5th Nov 2015 11:00
LONDON (Alliance News) - Anglo Pacific Group PLC Thursday noted the pre-feasibility study update announced by fellow London-listed Berkeley Energy Ltd for the Salamanca uranium project in Spain.
On Wednesday, Berkeley updated its pre-feasibility study for the project to include the Zona 7 deposit, which "transformed" the economics of the project showing a net present value of USD871.3 million, around GBP580.9 million.
Anglo Pacific Group has a 1% net smelter royalty over all production from Berkeley's operations in Spain and Portugal under a deal signed back in December 2009. Anglo Pacific paid AUD4.0 million to gain that royalty. Anglo Pacific also holds a 16.75% equity interest in Berkeley at a corporate level.
Anglo Pacific Thursday said: "Anglo Pacific is encouraged by Berkeley's decision to accelerate the development of the Salamanca project, with site works now expected to commence in mid-2016, much earlier than Anglo Pacific had previously anticipated."
The study released by Berkeley showed an internal rate of return of 93% based on a long term uranium price of USD65 per pound. The Salamanca project will also have a lifespan of 18 years after Berkeley added the Zona 7 deposit, compared to the 11 year mine life it would have had without it.
The updated study also lowered anticipated operating costs to only USD15.60 per pound from the previous estimate of USD24.60 per pound.
Based on Berkeley's price assumption, the company is aiming to have a gross margin of around USD49.4 per pound of uranium, compared to its previous estimate that would have only made USD40.4 per pound.
To take that further, based on the average 3.0 million pounds of uranium per year at USD65 per pound over the 18 year mine life, Berkeley will generate an average of USD195.0 million per year in revenue.
Overall, Berkeley said the project will be "one of the lowest cost producers in the world" once it is developed, with production set to start during 2017.
Another huge bonus from the study is the capital cost has also fallen to USD81.4 million from its previous estimate of USD95.1 million, driven by lower-than-anticipated costs to develop the Zona 7 deposit and from benefits of currency depreciation.
Anglo Pacific said: "The longer mine life, increased grade and higher uranium production profile should considerably increase the value of the company's Salamanca royalty, well in advance of the company's current carrying value of AUD4.0 million."
The Salamanca project is comprised of the Retortillo, Alameda and the newly added Zona 7 deposits. The Zona 7 deposit is a shallow, high grade deposit located within ten kilometres of the proposed processing plant.
Berkeley are now working toward completing a definitive feasibility study for the project, which should be completed in May 2016.
Anglo Pacific shares were up 1.0% to 73.23 pence per share on Thursday morning whilst Berkeley shares were up 11% to 0.565p.
By Joshua Warner; [email protected]; @JoshAlliance
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