REG - Berkeley Energia - DFS confirms Salamanca as a low cost producer <Origin Href="QuoteRef">BKY.AX</Origin> - Part 7
14/07/2016 07:31
- Part 7: For the preceding part double click ID:nRSN1376Ef
samples distributed along orebody divided in 6 possible wastes based on lithology and weathering has been tested.Waste has been
divided into:· Inert: comprising Tertiary cover and conglomerates, and Completely Weathered lithologies with less than
40ppm of U3O8.· Non-Inert: all the lithologies with more than 40ppm U3O8 and the Partially Weathered and Unweathered
materials.One waste dump has been considered for each of the two previous type of wastes. Non-inert waste will need a liner as
waste dump floor while Inert waste only need a conventional preparation based on topsoil removal and base compaction. Waste
dumps approved by the Exploitation Project. Detailed project for waste dump will be finalize before operation starts
Infrastructure The existence of appropriate infrastructure: availability of land for plant development, power, water, transportation (particularly for bulk commodities), labour, accommodation;or the ease with which the infrastructure can be provided, or accessed. Road, power line and communications are available.Land acquisition has begun although only 15.4Ha have been acquired from 202Ha.
It is not expected difficulties to reach amicable agreements with the current landowners for the rest. If any, the law allow the
company for the force expropriation of the land. The project location is not remote and accommodation can be done in all
villages and towns around
Costs The derivation of, or assumptions made, regarding projected capital costs in the study. Capital costs have been estimated through the issue of detailed enquiries to multiple contractors and the receipt of formal
proposals by possible suppliers or contractors.
The methodology used to estimate operating costs. Mining operational cost have been calculated from formal proposals from 5 possible contractors. Of the 5 proposals, one has
been discarded because of elevated rates. The other. 4 of them are in a very close range and the selected one is the lowest. The
different between the lowest and the average of the 4 low range contractors is less than 10%.Processing cost have been estimated
based on consumptions obtained from testwork and engineering design, and proposals received from suppliers of the different
commodities. Man-power was estimated based on similar operations and cost based on a benchmarking of this cost in other
operations in country.
Allowances made for the content of deleterious elements. Deleterious elements were analysed in the ore, in the PLS and in the obtained product, and non-deleterious elements were found
at levels that could penalize the product
Any assumptions or allowances made for deleterious elements. N/A
The source of exchange rates used in the study. Consensus of different analysts
Derivation of transportation charges. Estimated based on proposals of courier companies
The basis for forecasting or source of treatment and refining charges, penalties for failure to meet specification, etc. Estimated based on the industry standards
The allowances made for royalties payable, both Government and private. 1% Royalty is payable to Anglo Pacific Group, Plc and 0.375% royalty is payable to Resource Capital Fund.25% on benefits has
been considered as a fix tax in Spain.
Revenue factors The derivation of, or assumptions made regarding revenue factors including head grade, metal or commodity price(s) exchange rates, transportation and treatment charges, penalties, net smelter returns, etc. Projected U3O8 concentrate quality is consistent with the results of metallurgical test work data completed for the project,
compared against standard product specifications at converters. Uranium revenues are based on the latest published long term
contract pricing forecasts (LT mid-range) from UxC. Prices escalate from US$39.1/lb in 2017 to US$67.7/lb by 2030. The company
considers this a conservative estimate of long term prices, with analyst consensus forecasts reaching US$65 per pound long
term.Commercialisation costs of 1% have been applied to gross revenues to reflect transportation costs, insurances and
commissions. All prices are based on 2016 constant United States dollars.
The derivation of assumptions made of metal or commodity price(s), for the principal metals, minerals and co-products. U3O8 pricing forecasts are based on the latest published long term contract pricing forecasts (LT mid-range) from UxC. Prices
escalate from US$39.1/lb in 2017 to US$67.7/lb by 2030.
Market assessment The demand, supply and stock situation for the particular commodity, consumption trends and factors likely to affect supply and demand into the future. The uranium market is currently characterised by high inventory levels, oversupply and depressed demand levels, largely due to
the ongoing effects of the Fukushima disaster in Japan in 2011 which resulted in the closure of all Japanese nuclear reactors.
The spot uranium price has fallen in response, and most mines are currently operating at or near marginal cost, with significant
production now coming off stream by higher cost producers. A major increase in demand is expected from China and India where
large scale reactor build programs are ongoing. Analyst consensus forecast is for the uranium market to turn into deficit around
2021/2022 when price recovery is expected to increase significantly to the analyst consensus long term incentive price of
US$65/lb.
A customer and competitor analysis along with the identification of likely market windows for the product. Customers are expected to originate from the US, Asia (in particular China, Japan and India) and Europe and will either be large
nuclear utilities or trading houses. The company is currently in discussions with numerous global utilities and trading houses
regarding off-take contracts and is confident that demand will exist for its product from the commencement of production and
throughout the life of mine.
Price and volume forecasts and the basis for these forecasts. Uranium revenues are based on the latest published long term contract pricing forecasts (LT mid-range) from UxC. Prices escalate
from US$39.1/lb in 2017 to US$67.7/lb by 2030. The company considers this a conservative estimate of long term prices, with
analyst consensus forecasts reaching US$65 per pound long term.Volume sold averages 3.5X m lbs per annum over the life of mine
and is based on the Company's expectations that sufficient demand exists from Asian, US and European customers for such
material.
For industrial minerals the customer specification, testing and acceptance requirements prior to a supply contract. Not applicable
Economic The inputs to the economic analysis to produce the net present value (NPV) in the study, the source and confidence of these economic inputs including estimated inflation, discount rate, etc. The Salamanca Project is made up of the Retortillo, Santidad, Zona 7 and Alameda sites. Although the ore reserves discussed in
this Table 1 represent the Retortillo and Santidad sites only the project has been evaluated as a whole and the following
information relating to the financial evaluation represents the input parameters and results for the entire project.The after
-tax NPV of the projected cash flows is US$531.94 million at an 8-percent (real) discount rate.The after-tax internal rate-of
-return is 60 percent.Capital is projected to be committed beginning in 2017.All costs and prices are based on 2016 constant
United States dollars (zero inflation assumed).Up-front Capital Costs Mining & mine related facilities = US$22.4 million (US$9.9
million for Retortillo, US$6.1 million for Zona 7 and US$6.3 million for Alameda)Processing & plant related infrastructure =
US$197.1 million (US$78.7 million for Retortillo, US$50.3 million for Zona 7 and US$68.1 million for Alameda)Other capex
including G&A = US$ 15.1 million (US$7.1 million for Retortillo, US$2.7 million for Zona 7 and US$5.3 million for Alameda)Up
-front capital costs = US$.95.7 millionA contingency of 6% applied to capex requirements for all Project facilities.Production
(tons)Total Tonnes Mined over Life-of-Mine = 61.3 million (16.1 million tonnes at Retortillo, 18.8 million tonnes at Zona 7 and
26.5 million tonnes at Alameda)Plant recovery = 87% for Retortillo, 93% for Zona 7, and 82% for AlamedaLife of Mine = 13.75
yearsAverage Production Steady State = 4.4 million pounds U308Average Life of Mine Production = 3.5 million pounds U308Total
U308 Produced Life-of-Mine = 48.6 million pounds Start of Construction = 2017Start of Production = 2018Cash flowAverage Sales
Price Received = US$52 per pound Average Cash Operating Costs = US$15.4 per poundAverage Annual Operating Earnings
beforeInterest, Taxes, Depreciation andAmortization (EBITDA) (steady state) = US$144.8millionNPV = $531.94 millionInternal rate
of return (IRR) = 60%
NPV ranges and sensitivity to variations in the significant assumptions and inputs. The sensitivity study shows the NPV at the 8-percent (real) discount rate when Base Case annual production tonnages, sales
prices, operating costs and capital costs are increased and decreased in increments of 5 percent within a +/-10-percent range.
Minus 10% NPV (US$ '000) Production (pounds U3O8) 431 Sales price 431 Operating costs 561 Capital costs 554 Minus 5% Production
(pounds U3O8) 482 Sales price 482 Operating costs 547 Capital costs 543 Base Case Production (pounds U3O8) 532 Sales price 532
Operating costs 532 Capital costs 532 Plus 5% Production (pounds U3O8) 582 Sales price 582 Operating costs 517 Capital costs 521
Plus 10% Production (pounds U3O8) 632 Sales price 632 Operating costs 502 Capital costs 510
Social The status of agreements with key stakeholders and matters leading to social licence to operate. An Exploitation plan was submitted to the regulatory body, the review of which included a public consultation. All stakeholders
were asked to provide comments on the project. A number of questions were raised and all of them answered. After the review of
the questions and the answers and after the review of all the documents shown by the company, the project was authorised by
relevant mining legislation. The Nuclear Safety Council has authorised the conceptual project and is reviewing the additional
information to authorise the plant construction.
Other To the extent relevant, the impact of the following on the project and/or on the estimation and classification of the Ore Reserves: At Zona 7 202 Ha are needed to develop the project. A total of 15.4 Ha has already been purchased as part of the project site
and for changing with other landowners.
Any identified material naturally occurring risks. N/A
The status of material legal agreements and marketing arrangements. N/A
The status of governmental agreements and approvals critical to the viability of the project, such as mineral tenement status, and government and statutory approvals. There must be reasonable grounds to expect that all necessary Government approvals will be received within the timeframes anticipated in the Pre-Feasibility or Feasibility study. Highlight and discuss the materiality of any unresolved matter that is dependent on a third party on which extraction of the reserve is contingent. The key authorisation aspects of the project comprise:- Mining and environmental: Exploitation Project submitted-
Water uses: Not initiated- Land use: Not initiated- Radiological protection: Not initiated
Classification The basis for the classification of the Ore Reserves into varying confidence categories. Measured mineral resources have been classified as Proven ore reserves while Indicated mineral resources have been classified as
Probable ore reserves.
Whether the result appropriately reflects the Competent Person's view of the deposit.
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