Berkeley Energia Ltd (LON:BKY) is now undertaking final detailed project reviews as it counts down to the commencement of construction at the Salamanca uranium mine in Spain.
At the same time production cuts are being announced at some of the world's largest uranium mines, which are likely to result in a 12% reduction in primary mine production this year.
READ: Berkeley Energia confident it has its timing right at Salamanca
This means that the Salamanca mine, the only major uranium mine in construction in the world this year, is scheduled to reach production as the market enters a long-awaited supply-demand deficit.
Much progress was made during the fourth quarter, not the least of which was the completion of a strategic investment of up to US$120mln with the Oman sovereign wealth fund. Shareholders overwhelmingly voted to approve the strategic investment and the company received the initial US$65mln tranche of funding in November 2017 which funds the capital costs for production.
READ: Berkeley Energia welcomes Deepankar Panigrahi to the board as funds from Oman roll in
That’s allowed the company to recruit key management and to partner up with Sanchez y Lago, one of Spain's major construction companies and contract mining firms
The company has 2.75mln pounds of U3O8 under contract for the first six years, with a further 1.25mln pounds of optional volume, at an average price above US$42, compared with a spot price of US$24 per pound.
In a note to clients, analysts at Shore Capital said they believe it should be borne in mind that project economics should still be decent even at DFS cost estimates and current spot prices.
They concluded: “Unless costs rise dramatically, we believe Salamanca’s capital costs to currently be fully funded to production.”
In late afternoon trading, Berkeley Energia shares were 0.6% lower at 51.5p.
-- Adds broker comment, share price --