further 3.45 million lb of U3O8 for an
aggregate cash consideration of USD100.0 million. The
Kazatomprom purchase completed after financial year end and
the Company took delivery of the uranium on 21 June 2021.
As part of the subscription agreement entered into at the
time of the Company’s IPO in July 2018, the Company
granted Uranium Royalty Corp. an option to acquire
between USD2.5 million and USD10.0 million worth of U3O8
per year in each of the nine calendar years commencing on
1 January 2019, up to a maximum aggregate amount over
such nine-year period of USD31.25 million worth of U3O8.
On 30 March 2021, Yellow Cake accepted Uranium Royalty
40 Month-end spot price published by UxC LLC on 29 June 2020.
25
Corp’s option exercise notice to purchase 348,068 lb of
U3O8 from Yellow Cake at USD28.73/lb for an aggregate
consideration of USD10.0 million. The sale to Uranium
Royalty Corp. completed after financial year end on
28 April 2021.
On 20 May 2021, Yellow Cake completed the purchase of
343,053 lb of U3O8 in the market at a price of USD29.15/lb
for total consideration of USD10.0 million.
In July 2021, the Company concluded agreements
to purchase a further 550,000 lb of U3O8 in the spot
market at an average price of USD32.35/lb for a total
consideration of USD17.8 million. The Company will take
delivery of this uranium between July and August 2021.
The Company expects to conclude an agreement with
Kazatomprom to purchase a further 2.0 million lb of
U3O8 for delivery between October and December 2021
at a price of USD32.23/lb for a total consideration of
USD64.5 million, pursuant to Kazatomprom’s offer of
12 June 2021.
URANIUM-RELATED PROFIT
Yellow Cake made a total uranium related profit
of USD33.9 million in the year to 31 March 2021
(2020: USD15.9 million). This comprised an increase in
the fair value of the Company’s uranium investment of
USD33.4 million (2020: USD15.7 million), a premium to
the prevailing spot price on the disposal of 300,000 lb
of U3O8 of USD0.2 million and USD1.1 million in location
swap fees. These gains were partially offset by an increase
in the fair value of a uranium derivative liability related to
the Kazatomprom repurchase option of USD0.8 million
(detailed in note 7 of this report).
Of the 9.62 million lb of U3O8 held at the beginning of the
financial year, 300,000 lb of U3O8 was sold at the end of
June 2020 at a price of USD33.20/lb and at a premium of
USD0.60/lb above the carrying value of USD32.60/lb40 on
the date of disposal, being the prevailing market price at
the time.
Yellow Cake Annual Report 2021 CFO’S REVIEW CONTINUED
The increase in the fair value of the Company’s uranium
investment of USD33.4 million during the year was
attributable to:
• an increase of USD5.20/lb in the carrying value of the
300,000 lb of U3O8 sold at the end of June 2020;
• an increase of USD3.25/lb in the carrying value of
the 9.32 million lb of U3O8 uranium investment held
by the Company since the beginning of the financial
year (as the underlying price of U3O8 increased from
USD27.40/ lb to USD30.65/lb over the financial year);
and
• an increase of USD2.83/lb in the carrying value of
the additional 0.54 million lb of U3O8 acquired by
the Company in March 2021 for an average price of
USD27.82/lb.
At the end of the financial year, the Company’s uranium
investment comprised 9.86 million lb of U3O8.
OPERATING PERFORMANCE
Yellow Cake delivered profit after tax for the year of
USD29.9 million (2020: USD12.5 million).
Expenses for the year of USD4.0 million (2020:
USD3.5 million) recognised in the Statement of
Comprehensive Income included the following costs:
• USD0.7 million in costs related to Yellow Cake’s share
placing (2020: USD0.5 million); and
• USD0.3 million in commissions payable to 308 Services
Limited in relation to the purchase by Yellow Cake of U3O8
(2020: USD0.2 million).
• Operating costs of a recurring nature of USD2.9 million
(2020: USD2.8 million), comprising:
− Procurement and market consultancy fees (holding
fees and storage incentive fees) paid to 308 Services
Limited of USD1.1 million (2020: USD1.0 million)
(detailed in note 12); and
26
− Other operating costs of USD1.7 million
(2020: USD1.8 million).
Operating expenses of a recurring nature of USD2.9 million
represent approximately 0.7% of the Company’s net asset
value at 31 March 2021.
SHARE BUYBACK PROGRAMME
The share buyback programme (the “Programme”) approved
by the Board early in 2020 to purchase up to USD2.0 million
of the Company’s ordinary shares continued during the year
under review. On 30 June 2020, the Company announced its
intention to enlarge the Programme, with a view to purchase
up to an additional USD10.0 million of the Company’s
outstanding ordinary shares.
During the financial year, the Company purchased 3,846,597
shares under the Programme for a total consideration of
GBP8.3 million (USD10.7 million). The Programme was
completed in October 2020 with the acquisition of a total of
4,156,385 of the Company’s shares for a total consideration
of GBP8.9 million (USD11.5 million) at a volume weighted
average price of GBP2.13 per share and volume weighted
average discount to the Company’s estimated net asset
value of 21%.
The shares repurchased are held in treasury.
The Company does not propose to declare a dividend
for the year.
SHARE PLACINGS
On 2 March 2021, the Company issued a total of 43,001,944
new ordinary shares to existing and new institutional
investors and 1,523,070 new ordinary shares to retail
investors, at a price of GBP2.23 per share, equal to the
Company’s estimated net asset value per share at the
date of the offering. The Company raised net proceeds of
GBP96.3 million (USD equivalent: 134.4 million net of costs of
USD4.1 million).
On 21 June 2021, after year end, the Company issued
23,947,009 new ordinary shares to existing and new
institutional investors and 1,052,991 new ordinary shares
to retail investors, at a price of GBP2.50 per share, equal to
a 1% premium to the Company’s estimated net asset value
per share at the date of the offering. The Company raised net
proceeds of GBP60.6 million (USD equivalent: 84.0 million
net of costs of USD2.9 million).
ADDITIONAL TRANSACTIONS TO REALISE
VALUE FROM THE COMPANY’S U3O8
HOLDINGS
On 24 July 2020, the Company concluded a location swap
agreement that realised gross proceeds of USD1.1 million.
The location swap was reversed in May 2021 and realised a
small profit contribution.
Under the location swap agreement, the Company
exchanged 500,000 lb of U3O8 located at Cameco’s storage
facility in Canada for an equal volume of U3O8 located
at Orano’s storage facility in France. In consideration,
Yellow Cake received gross proceeds of USD1.1 million
on 11 August 2020. The location swap was reversed in
May 2021, at which time Yellow Cake received the same
volume of uranium in Canada in exchange for uranium held
in France and received a swap fee of USD100,000.
The Company will continue to pursue attractive uranium
related transaction opportunities as they arise, including
location swaps.
Yellow Cake Annual Report 2021 Yellow Cake’s estimated net asset value on 12 July 2021
was USD533.8 million, consisting of 13,305,601 lb42 of
U3O8 valued at the weekly price of USD32.35/lb published
by UxC LLC on 12 July 2021, a uranium derivative
liability of USD3.4 million, cash and cash equivalents
of USD126.2 million and other net current assets and
liabilities of USD3.5 million as at 31 March 2021, less net
consideration paid for net purchases of USD100.0 million
completed after the end of the financial year, plus
net proceeds of the share placing on 21 June 2021 of
USD84.0 million.
Yellow Cake’s estimated net asset value per share as at
12 July 2021 was GBP2.50 per share. At market close on
12 July 2021, the Company’s share price was GBP2.68 per
share, which represents a 7% premium to the estimated net
asset value per share.
Carole Whittall
Chief Financial Officer
BALANCE SHEET AND CASH FLOW
The share placing and retail offer which completed on 2 March 2021 raised net proceeds of USD134.4 million.
USD15.0 million was applied to purchasing uranium during the financial year, while the Company committed to purchasing
USD100.0 million of U3O8 from Kazatomprom under the Framework Agreement after financial year-end. The Kazatomprom
purchase transaction completed in June 2021.
Yellow Cake’s U3O8 investment increased by 15% to USD302.1 million at year-end compared to USD263.5 million at the end
of the 2020 financial year, as a result of the appreciation in the uranium price and a net increase in the volume of uranium
held. As at 31 March 2021, Yellow Cake had cash of USD126.2 million (2020: USD6.5 million).
NET ASSET VALUE (NAV) (USDM) AND NAV PER SHARE (GBP)
450
400
350
300
250
200
150
100
200
2.00
Listing
237.5
246.6
222.9
243.7
252.2
245.3
2.39
2.53
2.25
2.18
2.32
2.11
267.1
2.45
421.5
315.7
279.9
280.5
2.92
2.56
2.44
2.38
6
5
4
3
2
1
2018/
09/30
2018/
12/31
2019/
03/31
2019/
06/30
2019/
09/30
2019/
12/31
2020/
03/31
2020/
06/30
2020/
09/30
2020/
12/31
2021/
03/31
NET ASSET VALUE (USDM)
NET ASSET VALUE PER SHARE (GBP)
Yellow Cake’s net asset value at 31 March 2021 was GBP2.38 per share41 or USD421.4 million, consisting of 9,856,385 lb
of U3O8 valued at a spot price of USD30.65/lb, a uranium derivative liability of USD3.4 million, cash and cash equivalents of
USD126.2 million and other net current assets and liabilities of USD3.5 million.
41 Net asset value per share on 31 March 2021 is calculated assuming 132,740,730 ordinary shares in issue less 4,156,385 shares held in treasury, the Bank of
England’s daily USD/GBP exchange rate of 1.3796 on 31 March 2021 and the month-end spot price published by UxC LLC on 29 March 2021.
42 As at 31 March 2021, Yellow Cake held 9,856,385 lb of U3O8. Adjustments for purchases completed after 31 March 2021 include the addition of 3,454,231 lb of
U3O8 that Yellow Cake purchased from Kazatomprom for a cash consideration of USD100.0 million (delivered on 21 June 2021), the addition of 343,053 lb of U3O8
which Yellow Cake purchased in the market for a cash consideration of USD10.0 million (completed on 20 May 2021) and the deduction of 348,068 lb of U3O8 which
Yellow Cake sold to Uranium Royalty Corp. for a cash consideration of USD10.0 million (completed on 28 April 2021). Yellow Cake’s estimated net asset value per
share as at 12 July 2021 was calculated assuming 157,740,730 ordinary shares in issue less 4,156,385 shares held in treasury on that date and the Bank of England
USD/GBP exchange rate of 1.3894.
27
Yellow Cake Annual Report 2021
RISK MANAGEMENT
HOW WE MANAGE RISK IN OUR BUSINESS
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 determines the Company’s business strategy and has overall responsibility for risk assessment. 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. The feedback provided by the external auditor regarding issues identified during its
engagement informs the committee’s assessment, particularly feedback relating to any control weaknesses and 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 for completeness and accuracy,
carefully considers the Company’s risk register at regular intervals and receives regular updates from management.
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
Industry Risks
Environmental, Social
and Governance Risks
Financial Risks
1 Counterparty risk
5 Key personnel
7 Regulatory regime
9 Environmental risk
12 Uranium price risk
6 Key service providers
8 Industry
10 Social risk
13 Foreign exchange risk
11 Governance risk
14 Taxation risk
2 Cash flow risk
3 Operating risk
4 COVID-19
28
Yellow Cake Annual Report 2021 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.
High
A force majeure event under the Kazatomprom Framework Agreement, or the Company no longer being
able to make purchases under the 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 risk reduces.
(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). Yellow Cake maintains a watching brief on the credit rating and financial health of Cameco
and Orano.
Medium
(c) There is a risk that the storage facilities could be destroyed.
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.
High
(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.
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
29
Yellow Cake Annual Report 2021 RISK MANAGEMENT CONTINUED
Nature and impact of risk
How we manage the risk
Risk level
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.
30
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.
Medium
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.
During the review and diligence phase of evaluating potential opportunities the Company considers
potential risks and identifies ways to mitigate these potential risks
Low
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.
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.
High
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. As at 31 March 2021, Yellow Cake had sufficient
cash balances to meet approximately 4.5 years of working capital requirements, after taking into account
commitments to purchase USD110.0 million worth of U3O8 after the year end and to sell USD10.0 million
worth of U3O8 after the year end, before it would need to raise additional funds. The Company has no debt
or hedges on its balance sheet. The Company aims to retain three years’ of working capital requirements
following an equity issuance and may therefore apply some of its cash balances which are in excess of three
years’ working capital requirements to the purchase of additional uranium, subject to value.
Yellow Cake Annual Report 2021 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 and other key
personnel. Any change to the Company’s management and service
providers may have a negative impact on its business.
6. Key service providers
The Services Agreement with 308 Services Limited may be
terminated by either party on one year’s notice.
Industry 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.
Uncertainty remains as to whether nuclear power will be
considered a sustainable source of energy under the EU taxonomy
regulation. This may impact the Company’s ability to access certain
categories of capital.
8. Industry
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.
31
The Company believes that its executive team, as well as the Board of Directors 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.
The Company believes that its advisers in 308 Services Limited are dedicated to the long-term growth of
the Company. 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.
Low
Low
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.
High
The Company keeps a watching brief, with the advice of counsel and 308 Services Limited, on changes of
legislation that may impact its business.
The 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.
Yellow Cake Annual Report 2021 RISK MANAGEMENT CONTINUED
Nature and impact of risk
How we manage the risk
Environmental, social and governance risks
9. Environmental
The Company operates in the resources sector, which is under
increasing scrutiny from investors and other stakeholders with
regards to how it manages its environmental responsibilities.
Negative environmental trends in the resources sector could cause
a significant withdrawal of capital and affect the share prices of
listed companies in the sector and their ability to access equity
capital markets.
10. Social
Yellow Cake is exposed indirectly to social risk via its suppliers.
Negative social trends in the resources sector could cause a
significant withdrawal of capital and affect the share prices of
listed companies in the sector and their ability to access equity
capital markets.
32
Risk level
High
Yellow Cake does not carry out exploration, development or mining operations, but is exposed to
environmental risk via its suppliers, particularly through its partnership with Kazatomprom. The Company
has limited influence over the activities of its suppliers but is committed to more responsible mining
practices that mitigate the risk of climate change and damage to the environment. To ensure this, Yellow
Cake regularly monitors its partners’ environmental performance. Specifically, it appraises Kazatomprom’s
record with regard to greenhouse gas emissions, water management, waste and hazardous materials,
radiation and safety, decommissioning of mining sites and land management. Cameco and Orano, as storage
providers to Yellow Cake, are also monitored for environmental compliance and efficient use of resources.
Yellow Cake’s Supplier Standards Policy sets out the Company’s position and expectation of its suppliers
regarding their environmental, social and governance practices. Kazatomprom is listed on the London Stock
Exchange (LSE) and Cameco is listed on the Toronto Stock Exchange (TSX). Listing on these exchanges
require a commitment to good corporate governance and responsible environmental and social practices.
Cameco’s storage facilities are subject to strict licencing requirements by the Canadian Nuclear Safety
Commission regarding the health and safety of the public and the environment.
Yellow Cake regularly monitors its partners’ exposure to social risk by analysing incidents involving injury or
fatality, storage facilities management, and response to COVID-19. Kazatomprom is a significant employer
and tax contributor in Kazakhstan and Yellow Cake monitors its programmes of education and training as
well as employee diversity and inclusion. Yellow Cake assesses Kazatomprom’s human rights compliance
and community relations particularly with regard to its mine closures. Yellow Cake will only continue to
partner with companies with a good track record on social issues.
High
Yellow Cake’s Supplier Standards Policy sets out the Company’s position and expectation of its suppliers
regarding their environmental, social and governance practices. Kazatomprom is listed on the London Stock
Exchange (LSE) and Cameco is listed on the Toronto Stock Exchange (TSX). Listing on these exchanges
require a commitment to good corporate governance and responsible environmental and social practices.
Cameco’s storage facilities are subject to strict licencing requirements by the Canadian Nuclear Safety
Commission regarding the health and safety of the public and the environment.
Yellow Cake Annual Report 2021 Nature and impact of risk
How we manage the risk
11. Governance
Yellow Cake is exposed indirectly to governance risk via
Kazatomprom being based in Kazakhstan, a country which could be
affected by political instability. As Kazatomprom is a State-Owned
Enterprise, a change in the political leadership could negatively
impact its corporate governance record should Kazatomprom’s
management and board become less independent. There is a risk
that political instability could also initiate a challenge to contracts
held between the Company and Kazatomprom.
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.
Financial Risks
12. Uranium price
The uranium price is volatile and affected by factors beyond the
Company’s control.
Risk level
Medium
Kazatomprom is listed on the FCA’s standard list in the UK. It is not required to comply with the UK
Corporate Governance Code, although it is required to comply with relevant provisions of the FCA’s Listing
Rules and the Disclosure and Transparency Rules.
Yellow Cake complies with the UK Corporate Governance Code insofar as appropriate given the Company’s
size, business, stage of development and resources, explains areas of non-compliance in its Annual Report,
and regularly assesses its chief supplier Kazatomprom’s corporate governance practices.
The Company does not have assets in Kazakhstan and any deterioration in governance of Kazatomprom is
only likely to impact on the future of its uranium supply contract. Yellow Cake closely monitors the extent of
political risk and its effect on Kazatomprom’s corporate governance performance.
Yellow Cake’s Supplier Standards Policy sets out the Company’s position and expectation of its suppliers
regarding their environmental, social and governance practices.
Relations with suppliers is overseen by Yellow Cake’s management and board, who are informed by regular
due diligence. The Company has a zero tolerance towards bribery and corruption.
The Company believes that uranium is structurally underpriced, 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.
Medium
A protracted period of weak uranium prices may limit the
Company’s ability to raise capital or fund itself.
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.
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.
33
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 2021 RISK MANAGEMENT CONTINUED
y
t
i
l
i
b
a
b
o
r
P
Very Likely
(5)
Likely
(4)
Possible
(3)
Unlikely
(2)
Rare
(1)
High Risk
10
9
8
4
14
7
Social risk
Environmental risk
Industry risk
COVID-19
Taxation risk
Regulatory regime
1 a Counterparty risk
1 c Counterparty risk
34
Extreme
High
b
12
11
Medium
4
14
8
9
10
3
5
13
1 b 1 d
a
11
1 a
7
6
Low
2
1
c
Very Minor (1)
Minor (2)
Moderate (3)
Major (4)
Catastrophic (5)
Consequence
Low Risk
13
Foreign exchange risk
5
3
6
Key personnel
Operating risk
Key service providers
Medium Risk
12
Governance risk
11 b Governance risk
11 a Counterparty risk
1 b Counterparty risk
1 d Cash flow risk
Cash flow risk
2
Yellow Cake Annual Report 2021 VIABILITY
COVID-19
While the COVID-19 pandemic continues to evolve, Yellow
Cake’s operations were not significantly affected during the
first and second waves of the pandemic as the Company has
no physical operations and the executive team was already
home-based. The business continuity plans implemented
at the Company’s key business partners have to date been
effective in enabling them to continue to provide all key
support services that were provided to the Company prior to
the pandemic outbreak.
As at 31 March 2021, Yellow Cake had sufficient cash
balances to meet approximately 4.5 years of working capital
requirements, after taking into account commitments to
purchase USD110.0 million worth of U3O8 after the year end
and to sell USD10.0 million worth of U3O8 after the year end,
before it would need to raise additional funds.
On 21 June 2021, after year end, the Company issued
25 million new ordinary shares raising net proceeds of
GBP60.6 million (USD equivalent: 84.0 million net of costs
of USD2.9 million). The Company will apply the net proceeds
to the purchase of additional uranium and towards working
capital and general corporate purposes.
The Company has no debt or hedge liabilities on its balance
sheet. The Company aims to retain three years’ of working
capital requirements following an equity issuance and may
therefore apply some of its cash balances which are in excess
of three years’ working capital requirements to the purchase
of additional uranium, subject to value.
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 approximately 3% and reduce the Company’s estimated
working capital balance by less than a month.
35
The global uranium supply has been significantly impacted
by COVID-19 while the impact on global demand for nuclear
energy has been relatively small. Yellow Cake believes that
it is well positioned to benefit from the supply side pressure
that has manifested since the start of the pandemic and the
resulting uranium price increase.
The medium-to long-term impact of the COVID-19 pandemic
on society and the uranium value chain remains uncertain.
Notwithstanding this uncertainty, 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 2024, which the
Directors believe is an appropriate timescale for existing
and potential risks and opportunities to crystalise. Given
the nature of the Company’s operations which are not
significantly income generative, the Company relies on the
proceeds of its regular capital raises to acquire uranium
and also to set aside sufficient cash to meet approximately
three years’ working capital requirements. The Directors
consider that within a three-year time horizon, the Company
can reasonably expect to secure additional working capital
as required through further equity issuances, debt or the
realisation of a portion of its uranium holdings. Detailed
annual budgets are prepared against which performance is
assessed, and the Company regularly reviews its medium-
term working capital projections. Cash balances are retained
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 accretively 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 28 to
33 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 2024.
Yellow Cake Annual Report 2021 BOARD OF DIRECTORS
NON-EXECUTIVE DIRECTORS
The Lord St John of Bletso
Sofia Bianchi
The Hon Alexander Downer
Alan Rule
Alexandra Nethercott Parkes
Independent Non-Executive Director
and Chairman
Age: 63
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, B.SocSc
and B.Proc in South Africa.
36
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Age: 64
Age: 69
Age: 59
Age: 38
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.
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’s in Business
Administration (MBA) from the Wharton
School.
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.
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. Alexandra
Nethercott Parkes resigned from the Board
with effect from 31 March 2021, following
her resignation from Langham Hall Fund
Management.
Yellow Cake Annual Report 2021 EXECUTIVE DIRECTORS
Emily Manning
Independent Non-Executive Director
Age: 32
Emily Manning has more than 12 years of experience in
the Jersey finance industry, with a background in real
estate, funds, corporate and private clients. Emily acts
as a Client Director of Langham Hall Fund Management
(Jersey) Limited and holds directorships with a number
of real estate and private equity-based boards with
a focus on commercial retail, private and residential
development and European industrial logistics. She
previously held directorships for a number of listed and
regulated funds and real estate companies, including
board positions with some of London’s largest real
estate developments, and oversaw capital markets
transactions as part of a portfolio worth over USD13
billion assets under management.
Emily brings to the board comprehensive knowledge
of the running and regulations of Jersey structures
with a strong understanding of internal governance
and company secretarial experience. Emily has been
a Principal Person with the Jersey Financial Services
Commission since 2018 and holds her ICSA Diploma
table 4 qualification.
Emily Manning was appointed to the Yellow Cake Board
effective 31 March 2021 following the resignation of
Alexandra Nethercott-Parkes.
37
Andre Liebenberg
Executive Director and
Chief Executive Officer
Age: 59
Carole Whittall
Executive Director and
Chief Financial Officer
Age: 49
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
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.
BOARD COMPOSITION
2
2
5
5
EXECUTIVE DIRECTORS
NON-EXECUTIVE DIRECTORS
EXECUTIVE DIRECTORS
NON-EXECUTIVE DIRECTORS
BOARD DIVERSITY
3
3
4
4
MALE
MALE
FEMALE
FEMALE
Yellow Cake Annual Report 2021 CORPORATE GOVERNANCE REPORT
In line with Yellow Cake’s commitment to ensuring high standards of corporate governance, with a focus on generating and
protecting value for shareholders, the Company has elected to comply with the principles and provisions of the UK Corporate
Governance Code 2018 (the “Code”) insofar as appropriate given the Company’s size, business, stage of development and
resources.
The directors of a Jersey company have a range of obligations and responsibilities placed upon them under Jersey law, which
arise principally under Jersey customary law, under the Jersey Companies Law and under the Company’s articles of association
(the “Articles”).
As Yellow Cake’s business continues to evolve, the Company will seek to ensure that 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 Code during the year to
31 March 2021. The table below provides references to
where the Company’s application of the Code’s principles can
be found and explains areas of non-compliance, which 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.
Part 1: Board leadership and company purpose
References
The Governance structure section on pages 40 to
42 provides information regarding the members,
structure and activities of the Board.
Part 2: Division of responsibilities
References
The Division of responsibilities section on
page 43 contains information on the division of
responsibilities among the Board.
38
Areas of non-compliance
Provision 5 – Yellow Cake’s workforce comprises its two Executive Directors and it is consequently not considered necessary to establish
formal mechanisms for engagement with the Company’s workforce. Yellow Cake’s Remuneration Committee is responsible for monitoring
the size and nature of the Company’s workforce to determine, among 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. If Yellow Cake’s workforce increased significantly in the future, the Company would favour mandating
one of its Non-Executive Directors with responsibility for representing the interests of the workforce (alongside their other duties).
Areas of non-compliance
Provision 12 – The Board does not consider it necessary or desirable to appoint a Senior Independent Director at this stage, given the scale
and complexity of the Company’s activities. 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 – While the Chairman will hold meetings with the Non-Executive Directors without the Executive Directors present as and
when appropriate and required, it is not currently anticipated that such meetings will take place on a regular basis due to the scale and
complexity of the Company’s current activities.
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.
Yellow Cake Annual Report 2021 Part 3: Composition, succession and evaluation
Areas of non-compliance
Provision 21 – The Directors complete annual self-assessments to appraise the performance of the Board as a whole and feedback from the results
is implemented, where relevant. 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. The Board may also undergo periodic informal
assessment processes. Each of the Audit, Remuneration and Nomination Committees reviews its effectiveness annually, in accordance with their
terms of reference.
Areas of non-compliance
Provision 25 – The Company does not currently have an internal audit function due to the current size and complexity of its activities. 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.
Areas of non-compliance
Provision 33 – The Remuneration Committee does not conduct a separate review of workforce remuneration and related policies and the
alignment of incentives and rewards with culture as Yellow Cake’s workforce currently comprises its two Executive Directors. 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.
References
More information regarding the Board’s
composition, succession and evaluation
are available in the Governance
structure section on pages 40 to 42
as well as in the discussion of the
Nomination Committee on pages 45 and
46.
Part 4: Audit, risk and internal control
References
The role of the Board in this area is
primarily shown in the Report of the
Audit Committee on pages 47 and 48,
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 35.
Part 5: Remuneration
References
Refer to the Company’s remuneration
policy and the Report of the
Remuneration Committee on pages 49
to 58.
39
Yellow Cake Annual Report 2021 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.
Certain authorities have been delegated by the Board to
the Board Committees and to the CEO and CFO, who are
responsible for the day-to-day management of the business.
The Board reserves certain decisions to ensure it retains
proper direction and control of the Company, and monitors
delivery against the Company’s strategy. These include:
• 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). In the year to 31 March 2021, at least half
of the board, excluding the Chairman, was made up of
Independent Non-Executive Directors.
40
Directors
The Lord St John of Bletso (Chairman)
Sofia Bianchi
The Hon Alexander Downer
Emily Manning†
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
Independent Non-Executive Director
Executive Director and CEO
Executive Director and CFO
† Alexandra Nethercott-Parkes resigned from the Board effective 31 March 2021 and Emily Manning was appointed to the Board on the same date.
Further detail on the Board members and their skills and experience can be found on pages 36 and 37.
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 2021, the Board met 14 times.
Meeting attendance
Date of
appointment Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Attendance
percentage
Number of meetings
The Lord St John of Bletso (Chairman)
Sofia Bianchi
The Hon Alexander Downer
Alan Rule
Alexandra Nethercott-Parkes†
Andre Liebenberg (CEO)
Carole Whittall (CFO)
1 June 2018
1 June 2018
1 June 2018
1 June 2018
18 July 2019
1 June 2018
1 June 2018
14
14
14
14
14
14
14
14
4
N/A
4
4
4
4
N/A
N/A
Attendance percentage
100%
100%
5
4
5
5
4
5
N/A
N/A
92%
2
2
2
2
2
2
N/A
N/A
100%
95%
100%
100%
96%
100%
100%
100%
99%
† Alexandra Nethercott-Parkes resigned from the Board effective 31 March 2021.
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 at these meetings.
Yellow Cake Annual Report 2021 Board focus areas in 2020/2021
The primary focus of Board deliberations during the 2021
financial year included:
• Review and approval of the 2020 financial statements
and the decision to not declare a dividend for the year;
• Review and approval to extend and increase the value
of the share buyback programme that commenced in
January 2020 and oversight of the programme to its
conclusion in October 2020;
• Review and approval of the decision to sell 300,000 lb
of U3O8 in June 2020 to fund the expanded share
buyback programme;
• Review and approval of the decision to enter into
location swap agreements in 2020;
• Review and approval of the decision to place 43 million
shares in March 2021 and to apply the proceeds to
acquire 4 million lb of U3O8, exercise the Kazatomprom
option and purchase additional uranium; and
• Approval of the nomination of Emily Manning to the
Board.
Board appointments and succession planning
The Nomination Committee oversees appointments to
the Board and succession planning for both the Board
and senior management, which are based on merit and
objective criteria, including an assessment of the balance of
skills, knowledge, experience and diversity of the Board. In
accordance with the Code, 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.
41
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.
Service agreements for the Non-Executive Directors are
terminable on 90 days’ notice (by either party) and are
available for inspection at the Company’s registered office.
Directors’ development
A comprehensive set of policies and manuals on regulatory
and compliance matters is in place and has been adopted
by the Board. 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. Directors undergo a formal induction process
on appointment. Directors have access to the Company
Secretary 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.
The appointment and removal of the Company Secretary is a
matter for the Board as a whole.
The Directors conduct an annual evaluation process to
appraise the performance of the Board that assesses
areas including the Board’s role and responsibilities,
the appointment process, Board effectiveness, Board
meetings, the Board Chairman and the Company’s ethics.
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
The Board sets the Company’s values, which are available in
the Code of Conduct (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. The Board is mindful of
the need to ensure that Yellow Cake’s values and culture are
maintained as its business evolves and 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 contain provisions governing conflicts of
interest, including a restriction on Directors’ ability to vote
on certain contracts and arrangements in which they are
interested. The Directors’ service agreements require the
Directors to devote sufficient time to fulfil their duties to the
Company.
The Directors hold external directorships and/or are
partners in various partnerships, and the Board is
comfortable that these external positions do not negatively
affect the time they devote to the Company.
REGULATORY MATTERS
The Company’s share-dealing code for Directors and
employees 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 defines 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 Annual Report 2021 CORPORATE GOVERNANCE REPORT CONTINUED
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
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.
The dealing code, dealing policy and disclosure policy were
reviewed and updated during the year, and the updated code
and policies were adopted by the Board in April 2021.
ANTI-MONEY LAUNDERING, ANTI-
BRIBERY AND CORRUPTION POLICY
Yellow Cake is committed to acting professionally, fairly
and with integrity in all business dealings and relationships.
The Company 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. During
the year, the policy was revised, updated and expanded to
include Yellow Cake’s obligations in relation to sanctions and
to explicitly address advantages offered to public officials.
The revised policy was adopted by the Board in April 2021.
DIVERSITY AND INCLUSION
Yellow Cake values diversity and inclusion, and is committed
to promoting equal opportunities in employment.
The Company complies with all relevant anti-discrimination
laws. Employees and job applicants are treated equally
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
42
or sexual orientation. Recruitment and promotion will be
conducted on the basis of merit, against objective criteria
that avoid unfair discrimination.
Yellow Cake’s equal opportunities policy is applied to all
aspects of its operations, including recruitment, pay and
conditions, training, appraisals, promotion, conduct at work,
disciplinary and grievance procedures, and termination of
employment.
RISK MANAGEMENT
A system of prudent and effective controls is in place
to assess and manage risks effectively, and appropriate
measures have been implemented for whistleblowing
and to manage 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 28 to 34 and on page 60.
SHAREHOLDERS AND OTHER
STAKEHOLDERS
The Board values its dialogue with 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.
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). In particular, the Board
considers the following:
•
•
the likely long-term consequences of any decision. As
described in the Viability Statement on page 35, 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. Yellow Cake is committed to
employing a diverse and balanced team to ensure 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, experience, culture, ethnicity and gender
Yellow Cake Annual Report 2021 is evident in our daily operations and formalised in our
policies and procedures. Our recruitment policy is to
appoint individuals based on their skills, experience and
suitability to the role, as well as their contribution to
promoting diversity in the workforce.
the need to foster the Company’s business relationships
with suppliers, customers and others. Our focus on
long-term strategic thinking, and ability to foster 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. Refer to page 17 for more information
on Yellow Cake’s key business relationships.
the impact of the Company’s activities on society 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 nature of the
Company’s activities, its direct social and environmental
impact is minimal. The Board nevertheless 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 18
to 20.
the importance of maintaining the Company’s reputation
for high standards of business conduct. Yellow Cake is
a Jersey-incorporated, Jersey tax domiciled Company
which is quoted 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.
The Board of Directors is committed to behaving in a
responsible manner toward our shareholders and treating
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.
The Company proactively facilitates opportunities for
engagement with its stakeholders, particularly with
shareholders, investors and analysts, by participating in
investor roadshows and conferences, conference calls,
investor briefings with industry experts, media briefings,
interviews, presentations and at the Annual General
Meeting. Day-to-day queries raised by stakeholders are
addressed by either the CEO or the CFO.
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 2020 Annual General Meeting held on 2 September
2020, all resolutions were passed with more than 80%
shareholder approval.
Due to the COVID-19 pandemic, the majority of interactions
with stakeholders took place remotely during the 2021
financial year and shareholders were invited to submit
written questions to the Company for the 2020 Annual
General Meeting.
GENERAL MEETING
On 26 May 2021, the Board gave notice to shareholders of
a General Meeting which was held on 10 June 2021 to seek
shareholder approval to renew its authorities to allot up to
25 million new ordinary shares prior to the Annual General
Meeting in September 2021. Following the upsized share
placing of circa USD140 million in March 2021, Yellow Cake
had almost fully utilised the authorities to allot and issue
new shares obtained at its Annual General Meeting in 2020,
which restricted its ability to issue further new shares on
an opportunistic basis prior to the renewal of the annual
authorities at its 2021 Annual General Meeting.
At the meeting, the requisite shareholder approval was
achieved, ensuring that Yellow Cake would be in a position
to act opportunistically to identify new uranium purchase
opportunities.
ANNUAL GENERAL MEETING
Yellow Cake’s 2021 Annual General Meeting will be held at
10:00 a.m. on 8 September 2021 at the Company’s offices at
3rd Floor Liberation House, Castle Street, St Helier, Jersey,
JE1 2LH. Due to COVID-19, the meeting will be closed to
participation. The notice of the Annual General Meeting will
be 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
•
•
•
43
Yellow Cake Annual Report 2021 CORPORATE GOVERNANCE REPORT CONTINUED
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 is in place and was approved by the
Board.
The Board does not presently consider it necessary
or desirable to appoint a senior independent director,
given the stage of the Company’s development, and the
responsibilities of the senior independent director are
shared between the Non-Executive Directors.
The CEO is responsible for setting corporate strategy and the
direction of the Company, in conjunction with the Board. His
responsibilities include 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.
More information regarding the role and responsibilities
of the Chairman, Board, CEO and CFO is available on our
website at https://www.yellowcakeplc.com/wp-content/
uploads/2019/07/Role-of-Board-Chairman-CEO-and-CFO-.
pdf
44
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. During the year, the terms of reference
were reviewed and updated, and the updated terms of
reference were approved by the Board in April 2021.
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
Emily Manning‡
Alexandra Nethercott-Parkes†
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive
Director
‡ Appointed to the Board on 31 March 2021 and to the Audit Committee on 28
April 2021.
† Resigned from the Board and Audit Committee effective 31 March 2021.
The Audit Committee comprises the Independent Non-
Executive Directors and 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
committee is also mandated to keep under review the
Company’s internal control and risk management systems
and to report to the Board. In line with the recommendations
of the Code, the Board Chairman is not a member of the
Audit Committee.
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. During
the year under review, the committee met four times and
attendance is shown on page 40.
More information on the roles and responsibilities of
the Audit Committee and its activities during the year
to 31 March 2021 is available in the Report of the Audit
Committee on pages 47 and 48.
Yellow Cake Annual Report 2021 REMUNERATION COMMITTEE
NOMINATION COMMITTEE
Remuneration Committee members
Nomination Committee members
The Hon Alexander Downer
(Chairman)
The Lord St John of Bletso
Sofia Bianchi
Emily Manning‡
Alexandra Nethercott-Parkes†
Alan Rule
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive
Director
The Lord St John of Bletso
(Chairman)
The Hon Alexander Downer
Sofia Bianchi
Emily Manning‡
Alexandra Nethercott-Parkes†
Alan Rule
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive
Director
‡ Appointed to the Board on 31 March 2021 and to the Remuneration
‡ Appointed to the Board on 31 March 2021 and to the Nomination Committee
Committee on 28 April 2021.
on 28 April 2021.
† Resigned from the Board and Remuneration Committee effective 31 March 2021.
† Resigned from the Board and Nomination Committee effective 31 March 2021.
The Remuneration Committee’s responsibilities include
setting the remuneration policy for Executive Directors and
for determining the total individual remuneration package
of the Chairman and the executive directors. 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 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.
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 page 49.
The Nomination Committee comprises the Independent
Non-Executive Directors and meets at least twice each year.
During the year under review, the committee met twice and
attendance at these meeting is shown on page 40.
The Nomination Committee 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. 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.
The committee’s terms of reference stipulate that the
chairman of the Nomination Committee will not chair
the committee when dealing with the appointment of
his successor.
It is intended that 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 to ensure, for example,
that an incoming appointee has at least the equivalent skill
set of an outgoing appointee.
The duties of the Nomination Committee include:
• regularly reviewing the structure, size and composition
(including the skills, knowledge, experience and diversity)
of the Board and making recommendations to the Board
with regard to any changes;
• succession planning for Executive and Non-Executive
Directors and in particular for the key roles of Chairman
and Chief Executive;
•
identifying and nominating candidates to fill Board
vacancies for the approval of the Board when these arise;
• reviewing the leadership needs of the Company, both
Executive and Non-Executive; and
• making recommendations to the Board regarding:
− membership of Board Committees in consultation
with the chairpersons of those committees;
− the re-appointment of any Non-Executive Director at
the conclusion of their specified term;
− the re-election by shareholders of any Director
under the re-election provisions of the Code or the
“retirement by rotation” provisions in the Articles; and
45
Yellow Cake Annual Report 2021 CORPORATE GOVERNANCE REPORT CONTINUED
− 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 2020/2021
During the year under review the primary focus areas of the
Nomination Committee included:
• reviewing the leadership needs of the Company;
• reviewing the requirements for annual re-election
of Directors under the Code for the financial year
commencing 1 April 2020; and
• reviewing candidates for appointment to the Board
following the resignation of Alexandra Nethercott-Parkes
and recommending Emily Manning to the Board for
appointment.
The Nomination Committee recommended to the Board
that each of the Directors be submitted for re-election at the
Annual General Meeting on 8 September 2021.
46
Yellow Cake Annual Report 2021 REPORT OF THE AUDIT COMMITTEE
The four Independent Non-Executive Directors that
serve on the Audit Committee all 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. Details of the Directors’
qualifications and experience are available on pages 36
and 37.
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 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 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.
The Audit Committee has access to sufficient resources
to carry out its duties, including access to the Company
Secretary for assistance as required.
The committee’s full terms of reference are available on our
website at www.yellowcakeplc.com/investors/the-board/
board-committees.
Key duties of the Audit Committee include:
• monitoring the integrity of the Company’s financial
reporting;
• reviewing the consistency of, and any changes to,
accounting policies both on a year-on-year basis and
across the Company, and reviewing whether the
Company has followed appropriate accounting standards
and made appropriate estimates and judgements, taking
into account the views of the external auditor;
• reviewing the Company’s internal financial controls and
internal control and risk management systems;
• reviewing the adequacy and security of the Company’s
whistleblowing facilities for employees and contractors,
and ensuring that these facilities allow for investigation
and appropriate follow up action in respect of any reports
made;
• reviewing the Company’s systems, procedures and
controls for detecting fraud, the Company’s bribery
and money laundering systems and controls, and the
adequacy and effectiveness of its compliance function;
• considering annually whether there is a need for an
internal audit function, taking into account the growth of
the Company, the scale, diversity and complexity of the
Company’s activities and the number of employees, as
well as cost and benefit considerations;
• making recommendations to the Board (to be put to
shareholders for approval at the Annual General Meeting)
in relation to the appointment of the external auditor;
• managing and overseeing the relationship with the
external auditor, including their terms of engagement and
remuneration; and
• meeting regularly with the external auditor and reviewing
their findings.
FINANCIAL REPORTING
The Audit Committee reviewed and assessed the Company’s
financial reporting in the 2021 financial 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;
• obtaining independent tax advice;
•
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
pages 72 to 75. 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.
47
Yellow Cake Annual Report 2021 REPORT OF THE AUDIT COMMITTEE CONTINUED
INTERNAL AUDIT
Each year the Audit Committee considers 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 it is currently 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 regarding
the Company’s interactions with its external auditor in
accordance with its terms of reference during the year to
31 March 2021, 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 2021 with the
external auditor;
• reviewing the management representation letter
requested by the external auditor before it was signed by
management and management’s response to the auditor’s
findings and recommendations; and
• reviewing the effectiveness of the audit process.
Given the size and nature 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. The year under review is the Company’s third financial
year and consequently there are no current plans to put the
appointment of its auditor through a formal tender process.
NON-AUDIT SERVICES
A formal policy is in place to govern non-audit services
provided by the external auditor to safeguard independence
and objectivity. In the current year, there were no non-audit
services performed by RSM (2020: USD5,581 and 8%).
WHISTLEBLOWING
Yellow Cake’s whistleblowing policy sets out the Company’s
commitment to conducting its business openly and honestly,
and encourages all staff to report any wrongdoing that
falls short of the Company’s standards. It also commits the
Company to treat all such disclosures in a confidential and
sensitive manner, and outlines the protection and support
available for whistle-blowers. As Yellow Cake’s workforce
comprises two Executive Directors (the CEO and CFO), there
is currently no separate whistleblowing channel in place
as these Directors can raise any concerns directly with the
Audit Committee and Board. No whistleblowing reports
were received by the Audit Committee during the year. The
whistleblowing policy was reviewed and updated during the
year, and adopted by the Board in April 2021.
RISK MANAGEMENT AND INTERNAL
CONTROL
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 60 of this report.
The committee reviews the system of internal controls and
regularly assesses its effectiveness. The feedback provided
by the external auditor regarding issues identified during
its engagement informs the committee’s assessment,
particularly feedback relating to any control weaknesses
and the responses from management to these issues. During
the year the committee reviewed the Company’s risk
management and material controls, including financial,
operational and compliance controls, and concluded that
these were effective and appropriate given the size and
nature of the Company.
2021/2022 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
18 July 2021
48
Yellow Cake Annual Report 2021 DIRECTORS’ REMUNERATION REPORT
Dear Shareholder,
It is with great pleasure that I present the Company’s
Directors’ Remuneration Report for the year ended 31 March
2021.
The Remuneration Committee’s policy is to openly engage
with shareholders to obtain feedback on the existing
remuneration policy and any proposed revisions. In the first
half of the 2021 financial year, the Remuneration Committee
engaged with the Company’s shareholders with regards
to the remuneration policy. Further engagement with the
Company’s largest shareholders took place following the
March 2021 share placing, which resulted in a significant
change to the Company’s shareholder register.
The Company’s remuneration policy outlined on pages 50
to 52 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.
Yellow Cake plc’s workforce comprises only two employees;
its CEO and CFO. The management culture is to focus on
successful outcomes and the Company’s business strategy is
to achieve this by investing in long-term holdings of U308.
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.
The policy comprises three components:
• a base salary;
• an annual bonus to reward achievement of key
performance indicators, in the form of nil-cost or
nominal-cost share options or cash; and
• a long-term incentive in the form of share options based
on the estimated net asset value of the Company at grant
date or the market price, whichever is higher.
The short- and long-term incentives were designed
to reward growth and take account of risks through
equity participation, and to align employee rewards with
shareholder returns. During the year under review, the
long-term incentive plan was amended in accordance
with its rules, such that the exercise price per share for
all outstanding options is now based on the higher of the
estimated net asset value per share on the grant date and the
average market price in the week prior to the grant date. The
committee is of the view that this change more closely aligns
employee rewards with shareholder returns.
The year under review is the second 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 and the annual
bonuses for the year based on the executive performance
measured against a scorecard of performance targets, a
summary of which was included in the 2020 annual report.
In light of the economic circumstances brought about by the
COVID-19 pandemic in 2020, the Remuneration Committee
took the decision to defer half of the bonus option award in
respect of the 2020 financial year (the full award being equal
to 70% of base salary) until after the 2020 Annual General
Meeting. Having regard to the COVID-19 situation, the
Remuneration Committee also decided to reduce the annual
base salaries of the Chief Executive Officer
and the Chief Financial Officer by USD22,000 effective
1 October 2020. Following this reduction, the annualised
base salaries of the Chief Executive Officer and the Chief
Financial Officer were respectively USD193,000 and
USD150,000.
The Remuneration Committee assessed the performance
outcome of the Executive Management during the 2021
financial year and determined to award a cash bonus equal
to 30% of base salary taking into account the company’s
performance and the broader economic environment.
The Remuneration Committee will review the long-term
incentive scheme in the coming year and as a consequence
will not award any long-term incentive options in relation to
the 2022 financial year.
The annual bonus and incentive awards are shown in the
tables on pages 52 to 57.
The Remuneration Committee reviewed the base salaries
of the Executive Directors and proposed to increase
these from the reduced 2021 levels to USD212,300 and
USD165,000 for the Chief Executive Officer and the Chief
Financial Officer respectively for the financial year ending
31 March 2022.
Alexander Downer
Remuneration Committee Chair
18 July 2021
49
Yellow Cake Annual Report 2021 DIRECTORS’ REMUNERATION REPORT CONTINUED
The full terms of the reference for the committee are
available on our website at www.yellowcakeplc.com/
investors/the-board/board-committees.
ANNUAL REPORT ON DIRECTORS’
REMUNERATION
RESPONSIBILITIES OF THE
REMUNERATION COMMITTEE
The Remuneration Committee is responsible for, among
other things, 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 committee comprises five Independent Non-Executive
Directors and meets at least twice a year. During the year
under review, the committee met five times and details of
the committee members and their record of attendance at
meetings during the year are available on page 40.
Key duties of the Remuneration Committee include:
• 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;
The remuneration of Non-Executive Directors is a matter
for the Board or the Shareholders, within the limits set in the
Articles. No Director is involved in any decisions as to their
own remuneration.
ACTIVITIES DURING 2020/2021
During the year to 31 March 2021, the Remuneration
Committee discharged its duties by:
• reviewing and approving the Executive Directors’ annual
bonus performance scorecard for the 2021 financial year;
• engaging with shareholders on concerns relating to
executive compensation;
• reviewing the Company’s remuneration policy and its
effective implementation during the year; and
• recommending and monitoring the level and structure of
• reviewing relevant provisions of the Code.
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 and the Executive Directors;
• ensuring there is an appropriate level of engagement
with the CEO and CFO (currently the Company’s only
employees) to monitor the continued effectiveness of the
Company’s remuneration policy and practice; and
• reviewing the operation of share option schemes and the
granting of such options.
2021/2022 FOCUS AREAS
The main objectives for the Remuneration Committee in the
financial year ended 31 March 2022 will be to:
• review and approve the Executive Director annual bonus
performance scorecard for the 2022 financial year;
• review the short-term and long-term incentive scheme;
and
• maintain an ongoing review of remuneration levels and
structures for Executive Directors, the Chairman and
Non-Executive Directors.
50
This report describes the Company’s remuneration policy
and remuneration outcomes for Executive Directors for the
year ended 31 March 2021.
REMUNERATION COMMITTEE
MEMBERSHIP DURING THE YEAR
The tables on pages 40 and 45 show the members of the
Remuneration Committee and their dates of appointment.
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.
The Remuneration Committee’s terms of reference require
it to ensure that the Company’s remuneration schemes
and practices allow the committee discretion to override
formulaic outcomes. When reviewing the Company’s
remuneration schemes and practices, the Remuneration
Committee considers, inter alia, the underlying financial
performance of the Company, 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.
Yellow Cake Annual Report 2021 The table below describes the components of the Company’s remuneration policy for Executive Directors.
Remuneration element
Salary
Purpose, link to strategy and operation
A base annual salary is essential to attract and retain
key executives. It is reviewed annually based on:
• role, experience and individual performance;
Opportunity and performance metrics
Salaries are benchmarked to the relevant market
median, taking account of the individual’s time
commitments to the Company.
Remuneration Committee discretion
Salaries may be reviewed annually by the committee.
Benefits
Pension
Annual Bonus
• external market practices; and
the general economic environment.
•
Directors are not entitled to any non-cash benefits.
Directors are not entitled to any company pension
contributions.
The annual bonus rewards achievement of annual
key performance indicators (KPIs). Bonus awards
are determined after the relevant year-end based on
the committee’s assessment of achievement against
the KPI targets. Initially, bonus awards will be made
wholly in the form of nil-cost or nominal-cost share
options.
An annual bonus of up to 100% of salary may
be awarded for exceptional performance. The
committee sets annual targets and weightings, and
performance is measured over a single financial year.
The committee may at its discretion award a cash
annual bonus in lieu of shares, having regard the
Company’s cash position.
Long-term Incentive
The long-term incentive aims to align the interests
of management and shareholders, and encourages
retention. Long-term incentives may be granted
annually and currently take the form of market-
priced share options.
The exercise price of the options multiplied by the
number of options granted may not exceed 125% of
salary.
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. The committee will
undertake a review of this annual bonus in
2021/2022.
The committee retains the discretion to give effect
to malus and clawback provisions, and to impose
performance conditions on the vesting of incentive
awards, should it wish to do so. The committee
will undertake a review of this incentive scheme in
2021/2022.
51
Yellow Cake Annual Report 2021 DIRECTORS’ REMUNERATION REPORT CONTINUED
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.
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,
the rules of any incentive plan in which the individual is a
participant and the individual’s obligation to mitigate loss.
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 months’ written notice
from either the individual or the Company.
5252
IMPLEMENTATION OF THE REMUNERATION POLICY IN 2020/2021
The salaries earned for the current year and proposed base salary for the financial year ending 31 March 2022 are shown in
the table below. In view of the socioeconomic challenges precipitated by the COVID-19 pandemic at the start of the financial
year, the CEO and the CFO agreed to a reduction in their annual base salaries from USD215,000 p.a. and USD172,000 p.a.
respectively to USD193,000 p.a. and USD150,000 p.a. respectively, effective 1 October 2020. Effective 1 July 2021, the
annual base salaries of the CEO and the CFO were adjusted upwards from the previously reduced levels to USD212,300 p.a.
and USD165,000 p.a. respectively.
ANNUAL BONUS
The annual bonus is based on commercial targets and is capped at 100% of base salary, subject to performance, as determined
by the Board. The bonus awards take the form of nil-cost or nominal cost options (which normally vest and become exercisable
not earlier than one year after grant) or cash.
Annual bonus awards in respect of the 2020 financial year
During the year under review, the following annual bonus awards were made in respect of the 2020 financial year. The
award proposed and included in the 2020 Annual Report was split into two tranches of 35% of base salary each, both with a
vesting date of 8 July 2021. The grant of the first tranche was made on 8 July 2020 and the second deferred until after the
Company’s Annual General Meeting on 2 September 2020, having regard to the uncertainty created by COVID-19 at the time
of finalisation of the 2020 awards. The performance scorecard for the 2020 annual bonus calculation is described in the 2020
Annual Report.
First Tranche of Grant
Chief Executive Officer
Chief Financial Officer
Total
Award date
8 July 2020
8 July 2020
Face value of
award as a % of
base salary
Number
of options
awarded
35%
35%
27,392
21,913
49,305
Vesting date
8 July 2021
8 July 2021
The grant of the second tranche will be made on 26 July 2021, following the Company’s closed period.
All annual bonus options awarded on 8 July 2020 have an exercise price of 1 pence per share and are exercisable one year after
the date of grant, save in certain circumstances including a change of control of the Company, and will expire 18 months after
the date of grant.
Yellow Cake Annual Report 2021 During the year ended 31 March 2021, the Executive
Directors led the successful completion of a share buyback
programme and the sale of uranium to fund the buyback,
and the implementation of a circa USD140 million
equity raise. As a result of the transactions completed or
committed to during the financial year, the Company’s
uranium holdings have increased by approximately 40%.
The number of shareholders has also increased with
additional high quality institutions and more retail investors
added to the share register. Shareholder engagement
increased significantly with a view to maintaining investor
interest, even while the Company was trading at a discount
to net asset value in 2020, temporarily constraining growth.
The Remuneration Committee considers that these actions
have created significant shareholder value, notably through
the purchase of 4,156,385 shares at a 21% discount to
net asset value in 2020, the successful completion of the
circa USD140 million equity raise and the subsequent
use of these proceeds to purchase a net 4.0 million lb of
U3O8, during the financial year and after year end, at an
average price of USD28.83/lb. Uranium swap transactions
agreed during the financial year generated net proceeds of
USD1 million. Operating costs were effectively managed to
budget. As such, the Remuneration Committee considers
that the Executive Directors have delivered effectively
against the KPIs outlined in the performance scorecard for
the 2021 financial year.
Annual bonus awards in respect of the
2022 financial year
The Remuneration Committee reviewed the annual
bonus performance scorecard for the 2021 financial year.
The annual bonus calculation for the 2022 financial year
will assess:
• 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;
− reporting and budgeting; and
− actions to address any discount to net asset value.
• Reputation, stakeholder engagement and investor
relations, comprising:
− implementation of an effective investor relations
programme;
− engagement with equity and debt providers;
− ongoing management of the ESG framework, policies
and reporting; and
− engagement with suppliers, prospective suppliers
and regulators and other stakeholders and potential
stakeholders as appropriate.
Annual bonus awards in respect of the
2021 financial year
The performance scorecard for the evaluation of the
executive team during the 2021 financial year is summarised
as follows:
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.
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.
Based on the performance scorecard for the 2021 financial
year, the Remuneration Committee has resolved at its
discretion to make the following cash bonus awards,
equivalent to 30% of base salary.
Chief Executive Officer
Chief Financial Officer
53
USD ‘000
58
45
Yellow Cake Annual Report 2021 DIRECTORS’ REMUNERATION REPORT CONTINUED
Long-term incentive awards in respect of the 2021 financial year
The following long-term incentives were awarded on 8 July 2020 in relation to the 2021 financial year, as disclosed in the
Company’s 2020 annual report. Refer to Note 10 to the Financial Statements for more details:
Chief Executive Officer
Chief Financial Officer
Total
Share
options
awarded
78,262
62,609
140,871
Fair value
at grant date
USD’000
26
21
47
Vesting
date
8 July 2023
8 July 2023
The long-term incentive options awarded on 8 July 2020 had an exercise price of GBP2.18 per share (being 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). As a result of the amendment to the long-term incentive plan discussed above, the exercise price of
these options was increased from GBP2.18 per share to GBP2.88 per share (being the estimated net asset value per share of
the Company on 8 July 2020).
The long-term incentive options awarded on 24 February 2020 had an exercise price of GBP1.97 per share (being 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) and are exercisable three years after the date of grant. As a result of the amendment
to the long-term incentive plan discussed above, the exercise price of these options was increased from GBP1.97 per share to
GBP2.13 per share (being the estimated net asset value per share of the Company on 24 February 2020).
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 ten years after the date of grant. They 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 exercise price of the options
multiplied by the number of options granted may not exceed
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 long-term incentive plan was initially structured such
that the exercise price per share was based on the average
share price at the grant date and the awards granted in
February 2020 (for the 2020 financial year) and July 2020
(for the 2021 financial year) were made on this basis. In
December 2020, the Remuneration Committee resolved
to amend the plan in accordance with its rules such that the
exercise price per share of those awards will be the higher of
the market price and the estimated net asset value per share
on the grant date.
The long-term incentive options may be exercised subject
to the condition that the share price as at the exercise date
being greater than the net asset value per share as at the
date of grant and subject to continued employment by
the Company. The Remuneration Committee retains the
discretion to impose additional performance conditions on
the vesting of incentive awards, should it wish to do so.
54
Yellow Cake Annual Report 2021 The long-term incentive options are exercisable three years after the date of grant and must be held for a further two years.
Details of the long-term incentive options held by the Executive Directors at year end are as follows:
Chief Executive Officer
FY2020
FY2021
Total
Chief Financial Officer
FY2020
FY2021
Total
Share options
awarded
Date of
Award
Revised
exercise
price
Value at
award date
USD’000
Vesting
date
24 February 2020
8 July 2020
GBP2.13
GBP2.88
24 February 2020
8 July 2020
GBP2.13
GBP2.88
84,480
78,262
162,742
67,584
62,609
130,193
24 February 2023
8 July 2023
24 February 2023
8 July 2023
35
26
61
28
21
49
55
Yellow Cake Annual Report 2021 DIRECTORS’ REMUNERATION REPORT CONTINUED
Long-term incentive awards in respect of the 2022 financial year
The Remuneration Committee has resolved to review the long-term incentive plan and as a consequence no grant of
long-term incentive options will be made for the time being in respect of the 2022 financial year.
DIRECTORS’ TOTAL COMBINED REMUNERATION FOR THE YEAR ENDED 31 MARCH 2021
Director
Executive Directors
Andre Liebenberg
Carole Whittall
Non-Executive Directors
The Lord St John of Bletso
Sofia Bianchi
Alexander Downer
Alan Rule
Emily Manning
Alexandra Nethercott-Parkes†
Total
Salaries and
Fees
USD ‘000
(A) Annual
Bonus
USD ’000
(B) LTIP
USD ’000
(A)+(B) Total
Variable Pay
USD ’000
Total
USD ’000
204
161
50
40
40
40
Note 1
Note 1
535
60
48
–
–
–
–
–
–
17
14
–
–
–
–
–
–
77
62
–
–
–
–
–
–
108
31
139
281
223
50
40
40
40
Note 1
Note 1
674
The amounts indicated for the annual bonus and LTIP above correspond to the amount recognised in profit and loss for the year ended 31 March 2021. 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.
Note 1: Ms Manning’s and Ms Nethercott-Parkes’ services were 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 2021 is GBP134,975 (USD173,802) (2020: GBP125,608 (USD161,317).
† Ms Nethercott-Parkes resigned from the Yellow Cake Board effective 31 March 2021.
56
Yellow Cake Annual Report 2021
DIRECTORS’ TOTAL COMBINED REMUNERATION FOR THE YEAR ENDED
31 MARCH 2020
Salaries and
Fees
USD ‘000
(A)
Annual Bonus
USD ‘000
(B)
LTIP
USD ‘000
(A)+(B)
Total Variable
Pay
USD ‘000
Total
USD ‘000
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 2021 is shown in the
graph below:
TOTAL SHAREHOLDER RETURN (%)
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
215
172
50
40
40
40
Note 1
Note 1
557
–
–
–
–
–
–
–
–
–
1
1
–
–
–
–
–
–
2
10
5
0
(5)
(10)
(15)
(20)
(25)
(30)
(35)
(40)
1
1
–
–
–
–
–
–
2
216
173
50
40
40
40
Note 1
Note 1
559
Apr 19 May 19
Jun 19 Aug 19
Sep 19 Oct 19 Nov 19 Dec 19
Jan 20
Feb 20 Mar20
FTSE AIM ALL-SHARE INDEX
YELLOW CAKE PLC
The amounts indicated for the annual bonus and LTIP above correspond to the amount recognised in profit and loss for the year ended 31 March 2020.
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.
Note 1: Mr Keating’s and Ms Nethercott-Parkes’ services were 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 was GBP125,608 (USD161,317).
† Mr Keating resigned from the Yellow Cake Board effective 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.
57
Yellow Cake Annual Report 2021
DIRECTORS’ REMUNERATION REPORT CONTINUED
STATEMENT OF DIRECTORS’ SHARE INTERESTS
The number of shares held by each Director in the Company as at 31 March 2021 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
Emily Manning
Alexandra Nethercott-Parkes
Alan Rule
Andre Liebenberg
Carole Whittall
Number of
ordinary shares
% of share capital
(excluding
treasury shares)
26,302
13,186
29,925
–
–
18,837
73,207
11,302
0.02%
0.01%
0.02%
–
–
0.01%
0.06%
0.01%
* The Lord St John of Bletso’s shares are held through African Business Solutions Limited, in which he holds 100% of the Ordinary Shares.
While the Non-Executive Directors hold shares in the Company, the holdings are considered sufficiently small so as not to impinge on their independence.
Alexander Downer
Remuneration Committee Chair
18 July 2021
58
Yellow Cake Annual Report 2021 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 2021. The
financial statements of the Company have been prepared
in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act
2006.
PRINCIPAL ACTIVITIES
Yellow Cake plc was incorporated in Jersey, Channel Islands
on 18 January 2018. The Company 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 68 to 89.
BUSINESS REVIEW AND FUTURE
DEVELOPMENTS
The Strategic Report on pages 4 to 35 provides a review of
the year’s activities, operations, future developments and
key risks.
DIRECTORS
The Directors who held office during the period and
subsequently were as follows:
• The Lord St John of Bletso (Chairman)
• Sofia Bianchi
• The Hon Alexander Downer
59
• Alan Rule
• Alexandra Nethercott-Parkes†
• Andre Liebenberg
• Carole Whittall
• Emily Manning
†
Alexandra Nethercott-Parkes resigned from the Yellow Cake Board and was
replaced by Emily Manning with effect from 31 March 2021.
DIRECTORS’ INTERESTS
The Audit and Remuneration Committee reports are
available on pages 47 and 49 respectively.
Details of the Directors’ interests in the Company’s shares
can be found in the remuneration report on page 58.
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.
DIRECTORS’ INDEMNITIES
The Company maintains appropriate insurance cover in
respect of legal action against its Directors.
DIVIDENDS
The Directors do not recommend an ordinary dividend for
the year.
EVENTS AFTER THE REPORTING DATE
On 3 March 2021, Yellow Cake exercised the Kazatomprom
option to acquire a further 3.5 million lb of U3O8 for
an aggregate cash consideration of USD100.0 million.
The Kazatomprom purchase completed after financial
year end and the Company took delivery of the uranium
on 21 June 2021. Yellow Cake accepted Uranium Royalty
Corp’s option exercise notice to purchase 348,068 lb of
U3O8 from Yellow Cake at USD28.73/lb for an aggregate
cash consideration of USD10.0 million. The sale to
Uranium Royalty Corp completed after financial year
end on 28 April 2021. On 6 May 2021, the Company
committed to purchase 343,053 lb of U3O8 at a price
of USD29.15/lb for an aggregate cash consideration
of USD10.0 million. The transaction completed on
20 May 2021.
On 21 June 2021, the Company issued 25 million new
ordinary shares at a price of GBP2.50 per share, raising net
proceeds of GBP60.6 million (USD equivalent: 84.0 million
net of costs of USD2.9 million). The Company expects to
apply the proceeds to the following transactions:
•
In July 2021, the Company concluded agreements
to purchase a further 550,000 lb of U3O8 in the spot
market at an average price of USD32.35/lb for a total
consideration of USD17.8 million. The Company will take
delivery of this uranium between July and August 2021.
• The Company expects to conclude an agreement with
Kazatomprom to purchase a further 2.0 million lb of
U3O8 at a price of USD32.23/lb for a total consideration
of USD64.5 million for delivery between October and
December 2021, pursuant to Kazatomprom’s offer of
12 June 2021.
FINANCIAL RISK MANAGEMENT
Details of financial risk management are provided in note 3
to the financial statements.
Yellow Cake Annual Report 2021 DIRECTORS’ REPORT CONTINUED
POLITICAL AND CHARITABLE
CONTRIBUTIONS
The Company made no charitable or political contributions
during the year.
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 key elements of the control system in operation are
as follows:
• The Board meets regularly with a formal schedule of
matters reserved to it for decision.
• The Company has an organisational structure and
has put in place operating protocols and procedures
ensuring clear lines of responsibility and appropriate
delegation of authority.
• The Board monitors the Company’s financial
performance against budgets and forecasts.
• The Executive Directors undertake a regular assessment
process, to identify and quantify the risks that face the
Company’s operations and functions, and to assess the
adequacy of the prevention, monitoring and mitigation
practices in place for those risks.
• The Board is responsible for reviewing the risk
assessment and risk management processes for
completeness and accuracy.
• The Board receives regular updates from management
in addition to carefully considering the Company’s risk
register at regular intervals.
• There are no significant issues disclosed in the
report and financial statements for the year ended
31 March 2021 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 2022 financial year.
CORPORATE GOVERNANCE
The corporate governance report on pages 38 to 46 forms
part of this Directors’ report.
GOING CONCERN
COVID-19
The COVID-19 pandemic continues to evolve and the Board
is monitoring the ongoing impact on Yellow Cake’s activities,
the uranium industry and the world economy. The Company’s
operations were not significantly affected during the first and
second waves of the pandemic as the Company has no physical
operations and the executive team was already home-based.
The business continuity plans implemented at the Company’s
key business partners have to date been effective in enabling
them to continue to provide all key support services that were
provided to the Company prior to the pandemic outbreak.
As at 31 March 2021, Yellow Cake had sufficient cash
balances to meet approximately 4.5 years of working capital
requirements, after taking into account commitments to
purchase USD110.0 million worth of U3O8 after the year end
and to sell USD10.0 million worth of U3O8 after the year end,
before it would need to raise additional funds.
On 21 June 2021, after year end, the Company issued
25 million new ordinary shares raising net proceeds of
GBP60.6 million (USD equivalent: 84.0 million net of costs of
USD2.9 million). The Company will apply the net proceeds to
the purchase of additional uranium and towards working capital
and general corporate purposes.
The Company has no debt or hedge liabilities on its balance
sheet. The Company aims to retain three years’ of working
capital requirements following an equity issuance and may
therefore apply some of its cash balances which are in excess
of three years’ working capital requirements to the purchase of
additional uranium, subject to value.
The Directors, having considered the Company’s objectives
and available resources along with its projected income and
expenditure for at least 12 months from the date of approval
of the financial statements, are satisfied that the Company has
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the Directors have adopted
the going concern basis in preparing these financial statements.
60
Yellow Cake Annual Report 2021
PURCHASE OF OWN SHARES
The share buyback programme initiated in January 2020
was concluded in October 2020. Over the course of the
programme, 4,156,385 of the Company’s shares were
repurchased for a total consideration of GBP8.9 million
(USD11.5 million) at a volume weighted average price of
GBP2.13 per share and volume weighted average discount to
net asset value of 21%. The shares repurchased are held in
treasury.
SUBSTANTIAL SHAREHOLDINGS
As at 30 June 2021, Yellow Cake had 157,740,730 in issue of
which 4,156,385 shares were held in treasury.
The Company was aware of the following holdings of 3% or
more in the Company’s issued share capital:
Percentage
of issued
share
capital
excluding
treasury
shares
13.86%
6.18%
4.79%
4.53%
4.33%
4.20%
3.65%
3.64%
Significant shareholders
Number of
Shares
21,293,653
MM Asset Management
9,498,889
Brandes Investment Partners
7,351,086
Kopernik Global Investors
6,957,431
Uranium Royalty Corporation
6,645,541
Interactive Brokers (EO)
6,449,712
Exchange Traded Concepts Trust
Sachem Cove Partners
5,612,950
Goldman Sachs collateral account 5,589,987
Hargreaves Lansdown,
stockbrokers (EO)
5,551,172
61
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.
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Annual
Report and the Financial Statements in accordance with
applicable laws and regulations.
Jersey Company law requires directors to prepare Financial
Statements for each financial year in accordance with any
generally accepted accounting principles. The Directors
have elected to use International Accounting Standards in
conformity with the requirements of the Companies Act
2006. 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
3.61%
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 for safeguarding the assets of the Company
and, accordingly, for taking reasonable steps to further the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Information published on the
website is accessible in many countries, and legislation in
Jersey and the relevant provisions of the AIM Rules for
Companies governing the preparation and dissemination
of financial statements may differ from legislation and the
rules in other jurisdictions. The Directors’ responsibility
also extends to the continued integrity of the financial
statements contained therein.
The Directors have reviewed this Annual Report and have
concluded that, taken as a whole, it is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Company’s position,
performance, business model and strategy.
By order of the Board
Andre Liebenberg
Chief Executive Officer
18 July 2021
Yellow Cake Annual Report 2021 INDEPENDENT AUDITOR’S REPORT
CONCLUSIONS RELATING TO GOING
CONCERN
In auditing the financial statements, we have concluded that
the directors’ use of the going-concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the company’s
ability to continue to adopt the going concern basis of
accounting included audit of three-year forecasts prepared
by management and corroboration of cash balances.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the company’s ability to continue as a
going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
In relation to the entities reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to
the directors’ statement in the financial statements about
whether the directors considered it appropriate to adopt the
going-concern basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this 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 2021 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 significant accounting policies. The
financial reporting framework that has been applied in their
preparation is applicable law and International Accounting
Standards in conformity with the requirements of the
Companies Act 2006.
In our opinion the financial statements:
• give a true and fair view of the state of the company’s
affairs as at 31 March 2021 and of its profit for the year
then ended;
• have been properly prepared in accordance with
International Accounting Standards in conformity with
the requirements of the Companies Act 2006; and
• have been prepared in accordance with the requirements
of the Companies (Jersey) Law 1991.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We
are independent of the company in accordance with the
ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed entities and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for
our opinion.
62
SUMMARY OF OUR AUDIT APPROACH
Key audit matters •
Materiality
• Overall materiality: $6,140,000
Investment in uranium
Scope
(2020: $4,160,000)
• Performance materiality:
$4,600,000 (2020: $3,120,000)
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
judgement, 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 of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Yellow Cake Annual Report 2021 INVESTMENT IN URANIUM
Key audit matter
description
How the matter was
addressed in the audit
The Company’s business model is based on holding investments 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 2021;
• corroborating the purchases and disposals of uranium during the year and consideration of
the accounting treatment applied to these transactions;
• corroboration of the price used to value the investment at 31 March 2021 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:
Overall materiality
Basis for determining
overall materiality
Rationale for benchmark
applied
Performance materiality
Basis for determining
performance materiality
Reporting of misstatements
to the Audit Committee
63
$6,140,000 (2020: $4,160,000)
1.43% (2020: 1.54%) of total assets
The company’s business model is based on long-term holding of investments in uranium, which
represents the majority of total assets. Total assets is therefore considered to be the most
appropriate benchmark.
$4,600,000 (2020: $3,120,000)
75% (2020: 75%) of overall materiality
Misstatements in excess of $307,000 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.
OTHER INFORMATION
The other information comprises the information included
in the annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible
for the other information contained within the annual report.
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.
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 course of 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 this gives rise
to a material misstatement in the financial statements
themselves. 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.
Yellow Cake Annual Report 2021 MATTERS ON WHICH WE ARE REQUIRED
TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of the
company and its environment obtained in the course of the
audit, we have not identified material misstatements in the
Strategic Report or the Directors’ Report.
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
parent 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.
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the directors’
statement in relation to going concern, longer-term viability
and that part of the Corporate Governance Statement
relating to the company’s compliance with the provisions of
the UK Corporate Governance Statement specified for our
review.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent
with the financial statements or our knowledge obtained
during the audit:
• Directors’ statement with regards the appropriateness of
adopting the going-concern basis of accounting and any
material uncertainties identified;
64
• Directors’ explanation as to its assessment of the
company’s prospects, the period this assessment covers
and why this period is appropriate;
• Directors’ statement on fair, balanced and
understandable;
• Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks;
• The section of the annual report that describes the
review of effectiveness of risk management and internal
control systems; and
• The section describing the work of the audit committee.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities
statement set out on page 61, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company’s ability to continue
as a going concern, disclosing, as applicable, matters related
to going concern and using the going-concern basis of
accounting unless the directors either intend to liquidate
the company or to cease operations, or have no realistic
alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE
AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
THE EXTENT TO WHICH THE AUDIT WAS
CONSIDERED CAPABLE OF DETECTING
IRREGULARITIES, INCLUDING FRAUD
Irregularities are instances of non-compliance with laws
and regulations. The objectives of our audit are to obtain
sufficient appropriate audit evidence regarding compliance
with laws and regulations that have a direct effect on the
determination of material amounts and disclosures in the
financial statements, to perform audit procedures to help
identify instances of non-compliance with other laws and
regulations that may have a material effect on the financial
statements, and to respond appropriately to identified
or suspected non-compliance with laws and regulations
identified during the audit.
In relation to fraud, the objectives of our audit are to
identify and assess the risk of material misstatement of
the financial statements due to fraud, to obtain sufficient
appropriate audit evidence regarding the assessed risks
of material misstatement due to fraud through designing
and implementing appropriate responses and to respond
appropriately to fraud or suspected fraud identified during
the audit.
However, it is the primary responsibility of management, with
the oversight of those charged with governance, to ensure
that the entity’s operations are conducted in accordance with
the provisions of laws and regulations and for the prevention
and detection of fraud.
Yellow Cake Annual Report 2021 In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the audit engagement
team:
• obtained an understanding of the nature of the industry and sector, including the legal and regulatory frameworks that the
•
company operates in and how the company is complying with the legal and regulatory frameworks;
inquired of management, and those charged with governance, about their own identification and assessment of the risks of
irregularities, including any known actual, suspected or alleged instances of fraud;
• discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of how
and where the financial statements may be susceptible to fraud.
The most significant laws and regulations were determined as follows:
Legislation/Regulation
International Accounting Standards in
conformity with the requirements of the
Companies Act 2006 and Companies
(Jersey) Law 1991
UK Corporate Governance Code
Tax compliance regulations
Additional audit procedures performed by the audit engagement team included:
Review of the financial statement disclosures and testing to supporting
documentation.
Completion of disclosure checklists to identify areas of non-compliance.
Review of financial statement disclosures against the requirements of the UK
Corporate Governance Code.
Inspection of advice received from external tax advisors and review of their
assessment of the tax implications of activities in different jurisdictions.
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
The areas that we identified as being susceptible to material misstatement due to fraud were:
Risk
Management override of controls
Audit procedures performed by the audit engagement team:
Testing the appropriateness of journal entries and other adjustments;
25 Farringdon Street
London
EC4A 4AB
18 July 2021
Assessing whether the judgements made in making accounting estimates are
indicative of a potential bias; and
Evaluating the business rationale of any significant transactions that are unusual or
outside the normal course of business.
A further description of our responsibilities for the audit of the financial statements is included in appendix 1 of this auditor’s
report. This description, forms part of our auditor’s report.
65
Yellow Cake Annual Report 2021 APPENDIX 1: AUDITOR’S
RESPONSIBILITIES FOR THE AUDIT OF THE
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.
66
• 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
consolidated financial statements. We are responsible for
the direction, supervision and performance of the 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 consolidated 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.
Yellow Cake Annual Report 2021 FINANCIAL STATEMENTS
67
Financial
statements
68 Financial statements
90 Corporate information
Yellow Cake Annual Report 2021 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
Uranium derivative liability
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
As at
31 March 2021
USD’000
As at
31 March 2020
USD’000
Notes
4
5
6
7
8
7
9
9
10
11
302,098
302,098
119
126,159
126,278
428,376
–
–
(3,621)
(3,361)
(6,982)
(6,982)
421,394
1,785
358,812
141
(11,458)
72,114
421,394
263,489
263,489
89
6,481
6,570
270,059
(2,587)
(2,587)
(392)
–
(392)
(2,979)
267,080
1,164
224,437
2
(726)
42,203
267,080
The financial statements of Yellow Cake plc and the related notes were approved by the Directors on 18 July 2021 and are signed on its behalf by:
Andre Liebenberg
Chief Executive Officer
68
Yellow Cake Annual Report 2021 STATEMENT OF COMPREHENSIVE INCOME
Uranium related profit
Fair value movement of investment in uranium
Uranium swap income
Premium to spot price on disposal of uranium
Fair value movement of uranium derivative liability
Total uranium related profit
Expenses
Share-based payments
Equity offering expenses
Commission on uranium transactions
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
Profit and total comprehensive income for the year after tax attributable to the equity owners of the Company
Basic earnings per share attributable to the equity owners of the Company (USD)
Diluted earnings per share attributable to the equity owners of the Company (USD)
69
1 April 2020
to
31 March 2021
USD’000
1 April 2019
to
31 March 2020
USD’000
Notes
4
4
4
7
10
9
12
12
13
14
16
16
33,365
1,145
180
(774)
33,916
(139)
(681)
(282)
(1,124)
(1,739)
(3,965)
3
(43)
29,911
–
29,911
0.34
0.33
15,714
–
–
212
15,926
(2)
(547)
(152)
(1,017)
(1,756)
(3,474)
104
(47)
12,509
–
12,509
0.14
0.14
Yellow Cake Annual Report 2021 STATEMENT OF CHANGE IN EQUITY
Attributable to the equity owners of the company
Notes
Share capital
USD’000
Share premium
USD’000
Share based
payment reserve
USD’000
Treasury shares
USD’000
As at 31 March 2019
1,007
192,248
Total comprehensive income after tax
for the year
Transactions with owners:
Shares issued
Share issue costs
Share incentive options
Purchase of own shares
As at 31 March 2020
Total comprehensive income after tax
for the year
Transactions with owners:
Shares issued
Share issue costs
Share incentive options
Purchase of own shares
As at 31 March 2021
9
9
10
11
9
9
10
11
–
157
–
–
–
–
33,608
(1,419)
–
–
1,164
224,437
–
621
–
–
–
1,785
–
137,879
(3,504)
–
–
358,812
–
–
–
–
2
–
2
–
–
–
139
–
141
70
Retained
earnings
USD’000
29,694
Total
equity
USD’000
222,949
12,509
12,509
–
–
–
–
33,765
(1,419)
2
(726)
42,203
267,080
–
–
–
–
–
(726)
(726)
–
29,911
29,911
–
-
–
(10,732)
(11,458)
–
–
–
–
72,114
138,500
(3,504)
139
(10,732)
421,394
Yellow Cake Annual Report 2021 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
Premium to spot price on disposal of uranium
Share based payments
Loss/(gain) on foreign exchange
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 generated from/(used in) operating activities
Interest received
Cash generated from/(used in) operating activities
Cash flows from investing activities
Purchase of uranium
Proceeds of sale 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 increase/(decrease) in cash and cash equivalents during the year
Cash and cash equivalents at the beginning of the year
Effect of exchange rate changes
Cash and cash equivalents at the end of the year
71
1 April 2020
to
31 March 2021
USD’000
1 April 2019
to
31 March 2020
USD’000
Notes
4
7
4
10
4
4
9
9
11
29,911
(33,365)
774
(180)
139
43
(3)
(2,681)
(29)
3,216
506
3
509
(15,025)
9,960
(5,065)
138,500
(3,504)
(10,732)
124,264
119,708
6,481
(30)
126,159
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
Yellow Cake Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2021
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
These audited financial statements of the Company for the year 1 April 2020 to 31 March 2021 have been prepared in accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006.
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.
The principal accounting policies adopted are set out below.
Going concern
The Directors, having considered the Company’s objectives and available resources along with its projected income and expenditure for at least twelve 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.
The COVID-19 pandemic has had a material impact on the general economy and a number of the Company’s counterparties. The Company’s operations however continue to remain
unaffected by COVID-19, given that it has no physical operations and the executive team is already home-based. The Company’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.
After taking into account the Company’s post year end commitments to purchase USD109,999,982 of U3O8 and to sell USD10,000,000 of U3O8, the Company considered that as at
31 March 2021 it had sufficient cash balances to meet approximately 4.5 years of working capital requirements before it would need to raise additional funds. The Company has no
debt or hedge liabilities on its balance sheet.
On 21 June 2021, after year end, the Company issued 25 million new ordinary shares raising net proceeds of GBP60.6 million (USD equivalent: 84.0 million net of costs of USD2.9 million.
The Company will apply the net proceeds to the purchase of additional uranium and towards working capital and general corporate purposes.
The Company aims to retain three years’ of working capital requirements following an equity issuance and may therefore apply some of its cash balances which are in excess of three
years’ working capital requirements to the purchase of additional uranium, subject to value.
72
Yellow Cake Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2021
Sale of uranium and uranium swaps
The income in respect of disposals of uranium is recognised at the point when the significant risks and rewards of ownership and legal title have been transferred to the buyer. At the point
of disposal the carrying value of the uranium, being the spot price, is derecognised from the balance sheet.
The gain or loss on disposal of uranium is calculated as the difference between the sale price and the carrying value, being the spot price, at the point of sale. This gain or loss is
reflected as a premium or discount to the spot price on a separate line in the statement of comprehensive income during the period in which the disposal occurs.
The Company has entered into certain uranium location swap agreements under which it has agreed to exchange, by way of book transfer, an equal quantity of uranium between specified
storage facilities. In certain instances, the location swap is temporary and the uranium will be swapped back to the original location at the end of an agreed term. Where the swap is
temporary and for a fixed term, the income which the Company is entitled to receive in consideration for the swap is recognised over the term of the swap, in line with the substance of the
transaction and delivery of the related performance obligations.
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, which is the date that the legal title to the uranium passes.
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 that 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.
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.
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.
73
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 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.
Financial assets
The Company’s financial assets comprise trade and other 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 derivative financial liability in the scope of IFRS 9. This financial 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 a 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 is 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.
74
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 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 derivative financial liability. These assumptions are set out in note 7 and the carrying value of the derivative
financial liability is USD3,361,000 as at 31 March 2021 (31 March 2020: USD2,587,000).
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 2020:
USD nil).
75
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 3. MANAGEMENT OF FINANCIAL RISKS
Financial risk factors
The Company’s financial assets and liabilities comprise of cash, derivatives, receivables and payables that arise directly from its operations. The accounting policies in note 2 include criteria
for the recognition and the basis of measurement applied for financial assets and liabilities. Note 2 also includes the basis on which income and expenses arising from financial assets and
liabilities are recognised and measured.
The Company’s assets and liabilities have been primarily categorised as assets and liabilities at amortised cost, with the exception of the investment in uranium and derivative financial
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 the year end, the profit after tax would decrease by USD15,104,910. Likewise, if the value rose by 5% the profit after tax would have
increased by USD15,104,910.
Economic Risk
The COVID-19 pandemic is an ongoing situation and will continue to have a significant impact on the global economy and many businesses across the world. The Company’s operations
however continue to remain unaffected by COVID-19, given that it has no physical operations and the executive team is already home-based. The Company’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.
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 USD126,159,065 (31 March 2020: USD6,480,946).
76
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 As at 31 March 2021
Cash and cash equivalents
Other creditors and accruals
As at 31 March 2020
Cash and cash equivalents
Other creditors and accruals
Fair value estimation
Carrying amount
USD’000
126,159
(3,621)
< 1 year
USD’000
126,159
(3,621)
1 to 2 years
USD’000
2 to 10 years
USD’000
–
–
–
–
USD’000
USD’000
USD’000
USD’000
6,481
(392)
6,481
(392)
–
–
–
–
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:
1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
2 – 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
3 – 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. The following table analyses within the fair value hierarchy the Company’s financial assets and liabilities (by class) measured at fair value.
Assets and liabilities
As at 31 March 2021
Investment in uranium
Uranium derivative liability
As at 31 March 2020
Investment in uranium
Uranium derivative liability
77
Level 1
USD’000
302,098
–
263,489
–
Level 2
USD’000
–
(3,361)
–
(2,587)
Level 3
USD’000
–
–
–
–
Total
USD’000
302,098
(3,361)
263,489
(2,587)
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 4.
INVESTMENT IN URANIUM
As at 31 March 2019
Purchase of U3O8
Change in fair value
As at 31 March 2020
Purchase of U3O8
Change in fair value
Sale of U3O8
As at 31 March 2021
Fair Value
USD’000
217,366
30,409
15,714
263,489
15,024
33,365
(9,780)
302,098
The value of the Company’s investment in U3O8 is based on the month end spot price for U3O8 of USD30.65/lb as published by UxC LLC on 29 March 2021 (2020: USD27.40/lb as
published by UxC LLC on 30 March 2020).
Purchase of uranium
The Company has purchased a total of 10,156,385 lb of U3O8 at an average price of USD22.01/lb. The total cash consideration for the purchases was USD223,588,600 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 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.
• On 23 March 2021, the Company purchased 440,000 lb of U3O8 for a cash consideration of USD12,029,600.
• On 30 March 2021, the Company purchased a further 100,000 lb of U3O8 for a cash consideration of USD2,995,000.
Post year-end purchases of uranium
On 3 March 2021, the Company committed to purchase a further 3,454,231 lb of U3O8 from Kazatomprom under the Framework Agreement for a cash consideration of
USD99,999,987. The Company took delivery of the uranium on 21 June 2021, at which point legal title passed to the Company.
On 20 May 2021, the Company completed the purchase of and took title to 343,053 lb of U3O8 in the market at a price of USD29.15/lb for total consideration of USD9,999,995.
78
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 In July 2021, the Company concluded agreements to purchase a further 550,000 lb of U3O8 in the spot market at an average price of USD32.35/lb for a total consideration of
USD17.8 million. The Company will take delivery of this uranium between July and August 2021.
The Company expects to conclude an agreement with Kazatomprom to purchase a further 2.0 million lb of U3O8 at a price of USD32.23/lb for a total consideration of USD64.5 million
for delivery between October and December 2021, pursuant to Kazatomprom’s offer of 12 June 2021.
Location swaps
Since May 2018, Yellow Cake has held an account with Cameco Corporation (“Cameco”) for the storage of uranium owned by the Company at Cameco’s facilities at Blind River and
Port Hope, Ontario in Canada.
On 15 November 2019, the Company entered into an agreement with Orano Cycle (“Orano”) to open a holding account for the storage of uranium owned by the Company at Orano’s
conversion facility at the Malvési and Tricastin sites in France.
During the year, the Company entered into the following location swap transactions:
1) On 3 April 2020, a location swap agreement was entered into to exchange 100,000 lb of U3O8, earning an exchange fee of USD20,000. On 20 April 2020, the Company transferred
100,000 lb of U3O8 from the Cameco facility to the Orano facility in satisfaction of its obligations under this location swap agreement.
2) On 24 July 2020, a series of location swap agreements were entered into to exchange 500,000 lb of U3O8 located at Cameco’s storage facility in Canada for an equal volume of
U3O8 located at Orano’s storage facility in France for a period of six months to 29 January 2021. At the end of the term, the U3O8 was to be swapped back to its original location.
In consideration, Yellow Cake received proceeds of USD1.0 million, net of costs and commissions (gross proceeds of USD1,125,000). On 2 October 2020, the Company agreed to
defer the date of the reverse location swap date by four months. This location swap was reversed in May 2021 when the Company again received the same volume of uranium in
Canada in exchange for uranium held in France. In consideration for the extension of the reverse swap transaction, the Company received an additional fee of USD90,000 net of
costs and commissions upon completion of the reverse swap transaction.
Sale of uranium
On 26 June 2020, the Company sold 200,000 lb of U3O8 to Cameco at a price of USD33.20/lb for a total cash consideration of USD6,640,000.
On 29 June 2020, the company sold a further 100,000 lb of U3O8 to Cameco at a price of USD33.20/lb for a total cash consideration of USD3,320,000.
In respect of the above two disposals, a premium of USD0.60/lb to the prevailing June 2020 month-end spot price of USD32.60/lb (as published by UxC, LLC), or USD180,000, has been
recognised in the statement of comprehensive income. This premium represents the cumulative disposal proceeds of USD9,960,000 less the carrying value at the respective dates of
disposal of USD9,780,000, being the premium on spot price (and therefore carrying value) that was realised on disposal.
For illustrative purposes, this sale of uranium resulted in an effective “realised gain” of USD3,657,000 since the U3O8 was originally purchased, being the sales proceeds USD9,960,000 less
the “acquisition cost” of USD6,303,000, where the “acquisition cost” is estimated by applying a “first in first out” methodology to the cost of all uranium purchases made by the Company to
the date of sale.
Post year-end sale of uranium
On 30 March 2021, the Company accepted Uranium Royalty Corp’s option exercise notice to purchase 348,068 lb of U3O8 from the Company at a price of USD28.73/lb for a total
consideration of USD10,000,000. The transaction completed on 28 April 2021.
79
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 The following table provides an analysis of the Company’s investment in U3O8 at 31 March 2021:
Location
Canada
France
Total
Post year end uranium related transactions
Location
As at 31 March 2021
URC sale transaction
Spot market purchase transaction
Kazatomprom purchase transaction
Total
The above transactions do not include purchase commitments by the Company which have not yet completed.
5. TRADE AND OTHER RECEIVABLES
Other receivables
80
Quantity
lb
9,256,385
600,000
9,856,385
Quantity
lb
9,856,385
(348,068)
343,053
3,454,231
13,305,601
Fair Value
USD’000
283,708
18,390
302,098
Fair Value
USD’000
302,098
(10,000)
10,000
100,000
402,098
As at
31 March 2021
USD’000
As at
31 March 2020
USD’000
119
119
89
89
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 6. CASH AND CASH EQUIVALENTS
Cash and cash equivalents as at 31 March 2021 were held with Citi Bank Europe plc in a variable interest account with full access. Balances at the end of the period were USD125,685,604
and GBP337,918, a total of USD126,159,065 equivalent (31 March 2020: USD6,480,061 and GBP714, a total of USD6,480,964 equivalent).
7. URANIUM DERIVATIVE LIABILITY
As part of the Initial Purchase mentioned in note 4 above, the purchase price was 2.5% below the spot price, resulting in the Company receiving a discount of USD4,250,000.
In exchange for this discount, the Company provided to Kazatomprom an option to repurchase up to 25% of the Initial Purchase volume of 8,091,385 lb of U3O8 at the prevailing
uranium spot price less an aggregate discount of USD6,525,000 (the “Repurchase Option”). The Repurchase Option can be exercised from 4 July 2021 (being three years from the
date at which the Company took delivery of the Initial Purchase inventory) if the U3O8 spot price exceeds USD37.50/lb for a period of 14 consecutive days. The option expires 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 USD3,361,000 as at 31 March 2021 (31 March 2020: USD2,587,000) based on the exercised Repurchase Option.
A valuation date spot price of USD30.65 per lb and volatility of 20.0% were used to simulate spot price as at 4 July 2021 (date at which the option may first be exercised). After which
monthly volatility of 6.0% was used to simulate monthly prices to 30 June 2027. The derivative financial liability is classified within level 2 of the fair value hierarchy as at 31 March 2021.
8. TRADE AND OTHER PAYABLES
Uranium purchase consideration
Other creditors and accruals
81
As at
31 March 2021
USD’000
As at
31 March 2020
USD’000
2,995
626
3,621
–
392
392
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 9. SHARE CAPITAL
Authorised:
10,000,000,000 ordinary shares of GBP0.01
Issued and fully paid:
Ordinary shares
Share capital as at 31 March 2019
Issued 12 April 2019
Share capital as at 31 March 2020
Issued 2 March 2021
Share capital as at 31 March 2021
Share premium
Share premium as at 31 March 2019
Proceeds of issue of shares
Share issue costs
Share premium as at 31 March 2020
Proceeds of issue of shares
Share issue costs
Share premium as at 31 March 2021
Number
GBP’000
USD’000
76,176,630
12,039,086
88,215,716
44,525,014
762
120
882
445
132,740,730
1,327
GBP’000
145,384
25,764
(1,192)
169,956
98,846
(2,512)
266,290
1,007
157
1,164
621
1,785
USD’000
192,248
33,608
(1,419)
224,437
137,879
(3,504)
358,812
The Company has one class of shares which carry no right to fixed income.
On 2 March 2021, the Company issued a total of 43,001,944 new ordinary shares to existing and new institutional investors and 1,523,070 new ordinary shares to retail investors, at
a price of GBP2.23 per share. The Company incurred listing expenses, comprising of commissions and professional adviser fees totalling USD4,185,705 of which USD3,504,355 have
been taken to the share premium account. Additional placing costs of USD681,350 have been recognised in the statement of comprehensive income. Net proceeds from the placing were
GBP96,289,989 (USD equivalent: 134,313,908).
82
Yellow Cake Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 10. SHARE-BASED PAYMENTS
The Company implemented an equity-settled share-based compensation plan in 2019 which provides for the award of long-term incentives and an annual bonus to management personnel.
Annual bonus
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 annual bonus awards are in
the form of nominal-cost options, which will vest and become exercisable no earlier than one year after grant or in cash.
The 2020 annual bonus award, based on performance criteria, was based on commercial targets and was reduced from the maximum award of 100% of base salary to 70%. This was
primarily due to the uncertainties that prevailed in mid-2020, arising from the COVID-19 pandemic and the resulting impact on the global economy.
The 2020 annual bonus award was split into two tranches of 35% of base salary each, both with a vesting date of 8 July 2021, with the first award made on 8 July 2020 and the second
deferred until after the Company’s Annual General Meeting on 2 September 2020, having regard to the uncertainty created by COVID-19 at the time of finalisation of the 2020 awards.
The grant of the second tranche will be made on 26 July 2021.
Set out below is the summary of the first tranche of the annual bonus awards as granted to directors granted on 8 July 2020 in relation to the year ended 31 March 2020:
Director
Grant date
Exercise date
Exercise price
Opening balance Granted/Exercised
Expired/
forfeited/other
Closing balance
A Liebenberg
C Whittall
Total
08/07/2020
08/07/2020
08/07/2021
08/07/2021
GBP0.01
GBP0.01
–
–
–
27,392
21,913
49,305
–
–
–
27,392
21,913
49,305
A Black-Scholes option pricing model was used to determine the fair value the bonus awards. 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*
08/07/2020
08/07/2021
GBP2.26
GBP0.01
30%
(0.01%)
GBP110,690
USD152,708
* The USD equivalent is derived using the FX rate as at the date of reporting.
No annual bonus in the form of share based payments was awarded in relation to the year ended 31 March 2021.
83
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 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 has been determined to be the net asset value
per share 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 sufficient shares may be
sold on exercise in order to meet tax liabilities arising at vesting). The face value (exercise price of the options multiplied by the number of options granted) 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 exercise of each of the long-term incentive options is conditional upon the share price as at the exercise date being equal to or greater than the net
asset value per share of the Company as at the date of grant.
Set out below is the summary of the long-term incentive options awarded on 24 February 2020 in relation to the year ended 31 March 2020 and on 8 July 2020 in relation to the 2021
financial year:
Director
A Liebenberg
C Whittall
Total (no. options)
Grant date
Exercise date
Exercise price
Opening balance Granted/Exercised
24/02/2020
24/02/2020
24/02/2023
24/02/2023
GBP2.13
GBP2.13
84,480
67,584
152,064
–
–
–
Total fair value as at the grant date*
* The USD equivalent is derived using the FX rate as at the date of reporting.
Expired/
forfeited/other
Closing balance
–
–
–
84,480
67,584
152,064
USD63,565
Grant date
Exercise date
Exercise price
Opening balance Granted/Exercised
Expired/
forfeited/other
Closing balance
Director
A Liebenberg
C Whittall
Total (no. options)
Total fair value as at the grant date*
* The USD equivalent is derived using the FX rate as at the date of reporting.
08/07/2020
08/07/2020
08/07/2023
08/07/2023
GBP2.88
GBP2.88
–
–
–
78,262
62,609
140,871
–
–
–
78,262
62,609
140,871
USD46,837
Subsequent to the grant of the 2020 and 2021 long term incentive awards, the plan was amended such that the exercise price per share represents the estimated net asset value per
share on the grant date.
84
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 This has resulted in the exercise price of the options granted on 24 February 2020 being increased from GBP1.97 per share (being 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) to GBP2.13 per share (being the estimated net asset value per
share of the Company on 24 February 2020). The exercise price of the long-term incentive options granted on 8 July 2020 has also been increased from GBP2.18 per share (being 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) to GBP2.88 per
share (being the estimated net asset value per share of the Company on 8 July 2020).
The exercise price for the long-term incentive options granted on 24 February 2020 was amended after the grant date such that the fair value of these options was reduced, as measured
immediately before and after this modification. In accordance with IFRS 2, this reduction in fair value is not taken into account and the Company will continue to measure the amount
recognised for services received as consideration for the incentive options, based on the grant date fair value.
A Black-Scholes option pricing model was used to determine the fair value of 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
24/02/2020
08/07/2020
24/02/2023
08/07/2023
Share price
at grant date
GBP1.95
GBP2.26
Exercise price
GBP1.97
GBP2.88
Expected
volatility
Risk-free
interest rate
25%
30%
0.40%
(0.08%)
Fair value
at grant date
GBP
GBP46,075
GBP33,950
Fair value
at grant date
USD
USD63,565
USD46,837
The Remuneration Committee resolved to review the long-term incentive plan and as a consequence no grant of long-term incentive options will be made for the time being in respect
of the 2022 financial year.
85
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 11. TREASURY SHARES
Treasury shares as at 31 March 2019
Purchased in the year
Treasury shares as 31 March 2020
Purchased in the year
Treasury shares as at 31 March 2021
Number
GBP’000
USD’000
–
309,788
309,788
3,846,597
4,156,385
–
565
565
8,301
8,866
–
726
726
10,732
11,458
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.
On 30 April 2020, the Company extended the Programme to the earlier of 21 July 2020 or the date on which USD2 million had been incurred in the purchase of the Company’s shares.
On 8 July 2020, the Company announced an enlargement of the Programme to purchase an additional number of shares for an aggregate consideration of up to USD10 million over three
months, given that the Company’s shares continued to trade at a significant discount to net asset value. The duration of the Programme was subsequently extended to 30 October 2020
and completed on that date.
The share buyback programme concluded on 31 October 2020, with a total of 4,156,385 shares acquired at an average price of GBP2.13 per share, for a total cost of USD11.5 million
(GBP8.8 million) and a weighted average discount to net asset value of 21%. All the shares repurchased are held in treasury.
86
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 12. COMMISSIONS, PROCUREMENT AND CONSULTANCY FEES
308 Services Limited (“308 Services”) provides procurement services to the Company relating to the sourcing of U3O8 and other uranium transactions and in securing competitively priced
converter storage services.
In terms of the agreement entered into between the Company and 308 Services on 30 May 2018, 308 Services is entitled to receive (i) a Holding Fee comprised of a Fixed Fee of
USD275,000 per calendar year plus a Variable Fee equal to 0.275% per annum of the amount by which the value of the Company’s holdings of U3O8 exceeds USD100 million and
(ii) an Annual Storage Incentive Fee equal to 33% of the difference between the amount obtained by multiplying the Target Storage Cost (initially set at USD0.12/lb per year) by the
volume of U3O8 (in pounds) owned by the Company on 31 December of each respective year and the total converter storage fees paid by the Company in the preceding calendar year.
The Company considers Holding Fees and Storage Incentive Fees to be costs of an ongoing nature. During the period the Company paid Holding Fees and Storage Incentive Fees of
USD1,123,870 (31 March 2020: USD1,017,413) to 308 Services.
308 Services is also entitled to receive commissions equivalent to 0.5% of the transaction value in respect of uranium sale and purchase transactions completed at the request of the Yellow
Cake Board.
In addition, if the purchase price paid by the Company in respect of such a purchase transaction is in the lowest quartile of the range of reported uranium spot prices in the calendar
year in which the transaction completed, 308 Services is entitled to receive, at the beginning of the following calendar year, an additional commission of 0.5% of the value of the
uranium transacted. If the purchase price paid by the Company in respect of such a purchase transaction is in the second lowest quartile of the range of reported uranium spot prices
in the calendar year in which the transaction completed, 308 Services is entitled to receive, at the beginning of the following calendar year, an additional commission of 0.25% of
the value of the uranium transacted. If the purchase price is in the top half of the range for the calendar year in which the transaction completed, no additional commission will be
payable to 308 Services. Therefore, the Company has elected to include a provisional commission of USD75,123 within these financial statements in respect of the uranium purchase
transactions completed by the Company in March 2021 equal to 0.5% of the value transacted.
During the period, commissions and provisional commissions payable to 308 Services totalled USD282,296 (31 March 2020: USD152,045).
13. OTHER OPERATING EXPENSES
Professional fees
Management Salaries and Directors’ fees
Other expenses
Auditor’s fees
87
1 April 2020
to
31 March 2021
USD’000
1 April 2019
to
31 March 2020
USD’000
687
535
443
74
1,739
682
557
470
47
1,756
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021
14. TAXATION
Tax expense for the year
1 April 2020
to
31 March 2021
USD’000
1 April 2019
to
31 March 2020
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.
15. RELATED PARTY TRANSACTIONS
During the year, the Company incurred USD173,802 (31 March 2020: USD161,317) of administration fees payable to Langham Hall Fund Management (Jersey) Limited (“Langham Hall”).
Alexandra Nethercott-Parkes was an employee of Langham Hall and served as a Non-Executive Director of the Company from 18 July 2019 up to the date of her resignation on 31 March
2021, for which she has received no Directors’ fees. Emily Manning is an employee of Langham Hall and has served as a Non-Executive Director of the Company since 31 March 2021,
for which she has received no Directors’ fees. As at 31 March 2021 there were no amounts due to Langham Hall (31 March 2020: 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.
The following Directors own ordinary shares in the Company:
Name
The Lord St John of Bletso*
Sofia Bianchi
The Hon Alexander Downer
Emily Manning
Alexandra Nethercott-Parkes
Alan Rule
Andre Liebenberg
Carole Whittall
Total
Number of
ordinary shares
% of share capital as
at 31 March 2021
26,302
13,186
29,925
–
–
18,837
73,207
11,302
172,759
0.02%
0.01%
0.02%
0.00%
0.00%
0.01%
0.06%
0.01%
0.13%
* 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.
88
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 16. EARNINGS PER SHARE
Profit for the year (USD’000)
Weighted average number of shares during the year – Basic*
Weighted average number of shares during the year – Diluted*
Earnings per share attributable to the equity owners of the Company (USD):
Basic
Diluted
* The weighted average number of shares excludes treasury shares.
17. EVENTS AFTER THE REPORTING DATE
1 April 2020
to
31 March 2021
1 April 2019
to
31 March 2020
29,911
89,017,413
89,308,071
12,509
87,823,408
87,837,764
0.34
0.33
0.14
0.14
On 3 March 2021, the Company gave notice to Kazatomprom to exercise its option to purchase 3,454,231 lb of U3O8 at a price of USD28.95/lb for a total cash consideration of
USD99,999,987. The Company took delivery of the uranium on 21 June 2021, at which point legal title passed to the Company.
On 30 March 2021, the Company accepted Uranium Royalty Corp’s option exercise notice to purchase 348,068 lb of U3O8 from the Company at a price of USD28.73/lb for a total
consideration of USD10,000,000. The transaction completed on 28 April 2021, when legal title passed to the company.
On 6 May 2021, the Company committed to purchase 343,053 lb of U3O8 at a price of USD29.15/lb for a total cash consideration of USD9,999,995. The transaction completed on
20 May 2021, when legal title passed to the company.
On 21 June 2021, the Company issued 25 million new ordinary shares at a price of GBP2.50 per share, raising net proceeds of GBP60.6 million (USD equivalent: 84.0 million net of costs of
USD2.9 million). The Company intends to apply the proceeds to the following transactions:
• In July 2021, the Company concluded agreements to purchase a further 550,000 lb of U3O8 in the spot market at an average price of USD32.35/lb for a total consideration of
USD17.8 million. The Company will take delivery of this uranium between July and August 2021.
• The Company expects to conclude an agreement with Kazatomprom to purchase a further 2.0 million lb of U3O8 at a price of USD32.23/lb for a total consideration of
USD64.5 million for delivery between October and December 2021, pursuant to Kazatomprom’s offer of 12 June 2021.
89
Yellow Cake Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFor the year ended 31 March 2021 CORPORATE INFORMATION
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
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
Canaccord Genuity Limited
88 Wood Street
London, EC2V 7QR
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
Linklaters LLP
One Silk Street
London, EC2Y 8HQ
90
Yellow Cake Annual Report 2021
91
Yellow Cake Annual Report 2021 www.yellowcakeplc.com