UPDATE: Energy Resources Of Australia 1st Half Profit Tumbles 82%
July 29 2010 - 8:26PM
Dow Jones News
Energy Resources of Australia Ltd. (ERA.AU) said Friday that its
first half profit plunged 82% after the Rio Tinto Ltd. (RIO.AU)
subsidiary and one of the world's biggest uranium producers
encountered poor ore grades at the resumption of dry season mining
in Australia's Northern Territory.
ERA also got less money for its uranium oxide as high global
stockpiles and lower demand caused by a global economic slowdown
kept prices subdued.
Net profit for the six months to June 30 fell to A$22.7 million,
from A$127.6 million in the previous corresponding period, missing
UBS and J.P. Morgan forecasts of A$28 million and A$39.6 million,
respectively.
Revenue slid 37% to A$217.7 million from A$347.0 million.
ERA, which is 68%-owned by Rio Tinto, negotiates prices in
long-term sales contracts that can be partially influenced by
movements in the spot price.
Higher uranium stockpiles, particularly in Kazakhstan, and
delays in the construction of some nuclear reactors in China are
expected to keep uranium oxide, or yellow cake, prices suppressed
in the short term, ERA said.
It stuck to its forecast of achieving an average realized
uranium oxide price in 2010 broadly similar to what it got in 2009.
In the 2010 first half, it realized a price of US$44.79 per pound,
compared to US$48.02 in the 2009 first half.
A big fall in profits was already largely expected by the market
after ERA on July 13 sharply downgraded its production guidance to
4,300-4,700 metric tons of uranium ore. It reiterated that guidance
Friday.
ERA downgraded its output guidance after it at last gained
access to the main ore body at its Ranger mine after seasonal rains
dried up in recent weeks and stability problems with the south wall
of the pit were dealt with.
The ore it encountered, however, was of a much lower grade than
it expected. Chief Executive Rob Atkinson had said July 13, "we see
good grades in front of us now and we're hoping to exploit
that".
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692;
Ross.Kelly@dowjones.com
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