Geiger Counter Ltd : Annual Financial Report fo...

GEIGER COUNTER LIMITED

Date of Announcement: 16/12/2016

RELEASE OF REPORT AND FINANCIAL STATEMENTS

The Directors announce the release of the Annual Report and Financial Statements for the year ended 30 September 2016.

CHAIRMAN'S STATEMENT - FOR THE YEAR ENDED 30 SEPTEMBER 2016

When I last wrote to Shareholders in June I commentated that the six months to 31st March 2016 had been very interesting for investors in the uranium sector as some of the themes previously mentioned had finally come to pass. Six months further on and this story continues. The spot price of uranium (as measured by the U308 price) has fallen further and ended the financial year at $22.38 per pound. Over the year the price fell by 40 per cent.  Away from the spot price of uranium there were significant developments in the underlying uranium equity market. This was characterised by merger and acquisition transactions particularly in the Western Athabascan area of Canada where Chinese state and private entities took significant stakes in some of the attractive plays.

For the year to 30th September 2016 the Company's net asset value rose by 39.1 per cent. The investment managers' report on the following page sets out the background to this strong performance and your Company has benefitted from the fact that we had exposure to many of the equities that attracted attention from China. We believe that this trend will continue as China and other emerging market economies continue to build new power stations. The falling spot price of uranium has the effect of curtailing supplies as it becomes more difficult to develop new resources due to cost pressures.  We still follow progress in the Japanese nuclear restart programme but note this is a very slow process.

The Company's share price lagged the rise in the net asset value and rose by 26.9 per cent over the year with the discount being 21.7 per cent at the end of September.

Shareholders have the opportunity each year to vote on the continuation of the Company. Your Board is recommending that Shareholders vote in favour of continuation as we believe there are good opportunities to benefit from corporate consolidation in the uranium equity market.

I would like to thank all Shareholders for their interest and support for the Company.  The last year has shown the potential from this unique asset class and the Board and the investment management team look forward to achieving better returns for Shareholders in the months and years to come.

George Baird
Chairman
December 2016

INVESTMENT ADVISER'S REPORT - FOR THE YEAR ENDED 30 SEPTEMBER 2016

With its more predictable demand cycle uranium avoided the deflationary affects which impacted most other industrial commodities from early 2014 and which culminated in their downward price spiral during January this year. Unfortunately uranium's resilient performance has subsequently unwound and following a 2.5% price rise in the year to September 2015 the spot price declined 40% over the following twelve months with declines occurring as other industrial commodities began to recover from their January lows. Despite the disappointing backdrop the Company's performance has nevertheless proved very resilient with the Net Asset Value per share rising 39% with strong performances from Athabasca explorers Nexgen and Purepoint being the prime contributors. By comparison the Solactive Uranium Index and the URA uranium equity ETF generated sterling returns of 15% and 9% respectively.

Arguably prompting the uranium commodity price sell off, Japan's reactivation plans continue to suffer inertia. Promising news in early January regarding the country's nuclear restart unfortunately stalled as two reactors at Takahama, of four reactors restarted, again shut down and remain off-line largely in response to local opposition to their operation. Public opinion runs counter to central government plans to reactivate its cheaper-to-run installed nuclear capacity. Nuclear's competitive cost of production remains fundamentally attractive, underpinning the government's drive to restart power stations. Notwithstanding the prospect of deteriorating air quality recent price increases of imported LNG and thermal coal will have only extended the relatively cost advantage of nuclear over fossil fuels for the nation. Both factors may help soften local resistance. Away from Japan, pro-nuclear support in the US state of New York illustrates political recognition of nuclear within the country's power generating mix, having an approximate 19% share of the market. The US election outcome could similarly support the nation's nuclear power industry. This is particularly relevant when considering regional incentives offered to assist market penetration of renewable energy which, despite extreme variability in supplying grid power, now rivals nuclear.

The primary driver to NAV performance remains the substantial growth plans of developing markets. In particular China's environmental policy to improve air quality and integral to this, its motivation to expand nuclear power generating capacity. This has seen significant interest in securing long-term supply. Indeed China has followed through on explicit statements early in the year that it was seeking to acquire strategic uranium supplies investing directly in projects owned by Fission Uranium and latterly in NexGen. This has driven strong equity performance from these and neighbouring explorers.

Currency has also made a positive contribution to NAV performance as non-sterling equity holdings protected shareholders from sterling weakness post BREXIT. Elsewhere, the weakness of the Kazakh Tenge has had minimal impact on regional mine output, estimated to represent approximately 40% of global primary U3O8 production. Illustrating challenging economics faced even by low cost Kazakh producers, the Naserbayev administration reiterated that it expects the country's production to remain stable following its re-election, despite the cost relief resulting from its currency devaluation.

In contrast, production from larger commercial producers such as Cameco, Rio Tinto and Paladin has been curtailed as they retrench strategy to focus on their lowest cost mines and deliver only into higher priced legacy contracts. This marks an important step in the uranium cycle helping to rebalance the market. Similarly retirement of marginal enrichment capacity, recently announced by Urenco, illustrates the challenging conditions in this segment of the market. This too represents a helpful indicator to the uranium cycle. The removal of spare enrichment capacity, which allowed longer processing cycle times allowed more usable fuel to be squeezed from U3O8 feed, should ease.
Recent safety checks on steam generators at five French reactors, which necessitated them being taken offline, has also weighed sentiment. France could be reliant on imported, fossil fuel power over the winter, ironically the polar opposite of the intended aim to reduce greenhouse gas emissions of the Paris Accord. As a result prices have slipped further with the U3O8 spot price of US$18.75/lb at the time of writing. Notably, however, having traded at a discount for much of the last year the share price of the physically backed ETF UPC has returned to a premium pointing to an improvement in prices. Reflecting a similarly positive stance the Company has increased exposure to the sector, most recently participating in a recent UPC equity placing, the proceeds of which it use to acquire U3O8. The Fund has also repurchased shares in Athabascan explorers having reduced exposure over summer.

Robert Crayfourd and Keith Watson
New City Investment Managers
December 2016

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

Annual Financial Report for the year ended 30 September 2016

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Source: Geiger Counter Ltd via Globenewswire