Energy Resources Australia (ASX: ERA) chief executive, Rob Atkinson, has quit his position after nearly five years at the helm of the Rio Tinto (ASX: RIO) subsidiary.
ERA has struggled with massively reduced demand and prices for the past seven years. In the wake of the Fukushima nuclear disaster in Japan, the spot price of uranium hit a low of slightly less than $US 40 per pound, its lowest point in seven-and-a-half years but it's not getting better. Prices around $50 per pound are expected in the short term as a result of oversupply.
The company released its half-year result this morning and posted a net loss of $53.5 million compared to a $59.9 million loss in the previous corresponding period but attributes much of the results to higher spending, including $64 million in capex.
The company's new $120 million Ranger 3 Deeps underground mine, expected in be in production by late 2015, will replace the open pit mine it closed last year. The company agrees the short term outlook remains difficult, but feels the long term is encouraging. The company is current producing uranium from stockpiles and has forecast production and sales of 2,700 to 3,300 tonnes.
Chances of increased demand continue to rise
Tension is growing in Japan for a return to nuclear power as the country struggles with blackouts and excessive power costs. A survey by Asahi Shimbum found that 28% of respondents in the country did not oppose the reopening of nuclear facilities while most did not believed radioactivity did not have a place in Japanese society.
Japanese utility providers face an uphill battle to return the country to a nuclear power but their reliance on fossil has cost some $241 billion since the nuclear disaster and inefficient power supply is taking its toll on both businesses and the public.
Foolish takeaway
The one positive ERA shareholders can take away from a difficult short-term outlook is the knowledge that few new producers will come online in the near future. There was no dividend declared by ERA and although it may not be worthy of a spot in your portfolio just yet, it's still deserving of a spot on watchlists.
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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.
