TORONTO (miningweekly.com) - Canadian uranium producer Cameco Corp is ramping up spending on exploration for the nuclear fuel, especially at earlier stage prospects, in preparation for increased demand in the future, CEO Jerry Grandey said on Monday.
"Expect that the growth in the uranium fuel market will accelerate and that primary supply must respond," he stated on a conference call.
Grandey also commented that the "summer doldrums" in the uranium price have ended "quite dramatically", although trade in the spot prices continues to be thin.
Uranium spot prices have risen from around $41/lb in May this year to about $52/lb as of last week.
Grandey said that Chinese buyers remain active in the market, looking to build inventory, while some North American and European utilities are also seeking uranium for delivery around 2012 and 2013.
Overall though, utilities are generally well covered for the next two or three years, he commented.
"But beyond that, into 2014 and 2015, there remains a lot of uncovered need," Grandey said.
"We are now seeing utilities move back into the term market."
Uranium being mined actually already falls short of global demand, but the balance is made up by supply from inventories held by governments, mainly the US and Russia.
However, these supplies are expected to decline over the next ten years, as Russia reaches the end of its programme to recycle highly-enriched uranium from nuclear warheads into low-enriched-uranium fuel for sale to US nuclear power plants.
Grandey said that he is increasingly inclined to believe Russian statements that the so-called 'Megatons to Megawatts' programme will not be renewed when it ends in late 2013.
Some industry players had speculated that the agreement could be extended at smaller volumes.
Meanwhile, Cameco continues to "advance relationships" in China, where it signed its first long-term supply contract earlier this year, Grandey said. The firm is also hoping for similar deals with Indian nuclear-plant developers.
The company said on Monday that it increased exploration spending to C$35-million in the third quarter, compared with C$11-million a year earlier.
Activity increased in Canada, Kazakhstan and Australia, and the firm is moving a number of prospects closer to the prefeasibility stage, Grandey said.
"Spending on exploration and development well ahead of production is essential in the uranium business," he commented.
"We need to be able to meet what will clearly be greater market demand in the coming decades."
Cameco has said that it will grow production to at least 40-million pounds a year of uranium by 2018, including expected output from its delayed Cigar Lake project, in Canada's Saskatchewan province.
Output this year is now forecast at 22-million pounds, the company indicated on Monday. The firm had said earlier this year it would produce 21,5-million pounds of uranium in 2010.