UPDATE: ERA Puts A$175 Million Price Tag on New Ranger Uranium Mine

-- Energy Resources CEO say Ranger 3 Deeps would cost at least A$175M

-- Plans to make final investment decision in mid-2014

-- CEO expects uranium prices will bounce due to supply shortfalls

(Recasts to add details on Ranger mine throughout; analyst comment in tenth paragraph)

By Ross Kelly

SYDNEY--Energy Resources of Australia Ltd. (ERA.AU), battling to secure a new source of uranium after its flagship Ranger mine ran out of ore last year, said the development of an adjacent deposit could cost at least 175 million Australian dollars (US$182.3 million).

In an interview with The Wall Street Journal, Chief Executive Rob Atkinson said the cost of building the Ranger 3 Deeps pit in the Northern Territory is well below what rivals would need to spend on new mines. That's significant because low uranium prices are stifling investment across the industry, paving the way for a potential supply shortfall in future as China expands its nuclear-reactor fleet and more Japanese plants come back online.

ERA--majority owned by Rio Tinto PLC (RIO)--stopped mining at Ranger in November and has been whittling down stockpiles to meet existing sales commitments. Although it has enough inventories to last almost a decade, it will need to build a new mine to revive a share price that has fallen more than 90% over the past three-and-a-half years.

The Darwin-based company wants to decide whether to tap the Ranger 3 Deeps deposit by mid-2014, in time to start producing uranium oxide by late 2015.

"Certainly the cost is nowhere near the amount people that are starting from greenfield have to pay because it's right smack in the middle of our operation," Mr. Atkinson said.

Building a new underground mine would be cheaper than starting from scratch because there is already infrastructure in place, including a processing plant, power stations and worker accommodation.

Mr. Atkinson said annual output from a new mine at Ranger could be between 3,000 and 3,500 metric tons. At the top end, that would rank it as the world's second-biggest uranium mine by production in 2011 behind Cameco's McArthur river pit in Canada, according to the World Nuclear Association.

Ranger borders the World Heritage-listed Kakadu National Park so developments come with the stringent water-treatment conditions. ERA has already committed A$220 million to acquiring a brine concentrator.

That helped the company this month forge a new mining agreement with the area's traditional landowners. It has also committed A$120 million to studying the quality of the Ranger 3 Deeps resource.

UBS resources analyst Glyn Lawcock said improving relations with the traditional owners raises the prospect that Ranger 3 Deeps will go ahead. He rates the stock a buy.

Miners including ERA, France's Areva SA and Canada's Cameco Corp. have been writing down the value of mines and shelving new developments since Japan's Fukushima atomic crisis in early 2011 sent prices for nuclear fuel into a tailspin.

ERA said Thursday its net loss widened to 218.8 million Australian dollars (US$227.4 million) last year due to the weak uranium prices, a high Australian dollar and the cost of rehabilitating the recently depleted Ranger pit.

It achieved an average uranium sales price of US$58.33 per pound last year. Mr. Atkinson said prices need to rise to between US$70 and US$80 per pound to drive construction of new mines.

The uranium market will be "in a different place" by the end of 2015, partly because current mine closures will leave it short of supply, he says.

"Many of the nuclear power companies are uncovered beyond 2016 and that gives an opportunity for very established producers like ourselves with a proven track record to lock in long-term contracts with good prices," Mr. Atkinson said.

Write to Ross Kelly at [e-mail]

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