ERA Shares Collapse After Halting Mine Expansion

ERA shares plunged 48% this morning after it announced late on Thursday evening that it was abandoning its Ranger 3 Deeps expansion plan at its Northern Territory mine. The news is a rejection of the pro-nuclear power push from sections of the Abbott government (its mates in business among), the media (The News Corp papers, led by The Australian).

The shares fell from $1.26 on Thursday to around 67 cents. Mining ended at Ranger back in 2011 amid floods and damage to the mine and stockpiles which required expensive remedial action.

ERA has been exploring ways of justifying the new project – it deferred a decision last year and for some the writing was on the wall then. Its parent, Rio Tinto (RIO) said this morning it will look at a $US300 million inpairment fof the value of its stake in ERA.

Uranium prices plunged in the wake of the 2011 Fukushima nuclear disaster, and ERA said: “The board’s view is that the uranium market has not improved as ERA previously expected and there is uncertainty regarding the uranium markets direction in the immediate future.”

With ERA’s licence to operate at Ranger due to expire by 2021, and the company said the expansion could not be viable in just six years and has chosen not to seek an extension to its lease. So much for all that talk about the expansion at Olympic Dam (owned by BHP Billiton) which has a high uranium content in the ore.

“The economics of the project require operations beyond the current Ranger authority which expires in 2021,” the company said in its statement on Thursday evening. But ERA also said it was hoping to start talks about extending the mine’s life past 20121, but Rio Rinto ruled that out in its statement this morning.

ERA will continue running down its stockpiles and processing them to meet contracts with existing customers. But now the battle over rehabilitation. That is estimated to cost more than half a billion dollars (and will be a major investment project in its own right).

ERA has suggested it doesn’t have enough money, while Rio is reported to have offered ERA “conditional” funding support to cover the shortfall in rehabilitation funds – one of those conditions is for ERA to give up efforts to develop the mine and extend the lease, according to media reports.

What’s the bet that the Federal and NT governments will be approached to cough up some loot (from the new $5 billion northern Australia development slush fund announced in the budget?). But it seems Rio will put its hands in its pockets to start with. If Rio can’t see any future in uranium in Australia, why should BHP?

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →