20110128 financial community presentation 2010 final.ppt · 1/28/2011 · financial overview 2010...
TRANSCRIPT
2010 Full Year Results
Presentation to the Financial Community
Rob Atkinson – Chief Executive
Steeve Thibeault – Chief Financial Officer
28 January 2011
1
Acknowledge Traditional Owners
The mining operations of Energy Resources of Australia Ltd (ERA) are located on
Aboriginal land and are surrounded by, but separate from, Kakadu National Park.
ERA respectfully acknowledges the Mirarr, Traditional Owners of the land on which
the Ranger Mine is situated.
2 2010 Full Year Results
Forward-looking statements
This presentation has been prepared by Energy Resources of Australia Ltd (“ERA”) and consisting of the slides for a presentation concerning ERA.By reviewing/attending this presentation you agree to be bound by the following conditions.
Forward-looking statementsThis presentation includes forward-looking statements. All statements other than statements of historical facts included in this presentation,including, without limitation, those regarding ERA’s financial position, business strategy, plans and objectives of management for future operations(including development plans and subjectives relating to ERA’s products, production forecasts and reserve and resource positions), are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actualresults, performance or achievements of ERA, or industry results, to be materially different from any future results, performance or achievementsexpressed or implied by such forward-looking statements.
Such forward-looking statements are based on numerous assumptions regarding ERA’s present and future business strategies and the environmentin which ERA will operate in the future. Among the important factors that could cause ERA’s actual results, performance or achievements to differmaterially from those in the forward-looking statements include, among others, levels of actual production during any period, levels of demand andmarket prices, the ability to produce and transport products profitably, the impact of foreign currency exchange rates on sales revenues, marketprices and operating costs, operational problems, political uncertainty and economic conditions in relevant areas of the world, the actions of
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prices and operating costs, operational problems, political uncertainty and economic conditions in relevant areas of the world, the actions ofcompetitors, activities by governmental authorities such as changes in taxation or regulation and such other risk factors identified in ERA’s mostrecent Annual Report. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance should not beplaced on forward-looking statements. These forward-looking statements speak only as of the date of this presentation.
Nothing in this presentation should be interpreted to mean that future earnings per share of ERA will necessarily match or exceed its historicalpublished earnings per share.
The information in this presentation relating to exploration results is based on information compiled by Greg Rogers, who is a member of theAustralasian Institute of Mining and Metallurgy. Greg Rogers is a full-time employee of the company and he has sufficient experience which isrelevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a CompetentPerson as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. GregRogers consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
2010 Full Year Results
Agenda
� Safety
� People and community
� Operational performance
� Financial performance
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� Financial performance
�Water management
� Outlook
2010 Full Year Results
2010 Summary
� Record plant performance
� Ore treated up by 6%
� Difficult mining conditions
� Late access to the bottom of the pit
� Geotechnical issues
� Average grade at the bottom of the pit, lower than expected
� Financial results impacted by low production
� Purchase of material on the spot market
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� Purchase of material on the spot market
� Infill drilling programme completed in the Ranger pit
� Ranger in-situ reserves reduced by approximately 2,400 tonnes of uranium oxide
� The infill drilling programme has significantly enhanced the resolution of the geological model and will enable more accurate mine scheduling of the remaining ore.
� Strategic projects continuing
� Work continued on the feasibility study for the proposed heap leach facility at the Ranger mine.
� Completion of the study for the development of an exploration decline to conduct close spaced underground exploration drilling of the Ranger 3 Deeps resource.
2010 Full Year Results
2.5
3
3.5
4
4.5
5
Fre
quen
cy r
ate
(per
200
,000
hrs
wor
ked)
Safety
• 278 consecutive days without a lost time
injury; a company record
• 1,470,557 hours worked without a lost
time injury
All injury frequency rate (AIFR) and lost time injury frequency rate (LTIFR)
6
0
0.5
1
1.5
2
2.5
2004 2005 2006 2007 2008 2009 2010
Fre
quen
cy r
ate
(per
200
,000
hrs
wor
ked)
AIFR LTIFR
2010 Full Year Results
People and community
86
54
83
99
60
80
100
120
Num
ber
10
12
14
16
18
20
Per cen
t of w
ork force
Ave No. Ind employees
% Ind employees
Indigenous employment
7
25
46 46
54
0
20
40
60
2004 2005 2006 2007 2008 2009 2010
Num
ber
0
2
4
6
8
10
Per cen
t of w
ork force
h
2010 Full Year Results
Operational performance
2010 2009 Change
Material mined (million tonnes) 10.6 19.5 - 46%
Ore mined (million tonnes) 1.4 2.2 - 36%
Ore treated (million tonnes) 2.4 2.3 + 6%
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Average mill head grade (%) 0.19 0.26 - 27%
Mill recovery (%) 87.2 88.3 - 1%
Production drummed– U3O8
- tonnes
- 000 lbs3,793
8,362
5,240
11,553
- 28%
2010 Full Year Results
Financial overview
2010 2009 Change
Net profit after tax - $ million 47.0 272.6 - 83%
Underlying earnings - $ million 52.8 272.6 - 81%
Income - $ million 586.0 780.6 - 25%
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Revenue from sales of uranium oxide - $ million 572.0 767.8 - 26%
Net cash flow - $ million (66.0) 146.8 - 145%
Capital expenditure - $ million 45.0 37.1 + 22%
Sales volume (tonnes uranium oxide) 5,026 5,497 - 9%
Average realised price – US$/lb 48.16 50.84 - 5%
Total dividends for the year (cents per share) 8 39 -79%
2010 Full Year Results
273
62
26
49
47
175
225
275
AU
D $
m
Net profit after tax
Purchase of 925 tonnes of material, 653t
sold in 2010, 272t held in Inventory
10
47411
7
1322
35
25
75
125
2009
Pric
e
Sal
es V
olum
e
Exc
hang
e
Pur
chas
es U
3O8
Mat
eria
ls
Chg
e in
inve
ntor
y
Labo
ur
Roy
altie
s
Dep
reci
atio
n
Fin
anci
ng
Oth
er
2010
AU
D $
m
Increased maintenance and projects
Note: Figures expressed in AUD, net of tax
2010 Full Year Results
Capital expenditure
53
18
19
100
120
140
160
180
$ m
illion
Deferred StrippingHealth, Safety & EnvironmentSustainingDevelopment
11
8
4625
38
95
5
13
37
21 21
3
18
710
2
124
0
20
40
60
80
2004 2005 2006 2007 2008 2009 2010
$ m
illion
2010 Full Year Results
Temporary suspension of milling operations
On 28 January 2011 ERA will commence an orderly suspension of plant processing operations, for a period of 12 weeks as a
precautionary measure to ensure that levels in the Tailings Storage Facility (TSF) remain below the authorised operating limit
Wet Season Rainfall Tracker
2010/11 Wet Season to date 998.6mm (0900 21 Jan 2011)
2250
2500
• The La Niña weather pattern, which has brought extensive flooding to the eastern states of Australia, has also brought significantly higher than average rainfall to the Ranger Mine since October 2010.
• Water levels in the TSF are currently higher than predicted for this time of the year.
• Higher than average rainfalls are forecast for remainder of the 2011 wet season
• Reduced inflows into the TSF, due to the suspension of plant processing, will allow extra capacity to manage unexpected extreme rain events in the coming months
12
0
250
500
750
1000
1250
1500
1750
2000
2250
01
-Se
p
01
-Oc
t
01
-No
v
01
-De
c
01
-Ja
n
01
-Fe
b
01
-Ma
r
01
-Ap
r
01
-Ma
y
01
-Ju
n
01
-Ju
l
01
-Au
g
01
-Se
p
Ra
infa
ll (
mm
)
Cumulative Rainfall 2006-07 Cumulative Rainfall 2007-08 Cumulative Rainfall 2008-09
Cumulative Rainfall 2009-10 Cumulative Rainfall 2010-11 Average Cumulative 1974-2010
2010-11 Wet Season
• Opportunity to bring forward important planned maintenance and improvement initiatives
• All sales commitments to ERA customers will be met. The shortage of supply will be managed by inventory management, swaps and loans
• ERA has advised regulatory authorities and key stakeholders of this precautionary measure
• Subject to weather conditions, mining operations continue as planned
2010 Full Year Results
Development projects and exploration
Heap Leach• 15,000 to 20,000 tonnes of Uranium Oxide contained in low grade material stockpiles• Heap Leach facility feasibility continuing• Environmental Impact Statement submission in the first half of 2011
Ranger 3 Deeps• Ranger 3 Deeps resource of 34,000 tonnes of Uranium Oxide indicated• First stage of potential development sequence is construction of exploration decline to conduct close
spaced underground exploration drilling
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spaced underground exploration drilling• Final decision expected in the second quarter of 2011• Subject to approvals decline construction commencement targeted for May 2011
Further exploration• Program to commence exploration of prospective targets on the Ranger lease
2010 Full Year Results
Outlook
2011
• 2011 production of uranium oxide expected to be at a similar level to 2010
• Sales commitments are around 4,500 tonnes
• The supply shortfall due to the suspension of processing will be covered by way of inventory
management, swaps and loans.
• Approximately 450 tonnes of sales supplied from purchases (currently contracted)
• Average realised price favourably impacted by the completion in 2010 of a large volume and lower
priced legacy contract
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priced legacy contract
The outlook of the uranium industry remains robust
• Sustained government and public interest, given the carbon constrained economy
• Significant nuclear power build programs underway globally, particularly China
• New supplies of uranium slow to come to market
• Spot and term prices recovering strongly from the lows of early 2010
2010 Full Year Results
2010 a challenging year
� Record plant performance
� Difficult mining conditions
� Financial results impacted by low production, due primarily to grade
� Strategic projects continuing (Heap Leach, R3D)
� The environment has remained protected
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� The environment has remained protected
2010 Full Year Results