Cameco profit more than doubles on stronger uranium sales

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Cameco Corp., one of the world's biggest uranium producers, more than doubled its profit for the third quarter as stronger sales of the nuclear fuel and fixed-price contracts for its product mitigated a slump in uranium prices.

Although the price of uranium was 30 per cent lower at $34.75 (U.S.) a pound in the quarter, the Saskatoon-based company was able to lock in a higher price under previous orders with its customers.

Cameco's realized price per pound of uranium was $50.73 in the quarter, up 12 per cent from $45.26 last year. That combined with the higher sales from its mines in Saskatchewan, the United States and Kazakhstan boosted the company's earnings to $211 (Canadian) million or 53 cents share for the three months ending Sept. 30. That was 167 per cent higher than the $79 million or 20 cents a share Cameco earned in the third quarter of last year. Analysts had expected the company to earn about 19 cents a share.

But the company trimmed its production outlook for the year to 23.1 million pounds of uranium from 23.3 million pounds because construction problems forced the miner to delay the start of its key Cigar Lake project in northern Saskatchewan.

A joint venture between Cameco, France's Areva SA and two other partners, Cigar Lake is now expected to start producing uranium in the first quarter of next year and will take a few years to increase production.

Cameco's financial results reflect the "strength of our contracting strategy in this lower price environment," the company's chief executive officer Tim Gitzel said in a statement.

The price of uranium has plunged 40 per cent to $35.25 (U.S.) since March 2011, when a tsunami wrecked Japan's Fukushima nuclear plant and spilled radioactive water in the country.

After the Fukushima disaster, Japan shut down 50 of its nuclear reactors, keeping uranium prices depressed. Uranium reached a high of $136 a pound in the summer of 2007.

The Asian country is expected to restart some of the reactors and subsequently boost demand for the nuclear fuel. That along with the expiration of the U.S.-Russian Highly Enriched Uranium Agreement, which allows Russia to pull and sell uranium from Soviet-era nuclear warheads, is expected to underpin the price of uranium next year.

"The fact that 50 reactors are not operating has really taken a toll on prices," said Patricia Mohr, vice-president and commodities expert with ScotiaCapital. "A beginning of the restart of the reactors would signal the beginning of the recovery," she said.

The end of the U.S.-Russia agreement is expected to remove about 24 million pounds of uranium concentrate from Western markets, according to Ms. Mohr.