Cameco Corp. Receives Skepticism As Global Uranium Supplies Dwindle

Published on Wednesday December 01 2010

Cameco Corp. plans to begin output at the world’s largest untapped uranium deposit in 2013, just in time to make up for a shortfall in global supplies.

The Project’s critics say it won’t happen.

Cameco, the world’s second-largest uranium producer, is developing the Cigar Lake mine in Saskatchewan beneath almost a half-kilometer (1,641 feet) of water-soaked sandstone. The mine, six years behind schedule because of floods, could meet 10 percent of current global needs.

Uranium use will exceed supply through at least 2015, according to the Royal Bank of Canada. China is building 25 nuclear reactors, almost double the number in operation, while Russia ends a program to extract uranium from atomic warheads.

“The world needs Cigar,” said Thomas L. Neff, a physicist at the Massachusetts Institute of Technology, who in the 1990s devised the so-called HEU, or highly enriched uranium, program to decommission the warheads.

Cameco said Nov. 8 it will proceed with an oil-industry technology to freeze the ground at the deposit to prevent more floods. Preventing further delay is crucial to Chief Executive Officer Jerry Grandey’s goal of doubling the Saskatoon, Saskatchewan-based company’s output to 40 million pounds by 2018.

“Since the HEU deal increasingly looks like it will come to a full stop by the end of 2013, it’s important from a global supply perspective that Cigar be there about the same time,” Grandey said in a Nov. 12 interview.

Uranium from the HEU program is responsible for almost 10 percent of U.S. electricity generation, Neff said.

Cigar Lake Joint Venture Partnership

• Idemitsu Canada Resources Ltd., 7.875%
• Cameco Corporation (mine operator), 50.025%
• AREVA Resources Canada Inc., 37.100%
• TEPCO Resources Inc., 5.000%

Earlier Disappointment

Some analysts and investors who track Cameco say it will miss its deadline. Duncan McKeen, a Montreal-based analyst at Macquarie Capital Markets, expects Cigar Lake won’t begin output until 2014. John Redstone, a Montreal-based analyst at Desjardins Securities Inc. who visited the project in September, predicts a 2015 startup.

“When someone has disappointed in the past, you have to discount the guidance they give,” said John Wong, a portfolio manager at New City Investment Managers in London who helps manage $450 million, including 175,000 Cameco shares. “Startup could be six months to a year later than projected.”

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