Monday, 15 October, 2007

by Bruce Hextall
Forbes

Australian uranium miner, Energy Resources of Australia Ltd (ERA), said Tuesday long term demand for uranium remains strong despite a dramatic weakening in spot prices.

The single-mine company, 68 percent-owned by Rio Tinto, said its average contractual sales price was only partially influenced by the current market price due to its portfolio of contracts containing a range of pricing mechanisms.

ERA said many of its long-term contracts were entered into when the uranium oxide market was considerably weaker than it currently is, which has meant the company had not enjoyed the full benefits of the rapid run up in prices.

The long term market price at the end of September was 95.00 US dollars per pound, up from 54 dollars a year earlier.

Last week, the spot market showed the first signs of strengthening after 16 weeks of falling or flat prices.

TradeTech LLC, a publisher of uranium market reports, said Monday spot uranium price rose 3 US dollars to 78 dollars per pound of uranium oxide, marking the first rise after six weeks of flat or falling prices. The uranium spot market price had been falling since reaching a peak of 138 dollars in June.

The Denver-based organisation said the price has recovered as near-term supplies remain thin though the radioactive price is still well short of the peak of 138 dollars a pound reached in June.

ERA made its comments in its production report for the quarter ended September in which it said production at its Ranger mine in The Northern Territory was returning to normal after being affected by heavy rains which flooded the mine early in the year.

The mine flooding prevented access to high grade ore and caused the company to declare 'force majeure' on contracted sales.

ERA said 'force majeure' will continue to apply to contracted sales in the first half of 2008 until a backlog of deliveries is cleared.

In the latest quarter, drummed production of 1,363 tonnes of uranium oxide was 24 percent more than the same quarter a year earlier due to the processing of high grade ore made available through the implementation of various water disposal measures at the mine site.