Overview: Berkeley Resources Limited (“Berkeley”, the Company”) is an Australian minerals company with uranium assets in Spain. The Company’s most advanced asset is the Salamanca Project, where indicated resources of 34.4million tonnes (mt) and inferred resources of 31mt have been delineated. We initiated coverage in Feb 2012 at $0.34/share with a ‘spec buy’ recommendation for its development potential. During Sep 2013 a Preliminary Feasibility Study(PFS) was completed into a 2.7million lb pa operation with 11-year mine life.
Catalysts: The recently completed Salamanca PFS highlighted globally attractive operating (<US$25/lb) and start-up capital costs (US$95.1m). The Project’s near-term development potential has also been supported by recent permitting advances, with the Environmental License received in Oct 2013 following a 24-month process. We expect satisfaction with final mining and processing regulations, and uranium market developments to drive interest in the Company.
Hurdles: Salamanca PFS indicates that project development requires a uranium price of US$65/lb, which is a significant premium to the current spot price of ~US$35/lb. 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 a recovery in uranium markets. We are attracted to management’s track record of delivering shareholder value, and Berkeley’s strong funding position. Its recently completed PFS highlights Salamanca as one of the world’s most compelling, independently held undeveloped uranium projects. In our view, current market pricing is constraining supply across the industry, and looming nuclear capacity additions in Asia have the potential to stimulate a recovery. Offering strong leverage to improving uranium markets, we maintain our ‘spec buy’ recommendation.
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this report is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
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