Berkley Energia uranium project kicks off, commits to local community

By Megan Graham. Published at Oct 11, 2016, in Small Caps

After a decade and US$60 million of investment, Berkeley Energia today announced the development of infrastructure for their Salamanca Project in Western Spain is well underway.

The project has the chance to be Europe’s sole major uranium mine and one of the biggest producers in the world, potentially supplying over four million pounds of uranium per annum. This is equivalent to around 10 per cent of Europe’s total uranium requirement.

Whether the company meets this potential or not remains to be seen, so if considering this stock for your portfolio seek professional financial advice.

With some saying we’ve seen the bottom of the uranium market, several sources are predicting a significant lift in price perhaps as early as 2017, and very likely between 2018 and 2020, as speculation flows about multiple countries expanding their nuclear reactor fleet.

Earlier in October Managing Director of Berkeley Energia, Paul Atherley released a video explaining why the company was choosing to proceed with the project given the current price of uranium and the shelving of other similar projects.

“Uranium price has fallen 20 per cent this year, and is now trading at the lowest price for the decade,” he says, noting that industry giant Calico has closed its Rabbit Lake producer in Canada, resulting in the loss of 500 jobs.

Mr Atherley provides two reasons why BKY are choosing to put their Salamanca Project into production at such a time. Firstly, the company have invested $60 million into the project over the last decade to get to this point of readiness.

Secondly, he cites the unique mix of low operating costs combined with low capital costs, with the latter predicted at $100 million, which is “the lowest they could be for a top ten producer.” Current operating costs for the project sit at half the existing uranium price.

As a result, the company can boast a “strong after tax cash flow right at the bottom of the uranium price cycle,” Mr Atherley said. The Project is set to be the only one of its kind coming in stream while there is a uranium supply deficit.

Interest from nuclear, utilities sectors

China is re-entering the nuclear market in a big way, reportedly set to build eight reactors per year in the future. According to BKY, the country recently allocated a further US$570 billion to construct an additional sixty reactors in the next decade.

In addition, utilities companies have been approaching BKY, as forecasts for the period of 2018-2022 show that supply for European utilities are currently only 86 per cent covered in terms of their uranium needs.

“We expect to announce off take agreements at higher prices than the current uranium price,” Mr Atherley said.

Uranium shipments are scheduled for 2018, supplying customers in Europe, the US and Asia, many of whom are expanding their nuclear reactor fleets to meet 2030 carbon targets.

Demand for the metal is expected to grow around 2018 as US and EU utilities commence re-contracting for uranium.

Infrastructure development commences

A significant step in infrastructure for the Salamanca Project is a 5.2km road deviation, which is progressing well so far and is expected to take a total of three months to complete.

Along with construction of a raw water dam, the company are also in the process of developing secure footpaths for pedestrians and cattle.

Further construction can commence once the road access development is complete, which the company state will happen early next year.

Front end engineers appointed

BKY have appointed MDM Engineering to carry out the Front End Engineering Design (FEED) – an exciting stage of the project, where the overall engineering and process design is implemented via the procurement of equipment packages and specialist subcontractors.

As all these plans are put into motion, Mr Atherley is enthusiastic about the months ahead.

“After a decade of investment we are absolutely delighted to start development of the initial infrastructure which paves the way for the main construction early next year. As work on the ground progresses we move closer to our goal of being one of the world’s lowest cost uranium producers, reliably supplying long term customers from the heart of the European Union.”

Local community rejuvenation

The local community, severely impacted by unemployment, will see the creation of over 450 new jobs, leading to the creation of an estimated 2,700 indirect jobs.

The company has received 20,518 applications for the first 200 jobs and has provided training for nearly 100 potential employees.

BKY’s policy of training and hiring local residents where possible has been well received in the community, with the training programme now heavily oversubscribed.

The injection of new business opportunities will also be an expected windfall. Further, the project will see the installation of a Wifi network for villagers as part of the company’s overall commitment to improve infrastructure for the local community.

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S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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