Stock Analysis ASX:RIO
August 31st, 2010
Stock Analysis ASX:RIO
Energy Resources of Australia (ERA) is one of the largest uranium producers in the world, providing over 10% of the worlds uranium production through long-term contracts.
ERA sells its product, drummed uranium oxide, to power utilities in Asia, Europe and North America, under strict international and Australian Government safeguards.
The company is majority-owned by mining bigwig Rio Tinto (ASX:RIO), which has a 68% stake in the company.
ERAs flagship asset is the Ranger mine (east of Darwin), the worlds second largest uranium mine, which currently accounts for 100% of ERAs production.
With the coming full year likely to be impacted by higher costs, ERA will no doubt also suffer from a sluggish market for uranium, which has seen uranium spot prices slipping almost 20% since October 2009.
ERAs Ranger mine is showing signs of a slowdown, a worrying turn, as Ranger is ERAs only operating production vehicle at present.
With uranium not making the impressive gains forecast by this time, and with production issues crimping ERAs results, the short-term looks to be tough for the miner.
Australian share price for ERA has dwindled since October 2009 from over $25.00 to under $15 as of late. This may be one of the shares to sell if it continues to break lower.
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