Tuesday, 16 January, 2007

by Mandi Zonneveldt
The Courier-Mail

URANIUM miner Energy Resources of Australia excited the market yesterday, reporting record quarterly production and flagging a potential expansion of its Ranger mine.

Shares in the company soared $1.20, or almost 6 per cent, to $21.46, with the value of the company almost doubling since July.

The company overcame difficulties associated with an unusually bad wet season to produce a total of 1662 tonnes of uranium in the three months to December 31.

However, full-year production of 4748 tonnes was 20 per cent lower than in 2005, with water in the pit preventing access to high-grade ore in the second and third quarters and problems with an acid plant.

The result was in line with the expectations of analysts, who expect the company to report a $44.9 million profit this year.

Despite the spot price for uranium rising to $US72 a pound at the end of December compared with $US36.13 a year earlier, ERA will only marginally outperform its 2005 result because most of its uranium is sold under long-term contracts which are only partially influenced by the spot price.

The rocket under the company's share price was yesterday attributed to an imminent report on the potential expansion of ERA's Ranger mine, which is inside the Kaka National Park in the Northern Territory.

The company also announced yesterday that it is one of 40 companies vying for the right to explore the potentially lucrative Pamela and Angela deposits in the NT.

The deposits have attracted the attention of six Chinese companies, and are currently the subject of a legal battle brought by prospector Norm McLeay.

ERA's uranium supplies are dwindling and were due to be mined out before the end of the decade, but a recent review of reserves, based on the higher spot price of uranium, has bought it some time.

The company spent $7.2 million on exploration around Ranger last year, and is looking at the technical and economic feasibility of extending the open pit.

It said yesterday the results of its work would be released shortly, with analysts predicting the study could result in a two-year extension to the life of the mine.

ERA has also begun to assess the potential for mineralisation below the open pit, with an 80-hole drill program set to begin in February.

"Considerably more drilling will be required to determine whether the mineralisation will be economic as its probable that it will have to be accessed by underground methods," the company said in its report yesterday.

ERA, which is majority-owned by Rio Tinto, also owns the controversial Jabiluka deposit inside Kakadu but has vowed not to develop it without consent from traditional owners.

Uranium has become a precious commodity, with countries increasing their reliance on nuclear power and stocks of weapons grade uranium falling.

Ranger is one of only three uranium mines in Australia, despite Australia having the world's largest known uranium reserves.

The Australian Labor Party is expected to reverse its ban on the development of new mines at its national conference in April.