Geiger Counter Ltd : Interim Report and Financi...

GEIGER COUNTER LIMITED

Date of Announcement: 19/06/2015

RELEASE OF INTERIM REPORT AND FINANCIAL STATEMENTS

The Directors announce the release of the Interim Report and Financial Statements for the Six Months to 31 March 2015.

CHAIRMAN'S STATEMENT

The six month under review probably represent one of the quietest periods since the trust was established. The spot price of uranium traded around the USD 40 per pound level for most of the time while the relative shares were largely ignored by the market as a whole.

Once again, Japan was the main focus of market emotion and after a number of false dawns it would appear that, at last, a number of districts are on the cusp of restarting their nuclear power stations. The Kagoshima District Court overruled a lawsuit that would have halted the restart of the Kyushu Electric Power Company's Sendai nuclear station. This decision means that by June this year, Sendai will be the first plant to recommence operations following the Fukushima close down four years ago. We would be confident that with this decision resolved, and given the total support of Prime Minister Shinzo Abe, the restart process will now gather pace.

It would be a mistake to discuss the uranium market without referring to natural resource markets generally, uranium has been a sea of tranquillity within a maelstrom of activity seen in other commodities. Oil, iron ore and base metals have had a torturous time with falls of over 50 percent not uncommon. However just as consensus opinion became overtly bearish; the commodities staged a material recovery. The reason I have highlighted the situation is that so far uranium equities have not really shared in this recovery, but in my opinion, it is only a matter of time.

Just to reiterate some of the more relevant facts; China continues its policy of building new power stations, India has signed a long term agreement with Cameco for the delivery of uranium and America is now actively encouraging the development of new uranium projects. Longer term it has been estimated that supplies from Kazakhstan will have run down within the next five years.

Corporate Governance

The Board have decided that as a result of feedback from shareholders they will introduce with immediate effect an Audit and Risk Committee and continue the process of refreshing the Board of Directors where Graeme Ross will stand down and be replaced by an appropriately qualified individual who will take on the role of Chairman of this new committee.

On that final point I would wish to thank Graeme and the other directors for their sterling efforts and also the shareholders for their vote of confidence in approving the recent continuation vote. 

George Baird
Chairman
May 2015

INVESTMENT ADVISER'S REPORT

News of industry supply curtailment and anticipation of "fast tracked" reactor restarts in Japan remained key market drivers during the period. It is encouraging that after much legal wrangling, the final Kagoshima District Court decision confirmed the restart the two reactors at Sendai can take place this summer, providing a firmer footing for the country's reactivation programme to move forward, a key factor for market sentiment.

Momentum in key markets outside Japan has also picked-up. Integral to the advancement of its clean air policy, China aims to boost nuclear power's share of generation capacity to 20% by 2030. Driving a near ten-fold capacity expansion from the current 20GW and the government has started to award reactor construction permits based on new generation reactor designs incorporating latest safety technology. In January India's government announced a framework agreement with the US, crucially removing the liability of service providers in the event of an accident, which should unlock significant demand from the region which has the second largest reactor development pipeline behind China. India's more recent long-term uranium purchase agreement with Canadian producer Cameco lends further weight to growth prospects in this region.

At the same time that Asian demand growth is accelerating, mine production is being shut-in as higher priced legacy contracts run-off, helping to tighten the market and highlighting the necessity for higher commodity prices not just to sustain existing output but incentivise required new production. While a broader commodity malaise continues to weigh on the sector we believe these positive uranium industry fundamentals differentiate the sector from broader commodity markets which remain closely tied to exchange rate fluctuations.

Notwithstanding the fact that mine production remains prone to disruption as operators sweat their assets, with such concentrated global production, the risk labour disputes or geopolitical supply shocks remain ever present. M&A activity also represents a significant opportunity with both China and India having flagged interest in acquiring assets.

The fund NAV declined 9% versus a sterling decline of 13% by the URA Global X ETF. Reflecting the concentrated nature of the market the fund remains highly focussed though exposure is biased towards low cost in situ leach projects and tier one development projects. In addition, the fund has established a position in Hong Kong-listed China General Nuclear Power Corporation, which may benefit disproportionately from China's huge domestic nuclear power development pipeline. Access to capital may help the organisation compete effectively against more costly Western service providers, such as Areva, for international business whilst allowing it to capitalise on low asset valuations to secure long-term uranium supply in support its growth aspirations.

Keith Watson
CQS Asset Management Limited
May 2015

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

Interim Report and Financial Statements

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Source: Geiger Counter Ltd via Globenewswire

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