(MENAFN- ProactiveInvestors - UK) Berkeley Energia Ltd (LON:BKY) is forging ahead with its uranium mine development in Spain, where initial site works have already begun.
Salamanca will be one of the globe's top ten producers and among the lowest cost, able to generate cash, even during current low uranium prices, the group has said.
Early stage work is fully funded, while the company hopes to secure a deal for full mine financing this December quarter, ahead of completing the project by the end of 2017.
A robust definitive feasibility study
The study in July showed that over an initial ten-year period, Salamanca can produce an average of 4.4 million pounds per year at US$13.30 per pound and cash cost of US$15.06 per pound (compared to current spot of US$26 per pound).
It is expected to generate an average annual net profit after tax of US$116 million.
The DFS placed a net present value (NPV) on the operation of US$531.9mln, and upfront capital costs to build the mine were slated at US$95.7mln.
With operating costs almost exclusively in Euros and revenue coming in in US dollars, it is expected to continue to benefit from continuing deflationary pressures in the EU.
The initial mine life of 14 years based on measured and indicated resources of 59.8 million pounds.
Exploration is aimed at converting some of the inferred 29.6 million pounds into mineable material.
Speaking to Proactive, chief executive Paul Atherley has said: "We are able to build this project, produce uranium, right at the bottom of the uranium price cycle and we are the only mine in the world that's able to do that."
Offtake negotiations underway and a price rise?
Berkeley is already in negotiations with selected utilities regarding offtake contracts during the initial 3-5 years of production from the project.
At a time when the project is due to come online, US utility firms' contracts will have ended, and be competing with demand from new Chinese nuclear reactors, which may push up prices, the firm reckons.
Atherley said: "So two big demand shocks at a time when primary supply is falling, so a lot of people are forecasting the uranium price to move quite strongly."
Building work started and mulling full financing route
Work on a road realignment and power line upgrade at Salamanca, three hours west of Madrid, is already underway and Berkeley said it was fully funded for this initial phase with A$11.3 million in cash and no debt.
On the remainder needed, the firm says it has been approached by a number of potential groups due to the site's attractive low operating and capital costs
Its preferred method and to minimise shareholder dilution, would be the sale of a minority interest to a strategic partner for a price that reflects the NPV (net present value).
What the broker are saying
FinnCap repeated a 'buy ' and 113p target price having initiated on the stock last week.
Given the weak uranium market currently, finncap expects this to be the only 'major new project to start construction', something which Berkeley could use to its advantage.
Liberum has also started coverage, saying it sees little downside to Berkeley, as further exploration success and higher uranium prices in the future will only serve to drive the share price higher. It has a target of 60p.
Shares today added 7.76% to 49.3p.
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