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Cameco's Cigar Lake Uranium Project Update

Cameco says Cigar Lake uranium project ready for development as early as April 2010





Cameco Corp. (TSX:CCO) says it expects to have enough water pumped out of its flooded Cigar Lake uranium mine to resume development on the project by as early as April.

CFO Kim Goheen said Friday that the company has already pumped most of the water out of the northern Saskatchewan mine, which has been flooded for three years.

Goheen said refurbishment of shaft one, the main shaft, is three-quarters complete and the water level is down to the 475-to 480-metre level.

"De-watering, and work to secure the underground developments, is expected to be complete between April and October of this year," he told investors in Whistler, B.C.

"Crews have safely re-entered shaft one and are working to restore the ladder way, mechanical and electrical systems, including additional pumping to provide further assurance."

The Saskatchewan-based uranium miner will complete an updated report on the progress by the end of its first quarter.

Goheen said the key element to preparing the mine for development is not removing the water but refurbishing the main shaft.

"We're very cautious but very optimistic things are working out," he said.

Once up and running, Cigar Lake is expected to produce 18 million pounds of uranium annually, half of it belonging to Cameco, which owns 50 per cent of the project. The company aims to double its uranium production by 2018.

The other half is held by a number of investors, the largest being French nuclear giant Areva.

Cameco said last month that it plans to use proceeds from the $872-million sale of its stake in Centerra Gold Inc. (TSX:CG) to finish Cigar Lake.

In November, Cameco said it had stopped the inflow of water and expected the process of pumping out the mine to take six to 12 months.

Goheen said uranium miners need to increase production and exploration to meet demand over the coming decade, but added there has been little development because uranium prices have been below the production costs of most suppliers.

While there is still volatility in the price of uranium, which is trading at 43.50 a pound, it is up from last April's low of $40 a pound, he said.

Cameco has several other projects in various stages of development, including the Kintyre project in Australia and Inkai in Kazakhstan.

Shares in the company were down just over one per cent at $30.13 with about 500,000 changing hands in midday trading Friday on the Toronto Stock Exchange.

RBS Equities Australia Say Cameco May Bid For Australia's Paladin Energy

Jan. 19 (Bloomberg) -- Cameco Corp., the world’s second-largest uranium producer, may be more interested in acquiring Paladin Energy Ltd. after the Australian company fell 15 percent in three months, RBS Equities Australia said.

“I think Cameco would certainly be looking at Paladin,” RBS analyst Lyndon Fagan said today. “Paladin’s share price has been underperforming recently because of failing to deliver on production targets, and the recent weakness could provide an opportunity for the likes of Cameco.”

The Australian uranium producer on Oct. 29 cut its production forecast after delays to an upgrade at the Langer Heinrich mine in Namibia and the replacement of equipment at the Kayelekera venture in Malawi. Perth-based Paladin estimated production of 5.6 million pounds to 6.1 million pounds for the year ending June 30, down from a previous projection of 6.6 million pounds.

Cameco declined to comment on a potential bid for Paladin. “As one of the world’s leading uranium producers, we are often associated with speculation about various business deals,” Lyle Krahn, a Cameco spokesman, said in e-mailed comments today.

Paladin Managing Director John Borshoff didn’t immediately return a phone call seeking comment.

The Australian uranium producer’s shares have fallen 15 percent from A$4.80 on Oct. 19 to close at A$4.07 yesterday, compared with a gain of 2.5 percent for the benchmark S&P/ASX 200 Index. Paladin traded at A$4.05 in Sydney, down 0.5 percent, at 1:35 p.m. local time, valuing the company at about A$2.9 billion ($2.7 billion).

Saskatoon, Saskatchewan-based Cameco, should it be interested in acquiring Paladin, would probably need to pay a premium of more than 30 percent to the Australian company’s share price, Fagan said by telephone in Sydney.

Speculation Not New

Discussion of a potential Cameco-Paladin transaction isn’t new. JPMorgan Chase & Co. said in March 2009 that Paladin may be an attractive target for producers such as Cameco. Speculation that Cameco may buy Paladin is increasing, and a takeover would cost the Canadian company about A$4 billion, the Australian Financial Review said in its Street Talk column today.

Paladin completed a share sale to institutional investors, raising A$429 million, the company said in September. Borshoff said last year the company may grow beyond Africa and Australia, while expanding its project in Namibia. Paladin will consider acquisitions of its own, he said in October.

Cameco, which plans to double annual uranium output from its existing operations by 2018, will consider acquisitions of mining assets and creating joint ventures with customers, Chief Executive Officer Jerry Grandey said in November. Paladin Energy is among the companies Cameco considers attractive, he said.

Even so, Grandey said: “We’ve always been challenged by the valuation.” Paladin shares rose 69 percent in 2009 to finish the year at A$4.18.

Cameco agreed to sell its stake in Centerra Gold Inc. for about C$872 million ($850 million), the company said last month.

The Canadian producer currently has “substantial financial capacity for acquisitions,” RBC Capital Markets analyst Fraser Phillips in Toronto wrote in a report yesterday.

By James Paton Jan. 19 (Bloomberg)

Uranium Spot Price Tumbles Yet Again

Industry consultant TradeTech's weekly spot price indicator for yellow cake has tumbled more than 1.5% during the week ending on Friday. TradeTech puts the blame on a "combination of offers from aggressive sellers and limited, largely discretionary, demand".

TradeTech's U3O8 spot price indicator now stands at US$43.75/lb, US75c (1.69%) lower than the week prior.

The consultant registered five transactions for a combined total of approximately 700,000 pounds U3O8 equivalent. Buyers included utilities and intermediaries, with TradeTech indicating prices in some of the spot transactions concluded were below the new spot price indicator.

The consultant adds the drop in price seems to have attracted new demand which, in turn, is likely to ease some of the downward pressure on prices.

TradeTech's Mid-Term U3O8 Price Indicator stands at US$50.00/lb, while its Long-Term Price Indicator stands at US$60.00/lb.