MELBOURNE (MarketWatch) -- Uranium miner Energy Resources of Australia Ltd. (ERA.AU) boosted production forecasts for its waterlogged Ranger mine in Australia's Northern Territory Thursday, sending its shares up 8.6%.
News of the production upgrade and that the miner had posted a small first half profit, instead of the expected small loss, surprised the market and buoyed shares in the Rio Tinto Ltd. RTP subsidiary.
Heavy rains in February and March flooded the Ranger mine, forcing ERA to declare force majeure on sales contracts.
As a result, first half net profit fell 71.5% on year to just A$5.67 million from A$19.86 million a year before, but still ahead of guidance for a loss of between A$5 million and A$10 million thanks to accounting adjustments that lifted profits by A$10 million.
The miner also surprised the market with news that efforts to remove water from the Ranger mine are proceeding at a better than expected rate, allowing it to lift its production guidance.
Chief Executive Chris Salisbury said the disposal of water from the uranium mine required regulatory approvals and the miner had been pleased with the speed at which these were granted.
"We have had great support form our regulators and our other stakeholders and that, combined with the fact that we have been able to overachieve our forecast, has allowed us to revise out overall production forecast," he told Dow Jones Newswires.
Previously, ERA had said the flooding at Ranger would mean full year production for 2007 would likely be in line with the 4,750 metric tons of uranium produced in 2006, with 2008 to be 25% to 35% lower.
Thursday, ERA said fast tracking of the dewatering of the mine means it now expects 2007 output to be about 5,200 tons and 2008 to be about 5,000 tons.
Australia's Resources Minister Ian Macfarlane Thursday said the nation is looking at selling uranium to India, which is not a signatory of the Nuclear Non Proliferation Treaty, subject to stringent safety agreements.
Salisbury said ERA's current policy is that it will only sell uranium to countries that are signatories to the treaty, but that it would be interested to hear what the government is proposing.
"An absolute cornerstone of our industry is the non-proliferation regime," he said.
"We would need to understand what are the regimes that are being proposed and how do they compare to our current very strict regime and clearly we would be interested to talk to the Federal Government about that."
The miner's exposure to soaring uranium prices, which even after a pullback are now about US$120 a pound, is limited by its sales into long-term contracts struck when the price was much lower.
ERA said the average realized sales price for the half was US$16.90 a pound, up from US$15.57 a pound in the previous corresponding period.
A strengthening Australian dollar cut revenue by A$6.7 million but the company said it also settled some forward exchange contracts during the half, resulting in a pretax gain of A$9.4 million.
ERA's revenue for the half fell 26% on year to A$114.28 million, from A$154.75 million.
As a result of the dip in profit, ERA declared no interim dividend, whereas last year it paid a dividend of 6 cents.