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2018-06-13 17:56 CEST
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Geiger Counter Ltd : Half-year Report


Date of Announcement: 13/06/2018


The Directors announce the release of the Interim Report and Financial Statements for the Six Months to 31 March 2018.


We saw both sides of the uranium market at work over the last reporting period. Spot prices and uranium focussed equity prices rose during October and November as production cuts and mine closures drove market sentiment higher. Sadly the promised production cuts did not materialise in full and other technical factors caused market sentiment to fall sharply as we moved into 2018. The spot price of uranium (as measured by the U3O8 price) initially rose from US$20.25 at the end of September 2017 to US$22.32 in December 2017 before falling to US$21 at the end of March 2018.

For the six months to 31st March 2018 the Company's net asset value fell by 23 per cent and was affected by the rebalancing of the Global Uranium ETF. The investment managers' report on the following page explains this in more detail and outlines the background to the supply and demand factors in the uranium sector. On a positive note it is encouraging to see that globally nuclear power output has recovered to pre-Fukushima levels at over 2,500TWh per annum.

The Company's ordinary share price fell by 4 per cent over the six months and traded at a strong premium at the end of March. The subscription share price was 4.75p at the end of March 2018.

Your Board is pleased to see that the subscription shares are trading well in the market and also want to thank Shareholders for supporting the continuation of the Company at the recent AGM.

Since the end of March we have seen an improving net asset value and demand for the Company's shares has seen them trade at a consistent premium for the last few months. We believe this supports our belief that at some time in the relatively near future the uranium price is due for a substantial increase. In response to this the Company has begun to issue modest amounts of new ordinary shares at a premium. We are confident that improving sentiment will see increasing demand for the shares as we move positively into the new future.

George Baird
June 2018


We remain optimistic about the improving backdrop for the uranium price and believe deep value offered by equity investments in the sector offers significant investor opportunity. This has begun to gain recognition as illustrated by the premium attributed to the physically backed uranium ETF, Uranium Participation, which has been able to raise equity in order to acquire material. At the time of writing proceeds from the proposed IPO of Yellow Cake will be used to acquire U3O8 locking up a substantial amount of material and further tightening the market. Also evidencing improving investor sentiment the Fund's share price has traded at a premium to NAV for the last six months which has allowed the board to issue new equity in addition to the subscription shares listed at the turn of the year.

Geiger remains a uranium focused vehicle
The Solactive Global Uranium Index (Global X Uranium ETF) announced that it is reweighting its constituents from 100% Uranium equities to ~50%, with the remaining constituents constituting companies such as Barrick Gold, Rio Tinto and BHP, which weighed on the sector in March, although will officially complete in July. This saw technical selling of positions such as Nexgen, which hit a recent low on the last day of the month and Geiger Counter used this as an opportunity to add. We believe this was undertaken following a request from the URA equity ETF which had outgrown the underlying liquidity, following significant inflows since the late-2016 production cuts announced by Kazakhstan and latterly by Cameco. Geiger Counter now stands out as the purist as play from a uranium focused equity fund.

Supply adjustment continues
Cameco's December announcement to place its McArthur River mine into care and maintenance in 2018 removed around 14Mlb, equivalent to nearly 8% of forecast uranium production for the year, having a significant impact on spot prices. Following the earlier 5Mlb per annum production cuts announced by Kazakhstan's state mining company Kazatomprom, in January the market returned to balance and as a result the uranium price rose sharply from US$20/lb to US$26/lb in December. Prices did, however, retrace as Kazatomprom revealed its cuts would not be deepened around the turn of the year, which weighed on sentiment. In addition, two US uranium miners filed a joint petition to the US Department of Commerce seeking industry protection from cheap imports in particular of "state subsidised" product from Russia, Kazakhstan and Uzbekistan prompting utilities to step away from the market as they wait to see what, if any, policy changes are forthcoming.

Unsurprisingly the Fund NAV followed the uranium price, rising 24% into mid-December before subsequently slipping to close the year down nearly 19%. However, spot prices have once again begun to recover US$23.4/lb as it has become more obvious that commercial producers such as Cameco and Rio Tinto will fulfil contracts from existing inventory and purchasing material on the spot market, rather than mine their resources unprofitably. This has driven 30% improvement in NAV to 20.9p since end-March.

Without high prices, output cuts by Kazakhstan and most recently Cameco seem unlikely to be reversed, as currently forecast by some industry commentators. Major supply adjustments that have taken place in the uranium market seem likely to continue helping to drive this dynamic, as high priced legacy contracts run-off and unprofitable operations close. With the market rebalancing incremental output cuts should soak up the overhang of excess inventory and lift pricing.

Demand improving
At the same time the re-election of the pro-nuclear Abe government in Japan has coincided with a pick-up in momentum of reactor restarts in the region prompting utilities such as Kensai to resell LNG, an alternative fuel used to generate power in the region. Importantly Abe has backed the role of nuclear power and reiterated proposals for it to have a 20-22% share of the market by 2030. Japanese generating capacity is reaching more meaningful levels, currently 5.5GW, and globally nuclear power output has recovered to pre-Fukushima levels at over 2,500TWh. China's continues its nuclear power development programme, which is integral to its "blue sky" policy with 19 reactors currently under construction while other regions such as India and Saudi Arabia are also rolling out significant new capacity. Increasing marginal demand for enriched fuel will help reduce secondary supply from underfeeding as spare enrichment capacity is utilised, removing another source of excess U3O8. In the short term clarification of US policy may remove the temporary buyers' strike which has
latterly been evident following the joint 232 Petition filed by UR-Energy and Energy Fuels could see a
return of utility buying later in the year.

Robert Crayfourd and Keith Watson
New City Investment Managers
June 2018

For further information please contact:

Craig Cleland - CQS (UK) LLP - 020 7201 5368

Lisa Neil - R&H Fund Services (Jersey) Limited - 01534 825 336