logo-loader

Berkeley Energy convinced Salamanca is a winner

Published: 07:00 13 Oct 2015 BST

shutterstock_15683893
Nuclear power stations still need fuelling.

Unconcerned by the current bear market in mining equities Paul Atherley has a wry smile over a gentle glass of wine in a secluded West End restaurant.

For a man in his position as chief executive of a junior mining company, the bear market would be the burning issue of the day.

Except that, as the latest resource numbers from Berkeley Energy (LON:BKY) come in, you get the sense that you don’t need to know anything about uranium or even the mining to realise that BKY’s Salamanca project is a winner. 

“The idea”, says Paul, “is to build a mine that will work in any economic environment.”

So, at the same time as he concedes that the bear market may yet run for another two years or more, he’s also lining up a development schedule for Berkeley’s Salamanca project in Spain.

And it’s likely to happen pretty quickly.

That’s because the results that are coming in from Salamanca - and in particular from a newly emerging area called Zona 7 - are so good that the next update on project economics, due out in about a month, is likely to be compelling

The latest resource numbers for Zona 7 shows 31.4mln pounds of U3O8, 27mln pounds of which is in the indicated category. In terms of size pure and simple, that’s unremarkable amongst the world’s widely scattered uranium projects.

Where Salamanca, and in particular Zona 7, real wins is on grade and depth.

“This has one of the highest grades of any open pit project in the world,” says Paul. “And the strip ratio will be 1:1 or something like it because the bulk of the ore is within fifty metres of  the surface.”

In short, the ore will be richly mineralised and easy to mine.

And that should make for a highly profitable operation.

Even before the full potential of Zona 7 began to become apparent, Berkeley had been working on the economics at Salamanca.

A previous study completed in 2013 envisaged production of 2.7mln pounds of uranium over eleven years with cash costs running at US$24.60 per pound and up-front capital pegged at US$95mln.

That was nice enough, but with the uranium price now treading water at around US$37 per pound, under those parameters there is the potential for margins to get squeezed.

But now, with the mineralisation at Zona 7 lying at shallow depths and  with impressive metallurgy, the prospects of significantly improved margins now looks very real.

“It’s going to make loads of money at this uranium price or less,” says Paul. “The issue then becomes the financing.”

But here Paul’s pretty confident too.

The price tag delivered by the previous study wasn’t exactly prohibitive, even in the current restrictive market conditions.

But there should be further improvements now that the Euro has weakened against the dollar.

What’s more, certain influential figures in uranium development stand behind Berkeley.

Chairman Ian Middlemas, who brought Paul into the project, was a central figure in the team that created Mantra and then sold it on to a Russian company in a billion dollar deal.

His partner in Mantra was Robert Behets, who’s also on the board of Berkeley as a non-exec.

Between them, these two have plenty of residual goodwill in the market, even if the good times aren’t exactly rolling as they were in the pre-Fukushima days.

So, with Paul’s own long-standing experience in capital markets also factored in, Berkeley has a formidable team at its disposal when it starts to hit the funding trail.

And that may be pretty soon now.

The preludes will be the recent announcement of the new resource at Zona 7 and the upcoming pre-feasibility study.

Then, as the company pushes on into full bankable studies, the funding efforts will ratchet up.

“We’ll be running the financing in parallel,” says Paul.

“We already have financiers doing due diligence.”

But with the way Zona 7 is shaping up, that’s hardly surprising, bear market or no. 

Caledonia Mining tackles 2023 challenges with optimism for 2024 as it...

Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL) chief executive Mark Learmonth tells Proactive's Stephen Gunnion the company faced a challenging 2023, primarily due to poor production in the first half of the year at its core asset, the Blanket Mine in Zimbabwe, and an underperformance...

2 hours, 22 minutes ago