More than 26 months after the nuclear accident at Fukushima, Japan, the nuclear industry is still feeling the effects with depressed uranium prices and cost pressures that are squeezing margins.

It took many years for the political fallout after the Chernobyl and Three Mile Island nuclear disasters to dissipate and for the nuclear industry to rebuild again. It looks fairly likely to follow the same path this time, which could mean several years before the uranium price recovers.

The price for uranium has fallen 40% since Fukushima to US$40 a pound, as Japan suspended its fleet of nuclear plants, while Germany cancelled licence extensions, shut down some if tis oldest nuclear reactors, with others to close by 20122. And it's not just the Fukushima incident that has affect uranium prices. Concerns over global growth and China's demand for raw materials have seen most commodity prices dragged down.

Falling prices have forced many companies to put new projects on hold, but with huge demand for electricity and energy, there's a growing gap between supply and demand. Simple economics dictates that that should force the price of uranium to rise. India, South Korea, Russia and China continue to expand their nuclear programs, and Japan is expected to restart some of its reactors later this year. According to Tim Gitzel, CEO of Canadian uranium miner Cameco, 65 reactors are under construction around the world. Mr Gitzel predicts that annual consumption of uranium will rise from 170 million pounds to 220 million pounds by 2022.

Australia's Paladin Energy (ASX: PDN) is expected to produce 8 -8.5 million pounds this financial year, and expects a supply shortage post 2013-2014. However, the company suggests that the price would need to double or triple from here to between US$80/lb to US$120/lb to incentivise new production. That would certainly help Paladin, which has average costs of US$45/lb. No wonder the company has flagged a potential sale of 15-20% of one of its two African mines, as it tries to cut its debts from US$673 million.

Foolish takeaway

While the outlook for uranium may appear bright, the uranium price could stagnate at current levels for many years, much like it did after previous nuclear incidents. Japan may not restart its reactors, preferring instead to seek other energy alternatives, and reactors currently under construction could still be cancelled or postponed. That is not good news for ASX listed uranium miners Paladin, Energy Resources of Australia (ASX: ERA), Toro Energy (ASX: TOE) or Deep Yellow Limited (ASX: DYL).

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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.

The post Uranium on the nose appeared first on The Motley Fool Australia.

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The world continues to feel the impact of the Fukushima nuclear disaster.

The disaster in Japan in 2011 has left 48 of Japan's nuclear reactors sitting idle, awaiting government approval to resume operations, with just 2 restarted. In mid-September, the Japanese government approved a new energy plan which included reducing the nation's reliance on nuclear energy substantially.

Following the Fukushima accident, Germany immediately shut 8 of its reactors, and plans to close its remaining 9 reactors by 2022.

The impact is being felt by uranium miners globally.

Paladin Energy Ltd (ASX: PDN) recently stated that annual demand for uranium has fallen, as the future of nuclear energy was cast into doubt. The world's largest uranium producer, Canada's Cameco, has also forecast lower sales and highlighted doubts about the take-up of nuclear power in future.

This appears to be a similar situation following the US 3 Mile Island incident in 1979 and the Ukrainian Chernobyl incident in 1986. Following those disasters, growth in nuclear reactors completely derailed. Before those accidents, more than 1,000 reactors had been planned to be built by the year 2000.

The world currently has just 430 reactors, and the Fukushima incident could have the same effect on planned nuclear reactors. According to the World Nuclear Association, 160 reactors are planned and over 320 have been proposed. We have serious doubts that many of those will go ahead, further reducing demand for uranium.

Adding to the miners' woes, uranium prices continue to fall, from US$73 a pound in March 2011, to around US$43 currently. That's lower than the cash cost of production at Paladin's Kayelekera mine in Malawi, giving the miner a decent sized headache.

The big hope for many miners is for India to embrace nuclear energy to resolve its ongoing power outages. However, the massive increase in gas exploration and generation, including coal seam gas and shale gas, and the subsequent fall in gas prices, could make gas a much more attractive option for power generation than nuclear.

Foolish takeaway

If you want exposure to uranium, with a margin of safety, you can't go past BHP Billiton (ASX: BHP). The company's Olympic Dam mine contains the world's largest uranium ore body, and if prices are driven up by higher demand, BHP will likely ramp up production of uranium from the mine. Alternatively, Rio Tinto Limited (ASX: RIO) holds 70% of Energy Resources of Australia (ASX: ERA). ERA owns and operates one of Australia's largest producing uranium mines.

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Motley Fool writer/analyst Mike King owns shares in BHP. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Nuclear fallout hurts uranium miners appeared first on The Motley Fool Australia.

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Higher capital costs and subdued commodity prices led to the decision to not proceed as originally planned.

The company instead will investigate an alternative, less capital-intensive design of the open-pit expansion to substantially improve the economics of the project. BHP sets an internal rate of return hurdle of 15% on its projects and it appears the Olympic Dam expansion has failed to make the grade.

Olympic Dam is the world's largest uranium ore body, substantially bigger than Energy Resources of Australia Limited's (ASX: ERA) Ranger mine and Paladin Energy Ltd's (ASX: PDN) Langer Heinrich mine. Not only does it contain uranium, it's also the world's fourth largest copper deposit, fourth largest gold deposit and a massive deposit of silver to boot. The expansion project would have created one of the world's largest open pit mines.

In the current climate the decision not to proceed appears to makes sense, but rather to conserve its capital or invest in other higher value projects, until commodity prices recover, or the company finds another, cheaper way of expanding Olympic Dam.

Iron ore miners, Fortescue Metals Group Limited (ASX: FMG) and Rio Tinto Limited (ASX: RIO) are pushing ahead with their costly expansion plans. With a much higher leverage to the iron ore price than BHP, only time will tell if their moves have been well timed.

The Foolish bottom line

While the cancellation of the Olympic Dam expansion is likely good news for BHP and its cash flow, it may not be good news for the company's CEO Marius Kloppers, as it could be seen as another failure. He has already come under fire from investors for the missed merger with Rio, the failed US$39 billion takeover of Canada's Potash Corp and the writedown on the company's shale gas and nickel assets.

If you're in the market for some high yielding ASX shares, look no further than our "Secure Your Future with 3 Rock-Solid Dividend Stocks" report. In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

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Motley Fool writer/analyst Mike King owns shares in BHP. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is Olympic Dam strike three for BHP's CEO? appeared first on The Motley Fool Australia.

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The refinery has been operating for 57 years, and Caltex said the Kurnell refinery was setup to process 'sweet' crude oil, but was increasingly handling 'heavier' crude oil imports, putting it at a competitive disadvantage.

Closure of the refinery will reduce the company's exposure to volatile refining earnings, and cut capital expenditure as Kurnell needed significant capex to run safely and reliably. Caltex said Kurnell lost $208m last year and another $60m in the first three months of this year, which forced the company's hand.

The company will spend $430m to close the refinery, and spend approximately $250m to convert it to an import terminal, beginning in 2015, once refining is halted in the second half of 2014, and work is expected to take several years.

To pay for the transformation, Caltex is reducing its dividend payout ratio from the current level of between 40 to 60% of reported earnings, down to a lower level of between 20 to 40%, while the conversion goes ahead, and will revert to the normal dividend payout ratio in 2014, following successful closure of the refinery.

Woolworths, which sells about a third of Kurnell's output, said the closure would not affect its retail operations.

Last month Shell closed its smaller Clyde refinery in western Sydney, also converting it to an import terminal, with the loss of more than 220 jobs, and together with Kurnell, the two refineries represented 27% of Australia's oil refining capacity.

More job cuts

Caltex is not the only company cutting staff. In tough times, companies look to reduce their costs, as revenues fall, and the most obvious target is employee costs.

Energy Resources of Australia (ASX: ERA) has warned of job cuts at its Ranger uranium mine, as the company suspends mining and begins underground exploration, after posting a $60m loss for the six months to June 2012. ERA has warned that the near term market for uranium remains challenging, but the longer term outlook is encouraging, with China expected to build many more reactors. Rio Tinto Limited (ASX: RIO) owns 70% of ERA.

164 jobs will also go with the closure of a Victorian aircraft engine overhaul facility co-owned by Qantas Limited (ASX: QAN). The company has blamed a decline in demand for engine overhaul services for the closure.

If you're in the market for some high yielding ASX shares, look no further than our "Secure Your Future with 3 Rock-Solid Dividend Stocks" report. In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

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Motley Fool writer/analyst Mike King owns shares in Woolworths. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Little World Beverages Limited (ASX: LWB) rocketed $1.37, or 36% to close at $5.16 after receiving a takeover offer from Australia's biggest brewer Lion. The company (Lion) has offered $5.30 for each Little World share, including a fully franked special dividend of 20 cents.  Little World is a boutique brewing company headquartered at the Little Creatures Brewery in Fremantle, Western Australia, which also produces from the White Rabbit Brewery in Victoria.

Energy Resources of Australia Limited (ASX: ERA) jumped 20.5% to close at $1.41. The miner, 70% owned by Rio Tinto Limited (ASX: RIO) hosted an analyst site visit of its Ranger uranium mine in the Northern Territory last week. As part of the site tour, the company advised that full mining access to Pit 3 had been achieved ahead of schedule.  Thanks to heavy rains, the pit had 1.2 gigalitres of water in it and wasn't scheduled to be pumped dry until July 2012. The company also advised that it was expecting to repay all outstanding loans by the end of 2012.

Energy World Corporation Ltd (ASX: EWC) climbed 10.3% to close at 37.5 cents as the stock continues its roller-coaster ride. Since early June, when EWC's shares hit a 52-week low of 31.5 cents, the share price appears to be at the mercy of speculators. The company is developing a controversial liquefied natural gas project in Papua New Guinea, but slow progress caused PNG politicians to lash out at the company. Speculation in the Australian media has even questioned whether the plant will ever be built.

With many stocks hitting 52-week lows, it's perhaps not surprising to see small-to-medium resource stocks bounce around and takeovers occurring.

If you're in the market for some less risky, high yielding ASX shares, look no further than Secure Your Future with 3 Rock-Solid Dividend Stocks. In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

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Motley Fool contributor Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 3 ASX stocks that thumped the market last week appeared first on The Motley Fool Australia.

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Energy Resources of Australia (ASX: ERA) shares have risen 28.5 per cent in the last five days and up 10.7 per cent in today's trading. Broker's Merrill Lynch and UBS both upgraded the stock to "Buy", on the belief that the company had finally addressed its key issues of water, traditional land owner relations, financial viability and growth.

The miner and owner of the Ranger mine and Jabiluka uranium deposit in the Northern Territory, recently raised $500m via a rights issue to fund capital expenditure from 2012 to 2014. The company is spending over $200m on a Brine Concentrator, which is used to treat process water, and expects it to be fully operational in the second half of 2013.

Being in the middle of a world heritage site, and on indigenous owned land, the company must go to incredible lengths to minimise the damage mining causes to the surrounding areas. Kakadu National Park surrounds the Ranger mine, so the company has to be especially careful with what happens to toxic process water.

More problems

Unfortunately, nature has taken a hand in ERA's future, with wet weather playing havoc with production in the last two years.

In fact, the past decade has been the wettest on record, with five of the six highest wet seasons occurring since 1999. Water and rainfall is a major issue for the Ranger mine. It's now over 30 years old, and beginning to show its age. ERA had to cease production of uranium from 28^th January to 15^th June 2011 to contain the volume of water that needed to be processed, thanks to the heavy rains.

As a result, the company had to purchase $244m of uranium to meet its contracts, resulting in a net loss after tax for the 2011 financial year of $153.6m.

So far this year, there has been significant rainfall, although about half of what was received in 2011. ERA still has 1.2 gigalitres of water in Pit 3 of the Ranger mine, which won't be pumped dry until July 2012.

Falling production

Production has been steadily falling over the past five years from 5,412 tonnes in 2007 to 2,641 tonnes in 2011. Production for Q1 2012 was predominantly from stockpiles and totalled 612 tonnes. The company has forecast to produce between 3,200 and 3,700 tonnes of uranium in 2012, as the company continues to mill stockpiles.

Another issue is that the Ranger open-pit is running out of uranium and the company is embarking on a plan to mine underground, which is a whole new ball game. The problem for ERA, and its 70% major shareholder, Rio Tinto Limited (ASX: RIO) is that ERA's other uranium project, Jabiluka, is currently being run on care and maintenance, as the indigenous owners of the land have objected to the mine.  I don't see this changing in the near future, if ever.

ERA doesn't have many options available, but to start underground mining at Ranger.

Uranium prices & strong Australian dollar

At the start of 2011, the short term uranium price was at US$72, but following the Fukushima accident, the price fell to US$49, before rising above US$55 in the latter half of the year. The current short term price is hovering around US$51.

ERA's strategy has been to focus on long term contracts, but nuclear energy remains a controversial subject, especially after the Japanese accident. This has consequences for ERA and the production of uranium, especially if the uranium price continues to be weak, or falls back again.

The strong Australian dollar is also having an effect on profits, with uranium sales in US dollars.

The Foolish bottom line

With nature seemingly against it, low uranium prices, the high Australian dollar and running out of uranium and other options, ERA is a stock to avoid. Investors would be better off with Rio Tinto shares, to mitigate the headwinds ERA still faces.

If you're looking for income from your shares, look no further than "Secure Your Future with 3 Rock-Solid Dividend Stocks". In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

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Motley Fool contributor Mike King doesn't own shares in ERA or Rio. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool's disclosure policy.

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After tracking higher in the first couple of hours of trade, the S&P / ASX 200 (Index: ^AXJO) couldn't hang on to its early gains on Tuesday 17^th April, closing down 0.3% to 4288.6 points.

The market seemed to lose steam after the Reserve Bank released the minutes from its most recent meeting, outlining its plans to use the upcoming Consumer Price Index (CPI) read as its guide for the next move on rates.

As is always the case, though, the index return only tells part of the story. It's the weighted average of the 200 companies that make up the index – meaning that half of the index (by weight) did better than that mark, and the other half worse.

Leading the charge today were the miners – bouncing back from losses at the end of last week. Streeting the field was Energy Resources of Australia (ASX: ERA) with a 12.7% gain today alone. ERA left the others in its dust, but Lynas Corporation Limited (ASX: LYC) managed a very creditable 5% gain, and Energy World Corporation Ltd. (ASX: EWC) closed up 4.6%. Rounding out the top 5 were Ardent Leisure Group (ASX: AAD) with a 2.9% bump and Australian Infrastructure Fund Ltd. (ASX: AIX), up 2.7%.

With gainers of this magnitude, and the index showing losses on the day, it was inevitable that there'd be some big losers among the 60% of the companies that ended lower today.

Providing a neat bookend to ERA's gain, was Linc Energy Ltd (ASX: LNC), which closed down13%. There were some other heavy losers today, with 13 companies showing losses of 3% or more. Among the largest were Mirabela Nickel Limited (ASX: MBN), off 8.3%, Ramelius Resources Limited (ASX: RMS), down 5.5%, Regis Resources Limited (ASX: RRL), which shed 5.3%, and Mineral Deposits Limited (ASX: MDL), which dropped 4.8% today.

In other news, Rio Tinto Limited (ASX: RIO) released output figures which disappointed the market, with a 0.7% fall in the share price.

The Australian dollar dipped after the release of the RBA minutes, down 0.5c to $1.0305 just before 5pm Australian Eastern Standard Time on Tuesday.

As always, an index throws the good in with the bad, and you should never read too much into a single day's share price movement. We Fools remain on the hunt for the best shares on the market – using dips as a buying opportunity.

If you're looking for income from your shares, look no further than "Secure Your Future with 3 Rock-Solid Dividend Stocks". In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

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 Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691).

The post Interest rates and resource outputs weigh on ASX appeared first on The Motley Fool Australia.

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