Berkeley Energia on Track to Become Low-Cost Uranium Producer
The DFS suggests that the over a ten-year period Berkeley will be able to produce 4.4million pounds of uranium per year at a total cash cost of US$15.06 per pound.
Uranium explorer Berkeley Energia (ASX:BKY) is moving closer towards construction of its highly valuable Salamanca mine in Spain. Berkeley is set to become one of the world’s low cost producers of uranium, estimated to generate an average annual net profit after tax of US$116million per annum.
Definite Feasibility Study Confirms Financial Viability of Project
On 14 July Berkeley released the Definite Feasibility Study (DFS) which confirmed that the Salamanca project will make Berkeley “one of the lowest cost producers capable of generating strong after tax cash flow through the current low point in the uranium price cycle.”
The DFS suggests that over a ten-year period Berkeley will be able to produce 4.4million pounds of uranium per year at a total cash cost of US$15.06 per pound.
Salamanca to Add Value to Shareholders and Community
While the DFS clearly demonstrates the financial merits for both the company and shareholders, management focuses on a number of aspects beyond the financial capabilities of the mine.
Paul Atherley, Managing Director of Berkeley Energia says: “The Salamanca mine will rank as Europe’s largest uranium mine, one of the world’s top ten producers and will be a long term, reliable supplier of clean energy fuel.”
Her furthermore highlights on the socio-economic benefits for the region: “It will rejuvenate a local community badly hit by long-term unemployment by providing training and sustainable jobs and supporting local business and the community in general.”
Upcoming Milestones: Construction & Offtake Agreements
Over US$60million has been invested in the project to date and the upcoming 12 months will be exciting times for all stakeholders. With approvals in place for infrastructure development, work has already commenced on road alignments and power line upgrades. The main construction will go ahead shortly.
In the latest ASX announcement management confirmed that a number of parties have already approached the company to negotiate offtake agreements. Project financing will be the last step before progressing the Salamanca project.
Investment View: Bullish Outlook for BKY
Berkeley’s share price has risen over 70% year-to-date and 150% over the past 12 months. Wise-owl recommended to buy BKY on 2 April 2014 at $0.30 and then again on 12 May 2016 at $0.62.
Berkeley offers speculative exposure to one of the lowest cost uranium projects in the world. We are attracted to the magnitude of its assets and permits obtained which has led to commencement of development work in 2016. While volatility in uranium prices and funding are principal risks, Berkeley is transitioning from explorer to producer which should yield interest towards the stock.
Author: Simon Herrmann
Jul 27, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.