London-based Bacchus Capital raises $140m equity capital for its uranium venture, Yellow Cake

Bacchus Capital, the independent investment and merchant bank specialising in cross border public market M&A, and natural resources sector ventures, arranged for the financing of $100 million purchase of physical uranium, by Yellow Cake, pursuant to its option with Kazatomprom. The $140 million oversubscribed equity fundraising was conducted by accelerated bookbuild, in which Canaccord Genuity Limited and Cantor Fitzgerald & Co. were appointed as Joint Bookrunners.

Yellow Cake was founded and established by Bacchus Capital in 2018 on the fundamental premise that uranium, as a commodity, is structurally mispriced. Bacchus Capital believes that the central source of this mispricing is the potential looming supply gap, as demand for nuclear power as a low-carbon baseload source continues to increase, while a lack of investment in new supply sees existing mines reaching end of life, with insufficient new mines under development to replace them. Since 2018, Yellow Cake has accumulated 9.3 million pounds of U₃O₈ at an effective price of $21.34 per pound; at the current spot price of $28.35 per pound, this represents a gain of approximately 33%, or $65 million.

The timing of the fundraise is predicated on the Covid-19 global pandemic and Section 232 petition in the United States having caused a slowdown in the uranium spot and term-markets, as utilities have been reluctant to commit to purchases and the world's largest uranium producers, Kazatomprom and Cameco, have been reducing production or suspending operations. The reduced activity has resulted in a tightening of the spot-market, with only c. 5.6 million pounds of U₃O₈ traded year to date in 2021. Yellow Cake's purchase of 3.5 million pounds will represent a very significant volume in that context. Following the transaction, Yellow Cake will increase its U₃O₈ holdings to 12.8 million pounds and retains the option to purchase up to $100 million of U₃O₈ per year from Kazatomprom through to 2027. While this transaction will fully exercise Yellow Cake's 2021 Kazatomprom purchase option, the company may elect to pursue additional purchases during the year outside of the option.

Bacchus Capital was established in 2017 by Peter Bacchus, former Global Head of Mining and Metals Investment Banking at Morgan Stanley, in order to bring traditional investment banking values of independence, objectivity and trust to an expanded client base, which includes some of the largest and leading companies in the natural resources sector, alongside some of the industry's most interesting and innovative growth companies. His co-founders are Paul Cahill, former Group Head of Business Development at Anglo American plc; Chris Johannsen, previously a founder of Australian boutique advisory firm Gryphon Partners; and former Morgan Stanley banker, Richard Allan.

www.bacchuscapital.co.uk