Uranium Participation Corporation Reports Financial Results for the Period Ended November 30, 2016
TORONTO, ONTARIO--(Marketwired - Jan 12, 2017) - Uranium Participation Corp. (TSX:U) ("UPC" or the "Corporation") today filed its Financial Statements and Management's Discussion & Analysis ("MD&A") for the period ended November 30, 2016. 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:
| November 30, 2016 | August 31, 2016 | May 31, 2016 | February 29, 2016 | ||||||||
| Net asset value (in thousands) | $ | 388,530 | $ | 498,140 | $ | 535,372 | $ | 649,479 | |||
| Net asset value per common share | $ | 3.22 | $ | 4.31 | $ | 4.63 | $ | 5.62 | |||
| U3O8 spot price(1) (US$) | $ | 18.25 | $ | 25.25 | $ | 27.25 | $ | 32.15 | |||
| UF6 spot price(1) (US$) | $ | 53.40 | $ | 72.25 | $ | 77.00 | $ | 90.00 | |||
| Foreign exchange noon-rate (US$ to CAD$) | 1.3426 | 1.3124 | 1.3100 | 1.3523 | |||||||
(1) Spot prices as published by Ux Consulting Company, LLC ("UxC").
Overall Performance
Total equity, or the value of the Corporation's assets minus its liabilities ("Net Asset Value" or "NAV"), decreased by $109.6 million during the three months ended November 30, 2016. This equates to a reduction in the NAV per common share of $1.09.
The net loss for the three months ended November 30, 2016, of $128.5 million, was primarily due to unrealized net losses on investments in uranium of $127.6 million and operating expenses of $1.0 million.
Unrealized net losses on investments in uranium, during the three months ended November 30, 2016, were caused by decreases in the spot prices of U3O8 and UF6, partly offset by the increase in the U.S. dollar to Canadian dollar exchange rate.
Operating expenses of $1,015,000, partially offset by income from lending and/or relocation of uranium of $100,000, for the three months ended November 30, 2016, represents approximately 0.1% of the Corporation's NAV at February 29, 2016.
Current Market Conditions
Uranium prices continued to be under downward pressure throughout the reporting period. Prices started the quarter ending November 30 2016, at a high of US$25.25 per pound U3O8, but fell 29% to reach a low of US$18.25 per pound U3O8 by the end of November 2016. During the 2017 fiscal year, the uranium price has dropped 43%, from US$32.15 per pound U3O8 at February 29, 2016 and the price per pound U3O8, as of November 30, 2016, represents a 13-year low. Subsequent to the end of the reporting period, the spot price per pound U3O8 increased on renewed utility buying interest at the end of the calendar year, and is now trading back over US$22.00 per pound U3O8.
Uranium prices prior to the Fukushima events in 2011 were in the range of US$70.00 per pound U3O8, and analysts continue to point to certain increases in primary mine production (despite the negative price signals) and excess secondary supplies as the reasons for the persistent oversupply in the market. The extended bear market has, however, begun to take its toll on production, with cutbacks, delayed expansions and cancelled projects having been announced in recent months. With respect to demand, the slow pace of reactor restarts in Japan, combined with the relatively low levels of utility contracting during 2016, have failed to provide support for a sustained rally in prices, despite a decline in the spot price to levels not seen since 2004.
The current low level of contracting volume is expected, however, to become a positive driver for price increases going forward, as substantial levels of utility reactor requirements remain uncommitted in future years. UxC tracks the five-year forward uncommitted reactor requirements of global utilities and reported that these relatively near-term needs increased 18% in calendar 2016, with uncommitted needs of global reactors estimated to total 1 billion pounds U3O8 over the next 10 years. With production curtailments and poor visibility for producers to a uranium price that will incentivize new material sources of future production through the development process, there is potential for a sustained period of supply shortfall to emerge.
The broader fundamentals of the nuclear energy market continue to be positive in contrast to the near term uranium price weakness. According to the World Nuclear Association, presently, 448 reactors are operable around the world with 58 under construction and an additional 167 units firmly planned or ordered. The ten new reactors connected to the grid globally in calendar 2015 resulted in a net gain of almost 5,000 Megawatt electric (MWe) of installed nuclear capacity - which represents the highest annual growth in capacities in the past 25 years. This growth is being driven largely by the emerging markets of China, India, South Korea and Russia, however, the more traditional, developed markets are also building new reactors. The United Kingdom is advancing major new nuclear power projects on multiple sites and the U.S. added one unit to its fleet in 2016, with four more currently under construction. The need for large amounts of reliable baseload electricity, environmental concerns around carbon emissions, and crisis-level air pollution, are driving decision makers increasingly towards nuclear energy. Even with significant competition from heavily subsidized renewables and low natural gas prices, the need for grid-stabilizing, baseload, nuclear power should continue to be recognized and valued in the global energy mix. This was reinforced recently in the United States, where the New York and Illinois state legislatures both passed bills to ensure nuclear power plants remain an important part of their regional energy mix. Also, in Switzerland, voters defeated a referendum which would have phased out nuclear energy in that country.
With global nuclear energy capacities expected to grow between two and three percent each year for the next decade and beyond, the long term outlook for the uranium market remains positive.
About Uranium Participation Corporation
Uranium Participation Corp. is a company that invests substantially all of its assets in uranium oxide in concentrates ("U3O8") and uranium hexafluoride ("UF6") (collectively "uranium"), with the primary investment objective of achieving appreciation in the value of its uranium holdings through increases in the uranium price. Additional information about Uranium Participation Corporation is available on SEDAR at www.sedar.com and on Uranium Participation Corp.'s website at www.uraniumparticipation.com.
Cautionary Statement Regarding Forward-Looking Statements
Certain information contained in this press release constitutes forward looking statements or forward looking information. These statements can be identified by the use of forward looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "plan", "should", "believe" or "continue" or the negative thereof or variations thereon or similar terminology. In particular, this press release contains forward-looking information pertaining to expectations regarding uranium spot prices and uranium market factors, including expectations regarding reactor restarts, levels of uncommitted utility reactor requirements, anticipated contracting cycle and market supply and demand, the development of new nuclear power projects and other statements regarding the outlook for the uranium industry and market.
By their very nature, forward looking statements involve numerous factors, assumptions and estimates. A variety of factors, many of which are beyond the control of UPC, may cause actual results to differ materially from the expectations expressed in the forward looking statements. For a list of the principal risks of an investment in UPC, please refer to the "RISK FACTORS" section in the Corporation's Annual Information Form dated May 11, 2016 available under UPC's profile at www.sedar.com. These and other factors should be considered carefully, and readers are cautioned not to place undue reliance on these forward looking statements. Although management reviews the reasonableness of its assumptions and estimates, unusual and unanticipated events may occur which render them inaccurate. Under such circumstances, future performance may differ materially from those expressed or implied by the forward looking statements. Except where required under applicable securities legislation, UPC does not undertake to update any forward looking information.
Contact
Uranium Participation Corp.
David Cates
President & Chief Executive Officer
(416) 979-1991 Ext. 362
Uranium Participation Corp.
Mac McDonald
Chief Financial Officer
(416) 979-1991 Ext. 242