The flagship asset of Berkeley Energia Ltd (LON:BKY)(ASX:BKY) is the Salamanca uranium project in Spain. The plan is to build this project into one of the world’s lowest cost uranium mines, capable of generating strong after-tax cash flows that will be robust even at low uranium prices.
A recently-completed definitive feasibility study demonstrated that over an initial ten-year period Salamanca is capable of producing an average of 4.4mln pounds of uranium per year at a cash cost of US$13.30 per pound and a total cash cost of US$15.06 per pound.
All told, the project has a net present value of US$531.9mln and an internal rate of return of 60%, using a discount rate of 8%.
Recent uranium price trading range allows for plenty of margin
Spot prices have recently been running some way higher than US$20 per pound in recent months, so there is plenty of margin on offer. What’s more, the term contract price is much higher at US$41 per pound.
Strong Resource base provides for long-term upside
The definitive feasibility study for Salamanca was based solely around the indicated and measured resource base, which currently totals 59.8mln pounds of U3O8.
The study did not incorporate any of the inferred resources, which total 29.6mln pounds of U3O8.
Potential exists to maintain steady state production by successfully converting these inferred resources into indicated resources with further drilling.
Salamanca the only major uranium development as market tips into deficit
Paul Atherley, the company’s chief executive outlined the significance of Salamanca in the global uranium context to an audience at this year’s Indaba mining conference in South Africa.
“As the uranium market tips into deficit Salamanca is the only major uranium mine being developed in the world today,” he said.
And he highlighted the likely upward trend in demand going forward by arguing that the equivalent of ten more Hinkley Point power stations will be needed to power the UK government’s 2040 electric vehicle targets.
Berkeley Energia will help meet the demand that arises for power in the coming years. It will be the world’s ninth largest producer of uranium when it hits nameplate capacity of 4.4mln pounds per year, ahead of Paladin (ASX:PDN).
Well supported by institutions
Institutions and management make up 70% of the share register. Among the most prominent names with stakes in Berkeley Energia are Resource Capital Funds, Anglo Pacific Group (LON:APF), Blackrock, Fidelity, Majedie and River & Mercantile.
The company’s construction debt is provided by the Sultanate of Oman, and conversion of a significant portion of it would add a significant sovereign wealth fund to the register too.