Canadian uranium major Cameco on Wednesday announced the planned restart of the Cigar Lake mine, in northern Saskatchewan.
The mine will resume operations at the beginning of September, having been placed on care and maintenance on March 23, owing to the Covid-19 pandemic.
CEO Tim Gitzel said that the decision to resume Cigar Lake was “prudent”, noting that the Covid-19 pandemic posed a greater risk to supply than to demand, as the industry had become highly concentrated geographically and geologically.
The world's largest uranium producer, Kazatomprom of Kazakhstan, also suspended operations on April 7, tightening global supply.
Cameco said it would not be able to make up the lost production and Cameco’s share of 2020 production would be up to 5.3-million pounds.
“With the uncertainty remaining about our ability to restart and continue operating the Cigar Lake mine, the delays and deferrals of project work and therefore the resulting production rate in 2020 and 2021, we believe the current plan represents an appropriate balance of the commercial considerations affecting our decision,” said Gitzel.
Meanwhile, Cameco reported a net loss of $53-million and an adjusted net loss of $65-million for the second quarter.
The miner reported additional care-and-maintenance costs of $37-million resulting from the suspension of production at the Cigar Lake mine, Blind River refinery and Port Hope UF6 conversion plant.
Given the production interruptions at the Cigar Lake mine and at the Inkai operations, Cameco said it would increase its required spot market purchasing in 2020 to meet its delivery commitments and to maintain its desired inventory levels.
Combined with the additional care-and-maintenance costs, the average unit cost of sales in the uranium segment would be higher than expected.
“We have the tools we need to deal with the current uncertain environment. We are well positioned to self-manage risk. We have $878-million in cash and short-term investments on our balance sheet and a $1-billion undrawn credit facility, which we do not anticipate we will need to draw on this year.”
Cameco also believes its risks have been significantly reduced with the Federal Court of Appeal’s decision in its favour in its tax case with the Canada Revenue Agency (CRA) for the tax years 2003, 2005 and 2006. Based on its calculations, the company expects to recover $303-million in cash paid and $482-million in letters of credit secured with the CRA in relation to this dispute.