Uranium Miner Expects Profit Hit

The production shortfall means ERA will have to cover some supply requirements with purchases, further eroding its earnings.

ERA owns Ranger, a major mine that provided 9% of the world’s uranium oxide last year. The company, 68%-owned by Rio Tinto, said the fall in output was caused by disappointing ore grades. Without expansions, Ranger’s ore body is due to run out by 2012. “

Source: Wall Street Journal, October 13 2010

Observations:

• Energy Resources of Australia also owns the undeveloped Jabiluka Deposit, close to the Ranger mine. However, development of this deposit is subject to the cooperation of indigenous people.
• Rio Tinto is planning to increase its presence in uranium production through the Kintyre development (operated by Cameco) and Rössing Uranium mine in Namibia. BHP Billiton is the only competitor active in uranium production through the Olympic Dam mine.

Implications:

• According to the World Nuclear Association, Australia accounted for 16% of global uranium production in 2009. Ceasing of operations at Ranger would more than half this share.
• The global demand for uranium is likely to increase rapidly as safer small-scale nuclear power generation facilities become mainstream. Given the location of current reserves, Australia will be one of the major producers that will be able to facilitate increases of supplies. The Olympic dam reserves in Southern Australia are the world’s largest reserves.

©2010 | Wilfred Visser | thebusinessofmining.com