Energy Resources of Australia’s first half profit plunged 82 per cent after it encountered poor ore grades at its Northern Territory mine.

ERA also got less money for its uranium oxide as high global stockpiles and lower demand caused by a global economic slowdown kept prices subdued.

Net profit for the six months to June 30 fell to $22.7 million, from $127.6m in the previous corresponding period, missing UBS and JP Morgan forecasts of $28m and $39.6m, respectively.

Revenue slid 37 per cent to $217.7m from $347m.

ERA, which is 68 per cent-owned by Rio Tinto, negotiates prices in long-term sales contracts that can be partially influenced by movements in the spot price.

Higher uranium stockpiles, particularly in Kazakhstan, and delays in the construction of some nuclear reactors in China are expected to keep uranium oxide, or yellow cake, prices suppressed in the short term, ERA said.

It stuck to its forecast of achieving an average realised uranium oxide price in 2010 broadly similar to what it got in 2009. In the 2010 first half, it realised a price of $US44.79 per pound, compared to $US48.02 in the 2009 first half.

A big fall in profits was already largely expected by the market after ERA on July 13 sharply downgraded its production guidance to 4,300-4,700 tonnes of uranium ore. It reiterated that guidance Friday.

ERA downgraded its output guidance after it last gained access to the main ore body at its Ranger mine after seasonal rains dried up in recent weeks and stability problems with the south wall of the pit were dealt with.

The ore it encountered, however, was of a much lower grade than it expected. Chief executive Rob Atkinson had said July 13, “we see good grades in front of us now and we’re hoping to exploit that”.

(Source: TheAustralian.com.au)