ERA Resources says it will need to raise a significant sum for uranium rehab as cash dries up quickly

Cottesloe-based fund manager Willy Packer faces a major dilemma after Energy Resources of Australia warned it will run out of cash by the end of the year and slashed the value of its main asset to zero. ERA booked a $89.8 million impairment against the Jabiluka uranium deposit near Kakadu National Park in the Northern Territory, wiping away the entire value of the company’s core asset. ERA’s 86 per cent shareholder Rio Tinto reduced the asset’s value to nil early last year because native title holders oppose a mine being developed. The Northern Territory Government rejected a renewal of the Jabiluka deposit’s lease last month, a move which Rio supported but angered 8 per cent shareholder Mr Packer. ERA had $650 million of cash at June 30 but still has a $2.4 billion rehabilitation bill hanging over Rio’s formerly operational Ranger mine, located just south of Jabiluka. ERA on Tuesday said its cash reserves would be drained by the end of the year. “ERA plans to conduct a material equity raise in the near term,” the company stated. Mr Packer’s $2 billion Investigator Trust has tipped about $80 million into ERA over the past four years as part of a long-term bet that uranium’s price resurgence and a growing pro-nuclear sentiment would prompt a reassessment of the undeveloped site. He will now need to decide whether he takes part in a future raising to maintain his stake in the company, or cut his losses and walks away. If doesn’t maintain his stake Rio could pass the 90 per cent ownership threshold to compulsorily acquire all remaining shares in ERA. This would kill off any chance of Rio tabling a big takeover offer to seize full control of ERA.