Anglo Pacific’s (LON:APF) chief executive Julian Treger has given a ringing endorsement of the latest resource upgrade from Berkeley Energy (LON:BKY).
As was widely reported across the Proactive platforms, Berkeley yesterday announced a substantial increase in the uranium grade at the Zona 7 deposit on the Salamanca project in Spain.
The total resource for Zona 7, almost all of it lying at depths of less than 50 metres, now stands at 31.4 mln pounds, of which 27.8mln pounds is in the indicated category.
Anglo Pacific holds a significant shareholding in Berkeley, and also holds a 1% life-of-mine royalty over Salamanca.
“The significant increase in uranium grades, by approximately 10%, should help with the economics of the project,” said Treger, “increasing the chance that the project will be financed and built. This in turn equates to a greater chance that this will become a revenue-generating royalty for us.”
In a nutshell, it’s good news.
But it’s more about quality than quantity, as Treger explains.
Not only has the grade increased but, with the majority portion of Zona 7 now in the indicated category, so has the certainty about mineralisation.
“This is very important,” says Treger.
“Nearly 90% of the contained uranium in the new Zona 7 resource has been upgraded to the indicated category, meaning it can be incorporated into feasibility-type studies. This significantly increases the change that Zona 7 will be fast-tracked into production, depending on permitting, thus generating royalty cash flows from this deposit for us sooner than we expected.”
As for improvement in the grades, from Anglo Pacific’s point of view that too, is all to the good.
“Higher grades into the process plant generally equates to more uranium pounds out of the other end for the same process capacity,” says Treger. “This has the potential to generate higher royalty revenues for us.”
Nevertheless, it may be a little while longer for the real value in Anglo Pacific’s stake in Berkeley to show through in its own share price.
“We think the next catalyst for us is when Berkeley releases its pre-feasibility study by the end of this quarter,” says Treger.
“This will put some concrete economics on the project which City analysts can incorporate into their Anglo Pacific models. It will solidify the real current value of our royalty and will hopefully include a timeline to production.”
The upside on offer is quite marked.
“We are holding the value of the royalty at the price we paid several years ago and so all the good news from this year is not reflected in our valuation,” says Treger. “This is an example of our hidden upside”.
And what about the Berkeley share price?
Treger expects that to jump too, in due course, notwithstanding recent strength.
“We think this is a significant event for Berkeley which should positive affect its share price. Anglo Pacific holds approximately 17% of the company, so any rise in the Berkeley share price will positive affect the market value of our shareholding.”
As to Berkeley itself, chief executive Paul Atherley is confident that Zona 7 will be the key to unlocking the economics of Salamanca.
“It’s going to make loads of money at this uranium price or less,” he said.