ERA may have $800m Ranger mine cleanup solved

ENERGY Resources of Australia may have had the problem of finding the funds for its massive $800 million rehabilitate cost of its Ranger uranium mine near Jabiru solved

An aerial view of the Ranger Uranium Mine which is located at the door to Kakadu National Park about 230km's from Darwin.

ENERGY Resources of Australia may have had the problem of finding the funds for its massive $830 million rehabilitate cost of its Ranger uranium mine near Jabiru solved.

ERA is a subsidiary of Rio Tinto, and has only total cash resources to $425 million — $349 million total cash at bank as of June 30, plus another $76 million held by the Federal Government as part of a clean up trust.

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ERA has until January 2021 to close the mine following a 2015 decision by Kakadu traditional Aboriginal owners to end mining at the site in 2015.

ERA’s feasibility study for the Ranger rehabilitation earlier this year revealed an increase in closure costs. Rio Tinto has now agreed to fund the clean up.

Rio Tinto will now provide additional financial support to ERA through a renounceable entitlement offer, in which the parent company will subscribe for ERA’s 68.4 per cent entitlement of new shares — the same amount of Rio Tinto’s shareholding in the subsidiary.

Rio Tinto will also underwrite the balance of a renounceable entitlement offer if an alternative underwriting solution is not available to ERA.

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ERA says it is considering the size, structure and terms of any potential renounceable entitlement offer, having regard to the interests of ERA as a whole.

It says it will continue to investigate whether there are other potential funding sources and it will provide a further update in due course.

The Ranger mine has produced 128,000 tonnes of uranium oxide since opening in 1981 and provided a billion dollars in dividends, another billion in tax and half a billion in royalties to Aboriginal interests and the government.

ERA has made $49.2 million in profit in the six months to June 30, up 150 per cent from a year ago, on profit of $170 million on uranium sales and $190 million on other activities.

It generated negative cash flow from operating activities of $76 million in 2018 compared to positive $8 million in 2017.

It said this was largely due to an increased rehabilitation spend on the Ranger Project Area and lower sales receipts compared to the prior period.

The rehabilitation provision for the project has increased before – initial costs by the end of 2017 were $526 million, but this increased to the current cost of $830 million by the end of December 2018.

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Progressive rehabilitation of the Ranger Project Area continued with expenditure of $59 million incurred during 2018.

Expenditure was primarily associated with the dredge operating to transfer tailings from the tailings storage facility to Pit 3, the backfill of waste material into Pit 1 and the feasibility study and other studies.