Monday, 16 April, 2007

by Tan Hwee Ann and Madelene Pearson
Bloomberg

Energy Resources of Australia Ltd., producer of more than a 10th of the world's uranium supply, said output of the fuel fell 28 percent in the first quarter from a year ago following heavy rain.

Production dropped to 1,006 metric tons for the three months ended March 31, Darwin-based Energy Resources said today in a statement. The company maintained its April 2 forecast that output will fall next year as high water levels restrict access into 2008.

Energy Resources, controlled by Rio Tinto Group, last month said it may miss some deliveries after rain halted production and said first-quarter output may fall as much as 30 percent. Uranium prices have more than doubled in the past year on rising demand from utilities and a delay in building a mine in Canada.

"The uranium picture continues to look tight," said Rob Clifford, an analyst at ABN Amro Holding NV, in Melbourne. "They've kept their guidance. It may be a bit of lottery on what they get in the second quarter."

Shares of the company rose as much as 17 cents, or 0.7 percent, to A$25.78 and traded at A$25.74 at 1:12 p.m. Sydney time. The stock has gained 71 percent in the past year.

A cyclone dropped almost 850 millimeters (33.5 inches) of rain in the seven days to March 4 on the Ranger mine, the largest operating mine in Australia, and surrounding area, Chief Executive Officer Chris Salisbury said today in speech notes lodged with the Australian Stock Exchange. Rain in the first three months of 2007 far exceeded the annual average for the region, he said.

Rain Mitigation

The company has "identified a number of potential opportunities to reduce the impact of the weather event, including accelerating the treatment and disposal of water," Salisbury said.

Australia holds 40 percent of the world's known uranium reserves yet supplies just 23 percent of global demand because of bans on new mines in all but one of the eight states and territories. The Liberal-National coalition federal government is trying to get state governments, all controlled by the opposition Labor Party, to drop the ban.

Uranium prices rose 19 percent this month to a record $113 a pound at a U.S. auction, industry consultant TradeTech LLC said.

Energy Resources drilled for more uranium to the east of its current pit, within an area between the mine and an access road, it said.

Energy Resources has made some "very significant" intersections of uranium mineralization in the Ranger 3 Deeps area, chairman David Klingner said today in speech notes lodged with the exchange.

"There are other prospects further a field on the Ranger Project area," Klingner said.