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« Taylor MacDonald: Bullish on Unconventional Oil Plays | Main | 51 CONSECUTIVE WINNING TRADES from SK OptionTrader »
Tuesday
Apr192011

Mining companies have consistently shown they can’t be trusted

ERA Chart 19 April 2011.JPG

The stock price of ASX:ERA is now about one third of what it was a year ago, so this warning regarding environmental considerations doesn't help:


THE largest Aboriginal organisation in northern Australia has warned the Rio Tinto-controlled company Energy Resources of Australia (ASX:ERA) against cutting corners on environmental protection during an emergency shutdown of its Ranger uranium mine in Kakadu National Park.

The Northern Land Council called on ERA to guarantee that monitoring of the troubled mine would not be reduced during the emergency, caused by the threat of radioactive water spilling into an Aboriginal community and surrounding wetlands.

Kim Hill, the council's chief executive, said the ERA decision to stop mining, combined with the company's falling share price and environmental record, would cause it to look to cut costs.

"The World Heritage-listed environment which surrounds the mine mustn't suffer further as the company looks to protect the bottom line," he said.

The situation at Ranger added weight to his calls for an end to self-regulation of the Northern Territory's resources sector.

"Mining companies have consistently shown they can't be trusted to monitor themselves and the government needs to step in and end this ridiculous situation immediately.''

With three weeks to go until the end of the wet season, the Herald reported on Saturday that ERA may have to take drastic action to prevent radioactive water spilling from the mine's tailings dam if the area receives about 100 millimetres more rain.

The company would have to pump contaminated water into an open cut mine, which already has 3.6 billion litres of water sitting above its ore deposits.

Sydney Morning Herald Logo.JPG


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sk charts 19 April 2011.JPG


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Reader Comments (1)

Wow - you are commenting on an ASX stock. In mid Nov 2010 Fosters Stockbroking put out a strong buy on ERA when the stocks was $11.63. I emailed them on 30 Nov as follows pointing out that I thought their report was a tad over bullish.
Your 15 Nov Talking Point - ERA Ltd
Dear Foster Stockbroking,
I owned a small parcel of ERA pre-GFC.
I have had a read through your Talking Point paper on ERA and I think it could be improved.
Your correctly identify ERA as "The laggard in the uranium space".
Then before telling readers why ERA is a laggard - you jump in with a "strong Buy on ERA".
In my humble opinion the salient points that deter investors are;
[1] The ERA share price has halved in a year as their production has slumped due to lower grades - so they would not be ranked anywhere near as high as you indicate in the Table - "largest-producing uranium mines - 2009". Who wants a stock where production is declining.
[2] On top of this is the issue of contract pricing where ERA seems to be locked in to old prices to an unfortunate degree.
[3] ERA operations are sensitive to rain events causing shutdowns and we all know that every summer sees a monsoon wet season of varying length and intensity which is a risk for ERA.
[4] ERA's 3 Nov Presentation talk of future projects which will enhance production.
(a) Heap leach hopefully starting in 2013 which should boost production for several years - but far too late to cushion the 2010 grade decline - and investors would hope that heavy rain events will not adversely impact the open-air heap leach process.
(b) Production from Ranger 3 deeps and other longer term mineralised positions on the Ranger lease is planned to progressively takeover from Pit 3 sources before 2021. No detailed planning timeline is presented - investors have to take the underperforming ERA on faith.
It must be pointed out that all these future developments take place on the increasingly crowded ERA RPA site (see map "Exploration - 2011 Priorities") and that potential for negative impacts from rain events is likely to increase in future years as industrialisation occupies a greater area of this RPA.
[5] In view of the fact that uranium prices were steadily improving from 2004 - it seems surprising that ERA are not further advanced with future mine planning to maintain or even increase production.
[6] It is a puzzle to me why ERA does not engage in exploration for uranium in Australia and indeed the world - I can only conclude that RIO does not want this - which makes ERA a strangely handicapped company.
[7] The development of Jabiluka would be a "gamechanger" but to date it has been a mirage because it depends on the signature I think of one person.

I trust my comments are constructive,
All the best and thanks for making some of your valuable research public.
Warwick Hughes

April 20, 2011 | Unregistered CommenterWarwick Hughes

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