19
DIY Investor Magazine
/
September 2016
Paul Atherley, Managing Director, Berkeley Energia Ltd explains how Salamanca’s low capital requirements and
low operating costs can deliver strong, sustainable earnings, even when uranium prices are low.
In terms of valuing any junior mining business, and
assessing it as a potential investment, its feasibility
study is critical. In July 2016 BKY published the results
of its Definitive Feasibility Study which confirmed that
the Salamanca project will be one of the world’s lowest
cost producers of uranium. The study reported an
after tax NPV US$531.9 million and an internal rate of
return of 60% based on a discount rate of 8%. These
are highly impressive economics by any measure,
and reflect the ultra-low operating cost nature of the
mine, coupled with low upfront capital and a significant
production base.
Over an initial ten-year steady state period the project
is capable of producing an average of 4.4 million
lbs of uranium per year at a total cost of US$15.06/
lb and is expected to generate an average annual net
profit after tax of US$116 million. With operating costs
predominantly in euros and revenue in US dollars
the project is expected to continue to benefit from
the effects of deflationary pressures within the EU.
Additionally, due to its location, it benefits greatly from
the well-established EU funded infrastructure in the
region.
To read the announcement of the Definitive Feasibility
Study
Berkeley has established a good neighbour and
business partner relationship with the local community
with the latest skills training programme for potential
employees being heavily oversubscribed; in addition
to the creation of 450 direct jobs (up more than five
times as many indirect jobs) in a community hard hit by
long term unemployment, it will actively support local
businesses and the activities of the local municipalities.
The mine design incorporates the very latest thinking
on minimal environmental impact and continuous
rehabilitation such that land used during mining and
processing activities is quickly restored to agricultural
usage.
Managing Director, Paul Atherley, commented: ‘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.
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.
This positive impact the mining industry has on regional communities
starved of investment and sustainable employment is something the
Board and management team is proud to be associated with.’ BKY is fully
funded through the initial development phase with A$16.3 million in cash
(and no debt), having recently completed a $10m financing with global
mining private equity fund RCF royalty.
Owing to the low operating and capital cost nature of the project and the
extremely robust project economics, the Company has been approached
by numerous high quality strategic partners and other financiers for
the mine financing and is considering a range of financing options
focused on minimising dilution. The Company has been approached
by a number of utilities looking to secure long term offtake agreements;
these discussions are underway and offtake arrangements are being
negotiated.
