ERA Up On Reserves News
Tuesday, 17 April, 2007
Australasian Investment Review
These speeches confirmed the bullish hints given at last Friday's Rio Tinto London AGM
RIO owns around 68 per cent of ERA and its retiring CEO, Leigh Clifford was careful not to reveal the news when he told Rio's UK shareholders "We are particularly encouraged by the exploration potential of Energy Resources of Australia's uranium leases".
That potential was expanded upon byERA'sChairman David Klinger who said a highlight of 2006 for the company was the "increase in reserves of 11,100 tonnes, leading to a six year extension of operations' at Ranger.
"Processing at the site is now expected to continue until 2020 and there is potential for further extension to the mining operations at Ranger as well."
"Exploration on the Ranger project area was a major focus for 2006 with exploration expenditure of $7.2 million, more than three times the 2005 figure. As a result the company has announced a full feasibility study to expand the current mining pit.
"We have just announced (in the quarterly report) some very significant intersections of uranium mineralisation in the Ranger Deeps 3 area, across the access road from the current operating pit.
"There are other prospects further afield in the Ranger project area. A laterite treatment plant will be constructed in 2007 to extract value from the ore in clay-bearing material that requires extra treatment before being processed.
"Extensive studies are also being carried out on the low grade stockpiles to extract more value from them."
Mr Klinger said the 11,000 tonne boost to reserves "will occur through screening of low grade stockpiled material' as well through a radiometric sorter will come on line in 2008 and will further assist in processing the low-grade stockpiles and will be added to if successful".
ERA sold a record 5,760 tonnes of uranium in 2006 while producing 4,748 tonnes with the difference coming from stocks or uranium loans now repaid.
He said ERA's averaged realised price was up to $US18.36 a pound from $16 per pound which is well under current world spot prices of around $US101 to $US113 a pound. That's because the company has long term supply contracts at old prices which are gradually maturing, so when that happens the returns to the company will rise.
CEO Chris Salisbury said in his address that the company has some important initiatives for the future.
"Perhaps the most interesting of which is our feasibility study into an extension of the current operating pit. We will be announcing the outcome of this study towards the end of the year. It will target 6,100 tonnes of contained uranium oxide already included in the Ranger resources estimate.
"If the pit extension proceeds it has the potential to extend actual mining operations, as distinct from processing, from 2008 to 2011.
"David has mentioned our increase in reserves, adding six years to the company's operations as more of the low grade stockpiles are to be processed, and has also mentioned the construction of the radiometric sorter, and the laterite treatment plant both of which will begin operations next year.
"The radiometric sorter is an exciting opportunity aimed at deriving more value from resources that are already mined. The first module is seen as a trial unit, and application of the technology could be expanded, dependent on results.
"We are also planning another important year of exploration on the Ranger lease, after the $7.2 million spent last year - this expenditure will increase in 2007. Expenditure in the first quarter was $3.7 million and for the first time we have continued the drilling program during the wet season. As David has said, we have received encouraging results from all exploration targets.
"Ranging more widely, the company has also made a bid for an exploration permit over the Pamela and Angela deposits south of Alice Springs, with the Northern Territory government likely to make a decision from a wide field of bidders later this year."
In its first quarter statement ERA confirmed the news of April 2 about the disruption to its activities at Ranger caused by the big wet in the Top End.
ERA reported a 28 per cent drop in production of uranium oxide from Ranger for the first quarter of 2007, in the wake of the rains of late February and early March.
ERA said 1,006 tonnes of uranium oxide were produced in the quarter, also 39 per cent down on the 4th quarter of 2006.
The company said 769,498 tonnes of ore were mined, up 45 per cent on the prior 1st quarter of 2006 but only 399,303 tonnes of ore was milled, down 32 per cent.
"ERA declared force majeure on its sales contracts on 7 March 2007 as a result of exceptionally heavy rainfall at the Ranger mine and processing plant in late February and early March," the company told the Australian stock exchange yesterday, echoing the statement on April 2.
It said around 300 tonnes of uranium oxide production was lost as a result of the high rainfall, which forced a shutdown of Ranger's processing plant.
"Ore mined was 45 per cent higher than the corresponding quarter in 2006 as water treatment and disposal strategies enacted in 2006 allowed access to higher grade ore at the bottom of the pit in January and February, before the high rainfall when access was curtailed.
"In the second quarter of 2007, ERA will process high grade ore that was mined and stockpiled in 2006.
"The elevated water level in the mine will restrict access to ore in the second half of 2007 and into 2008."
ERA said full year production in 2007 was likely to be similar to 2006, as announced on April 2, while 2008 production was likely to be 25-35 per cent lower than in 2006.
ERA says 2007/08 sales will be in line with production.The market shrugged off this news and concentrated on the emerging improvement inERA's reserves and longevirty. the shares closed around 47c higher at $26.08