Energy Resources of Australia: Another Hedger

ERA Misses Uranium Price Rises
By Mandi Zonneveldt
February 02, 2006

Energy Resources of Australia lifted output at its Ranger uranium mine by 15 per cent last year but has missed out on the big rise in uranium prices.

ERA yesterday reported a 10 per cent increase in annual profit to $40.7 million but long term contracts meant its average sale price rose just 17 per cent to $21.12 ($US16) a pound.

Note: better than Cameco's $15.45..

Spot yellowcake prices almost doubled in 2005, from $US20.50 a pound to almost $US37.

ERA has had a bumpy ride in the past year.

Shares in ERA, which stops mining at Ranger in 2008, fell after it warned that closure costs would affect its bottom line. The stock also took a hit after three foreign shareholders dumped their combined 25 per cent stake at a big discount.

Its shares fell 35c to $13.90 yesterday.

ERA predicted its sales volumes in 2006 would remain steady at about 5700 tonnes and doused expectations it would be able to cash in on more uranium price rises.

"Of this nearly all will be sold into existing contracts," ERA said.

Analysis: so another 1 million lbs of uranium oxide will be gone on the production side of things after the Ranger mine shuts down. Of course, the massive Jabiluka deposit is right next door..

The company also warned of pressure on its payroll due to a rise in employee numbers and wages, but said it had operating costs in hand.

ERA declared a final dividend of 11c, franked at 30 per cent and payable on March 1.
Annual profit of Rio Tinto, which owns 68 per cent of ERA, is due today.