Ura­nium min­ers in hot de­mand af­ter fi­nan­cial break­through

Berke­ley En­er­gia and Aura En­ergy move step closer to both start pro­duc­tion in 2019

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Two im­por­tant de­vel­op­ments among ju­nior ura­nium min­ers are worth closer in­spec­tion as they put the com­pa­nies in a stronger po­si­tion to bring their re­spec­tive mines into pro­duc­tion. How­ever, a weak ura­nium price may weigh on mar­ket sen­ti­ment to­wards their share prices near-term.

Berke­ley En­er­gia (BKY:AIM) has se­cured the nec­es­sary fund­ing to build its Sala­manca mine in Spain. Aura En­ergy (AURA:AIM) has re­duced the ex­pected op­er­at­ing costs for its Tiris mine in Mau­ri­ta­nia, mean­ing the project could make a profit at to­day’s very low ura­nium price.

Both events re­duce the risks in­volved with owning the shares although they are by no means risk-free in­vest­ments. Min­ing shares can be ex­tremely volatile even when com­pa­nies are gen­er­at­ing rev­enue, profit and cash. As such, we only be­lieve stocks in this sec­tor are suit­able for peo­ple who al­ready have a di­ver­si­fied portfolio and have money they can af­ford to lose. spot price fell from a high of $136 per pound in June 2007 to a low of $18 per pound in De­cem­ber 2016, ac­cord­ing to data from Thom­son Reuters. It now trades at $20.5 per pound.

Most util­ity com­pa­nies buy ura­nium on a con­tract ba­sis which is typ­i­cally priced higher than the spot price. We’re told $35 per pound is the typ­i­cal level at present.

Paul Ather­ley, man­ag­ing direc­tor of Berke­ley En­er­gia, at­tributes the cur­rent price weak­ness to util­ity com­pa­nies hav­ing huge stock­piles of ura­nium, thus de­press­ing de­mand from min­ers. He be­lieves these sup­plies will be run down over the next five years which should push the ura­nium price back up as util­i­ties re-en­gage with min­ers and sign new longterm supply con­tracts.

That’s why Ather­ley says de­cided Berke­ley won’t seek new off­take deals un­til at least late 2018, in the hope that prices will have started to move up by then. Sala­manca is sched­uled to start pro­duc­tion in 2019.

Berke­ley’s $120m fi­nanc­ing deal with Oman’s sovereign wealth fund pro­vides enough money to start the Re­tor­tillo sec­tion of the project. The higher-qual­ity part of the mine is called Zona 7 and which is due to start pro­duc­tion a year af­ter Re­tor­tillo. How­ever, it hasn’t yet got the per­mit for this sec­tion.

Stock­bro­ker Nu­mis flags Zona 7’s lo­ca­tion as a key risk to the in­vest­ment case as the de­posit is next door to a vil­lage which may prove prob­lem­atic in terms of get­ting the min­ing per­mit.

Aura En­ergy be­lieves it can pro­duce ura­nium for $19.40 per pound which is be­low the cur­rent mar­ket price. Chair­man Peter Reeve be­lieves the Tiris mine could be op­er­a­tional by early 2019, cost­ing $45m to build. (DC)

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