14th Jul 2016 09:29
LONDON (Alliance News) - Berkeley Energia Ltd shares on Thursday lost all of the gains made on Wednesday after the company published the definitive feasibility study for the Salamanca uranium project in Spain, revealing annual profit from the asset should be around USD116.0 million.
Berkeley Energia shares were down 7.9% on Thursday morning at 37.75 pence.
The stock had soared in London on Wednesday after the company's shares in Australia were suspended from trading pending the release of the study. They closed up 9.3% to 41.0 pence on Wednesday, but those gains have now been lost by midday Thursday.
The study has confirmed Berkeley Energia's long-running claim that Salamanca will be one of the world's lowest-cost uranium projects, producing 4.4 million pounds of uranium per year over a 14-year lifespan.
Berkeley said it expects the project to deliver annual net profit after tax of USD116.0 million based on cost projections and prices.
Cash costs will be around USD13.30 per pound and total cash costs will be USD15.06 per pound. Those can be compared to current spot prices for uranium of USD26 per pound and term contract prices of USD41 per pound - providing a healthy margin for Berkeley Energia.
"The company is of the view that whilst uranium prices will remain soft in the near term, from 2018, when Salamanca is scheduled to come on line, the market is expected to be dominated by US utilities looking to re-contract. These utilities will also be competing with Chinese new reactor demand, which may lead to higher prices," said Berkeley Energia.
"The company has recently been approached by a number of utilities looking to secure long-term offtake agreements. These discussions are underway and offtake arrangements are being negotiated," it added.
Notably, the majority of costs will be in euros whilst revenue will be generated in dollars, meaning the project will continue to benefit from the effects of deflationary pressures within the European Union, Berkeley Energia said.
The initial capital cost will be USD95.7 million, which the company said was "low by international standards for a project of this size".
Exploration will continue at the project in order to convert the inferred resources to replenish production. The ultimate aim is to keep production over 4.0 million pounds of uranium per year.
That is already underway as drilling is being conducted to extend the main Zona 7 deposit and initial results are expected shortly. Infrastructure development also is being undertaken, specifically realigning a road and upgrading a power line ahead of main construction activities.
The project will create 450 jobs and a further 2,000 indirect jobs.
By Joshua Warner; [email protected]; @JoshAlliance
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