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Energy Resources Shares Decline After First-Half Uranium Sales Drop 37%
Energy Resources of Australia Ltd., the uranium producer controlled by Rio Tinto Group, declined the most in almost three months after reporting a 37 percent drop in first-half sales of the fuel for nuclear power stations.
Energy Resources, the operator of the Ranger mine in Australia’s Northern Territory, fell as much as 6.3 percent to A$13.44 in Sydney, the biggest drop since May 3. The shares traded 4.5 percent lower at A$13.70 at 1:57 p.m. local time, while the benchmark S&P/ASX 200 Index dropped 0.7 percent.
Uranium supply may outpace demand during the next 18 months to two years due to increased production, especially in Kazakhstan, and more of the material being released by the U.S. Department of Energy, Chief Executive Officer Rob Atkinson said in telephone interview today from Darwin.
“I think the uranium market is fairly well-serviced” over that period, Atkinson said. After that, “there is going to be a realization that Kazakhstan is supplying an enormous proportion of the world market, and I don’t think countries or buyers are going to be comfortable having as many eggs in one basket.”
Sales fell to A$217.7 million ($196 million) in the first half from A$347 million a year earlier on lower output and prices, the company said in a statement today to the Australian stock exchange. Net income dropped 82 percent to A$22.7 million, the producer of about a 10th of the world’s mined uranium said.
Energy Resources cut its 2010 uranium output forecast by as much as 18 percent because of delayed access to higher grades of ore. It expects production for the year of 4,300 to 4,700 tons, the company reiterated today.
Previous Forecast
Previously it had forecast output to be “broadly similar” to the 2009 level of 5,240 tons. The average uranium price it receives this year is expected to be similar to prices in 2009, the company said.
Sales declined in the first half because of weaker production and prices and a stronger Australian dollar, Energy Resources said. Uranium oxide production in the first half of the year slumped 36 percent from a year earlier, and the average price it received declined to $44.79 from $48.02 a year earlier.
Over the “long term,” prices of uranium should rise with higher demand, mainly in China, Energy Resources said.
Royal Bank of Scotland earlier this month cut its rating on Energy Resources stock to “sell” from “hold,” citing project uncertainty and a “lousy” uranium market. “We see little investor appetite,” for Energy Resources, RBS analysts led by Lyndon Fagan said in the July 14 research note.
To contact the reporter on this story: James Paton in Sydney jpaton4@bloomberg.net.
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