Energy Resources of Australia (ERA), the part owned subsidiary of Rio Tinto (RIO) has decided not to push ahead with the major Ranger 3 Deeps project at its Northern Territory uranium mine, a move that will effectively end mining operations at the site, unless there’s a turnaround in the current weak market for the metal.
The company slipped out an announcement to the ASX just after 6.30 yesterday evening, announcing the decision which had been half suspected by many investors.
ERA said in the statement it will continue to process its stockpiles at Ranger and meet contract obligations to its customers.
“This decision has been driven primarily by two key factors,” ERA said in its statement.
"First, the Board’s view is that the uranium market has not improved as ERA previously expected and there is uncertainty regard the uranium market’s direction in the immediate future.
"Secondly, having finalised and considered the Prefeasibility Study, the economics of the project require operations beyond the current Ranger Authority, which expires in 2021,” the company said.
This decision is recognition that the Authority will not be extended past 2021.
ERA 1Y – End of an ERA for Ranger 3 Deeps
ERA said it is talking to its major shareholder, Rio Tinto, "regarding funding support for rehabilitation, should additional funding ultimately be required.”
ERA said it has also commenced discussions with representatives of the Traditional Owners and the Commonwealth Government regarding a possible extension to the Ranger Authority.
"ERA will continue to conserve cash until it has greater certainty in relation to the Authority extension. This would allow ERA to revisit the project’s economics over time."
ERA’s Ranger mine is located eight kilometres east of Jabiru and 260 kilometres east of Darwin, located in Australia’s Northern Territory.
In a statement early today Rio Tinto acknowledged ERA’s statement on Thursday night saying it supported the move.
"Rio Tinto agrees with the decision not to progress the study. After careful consideration, Rio Tinto has determined that it does not support any further study or the future development of Ranger 3 Deeps due to the project’s economic challenges," Rio said.
“Rio Tinto recognises the importance of ongoing rehabilitation work at the Ranger mine site, which is surrounded by the World Heritage-listed Kakadu National Park.
"Rio Tinto is engaged with ERA on a conditional credit facility to assist ERA to fund its rehabilitation program, should additional funding be required beyond ERA’s existing cash reserves and the future earnings from processing ore stockpiles."
Rio Tinto said it is looking at taking a non-cash impairment charge of approximately $US300 million after tax) relating to its shareholding in ERA.
ERA shares closed at $1.25 yesterday afternoon.