Why is the Deep Yellow (ASX:DYL) share price gaining 5% on Monday?

Investors are driving up Deep Yellow shares.

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The Deep Yellow Limited (ASX: DYL) share price is on the move during afternoon trade. This follows other uranium shares, which are also heating up the S&P/ASX 200 Energy Index (ASX: XEJ).

At the time of writing, Deep Yellow shares are rebounding from Friday’s losses to $1.095, up 4.78%.

What did Deep Yellow recently announce?

Investors are driving up Deep Yellow shares after the company provided an update to the ASX regarding a non-core asset.

On Friday, Deep Yellow announced an option agreement for the sale of shares in Shiyela Iron Pty Ltd. The latter holds the Shiyela Iron Ore Project, located in Namibia, around 45 kilometres from Walvis Bay deep-sea port.

Deep Yellow’s subsidiaries, Reptile Uranium Namibia and Oponona Investments, have a 95% and 5% interest in Shiyela Iron, respectively.

As such, both Reptile and Oponona entered into an exclusivity agreement with Namibian registered company HyIron Green Technologies.

Working together with German technology leader CO2Grab, HyIron aims to utilise its proprietary technology to produce green pig iron. The company has set its eyes on boutique steel manufacturers in Germany.

Under the agreement, HyIron will have a 12-month option to undertake due diligence along with a number of wind, water and solar studies. HyIron will pay a fee of US$100,000 for the exclusivity period, with an option to extend a further 6 months for US$50,000.

At the end of this time, HyIron will have the right to acquire all the shares in Shiyela Iron for US$5 million. However, this is provided that the price of iron ore at 62% Fe fines is trading above US$250 a tonne. If the spot price is fetching below US$100 a tonne, the purchase price will be lowered to US$3 million.

Deep Yellow share price snapshot

Over the last 12 months, Deep Yellow shares have surged more than 240%, with year-to-date gains of 130%. It’s worth noting, the company’s shares reached a multi-year high of $1.37 cents in mid-September.

Based on today’s prices, Deep Yellow commands a market capitalisation of roughly $364.09 million, with 331.7 million shares on issue.

Should you invest $1,000 in Deep Yellow right now?

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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