Energy Resources Australia buoyed by strong full-year profit
Alex Wilson
Market Watch
Uranium miner Energy Resources of Australia Ltd. (ERA.AU) posted full year earnings ahead of market expectations Friday as higher uranium prices offset the impact of flooding at its Ranger mine in Australia's Northern Territory.
ERA said full year net profit climbed 74% on year to A$76.1 million, ahead of market expectations of about A$60 million, and revenue for the year rose 14% on year to A$362.4 million.
Heavy rains in March last year flooded the open pit at Ranger, forcing ERA to declare force majeure and affecting production.
However the miner made up ground by processing high grade ore and posted sales for the year of 5,324 metric tons, down from 5,760 tons in 2006.
ERA said 2008 sales are expected to be at similar levels to 2007.
Macquarie analyst Brendan Harris said the profit figure is a good result and that the key focus for the market now is the extent of ERA's exposure to strong uranium prices.
Uranium raced to a record spot price of US$135 a pound in 2007 and has fallen back to about US$80 a pound, still well above long term averages.
ERA's benefit from the soaring prices has been limited by its long term contracts, signed when the price was much lower. The miner received an average realized price of US$25.06 per pound in 2007, up from US$18.36 in 2006.
The Rio Tinto Ltd. subsidiary said the higher realized uranium price was partially offset by higher employee and contractor numbers and higher expenditure on consumables, particularly sulfuric acid.
The miner said it also incurred costs associated with removing water from the Ranger pit, and that it is in discussions with insurers regarding the recovery of costs associated with the flooding.
ERA said the outlook for uranium is positive and the company is looking to benefit from this by expanding production.
The Darwin-based company also issued its annual reserves statement Friday, with total proven and probable reserves at Ranger dropping to 49,471 metric tons from 50,869 at the end of 2006.
Proven and probable reserves at the Jabiluka deposit stand at 59,000 metric tons. Mining there is on hold until local indigenous land owners agree it can proceed.
The miner posted a final dividend of 20 cents a share, up from 11 cents last year.
At 0507 GMT, shares in ERA were trading up 6.2% at A$20.00 in an Australian market up 3.4%.