Monday, 16 April, 2007

The Age

Energy Resources of Australia Ltd (ERA) has promising signs of new high grade uranium reserves at its Northern Territory Ranger mine as it prepares to invest in further exploration.

But the world's third largest uranium producer - 11 per cent of global supply comes from Ranger - is also encountering more intense wet seasons in tropical west Arnhem Land that have affected production.

At its annual general meeting in Sydney, ERA said intense rainfall meant uranium oxide production was 32 per cent lower in the first quarter, compared with last year, at 399,303 tonnes.

Approximately 300 tonnes of uranium oxide production were lost to the monsoonal downpour that forced ERA to declare force majeure on its sales contracts on March 7.

Chief executive Chris Salisbury said the 850 millimetres of rain associated with cyclone George would affect production for some time.

"In 2007, production is likely to be similar to 2006, while production in 2008 could be 25 to 30 per cent lower than this," Mr Salisbury told shareholders.

Environmentalists at the meeting suggested climate change meant increased tropical rainfall could be an ongoing problem, affecting production and environmental management into the future.

Speaking after the meeting, Mr Salisbury said ERA had mitigation plans in mind.

"We're looking at a range of options, including expansion of irrigation, expansion of our water treatment plant and the use of evaporation, which we used quite successfully last year," he said.

The company's mining effort was unaffected by the rain, however, increasing 45 per cent on the prior first quarter to 769,498 tonnes.

ERA also said it will by the end of the year announce the results of a feasibility study into extending mining by three years to 2011, through an extension of Ranger's operating pit.

Key aspects of the study are the water and tailings management and the company's rehabilitation obligations.

The exploration effort on the site will be enhanced, with ERA firmly of the opinion that the east Alligator River region remains world class in terms of the supply and quality of uranium deposits.

ERA spent $7.2 million on exploration in 2006, and has already spent more than half that again, $3.7 million, drilling despite the monsoons of the first quarter.

Mr Salisbury said the Ranger three deeps site was a good prospect.

"We're very excited about Ranger three deeps and we continue to report intercepts around the 0.2 per cent uranium level and that's consistent with what we're mining in the current open pit," he said.

"The results look promising, but it's early days."

The ERA boss was unwilling to provide guidance on how much would be spent on exploration, but said it would be more than last year's budget.

ERA is largely focussed on Ranger and Jabiluka, where there's the potential to mine up to 67,000 tonnes of uranium if and when traditional Aboriginal owners give their consent.

The company says it relationship with the Mirrar people is an ongoing priority.

But ERA now also eagerly awaits a decision from the Northern Territory government on two separate sites south of Alice Springs.

The Angela and Pamela sites are two of eighteen recently released from reservation of occupation by the Territory Government.

The sites are considered highly prospective and about 40 companies have applied for exploration rights.

"We've got a proven track record in the Northern Territory, and we think that stands us in good stead," Mr Salisbury said.

"We really are focussed primarily on exploration and exploiting value from our own lease areas, but the opportunity for Angela and Pamela came up and we decided to have a look and we've thrown our hat in the ring."

The Northern Territory government is expected to make a decision on the sites in the second half of the year.

Gradually, ERA expects to begin benefiting from the recent upsurge in uranium prices.

The shareholder meeting also heard the company's long term contracts with major international power utilities would soon begin expiring and be replaced by agreements that reflected the higher spot price or uranium.

Uranium currently trading around $US113 a pound.

ERA shares rose 47 cents or 1.8 per cent to $26.08 on Monday.