Energy Resources Fourth-Quarter Production Rises 5%

By Angela Macdonald-Smith

Jan. 14 (Bloomberg) -- Energy Resources of Australia Ltd., producer of more than a 10th of the world’s mined uranium, said fourth-quarter output rose 5 percent from a year earlier on the processing of higher-grade ore.

Production of uranium oxide was 1,634 metric tons in the three months ended Dec. 31, taking full-year production to 5,339 tons, Darwin-based Energy Resources, controlled by Rio Tinto Group, said today in a statement to the Australian stock exchange. Full-year sales slid 1 percent to 5,272 tons.

Uranium spot prices fell 40 percent last year, the biggest annual drop since at least 1996, according to prices compiled by Metal Bulletin. Energy Resources, which in November said drilling at its Ranger site near Darwin found between 15 million and 20 million tons of resources that may underpin an expansion, said today it halted studies on the extension of the open pit at the mine.

“It is likely that the high-grade mineralization targeted in the open pit extension study may be recovered through underground mining,” the company said in the statement.

The decision to stop the studies for the open pit extension is related more to the depth of the resource than the outlook for uranium, which the company believes is “quite sound,” said Libby Beath, a spokeswoman. The company may start seeking government approval for an underground mine “in the next month or so,” depending on confirmation of the resource, she said by telephone.

Sales Prices

Energy Resources, or ERA, rose 36 cents, or 2 percent, to A$18.28 in Sydney trading, outpacing a 0.9 percent advance in the exchange’s benchmark index.

Energy Resources’ average sales price for uranium rose to $32.53 a pound last year, from $25.06 in 2007. The spot price fell to $52.50 at the end of December, down from $89.50 a year earlier.

“ERA’s average contractual sales price is only partially influenced by the spot market due to the portfolio of contracts containing a range of pricing mechanisms,” it said in the statement.

The company may get an average price for its uranium of $53.30 a pound this year, rising to $59.60 in 2010, JPMorgan Chase & Co. said in a Jan. 9 report. The firm raised its forecast for average spot prices in 2009 by 1.1 percent to $57, while cutting its 2010 forecast by 16 percent to $53.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net