The share price of Deep Yellow Ltd [ASX:DYL] has continued its downward trend this morning, shedding a further 1.47% or 0.5 cents to trade at 33.5 cents per share.
DYL, whose primary focus is in Namibia where it operates through its wholly owned subsidiary Reptile Uranium Namibia, has slid more than 11% since the beginning of the year as the uranium spot price continues to reverse gains made in 2018, as you can see below:
Where have Deep Yellow investors gone?
DYL announced at the beginning of June it would seek to raise $9 million to fund its growth strategy via a share placement. The capital raising issued about 29 million fully paid shares at $0.31 per share.
The company hoped to raise a further $2.5 million via a share purchase plan (SPP) intended for eligible shareholders. In an announcement released today, DYL fell about $250,000 short of the $2.5 million target.
According to DYL, eligible shareholders accounted for about further $1.677 million. To account for the shortfall fall, DYL reserved the right to place any shares not subscribed to by regular shareholders to certain institutional and sophisticated investors who participated in the original placement.
The shortfall placement raised a further $611,807. Closure of the SPP together with commitments for the shortfall placement will bring total funds raised by the company, including the placement, to $11.29 million before costs.
DYL said the funds will help the company meet their short-term working capital requirements as well as continue to expand the existing uranium resource base of its Namibian projects.
What does this all mean?
The under subscription from regular investors is likely to play on the mind’s at DYL, however, it is not overly surprising given the current uranium downturn.
Globally, there have been several mine closures by uranium producers, forced to cease operations due to the low spot prices. Canada’s largest uranium miner, Cameco, announced in 2017 it would be closing the world’s largest uranium mine.
The company cited that it would not deliver into an oversupplied spot market. As a result, Cameco, along with other uranium miners, have been forced to fulfil long-term sales contracts by buying volumes in the spot market.
But despite the uplift in the spot market, the uranium price has struggled to find momentum.
The supply side of the uranium market is likely undergoing a structural shift of sorts. Spot prices for uranium have been supressed over a prolonged period, with the market generally in oversupply. This oversupply can largely be accounted for by the prevalence of long-term contracts. But many of these contracts have now been concluded.
With the remaining proportion of these contracts set for conclusion at the beginning of the next decade, uranium consumers are likely to return to the market in the short- to mid-term to begin securing their future needs for fuel.
Meaning Australia’s uranium miners, such as DYL, could find themselves in a solid position once supply begins to fall.
The world’s uranium mines produced around 135 million pounds in 2018, a shortfall from the 192 million pounds currently demanded. The 57 million pound shortfall is sated thanks to a global inventory overhang.
Given the current deficit, it wouldn’t be a stretch to say we might have a uranium shortage within the next few years or so. Compound that with the 58 nuclear reactors under construction and the 154 under planning, uranium could become very lucrative.
For Money Morning
PS: It’s down over 90% in 10 years…but is uranium about to surge 2,000% (again)? One man thinks so. Download his FREE report now.