Berkeley Energia Ltd’s (LON:BKY) Salamanca uranium project in Spain is expected to generate significant earnings, even at this low point in pricing for the commodity.
This was one of the headline findings for a definitive feasibility study (DFS) of the planned mine, which revealed that all-in costs would be just over US$15 per pound – compared with a spot price of US$26 per pound and a term contract price of US$41.
Berkeley said while it expects the market to remain subdued in the short-term, re-contracting by US generators and demand from China will eventually drive prices higher.
Output from Salamanca is likely to be in the order of 4.4mln pounds of uranium a year, generating an annual average net profit of US$116mln. Peak annual EBITDA will be US$226.3mln.
The DFS, meanwhile, places a net present value on the operation of US$531.9mln, using an 8% discount rate with the upfront capital costs to build the mine of US$95.7mln.
“The Salamanca project is capable of generating strong, sustainable cash flow though the low point in the uranium price cycle,” said managing director Paul Atherley.
“We have commenced initial infrastructure works and are aiming to establish the operation as one of the world's top ten producers, reliably supplying long-term customers from the heart of the EU."
Already Berkeley has been approached by “a number of utilities” looking to secure long-term offtake agreements for its uranium.
“These discussions are underway and offtake arrangements are being negotiated,” the firm said.
Early work on roads and power lines into the Salamanca site has already begun and the project is expected to be up and running by 2018.