RNS Number:4685T
Nufcor Uranium Limited
22 March 2007
22 March 2007
NUFCOR URANIUM LIMITED ("NUFCOR URANIUM" OR "THE COMPANY")
INTERIM RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2006
Nufcor Uranium today announces its interim results for the period from 28 June
2006 to 31 December 2006.
Highlights
Highlights for the period ended 31 December 2006:
* Income US$859,600
* Loss for the period (US$572,855)
* Shareholders' equity US$113,822,273
* Net assets at market value US$171,056,273
* NAV per share at 31 December 2006 #2.65 (US$5.18)
* Increase in NAV since admission
to AIM on 21 July 2006 #0.76 (40.2%)
* Proposed changes to investment guidelines - EGM to be held on Monday 26
March
Commenting on the results, Michael Travis, Chairman of Nufcor Uranium said:
"The period under review has been a successful one for Nufcor Uranium, with the
Company meeting the investment objectives set out at the time of its flotation
in July last year. In addition, the price of U3O8 has risen significantly,
resulting in a 40% increase in the Company's NAV and a 33% increase in the share
price."
"As announced at the beginning of March, the Board has proposed two changes to
the Company's investment guidelines, which would give it greater flexibility to
exploit the investment opportunities available to it. I encourage all
shareholders to return their proxies in advance of the EGM on Monday 26 March.
"Looking ahead, the market fundamentals for uranium remain strong and we view
the future with confidence."
Market Commentary
The uranium market supply and demand fundamentals remained strong during the six
months ended 31 December 2006. During this period the industry average spot
price (TradeTech and UxC) of U3O8 has risen 57% from $45.75/lb as at 30 June
2006 to $72.00/lb as at 31 December 2006.
The U3O8 price has risen consistently during the period, exacerbated by flooding
at the Cigar Lake mine in Saskatchewan, Canada. The Cigar Lake mine had been in
the final stages of development and was expected to commence operation in early
2008 with a gradual ramp up to 18 mlbs U3O8 per annum (approximately 10% of
primary global demand). Cameco, the operator, are in the first phase of a
remediation plan which is likely to delay operation of the mine for a
significant period.
The events at Cigar Lake have compounded existing market imbalances. On the
supply side, primary uranium supply has been slow to react to substantial market
price increases in recent years. Between 2001 and 2006, uranium production
increased by less than 9% against a price increase in excess of 1000%. This is
largely a reflection on the lack of investment in exploration and project
development over the previous 20 year period. During the past 2 decades, uranium
consumption has exceeded primary mine production by a wide margin, with the
difference being made up by secondary supply sources such as excess commercial
inventories, surplus US and Russian military materials and recycled products. As
secondary supplies reduce, substantial additional primary supplies will be
required by the market. Primary production will need to supply approximately
80-90% of market requirements by 2015 versus recent levels of around 60%.
On the demand side, the strategic nature of nuclear energy has increasingly come
into focus on a global level. Emphasis on energy security and increased concerns
over the implications of global warming are creating a supportive political
environment for future nuclear growth. These factors are expected to increase
future requirements for uranium.
The market fundamentals remain supportive of further uranium price rises. In the
absence of major external events, such as a serious nuclear accident, market
prices are likely to remain under upward pressure over the short to medium term.
Since 31 December 2006, the industry average spot price of U3O8 has risen by 26%
to $90.50 /lb as of 22 March 2007.
Blueprint Capital Management LLP
58 Grosvenor Street
Mayfair
London
For further information, please contact:
Nufcor Uranium Limited +44 772 054 7834
Michael Travis (Chairman)
Smithfield +44 20 7360 4900
Rupert Trefgarne
Income statement
For the period ended 31st December 2006
Note 28th June 2006 to
31st December 2006
US$
Income
Bank interest 697,651
Loan interest 2 161,949
-----------
859,600
-----------
Expenses 2
Investment advisory fees 586,953
Audit fees 31,429
Directors fees 105,115
Other administrative expenses 708,958
-----------
-----------
1,432,455
-----------
Loss for the financial period attributable to equity
shareholders (572,855)
===========
Loss per share US $0.017
Number of shares in issue 33,000,000
Balance sheet
At 31st December 2006
Note 2006
US$
ASSETS
Non-current assets
Other assets - Uranium holdings 3 108,366,000
-----------
108,366,000
-----------
Current assets
Debtors and prepayments 4 208,527
Cash and cash equivalents 5,741,406
-----------
5,949,933
-----------
Total assets 114,315,933
===========
EQUITY
Share capital 5 330,000
Share premium account 114,065,128
Retained earnings (572,855)
-----------
Total Equity 113,822,273
-----------
LIABILTIES
Current liabilities
Accrued expenses 493,660
-----------
493,660
-----------
TOTAL EQUITY AND LIABILITIES 114,315,933
===========
Statement of changes in equity
For the period ended 31st December 2006
Ordinary Share Retained Total
shares premium earnings
US$ US$ US$ US$
Balance at 28th June 2006
Issue of shares 119,708,153 - 120,038,153
Loss for the period - (572,855) (572,855)
Formation and listing
expenses recognised directly
in equity (5,643,025) - (5,643,025)
---------- ---------- ---------- ----------
Balance at 31st December
2006 114,065,128 (572,855) 113,822,273
========== ========== ========== ==========
Cash flow statement
For the period ended 31st December 2006
28th June 2006 to
31st December 2006
US$
NET CASH FLOWS FROM OPERATING ACTIVITIES
Loss from operations (572,855)
Formation and listing expenses recognised directly
in equity (5,643,025)
Increase in receivables (208,527)
Increase in payables 493,660
Purchase of Uranium holdings (108,366,000)
-----------
NET CASH (USED BY) OPERATING ACTIVITIES (114,296,747)
-----------
FINANCING ACTIVITIES
Proceeds from issue of ordinary shares 120,038,153
-----------
CASH FROM FINANCING ACTIVITIES 120,038,153
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,741,406
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD -
===========
CASH AND CASH EQUIVALENTS
AT END OF PERIOD 5,741,406
===========
Notes to the financial statements
For the period ended 31st December 2006
1. GENERAL INFORMATION
Nufcor Uranium Limited (the "Company") was incorporated in Guernsey on 28th June
2006 and is a closed ended investment company.
The Company was admitted to the Alternative Investment Market of the London
Stock Exchange ("AIM") on 20th July 2006.
Activities
The Company's activities include holding and lending Uranium Oxide in
concentrates ("U3O8 "), with the objective of achieving capital appreciation in
the value of its U3O8 holdings.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The Financial Statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") and IFRIC interpretations as adopted by
the European Union (EU) and with Section 64 of The Companies (Guernsey) Law,
1994 applicable to companies reporting under IFRS. The Financial Statements have
been prepared under the historical cost convention. A summary of the more
important accounting policies is set out below.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
(a) Amendment to published standards effective in 2006
IAS 39 (Amendment), The Fair value Option is mandatory for the Company's
accounting period beginning on 28th June 2006. It allows entities to designate
financial assets and financial liabilities at fair value through profit or loss
when not held for trading if doing so eliminates or significantly reduces a
measurement or recognition inconsistency ("an accounting mismatch") or if a
group of financial assets, financial liabilities or both is managed and its
performance is evaluated on a fair value basis.
Adoption of this amendment only impacts the format and extent of disclosures
presented in the financial statements.
(b) Standards that are not yet effective
IFRS 7, Financial Instruments: Disclosures, and a complementary amendment to IAS
1, Presentation of Financial Statements - Capital Disclosures (effective from
1st January 2007). IFRS 7 introduces new disclosures to improve the information
about financial instruments. It requires the disclosure of qualitative and
quantitative information about exposure to risks arising form financial
instrument, including specified minimum disclosures about credit risk, liquidity
risk and market risk, including sensitivity analysis to market risk. It replaces
disclosure requirements in IAS 32, Financial Instruments: Disclosure and
Presentation. It is applicable to all entities that report under IFRS. The
amendment to IAS 1 introduces disclosures about the level of an entity's capital
and how it manages capital. The Directors have assessed the impact of IFRS 7 and
the amendment to IAS 1 and concluded that the main additional disclosures will
be the sensitivity analysis to market risk and the capital disclosures required
by the amendment of IAS 1. The Company will apply IFRS 7 and the amendment to
IAS 1 from 1st July 2007.
(c) Standards, amendments and interpretations effective in 2006 but not
relevant
The following standards, amendments and interpretations are mandatory for
accounting periods beginning on or after 1st January 2006 but are not relevant
to the Company's operations:
* IAS 19 (Amendment), Employee Benefits;
* IAS 21 (Amendment), Net Investment in a Foreign Operation;
* IAS 39 (Amendment), Cash Flow Hedge Accounting of Forecast Intragroup
Transactions;
* IAS 39 and IFRS 4 (Amendment), Financial Guarantee Contracts;
* IFRS 6, Exploration for and Evaluation of Mineral Resources;
* IFRS 1 (Amendment), First-time Adoption of International Financial
Reporting Standards;
* IFRIC 4, Determining whether an Arrangement contains a Lease;
* IFRIC 5, Rights to Interests arising from Decommissioning, Restoration
and Environmental Rehabilitation Funds; and
* IFRIC 6, Liabilities arising from Participating in a Specific Market -
Waste Electrical and Electronic Equipment.
(d) Interpretations to existing standards that are not yet effective and not
relevant for the Company's operations
The following interpretations are mandatory for the Company's accounting periods
beginning on or after 1st March 2006 or later periods but are not relevant for
the Company's operations:
* IFRIC 7, Applying the Restatement Approach under IAS 29, Financial
Reporting in Hyperinflationary Economies (effective from 1st March 2006);
* IFRIC 8, Scope of IFRS 2 (effective from 1st May 2006);
* IFRIC 9, Reassessment of the Embedded Derivatives (effective form 1st
June 2006);
* IFRIC 10, Interim Financial Reporting and Impairment (effective 1st
November 2006);
* IFRIC 11, IFRS 2 - Group and Treasury Share Transactions (effective from
1st March 2007); and
* IFRIC 12, Service Concession Agreements (effective from 1st January
2008).
Revenue recognition
Revenue is recognised only when it is probable that the economic benefits
associated with a transaction will flow to the company and the amount of revenue
can be measured reliably.
Sale of U3O8
Revenue on the sale of U3O8 is recognised at the time of delivery.
Loan interest
Interest on loans of U3O8 to third parties is recognised in the income statement
on an effective yield basis.
Formation and listing expenses recognised directly in equity
Formation and listing expenses are expensed against share premium as they are
incurred.
Expenses
All operating expenses, including investment advisory fees, are recognised in
the income statement on an accruals basis.
Holdings of U3O8
Holdings of U3O8 are valued at weighted average cost less impairment. Any
impairment is recognised in the income statement.
U3O8 on loan to counterparties remain on the balance sheet as the Company
retains substantially all of the risks and rewards of ownership.
Forward contracts
From time to time, the Company may enter into contracts for the future delivery
of U3O8 at a fixed price.
Such contracts are "executory contracts" in that both parties are still to
perform, to an equal degree, the actions required of them by the contract until
the day of final delivery under the contract. Executory contracts are not
recognised in the balance sheet of the Company, but are noted as a future
financial commitment.
Financial instruments
Financial assets and liabilities carried on the balance sheet include cash and
cash equivalents, trade and other accounts receivable and payable.
Financial instruments are classified as assets, liabilities or equity in
accordance with the substance of the contractual arrangement. Interest, gains
and losses relating to a financial instrument classified as an asset or
liability are reported as expenses or income. Financial instruments are offset
when the Company has a legally enforceable right to offset and intends to settle
either on a net basis or to realise the asset and settle the liability
simultaneously.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits and deposits
with original maturities of three months or less.
Trade receivables
Trade receivables are measured on initial recognition at fair value. Appropriate
allowances for estimated irrecoverable amounts are recognised in the income
statement when there is objective evidence that the asset is impaired. Any
allowance recognised is measured as the difference between the asset's carrying
amount and the present value of estimated future cash flows discounted at the
effective interest rate computed on initial recognition of the asset.
Provisions and contingent liabilities
Provisions are recognised when the Company has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of
resources will be required to settle the obligation, and a reliable estimate of
the amount can be made.
Provisions are measured at the Directors' best estimate of the expenditure
required to settle the obligation at the balance sheet date, and are discounted
to present value where the effect is material.
The Company recognises a provision for onerous contracts when the expected
benefits to be derived from a contract are less than the unavoidable costs of
meeting the obligations under the contract.
Contingent liabilities are disclosed if the future obligation is probable or the
amount cannot be reasonably estimated.
Where the Company expects a provision to be reimbursed, the reimbursement is
recognised as a separate asset, but only when the reimbursement is virtually
certain.
Trade payables
Trade payables are carried at the fair value of the consideration to be paid in
future for services that have been received or supplied and invoiced or formally
agreed with the supplier.
Trade payables are initially measured at fair value, and are subsequently
measured at amortised cost, using the effective interest rate method.
Impairment of other assets
Other assets are reviewed for impairment losses whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the carrying amount of the
asset exceeds its recoverable amount (that is, the higher of the asset's net
selling price and value in use). For the purposes of assessing impairment,
assets are grouped at the lowest level for which there are separately
identifiable cash flows.
Foreign currency translation
(a) Functional and presentation currency
The functional currency of the Company is US Dollars. The Company's investors
are mainly from the United Kingdom and North America. The primary activity of
the Company is to invest in U3O8 which is valued in US Dollars. The performance
of the Company is measured and reported to the investors in both Sterling and US
Dollars.
The Board of Directors considers the US Dollar as the currency that most
faithfully represents the economic effects of the underlying transactions,
events and conditions. The financial statements are presented in US Dollars
which is the Company's functional and presentation currency.
(b) Transactions and balances
Transactions in foreign currencies are accounted for at the rates of exchange
ruling at the dates of these transactions. Income statement items in foreign
currencies are translated into US Dollars at transaction date. Foreign currency
balances at year end are translated at the approximate rates of exchange ruling
at that date. Gains and losses arising on the settlement and translation of
transactions and balances denominated in foreign currencies are recognised in
the income statement.
Taxation
The Company is incorporated in Guernsey and has exempt status under the Income
Tax (Exempt Bodies) Guernsey Ordinance, 1989. The Company applies for the
exemption annually and a fixed fee of GBP 600 is payable to obtain the
exemption.
Segmental reporting
The Company has one main business segment and one main geographic segment.
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that are
subject to risks and returns that are different form those of segments operating
on other economic environments.
Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in equity as a deduction from
the proceeds, net of tax, and are disclosed in the statement of changes in
equity.
Risk management
The Company attempts to mitigate risks that may affect its performance through a
process of identifying, assessing, reporting and managing material risks.
The principal risks to which the Company is exposed are uranium price risk,
counterparty credit risk, custodian credit risk and liquidity risk.
Uranium price risk
As an investor in uranium, the Company holds significant positions in uranium
that are exposed to changes in market price. In addition, the Company may enter
into fixed price forward purchase and sales contracts. The price of uranium is
volatile and is influenced by numerous factors beyond the Company's control,
such as demand and supply fundamentals and geopolitical events.
The objective of the Company is capital appreciation, which it intends to
achieve through a policy of acquiring uranium and a strategy of holding such
uranium for the long term and not actively speculating or trading with regard to
short-term changes in the price of uranium. Accordingly, the Company does not
hedge or otherwise protect against movements in uranium price.
Counterparty credit risk
The Company's purchase, sale and lending of uranium expose the Company to the
risk of non-payment or non-performance. The directors review credit issues
associated with each and every transaction and consideration is given to credit
worthiness and credit concentration issues, the provision of appropriate
security, and other risk mitigation measures.
Custodian credit risk
The Company is exposed to the credit risk of the Custodian, Nufcor International
Limited, and that of the conversion facilities, the ultimate custodian of the
Company's uranium. The Custodian is required to give the company immediate
notice of any material adverse change in its financial condition. The Board
periodically reviews and manages its exposure to conversion facilities that are
the ultimate custodians of its uranium by diversifying its uranium holding
across several conversion facilities, considering the availability of
indemnities from the conversion facilities and/or the availability of external
insurance cover.
Liquidity risk
The Company funds ongoing expenses from interest income, uranium loan fees, and
from cash held on demand and on deposit. The Company could be exposed to
significant liquidity risk if it were to fully invest its cash balance and if
income from uranium loan fees were to reduce, and other sources of funding were
to become unavailable The Company reviews its cash requirements on an ongoing
basis and currently maintains a cash balance adequate to meet expected cash
requirements for the forward 12 month period.
3. URANIUM HOLDINGS
2006
US$
2,300,000 lbs of U3O8 - at cost 108,366,000
=========
At market value 165,600,000
=========
The market value of U3O8 is taken as the average of (i) the month end UxC U3O8
spot price indicator (as published by Ux Consulting Company, LLC in its Ux
weekly publication) and (ii) the month end TradeTech U3O8 exchange value (as
published by TradeTech, LLC in the Nuclear Market Review).
At 31st December 2006, 697,282 lbs of U3O8 (US$ 32,853,000 at weighted average
cost) was on loan to third parties.
4. DEBTORS AND PREPAYMENTS
2006
US$
Prepayments 46,578
Accrued loan fee 161,949
---------
208,527
=========
5. SHARE CAPITAL
2006
US$
Authorised
85,000,000 Ordinary Shares
of US$ 0.01 each 850,000
=========
Issued and fully paid
33,000,000 Ordinary Shares
of US$ 0.01 each 330,000
=========
Rights of shareholders
The Ordinary shares carry the right to vote, the right to receive all dividends
declared by the Company and on a winding up will have the right to share pro
rata in the surplus assets of the Company. The shares carry no right to fixed
income.
6. RECONCILIATION OF NET ASSET VALUE TO PUBLISHED NET ASSET VALUE ("NAV")
2006 Per Share
US$ US$
Total NAV per financial statements 113,822,273 3.45
Market value adjustment for U3O8 holdings 57,234,000 1.73
--------- ---------
Published NAV 171,056,273 5.18
========= =========
Converted to Sterling at US$ 1.9572 / GBP 1.00 GBP 2.65
=========
The market value of U3O8 is taken as the average of (i) the month end UxC U3O8
spot price indicator (as published by Ux Consulting Company, LLC in its Ux
weekly publication) and (ii) the month end TradeTech U3O8 exchange value (as
published by TradeTech, LLC in the Nuclear Market Review).
7. RELATED PARTY TRANSACTIONS
The following are related parties to the Company:
A C Pickford - Non-executive Director
W Scott - Non-executive Director
M S Travis - Non-executive Director
K H Williams - Non-executive Director
Nufcor International Limited - Custodian
Nufcor Capital Limited - Adviser
Non-executive Directors are entitled to fees totalling GBP 110,000 per annum.
The highest paid non-executive Director receives a fee of GBP 40,000 per annum.
Mr K H Williams, a Director of the Company, is also a Director of Nufcor
International Limited, the Custodian. Nufcor Capital Limited, the Adviser, is,
in turn, a wholly owned subsidiary of the Custodian. The Company has an Advisory
Services Agreement with the Adviser and the Custodian pursuant to which the
Advisor, on the instruction of the Board, identifies opportunities to acquire
and sell U3O8, provides market information to the Board and identifies suitable
opportunities to lend U3O8.
The Custodian holds 3,300,000 shares (10%) in the Company.
The Company has an Advisory Agreement with Blueprint Capital Management LLP
("Blueprint"), pursuant to which Blueprint provides advisory services to the
Company pending receipt by the Adviser of authorisation to undertake regulated
activities from the United Kingdom Financial Services Authority. The Company
pays Blueprint a monthly fee in arrears equal to one twelfth of 1% of the total
of the Uranium owned by the Company. Advisory fees charged in the period
totalled US$ 586,953 and the sum of US$ 138,000 was outstanding at the period
end.
Mr A C Pickford, a Director of the Company, is Chairman of Mercator Trust
Company Limited ("Mercator"), the Company's administrator. Mercator was entitled
to a fixed establishment fee of GBP 10,000 and to a fixed annual administration
fee of GBP 35,000 during the period. Fees totalling US$ 56,754 were charged in
the period, and the sum of US$ 19,892 was outstanding at the period end.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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