Market information
ERA has appointed Rio Tinto Uranium to provide sales and marketing services to the Company. Rio Tinto Uranium provides global reach and experience in sales, marketing and customer relations.
ERA sells its product to electric utilities in Asia, Europe and North America under strict international and Australian Government safeguards, and only to countries which have signed the Nuclear Non-Proliferation Treaty.
ERA's excellent established reputation as a leading supplier of uranium oxide for electricity generation is based on the Company's long established production history and its supply relationships with customers across the world.
As a long term supplier to the market, ERA's sales are not overly dependent on the spot price. The majority of 2010 production was delivered into long term contracts.
The bulk of these long term contracts were signed in the recent period of rising prices and as a consequence ERA's average realised price for the year was higher than the average spot price, and among the highest in the industry. All low-priced legacy contracts have been completed.
During 2010, the uranium spot price oscillated within the US$40 to $45 range in the fi rst half of the year before increased demand, particularly from other producers and speculators pushed the spot price into the low US$50s.
As new long term demand emerged in the second half of the year, market sentiment became more bullish and a number of utilities began to assess options for buying for the 2014-2020 period.
This increased level of interest and purchases from utilities during the second half of the year had the effect of firming the long term price, which moved from US60 per pound to US$66 per pound by year's end. ERA seeks to achieve prices closer to the long term indicators given its historical premium to spot prices.
In terms of supply and demand, the combination of China's rapidly growing appetite for uranium and the continued production increases in Kazakhstan have so far had a balancing effect on the global market.
China, which has purchased over 20,000 tonnes over the last fi ve years, is stockpiling nuclear fuel to ensure security of supply for its planned expansion to 75 - 85 gigawatts of generation capacity by 2020 - a fi gure which may ultimately be revised higher.
So far, this aggressive increase in demand has been matched by the signifi cant increases in production from Kazakhstan, which in 2009 became the world's largest producing country.
The weakening US dollar is another area of cost pressure on all non-US producers, and one which eventually is likely to flow through to market prices.
The impact of the global recession and the increasing availability of lower cost natural gas supplies in the US have temporarily slowed growth in new nuclear plants in the US. With new build in Europe currently limited to Finland and France, Asia has emerged as the rapid growth engine for the global nuclear power industry.
China leads the world with more than 27 units under construction and a further 50 in the planning stage. China's nuclear industry has the fastest growth rate and at this rate will overtake the United States as the world's largest civilian nuclear energy producer well before 2030.
South Korea has also committed to strong development of nuclear power, with six nuclear power stations under construction to augment the 20 currently in operation. South Korea has entered the reactor-supply market, and will be constructing four new units in the United Arab Emirates later in the decade.
In light of this activity, demand for nuclear fuel is expected to increase significantly over the decade, as concerns about climate change and energy security encourage further development of nuclear power.
Nuclear energy, a competitive energy source with low overall greenhouse gas emissions, is now seen in most parts of the world as a key component of the long term energy solution particularly in a carbon-constrained world.
By 2030, according to the World Nuclear Association, the number of operating nuclear reactors worldwide will have risen from 441 to more than 600.
The long term outlook for the industry, and for ERA's product and markets, remains very robust.
