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Geiger Counter Limited

Geiger Counter Ltd - Annual Financial Report

RNS Number : 0543J
Geiger Counter Ltd
17 December 2020
 

17 December 2020

GEIGER COUNTER LIMITED
(THE "COMPANY")

 

 

 

RELEASE OF REPORT AND FINANCIAL STATEMENTS

 

The Directors announce the release of the Annual Report and Financial Statements for the year ended 30 September 2020. *ATTACHMENT*
http://www.rns-pdf.londonstockexchange.com/rns/0543J_1-2020-12-17.pdf

CHAIRMAN'S STATEMENT - FOR THE YEAR ENDED 30 SEPTEMBER 2020

 

This has been a tumultuous year for your Company with the dramatic impact of the Covid-19 Pandemic causing a very steep decline in the underlying net asset value during the six-month period from 30 September 2019 to 31 March 2020. Although the Uranium spot price in the market remained in a narrow range between US$24 to US$26 per pound for most of the period, equities came under severe pressure in February and March 2020 as the initial market panic from the onset of Covid-19 was felt.  For the six months to 31 March 2020 the Company's net asset value fell by 37.2 per cent and the Company's ordinary share price fell by 41.6 per cent.

 

Since the end of March 2020 there has been a strong recovery in the Company's net asset value and share price. We believe there have been two major factors behind this; firstly, uranium production at many significant mines around the world has been suspended due to Covid-19 and secondly the US Government has begun to acquire a strategic stockpile of Uranium recognising the importance of nuclear energy in maintaining a stable and secure energy supply. The spot price of uranium increased to US$33 per pound during this period before falling back to around US$30 at the time of writing. The investment managers report on the following pages provides more details on these factors.

 

In the second half of the Company's financial year to 30 September 2020, the Company's net asset increased by 66.5 per cent and the Company's ordinary share price rose by 93.0 per cent.

 

The end result of all this volatility has been that for the year under review to 30 September 2020 the Company's net asset value increased by 4.5 per cent and the Company's ordinary share price rose by 12.6 per cent over the year and traded at a premium of 16.6 per cent at the end of September.

 

Your Board was pleased to see that the ordinary shares traded at a premium to their underlying net asset value for significant periods throughout the last year. The Company utilised the share issuance powers and issued 9,708,731 new shares during the year raising £1.67m of new capital. We were pleased to see new capital inflows and are working with our advisers to develop plans to grow the assets of the Company further as we believe that a greater size of assets will attract more investors into the Company.

 

Unfortunately, the rise in the net asset value over the last year has not been sizeable enough to enable the ordinary shares to trade over the final subscription price for the subscription shares at the end of November 2020.

 

Your Board and the Investment Managers remain confident over the long-term outlook for uranium.  Power output from nuclear generation continues to rise and governments around the world are looking to nuclear power to provide both a base load for energy to supplement renewal sources and to reduce more polluting energy generation such as coal.  The Investment Managers have a portfolio of leading companies involved in the mining and supply of uranium and firmly believe that prices will improve.

 

The impact of the Covid-19 pandemic has been dramatic across the world and although we have seen recent good news on vaccine development we still face a very uncertain time ahead of us all as we work through the various opportunities and threats to the Company.  The Board and I would like to thank all of the Company's service providers for working so diligently in these difficult circumstances.  We would also thank shareholders for their continued support for the Company and we look forward to a continued period of growth.

 

Finally, it should be noted that Richard Lockwood has intimated his decision to retire at the forthcoming AGM. Not only was Richard the founder of Geiger Counter Ltd but his contribution to the board during his term of office was immense and we all wish him the very best in his retirement.

 

 

George Baird

Chairman

December 2020

 

 

INVESTMENT ADVISER'S REPORT - FOR THE YEAR ENDED 30 SEPTEMBER 2020

 

There has been a step change in uranium prices during the second half of the Fund's fiscal year with prices rising to US$34/lb in May. There have been a number of factors contributing to this but the most significant has been the curtailment of production from the world's two largest producers, Cameco and Kazatomprom, which both temporarily closed operations during pandemic lockdowns. As a result, this year's global mine output reduced by around 20 million lbs, or 15%, and these same groups have instead acquired material in the spot market or utilised inventory to fulfil sales commitments. Furthermore, Kazatomprom announced that national production targets would continue at reduced rates for a further year, to the end of 2022. Equivalent to around 14 million lbs of Kazakh production, this has also reduced assumed world mine output in 2022 by approximately 10%.

 

While sector equities fell in March, in a broad synchronised sell-off across most asset classes, uranium mining equities have subsequently performed extremely well against the improved price backdrop and the Fund NAV increased 60% over the second half of the year to 30 September 2020. This compares to sterling returns of 30% for the Solactive Global Uranium and Nuclear Components Index and 36.5% for the Solactive Uranium Pure Play Index over the same period. Despite the strong recent performance there remains considerable opportunity for a demand led advancement in the nuclear sector and significant opportunity for strong performance from sector equities, particularly Nexgen's strategic project located in Canada's prolific Athabasca Basin.

 

Wider endorsement of nuclear power gaining momentum

In addition to the supply side effects, increasing recognition of Nuclear's merits is being reflected in governments' inclusion of nuclear power generation in new "green" policies, which is important for investor sentiment. While centrally planned investment in China remains a key growth driver for the sector, with a planned build out of 6-8 reactors per year between 2020-25 to increase installed capacity over 43.5% to 70GW, there has been a palpable shift in opinion on Nuclear's benefits in reducing carbon emissions elsewhere. This significantly improves confidence in the outlook for demand from established markets, particularly North America, which remains the largest consumer of nuclear fuel in the world. Biden policies also recognise the benefits of zero carbon baseload power, with the development of Small Modular Reactors (SMR's) incorporated in his $2Trn climate focussed spending plan.

Crucially, in recognition of the importance of nuclear power generation and its over reliance on foreign sources uranium, the US Senate has most recently approved a bipartisan bill to advance the purchase of a national strategic uranium reserve. Under the American Nuclear Infrastructure Act, the US Department of Energy will be restricted to only buy uranium recovered from facilities licensed by the Nuclear Regulatory Commission or equivalent agreement state agencies as of the date of enactment. The Senate indicated that the bill "preserves America's nuclear fuel supply chain, prevents more carbon emissions from entering the atmosphere, and protect economic, energy, and national security". Uranium from companies owned, controlled, or subject to jurisdictions in Russia or China are excluded from participating in the program. Highlighting the need to improve its security of supply the news has driven a sharp improvement in sentiment in many uranium equities, particularly those with assets located in the US and North America.

Closer to home, new UK energy policy also clearly endorses the need to invest more in the nuclear sector. Other organisations, such as the International Energy Agency, have also been more vocal highlighting the need for investment in nuclear power to support development of a broad range of clean energy technologies in low carbon energy-based recovery plan.

It is crucial to appreciate that such nuclear policies will run alongside renewables. As shown below, these will continue to supplant a proportion of fossil fuel generation capacity around the world particularly the secular decline in thermal coal, whose secular decline is clearly evident in recent data published by the US Energy Information Administration.

 

 

Supply concentration and political risks remain

Despite the expected decision by US Department of Commerce to extend the Russian Suspension Agreement, effectively ceasing its investigation into Russian state subsidised supply of uranium, political tensions between the two nations have recently stepped-up with the US threatening to sanction companies involved in the delivery of the Nord Stream II pipeline which will deliver gas from Russia to Europe. While this has not had a direct impact on nuclear fuel markets, indirectly it has had a meaningful impact on gas prices, a competing fuel source for power generation, with prices of LNG for delivery to Asia jumping 35%. Such tensions emphasise the need for more strategic investment in the sector as evidenced in US which is implementing policies to build a strategic reserve given its reliance on foreign sourced supplies.

 

Unquoted investments

The Fund has a position in High Power Exploration Inx ("HPX"), which is unquoted global mineral exploration company. HPX raised a substantial amount of new funding in November 2019 and the Fund currently values its position at a 50% discount to the per share value of cash raised in November 2019. HPX is planning to list and the planned IPO, which was due to take place before the calendar year-end, has been pushed back due to COVID delays. However, the major investor that contributed to HPX's most recent funding package, has accepted the delay in listing and an IPO is now targeted by mid-2021. The development of HPX's core iron ore project remains well supported given the US$120/t iron ore price, while other diverse investments are also benefitting from improving metal prices. The position is difficult to value at the present time as HPX currently has limited sources of operating cash flow, and has no assurance that additional funding will be available on a timely basis and under terms which are acceptable to them.

 

Robert Crayfourd and Keith Watson

New City Investment Managers

December 2020

 

 

 

For further information, please contact:

 

Craig Cleland - CQS (UK) LLP - 020 7201 5368

 

Jessica Riley - R&H Fund Services (Jersey) Limited - 01534 825 236

 

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