LONDON (Alliance News) - Berkeley Energy Ltd Wednesday said it has updated its pre-feasibility study for the Salamanca project in Spain to include the Zona 7 deposit which has led to the economics of the project being "transformed".
The Salamanca project is now thought to have a net present value of USD871.3 million, or GBP580.9 million, after it included the Zona 7 deposit with an internal rate of return of 93% based on a long term uranium price of USD65 per pound.
Berkeley said the valuation represents GBP3.22 per share on an undiluted basis, compared to its share price which was trading up 30.8% to 29.60 pence per share on Wednesday morning.
"With the major approvals in place and discussions with potential financiers underway we are expecting to commence site works in mid-2016," said Managing Director Paul Atherley.
Berkeley is hoping to produce its first uranium from the project in 2017, targeting a steady state of production of 4.3 million pounds of uranium per year, which will average 3.0 million pounds per year over the 18-year mine life. That 18-year mine life was the result of the study upgrade, which had previously had an 11 year mine life.
The study has also substantially reduced its operating costs to only USD15.60 per pound from the previous estimate of USD24.60 per pound.
Based on Berkeley's price assumption, the company is aiming to have a gross margin of around USD49.4 per pound of uranium, compared to its previous estimate that would have only made USD40.4 per pound.
To take that further, based on the average 3.0 million pounds of uranium per year at USD65 per pound over the 18 year mine life, Berkeley will generate an average of USD195.0 million per year in revenue.
Overall, the miner said the project will be "one of the lowest cost producers in the world" once it is developed.
Another huge bonus from the study is the capital cost has also fallen to USD81.4 million from its previous estimate of USD95.1 million, driven by lower-than-anticipated costs to develop the Zona 7 deposit and from benefits of currency depreciation, it said.
"We believe that the potential exists for further discoveries of Zona 7 style deposits and are finalising an exploration programme to commence in the New Year which will follow up a number of near surface, high grade drill intersections, located within ten kilometres of the plant that have not yet been fully evaluated," said Atherley.
The Salamanca project is comprised of the Retortillo, Alameda and the newly added Zona 7 deposits. The Zona 7 deposit is a shallow, high grade deposit located within ten kilometres of the proposed processing plant.
The company expects to enter into long-term uranium concentrate sale and purchase agreements with major power utilities.
However, the next step will be to secure a definitive feasibility study for the project, which has already started. The company said it anticipates finishing the study in May 2016.
"Following the board's decision to push ahead with the overall development of the project and the recent positive announcements on approvals, drill results, metallurgical test work and the study, the company has received a number of approaches from potential financiers which are now being advanced," it said in a statement.
Berkeley Resources Limited (LON:BKY) had its price objective boosted by research analysts at Numis Securities Ltd from GBX 40 ($0.62) to GBX 100 ($1.54) in a research note issued to investors on Wednesday, AnalystRatings.Net reports. The brokerage presently has a “buy” rating on the stock. Numis Securities Ltd’s price objective would suggest a potential upside of 341.99% from the company’s previous close.
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