TIDMBKY
RNS Number : 3771N
Berkeley Energia Limited
29 January 2016
BERKELEY ENERGIA LIMITED
NEWS RELEASE | 29 January 2016 | AIM/ASX BKY
Quarterly Report December 2015
Overview
The Zona 7 deposit has transformed the economics of the
Salamanca project and has led to the company aiming to be one of
the world's lowest cost producers of uranium.
The Salamanca project benefits from the combination of operating
costs at US$15.60 per pound, less than half the current spot
uranium price, and having one of the industry's lowest capital
costs to first production of US$81 million.
As a result, the project is very robust in today's market
conditions with a Net Present Value of US$353.5m (GBP235.7m)
representing GBP1.31 per share at current contract uranium prices
and on an undiluted and unfinanced basis.
Recent high grade intersections have highlighted the likelihood
of discovering extensions to the Zona 7 deposit. An exploration
programme commencing shortly will follow up these broad, high grade
intersections and also target multiple Zona 7 deposits elsewhere on
the licence.
A 15% increase in the grade of the Retortillo resource has
emphasized the project's robust economics at current uranium
prices.
Salamanca is expected to be one of the few projects in the world
that commences development in 2016 and will be ideally placed to
benefit from the forecast rise in demand for uranium from 2018
onwards.
All major permits are now in place allowing initial
infrastructure development to commence in March of this year.
There has been strong interest from financiers, strategic
partners and potential off-take partners, several of whom have
commenced detailed due diligence reviews following extensive
engagement with management during the quarter.
The project is expected to have a very positive social and
economic impact on the region, creating over 2,700 valuable direct
and indirect jobs in a rural community in Western Spain hard-hit by
intergenerational unemployment.
For further information contact:
Paul Atherley Hugo Schumann
Managing Director Corporate Manager
+44 207 478 3900 +44 207 478 3900
info@berkeleyenergia.com
Zona 7 has transformed the economics of the project lifting the
valuation to over GBP1.31 per share at current uranium prices.
The inclusion of the Zona 7 deposit has lifted the after tax net
present value of the project to US$353.5 million (GBP235.7 million)
with an internal rate of return of 54% based on a discount rate of
8% representing around GBP1.31 per share on an undiluted and
unfinanced basis at current contracted uranium prices.
Zona 7 is a shallow, high grade deposit with impressive
metallurgical characteristics located within ten kilometres of the
proposed processing plant and has increased the mine life from
eleven to eighteen years.
Estimated operating costs have decreased from US$24.60 to
US$15.60 per pound of uranium produced during steady state
operations, making it one of the lowest cost producers in the world
once developed.
In addition to the reduction in operating cost, the capital cost
to initial production has been reduced from US$95.1 million to
US$81.4 million making it one of the lowest capital cost projects
of those currently being considered for development.
High grade intersections have highlighted possible depth
extensions to the shallow Zona 7 deposit.
After the end of the quarter, broad, high grade intersections
have been reported from immediately below the Zona 7 deposit
highlighting the likelihood for the discovery of depth extensions
to the deposit (refer to announcement 27 January 2016).
Three holes drilled from surface through the deposit to a depth
of 220 metres reported grades up to eighteen times higher than the
average grade of the resource.
The Zona 7 deposit lies less than five metres below the surface
extending to around 100 metres in depth with the bulk of the
deposit lying less than 50 metres from surface.
Outstanding intercepts included:
-- 48 metres @ 1,018 ppm U(3) O(8)
incl. 9 metres @ 1,969 ppm U(3) O(8)
-- 19 metres @ 1,753 ppm U(3) O(8)
-- 14 metres @ 4,481 ppm U(3) O(8)
incl. 5 metres @ 11,913 ppm U(3) O(8)
-- 11 metres @ 1,105 ppm U(3) O(8)
-- 7 metres @ 1,438 ppm U(3) O(8)
-- 6 metres @ 3,274 ppm U(3) O(8)
-- 4 metres @ 1,598 ppm U(3) O(8)
An exploration programme commencing shortly will follow up these
broad, high grade intersections and target multiple Zona 7 type
deposits elsewhere on the licence.
Given the transformational effect the shallow, high grade Zona 7
deposit has had on the project's already robust economics,
intercepts of these widths and grades located immediately below the
deposit will be the focus of the company's next drill program with
results expected to be released over the next few weeks.
The project is being developed in a historic uranium mining
province and studies have reported that the licence area is endowed
with considerable exploration potential.
A broader exploration programme aimed at discovering multiple
Zona 7 type deposits is being finalised and will commence shortly.
The programme will drill test a number of recently generated near
surface targets within ten kilometres of the approved location of
the proposed processing plant.
Whilst every project is different and there is no guarantee of
exploration success there are numerous examples of projects around
the world which have been developed with a strong mineral endowment
where both the mine lives and production levels have increased over
the initial design, in some cases quite substantially, on the back
of sustained annual exploration expenditure.
The grade of the Zona 7 deposit is comparable to the world's
highest grade open pit mines currently being operated.
An updated Mineral Resource Estimate (MRE) for the Zona 7
deposit reported grades comparable to the world's highest grade
open pit mines in operation, with the bulk of the resource lying
within fifty metres of the surface.
The high grade, shallow nature of the resource moves the
Salamanca project closer to its aim of being one of the world's
lowest cost producers of uranium.
The MRE for Zona 7 now stands at 31.4 million pounds of U(3)
O(8) (at a cut-off grade of 200 ppm) including an Indicated
resource of 17.1 million tonnes at 735 ppm containing 27.8 million
pounds of U(3) O(8) (refer to announcement 7 October 2015).
Grade increase at Retortillo emphasizes robust economics at
current uranium prices.
An updated MRE for the Retortillo deposit has increased the
grade by 15% (refer to announcement 7 January 2016).
Managing Director Paul Atherley commented at the time of the
announcement: "The positive impact this increase in grade is
expected to have on the overall economics emphasizes the project's
robustness at current uranium prices. The steady state operating
costs of US$15.60 per pound are already less than half the current
uranium price and with the optimisation studies well underway this
very healthy margin is expected to increase."
Salamanca aims to be one of the world's lowest cost
producers.
Early indications from optimisation studies which commenced
during the quarter have demonstrated that, whilst the project has
benefited from on average a 42% increase in grade from the Zona 7
ore during the first ten years of operation there is room for
improvement, particularly in the material handling scheduling,
strip ratio, the mining unit rates and the fixed costs associated
with grade control drilling and assaying.
The optimisation studies are focussed on reducing the current
estimated US$15.60 per pound of uranium produced on as steady state
basis, ranking the project amongst the world's lowest cost
producers.
The studies are being undertaken by MDM Engineering, a
specialist process engineering company which has extensive
experience in the design and development of uranium projects and
has recently become part of the Amec Foster Wheeler group.
MDM is working in conjunction with major Spanish engineering
groups Iberdrola and OHL and a number of specialist local
contractors to integrate Zona 7 with existing studies into a
definitive feasibility study for finance and offtake purposes.
Activities conducted during the quarter included six metre
column testing on representative samples from Zona 7, the
completion of resource upgrades for Retortillo and Zona 7 and mine
optimisation studies.
All major permits are now in place allowing initial
infrastructure development to commence in March.
The company has now received all the European Union, National,
Regional and Provincial level approvals required for the initial
infrastructure development of the project.
Land acquisition and tendering for initial site works, which
include a road deviation and the upgrade of local power lines to
service the project, are well advanced. Contracts are expected to
be awarded in February/March with first works to commencing shortly
thereafter. These initial site works will be financed from existing
cash held by the company.
The European Union has issued a favourable report acknowledging
that the company has met its obligations to the Euratom agency in
relation to the Retortillo and Alameda deposits. Euratom's primary
function is to develop nuclear energy and distribute it to its
member states. The report highlights that the project will help to
meet European demand for uranium and bolster domestic production by
doubling production from current levels.
Creating over 2,700 valuable jobs in a rural community hard-hit
by intergenerational unemployment.
The Salamanca project is located in a historic uranium mining
area and, as such, there is overwhelming local support for the
project, as the community is familiar with the benefits the
investment in a project of this magnitude will bring to the
region.
(MORE TO FOLLOW) Dow Jones Newswires
January 29, 2016 02:00 ET (07:00 GMT)
Over 19,100 applicants have been received for the first 200 jobs
advertised reflecting the intense demand for sustainable jobs in a
community hard-hit by inter-generational unemployment and rural
desertification.
A skills training program undertaken during the quarter was
enthusiastically attended by over 30 locals.
The local community will be given priority for jobs in the
construction and operational phases of the project. The workforce
will be complemented by a small number of skilled professionals
recruited from elsewhere in Spain or abroad.
The workforce is expected to peak at over 450 jobs once full
production is achieved. The University of Salamanca has estimated
that the company's investment in the project will generate an
additional 5.1 indirect jobs for every direct job, making the
project one of the largest creators of sustainable employment in a
community which has suffered badly from long term unemployment.
Tax advice highlights the exploration and other incentives
available for mining companies in Spain which are expected to be
highly beneficial to the project.
The company has received detailed advice from Ernst & Young
Abogados, SLP, on the taxation arrangements for mining companies in
Spain which has highlighted a number of incentives and benefits
which are expected to be highly beneficial to the project.
In summary, whilst corporate income tax is in line with most
developed economies at 25% the project will benefit from carry
forward tax losses which have no time limitation and can offset
taxable income by up to 70%.
In addition to this general arrangement there are special
incentives for mining companies which include the accelerated
depreciation of mining assets, including capitalised expenses from
the date of the receipt of the exploitation licence, for a period
of ten years and a depletion allowance tax relief.
The depletion allowance tax relief allows for the reduction of
annual taxable income by the amount of expenditure in that year on
exploration, rehabilitation and restoration of areas affected by
mining activities.
The company aims to take advantage of this important incentive
by committing substantial annual exploration expenditure with the
aim of replacing the uranium produced in that year and thereby
maintaining or even increasing the annual production of around 4.5
million pounds per year.
Finally, the project may benefit from a regional government
subsidy related to the cost of the construction of the processing
plant, which is aimed at generating sustainable employment.
Project economics remain very robust even at current uranium
prices.
Based on updated tax advice received during the quarter the net
present valuation has been revised to US$764.5 million (GBP509.7
million) with an internal rate of return of 89% based on a discount
rate of 8% and a long term uranium price of US$65 per pound,
against the previously reported net present value of US$871.3
million (GBP580.9 million) with an internal rate of return of 93%
based on the same discount rate and long term uranium price.
With expected operating costs at US$15.60 per pound, less than
half the current spot uranium price, and with one of the industry's
lowest capital costs to first production at US$81 million the
project is very robust at current uranium prices, and ideally
placed to benefit from the forecast increase in demand.
The project has a Net Present Value of US$353.5m (GBP235.7m)
based on a current term contract price for uranium of US$44 per
pound representing GBP1.31 per share on an undiluted and unfinanced
basis.
Strong interest from financiers and strategic partners.
Following the Board's decision to push ahead with the overall
development of the project and the recent positive study and
permitting announcements, the company continues to receive
approaches from potential financiers and strategic partners.
The company is exploring a range of financing options and
strategic partnerships with a view to fully funding the project's
development whilst minimizing shareholder equity dilution.
A number of the prospective financiers and strategic partners
have commenced detailed due diligence reviews with site visits due
to commence shortly.
Strong interest from potential off-take partners.
The project is one of the few large scale and low cost uranium
mines in the world commencing development in 2016 and a recent
visit to Asia has indicated a high level of interest in the
project's offtake arrangements and potential financing amongst the
main utilities and trading houses.
Management has recently commenced discussions with the major
European and US utilities who have also expressed interest in the
project.
The general consensus appears to be that whilst uranium prices
are expected to remain flat in the near term there are an
increasing number of utilities that will be re-contracting offtake
from 2018 onwards and the company has commenced discussions with a
number of these both in Asia and the US who are looking to enter
these commercial arrangements now.
Corporate
Following shareholder approval at the company's Annual General
Meeting held on 27 November 2015, the company changed its name to
Berkeley Energia Limited.
As at 31 December 2015, Berkeley is in a strong financial
position with cash reserves of $8.41 million and no debt.
To view a full version of this announcement (including all
figures), please refer to the Company's website at
www.berkeleyenergia.com.
Mineral Resource Estimate
Salamanca Project Global Mineral Resource Estimate
January 2016
----------------------------- ----------- --------------------------
Deposit (all 100% Resource Tonnes U(3) U(3)
owned) O(8) O(8)
Name Category (Mt) (ppm) (Mlbs)
----------------------------- ----------- ------- ------- --------
Retortillo Measured 4.1 498 4.5
Indicated 11.3 395 9.8
Inferred 0.2 368 0.2
----------------------------------------- ------- ------- --------
Total 15.6 422 14.5
----------------------------------------- ------- ------- --------
Zona 7 Indicated 17.1 735 27.8
Inferred 4.9 333 3.6
----------------------------------------- ------- ------- --------
Total 22.1 645 31.4
----------------------------------------- ------- ------- --------
Las Carbas Inferred 0.6 443 0.6
Cristina Inferred 0.8 460 0.8
Caridad Inferred 0.4 382 0.4
Villares Inferred 0.7 672 1.1
Villares North Inferred 0.3 388 0.2
----------------------------- ----------- ------- ------- --------
Total Retortillo Satellites Inferred 2.8 492 3.0
----------------------------- ----------- ------- ------- --------
Alameda Indicated 20.0 455 20.1
Inferred 0.7 657 1.0
----------------------------------------- ------- ------- --------
Total 20.7 462 21.1
----------------------------------------- ------- ------- --------
Villar Inferred 5.0 446 4.9
Alameda Nth Zone 2 Inferred 1.2 472 1.3
Alameda Nth Zone 19 Inferred 1.1 492 1.2
Alameda Nth Zone 21 Inferred 1.8 531 2.1
----------------------------- ----------- ------- ------- --------
Total Alameda Satellites Inferred 9.1 472 9.5
----------------------------- ----------- ------- ------- --------
Gambuta Inferred 12.7 394 11.1
============================= =========== ======= ======= ========
Salamanca Project Measured 4.1 498 4.5
=============================
Indicated 48.4 540 57.5
Inferred 30.5 422 28.4
----------------------------------------- ------- ------- --------
Total 83.0 495 90.5
========================================= ======= ======= ========
All figures are rounded to reflect appropriate levels of
confidence. Apparent differences occur due to rounding
Competent Persons Statement
The information in this report that relates to the 2016
Exploration Results for Zona 7 is extracted from the announcement
entitled 'High grades intersected immediately below Zona 7 deposit'
dated 27 January 2016, which is available to view on Berkeley
Energia Limited's ('Berkeley') website at www.berkeleyenergia.com.
The information in the original ASX announcement is based on
information compiled by Mr Malcolm Titley, a Competent Person who
is a Member of The Australasian Institute of Mining and Metallurgy.
Mr Titley is employed by Maja Mining Limited, an independent
consulting company. Mr Titley has sufficient experience which is
relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking to
qualify as a Competent Person as defined in the 2012 Edition of the
'Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves'. Berkeley confirms that it is not aware
of any new information or data that materially affects the
information included in the original market announcements and, in
the case of estimates of Mineral Resources that all material
assumptions and technical parameters underpinning the estimates
in
(MORE TO FOLLOW) Dow Jones Newswires
January 29, 2016 02:00 ET (07:00 GMT)
the relevant market announcement continue to apply and have not
materially changed. Berkeley confirms that the form and context in
which the Competent Person's findings are presented have not been
materially modified from the original market announcement.
The information in this report that relates to the 2016 Mineral
Resources and Exploration Results for Retortillo is extracted from
the announcement entitled 'Increase in Retortillo grade expected to
boost economics' dated 7 January 2015 which is available to view on
Berkeley's website at www.berkeleyenergia.com. The information in
the original ASX announcement is based on information compiled by
Mr Malcolm Titley, a Competent Person who is a Member of The
Australasian Institute of Mining and Metallurgy. Mr Titley is
employed by Maja Mining Limited, an independent consulting company.
Mr Titley has sufficient experience which is relevant to the style
of mineralisation and type of deposit under consideration and to
the activity which he is undertaking to qualify as a Competent
Person as defined in the 2012 Edition of the 'Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves'. Berkeley confirms that it is not aware of any new
information or data that materially affects the information
included in the original market announcements and, in the case of
estimates of Mineral Resources that all material assumptions and
technical parameters underpinning the estimates in the relevant
market announcement continue to apply and have not materially
changed. Berkeley confirms that the form and context in which the
Competent Person's findings are presented have not been materially
modified from the original market announcement.
The information in this report that relates to the 2015 Mineral
Resources for Zona 7 is extracted from the announcements entitled
'Increase in Zona 7 grade' dated 7 October 2015 which is available
to view on Berkeley's website at www.berkeleyenergia.com. The
information in the original ASX announcements is based on
information compiled by Mr Malcolm Titley, a Competent Person who
is a Member of The Australasian Institute of Mining and Metallurgy.
Mr Titley is employed by Maja Mining Limited, an independent
consulting company. Mr Titley has sufficient experience which is
relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking to
qualify as a Competent Person as defined in the 2012 Edition of the
'Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves'. Berkeley confirms that it is not aware
of any new information or data that materially affects the
information included in the original market announcements and, in
the case of estimates of Mineral Resources that all material
assumptions and technical parameters underpinning the estimates in
the relevant market announcement continue to apply and have not
materially changed. Berkeley confirms that the form and context in
which the Competent Person's findings are presented have not been
materially modified from the original market announcement.
The information in this report that relates to the Mineral
Resources for the Retortillo Satellites, Alameda, Alameda
Satellites and the Gambuta deposits (refer to original ASX
announcements dated 31 July 2012 and 28 October 2015) is based on
information compiled by Mr Craig Gwatkin, who is a Member of The
Australasian Institute of Mining and Metallurgy and was an employee
of Berkeley at the time of initial disclosure. Mr Gwatkin has
sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity which he is undertaking to qualify as a Competent Person
as defined in the 2004 Edition of the 'Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves'. This information was prepared and first disclosed under
the JORC Code 2004. It has not been updated since to comply with
the JORC Code 2012 on the basis that the information has not
materially changed since it was last reported. Berkeley confirms
that the form and context in which the Competent Person's findings
are presented have not been materially modified from the original
market announcement.
The information in this report that relates to the
Pre-Feasibility Study is extracted from the announcement entitled
'Zona 7 transforms Salamanca project economics' dated 4 November
2015 which is available to view on Berkeley's website at
www.berkeleyenergia.com. The information in the original ASX
announcement is based on information compiled by Mr Francisco
Bellon, a Competent Person who is a member of the Australasian
Institute of Mining and Metallurgy. Mr Bellon is the General
Manager Operation for Berkeley and a holder of shares, options and
performance rights in Berkeley. Mr Bellon has sufficient experience
which is relevant to the style of mineralisation and type of
deposit under consideration and to the activity which he is
undertaking to qualify as a Competent Person as defined in the 2012
Edition of the 'Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves'. Berkeley confirms
that it is not aware of any new information or data that materially
affects the information included in the original market
announcements and, in the case of estimates of the Production
Target and related forecast financial information (other than the
Net Present Value and Internal Rate of Return Calculations) derived
from the Production Target, all material assumptions and technical
parameters underpinning the estimates in the relevant original
market announcement continue to apply and have not materially
changed. Berkeley confirms that the form and context in which the
Competent Person's findings are presented have not been materially
modified from the original market announcement.
The information in this report that relates to the Net Present
Value and Internal Rate of Return calculations is based on
information compiled by Mr Francisco Bellon, a Competent Person who
is a member of the Australasian Institute of Mining and Metallurgy.
Mr Bellon is the General Manager Operation for Berkeley and a
holder of shares, options and performance rights in Berkeley. Mr
Bellon has sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity which he is undertaking to qualify as a Competent Person
as defined in the 2012 Edition of the 'Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves'. Mr Bellon consents to the inclusion in the report of the
matters based on his information in the form and context in which
it appears.
Forward Looking Statement
Statements regarding plans with respect to Berkeley's mineral
properties are forward-looking statements. There can be no
assurance that Berkeley's plans for development of its mineral
properties will proceed as currently expected. There can also be no
assurance that Berkeley will be able to confirm the presence of
additional mineral deposits, that any mineralisation will prove to
be economic or that a mine will successfully be developed on any of
Berkeley's mineral properties.
Appendix 1: Summary of Mining Tenements
As at 31 December 2015, the company had an interest in the
following tenements:
Location Tenement Name Percentage Status
Interest
------------- ------------------------- ----------- --------
Spain
Salamanca D.S.R Salamanca 100% Granted
28 (Alameda)
D.S.R Salamanca 100% Granted
29 (Villar)
E.C. Retortillo-Santidad 100% Granted
I.P. Abedules 100% Granted
I.P. Abetos 100% Granted
I.P. Alcornoques 100% Granted
I.P. Alisos 100% Granted
I.P. Bardal 100% Granted
I.P. Barquilla 100% Granted
I.P. Berzosa 100% Granted
I.P. Campillo 100% Granted
I.P. Castaños 100% Granted
2
I.P. Ciervo 100% Granted
I.P. Dehesa 100% Granted
I.P. El Águlia 100% Granted
I.P. Espinera 100% Granted
I.P.Halcón 100% Granted
I.P. Horcajada 100% Granted
I.P. Mailleras 100% Granted
I.P. Mimbre 100% Granted
I.P. Oñoro 100% Granted
I.P. Pedreras 100% Granted
I.P. Alimoche 100% Pending
I.P. El Vaqueril 100% Pending
------------- ------------------------- ----------- --------
Cáceres
I.P. Almendro 100% Granted
I.P. Ibor 100% Granted
I.P. Olmos 100% Granted
Badajoz
I.P. Don Benito 100% Granted
Este - U
I.P. Don Benito 100% Granted
Este - C
I.P. Don Benito 100% Granted
Oeste - U
I.P. Don Benito 100% Granted
Oeste - C
------------- ------------------------- ----------- --------
Ciudad Real
I.P. Damkina 100% Granted
Fraccion 1
I.P. Damkina 100% Granted
Fraccion 2
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Berkeley Energia (LSE:BKY)
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