Antinuclear

ERA’s very Bad Timing to consider a new Uranium Development

Uranium mining in Kakadu at a crucial point, SMH, Peter Ker, Resources Reporter, 29 Nov 14   “….. As fate would have it, ERA could barely have picked a worse time to evaluate a new uranium development.

Prices for uranium have been depressed since an earthquake and tsunami sparked a nuclear crisis in Japan in 2011.

Most Australian uranium miners haven’t made a profit since. ERA has received just $US46 ($54) a pound for its product during most of this year. That is 12 per cent below the price it received in 2009.

Commodity prices are not the only threat to the project going ahead. A series of events over the past year have shaken investors’ confidence.

A tank failure in December last year spewed toxic substances around the Ranger site and prompted a six-month shutdown. Despite official surveys suggesting none of the substances escaped into Kakadu, a fierce debate ensued over the mine’s social licence to operate in such a delicate and difficult location.

The exploration results for the project have also fuelled concerns, with some analysts expressing alarm at the quality of some sections of the underground geology and cases of unstable rock formations.

At the same time ERA’s 68 per cent shareholder, Rio Tinto, is aggressively cutting back capital spending on new projects.

With Rio focused on boosting dividends rather than building large numbers of new mines, many doubt it will be willing to spend the hundreds of millions of dollars that would be required to go ahead with a new underground mine at Ranger.

When the geological concerns were reported to the market in July, Credit Suisse published the most pessimistic research note on the project to date.

“We believe the results of the Deeps resource drilling are poor,” the note said.

“Ranger Deeps either adds value or there is close to none, and risks are increasing towards the latter. If ERA announces at the end of this year that Ranger Deeps is not viable, then the share price should collapse to very low levels.”……..

JP Morgan analysts said the weak uranium prices, combined with the 2021 expiry of the mining lease, put ERA in a difficult position.

“We believe the project likely needs prices of $US50 per pound to $US60 per pound over the life of the project,” they wrote.  ……..

ERA chief Andrea Sutton said the geological results had been consistent with expectations, and sufficiently good for the company to conduct less drilling than planned.

The spot uranium price enjoyed a small surge in early November, and while the longevity of that rise is unclear, Sutton said the company was confident the price would rebound in the medium term……….http://www.smh.com.au/business/mining-and-resources/uranium-mining-in-kakadu-at-a-crucial-point-20141128-11vmr3.html

November 29, 2014 - Posted by Christina Macpherson | business, Northern Territory, uranium