Cameco revises 2023 Canadian production forecast

Cigar Lake is now expected to produce up to 16.3 million pounds U3O8 (6270 tU) this year, down from 18 million pounds U3O8. Production from the McArthur River/Key Lake operations for 2023 is expected to be 14 million pounds U3O8, down from the previous forecast of 15 million pounds U3O8. These figures are on a 100% basis.

"As previously reported, mining activities at the Cigar Lake operation were initiated from a new zone in the orebody (west pod) in the second quarter of this year, which impacted productivity," the company said in an update on 3 September. "As mining activities continued in the west pod during the third quarter, equipment reliability issues emerged which further affected performance." The mine is due to enter its planned annual maintenance shutdown, which will last for most of this month.

Cameco announced its decision to resume operations at the McArthur River/Key Lake operations - idled since 2018 - in early 2022. Ore from the underground mine at McArthur River is trucked 80 km by road to the mill at Key Lake for processing. The mine is operating well, and is expected to achieve its planned production for the year, but there is "continued uncertainty regarding planned production in 2023" as the mill continues to ramp up. The length of time the facility was in care and maintenance, operational changes, the availability of personnel with the necessary skills and experience, and the impact of supply chain challenges on the availability of materials and reagents, "have combined to impact production at Key Lake, leading to the reduced forecast", the company said.

Any ore from McArthur River that is not immediately processed at Key Lake will be stored in inventory for future milling.

Cameco said it can, if required, source material by means such as market purchases, pulling forward long-term purchases, using inventory or borrowing product. The company also pointed to its exposure to higher prices under market-related contracts in its long-term portfolio and a "pipeline" of ongoing contracting discussions, as well as its strong balance sheet "to help us self-manage risk".

"This expected production shortfall further highlights the growing security of supply risk at a time when we believe the demand outlook is stronger and more durable than ever and where the risk has shifted from producers to utilities," the company said. "Uncertainty about where nuclear fuel supplies will come from to satisfy growing demand continues to drive long-term contracting, with clear evidence that the broader uranium market is moving toward replacement rate contracting for the first time in over a decade. This is the type of contracting necessary to promote the price discovery already seen in the enrichment and conversion markets and that is expected to incentivise investments in the supply needed to satisfy the growing long-term requirements."

Cigar Lake is owned 54.547% by Cameco, 40.453% by Orano Canada Inc. (Orano) and 5% by TEPCO Resources Inc. The McArthur River mine is owned 69.805% by Cameco and 30.195% by Orano, while the Key Lake mill is owned 83.333% by Cameco and 16.667% by Orano.