Energy Resources of Australia (ERA) has published half-year losses thanks to an extended suspension of production at the Ranger uranium mine. It has also cancelled a heap-leach project and slashed uranium reserves in a reclassification decision. 

ERA's Ranger mine has been in operation since 1980, and over that time the company has built up extensive stockpiles of low-grade ore that could most economically be recovered using heap leach technology. This material had previously been classed as a reserve. However, ERA reports in its half-yearly results that it has decided not to go ahead with the proposed facility to recover the material. 

According to ERA, a recently completed study has shown the facility to be technically feasible, but its value would be limited by high capital costs and present economic assumptions. These considerations, together with "uncertainty in regards to stakeholder support," have led to a decision by ERA's board not to proceed with the project, which could have recovered up to 17,000 tonnes of uranium. 

In light of this decision, ERA has downgraded the low grade material previously classified as reserves (uranium resources that it would be both economically and technically feasible to extract) to resources. This has resulted in the reclassification of 7100 tonnes of uranium oxide reserves as resources with a consequential pre-tax writedown of A$142 million ($150.2 million) of inventory value. In addition, stockpile drilling completed over the six month period has resulted in a further reserves downgrading equivalent to 6100 tonnes of uranium oxide. Taking into account the reserves that have been processed over the six months, the Ranger project area's uranium reserves now stand at 16,000 tonnes uranium oxide, down from the 29,800 tonnes posted in December 2010.

Future reserve adjustments could follow from exploration at Ranger 3 Deeps, where the ERA board has now approved the construction of a new exploration decline to explore areas adjacent to the Ranger 3 Deeps resource which contains an estimated 34,000 tonnes of uranium oxide. Construction of the decline is scheduled to begin in May 2012, subject to regulatory approvals. The cost of the work is estimated at A$120 million ($127 million).

The first six months of 2011 saw the company's underlying earnings in debit by A$22.3 million ($23.6 million), 198% down on the same period in 2010. An exceptional wet season saw mining operations suspended at Ranger 3 in late January, when water levels in the open pit reached record levels. The suspension lasted until June, when falling water levels meant mining could resume in the upper benches of the pit. However, ERA does not expect to gain access to the higher grade uranium ore at the bottom of the pit until the final quarter of the year. The company had to purchase 405 tonnes of uranium oxide to meet its sales commitments during the period.

Total revenue, at A$235.6 million ($249.2 million), was slightly up on the same period in 2010 although sales volume was marginally lower. The average realised sales price for uranium oxide in the first six months of 2011, at $60.82 per pound U3O8, was significantly higher than the $44.79 per pound in the same period of 2010, which according to ERA is a reflection of an increase in the long term uranium price indicator and the completion in 2010 of a low-price legacy contract. 

The A$22.3 million loss in underlying earnings is in line with warnings issued by ERA earlier in the year. However, overall net losses for the period were A$121.7 million ($128.7 million), thanks to the negative impact of an adjustment to inventory values related to stockpiles of low grade uranium which the company had previously been planning to recover.