Company Announcements

27 December 2023

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 2023, which are included as an attachment to this announcement.

http://www.rns-pdf.londonstockexchange.com/rns/9697X_1-2023-12-27.pdf

CHAIRMAN'S STATEMENT - FOR THE YEAR ENDED 30 SEPTEMBER 2023

Introduction

The Company's financial year to 30 September 2023 started weakly as high inflation and interest rates worried investors in equities generally. The net asset value fell from 47.46p at the start of the financial year to 41.76p as at 31 March 2023. The second half of our financial year has been more positive with a strong rally in both the physical spot price of uranium as well as the uranium miners themselves. The Company's net asset value rose to 64.66p at the end of the financial year which is an overall return of 36.2%.  The Company's share price rose from 46.0p on 30 September 2022 to 52.0p a year later giving an overall return of 13.0% for the year. This was weaker than the NAV return as the discount to net asset value widened from 3.1% at the start of the period to a figure of 19.6% at the end of September 2023.  The Company bought back shares during the year as set out below.

Investment

The uranium sector has seen positive news flow in the last year which has encouraged utilities to enter into longer-term contracts at prices higher than we have seen for a number of years. We have also seen China planning to accelerate its new reactor programme and both France and Japan commit to extend the life of their nuclear fleet and add capacity. At the end of 2022 the US signed several long-term contracts with several US based uranium companies to supply the newly formed US strategic energy reserves which in turn has supported the share prices of several US and Canadian miners. Government support recognising the significant benefits of nuclear power in order to meet carbon emission goals has continued in Europe and Asia. Reflecting the improved demand outlook, the World Nuclear Association increased its annual demand growth estimates to 4.1% out to 2040 in its latest report on the industry supply-demand balance.  Your investment managers have done a good job in selecting the stocks for the portfolio and ensuring that the Company continues to prosper. Their report on pages 12 to 14 sets out the investment position more fully.

Share Capital

At the end of April 2023, the second Annual Subscription Right event took place and I am sorry to report that the net asset value at that time was substantially below the exercise price of 51.52p and therefore no new shares were issued. The third Subscription Right price will be 37.74p per share with the expected date being 30 April 2024.

In common with many listed investment companies the discount to net asset value widened over the financial year. During the financial year the Board has utilised its share buyback powers to repurchase 1,760,000 ordinary shares at a cost of £0.7m.  Since the end of September the Company has continued to utilise the share buyback authority and has repurchased a further 3.6 million shares at a cost of £1.8m

Outlook

Your Board and the Investment Managers remain confident over the long-term outlook for uranium. Pro-nuclear government policies have seen nuclear power being included in most "green" policy frameworks encouraging wider use. The US has made available zero emission credits and nuclear deployment incentives to uranium companies and China is accelerating its new nuclear building programme. In Japan, higher prices for fossil fuels have increased support to restart the nation's nuclear fleet. and momentum is gathering pace in this regard after completion of more stringent reactor upgrades. Expected demand for uranium is higher than the available supply and with such structural impetus, we believe the outlook for nuclear energy is bright. At the time of writing the Company's net asset value stands at 65.13p and the ordinary share price is 56.00p with the ordinary shares trading at a discount of 14.02%.

I would like to thank Shareholders for their continuing support for the Company. 

Ian Reeves CBE

Chairman

December 2023

INVESTMENT ADVISER'S REPORT - FOR THE YEAR ENDED 30 SEPTEMBER 2023

Performance and Outlook

After a decade of contracting below replacement rates, which has depleted buffers of surplus fuel inventory together with secondary sources of supply, nuclear fuel prices have been buoyed by the return of purchasing by utilities as they seek to secure long-term supply. This has been reflected in significant utility buying over the year. Much of this has been driven by reactor life extensions which has prompted significant demand for nuclear fuel over the remainder of this decade. Against a backdrop of ongoing political tensions in Russian and the Niger coup, the more vocal adoption of pro-nuclear government policies aimed at growing net generating capacity over the longer-term has also played a major part in prompting this increased activity. This all points to continued strong outlook for the nuclear power sector and continued uranium market tightness over the coming decades.

The U3O8 price increased 48% to $71.25/lb over the financial year to end-September 2023, though equities did not keep pace and the Geiger Counter NAV returned +36.2% over the year, similar to the 41% sterling return registered by the Solactive Uranium Pure Play Index. At the time of writing the spot U3O8 price has since risen to over $80lb while the Fund NAV has gained 8.3% to a post-Fukushima high of 68.47p versus a post-year-end sterling return of 1.5% registered by the Solactive Index. Returning 32% in sterling terms, the share price of the Sprott Physical Uranium Trust also lagged the rise in the uranium price over the 12 months to end-September and despite rising around 7% since it remains at a 5% discount to NAV.

Though uranium mining equities have seen improved performance further re-rating potential remains, underpinned by the strong utility contracting. With this in mind and with the share price remaining above the 37.74p per share strike price for the exercise of embedded rights, in May next year, the Fund is well placed for further strong returns and growth in assets.  

Contracting tightens market

At the time of writing latest World Nuclear Association (WNA) data, to mid-November, indicates utility uranium purchases exceeded 200Mlbs, the first time over the last decade buying has risen appreciably beyond annual consumption requirements of approximately 170Mlbs. Within this the proportion of U3O8 bought under long-term contracts has also risen to the highest level seen over the same period, as shown below, indicative of the need to secure material over the longer-term.

Having started the financial year at $48.25/lb the U3O8 spot price traded in a range between $43-51/lb over the interim period. Indeed, while the spot U3O8 price stood at approximately $72/lb at end-September at the time of writing it had risen above $81/lb, while the year-ahead price stands at over $86/lb rising to $93/lb by end-December 2025. Enrichment services are expected to rise at a similar rate over the same period.

Despite fuel price rises following the July coup in Niger and price sensitivity arising after minor reductions in Cameco's expected output in the second half of this calendar year, the continued price strength bares testament to much tightened market conditions and shift in market risks from producers to utility consumers, as price takers. Both Cameco and Kazatomprom, the two largest U3O8 producers both significantly raised medium term-production targets: Cameco indicated increased output guidance from McArthur River from the 18Mlbs level indicated for 2024 towards its nameplate capacity of 25Mlbs, assuming forward contracts can be priced at a satisfactory level to do so; while Kazatomprom will seek to increase production towards levels allowable under regulated subsoil use limits, with an ambitious target of 80.6Mlbs (100% basis) set as an exit rate for 2025, equivalent to a 26Mlbs rise in production from this year's target. Notwithstanding execution risks, particularly for Kazatomprom it is important to highlight that additional volumes produced by these players, amounting to a combined 35Mlbs pa, will be used to fulfil recently signed contracts, implying incremental production has already been spoken for.

Most recent estimates by the World Nuclear Association, published in September this year, indicate annual uranium demand is expected to rise 48Mlbs (+28%) by 2030 from current annual requirements of approximately 170Mlbs and nearly double by 2040. Having already sold forward much of this expected output, very little uncommitted production is available to meet uncovered utility requirements and it is becoming increasingly difficult to ignore the need to bring additional greenfield supply on stream and the additional upward pressure this will put on prices.

COP28 pro-nuclear push highlights government support

Symbolic of the ever more important role nuclear power may play in electricity generation globally, on 1^st December the US, UK, France, Sweden, Finland and South Korea (collectively representing over half global generating capacity, nearly 200GW) are expected to sign an initiative at the COP28 climate conference aimed at tripling installed generating capacity by 2050. They are also expected to request financial institutions, such as the World Bank, include nuclear in lending policies in the effort to achieve net-zero goals. Even deducting scheduled reactor retirements, expected to total approximately 220GW globally over the same timeframe, such plans nevertheless represent an ambitious increase in scale. Building on expansion plans and occurring alongside the ongoing industry build-out across Asia, led by China, this adds yet more impetus to the industry's growth prospects: 62 are reactors currently under construction, 111 planned and a further 318 proposed according to the latest WNA data.

Behind the headline target increase in generating capacity, expansion is also taking place within the nuclear fuel supply chain. As example, enricher Urenco plans to increase capacity at all its facilities located across the US, UK, Netherlands and even Germany. Elsewhere, French state-owned uranium fuel supplier Orano announced plans to expand its Tricastin processing facility, which will lift capacity at the Georges Besse II enrichment plant by more than 30%. However, it is noticeable that details of such process capacity expansions substantially lag proposed reactor growth. A consequence of this is an increased possibility of overfeeding, whereby conversion and enrichment constraints require more U3O8 to be processed for a shorter period of time, to derive sufficient enriched fuel, which would drive incrementally higher demand for raw U3O8 feedstock.  As stated all these factors point to a continued robust outlook for the sector.

Portfolio positioning

Portfolio position remains focussed on NexGen's Tier 1 Rook I project, located in the Athabasca Basin, production from which is scalable and could potentially surpass that of the world's largest mine, Cigar Lake. Importantly, having recently received its provincial environmental permits (the first company in more than 20 years to receive full Provincial EA approval for a uranium project in Saskatchewan) and having all of its First Nations benefits agreements the development of the project has de-risked considerably and the equity has been a leading performer registering a 50% rise in sterling terms over the year to end-September and a further 10% since. Along with neighbours Fission Energy, Pure Point and latterly Fission 3, which has discovered some exciting high-grade mineralisation the Fund's exposure to these western Athabasca projects currently stands at around 33%.

Mindful of the need to improve its supply security we retain a healthy exposure to US based assets via holdings in former producers UrEnergy, UEC and Energy Fuels that collectively represent around a quarter of assets. US exposure has been further bolstered following a recent all share acquisition of US assets by IsoEnergy, which already has a high quality Canadian project. Held back by the late September acquisition the share rose only 6% in sterling terms over the financial year and have declined 11% since. Though the most significant of the acquired assets, Coles Hill in Virginia, has yet to receive permitting we believe the US approvals process may ease somewhat: conspicuous by its absence, US authorities have yet to make meaningful inroads into building a strategic fuel reserve despite the Nuclear Regulatory Commission issuing an order preventing the export of special nuclear material and this may add political expedience to ease permitting requirements for domestic assets while the permitting experience of majority shareholder NexGen, lends further credibility to a methodical approach to the permitting process.

In addition to near-term production from in-situ developer UrEnergy the Fund holds a 9% position in ASX-listed Paladin which is restarting its Langer Heinrich mine in Nambia, whose share price rose 33% in sterling terms over the year to September.

The Fund has also reduced some exposure to Cameco, which currently represents around 12.5% of assets. Following the strong rerating post the strategic acquisition of downstream service provider Westinghouse uranium forward sales agreements have already started to act as a drag to earnings. While liquidity is expected to improve markedly over the remainder of the decade the group will have to assess investment in life-of-mine extension at Cigar Lake, restart of its mothballed US Smith Ranch assets and/or mine acquisitions to underpin continued full value capture of its new integrated business beyond the end of this decade. Given geopolitical machinations the Trust also retains a low weighting in state controlled Kazaktomprom. 

Elsewhere, the Fund has latterly reduced exposure to physically backed investments including the Sprott Uranium Trust and Yellow Cake with a view to reinvesting into future producing assets. This has included some investment into previously mentioned Fission 3 along with IsoEnergy and in preparation for equity raises by earlier stage development projects.

Robert Crayfourd and Keith Watson

New City Investment Managers

December 2023

For further information, please contact:

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

Jane De Barros-Sousa - R&H Fund Services (Jersey) Limited - 01534 825 259