Uranium prices are set to “explode” in two years as demand from Western utilities and China will give the heavy metal a major uplift, according to a London-listed mining executive.

Spot uranium prices, currently trading at around $18.50 a pound, could be set to almost triple in 2018, Paul Atherley, managing director of Spain-based uranium miner Berkeley Energia, told City A.M.

And he also predicted a rally for another five years, driven by major European and US utilities needing to renegotiate five-year contracts from producers. Demand from China is also escalating.

“We are about to see, in the next few years, the biggest ever deficit in the uranium market, because all the US and EU utilities will be recontracting and also competing with China’s $570bn worth of expenditure on 65 new nuclear reactors,”
Atherley said.

“The general consensus is for spot uranium prices to reach $65 a pound, but generally I would expect prices to grow by at least three times their current rate.”

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Last month shovels hit the ground in a dry corner of western Spain, near the ancient city of Salamanca. Berkeley Energia, a mining company listed in Australia and on London’s junior AIM market, started work on a $100m (£80m) uranium mine.

The project hopes to create nearly 500 jobs in a depressed former mining region and tap into future demand for the heavy metal, which powers nuclear reactors.

To fund its plans, Berkeley recently raised $30m from a placing of new shares, winning support from funds run by the likes of Blackrock and JP Morgan. When it opens in 2018, the mine will be one of the lowest-cost uranium producers in the world – and the only such mine in Europe, turning out 4.5m pounds a year.

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Berkeley Resources (AIM/ASX:BKY) has taken a big step forward in securing the funds needed for construction of its 100%-owned Salamanca project in west-central Spain (FCW #683, Nov. 3).

The firm announced on Nov. 4 it had raised approximately $30million before expenses from a share placement with existing and institutional shareholders. Apart from Paladin Energy and Namibia’s Langer Heinrich mine, no other junior outside the U.S. has successfully raised finance for the development of a new uranium mine in the past decade.

Commenting on the successful completion of the placing, BKY managing director Paul Atherley, said: “We are delighted with the strong institutional support for this financing which allows
us to accelerate the development of the Salamanca mine.” He noted: “The placing has been heavily oversubscribed by London based blue chip generalist institutions who will dominate
the register once settlement completes.”

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An AIM quoted miner will set out its stall today as the lowest  cost producer of uranium needed to feed the world’s growing number of nuclear reactors. Berkeley Energia, which aims to begin construction of its Salamanca mine in northwestern Spain next year, will announce the results of additional work on its Zona 7 deposit, which it says will enable it to bring down operating costs by 40 per cent, making it a lower cost producer than the Torontolisted Uranium One. The mine also would give Europe’s 160 reactors, which rely almost entirely on imports, chieflyfrom Kazakhstan, Russia and Niger, a source of uranium on their doorstep.

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Development of the $100 million Salamanca uranium project in west-central Spain began in August, owner Berkeley Resources (AIM:BKY) confirmed in an Oct. 11 news release. Work has been initially limited to supporting infrastructure, but “material procurement has begun and main construction will start early next year.”

The firm added that after a decade and $60 million of investment, infrastructure development is “well underway” (FCW #678, Sept. 29). Berkeley highlighted that its investment will help rejuvenate a local community severely impacted by unemployment with over 450 new jobs and an estimated 2,700 indirect jobs, while injecting new business opportunities into local firms and suppliers, many of whom have been struggling due to long term under investment in the area.

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Investment Case: Sector: “Mining”. Therefore, it is not a surprise that, having been above 100p just over 4½ years ago and 30p 2½ years ago, shares in what was Berkeley Resources, now Berkeley Energy (BKY), traded down towards 11p earlier this year. However, the last few months have seen a recovery to a current 21p offer price and, having largely (and correctly) avoided the sector here thus far, we now sense investor confidence is at least near the bottom. This together with recent developments at Berkeley give us the confidence to now add the shares to the Gold (really mining) portfolio, considering there the potential for further good gains from here in even just a relatively stable investment environment for the industry. Should sentiment actually decently improve – as it will at some point – we should be really off to the races here… Our initial target price to sell is 30p.

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Berkeley Energia (AIM/ASX:BKY) has further boosted the already favorable prospects for its 100%-owned Salamanca project in Spain with the latest drilling results from the Zona 7 deposit, suggesting a new resource upgrade may be imminent.

In a Sept. 5 market update, the firm said that additional high grade intersections had been located below Zona 7, “further supporting previous indications of continuity of mineralization beneath the current defined resource.”

Results from another four holes drilled to a maximum depth of 271 meters reported grades “consistent with, or higher than, the average grade of Zona 7.”

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All of the indicators are pointing to a resource upgrade at Berkeley Energia’s Salamanca uranium project in Spain after its standout Zona 7 deposit continued to show off further potential.

Part of ongoing exploration aimed at improving the production profile and economics of the project, the drilling targeted extensions below the existing Zona 7 deposit.
The AIM and ASX-listed company had already delineated a resource from surface down to 100m at Zona 7, but recent drilling has shown economic grades go down to 271m.

Even before this, Salamanca, which is in the initial stages of development, was already an exceptional project in the uranium space, one which could even make money at today’s depressed price.

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While all of the uranium bears were signalling the death knell for the market as spot prices hit an 11-year low earlier this month, Berkeley shareholders were looking at the Salamanca definitive feasibility study with awe asking not if it can make money, but how much?

Since the study was announced, the company’s London-listed share price has risen 26%, while the majority of its uranium peers have plummeted in value. Scheduled to produce 4.4 million pounds per annum of U3O8 for an initial 10 years at an all-in cash cost of US$15.06 per pound, the DFS has shown that if Salamanca went into
production today it would more than wash its face.

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