The results of our July 2016 Definitive-Feasibility Study confirmed the Salamanca project will be one of the world’s lowest cost producers

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 flow through the current low point in the uranium cycle.

The project has a Net Present Value of US$531.9 million with an internal rate of return of 60% based on a discount rate of 8%.

The Definitive Feasibility Study has reported that over an initial ten year period the project is capable of producing an average of 4.4 million pounds of uranium per year at a cash cost of US$13.30 per pound and a total cash cost of US$15.06 per pound during steady state which compares with the current spot price of US$20 per pound and term contract price of US$41 per pound.

During this ten year steady state period, based on the most recent UxC forward curve of uranium prices, the project is expected to generate an average annual net profit after tax of US$116 million.

The project benefits greatly from the well-established EU funded infrastructure in the region with an initial capital cost of only US$93.8 million, which is low by international standards for a project of this size.

The project has an initial mine life of 14 years based on mining and treating only the Measured and Indicated resources of 59.8 million pounds.

An annual exploration programme, which will take advantage of generous tax incentives, has been aimed at making new discoveries and converting some of the 29.6 million pounds of Inferred resources into the mine schedule, with the objective of maintaining annual production at over 4 million pounds a year on an ongoing basis.

The Company has utilised the UxC Annual Mid Long Term Base Price Projections for its sales price assumptions (UxC Uranium Market Outlook report for Q2 2016). The forward curve utilised is a projection of long term contracted uranium prices (rather than spot prices) which is consistent with the Company’s intention to enter into long term offtake contracts over the significant majority of its offtake.

To download a copy of the Definitive-Feasibility Study announcement please click here

Table 1 – Summary of Key Study Outputs, Definitive-Feasibility Study Results (to a maximum accuracy variation +/- 10%)

Net Present Value (Post-tax @8%) US$531.9m
Internal Rate of Return (Post-tax) 60%
Mine Life 14 years
Uranium sales price (2017-2030) US$39 – US$ 68/lb
First Production 2018
Annual Saleable Production (steady state operation) 4.4 Mlb of U3O8
Annual Saleable Production (life of mine) 3.5 Mlb of U3O8
C1 Cash Cost (steady state operation) US$13.30 /lb
C1 Cash Cost (life of mine) US$15.39 /lb
C2 Cash Cost (steady state operation) US$15.06 /lb
C2 Cash Cost (life of mine) US$17.15 /lb
Capital to first Production US$93.8m
Stripping Ratio – Life of Mine (ore:waste) 1:1.4
Peak Annual EBITDA US$226.3m

Table 2 – Material Assumptions

Maximum Accuracy valuation +/- 10%
Mine Life 14 years
Mining Method Open-pit & transfer mining
Strip ratio (life of mine average) 1:1.4
Mining cut off grades 107 ppm U3O8 for Retortillo, 125 ppm U3O8 for Zona 7 and 90 ppm U3O8 for Alameda
Overall Pit Wall Slope Angles 34-61 degrees for Retortillo, 47-59 degrees for Zona 7, and 34-59 degrees for Alameda
Processing Method Heap leaching using on-off leach pads, followed by uranium recovery and purification by solvent extraction, ammonium diuranate precipitation and calcination
Annual Ore Processing Rate (steady state) 2.7 Mtpa for Retortillo and Zona 7 / 3.4 Mtpa for Alameda
Annual U3O8 Production (steady state) 4.4 Mtpa
Metallurgical Recovery 88%
Sulphuric Acid Price €70 per tonne
Acid Consumption 18 kg/t for Retortillo, 20 kg/t Alameda, and 10 kg/t for Zona 7
Mining Costs US$9.90/lb for Retortillo

US$3.50/lb for Zona 7

US$7.40 for Alameda

Processing Costs US$10.70/lb for Retortillo

US$5.50/lb for Zona 7

US$11.10 for Alameda

G&A Costs US$0.90/lb for Retortillo

US$0.90/lb for Zona 7

US$0.90 for Alameda

Initial Capital Costs (Retortillo) US$93.8 million
Initial Capital Costs (Zona 7) US$59.2 million
Initial Capital Costs (Almeda) US$79.7 million
Commercialisation Costs 1.00%
State Reserves Royalty – ENUSA (Alameda) 2.50%
Municipality Royalty 0.20%
Anglo Pacific Royalty 1.00%
RCF Royalty 0.38%
Corporate Tax Rate 25%
Exchange Rate USD / EUR 1.11
Exchange Rate GBP / EUR 0.75
Uranium Sales Price (2017 – 2030) US$39-US$68/lb
Discount Rate 8%

Mtpa = Million tonnes per annum

Mlbs = Million of U3O8