Cameco awaits market pick-up

02 May 2013

Canada's Cameco expects the restart of Japanese reactors and the signing of long-term supply contracts to kick-start the stagnant uranium market. The company saw net earnings drop 93% in the first quarter of 2013.

While reporting a 5% fall in revenue to C$444 million ($440 million), Cameco said that net earnings for the first quarter of 2013 were C$9 million, a 93% drop from the figure of C$129 million for the first quarter of 2012. Gross profit fell 37% during the quarter to C$95 million.

Cameco attributed this drop in profits partly on lower earnings from its uranium business due to smaller sales volumes and reduced market prices. Lower electricity generation combined with higher operating costs also led to lower earnings from its stake in Bruce Power. The company said that its purchase of nuclear fuel and services broker Nukem Energy, completed in January, also contributed to the lower earnings due to administration and corporate restructuring costs.

Cameco president and CEO Tim Gitzel said that the results "are consistent with what we had projected." He added, "We are confident in the future growth for the industry, but also know the importance of being responsive to current market conditions by taking action today to remain a profitable, low-cost producer for years to come."

There has been little change in the uranium market since the previous quarter, Cameco noted. "Near- to medium-term uncertainty continues to impede a recovery, with neither buyers nor suppliers seeming to feel much pressure to contract," the company said. "Most suppliers have significant commitments out to 2016, and utilities are well covered for a similar period."

Cameco said that it expects the uranium market to "remain in a 'wait-and-see' mode until catalyzed by events such as reactor restarts in Japan and a significant return to long-term contracting by utilities." It believes that the restart of Japanese reactors will begin later this year.

Gitzel remarked, "We remain on track with our annual outlook and have increased our focus on streamlining and efficiency in order to remain competitive in today's uncertain environment."

In the long-term, Cameco sees strong prospects for the nuclear industry. Worldwide, its estimates an increase in generating capacity from the current 392 GWe to some 510 GWe by 2022, representing average annual growth of 3%. The company noted that some 65 new reactors, totalling 65 GW of generating capacity, are now under construction.

On the supply side, Cameco sees issues for both primary and secondary sources of uranium. Several uranium mining projects were cancelled or deferred in 2012 while uranium spot prices remained at a level "well below that required to incentivize new projects." Meanwhile, secondary sources continue to diminish, particularly with the end of the Russian high-enriched uranium commercial agreement this year.

Cameco said that its strategy is to increase annual uranium production to 36 million pounds (13,850 tonnes) by 2018, subject to market conditions, and to "invest in opportunities across the nuclear fuel cycle that we expect will complement and enhance our business."

Researched and written
by World Nuclear News