PERTH (miningweekly.com) – ASX-listed Energy Resources of Australia (ERA) will require a further A$1.06-billion to A$1.65-billion in capital expenditure to complete rehabilitation of the Ranger uranium project, in the Northern Territory.
The miner earlier this year flagged that an independent review of the Ranger rehabilitation had estimated a cost of between A$1.6-billion and A$2.2-billion for the project, compared with the 2019 cost estimate of A$973-million.
Furthermore, the review found that completion of the Ranger project rehabilitation work would be between the fourth quarter of 2027 and the fourth quarter of 2028.
The forecast cost overruns have been caused by a number of factors including complexities in technical risk management, project delays and additional scope matters involving unbudgeted costs.
ERA on Friday reported that A$410-million of the total cost of completing the rehabilitation had been spent between January 2019 and the end of June 2022, with the company having A$132-million cash on hand at the end of the period, marking a significant shortfall in funding.
The company also noted that the rehabilitation project continued to be exposed to "challenging conditions", including tight labour market conditions, supply chain constraints and inflationary pressures being experienced across the broader industry.
ERA has approached its largest three shareholders with an interim funding proposal to raise an initial A$300-million to fund the rehabilitation work until the end of 2023, however, major shareholder Rio Tinto was unwilling to take part in the scheme at the price suggested by ERA’s independent board committee.
Rio argued that further investment into the uranium company was unlikely to generate financial returns, given that the funding would be used for rehabilitation work, and that the offer price of any interim raising should reflect fair value to that expectation.
ERA on Friday said that it would engage an independent valuation expert to determine the fair value of the company, and would then determine the offer price for an interim entitlement offer. The company is hoping to determine the terms of the proposed interim entitlement offer by the fourth quarter of this year.
In the meantime, ERA is continuing with a feasibility study to assess a lower technical risk rehabilitation methodology, and to further refine the Ranger project area rehabilitation execution scope, risks, cost and schedule.
The study, which started in May, is expected to take 12 months to complete and will ultimately lead to a revised mine closure plan being developed.
Furthermore, the company is looking to boost its in-house project execution capabilities, given the size and complexity of the rehabilitation project, and to drive schedule improvements and general improvements to project risk management systems.
Rio has, meanwhile, submitted a proposal to ERA to provide additional project support, on a cost-recovery basis, which includes organisational and technical support and the secondment of Rio personnel into certain specified roles. ERA said on Friday that it is reviewing this interim support proposal in the context of initiatives already underway.