Cameco cuts uranium output target for McArthur Riv
Cameco cuts uranium output target for McArthur River mine, Key Lake mill
September 18, 2008 - 19:06
Kristine Owram, THE CANADIAN PRESS
TORONTO - Cameco Corp. (TSX:CCO) further cut its 2008 uranium production forecast Thursday with an announcement that output from its McArthur River mine and Key Lake mill in Saskatchewan will be six per cent lower than previously expected.
The world's top uranium producer already reduced its overall production target for the year by one million pounds in August due to delays in expanding some of its mines.
The company has also had to push back startup of production at its Cigar Lake mine due to recurring problems with flooding.
Cameco spokesman Lyle Krahn said production at the McArthur River complex, where the company's share of production is 70 per cent, could be up to 800,000 pounds less than the 13.1 million pounds previously forecast.
The Key Lake mill completed a three-week planned maintenance shutdown on Aug. 9, but restarting the mill was delayed due to equipment difficulties, he said.
"We had a lightening strike on some controls on the oxygen plant and we also had some difficulty commissioning a new centrifuge, which is used to reduce the moisture in the yellowcake," said Krahn.
Yellowcake is a partially processed form of uranium that is used to make fuel for nuclear reactors.
Krahn said the operational issues have been resolved and the production estimate for next year is unchanged at 13.1 million pounds.
"They were really unique issues that held us back on this particular restart, but they really won't have any effect in the future," he said.
He added that equipment upgrades were carried out while the other issues were being resolved, which should help production down the road.
Orest Wowkodaw, an analyst with Canaccord Adams, said Cameco will be able to meet its obligations from inventory and could actually indirectly benefit from the production cuts.
"The more production they take off the market, the higher the price goes, so that any potential lower deliveries in the future will probably be offset by higher uranium prices," said Wowkodaw.
"That's why you're not seeing the stock react negatively."
Cameco has been beleaguered by several problems recently, including a flooding problem at its Cigar Lake mine that it has been struggling to fix since October 2006.
The company had to halt work on pumping water out of the mine, which holds the world's highest-grade uranium, in August after the volume of water flowing into the mine jumped from a steady 25 to 30 cubic metres per hour to as much as 600 cubic metres per hour, and it still has no idea where the water is coming from.
The company's Rabbit Lake mine also had to curtail production last year after increased water inflow threatened to flood the operation, but the source of the water was quickly identified and plugged.
In addition, Cameco announced earlier this week that total remediation costs at its Port Hope, Ont., nuclear conversion plant will cost between $50 million and $55 million.
Cameco said the money was used to investigate the possibility that uranium, arsenic and fluorides may have seeped into Lake Ontario, as well as to rehabilitate the plant and install a system of wells that collect impacted groundwater.
The company also made a number of improvements inside the plant, including replacement of large sections of the ground floor, application of chemical-resistant coatings to all floors, and removal of some contaminated soil from under the building.
Cameco's net income fell to $150 million, or 44 cents per share, from $205 million, or 58 cents per share, in the second quarter of 2007. Revenue was $620 million in the second quarter, down from $725 million a year earlier.
Besides its uranium businesses, Cameco is the controlling shareholder of Centerra Gold Corp. (TSX:CG). Cameco's overall results included $143 million in revenue from Centerra, up from $117 million a year earlier.
Cameco shares were down $1.03 to $23.04, a change of more than four per cent, in Thursday trading on the Toronto Stock Exchange.