Berkeley Energia has signed a letter of intent with a European based commodity trading company relating to the sale of the first million pounds of production from the Salamanca mine.
The agreement with Interalloys Trading Limited contemplates the sale of up to one million pounds of uranium concentrate over a five year period starting from the commencement of the mine and extendable thereafter by mutual consent.
The average price contemplated by the parties is above US$41 per pound compared with the current spot price of around US$25 per pound.
A combination of fixed and market related pricing will apply in order to secure positive margins in the early years of production whilst ensuring Berkeley remains exposed to potentially higher prices in the future.
Discussions are under way to finalise the non-binding agreement into an offtake contract by the end of the year.
Berkeley is also in discussions with another potential off-taker in relation to a sales contract with terms similar to those outlined in the Interalloys agreement.
Berkeley's view is that whilst uranium prices may remain flat in the near term, from 2018, when Salamanca is scheduled to come into production, the market is expected to be dominated by US utilities looking to re-contract who will at the same time be competing with Chinese new reactor demand, which may lead to higher spot and term contract prices.
At 4:07pm: (LON:BKY) Berkeley Energia Ltd share price was +4.5p at 50.5p