Berkeley Energia (ASX:BKY)

May 12, 2016 | Price: $0.62

Growth Portfolio

Overview: Berkeley Energia Limited (“Berkeley”, the Company”), formerly known as Berkeley Resources Ltd, is an Australian minerals company focused on uranium mining. The company’s flagship asset is the Salamanca Project in Spain. The mineral resource estimate for the Salamanca Project stands at 83m tonnes, grading 495 ppm for 90.5m pounds of uranium. We issued a ‘speculative buy’ recommendation in Apr 2014 at $0.31/share.

Catalysts: Berkeley has recently commenced the development of the Salamanca project. Now incorporating the high-grade Zona 7 deposit, Salamanca has an estimated Net Present Value (“NPV”) of US$871.3 (~A$1190m) and a mine life of 18 years. Berkeley is currently undertaking the Definitive Feasibility Study, which, if completed, enables funding and sales contracts to be put in place. Project financing and offtake agreements remain the major catalysts, whilst a US$10m funding commitment by Resource Capital Funds at a premium to market is a signal of confidence.

Hurdles: The NPV of the Salamanca project is based on a long-term Uranium price of US$65 per pound, which is a significant premium to the current market price. Whilst the Company is well funded to complete Feasibility works, it remains reliant on external capital to advance project development.

Investment View: Berkeley offers speculative exposure to one of the lowest-cost uranium projects in the world. We are attracted to the magnitude of its assets and permits obtained which has led to the commencement of development work in 2016. While volatility in uranium prices and funding are principal risks, Berkeley is transitioning from an explorer to the producer which should yield interest towards the stock. We resume coverage with a ‘spec buy’ recommendation and upgrade our target to $0.90.

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