After a decade of exploration and feasibility work and more than US$60 mln of investment, development of the Salamanca uranium project in Spain finally got underway in March 2016.
Its owner, Berkeley Energia Limited (LON:BKY), has now appointed Spanish power giant Iberdrola (BME:IBE) to re-route a power line to the project site, and specialised mining contractor Excavaciones y Transportes Cerezo to re-align four kilometres of road to allow access to the proposed Retorillo pit.
This is still early stage work, and the bulk of the construction has yet to be funded. But it’s a clear statement of intent, and puts the company on the cusp of generating real regional change in the area. So far it’s received over 19,000 applications for the first 200 jobs offered.
This is a company that looks set to become firmly embedded into the local community, and the appointment of contractors is the first step on that road. Full construction is currently slated for September.
THE BUSINESS
Backed by some of the most successful uranium entrepreneurs in the business, in the shape of Robert Behets and Ian Middlemas, the men behind the rise and billion dollar sale of Mantra Resources to a Russian uranium giant, and run by seasoned mining promoter Paul Atherley (Murchison, Leyshon), Berkeley has all the key skills to make a success of the Salamanca project.
And the project itself has real promise. Following the inclusion of a new area of mineralisation known as Zona 7 in November of 2015, a pre-feasibility study for Salamanca envisioned the production of 4.3 mln pounds of uranium per year at steady state, averaging out over an 18 year mine life at 3 mln pounds.
The cost to get that production up and running will be relatively modest too, in mining terms, at just US$81.4 mln for an initial operation at Retortillo. Cash flow from that mine can then be steered towards the funding of development of two other mineralised areas, Zona 7 and Alameda.
The study predicted that life of mine cash costs should run at US$17.5 per pound, which compares favourably enough with the prevailing spot price of around US$28, and extremely well to the more aggressive longer term prices that most analysts are modelling. Contract prices are expected to come in at around US$44 per pound, at which price the project generates a 57% IRR.
What’s more, ongoing definitive feasibility work is indicating that there could be scope to cut costs further.
FROM THE BOSSES
"Salamanca has now moved into the development phase and the local support we have received for the project is fantastic,” says managing director Paul Atherley. “We are all very much looking forward to working closely with the local community as we bring the much needed jobs, training and new business activity to the area.”
Corporate manager Hugo Schumann adds: “We’ve got all the permits we need and now are commencing development. We’ve opened a data room and that process has attracted a lot of interest. We’re intending to close the financing around the middle of the year.”
WHAT THE BROKERS SAY
“Salamanca,” says Dr Brock Salier from GMP Securities, is “one of the world’s best undeveloped near production uranium assets with large scale production potential, best in class operating costs, low start-up capital and with all the permits in place.”
And, as far as the most recent news on the commencement of development at Salamanca is concerned, comment has been very positive. Yuen Low at Shore Capital called the news a “significant” milestone. He’s one of the analysts who expects contract sales from Salamanca to go through at higher than spot, and accordingly sets the NPV at US$420.5 mln, on an eight per cent discount and assuming a US$44 per pound uranium price.
Meanwhile, commentary from SP Angel highlights the favourable jurisdiction in which Salamanca is located. The local mines department has what the broker calls “a growing depth of knowledge,” following its permitting of the nearby Los Santos and Barruecopardo mines.
THE SHARE PRICE
Berkeley Energia’s share price has been one of the bright spots in a tough mining market in recent months. Following the news of the commencement of development at Salamanca the shares rose 2% to 24.75p. Between March 2015 and March 2016 they have more than doubled.