ERA pays price of failing to make the grade
ENERGY Resources of Australia warns its annual profit will be hit as it lowers its output guidance on poor grades from its Ranger Mine.
Energy Resources of Australia has warned its annual profit will be hit as it lowers its output guidance on poor head grades from its Ranger Mine.
Investors punished the Rio Tinto uranium subsidiary's stock on its poor September quarter operations review, sending shares down 6.43 per cent to $13.53 yesterday.
Chief executive Rob Atkinson said it was unfortunate the miner had not hit the grade it had planned, which had driven its quarterly numbers down "significantly more" than expected.
"Grade has dominated the last quarter for us," he said.
Uranium oxide output for the three months to September 30 was 911 tonnes, up 10 per cent from the June quarter but down 35 per cent from a year earlier.
The Darwin-based company cut its annual production forecast to 3900 tonnes from 4300-4700, meaning it will fall well short of its 5000-tonne supply requirement.
The production shortfall means ERA will have to cover some supply requirements with purchases, which will hit its bottom line.
"It is a significant impact (on earnings)," Mr Atkinson said.
"At the start of the year we were planning on production of above 5000 tonnes and now we have given guidance it is going to be around 3500 tonnes, so we do have a gap there and that is tonnage which we have to find by other means, which is in addition to the normal production costs, which we have incurred anyway."
Mr Atkinson said even though the miner had a shortfall in production, it was meeting all of its customer requirements.
He added that while the grade at the Northern Territory mine was poor, the plant performance was operating efficiently and the company had embarked on a significant infill drilling program at the bottom of the pit to provide greater confidence in the grade it can expect in the next few years.
"The infill drilling will allow ERA to increase our confidence in the grades and tonnages we can expect for the remainder of the mine life," Mr Atkinson said.
"That is an important step to take, so we don't continue expecting to get something that is perhaps not there, so that infill drilling is of critical importance to us."
The open pit at ERA has two years left on its life but it has two major projects, the heap leach project and the Ranger 3 Deeps project.
"While we are suffering from lower grade than we expected, we do have very good projects we are studying and certainly I hope they will be advanced in the future," Mr Atkinson said.