Broker GMP paid a recent visit to Berkeley Energy’s (LON:BKY) Salamanca uranium project in Spain and came away favourably impressed.
“Even at the currently depressed uranium prices Salamanca should generate significant cash flows at healthy margins,” GMP wrote in subsequent commentary.
“We see the board’s decision to accelerate the project into production as logical, with the low capex offering substantial flexibility on financing and as interested parties are already engaging with site due diligence.”
The Salamanca project is situated in the Salamanca Province of Spain and consists of several deposits, including the Retortillo, Alameda and Zona 7, as well as satellite deposits.
Currently, these combine to form a total resource of 85.2mln tonnes of ore grading 470 parts per million to give 88.2mln pounds of uranium oxide.
Zona 7 is a recent addition, and the one that GMP gets most excited about.
“The key new development for Berkeley is the upcoming inclusion of Zona 7 into an integrated development plan including all three deposits: Retortilla, Zona 7 and Alameda,” said GMP.
“We expect final infill drilling at Zona 7 and a revised JORC resource to complete ahead of, and feed into the integrated development plan.”
The broker left the Salamanca project “enthused” with regard to the potential for a low cost operation, both in terms of capital and operating costs.
A 2013 pre-feasibility study showed that initial capital for Retortillo was likely to ring in at US$95mln, while the cost of a follow-on operation at Alameda was put at US$74mln.
It amounts to what GMP calls a “bite-sized” approach to funding, and should be eminently more doable in the difficult current markets for mining, than a big one off spend.
Operating costs, meanwhile, are likely to be revised down to US$16.75 per pound, well below the prevailing uranium spot price, which sits in the mid-US$30s.