Korea Electric to invest US$70m into Berkeley’s Spanish uranium project

Finance

Berkeley Resources Ltd, the Spanish uranium company, has agreed to sell a 35% interest in its Salamanca uranium project to Korea Electric Power Corp (KEPCO) for US$70 million, valuing the overall project at US$200 million.

The non-binding memorandum of understanding (MoU) will potentially progress to a definitive agreement after a due diligence is undertaken by KEPCO, as well as board approvals. It also includes provision for a 35% off-take agreement based on a mixture of spot and term prices.

Korea’s sole electricity provider will also receive board representation at project level, where off-take arrangements and future capital needs will be reviewed. KEPCO operates twenty nuclear power plants in the country with six more under construction.

In 2008, Berkeley, which already owned uranium exploration assets in the region in western Spain, won a government tender for 90% of the Quercus uranium processing plant and nearby resources, owned by Enusa, a state energy company.

The Mina Fe deposit was mined by Enusa, between 1972 and 2000, producing 12.5Mlbs (5,670t) of uranium through heap leach extraction.

Ian Stalker, formerly head of Uramin plc and Niger Uranium plc, joined in November last year, chosen as the man to lead the company to its targeted of first production in 2012.

A number of different programmes are underway, including metallurgical work, drilling to prove up the deposits and the permitting process as a feasibility is scheduled for release in the last three months of this year.

A recent BMO Capital Markets report highlighted permitting as the greatest risk to development was permitting.

The permitting process officially kicked off in July, when the company submitted its Exploitation Plan (EP) to Enusa, which has two months to review the documents.

Following this the EP, which includes a feasibility study, environmental impact assessment (EIA) memorandum and reclamation plan, will be submitted to the federal government's Ministry of Industry.

Initially the project will involve the mining of three separate pits; Alameda South, Palacios and Sageras. Production will initially start at a rate of 2.1Mlb/y (953t) ramping up to 4Mlb/y by 2015.

Salamanca involves the mining of the Aguila, Alameda, Retortillo and Villar areas. The company will retain 100% of its other exploration projects in the area.