Monday, 5th June 2017 10:05 - by Stefania Barbaglio
Where the market is concerned, summer doesn’t have to mean a holiday. Not all companies and CEOs take long summer breaks, leaving the business dormant with no relevant news flow and investors hungry for updates which won’t come till late September.
On the contrary, some of them will in fact be pretty active over the next coming months. I will focus on just one of them: Berkeley Energia the London-listed (LON:BKY) clean energy company developing the Salamanca uranium mine in western Spain.
A strong news flow is expected over the next 6-8 weeks to include corporate and operational updates. “All is on time and on target, and we expect a very busy summer ready to start production later in the year” as Paul Atherley, MD of BKY, said.
News kicked off today with the Company announcing that its continued exploration programme is now targeting Zona 7, aimed at increasing the mineral resource estimate and unlocking further value in this exceptional deposit.
What to expect next?
Their previous announcement clearly started the Company was on course to update by mid 2017 on:
1. Further offtake agreements to secure the sale of the first year of uranium production at least
2. Additional drilling and resource estimation work at Zona 7 aimed to be on-going
3. Securing strategic partner investors to fund the full construction of the Salamanca mine
4. Commencement of production
All set to happen this summer: watch this space.
It’s very likely that the current share price of 45p will see a significant move. An all-year high was reached in February at 70p per share.
Three of the UK’s top mining analysts value Berkeley Energia at over £1 per share.
Paul Smith from WH Ireland reiterated his BUY recommendation with an increased target price of £1.28p, while Michael Stoner has an NAV of £1.18p per share and reiterates his BUY recommendation based on a risk weighted NAV of 90p per share, and Ben Davies has a Fair Value based on conservative NPV assumptions of £1.06p per share and a HOLD recommendation based on a share price of 60p per share.
Berkeley was heavily tipped back in 2015 just after Paul Atherley joined the Company: Those such as Proactive Investors, http://www.shareprophets.com/views/15122/buy-berkeley-energy-at-a-21p-offer, called it right this time. Investors who bought at 21p made a killing.
Small Cap Leaders: Berkeley Energia features All Street Small Cap Report May 2017
All Street is the independent voice of research for institutional and retail investors, aiming to provide insightful and thought-provoking reports on private markets and small cap companies. The May 2017 report is offering investors the story of 50 ‘active and interesting companies across a broad range of sectors’ companies driving the economy during these Brexit times. They have been carefully identified and selected based on criteria such as economical and operational value, innovation and balance sheet strength. Within the natural resource sector and its trending, Berkeley Energia Ltd (LON: BKY) stands out.
The Australian AIM London listed clean energy company boasts the largest uranium asset in Europe, the Salamanca project in western Spain. Berkeley has received all the national and European approvals required for development of the mine, and pre-construction works are in progress for full production to start at the end of 2018.
Why invest in uranium?
Uranium has been one of the most controversial commodities in the market, being subject to multiple discussions between those who believe in the safety of using nuclear energy and those who don’t, leaving investors torn. The truth is though, that despite negative claims, uranium is one of the cheapest options for clean energy supply in the developed world. In the past, it used to take a decade to build a nuclear reactor; whilst now it takes five years and is becoming quicker..
The whole fuss around uranium prices has been due to the oversupply. However, there are two main areas expected to heat up the market soon: the EU, where reinvestments in uranium are taking place, and China, a major consumer of uranium, which is spending $570 billion on new reactors. In addition, Japan is re-starting its reactors, while the USA and Kazakhstan - a major uranium supplier - are also looking to reduce spot supply which will translate into potential reduction of spot uranium prices in 2017 and beyond. The trend is set to be turning in the next few years.
In terms of supply, about two thirds of global uranium comes from three countries: Russia, Kazakhstan and Niger, all of which have questionable human rights histories. Berkeley’s Salamanca Project, being part of an OECD country, offers geographic security of supply, making Berkeley a reliable producer in the heart of Europe.
Back to BKY, the company is well-positioned in the market, being one of the leading European companies with interests in uranium mining and one of the few listed on the London Stock Exchange (LON:BKY). Berkeley managed to raise $30M last year, all from major UK institutions. During a period when uranium prices dropped 55%, Berkeley’s share price went from 11p to 47p. One of the key elements is the sources of funding for the project. Last year, BKY stated that their CAPEX costs would have been TOT $100M. With $30M in the bank, the company needed $60M to fully progress the Salamanca mine, and it is now in advanced discussions to secure a long-term supplier through investing in exploration. Great upside and margins lie in the low capital outlay with low operating costs.
In the age of Brexit, freedom of movement is an abstract concept, Berkeley believes. The company is committed to making a positive impact in the Salamancan community by training and employing locals and building basic infrastructure for the village. The company is currently employing more than 70 local workers and expect to be hiring 450 more when production in the mine starts, with a further 2,000 indirect jobs created across the region.
The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.