Berkeley Energia has entered into an investment agreement with the sovereign wealth fund of the Sultanate of Oman agreeing to invest up to $120 million to fully fund the Salamanca mine into production. The investment will position the fund as a long term strategic investor in the company as well as a potential offtake partner.
Managing Director, Paul Atherley, commented: “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.”
Tim Keating, Private Equity Manager for Mining and Resources, State General Reserve Fund commented: “The Salamanca mine matches our investment criteria of being a long life, low cost mine development opportunity with outstanding economic fundamentals. We are excited to partner with the Berkeley Energia team to unlock the full potential of the Salamanca project.”
In July 2016 Berkeley published the results of a definitive-feasibility study confirming that the Salamanca project will be one of the world’s lowest cost producers, capable of generating strong after tax cash flows through the current low point in the uranium cycle. It has an NPV of $531.9 million with an IRR of 60% based on a discount rate of 8%.
The DFS reported that over an initial ten year period the project is capable of producing an average of 4.4 Mlb/y of uranium at a cash cost of $13.30/lb and a total cash cost of $15.06/lb at steady state. UX Consulting’s current published price is $20.50/lb (August 21, 2017) and that of TradeTech at $19.90/lb (August 18, 2017).
The company says that “with operating costs almost exclusively in Euros and a revenue stream in US dollars the project is expected to continue to benefit from the effects of deflationary pressures within the EU.” The project benefits greatly from the well-established EU funded infrastructure in the region with an initial capital cost of only $93.8 million which is low by international standards for a project of this size.
Canaccord Genuity London acted as corporate finance advisor to the transaction. The investment is structured as:
- An interest-free and unsecured convertible loan of $65 million which can be converted into ordinary shares at £0.50/share resulting in the fund owning approximately 28% of the company; and
- Three tranches of options convertible at a weighted average price of £0.85/share contributing a further $55 million towards the later phases of the company’s development of the Salamanca mine resulting in the fund holding a further 9% of the company.
The investment is binding on the parties and is subject to approval by the company’s shareholders.
The fund will have the right to appoint a non-executive director to the Board and has the right to match future uranium off-take transactions on similar commercial terms subject to certain limitations on volume.
