Saturday, 9 June, 2007

by Jamie Freed
The Age

ENERGY Resources of Australia expects to report a half-year loss of between $5 million and $10 million after its Ranger mine in the Northern Territory was flooded by heavy rains in February and March.

The uranium miner's shares closed $1.18, or 5 per cent, lower at $21.22 yesterday after it released the profit warning, just before a planned analyst site tour next week.

Although uranium is trading at a record spot price of $US135 a pound, the Rio Tinto subsidiary has been hampered by legacy contracts signed during a period of low uranium prices earlier in the decade.

ERA declared force majeure, or an inability to deliver, on its contracts in March after receiving 750 millimetres of rain in a 72-hour period. Spokeswoman Amanda Buckley said ERA did not have to purchase uranium to meet its contracts but the life of the low-priced legacy contracts could be extended.

Last year, the uranium miner reported a $19.9 million first-half profit and second-half earnings of $23.7 million.

It expects its production this year to be similar to that of last year, when it produced 4748 tonnes of uranium, but the figure will fall between 25 per cent and 35 per cent next year because flooding has blocked it from mining higher-grade ore at the bottom of the pit.

ERA said its sales this year would be heavily weighted towards the second half.

In response to the profit warning, Goldman Sachs JBWere slashed its 2007 earnings estimate by 48 per cent and its 2008 estimate by 42 per cent.