Energy Resources of Australia(ERA)’s new Ranger uranium mine may well not get off the ground, let alone under it

Technical hitches bedevil ERA’s Ranger mine by: Matt Chambers The Australian July 12, 2014 http://www.theaustralian.com.au/business/mining-energy/technical-hitches-bedevil-eras-ranger-mine/story-e6frg9df-1226986174550   URANIUM producer Energy Resources of Australia could face more problems at its Ranger uranium mine in Kakadu National Park, flagging potential higher costs that Credit Suisse says could stop a planned underground ­expansion.

Ranger-3

The Darwin-based Rio Tinto subsidiary said its Ranger 3 Deeps exploration decline project was experiencing tougher than expected geotechnical conditions. “Some geotechnical conditions have been encountered that are less favourable than assumed,” ERA said in its June quarter report, released on Thursday.

“These findings are being factored in to the mine design and the pre-feasibility study.”

While the market was little moved by the report on Thursday, Credit Suisse analyst Matthew Hope saw red flags.“We believe the results of the Deeps resource drilling are poor,” Mr Hope said yesterday in a note to clients.“The rock is probably heavily fractured, so extensive rock bolting and meshing will likely be required to prevent the access drives from collapsing,” Mr Hope said.

Credit Suisse downgraded its rating on ERA from outperform to underperform, and cut its target price by two-thirds from $1.50 to just 50c.

Mr Hope said value in ERA was almost entirely based on whether Ranger 3 Deeps would be mined. “If ERA announces at the end of this year that Ranger Deeps is not viable, then the share price should collapse to very low levels, with only option value remaining,” he said.

“Ranger Deeps either adds value or there is close to none, and risks are increasing towards the latter.”Ranger shares slipped 0.5c to $1.16 yesterday, giving the company a market value of $600m.

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