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Writing on the wall for Energy Resources of Australia Limited


Energy Resources of Australia Limited (ASX: ERA) is likely to close the Ranger mine and being rehabilitation work, according to the former chairman, Peter McMahon.

Speaking to Fairfax Media, Mr McMahon said that despite speculation of a new suitor picking up Rio Tinto Limited’s (ASX: RIO) majority share in ERA, no efforts have been made to find such a white knight. Rio holds 68% of ERA, and clearly seems happy to let the Ranger uranium mine close and rehabilitation to begin.

Maybe it’s the ongoing losses from ERA, nearly $700 million over the past four years, the unlikely prospect of uranium prices jumping higher in the short term, the Ranger mine lease expiring in 2021 and the opposition from traditional owners for uranium mining in the Kakadu National Park. ERA certainly has some headwinds, and Rio may just want to see the back of the company.

ERA is now expected to continue processing stockpiled ore until 2021 and then spend five years rehabilitating the site. Mr McMahon said, “My understanding is they [Rio] are committed to doing that and I’m sure they will do that well. It is clear to me that their intent is to see that process through.

As I wrote yesterday, at current prices of around 37.5 cents, ERA shares appear highly overvalued given its issues and Foolish (capital ‘F’) investors should steer clear. The end of an ERA appears nigh.

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Motley Fool contributor Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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