Berkeley Energia*# (BKY) - Buy – Quarter of considerable progress
Market Cap £178m Price 68.5p Target 128p
Berkeley Energia has today announced the results of its December quarter – a period of considerable progress towards its ultimate goal of producing low cost uranium from its Salamanca mine in Spain. At the end of the quarter, Berkley had $AU31m in cash and remained debt free.
During the period, Berkeley completed its first offtake deal with Interalloys for 2Mlbs U3O8 over a five year period at a price of $US43.8/lb U3O8 – well ahead of the spot price. Berkeley report further interest with other parties at similar terms to those with Interalloys. During the quarter Berkeley also raised $US30m with London institutions in a placing which was oversubscribed and at only a slight discount to the prevailing share price. This first phase of funding allowed Berkeley to both complete the land purchase and land lease for the project and also to place orders for the crushing circuit for the plant and begin proper construction in Spain. The crusher was purchased from Sandvik at a price lower than expected from the DFS and bodes well for further optimisation and the final capital costings for the project as part of the front end engineering and design being undertaken by AMEC Foster Wheeler.
Berkeley continues to talk to a range of potential financing partners to finance the remaining capital required to build the mine and who are interested in taking a strategic stake in the mine. These potential partners are currently undertaking due diligence.
Perhaps one of the most important developments at the end of the quarter (and into this year) has been an improvement in sentiment in the uranium market with the spot price increasing and utilities beginning to enter the market again looking for longer term supply. We see this improvement continuing as existing demand renegotiates supply contracts and new demand enters the market, especially that from the large number of new reactors being commissioned and built (e.g. in China). Berkeley’s mine in Spain is well placed to benefit from the expected increase in price as it commissions and reaches full capacity. We retain our Buy recommendation and 128p price target as Berkeley moves positively into the new year.
BKY Price at posting:
$1.16 Sentiment: Buy Disclosure: Held
