Berkeley Energia signs for the sale of its first million pounds from Salamanca
A letter of intent has been signed between Berkeley Energia (ASX:BKY) and a European based commodity trading company relating to the sale of the first million pounds of uranium production from the Salamanca mine.
The agreement with Interalloys Trading Limited contemplates the sale of up to one million pounds of uranium concentrate over a five year period beginning from the commencement of the mine. The agreement can be extended thereafter by mutual consent.
Whilst the spot price for uranium is currently around US$25 per pound, the parties are contemplating a price above $41 per pound through the agreement, a significant margin.
Discussions are underway to finalise the non-binding agreement into an offtake contract by the end of 2016.
Similar sales contract discussions are underway between BKY and another potential off-take partner – the market will be updated should anything materialise from these discussions.
BKY plans to pursue a combination of fixed and market pricing in order to secure positive margins in the early years of mining operation, whilst still being exposed to any uptick in price of the resource.
Whilst BKY anticipates the uranium price to remain flat in the short term, by 2018 when Salamanca comes into production, demand is expected to be significantly higher due to demand out of China and India.
With a cash cost of around US$15 per pound, the sales agreement above US$41 per pound gives BKY a healthy margin.
It should be noted that BKY is still awaiting permits for its Salamanca project and any potential revenues are will not be actualised until if and when the project comes online. If considering BKY for your portfolio, seek professional financial advice.