Cameco increases uranium purchases to meet contracts

Cigar Lake restarted last month, having been idled due to the increasing risks posed by the COVID-19 pandemic in December 2020. That suspension followed an earlier five-month suspension from March 2020. Cameco said the latest temporary production suspension, during the first quarter, resulted in an additional CAD33 million (USD27 million) in care and maintenance costs.

The Cigar Lake operation is owned by Cameco (50.025%), Orano Canada Inc (37.1%), Idemitsu Canada Resources Limited (7.875%) and TEPCO Resources Inc (5.0%) and is operated by Cameco.

"Given the ongoing risks to production due to the COVID-19 pandemic, we will not be in a position to provide additional outlook for 2021 until we understand the rate at which we will be able to sustainably operate the mine.

"The COVID-19 pandemic has disrupted global uranium production adding to the supply curtailments that have occurred in the industry for many years. The duration and extent of these disruptions and risk of additional disruptions are still not fully known.

"In this environment, we believe the risk to uranium supply is greater than the risk to uranium demand and expect it will create a renewed focus on ensuring availability of long-term supply to fuel nuclear reactors. Over time, we expect this renewed focus on security of supply will provide the market signals producers need and will help offset any near-term costs we may incur as a result of the current disruptions to our business."

Cameco has increased its outlook for purchases in 2021 to meet its delivery commitments and to maintain a working inventory. It now expects to purchase between 11-13 million pounds of uranium segment in 2021, up from the previous estimate of 8-10 million pounds.

"Until we understand the rate at which we will be able to sustainably operate the Cigar Lake mine and with ongoing uncertainty around production due to the COVID-19 pandemic, we may make additional purchases," it said. "To the end of March, we had purchased 1.5 million pounds of uranium and delivered 5.0 million pounds under contract. In April, we finalised and executed an additional 9 million pounds U3O8 in long-term sales contracts which had been under negotiation."

Cameco reported a net loss of CAD5 million on CAD290 million in revenue for the first quarter of 2021, compared with a net loss of CAD19 million on revenue of CAD346 million in the first quarter of 2020. It sold 5 million pounds of uranium, down from 6 million pounds in Q1 2020.

"Our first quarter results were as expected," said Cameco President and CEO Tim Gitzel. "With the continued execution of our strategy and the unplanned disruptions due to the COVID-19 pandemic, we are not at the regular tier-one run rate of our business." Cameco sees demand for both traditional and non-traditional uses of nuclear power growing as the increasing focus on electrification while phasing out carbon intensive sources of energy continues to take hold, he said.