Monsters of Rock: Uranium bulls are getting excited, but Rio-backed miner is after more cash so it can CLOSE
Uranium bulls are pretty excited right now.
The nuclear fuel has a new lease on life as a mooted solution to the issue of providing firming electricity as the rollout of wind and solar expands and western governments try (though at this point they seem to be largely failing) to wean themselves off fossil fuels.
Spot prices may have fallen from above US$60/lb a couple months ago to US$47.50/lb, but that makes the sector a whole lot more investable now than it did five years ago, when prices of US$18/lb made turning a profit in the field a nigh on impossible task.
Case in point, Boss Energy (ASX:BOE) recently announced it would restart the Honeymoon uranium mine over in South Australia after nine years in mothballs.
While market conditions are vastly improved, Rio Tinto (ASX:RIO) is now chasing more cash so it can close what was until recently one of just three operating uranium mines in Australia.
Well not quite Rio exactly, but Energy Resources of Australia (ASX:ERA), 86% owned by the mining giant and the owner and operator of the Ranger mine in the Northern Territory.
Ranger is surrounded by the Kakadu National Park and ERA has until January 8, 2026, to fix the joint up and skedaddle after mining stopped on that date last year.
It will be a rare test of a major’s ability to complete a full and comprehensive cleanup of an historic mine, something the industry has been less than successful with in the past.
Making that task even harder was a major cost blowout ERA revealed in February this year from $973 million to $1.6-2.2bn. The schedule is also a concern, with full rehab only expected in Q4 2027 and Q1 2028.
ERA has Rio’s commitment it will help underwrite the bill, something it did in a major equity raise last year.
It will probably need to dip its hands back into its very deep pockets again after ERA confirmed media reports that it was looking at an entitlement offer to boost its coffers.
“Given ERA’s current cash on hand position an urgent interim funding solution is required,” the company said in a statement to the market today.
“ERA is engaging with its substantial shareholders in relation to a potential interim entitlement offer to raise ongoing funding for the rehabilitation of the Ranger Project.
“The size, price and structure of the interim entitlement offer are still to be determined. ERA expects to be in a position to announce details of the entitlement offer in coming weeks.”
ERA, which was expecting to make its final U3O8 spot sales this quarter, had just $164 million cash at bank and $535 million held in the Ranger Rehabilitation Trust Fund as of December 31.
The deal will make the Gruyere gold mine owner a 14.4% owner of $1.2 billion capped De Grey Mining (ASX:DEG), owner of Australia’s next tier-1 gold mine, the Hemi deposit in the Pilbara.
In the broader market falls for BHP (ASX:BHP) and Rio Tinto (ASX:RIO) led the ASX materials sector to a minor drop, capping a 4.88% loss in a tough week, despite a Friday rally from the lithium sector.