Wednesday, 17 January, 2007

The Australian

URANIUM miner Energy Resources of Australia looks set to miss out on the immediate benefits from a surging yellowcake price despite posting record production in the December quarter.

ERA produced a record 1662 tonnes of uranium in the fourth quarter of 2006 from its Ranger mine in the Northern Territory, a 3 per cent increase on the previous fourth quarter in 2005 and a 51 per cent increase on the third quarter of 2006. Shares in the uranium miner surged $1.20, or close to 6 per cent, to $21.46 after yesterday's news.

However, despite its record production quarter, ERA will not be able to take advantage of the surging uranium spot price, as it entered into long-term contracts when the price was weaker.

"ERA's average contractual sales price is only partially influenced by the spot market due to its portfolio of contracts containing a range of pricing mechanisms entered into when the uranium oxide market was considerably weaker," ERA said.

The spot price of uranium was $US72 per pound at the end of December compared with $US36.13 a year earlier.

An ERA spokesman would not disclose its average sales price or when the long-term contracts would expire. The uranium miner attributed the record production performance to sustained mill throughput and a higher head grade.

ERA shrugged off operational difficulties in the first half of 2006, which was affected by tropical cyclone Monica and difficulties with the acid plant after a maintenance shutdown. ERA said the acid plant operated as planned during the quarter and acid production was supplemented through external purchases. The company has had to increase its acid consumption over the past two years in line with the increased amount of ore treated.

ERA is 68.4 per cent owned by mining house Rio Tinto.