ERA profit rises but output slips

Isabelle OderbergJuly 27, 2006
URANIUM producer Energy Resources of Australia has flagged a fall in annual production, sending its shares down 6 per cent.
The company announced a net profit of $19.9 million for its first half to June 2006, up from $17 million in the previous corresponding period, but said annual production was likely to be lower than last year due to production difficulties in the first half.
"Sales volumes in the second half of the year are expected to be lower than in the first half," the company said.
ERA's yellowcake (uranium oxide) production was lower in the first half due to unusually wet weather.
The company also had operational difficulties in the second quarter at its acid plant, which was shut down for planned repairs and maintenance in April.
"In order to supplement acid inventories, a program of higher price imports was initiated in June," ERA said.
"The higher costs associated with this will have a negative impact on the price of consumables used in production."
Drummed production of uranium oxide for the half fell 26.8 per cent to 1988 tonnes, from 2714 tonnes for the same period last year.
Sales rose 6.6 per cent to 3198 tonnes, leading to a 19.2 per cent increase in revenue to $154.7 million, but the company said it expected sales for the full year to be comparable to 2005.
Despite strengthening uranium prices, ERA said it would not feel the full benefit until new contracts took effect.
The average long-term uranium market price in June was $US46.75 a pound, up from $US30 in 2005. ERA's average realised sale price of uranium oxide for the half was $US15.57 a pound, compared with $US14.64 last year.
ERA expects exploration drilling to continue for the rest of this year, both near the eastern part of Ranger's operating pit and on other targets in the Ranger project area, following the interpretation of results of airborne geophysical surveys done in 2005. Ranger is about 250 kilometres east of Darwin.
Daiwa Securities analyst Mark Pervan said the market tended to price companies like ERA more aggressively based on higher commodity prices but it was the "nature of the industry to lock in the sales at lower prices".
"It [the result] is a little disappointing considering they're still to renew some of their contracts at current high prices," he said.
ERA, majority owned by Rio Tinto, announced a fully-franked interim dividend of 6c a share, the same as last time.
Its shares fell 75c to $11.40.
AAP