Cameco Buys Uranium as Investment to Capitalize on Price Slump

Published on Thursday Sept 16 2010

Cameco Corp., the world’s second- largest producer of uranium, bought the nuclear fuel on the immediate-delivery market this year as an investment to take advantage of a price drop.

Uranium-oxide concentrate fell to a 2010 low of $40.50 a pound in the spot market in the week through March 1, a drop of 9 percent from last year’s close, according to data from Roswell, Georgia-based Ux Consulting. Prices have since climbed to $48, the highest level in more than 10 months.

“There were a number of times this year when we thought uranium was a good investment to buy, and that is what we did,” George Assie, Cameco’s senior vice-president of marketing and business development, said in an interview in London yesterday. “At times we’ll see material in the market that we think is very attractively priced, so we will purchase.”

Price gains in recent months reflect uranium’s positive fundamentals, Assie said. Fifty-nine nuclear reactors are being built to add to the 440 operating globally, data from the World Nuclear Association shows. An accord under which uranium from dismantled Russian weapons is turned into fuel for U.S. nuclear power plants is scheduled to expire in 2013.

The end of the U.S.-Russian Highly Enriched Uranium Purchase Agreement will shrink supply of the metal, according to Assie. Saskatoon, Saskatchewan-based Cameco has yet to “rule out” buying more uranium on the spot market, he said.

Production Goal

“We think the price is on an upward trend,” Assie said. “We have a fair degree of confidence we can place it into contracts at a higher price,” he said of spot uranium purchased by the company.

Cameco markets between 6 million and 7 million pounds of uranium a year as part of the HEU Purchase Agreement, which will be replaced by an increase in its own output, according to Assie. The company aims to double last year’s production of 21 million pounds by 2018, he said.

The Cigar Lake joint venture being developed in Canada will be key to reaching the production goal, Assie said. The site contains the world’s largest undeveloped high-grade uranium deposit, Cameco’s website shows. Paris-based Areva SA, Idemitsu Canada Resources Ltd. and Tepco Resources Inc. are the company’s partners.

Production at the venture is expected to start in the middle of 2013, rising to full output of 18 million pounds in 2017, according to Assie. Cameco’s share would be 9 million pounds, he said.

Purchases by Banks

Investment banks also were buyers of spot uranium this year, according to the executive.

“The banks will certainly step in when they see prices are soft,” Assie said. “On occasion when we bought material, it has turned out it has been them on the other side of the transaction.”