Thursday, 19 October, 2006

by Andrew Trounson
The Australian

URGENT exploration efforts to extend the life of the Ranger uranium mine in the Northern Territory appear to be paying off, with owners Energy Resources Australia yesterday reported encouraging drill results.

With uranium prices soaring, extending Ranger's production life would give ERA an opportunity to lock in high prices on long-term contracts.

Ranger, Australia's largest uranium mine, is due to exhaust its ore by the end of 2008, leaving it to just treat stockpiled ore before closing in 2014.

ERA's efforts to secure its long-term future by developing the nearby Jabiluka deposit have so far been vetoed by the traditional owners, leaving its future uncertain.

But drilling to the east of the Ranger pit has yielded significant intersections grading above 0.4 per cent uranium oxide about 150m-250m below ground, in line with high-grade ore areas in the current pit.

ERA, which is 68 per cent owned by mining giant Rio Tinto, is now investigating whether the pit can be extended by as much as 300m to the southeast. That would put the pit hard up against the operation's facilities.

Perhaps even more enticing are some high-grade results from deep drilling further to the southeast, raising the possibility of an underground mine development. One drill intersected 17m of ore grading over 0.7 per cent uranium oxide just over 500m below ground.

"Considerable more drilling will be required to determine whether the mineralisation will be economic, as it is probable that it will have to be accessed by underground methods," ERA said.

ERA is now considering extending the drilling campaign into the wet season, which started this month and extends to April next year.

The news sent ERA shares up 37c, or 2.8 per cent, to $13.80.

ERA is accelerating its exploration efforts in the wake of soaring uranium prices, and has spent about $4.8 million on exploration so far this year.

Spot prices for uranium oxide are over $US56 a pound, having risen from around $US10/lb in the last four years. Yesterday, ERA said long-term multi-year contract prices were up at $US54.50/lb compared with $US31.29/lb a year ago.

But ERA is not reaping the full benefit because, in line with industry practice, most of its production is sold on long-term contracts.

Ranger's production in the third quarter was down 31 per cent from a year ago at 1103 tonnes of uranium oxide, as the miner battled high water levels in the pit after heavy rains that hampered access to high-grade ore.

The water has now been drawn down, and ERA is now focusing mining on higher grade ore.

ERA said it was assessing options to increase acid supplies to the operation, where mine production has risen beyond the capacity of the acid plant. Options include upgrading the plant or trucking in more acid from Xstrata's Mount Isa operations in Queensland.

Both Ranger and Jabiluka are surrounded by the Kakadu National Park.