Quarterly Report March 2018

RNS Number : 4861M

Berkeley Energia Limited

30 April 2018

 

BERKELEY ENERGIA LIMITED

NEWS RELEASE | 30 April 2018 ogress has been achieved in bringing the project ready to the point where full construction can commence. The main focus has been on carrying out a detailed project review, aimed at ensuring that the optimal capital and operating costs are achieved.

The tone of the uranium market appears to be "cautiously more optimistic". Production cuts continue to be announced at uranium mines across the world following the announcement of production cuts from Cameco and Kazatomprom; the spot price of uranium currently sits at $21 per pound.

However, against this backdrop of a weakening uranium price forcing production cuts, demand still continues to grow.

Japanese reactor restarts are well underway, the Chinese new build programme has new impetus and with a record 57 reactors under construction around the world there is a growing recognition amongst policymakers that the combination of renewables and nuclear energy is the pathway to a clean energy future.

The National Energy Administration announced last month that China is making good progress with its nuclear build program and is currently constructing six to eight new reactors with five of them coming online this year.

The Salamanca mine is scheduled to reach production as the market enters the long awaited supply/demand deficit that industry experts have called both fundamental and unavoidable.

The project continues to receive strong support among key stakeholders in Spain, reflecting the growing awareness of the benefits the investment will bring to a community that is experiencing some of the highest levels of unemployment in the European Union.

Highlights:

·     Detailed review aimed at cost savings:

o   The Company has been carrying out an extensive review of the Salamanca mine to determine whether a further reduction of capital costs can be achieved;

o   The Company has identified a number of areas where there is potential to reduce the upfront cost required during the construction phase and will update the market once the review has been finalised; and

o   The Company is now focused on awarding major contracts ahead of commencing full construction later this year.

·     Strong support from key stakeholders:

o   AENOR, the Spanish Association for Standardisation and Certification, recently re awarded certificates to the Company in Sustainable Mining and Environmental Excellence; and

o   As part of its commitment to reduce unemployment in the region, the majority of new staff required at the project will be recruited from the local villages of Retortillo and Villavieja.

·     Uranium market:

o   Production cuts from Cameco and Kazatomprom are expected to remove 17Mlb U₃O₈ from the market this year (12Mlb attributable to Cameco alone), representing 12% of primary mine supply;

o   Demand continues to grow across the world as NGOs and think tanks advocate for the inclusion of nuclear in the clean energy mix;

o   The Company has 2.75 million pounds of U₃O₈ under contract for the first six years, with a further 1.25 million pounds of optional volume, at an average price above US$42, compared with a spot price of $21 per pound; and

o   The Company will continue to progressively build its offtake book and has granted the Oman sovereign wealth fund the right to match any future long term offtake transactions.

·     Exploration:

o   Exploration focused on identifying additional targets with similar characteristics to Zona 7 continued during the quarter; and

o   Some further 1,600 soil samples were collected during the second phase of the geochemical sampling programme which are now being analysed using Ionic Leach™ analysis and other methods. 

The Company is in a strong financial position with US$100 million in cash.

Managing Director, Paul Atherley, commented:

"Having completed the financing, we are finalising the selection of contractors and are undertaking detailed final reviews to ensure that we have the most optimal capital and operating costs.

There is a huge amount of support for the Salamanca mine, which is located in a region experiencing some of the highest levels of unemployment in the European Union.

Recently the Minister of Economy and Finance for Castilla y Leon, Pilar del Olmo, heralded the investment that the Company is making in the region, commenting that the Salamanca mine will bring 'a generation of direct employment.'

But our investment goes beyond just employment - it will boost local businesses, improve schools that haven't been refurbished for decades and see other key services such as petrol stations return to the area.  

We work closely with the surrounding communities and through cooperation agreements have provided Wifi networks for local villages, built play areas for children, repaired sewage water plants, upgraded sports facilities, and sponsored various sporting events and local festivals."

For further information please contact:

Berkeley Energia Limited	[phone]
Paul Atherley, Managing Director and CEO	[e-mail]
Berenberg (Joint Broker)	[phone]
Matthew Armitt
James Brooks
Tamesis Partners (Joint Broker)	[phone]
Charles Bendon Richard Greenfield
WH Ireland Limited (Nominated Adviser and Joint Broker)	[phone]
Tim Feather, Director Jessica Cave, Assistant Director Alex Bond, Executive

Detailed development review aimed at reducing capital costs continues

The Company has been focused on conducting detailed engineering and scheduling reviews to ensure that the optimal capital and operating costs are achieved prior to full construction commencing.

The Company has identified a number of key areas where further cost savings could be achieved and will look to finalise this review in the coming months.

The Company is continuing to award major contracts ahead of commencing full construction. As part of its commitment to develop the project in partnership with Spanish engineering excellence, Sanchez y Lago, one of Spain's major construction companies and contract mining firms was selected as the preferred mining contractor.

Employment and training

The project is located in an area that has suffered badly from intergenerational unemployment and rural desertification.

To date, the Company has received over 7,000 job applications just from residents of the Salamanca region alone; with 400 of those come from villages surrounding the project and of those, over 110 from Villavieja alone.

The University of Salamanca has estimated that for this type of business there will be a multiplier factor of 5.1 indirect jobs for every direct job created, resulting in over 2,500 direct and indirect jobs being created as a consequence of the Company's investment in the area.

To date, over 120 locals have attended courses organised by the Company and over 25% of residents from the local area have applied for jobs. The Company currently has a work force of nearly 70 people and over a quarter of these have been recruited from towns in the immediate vicinity.

Training programmes, which have been historically well attended and oversubscribed, will continue to run throughout the year ensuring that sufficient people from the local communities are qualified for jobs created during the construction and mining phases.

Commitment to the community

The Company has invested more than €70 million developing the project over the past decade and plans to invest an additional €250 million over the life of the project.

The Company has signed Cooperation Agreements with the highly supportive local municipalities, demonstrating its commitment to fostering positive relationships with these communities.

To date, through these agreements, the Company has provided Wifi networks for local villages, built play areas for children, repaired sewage water plants, upgraded sports facilities, and sponsored various sporting events and local festivals.

Following consultations with the residents of the local community a number of infrastructure improvements to neighbouring villages have been identified, which the Company is looking to progress in the coming months.

The Company has worked tirelessly over the past decade to develop positive and mutually beneficial relationships with the local communities and will continue to do so as construction ramps up. 

Committed to the highest environmental standards

The Salamanca mine is being developed to the highest international standards and the Company's commitment to the environment remains a priority. It holds certificates in Sustainable Mining and Environmental Excellence which were awarded by AENOR, an independent Spanish government agency. The Company was re-awarded both certificates following a consultation process with the agency.

The mine has been designed according to the very latest thinking on sustainable mining. The extraction and treatment areas will be continuously rehabilitated as operations progress and with minimum disturbance during operations. Once operations are complete, all areas utilised by the Company will be fully restored to an improved agricultural state.

As part of the Environmental Licence and the Environmental Measures Plan over 30,000 young oak trees will be planted over an area of 75 to 100 hectares. The first 20,000 of these will be planted in the nearby municipality of Vitigudino over an area of more than 500 hectares currently used by cattle farmers. 

Uranium Market - "Cautiously More Optimistic"

Representatives of the Company recently attended the World Nuclear Fuel Conference in Madrid and were encouraged by the cautiously more optimistic tone in the uranium market.

The demand outlook continues to improve. Japanese reactor restarts are well underway and the Chinese new build programme has new impetus. Around the world policymakers are increasingly recognizing the combination of renewables and nuclear generated electricity as the pathway to a low carbon future with a record 57 reactors now under construction across the world.

With the ongoing supply curtailments, most notably closure of Cameco's flagship McArthur River mine and the Kazatomprom production cuts, uranium prices at near record lows and with higher priced historical offtake sales contracts running off, more closures could be in the pipeline heralding a period of growing primary supply deficit.

Cameco, the world's largest listed producer, has announced that 2018 production will fall to 18 million pounds and in order to meet its delivery commitment of 33 million pounds it will need to draw down inventory and make "opportunist purchases" - widely interpreted as purchases of uranium in the spot market during the year.

At the same time the US and EU utilities which represent around half world's uranium demand, have a growing re-contracting requirement estimated at 665 million pounds over the next few years.

The pace of this re-contracting is expected to be a major driver in the uranium price. The last time the US and EU utilities allowed contractual coverage to fall to historically low levels they collectively entered the market to cover their positions resulting in an increase in the uranium price.

In discussion with utilities there appears to be a growing awareness of potential security of supply issues particularly at a time when both the US and Russia are openly discussing trade sanctions in the nuclear industry.

Nuclear accounts for more than a quarter of the EU's electricity generation and for the first time in its history the community has no domestic uranium mine supply and is heavily reliant on imports from Russia, Kazakhstan and Niger.

The Company remains of the view that development of the Salamanca mine as a reliable, low cost supplier from the heart of the European Union provides an attractive security of supply diversification opportunity for both EU and US utilities.

Offtake programme and notable increase in public tender activity

The Company currently has 2.75 million pounds of U₃O₈ concentrate under long term contracts over the first six years of production. Potential exists to increase annual contracted volumes further as well as extend the contracts by a total of 1.25 million pounds.

The Company has maintained its preference to combine fixed and market related pricing across its contracts 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.

Across the portfolio, the average fixed price per pound of contracted and optional volumes is above US$42 per pound. This compares favourably with the current spot price of around US$21 per pound.

The investment agreement signed with the Oman sovereign wealth fund grants the fund the right to match future long term uranium offtake transactions. This right to match is subject to an annual cap (on a rolling 12-month basis) which cannot exceed the greater of 1 million pounds of U₃O₈ concentrate per annum or 20% of annual production.

The Company intends to increase its offtaking activity this year once full construction of the mine is underway and will participate in public and private offtake opportunities with global utilities, reporting regularly on progress.

The Company was selected to present at the World Nuclear Fuel Cycle Conference in Madrid in April 2018. Following the conference, which was attended by utility companies from across the world, the Company hosted several major utilities on site to provide an update on progress made at the project.

The Salamanca mine is scheduled to reach production as the market enters a supply/demand deficit that industry experts have called both fundamental and unavoidable. US utilities looking to re-contract will be competing with Chinese and Japanese reactor demand, which may lead to higher spot and term contract prices.

In addition, organisations such as Imperial College and Energy for Humanity have spoken publicly on the importance of including nuclear power in the clean energy mix along with renewables.

Exploration programme expanded targeting Zona 7 style deposits 

The soil sampling programme continued throughout the quarter, focusing on identifying additional targets with similar characteristics to the Zona 7 and Retortillo deposits.

The process involves developing a fingerprint of the Zona 7 discovery (where a low radiometric anomaly existed) and the Retortillo deposit and looking for repetitions of these unique signatures in other areas of interest and then matching these with co-incident radon and geochemical anomalies and finally placed in a geological and structural setting.

During this second phase, following on from the December 2017 work programme, a further 1,600 soil samples were collected across the Salamanca I and Salamanca II areas and are being analysed using Ionic Leach™, which allows for very high levels of detection of uranium and other economic minerals.

The programme is supported by radiometric surveying and radon ground concentration measures which, when combined with the soil samples, will enable the Company to plan a targeted drilling programme based on the wealth of geological data it has collected.

Permitting update

To date, the Company has received more than 120 favourable reports and permits for the development of the mine.

The Urbanism Commission of Salamanca gave an Express Resolution for the granting of the Authorisation of Exceptional Land Use.

With the Mining Licence, Environmental Licence and the Authorization of Exceptional Land Use the next major approvals are the Urbanism Licence by the municipal authority and the Construction Authorization by the Ministry of Energy, Tourism and Digital Agenda for the treatment plant as a radioactive facility.

Approvals for the Zona 7 deposit are progressing well, the Exploitation Plan, the Reclamation and Closure Plan, the Environmental Impact Assessment and the Initial Authorization are complete and have all now been submitted to the relevant authorities. The final approval is expected during 2019 as previously announced.

To view this announcement in full, including all illustrations, please refer to https://www.berkeleyenergia.com/investor-relations/company-reports/.

Forward Looking Statements

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 mineral properties. These forward-looking statements are based on Berkeley's expectations and beliefs concerning future events.  Forward looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Berkeley, which could cause actual results to differ materially from such statements. Berkeley makes no undertaking to subsequently update or revise the forward-looking statements made in this announcement, to reflect the circumstances or events after the date of that announcement.

Appendix 1: Summary of Mining Tenements

As at 31 March 2018, the Company had an interest in the following tenements:

Location	Tenement Name	Percentage Interest	Status
Spain
Salamanca	D.S.R Salamanca 28 (Alameda)	100%	Granted
	D.S.R Salamanca 29 (Villar)	100%	Granted
	E.C. Retortillo-Santidad	100%	Granted
	E.C. Lucero	100%	Pending
	I.P. Abedules	100%	Granted
	I.P. Abetos	100%	Granted
	I.P. Alcornoques	100%	Granted
	I.P. Alisos	100%	Granted
	I.P. Bardal	100%	Granted
	I.P. Barquilla	100%	Granted
	I.P. Berzosa	100%	Granted
	I.P. Campillo	100%	Granted
	I.P. Castaños 2	100%	Granted
	I.P. Ciervo	100%	Granted
	I.P. Dehesa	100%	Granted
	I.P. El Águlia	100%	Granted
	I.P. Espinera	100%	Granted
	I.P.Halcón	100%	Granted
	I.P. Horcajada	100%	Granted
	I.P. Mailleras	100%	Granted
	I.P. Mimbre	100%	Granted
	I.P. Oñoro	100%	Granted
	I.P. Pedreras	100%	Granted
	I.P. El Vaqueril	100%	Pending
	I.P. Calixto	100%	Pending
	I.P. Melibea	100%	Pending
	I.P. Clerecía	100%	Pending
	I.P. Clavero	100%	Pending
	I.P. Conchas	100%	Pending
	I.P. Lis	100%	Pending
	E.P. Herradura	100%	Pending
Cáceres	I.P. Almendro	100%	Granted
	I.P. Ibor	100%	Granted
	I.P. Olmos	100%	Granted
Badajoz	I.P. Don Benito Este	100%	Granted
	I.P. Don Benito Oeste	100%	Granted

Investigation permits, Damkina Fraccion 1, 2 and 3, were relinquished during the quarter ended 31 March 2018. There were no other changes to beneficial interest in any mining tenements due to farm-in or farm-out agreements. No beneficial interest in farm-in or farm-out agreements were acquired or disposed during the quarter.

+Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96  Origin Appendix 8  Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/13, 01/09/16

Name of entity
Berkeley Energia Limited
ABN		Quarter ended ("current quarter")
40 052 468 569		31 March 2018

Consolidated statement of cash flows			Current quarter $A'000	Year to date (9 months) $A'000
1.	Cash flows from operating activities		-	-
1.1	Receipts from customers
1.2	Payments for		(4,824)	(9,629)
	(a)   exploration & evaluation
	(b)   development		-	-
	(c)   production		-	-
	(d)   staff costs		(1,234)	(4,781)
	(e)   administration and corporate costs		(328)	(1,144)
1.3	Dividends received (see note 3)		-	-
1.4	Interest received		114	260
1.5	Interest and other costs of finance paid		-	-
1.6	Income taxes paid		-	-
1.7	Research and development refunds		-	-
1.8	Other (provide details if material): - Business Development - Prepaid Deposits		(193) -	(636) (101)
1.9	Net cash from / (used in) operating activities		(6,465)	(16,031)
2.		Cash flows from investing activities	(981)	(2,247)
2.1		Payments to acquire:
		(a)   property, plant and equipment
		(b)   tenements (see item 10)	-	-
		(c)   investments	-	-
		(d)   other non-current assets	-	-
2.2		Proceeds from the disposal of:	-	-
		(a)   property, plant and equipment
		(b)   tenements (see item 10)	-	-
		(c)   investments	-	-
		(d)   other non-current assets	-	-
2.3		Cash flows from loans to other entities	-	-
2.4		Dividends received (see note 3)	-	-
2.5		Other (provide details if material):	-	-
2.6		Net cash from / (used in) investing activities	(981)	(2,247)
3.		Cash flows from financing activities	-	-
3.1		Proceeds from issues of shares
3.2		Proceeds from issue of convertible notes	-	85,824
3.3		Proceeds from exercise of share options	-	-
3.4		Transaction costs related to issues of shares, convertible notes or options	(1)	(2,526)
3.5		Proceeds from borrowings	-	-
3.6		Repayment of borrowings	-	-
3.7		Transaction costs related to loans and borrowings	-	-
3.8		Dividends paid	-	-
3.9		Other (provide details if material)	-	-
3.10		Net cash from / (used in) financing activities	(1)	83,298
4.		Net increase / (decrease) in cash and cash equivalents for the period	105,367	34,814
4.1		Cash and cash equivalents at beginning of period
4.2		Net cash from / (used in) operating activities (item 1.9 above)	(6,465)	(16,031)
4.3		Net cash from / (used in) investing activities (item 2.6 above)	(981)	(2,247)
4.4		Net cash from / (used in) financing activities (item 3.10 above)	(1)	83,298
4.5		Effect of movement in exchange rates on cash held	1,881	(33)
4.6		Cash and cash equivalents at end of period	99,801	99,801

5.	Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts	Current quarter $A'000	Previous quarter $A'000
5.1	Bank balances	17,520	24,429
5.2	Call deposits	82,281	80,938
5.3	Bank overdrafts	-	-
5.4	Other (provide details)	-	-
5.5	Cash and cash equivalents at end of quarter (should equal item 4.6 above)	99,801	105,367

6.	Payments to directors of the entity and their associates	Current quarter $A'000
6.1	Aggregate amount of payments to these parties included in item 1.2	(172)
6.2	Aggregate amount of cash flow from loans to these parties included in item 2.3	-
6.3	Include below any explanation necessary to understand the transactions included in items 6.1 and 6.2
Payments include directors' fees, superannuation, bonuses and consulting fees.

7.	Payments to related entities of the entity and their associates	Current quarter $A'000
7.1	Aggregate amount of payments to these parties included in item 1.2	-
7.2	Aggregate amount of cash flow from loans to these parties included in item 2.3	-
7.3	Include below any explanation necessary to understand the transactions included in items 7.1 and 7.2
Not applicable.

8.	Financing facilities available Add notes as necessary for an understanding of the position	Total facility amount at quarter end $A'000	Amount drawn at quarter end $A'000
8.1	Loan facilities	-	-
8.2	Credit standby arrangements	-	-
8.3	Other (please specify)	-	-
8.4	Include below a description of each facility above, including the lender, interest rate and whether it is secured or unsecured. If any additional facilities have been entered into or are proposed to be entered into after quarter end, include details of those facilities as well.
Not applicable.

9.	Estimated cash outflows for next quarter	$A'000
9.1	Exploration and evaluation	(3,000)
9.2	Development	-
9.3	Production	-
9.4	Staff costs	(1,000)
9.5	Administration and corporate costs	(200)
9.6	Other (provide details if material)	-
9.7	Total estimated cash outflows	(4,200)

10.	Changes in tenements (items 2.1(b) and 2.2(b) above)	Tenement reference and location	Nature of interest	Interest at beginning of quarter	Interest at end of quarter
10.1	Interests in mining tenements and petroleum tenements lapsed, relinquished or reduced	I.P. Damkina Fraccion 1 I.P. Damkina Fraccion 2 I.P. Damkina Fraccion 3	Direct Direct Direct	100% 100% 100%	- - -
10.2	Interests in mining tenements and petroleum tenements acquired or increased	-	-	-	-

Compliance statement

1        This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2        This statement gives a true and fair view of the matters disclosed.

                        [lodged electronically without signature]

Sign here:         ............................................................                        Date: 30 April 2018

(Director/Company secretary)

Print name:       Dylan Browne

Notes

1.       The quarterly report provides a basis for informing the market how the entity's activities have been financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2.       If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3.       Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

 

END

 

 

MSCSDLSISFASESL