Cameco raises equity

Friday, 6 March 2009

Canada's Cameco Corp reported that it had raised some C$460 million ($360 million) through the completion of a previously announced bought deal public offering of common shares. Meanwhile, remediation of its flooded Cigar Lake uranium mine continues.
 

Cameco's headquarters in Saskatoon

On 18 February, Cameco said that it had entered into an agreement with a syndicate of underwriters, led by BMO Capital Markets and RBC Capital Markets, who had agreed to purchase 23,188,400 Cameco common shares on a bought deal basis at a price of C$17.25 ($13.44) per share for sale to the public, primarily in Canada and the USA. Cameco also granted the underwriters an over-allotment option to purchase, on the same terms, up to a further 3,478,000 common shares.
 
The bought deal public offering was completed yesterday, with the underwriters exercising their over-allotment option in full. Cameco has therefore issued a total of 26,666,400 common shares for gross proceeds of C$459,995,400 ($357,973,070).
 
Cameco said that it intends to use the net proceeds of the offering, some C$440.5 million ($342.9 million), "to strengthen its capital position and enhance its financial flexibility to allow it to take advantage of opportunities that may emerge from the current industry environment, and for general corporate purposes."
 
The issue price of C$17.25 was nearly 10% below Wednesday's closing price of C$19.12, Reuters reported, prompting heavy selling of Cameco's stock on Thursday. It was down 6% at C$17.99 on the Toronto Stock Exchange just after midday.
 
In September 2007, Cameco embarked on a share repurchase program. At that time, the company said that over the following year it would buy back common shares up to a maximum of 5% of the company - some 17.7 million shares - at market prices. Ready funds and income from operations was to fund the repurchase, which was seen as the "best investment today" by CEO Jerry Grandey.
 
Cigar Lake remediation
 
Cameco announced in August 2008 that it had temporarily suspended remediation work at the No.1 shaft at its Cigar Lake uranium project in northern Saskatchewan, which flooded in 2006, due to an increase in the rate of water inflow to the mine.
 
Cigar Lake is one of the world's most promising uranium deposits, with estimated reserves of 113 million pounds of U₃O₈ at grades as high as 20.7%. Led by Cameco, holding 50% of the project, a consortium of Areva Resources Canada (37%), Idemitsu Canada Resources (8%) and Tepco Resources (5%) has been developing the deposit in the north of Canada's province of Saskatchewan. Originally, the mine was expected to begin operating in early 2008. In July, Cameco said that the start of production at Cigar Lake was anticipated for 2011 "at the earliest."
 
Cameco has now said that they "no longer anticipate production in 2011 and are assessing the impact of the August inflow on the planned production date and capital cost estimate." It noted, "There can be no assurance as to when production will commence or that other occurrences will not further delay production."
 
The company said that work on stopping water inflow in the No.1 shaft at Cigar Lake had started, but it expects the work to "take most of 2009." Remediation of No.2 shaft continues. Cameco said it had succeeded in sealing the inflow in the shaft and that it anticipated removing all of the water in the shaft in the second quarter of 2009.
 
Cameco has incurred C$359 million ($280 million) in capital costs to develop Cigar Lake up to the end of 2008. The company added that, in addition, its share of remediation costs is expected to total C$92 million ($72 million), of which C$46 million ($36 million) had been spent by the end of 2008. It expects to spend C$21 million ($16 million) on remediating Cigar Lake in 2009.