Monsters of Rock: This uranium stock is a money sink. So why is it being bought like a solid gold Rolex?

Energy Resources of Australia shares surge as it announces plan to renew Jabiluka Lease, but traditional owners aren’t happy
Develop Global secures Beta Hunt underground contract to add to Bellevue and Mt Marion deals
Comex gold futures climb beyond US$2200/oz as investors grow bullish on rate cuts

Energy Resources of Australia (ASX:ERA), the Rio Tinto (ASX:RIO) subsidiary tasked with the clean-up of the Ranger uranium mine in the Kakadu National Park, has been thrown into yet more controversy.

The uranium play’s ‘independent’ board was skittled two years ago after tabling a head-scratching expert’s report which placed a value of more than $1.1b on the Jabiluka uranium deposit, a project the NT region’s traditional owners the Mirarr People have long said they will never support the development of.

Rio, the 86% majority shareholder, is committed to a clean-up to restore Ranger to the state of the surrounding and UNESCO world heritage listed Kakadu National Park.

But it doesn’t want to buy out minority holders who are still holding onto hope that uranium’s price rise and reinvention as a tool of the green energy transition will prompt an eventual change of heart from the Mirarr.

Jakob Stausholm has previously told shareholders to acquire a company which only has rehabilitation liabilities would be a bad deal. But ERA is facing increasing angst over its ability to fund the restoration.

It reported a net loss after tax of $1.4 billion for 2023, having lifted its rehabilitation provision to over $2.4b as of December 31. 85% of the increase relates to funds to be incurred after 2027. The clean up was originally forecast to cost $973m according to a 2019 study.

Schedule overruns have also been known for several years, blowing out well beyond an initial deadline of January 2026.

So ERA is, effectively, just a crucible to spend money on this rehab. Yet it has tracked uranium prices higher with its shares lifting 42.5% in the past six months and a market cap of $1.24b.

Stranger Things

ERA’s received a shot in the arm from minority investors drunk on hope, who have pushed the price up in the past two days after ERA announced it had applied to renew the Jabiluka lease from August.

Best of luck to those running the ultimate contrarian play. I’ve been told my editor will eat a hat if yellowcake ever leaves Jabiluka.

The ERA line is that it flagged its intentions to renew the lease more than 12 months ago and that its long term care and maintenance agreement with the Mirarr, running since 2005, will be maintained. That includes a clause giving the TOs’ veto over development, something they continue to say will not happen.

“We believe the renewal of ERA’s mineral lease is the best way to protect Jabiluka’s cultural heritage,” quoth ERA CEO Brad Welsh.

“ERA has protected the cultural heritage at Jabiluka for almost two decades under a long-term agreement with the Mirarr.

“Traditional Owners that also includes a veto right over any future development. The agreement and veto right only remain in place if the lease is renewed.”

ERA’s recent annual report included a reference to the application stating: “ERA has commenced discussions with stakeholders, including the GAC, concerning any application for renewal of the Lease.” The 2022 annual report had explicitly stated ERA intends to apply for a renewal.

Only the Mirarr dispute that they have held discussions on the lease being extended, with their representative the Gundjeihmi Aboriginal Corporation saying the news came out of left-field. They claim the only discussions they’d held were on preparations for the expiry of the Jabiluka lease.

“How could anyone consider giving or extending a mineral lease to a company that is $2 billion in the red? No other mining company would seriously apply for a mineral lease with this balance sheet,” said GAC CEO Thalia van den Boogaard in a statement.

The GAC is calling for the Federal Government to step in and ensure the funds are there to complete the clean up, with ERA reliant on fundraisings backed by Rio to stay afloat.

“It’s a big problem that ERA is out of money,” next generation TO Corben Mudjandi said.

“It’s time for the government to step in. Mining has finished and now the government has got to protect Kakadu National Park.”

In response to questions from Stockhead an ERA spokesperson said:

“ERA has been on the public record for more than 12 months that it intends to renew the Jabiluka mineral lease.

“ERA has discussed renewing the lease with the GAC and the Mirarr.

“We would welcome a more extensive discussion with the Mirarr to further detail our position on the importance of renewing the lease and extending the Traditional Owners’ right of veto over the development of Jabiluka.”

ERA’s full year results showed it had $726m of liquidity available as of December 31, having spent $211m on rehab last year. That included $217m of cash in the bank and $509m of cash held by the Australian Government as part of the Ranger Rehabilitation Trust Fund.

But its cash reserves are expected to fund rehab only until the third quarter, when a further equity raising will be needed.

Energy Resources of Australia (ASX:ERA) share price today

Develop ramps up mining services

Bill Beament’s Develop (ASX:DVP) is emerging as a mini-MinRes of underground mining after securing a third major contract in the WA Goldfields.

The former Northern Star Resources (ASX:NST) boss says his mining services and critical minerals play will generate $175m in revenue from its order book next financial year.

That comes after it took on a contract to provide underground development at TSX-listed Karora Resources’ Beta Hunt gold and nickel mine near Kambalda.

It comes on top of a $46m contract to establish an underground decline at MinRes and Ganfeng’s nearby Mt Marion lithium mine, where a development cut is planned for May.

DVP already operates the mining services contract at Bellevue Gold’s (ASX:BGL) recently opened Bellevue Gold mine near Leinster in the northern Goldfields.

And while Esperance-raised Beament is better known for his exploits in the gold game, it also has a string of copper, zinc and lithium assets, including Sulphur Springs in the Pilbara, 20% of Anax Metals’ (ASX:ANX) Whim Creek copper project down the road, the Woodlawn zinc and copper redevelopment in New South Wales and the Pioneer Dome lithium project north of Norseman.

Beament said the addition of the Beta Hunt contract had seen $580m capped DVP hit a five-year mining services target to hold 2-3 external contracts in 18 months.

“This phenomenal result reflects the strength and capability of the world-class team of highly experienced underground personnel we have built in such a short time,” he said.

“The addition of the Beta Hunt work means we now have a hub of activity in WA’s Southern Goldfields region. This will bring significant benefits for Develop and our clients in terms of capability, synergies, consumables, spares, equipment, infrastructure and flexibility.

“The strong revenue now being generated from the provision of mining services will also be highly valuable as we seek to secure the most attractive funding terms possible to advance our critical minerals assets in Australia.”

Karora has itself been in the news of late, having been revealed to be having discussions regarding a ~$1 billion takeover from Ramelius Resources (ASX:RMS).

Develop Global (ASX:DVP) share price today

And what about the ol’ market?

It’s all about the goldies after the US Fed held rates steady and reiterated projections for 75bps of rate cuts in 2024.

That sent Comex gold futures to over US$2200/oz for the first time, sparking a 3.8% rally for the ASX All Ords gold sub-index.

Despite the rally, Aussie gold miners are still down ~5% YTD, but have enjoyed an 8.73% climb over the past month with bullion prices touching record levels.

Other metals enjoyed decent days aside from copper and iron ore. Notably palladium and platinum lifted 2.9% and 1.4% respectively to US$1025/oz and US$909.50/oz, with the Biden Administration introducing new rules restricting tailpipe emissions from cars to 2032.

The effect of the rule would be to try make half the cars sold in the US zero emissions — read: EVs — in eight years.

But that could benefit platinum and palladium, which are used in catalytic converters which reduce emissions in internal combustion engine vehicles and hybrids.

Gold miners dominated the large cap winners as the materials sector lifted 0.33% in morning trade against an ASX 200 gain of 0.66%, weighed down by a middling performance from the iron ore space.