TORONTO (miningweekly.com) - Uranium producer Cameco Corp plans to start production at its large Cigar Lake project by mid-2013, CEO Jerry Grandey revealed on Thursday.
This week's announcement is the first time that Cameco has been prepared to forecast a start-up date since its last setback at the beleaguered project, in Canada's Saskatchewan province.
Cigar Lake flooded while in development in 2006 and again in 2008, but Cameco said this month it had successfully completed dewatering and was sending teams down for the first time to have a look at the condition of the underground workings and the water damage they may have sustained.
Crews entered the main 480 level for the first time two weeks ago.
"It looks pretty good, in fact it looks a little bit better than we might have expected," COO Tim Gitzel said on a conference call.
"But it's really early days, they're just venturing out from the cage right now," he said.
The company plans to file a technical report detailing its plans and production outlook for Cigar Lake before the end of the first quarter, Grandey confirmed.
The company expects to have secured the underground workings and be ready to restart development and construction by October this year.
Cameco is the operator of the Cigar Lake project, and owns 50%, while Paris-based Areva holds 37%, Idemitsu Canada Resources owns 8% and Tepco Resources owns the remaining 5%.
Cameco expects its share of the total capital to build Cigar Lake to be between $920-million and $1-billion, including $470-million that had been spent by the end of 2009.
More than one analyst on Thursday's conference call expressed concern over a decline in the reserves at Cigar Lake, disclosed by Cameco in its full-year results documentation.
Cameco's share of proven and probable reserves at the project decreased to 104,7-million pounds, compared with 113,2-million pounds at the end of 2008, and a portion of the reserves which were all previously proven are now probable. Measured and indicated resources also decreased, while the uranium resources in the inferred category increased.
However, Grandey said he was not concerned by the changes in classification and “slight reduction”.
The difference was not linked to the water inflows at the project, but was a result of improved technology being used and additional geotechnical information gathered, he said.
While the spot market for uranium will likely be weak, with low volumes, in the first half of this year, Cameco expects to see stronger demand in the second half, said senior vice-president for marketing and business development George Assie.
“At this point, our view is that utilities are well covered in the near term. So the demand that we see is purely discretionary.”
The US Department of Energy is also continuing to sell uranium into the market, although it has said it will not continue with planned sales in 2011.
“So right now I think that is a recipe for probably some weaker prices in the near term,” Assie commented.
Cameco is forecasting a spot market of around 25-million to 35-million pounds this year, he said.
The uranium spot price stood at $41,75/lb this week, according to UxC. Most of the world's uranium is sold on negotiated contracts, so the spot market is sparsely traded.
The long-term fundamentals for the nuclear fuel remain strong, Assie added.
Cameco plans to grow production to at least 40-million pounds a year of uranium by 2018, including expected output from Cigar Lake.
Grandey said the company, which had $1,3-billion in available cash at the end of 2009, continues to assess acquisition prospects.
“But let us be clear: the money is not burning a hole in our pockets,” he added.
“We intend to take our time to ensure that any new investment will bring real value to our shareholders.”
Shares in Cameco, which reported fourth quarter profit of C$598-million, were down 0,6% on Thursday afternoon, at C$29,59 apiece by 14:00 in Toronto.