TIPS FOR SHARING MIDAS: Sitting on a pile of uranium can do you good

Commentators say that the price of uranium, at a cyclical minimum, seems ready to recover

Yellow Cake appears in Aim in July and expects to benefit from an increase in the price of uranium.

It takes its name from the term for uranium oxide powder. This is a stable compound produced in all countries that extracts the mineral and that is then used in the preparation of fuel for nuclear reactors.

The company's business plan is simple: buy this uranium oxide, store it and wait for the price to rise.

Commentators say that the price of uranium, at a cyclical minimum, seems ready to recover

Commentators say that the price of uranium, at a cyclical minimum, seems ready to recover

Prior to listing, the company had reached an agreement with the world's largest producer, Kazatomprom, to buy up to $ 170 million (£ 130million) of uranium oxide at a large discount in its listed price. That's 8.1 million pounds, or 5 percent of the world's production marketed in 2016.

By demonstrating that it can deliver on its promises, Yellow Cake has already received that shipment. This week the firm added 350,000 more pounds of uranium to the pile with a second purchase of Kazatomprom, with whom it has an agreement to buy up to $ 100 million per year over the next nine years.

Yellow Cake raised £ 151million in its flotation to 200p per share. It is now at 225¼p and attracts analysts' purchase ratings.

Commentators say that the price of uranium, at a cyclical minimum, seems to recover as Japan restarts the generation of nuclear power and China increases its own.

Uranium fell out of favor at the time of the financial crisis and the value of the merchandise has languished since then.

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After reaching a maximum of more than $ 135 per pound in 2007, today it is trading at only $ 26.10. The stockbroker Numis believes it could reach $ 40 by 2020.

Being at a disadvantage for so long means that there is a supply deficit and, with countries seeking alternatives to fossil fuels, uranium could again be in favor, although experts have predicted a recovery in their price before and have been wrong.

Berenberg wealth manager analysts have a target price of 249p in the stock and say it represents a low-risk way to get exposure to a compelling commodity history.

Yellow Cake also has an experienced boss in charge: the business was established by Bacchus Capital, led by Peter Bacchus, a former global head of metal mining at Morgan Stanley.

Midas verdict: To buy. Japan has nine reactors in operation and emerging nations, including China, are planning to build new reactors. For those who think that the price of uranium could eventually recover, this is a simple way to get exposure.

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