ERA

Recent elections in Japan bought not only a new government; they also provided much needed relief for the battered uranium sector. Equity prices of uranium miners responded gleefully as a new pro-nuclear party takes up office in Tokyo. With all but a few of Japan’s nuclear reactors shut down since the Fukushima disaster, the uranium price has stayed around $50 a pound, far below the marginal cost of production. The prospect of re-commissioned plants in Japan is one of the few bright spots in a battered industry. New plants in China are the other great hope.

If both those outcomes occur, the uranium price may rise in the years ahead. Yet venerable miner ERA is no longer the vehicle of choice to gain exposure to the increase. As we’ve noted in The end of an ERA? on 10 Feb 11 (Sell - $11.40), ERA’s resources are being exhausted and environmental and geological constraints limit expansion. The company has previously outlined plans to mine underground without success and a proposed heap leach operation has been cancelled. This is a company bleeding, with little respite. Despite the acute share price falls of the past few years, there are few obvious grounds for optimism. We’re switching to AVOID.