UPDATE: ERA Cuts 2010 Output Guidance; Says Profit Will Be Hit
October 12 2010 - 8:41PM
Dow Jones News
Uranium miner Energy Resources of Australia Ltd. (ERA.AU) on
Wednesday downgraded its annual production guidance for the second
time this year and said the shortfall means it will have to cover
some supply requirements with purchases, eroding its profits.
The Rio Tinto Ltd. (RIO.AU) subsidiary and owner of the world's
second biggest uranium mine by production in 2009, Ranger, said the
fall in output was caused by disappointing ore grades.
Ranger is located in Australia's Northern Territory where mining
operations can be subdued by heavy rains during the traditional wet
season.
ERA downgraded its output guidance on July 13 after it gained
access to the main ore body at Ranger when seasonal rains dried up
and it overcame stability problems with the south wall of the pit.
Chief Executive Rob Atkinson said at the time that the company was
starting to see better grades.
Output for the three months to Sept. 30, however, was only 911
metric tons, up 10% from the June quarter but down 35% from a year
earlier. "Mill head grade has improved compared with the June 2010
quarter but remains significantly below 2009 levels," ERA said in a
statement.
The Darwin-based company, 68%-owned by Rio Tinto, cut its annual
production forecast to 3,900 tons, from previous guidance of
4,300-4,700 tons, meaning it will fall well short of its 5,000 ton
supply requirement. At the start of the year, ERA was forecasting
about 5,240 tons of annual production.
Selling purchased product is expected to adversely impact ERA's
earnings because the small margin earned from selling external
material is more than offset by the company's ongoing costs of
operation, it said.
Persistent lower grades have prompted the company to launch an
extra drilling program in the current pit to improve its confidence
about the quality and volume of ore for the remainder of the mine's
life. ERA said exploration spending in the September quarter was
A$2.8 million, compared with A$1.0 million in the June quarter.
Ranger produced 9% of the world's uranium in 2009, according to
the World Nuclear Association.
ERA has extended the life of the mine to at least 2012, after
which it plans to sell stockpiled ore until 2020.
The company is considering an expansion of the mine in which it
would plunder an untapped 30,000-40,000 metric ton resource in the
Ranger 3 Deeps mineral deposit. It reiterated Wednesday that it is
finalizing studies on whether to build a 'decline'--a tunnel bored
through the resource to facilitate closely spaced drilling and a
geotechnical assessment--and expects to make a final decision on
the decline "in the coming months".
ERA also said Wednesday that it continues to prepare a draft
environmental impact statement for its proposed heap leach
facility, adding that the formal assessment process by regulators
is likely to be completed in the 2011 first half. Heap leaching
uses acid filtration to extract minerals from poor quality ore.
ERA shares fell on the release of the third quarter report and,
at 0004 GMT, were down 6.2% at A$13.56 in an overall market up
0.6%.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692;
Ross.Kelly@dowjones.com
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