Geiger Counter Ltd : Interim Report and Financi...

GEIGER COUNTER LIMITED

Date of Announcement: 27/06/2016

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 2016.

CHAIRMAN'S STATEMENT

The six month under review was very interesting for investors in the uranium sector as some of the themes I have been mentioning in my previous reports finally came to pass. Although the spot price of uranium fell by 22 per cent over the half year to 31 March 2016 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 regional explorers.

The Company's net asset value rose by 28.9 per cent over the six months driven by the Fund's heavy exposure to many of the equities that attracted attention from China. Just to reiterate some of the more relevant facts: China continues to pursue its policy of building new nuclear power stations; India has signed a long-term agreement with Cameco for the delivery of uranium; and America is now actively encouraging development of new uranium projects to reduce its dependence on foreign supply. Longer-term it has been estimated that supplies from Kazakhstan, the dominant global producer, will become increasingly difficult to sustain within the next five years.

The other themes that we hoped would come into play delivered more mixed results; Japan continues, albeit very slowly, with its nuclear reactor restart programme. Despite some legal proceedings attempting to stop this process it nevertheless grinds on, and we expect a significant portion of Japan's reactors to be online in the coming years. We also saw mines taken offline in Canada, a reflection of the challenging price environment.

The Company's share price lagged the increase in the net asset value rising 11.5 per cent over the six months. As a result the discount widened to reach 25.7 per cent at the end of March.

I would like to thank Shareholders for continuing to support the Company and for ensuring that the annual Continuation Vote was passed at the Annual General Meeting in March. The last six months 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
June 2016

INVESTMENT ADVISER'S REPORT

The uranium spot and term prices declined approximately 22% to US$28.1/lb and by 7% to US$41/lb over the half year to end-March. Japan's hesitant nuclear power reactivation programme coupled with some seasonal demand weakness continued to weigh on prices towards the end of the period. Despite the softness in physical commodity prices the Fund NAV increased 27.5% during the interim period, outperforming sterling returns for the Solactive Index and Global X Uranium equity ETF of 16.7% and 12.2% respectively.

Promising developments in early January regarding ramp-up of its nuclear generating capacity, as the first of two Takahama reactors authorised to restart commenced operation in February, were unfortunately stalled following a District Court injunction in March preventing their reactivation and requiring reactors to remain idled. Notwithstanding this hesitancy within resistant Fukui prefecture, Japan's restart programme displayed some resilience with local courts rejecting similar attempts to shut the two Sendai reactors which have already restarted. In addition, Japan's Nuclear Regulatory Authority indicated that the final pair of reactors at Takahama and a reactor at Ikata had successfully completed necessary safety tests prior to approving their restart. The competitive marginal costs of reactivating Japan's installed nuclear power industry compared to more expensive development of incremental fossil fuelled or alternative energy sources remain fundamentally favourable for the regional industry.

China's ambitious nuclear growth plans continued apace driving further strategic M&A, reflecting the nation's longer-term supply requirements. With acquisitions focussed on the attractive Western Athabascan explorers, exposure to which has been a significant factor driving Fund performance. Most notable in this regard were China General Nuclear's acquisitions of a 20% interest in Fission Uranium in late December and latterly investment in NexGen by Chinese investment fund CEF.

India too has taken positive steps which should encourage development of its domestic nuclear power industry, ratifying its nuclear liability laws, in-line with global norms, which will place liability in the event of an accident onto power station operators rather than equipment vendors, a factor which has previously stymied regional development in a region which offers the second largest market growth potential behind China.

Reflecting the still challenging price environment commercial industry continues to reduce supply illustrated by operational streamlining by Cameco, one of the most competitive non-state owned miners, which reduced group output expectations by approximately 2.5Mlb U3O8. Having increased guidance for its attributable share of production from Cigar Lake by 1.5Mlbpa earlier in the year it subsequently placed a number of high cost mines on care and maintenance reducing output guidance by over 4Mlbpa.

We believe consolidation will continue to underpin equity valuations over the next 12 months as the strategic relevance of accessing long-term uranium supply, key to the global reactor build out, increases. The announcement by Shenhua Coal, a $40bn market cap Chinese coal miner, that it is in talks with CNNC and CGN to fund the purchase of stakes in nuclear related projects as it seeks to diversify away from polluting coal fired power generation highlights both the increased emphasis on clean air power generation and prospects for further strategic activity, particularly within the Patterson Lake trend which represents one of the world's most prospective undeveloped sources of uranium.

Robert Crayfourd and Keith Watson
New City Investment Managers
June 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

Interim Report and Financial Statements

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The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Geiger Counter Ltd via Globenewswire

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