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One Further Reason to Add Berkeley Energia #BKY to your Watchlist

The content of this blog (or content associated with it) is not intended as investment advice. The author holds an interest in the company mentioned. Please do your own research.

Berkeley Energia (BKY)
Share Price: 52.5p
Market Capitalisation: £134m

What Do They Do?

Berkeley Energia is to become Europe’s biggest uranium mine, supplying 10% of the continents needs. Construction of the mine has already started and once in production, their Salamanca mine in Spain, will be one of the world’s biggest and lowest cost producers supplying over four million pounds of uranium concentrate a year.

You can read my previous blog, “3 Reasons To Add Berkeley Energia to your Watchlist”, by clicking here

One Further Reason to Add Berkeley Energia #BKY to your Watchlist

1. NOW FULLY FUNDED TO TAKE MINE INTO PRODUCTION

On the 30th August, Berkeley Energia released news that it had signed an aggreement with the sovereign wealth fund of the Sultanate of Oman agreeing to invest up to US$120 million to fully fund the Salamanca mine into production.

Paul Atherley, the Managing Director of Berkeley, had mentioned in a previous podcast interview, that he expected to get this funding deal finalised within a month or so. He was true to his word.

So what does this mean?

Berkeley will start producing uranium at the end of 2018 or early 2019.

The definitive feasability study show the mine to has a net present value of $531.9m and over an initial ten year period, the project is capable of producing an average of 4.4 million pounds of uranium per year, which is expected to generate an average annual net profit after tax of US$116 million.

If we put this on a P/E of 10, the market cap of Berkeley Energia would be $1.16bn or £890m, which is 6.6 times the current market cap at £134m.

Paul sums up the deal nicely on the recent release:

“We are delighted to welcome Oman’s sovereign wealth fund as a long-term strategic investor in the Company and look forward to working closely with them to realise the full potential of the exciting Salamanca project.

The Salamanca mine is one of the only major uranium mines in development in the world today at a time when spot uranium prices are at a decade low.

The project benefits from a rare combination of low up front capital cost and very low operating costs and due in part to its location in the heart of the European Union we are able to contract supply at prices well above the current spot price.

The fund’s interest in matching our future off-take contracts will further enhance our revenue stream.”

This is not taking into account success from further exploration, going on at the moment, which could result in expanding their resources / reserves and evenutally increasing the life of the mine.

One of the biggest risks to investing in any resource company, going from exploration to development through to production, is them securing the finance. Berkeley Energia have done this on decent terms, from a massive fund and therefore have removed this risk. Yes the share price did react positively on the funding news but I feel it is nowhere near priced in the potential of their Salamanca project, which will be generating, on average, around £90m of net profit a year over the first 10 years. Their share price is currenty at 52.5p, it was above 65p in January and this was before this funding was secured.

If Berkeley Energia continue to progess this project, as they have been doing, then I wouldn’t be surprised to see it’s share price comfortably top previous highs of 70p, before the end of the year.

To listen to Managing Director, Paul Atherley discuss the recent funding deal, on the podcast, click play below.

To add Berkeley Energia #BKY to your Vox Markets Watchlist, click here and tap the, “Follow”, button.

The content of this blog (or content associated with it) is not intended as investment advice. The author holds an interest in the company mentioned. Please do your own research.

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The content of this blog (or content associated with it) is not intended as investment advice. The author holds an interest in the company mentioned. Please do your own research.

Mentioned in this post

BKY
Berkeley Energia Limited (DI)