UPDATE: Energy Resources 4Q Output Falls On Lower Grades
January 13 2010 - 12:24AM
Dow Jones News
Energy Resources of Australia Ltd. (ERA.AU) said Wednesday its
fourth quarter uranium output fell 30% from a year earlier due to
lower grades at its Ranger mine in Australia's Northern
Territory.
Analysts said the fourth quarter output was below expectations
and guidance for lower grades in the first half of 2010 would
prompt downgrades to production forecasts, but that ERA's realized
uranium prices had been strong and the performance of its
processing plant impressive.
The Rio Tinto Ltd. (RTP) subsidiary produced 1,140 metric tons
of ore in the quarter, down 30% on year and 19% on the third
quarter.
This was largely due to the lower average ore grade processed
during the quarter, which fell to 0.20% uranium from 0.29% in the
third quarter and 0.37% in the fourth quarter of 2008.
ERA said it expects lower average head grades to continue in the
first half of 2010 before an improvement in grades in the second
half.
Chief Financial Officer Steeve Thibeault said it was normal for
grades to fluctuate and that the company was very pleased with the
strong milling rates and improved plant recoveries seen during the
quarter.
Full year production fell 2% on year to 5,240 tons but sales
rose 4% to 5,497 tons as the company drew on stockpiled ore.
RBS analyst Lyndon Fagan said fourth quarter production was
disappointing and that the company had given no indication it was
experiencing lower grades.
Fagan has lowered his production forecast for the company in
2010 based on the prospect of lower grades in the first half but
said the fourth quarter release did contain some positive news.
"It's a mixed bag. There is the grade issue but then the plant
utilization was good and the achieved price was good as well," he
said.
ERA's average realized sale price for 2009 climbed to US$50.84 a
pound, up 56% on the US$32.53 a pound achieved in 2008.
Analysts said they expect the miner to continue to see its
average realized price rise as lower priced contracts roll out of
its sales portfolio and are replaced with contracts struck in the
boom time, which saw the spot price race to an all time high of
US$138 a pound in 2007.
The global financial crisis has brought the price crashing back
down to earth and spot prices in December were US$44.50 a pound on
average.
Thibeault would not be drawn on the short term outlook for
uranium prices but said the longer term trend was positive.
"With the nuclear renaissance we are seeing at the moment, we
see the outlook for the market to be very positive," he said.
ERA shipped its first uranium to China in 2008 and the company
said Wednesday it is continuing to sell ore to China.
-By Alex Wilson, Dow Jones Newswires; 61-3-9292-2094;
alex.wilson@dowjones.com
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