Cameco to miss 2013 target for Cigar Lake uranium project

Share

Cameco Corp.'s problems in launching ore production at the Cigar Lake uranium mine in northern Saskatchewan continue with the company now saying it won't be able to meet its 2013 production target.

Saskatoon-based Cameco, one of the world's biggest uranium producers, said on Monday that more work needs to be done before jet boring to mine ore cavities can begin.

Cameco said it now expects to start ore production in the first quarter of 2014.

There are also further mill modifications to be made and the mill is now expected to begin processing Cigar Lake ore by the end of the second quarter of 2014, the company said.

That means Cameco won't meet its forecast production of 300,000 pounds of uranium from Cigar Lake in 2013, the company said.

Cameco said it will revise its five-year production forecast.

Cameco – the world's largest publicly traded uranium producer – says 97 per cent of Cigar Lake is complete and commissioning of mining systems "well advanced."

"We're not thrilled with [the delay] but we're going to deal with it," Cameco president and chief executive officer Tim Gitzel said on a conference call Monday.

"We won't cut corners to make it happen.

"Cigar Lake is among the most technically challenging mining projects in the world and we continue to make solid progress," he said.

"Over all, we view today's announcement as negative given the 4-6-month expected delay in initial production at the 97%-constructed Cigar Lake project," Desjardins Securities analyst John Hughes said in a research note Monday.

Cameco owns about half of the project, while Areva SA of France has a 37-per-cent stake, with two other partners owning the balance.

The McClean Lake mill where the ore is to be processed is majority owned and operated by Areva Resources Canada Inc.

Cigar Lake has already experienced several delays over the past few years due to flooding and a series of technical challenges.

It is also preparing for production in a climate of uncertainty over demand for uranium and weak prices in the wake of the earthquake and tsunami that struck Japan in March 2011, severely damaging the Fukushima-Daiichi atomic power plant and leading the country to shut down nearly all of its reactors.

The global uranium industry is counting on a recovery in prices.

Some Japanese utilities have sought authorization to restart a dozen or so of the country 48 idled facilities, Cameco said last month.

Mr. Gitzel said he expects to get a clearer picture of global demand for uranium at a conference this week in London where top officials from Japan's, China's and South Korea's nuclear industries are gathering.

Cameco said on Monday that the capital cost of the Cigar Lake project won't be materially affected by the additional work; it also said that, based on preliminary information, the capital cost of the mill modifications is not expected to be material.

But Cameco said last month its share of the capital cost for the mine project would increase by 15 per cent to 25 per cent from the previous estimate of $1.1-billion.

The unanticipated work at the mine involves sealing two tanks with steel liners; it was decided to seal the tanks, which receive the water and ore from the underground jet boring, after the discovery that slight amounts of water during testing were seeping out, said Mr. Gitzel.

Modifications at the mill involve installing ventilation and purging systems to prevent the buildup of hydrogen in the leeching circuit, Areva Resources vice-president of operations and projects Jim Corman said on the call.

Mr. Corman also said a full review by the Canadian Nuclear Safety Council is not anticipated but that company officials are keeping the CNSC abreast of developments.