Berkeley Energia Ltd (LON:BKY) has made a significant breakthrough in its bid to commercialise the Salamanca uranium mine in Spain.
For the company has signed an outline agreement to supply the commodity trading firm Interalloys with the first million pounds of output.
The average selling price is expected to be above US$41 per pound. This compares favourably with the current US$25 spot price for the metal, which used in nuclear power.
It will also provide a very healthy profit margin, with the cost of production at Salamanca put at US$15mln.
“We intend to build our uranium sales book by entering into long term off-take contracts from now until the commencement of production," said managing director Paul Atherley.
Already under construction, Salamanca will be one of the globe's top ten producers and among the lowest cost, able to generate cash, even during current low uranium prices.
Early stage work is fully funded, while the company hopes to secure a deal for full mine financing this December quarter, ahead of completing the project by the end of 2017.
A robust definitive feasibility study
The DFS in July showed that over an initial ten-year period, Salamanca can produce an average of 4.4 million pounds per year at US$13.30 per pound and cash cost of US$15.06 per pound.
It is expected to generate an average annual net profit after tax of US$116 million.
The study placed a net present value (NPV) on the operation of US$531.9mln, and upfront capital costs to build the mine were slated at US$95.7mln.
With operating costs almost exclusively in Euros and revenue coming in in US dollars, it is expected to benefit from continuing deflationary pressures in the EU.
The initial mine life of 14 years based on measured and indicated resources of 59.8 million pounds.
Exploration is aimed at converting some of the inferred 29.6 million pounds into mineable material.
“With initial construction well underway and as we move closer to production we are receiving growing interest from major utilities who are looking to diversify their offtake to a low cost producer in Europe,” said MD Atherley.