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Uranium miner Cameco not planning more output cuts 'right now': CEO

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11/09/2017 | 08:20pm CET
File photo: Cameco CEO Tim Gitzel speaks with the media after the company's annual general meeting in Saskatoon

Canada's Cameco Corp is not planning further cuts to uranium output "right now," but has the option of lowering production again without jeopardizing supply contracts, its chief executive said on Thursday.

Cameco will suspend production for 10 months at McArthur River, Saskatchewan - the world's biggest uranium mine - and the nearby Key Lake mill by the end of January because of low prices, the company said on Wednesday.

"Right now we don't foresee any other moves but that can always change," CEO Tim Gitzel said in an interview. "...We have to be ready if the market stays low so we can survive and be viable."

Gitzel said that earlier curtailments had little effect on utilities' appetite to sign new contracts.

The global uranium industry is in a tailspin dating back to the 2011 tsunami that caused Japan to shutter all nuclear reactors, a few of which have since restarted. The shutdown created a glut of uranium used to make fuel for nuclear reactors.

Cameco's move leaves it with only its Cigar Lake, Saskatchewan mine and the Inkai mine in Kazakhstan producing significant volumes.

Under its contracts, Cameco has sold an average of 26 million pounds annually during the next five years, Gitzel said.

Even so, cutting production further "is an option," because it is cheaper for Cameco to buy uranium on the market than to produce it itself, he said.

Cameco's Toronto-listed shares rose 3.6 percent to C$11.91, lagging gains by others including Denison Mines Corp and Energy Fuels.

Its cut represents 12 percent of expected global production in 2018 and "sends a strong message to utilities that future supplies are by no means guaranteed at current uranium prices," BMO analyst Alexander Pearce said in a note.

Spot uranium prices, which traded around $70 per pound before the 2011 tsunami, are mired around $20.

"This is the type of supply shock that will spur strength in the spot price," said Cantor Fitzgerald analyst Rob Chang.

Kazatomprom, the biggest global producer, cut 2017 output by 10 percent in January, and Areva SA said last month that it would slash output in Niger.

Uranium miners' hopes center on the 56 nuclear reactors under construction, including 19 in China.

In a statement, Areva, which owns 30 percent of the McArthur mine and a stake in the Key Lake mill, said Cameco's cuts will not affect its own deliveries.

(Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Marguerita Choy and Bernadette Baum)

By Rod Nickel

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