TIDMBKY
RNS Number : 2373Q
Berkeley Energia Limited
28 November 2016
BERKELEY ENERGIA LIMITED
NEWS RELEASE | 28 November 2016 | AIM/ASX: BKY
Offtake agreement concluded with Interalloys for double initial
volume
Berkeley Energia is pleased to announce that it has signed a
binding off-take agreement (Agreement) with Interalloys Trading
Limited (Interalloys) for the sale of the first production from the
Salamanca mine.
The parties have converted the previously announced Letter of
Intent into a binding agreement that includes a doubling of annual
contracted volumes to a total of two million pounds over a five
year period. Potential exists to increase annual volumes further as
well as extend the contract to a total of three million pounds.
A combination of fixed and market related pricing will apply in
order to secure positive margins in the early years of production
whilst ensuring the Company remains exposed to potentially higher
prices in the future.
An average fixed price of US$43.78 per pound of contracted and
optional volumes has been agreed between the parties. This compares
with the current spot price of around US$18 per pound.
The Company is in discussions with other potential off-takers in
relation to contracts with terms similar to those outlined in the
Interalloys Agreement with pricing at or around long term benchmark
levels for term contracts. Contracts for sale will be entered into
in the ordinary course of business as the company progressively
builds its sales book with high quality offtakers.
The Company's view is that whilst uranium prices may remain flat
in the near term, from 2018, when Salamanca is scheduled to come
into production, the market is expected to be dominated by US
utilities looking to re-contract who will at the same time be
competing with Chinese new reactor demand, which may lead to higher
spot and term contract prices.
Managing Director, Paul Atherley, commented:
"We are delighted to have converted the previously announced
Letter of Intent into a binding offtake agreement with Interalloys
including the doubling of contract volumes and with fixed pricing
at $43.78 per pound which would give us a very strong margin above
our steady state cash cost of around US$15 per pound.
With initial construction well underway and as we move closer to
production we are receiving growing interest from major utilities
who are looking to diversify their offtake from a low cost producer
in Europe.
We intend to build our uranium sales book by entering into long
term offtake contracts from now until the commencement of
production."
For further information please contact:
Berkeley Energia Limited +44 20 7478 3900
Paul Atherley, Managing Director info@berkeleyenergia.com
Hugo Schumann, Corporate Manager
Peel Hunt LLP (Joint Broker) +44 20 7418 8900
Matthew Armitt
Ross Allister
Chris Burrows
WH Ireland Limited (Nominated
Adviser) +44 20 7220 1666
Paul Shackleton
Nick Prowting
Jay Ashfield
Buchanan +44 207 466 5000
Bobby Morse, Senior Partner BKY@buchanan.uk.com
Anna Michniewicz, Account Director
About Interalloys:
Interalloys, founded in 1993, is a privately funded commodity
trading company specializing in the purchase, sale and distribution
of commodities to a global customer base.
Interalloys continue to add to their expanding portfolio of
offtake and distribution agreements. Working hand-in-hand with mine
owners the company provides a route to market; logistics, capital
and marketing.
Headquartered in Europe and with satellite operations worldwide
Interalloys provides global coverage with local know-how to ensure
the best cultural and strategic fit to its suppliers and
customers.
Further background:
Berkeley Energia's Salamanca mine
Berkeley Energia's objective is to be one of the world's lowest
cost producers reliably supplying the world's leading utilities
with fuel for base load clean energy from the heart of the European
Union. Once in production the mine will be one of the world's
biggest producers supplying over four million pounds of uranium
concentrate a year, equivalent to approximately 10% of the
continent's total requirement.
An independent study published in July 2016 by MDM Engineering
(part of AMEC Foster Wheeler Group) reported that the project has
an NPV of over US$530 million and will produce 4.4 million pounds
of uranium per annum at a cash costs of US$15.39 per pound, making
it one of the world's lowest cost and a top ten global producer of
uranium.
The mine will rejuvenate a community suffering from lack of
investment and badly hit by long-term unemployment. Skills training
programmes are being run for locals to equip them for the 454 jobs
the mine will create once in full production. In addition, it has
been estimated that over time the mine will generate indirectly an
estimated further 2,295 jobs in the region. Local businesses are
being prioritized and the local municipalities and communities will
be fully supported throughout the life of the mine.
Uranium has been mined in this area of Spain since the 1950's
and the country currently has seven nuclear reactors which generate
one fifth of its electricity requirement. Spanish uranium mining
initially occurred on a small scale until the 1970s when the Mina
Fe uranium mine in Salamanca began production, producing a total of
5,500 tonnes of uranium concentrate before its closure in 2000.
Other Material Terms of the Agreement:
-- 50% volume of U(3) O(8) concentrate (Concentrate) sold at
fixed prices and 50% volume of Concentrate sold at Spot pricing,
subject to floors and ceilings. The floors and ceilings have been
set at +$9 and -$9 either side of the fixed price in a given
year.
-- The average fixed price of Concentrate over the life of the Agreement is US$40 per pound.
-- The average fixed price of Concentrate including the
additional two years of optional purchases by Interalloys is
US$43.78 per pound.
-- The average price of all Concentrates to be sold under fixed
and Spot pricing (using the average of the floors and ceilings)
including the additional two years of optional purchases by
Interalloys is US$42.43 per pound
-- Year 1 of delivery of Concentrate is the later of 2019 or the
first year that the Salamanca mine commences production
-- Both the Company and Interalloys are entitled to delay the
first purchase of Concentrate on two (2) occasions for a period of
12 months, allowing for any potential delays in the project
-- If production has not commenced by 1 July 2023 then either party may terminate the Agreement
-- Berkeley must first fulfil its supply commitments under the
Interalloys contract before fulfilling other supply commitments, in
recognition of the fact that this is Agreement is the first
contract into which Berkeley is entering with respect to future
sales of Concentrate from the Project
-- Interalloys has the right to purchase up to an additional
100,000 pounds of Concentrate per annum each year at the fixed
price for that year
-- Interalloys has the right to extend the term of the Agreement
by two years by purchasing 400,000 pounds of Concentrate at a fixed
price of US$48 per pound in Year six and 400,000 pounds of
Concentrate at a fixed price of US$49 per pound in year seven
Competent Persons Statement
The information in this announcement that relates to the
Definitive Feasibility Study, Mineral Resources for Zona 7, Ore
Reserve Estimates, Mining, Uranium Preparation, Infrastructure,
Production Targets and Cost Estimation is extracted from the
announcement entitled 'Study confirms the Salamanca project as one
of the world's lowest cost uranium producers' dated 14 July 2016,
which is available to view on Berkeley's website at
www.berkeleyenergia.com.
Berkeley Energia Limited (Berkeley) confirms that: a) it is not
aware of any new information or data that materially affects the
information included in the original announcement; b) all material
assumptions and technical parameters underpinning the Mineral
Resources, Ore Reserve Estimate, Production Target, and related
forecast financial information derived from the Production Target
included in the original announcement continue to apply and have
not materially changed; and c) the form and context in which the
relevant Competent Persons' findings are presented in this
announcement have not been materially modified from the original
announcements.
The information in the original announcement that relates to the
Definitive Feasibility Study is based on, and fairly represents,
information compiled or reviewed by Mr. Jeffrey Peter Stevens, a
Competent Person who is a Member of The Southern African Institute
of Mining & Metallurgy, a 'Recognised Professional
Organisation' (RPO) included in a list posted on the ASX website
from time to time. Mr. Stevens is employed by MDM Engineering (part
of the Amec Foster Wheeler Group). Mr. Stevens has sufficient
experience that is relevant to the style of mineralization and type
of deposit under consideration and to the activity being undertaken
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'.
The information in the original announcement that relates to the
Ore Reserve Estimates, Mining, Uranium Preparation, Infrastructure,
Production Targets and Cost Estimation is based on, and fairly
represents, information compiled or reviewed by Mr. Andrew David
Pooley, a Competent Person who is a Member of The Southern African
Institute of Mining and Metallurgy', a Recognised Professional
Organisation' (RPO) included in a list posted on the ASX website
from time to time. Mr. Pooley is employed by Bara Consulting (Pty)
Ltd. Mr. Pooley has sufficient experience that is relevant to the
style of mineralization and type of deposit under consideration and
to the activity being undertaken 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'.
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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