Australia rejects Rio Tinto unit’s uranium mine lease renewal

The Australian government has blocked Rio Tinto (NYSE: RIO; LSE: RIO; ASX: RIO)-controlled Energy Resources of Australia (ASX: ERA) from mining a vast uranium deposit under the Kakadu National Park in the country’s Northern Territory, effectively ending a decades-long dispute over the resource.

ERA had applied in March for a 10-year lease renewal on Jabiluka, considered one of the world’s largest untapped deposits of high-grade uranium, as the current permit expires in August.

NT mining minister Mark Monaghan said in an emailed statement the decision not to renew the lease was partially based on advice from the federal government.

“We have gone through a thorough process to ensure that all stakeholder views have been considered in this decision,” Monaghan said. “The federal government advice, along with the wishes of the Mirarr people, were critical to this process and outcome.”

The Northern Territory government in May declared special reserve status over the Jabiluka area, which is surrounded by Kakadu National Park. This prevents any future applications for the granting of a mineral title in the area once the current lease expires.

ERA said in a statement that it is disappointed with the decision and is assessing its options.

Multi-decade protests

The Mirarr people have long opposed mining activities in the region, organizing protests in the late 1990s and early 2000s. Rio Tinto has backed the traditional owners’ position in recent years as it works to repair its ties with Aboriginal groups after destroying sacred rock shelters at Juukan Gorge in Western Australia in 2020 for an iron ore mine expansion.

Activity in the Australian uranium market has spiked in the past year, with developers such as Boss Energy (ASX: BOE), Bannerman Energy (ASX: BMN) and Deep Yellow (ASX: DYL) seeing their value soar. Paladin Energy (ASX: PDN), a Western Australia-based uranium miner, recently announced a proposed acquisition of Canadian competitor Fission Uranium (TSX: FCU). If successful, the combined company would produce 10% of global uranium output.

In contrast, ERA’s value has steadily dropped since the Ranger uranium mine, located near Jabiluka, stopped producing in 2021, after 40 years of operation. 

Rehabilitation costs for the site have surged to A$2.2 billion ($2 billion) in the past year and the company is expected to run out of funds by year-end. With no other significant assets, raising capital could be difficult.

Shares in ERA closed almost 6% lower at A3.2¢ on Friday in Sydney. Year-to-date, the stock has lost 20% of its value and the miner’s market capitalization sits at A$803.2 million.