Berkeley Energia Ltd (ASX:BKY) has signed an agreement with a European based commodity trading company for the sale of the first million pounds of uranium from the Salamanca mine in Spain.
The definitive feasibility study has projected the Salamanca mine to be one of the world’s lowest cost operations capable of generating strong after tax cash flow.
Over an initial ten-year period, the project is capable of producing an average of 4.4 million pounds of uranium per year at a total cash cost of US$15.06 per pound.
The new agreement contemplates the sale of up to one million pounds of uranium concentrate over a five year period starting from the commencement of the mine, which is expected in 2018.
The average price contemplated by the parties is above US$41 per pound of uranium compared with the current spot price of around US$25 per pound.
A combination of fixed and market pricing will apply in order to secure positive margins in the early years of production whilst ensuring Berkeley remains exposed to potentially higher prices in the future.
Discussions are underway to finalize the non-binding agreement into an offtake contract by the end of the year.
Although uranium prices may remain flat in the near term, demand from U.S. utilities and new reactors in China is expected to lead to higher prices from 2018.
Berkeley is also in discussion with another potential off-taker in relation to a sales contract with terms similar to those outlined in the present agreement.
The company’s share price has increased by about 65% during the past six months, last trading at $0.79.
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