Uranium Participation Corporation Reports Financial Results for the Period Ended August 31, 2017
TORONTO, ONTARIO--(Marketwired - Sept. 25, 2017) - Uranium Participation Corporation ("UPC" or the "Corporation") (TSX:U) today filed its Financial Statements and Management's Discussion & Analysis ("MD&A") for the period ended August 31, 2017. Both documents can be found on the Company's website (www.uraniumparticipation.com) or on SEDAR (www.sedar.com). The highlights provided below are derived from these documents and should be read in conjunction with them. All amounts are in Canadian dollars, unless otherwise noted.
Selected financial information:
|Net asset value (in thousands)||$||388,808||$||407,362||$||462,345|
|Net asset value per common share - basic and diluted||$||3.22||$||3.37||$||3.83|
|U3O8 spot price(1) (US$)||$||20.00||$||19.25||$||22.25|
|UF6 spot price(1) (US$)||$||56.35||$||55.55||$||64.00|
|Foreign exchange noon-rate (US$ to CAD$)||1.2536||1.3500||1.3248|
|(1)||Spot prices as published by Ux Consulting Company, LLC ("UxC").|
Total equity, or the value of the Corporation's assets minus its liabilities ("Net Asset Value" or "NAV"), decreased by $18.6 million during the three months ended August 31, 2017. This equates to a reduction in the NAV per common share of $0.15.
The net loss for three months ended August 31, 2017, of $18.6 million, was primarily due to unrealized net losses on investments in uranium of $17.5 million, operating expenses of $1.1 million, offset by income from lending and/or relocation of uranium of $0.1 million.
Unrealized net losses on investments in uranium, during the three months ended August 31, 2017, were caused by the decrease in the U.S. dollar to Canadian dollar exchange rate, slightly offset by increases in the spot prices of U3O8 and UF6.
Operating expenses, net of income from lending and/or relocation of uranium, of $1.0 million, for the three months ended August 31, 2017, represents approximately 0.3% of the Corporation's NAV at May 31, 2017 and 0.2% of the NAV at February 28, 2017.
Current Market Conditions
Over the last several months, uranium prices continue to be under downward pressure. This is generally due to a prolonged over-supply in the uranium market. Uranium spot prices have fallen as much as 75% from March 2011 (US$70 per pound U3O8), reaching a 13 year low of US$17.75 per pound U3O8 in early December 2016. In the first quarter of the 2018 financial year, uranium prices reached a high of US$25.50 per pound U3O8, before retreating back to the US$20 per pound U3O8 range. Uranium prices during the second fiscal quarter of 2018, traded in a fairly narrow range between a low of US$19.25 per pound U3O8 in June, and a high of US$20.75 per pound U3O8 in August, and the long-term price indicator remained constant at US$31 per pound U3O8.
While the ongoing realities of the over-supplied spot market can explain the recent market weakness, the longer term fundamentals continue to point towards market recovery, as new reactors are coming online around the world in significant numbers, and uranium production levels are not likely to be sustainable while spot prices challenge the all-in mining costs for most uranium mines.
Nuclear energy, with its reliability and clean air benefits, fills an important role in the supply of baseload electricity around the world. In each of 2015 and 2016, more new nuclear capacity was connected to the electricity grid than any of the preceding twenty-five years. As at August 31, 2017, the World Nuclear Association ("WNA") reported that there are 447 operable reactors worldwide, with 58 new reactors under construction, 160 reactors planned or on order, and another 351 proposed. When translated into uranium demand, UxC projects that these increases in nuclear power facilities will increase demand from approximately 185 million pounds U3O8 (Base Case) in 2017 to over 202 million pounds U3O8 by 2030 (9% increase) in the Base Case scenario, and as much as 276 million pounds U3O8 by 2030 (49% increase) in the High Case scenario.