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Uranium fund files for $1 billion share sale to expand holdings


Uranium prices have climbed by a third since mid-Aug

Fund buys, holds physical uranium for investors

A Toronto-listed physical uranium trust that sold more than $240 million in additional shares in recent weeks, acquiring millions of pounds of uranium and sending prices to almost a seven-year high, has filed to increase its share sale by an additional $1 billion.

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Sprott Physical Uranium Trust will expand its so-called at-the-market program, which allows it to sell additional sales at its discretion and use the proceeds to buy additional uranium, to a total $1.3 billion, it said in a statement Sept. 10.

The action was taken as a result of strong investor interest in the original $300 million equity sale program launched Aug. 17, the company said. The fund has sold $244.7 million in new shares since the start of the equity sales, it noted.

The larger amount available "is expected to allow the trust to continue to meet investor demand by issuing new units and actively accumulate physical uranium," Sprott said.

The new demand as Sprott bought uranium with the proceeds of the share sales sent uranium prices quickly higher. S&P Global Platts assessed the spot price of U3O8, the most traded form of uranium, at $41/lb as of 1 pm ET (1700 GMT) Sept. 10, the highest since mid-November 2014.

The spot price for current month delivery has climbed by 34% since Aug. 17.

Uranium market participants have said Sprott has been a constant buyer in the past three weeks. However, the size of the expanded ATM program caught some by surprise.

"This could really have an impact on uranium prices," a uranium producer said Sept. 10, speaking on condition of anonymity to discuss sensitive market developments. The new ATM is "a significantly larger war chest," the person said.

The uranium trust is a closed-end fund that can issue new units through at-the-market sales as long as such units are priced at a premium to the prior day's closing net asset value, based on the price of uranium. The trust shares have traded at above their net asset value since the ATM program launched.

Between the sale of new shares and the increase in the price of uranium, the value of the fund has climbed from about $600 million when Sprott acquired the fund, previously known as Uranium Participation Corp., to $1.04 billion as of Sept. 9.

Sprott Asset Management, which manages the trust, has said it will seek a US stock exchange listing for the trust in an effort to expand the market for the shares.