Geiger Counter Ltd : Annual Financial Report

GEIGER COUNTER LIMITED

Date of Announcement: 19/12/2014

RELEASE OF ANNUAL REPORT AND FINANCIAL STATEMENTS

The Directors announce the release of the Annual Report and Financial Statements for the year ended 30 September 2014.

CHAIRMAN'S STATEMENT - FOR THE YEAR ENDED 30 SEPTEMBER 2014

General Outlook

In my last report, I suggested that we might be very close to the bottom of the market. Uranium continued to fall for a while but, having traded at US$28 per pound, it has steadily improved and at the time of writing moved up to $43.

The general impression was that the turnaround was caused by the change in direction by one of the Japanese precincts which stated that its nuclear reactors would be restarted during the course of next year. While this obviously had an effect, there is no doubt that from a producer point of view there were little in the way of profits to be generated at that level. Secondly, and perhaps more importantly, there was no chance of new production being established at anything like that level.

There has also seen a sea change in how the product is marketed. Until very recently most business was conducted by the consumers on long term contracts. Seemingly this is becoming increasingly less important and most business is now conducted through the spot price. There is a precedent for this as in the case of Iron Ore; long term contracts have largely disappeared and virtually all business is completed on the spot market.

I retain my optimism featured in the last report. When a commodity falls to a level where virtually no producer makes a profit, it is purely a matter of time before a recovery takes place. In the case of Uranium there were other contributory features. Until last year world markets had largely been supplied from Russian stock piles. The agreement with the Americans has now been terminated and Russia has indicated that it is no longer a seller into the International markets. While the American utilities have been happily buying into a falling market, the recent rise will certainly polarise their thoughts. I would anticipate that if the rise continues, next year will see a number of American utilities arrange off take agreements with either existing producers or those with the ability to commence production within the foreseeable future. Either way it would be very positive for the sector. We have utilised gearing at modest levels throughout the year and have gently increased the level in recent weeks - currently gearing stands at 17% of assets.

Geiger Counter shares reflected the background of the sector and drifted down for much of the period under review however recently they have moved up substantially in line with the market and I confidently expect this trend to continue.

The Board / Investment Manager

At the start of the year Terry Ward announced his resignation as he felt that most of his time was spent in Australia and he was not able to fulfil his duties as a director. I would like to thank him for his wise council over the years.  James Leahy was appointed to the Board in October. James has spent most of his professional career in the natural resources sectors and we look forward to his input.

We are fully compliant with the recently introduced Alternative Investment Fund Manager Directive and the Foreign Account Tax Compliance Act. In January, we announced that Keith Watson would join Will Smith to work jointly on the management of the Company's portfolio. Keith has many years of valuable experience in the uranium sector.

Continuation Vote

At the forthcoming Annual General Meeting expected to be held in March 2015 shareholders will be given the opportunity to vote on the continuation of the Company. Although the following year will continue to be a challenge the Board will be recommending that shareholders vote in favour of the continuation resolution as the underlying fundamentals remain attractive in the medium to long-term.

On a personal note I would like to thank the Company shareholders for their continued support, my fellow Directors for their diligence and our advisers for their advice and guidance over the last year.

George Baird
Chairman
12 December 2014

INVESTMENT ADVISER'S REPORT - FOR THE YEAR ENDED 30 SEPTEMBER 2014

The uranium market remained under pressure through much of the year as delays to Japanese nuclear reactor restarts continued to weigh on the price which declined progressively over the year to reach a low of US$28/lb over the summer. The price did, however, improve into the year end and strong upward momentum has since been sustained. At the time of writing U3O8 has reached US$43/lb.

After a false start in the Spring, when equities ran ahead of the uranium price, the tide appears to have turned, and with good reason. While a number of factors have contributed to the sector recovery, Japan's long awaited approval to restart its nuclear power stations acted as a trigger to performance, providing a clearer picture of the demand outlook and removing a market overhang. Japan's decision occurred after sizable, multi-year off-take contracts by China and India with Uzbekistan's state owned producer Navoi, responsible for approximately 4% of global mined output, which had significantly tightened product availability.

Furthermore the prolonged, post Fukushima decline in product prices has led a number of established producers to not only halt new project development but also to deliver only into higher priced legacy contracts, reducing supply availability. As illustration, attributable 2014 production from Rio Tinto's Rossing Uranium and Ranger operations has declined approximately 60% on the prior year with output now running at 30% of pre-Fukushima levels and likely to fall further as higher priced legacy sales contracts run-off.

Meanwhile clean, cost competitive nuclear power remains integral to China's ambitious power strategy which proposes a trebling in nuclear generating capacity to 58GW by 2020 rising to 200GW by 2030. China's standardised reactor designs, incorporating latest generation passive safety systems, will likely aid this expansion drive. Becoming the largest consumer of feedstock, provides explanation as to China's ongoing appetite to secure long-term supply during the downturn and this year's acquisition of 25% interest in Paladin's Langer Heinrich asset and the latter US$800m off-take deal with Navoi. Suspension of steel manufacturing around Beijing to reduce chronic air pollution during the recent Asia Pacific Economic Co-operation summit, as China contends with an overdependence on coal fired power and chronic air pollution further supports nuclear national importance.
First half exuberance proved premature and uranium equities were latterly caught up in the general downdraught of US$ strength and broad resources market weakness, largely ignoring the pick-up in physical prices into the year-end. Despite the recent rally, a sustained price recovery will be required to incentivise production and valuations remain attractive.

The fund has maintained a healthy exposure to lower cost in-situ recovery operators, notably those located in North America, which are capable of profitable production at the current spot price. Improving sector sentiment will feed through to the valuations of exploration assets, such as Fission Uranium, which have the potential to delineate tier one projects and whose share price has lagged the recent bounce. Likewise fund exposure to development projects offers significant potential performance torque.

Meanwhile with such concentrated uranium production, supply remains at risk of disruption which could strengthen prices, a key consideration for utility buyers. Key among these include operational issues or strike action, such as occurred at the Cameco/Avera Key Lake mine and mill complex, further sanctions against Russia, politics of Kazakhstan.

Will Smith and Keith Watson
New City Investment Managers
12 December 2014

For further information please contact:

Craig Cleland - New City Investment Managers - 020 7201 5368

Lisa Neil - R&H Fund Services (Jersey) Limited - 01534 825 336

2014 Annual Report

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Source: Geiger Counter Ltd via Globenewswire

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