ERA says production may fall 18%

Energy Resources of Australia Ltd (ERA) has flagged a drop in full year uranium oxide production of up to 18 per cent after first half output slumped due largely to record rainfall.

Shares in ERA had slipped 63 cents, or 4.28 per cent, to $14.10 by 1435 AEST.

The world's fourth-largest uranium miner on Tuesday said it expected to produce between 4,300 and 4,700 tonnes of uranium oxide from its Ranger mine in the Northern Territory during 2010, down from 5,240 tonnes last year.

The Darwin-based company, which is 68 per cent owned by Rio Tinto Ltd, had previously said it expected production this year to be similar to 2009 output.

ERA produced 1717 tonnes of uranium oxide in the six months to June, down 36 per cent on the previous corresponding period.

The company said access to higher grade ore in the lower levels of the open pit had been reduced, due mainly to work on an area of instability on one of the pit walls and record rainfall at the mine in April.

The heavy rain meant ERA could not access to the bottom of the pit for virtually all of the first half, chief executive Rob Atkinson said.

"We did get a surprise with just how much water we had in the open pit," Mr Atkinson told AAP.

"The pit is now dry and we're resuming normal mining operations."

ERA expects to regain access to the higher grade ore in the second half of the year.

Despite the lower production, ERA still expects to sell more than 5000 tonnes of uranium oxide this year by managing its inventory and buying a small amount of uranium oxide from the spot market, Mr Atkinson said.

ERA's resource study of Ranger 3 Deeps, expected to be the main source of ore in coming years, was previously expected to be complete by the middle of this calendar year, but is now slated to be finalised during the September quarter.

"That work is very close to completion and I expect we'll be putting that to the ERA board in the very near future," Mr Atkinson said.

"I should be able to give guidance on that in the coming month or so."

Mr Atkinson said the mid-to-long term outlook for the uranium market remained positive.

But spot prices were currently weak and could dip further, partly due to the US Department of Energy selling the commodity onto the spot market, he said.

"They've got another release of material coming up very shortly I believe. It might be another 250-300 tonnes coming onto the market."

Also, China had effectively completed stockpiling uranium in anticipation of new nuclear power station developments and US demand wasn't picking up as quickly as anticipated as the world's largest economy slowly recovered, Mr Atkinson said.

"We've got traditional markets which still need to be supplied, new markets which are going to need to be supplied and ... we don't seem to have many new mines coming on - all the mines seem to be in one country and that's Kazakhstan.

"There will be a market reaction or a realisation that there are too many eggs in the one basket."

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