Cameco updates 2021 outlook following Cigar Lake restart

CEO Tim Gitzel said the company is investing in digital and automation technologies, to support the restart of its tier-one assets to create a more flexible asset base. This, he said, will allow Cameco to align production decisions with contract portfolio commitments and opportunities, eliminate the care and maintenance costs incurred while its tier-one production is suspended, and to benefit from the "very favourable life-of-mine economics" of its tier-one assets.

Operations at Cameco's Cigar Lake resumed in April after a "proactive" four-month suspension due to COVID, resulting in additional care and maintenance costs of CAD8 million, and were suspended again for a short time earlier this month because of a forest fire. Deliveries to date have not been materially impacted by the business disruptions resulting from the pandemic or the forest fires, and Cameco said it does not currently expect there will be a material impact on its remaining 2021 deliveries.

"Despite the near-term costs of our strategy and associated with the precautionary production suspensions at Cigar Lake, we have a strong balance sheet," Gitzel said. "We ended the quarter with about CAD1.2 billion in cash. We also successfully added an additional 7 million pounds U3O8 to our long-term sales contract portfolio, bringing the total contracted so far in 2021 to 16 million pounds.

"We are excited about the future of nuclear power generation, about the fundamentals of uranium supply and demand and about the prospects for our company, and remain committed to our tier-one strategy and to our vision. Globally, we see 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."

In its management’s discussion and analysis (MD&A) document, Cameco said it believes the risk to uranium supply is currently greater than the risk to uranium demand, and expects this 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 recent disruptions to our business," it said.