Last month, shovels hit the ground in a dry corner of western Spain, near the ancient city of Salamanca. Berkeley Energia, a mining company listed in Australia and on London’s junior AIM market, started work on a $100m (£80m) uranium mine.
The project hopes to create nearly 500 jobs in a depressed former mining region and tap into future demand for the heavy metal, which powers nuclear reactors.
To fund its plans, Berkeley recently raised $30m from a placing of new shares, winning support from funds run by the likes of Blackrock and JP Morgan. When it opens in 2018, the mine will be one of the lowest-cost uranium producers in the world – and the only such mine in Europe, turning out 4.5m pounds a year.
But with uranium prices languishing at 13-year lows, the timing would seem curious. Why would anyone bet on a metal that has fallen so far out of favour? Is uranium due to become a hot property once again? Paul Atherley, Berkeley’s chief executive, says his project is “a rare combination of low operating cost and low capital cost”.
It has been in development for more than a decade, but the breakthrough came in 2014 with the discovery of high-grade uranium near the surface. The shallow nature of the pit will help Berkeley keep its costs at around $15 a pound. By contrast the spot price has almost halved this year to around $18 a pound, a level not seen since 2003.
Somewhat paradoxically, Atherley is happy for the price to go even lower, because he has his eye on long-term contracts, which command a premium on the spot price.
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