Uranium outlook still bleak
Tuesday, 17 July, 2007
The West Australian
Output for the three months to June 30 from the Ranger mine in the Northern Territory increased to 1,490 tonnes of yellowcake, compared with 596 tonnes in the corresponding period last year.
ERA attributed the performance, which was also an improvement on the 1,006 tonnes produced in the first quarter of 2007, to the processing of high-grade ore stockpiled before the wet season.
"Overall performance in the second quarter of 2007 improved when compared with the same period last year when wet weather associated with cyclone Monica and unusually high rainfall throughout the wet season prevented access to high-grade ore," ERA said.
ERA said production and sales deliveries for the balance of 2007 and 2008 would continue to be affected as a result of water levels in the open pit, following adverse weather earlier in the year.
Cyclone George dumped 850 millimetres of rain over the Ranger mine in February, flooding the open pit and temporarily ceasing milling operations.
"Notwithstanding the second quarter production, ERA's sales contracts remain subject to force majeure as a result of flooding of the operational pit," ERA said.
The adverse weather event forced ERA to forecast a loss of as much as $10 million in the first half of 2007.
ERA's exposure to the buoyant uranium spot price is already constrained by long-term contracts, but the reduction in production and sales will minimise any upside in the near term.
Analysts from UBS expect the spot price, which is fetching about $US133 per pound, to reach $US200 a pound in 2008.
"Thereafter we expect that prices could decline modestly as primary and secondary supply becomes more meaningful and results in more balanced market conditions," UBS said in a client note.
ERA, which is 68.4 per cent-owned by Rio Tinto Ltd, closed down 61 cents to $20.10.