ERA says rains to lead to lower Q2 uranium output

SYDNEY, April 15 (Reuters) - Rio Tinto Ltd/Plc (RIO.AX) (RIO.L) unit Energy Resources of Australia Ltd (ERA.AX) said on Tuesday its expects reduced uranium production in the second quarter due to problems associated with heavy rains.

It said rain water had pooled at its main Ranger mine pit in northern Australia, restricting access to higher grade ore.

ERA said it produced 1,327 tonnes of uranium oxide in the first quarter, a 32 percent rise on the corresponding period in 2007. However output was down 15 percent versus the previous quarter, it said.

ERA's stock initially dropped around 3 percent on the news, though by late morning had recouped some losses, supported by the higher first-quarter production figures. At 2054 GMT, the stock was down 1.7 percent to A$19.95.

ERA, 68 percent owned by Rio, said water levels at the pit were substantially lower than they were this time last year.

But there still is restricted access to higher grade ore mostly at the bottom of the pit, which would remain the case until near the end of the second quarter. Stockpiled ore would be milled in the mean time, it said.

Rio, which also mines uranium in Namibia, last month said it intends to double uranium production over the next five years as demand for alternatives to fossil fuels grows.

Uranium prices have risen tenfold since the start of the decade as global energy needs have boomed, and as power consumers and producers seek alternatives to pollutants such as coal and oil. ($1=A$1.08) (Reporting by James Regan)