Uranium group Berkeley Energia (LON:BKY) is potentially one of the world’s lowest cost producers and worth double its current price reckons broker Peel Hunt.
Berkeley‘s asset is at Salamanca in Spain but Peel Hunt, the house broker, believes costs are similar to the in-situ leach production in Kazakhstan, which is widely acknowledged as the lowest cost uranium address currently.
Having an asset such as Salamanca in an OECD country such as Spain is a highly attractive proposition for major utilities that want security of supply.
The fact it is being developed when uranium spot prices are at a ten–year low further underlines he quality of the asset.
The broker expects US utilities and Chinese groups to compete for offtake deals especially as a significant number of new Chinese reactors are set shortly to come online.
On the likely margins, cash flow in each of first five years will be US$150mln or more than the current market value.
Once in production, scheduled to be 2018, this cash flow will also allow exploration to increase the predicted 14-year mine life and resource.
Peel Hunt's initiation price target currently is 93p, versus a market price of 47p, but as the various permit, finance and development milestones are ticked off the target rises to 159p.