Energy Resources of Australia Ltd., the uranium producer controlled by Rio Tinto Group, said output in the fourth quarter declined 30 percent as it processed lower grades of ore.

The producer of about a 10th of the world’s mined uranium said it expects the lower grades of ore to continue in the first half of 2010 before improving later in the year. The company fell as much as 4.2 percent to A$21.96 in Sydney, the biggest drop since Oct. 29, and was at A$22.25 at 3:09 p.m. local time. The benchmark S&P/ASX 200 Index dropped 0.7 percent.

Energy Resources is expanding the Ranger mine in the Northern Territory as it forecasts rising demand from power utilities for fuel produced from uranium. The number of nuclear power reactors may double by 2030, driven by demand in India and China, according to the World Nuclear Association.

“The outlook for the market is very positive, as well as the outlook for demand from countries like China,” Steeve Thibeault, Energy Resources chief financial officer, said by phone today. “Our current market in the U.S. is important to us, however we are looking at what we can be developing in China.”

Thibeault declined to comment on uranium price expectations in 2010 or potential customers in China. The company is scheduled to release its 2009 financial results on Jan. 29.

Price Increase

Production of uranium oxide in the fourth quarter fell to 1,140 metric tons, or 2.5 million pounds, from 1,634 tons a year earlier, the Darwin-based company said in a statement today. Output declined 2 percent in 2009 to 5,240 tons.

The company received an average price of $50.84 a pound in 2009, a 56 percent increase from 2008, and has now sold more than 100,000 tons of uranium oxide from the Ranger mine.

Glyn Lawcock, head of resources research at UBS AG in Sydney, said he had expected the company’s production to reach about 5,400 tons in 2010. Output may now fall 5 percent short of this estimate because of lower ore grades, he said.

Even so, the prices the company received for uranium are higher than projected, he said. The average market price was $44.50 a pound at the end of December, Energy Resources said.

“Their contracts are performing well,” said Lawcock.

Grades of ore extracted are expected to be lower in the first half of the year and higher in the second half, Energy Resources said. Access to higher and lower grades fluctuates during mining, Thibeault said.

“It’s a question of timing,” he said. “We still have the same grades in our reserves, but the access is different.”

The company is building a plant to extract uranium oxide from stored low-grade ore. In addition, construction of an underground project at an area known as Ranger 3 Deeps may now begin in 2011 after studies that are due to be completed in the middle of 2010, Thibeault said.

About 435 nuclear power plants are planned or proposed by 2030 and 53 plants were being built worldwide as of December, according to the nuclear association.Jam