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Canada’s top uranium producer Cameco (TSX:CCO) (NYSE:CCJ) is temporarily closing two of its operations in northern Saskatchewan, leaving 845 people without work for at least 10 months, in what is the latest evidence of the tough times the sector is facing worldwide.
The Saskatoon, Saskatchewan-based company said it would suspend production from its flagship McArthur River mine in Saskatchewan, the world’s biggest uranium mine, and the Key Lake mill by the end of January. It cited a six-year long rout in the prices for the radioactive metal as the main cause for the move. It also said it would cut its annual dividend to $0.08 per common share in 2018 from Cdn$0.10.
Uranium prices have fallen more than 70% since the Fukushima disaster in 2011 remaining low since then as a result of oversupply and excess inventory in the industry.
Cantor Fitzgerald analyst Rob Chang qualified the news Thursday as “a tough but necessary move.” He noted the company has said that with uranium prices currently around $20 a pound, it could purchase uranium at prices lower than its all-in sustaining cost.
“We view this as a prudent move and applaud all producers who elect to take this route as it saves a company’s in-situ inventory and works to reduce the excess inventories in the market,” Chang wrote.
Uranium prices have fallen more than 70% since the Fukushima disaster in 2011, remaining low since then as a result of oversupply and excess inventory in the industry.
To decrease costs, Cameco has taken drastic measures including the suspension of Rabbit Lake in 2016, which left 500 people unemployed. The company has also stopped development and curtailed production at its US operations, reduced workforce across all sites including head office, changed air commuter services for operations in Saskatchewan, changed shift schedules at two Saskatchewan sites, and downsized corporate office functions including a consolidation of its global marketing activities.
At McArthur River, Cameco is keeping 210 workers to ensure the facilities are maintained during the shutdown period. Once operations are halted there, Cameco will only have its Cigar Lake, Saskatchewan mine and the Inkai mine in Kazakhstan producing significant volumes of uranium.
The news follows the publication of a surprise loss in the third quarter this year, occasion in which the miner also announced it was cutting full-year production outlook to 24.0 million pounds from an earlier forecast for 25.2 million pounds.
3 Comments
Terry
The previous commenters are very severe. I had no problem understanding the article. It provides fairly detailed (and useful) information and there is no reason to doubt the site’s accuracy.
JJ
The action of Cameco suggests that there is an expectation that the uranium price will increase in a year, so better to keep the powder dry until you can make the best use of it. Interestingly, there were sharp increases in the value of uranium company shares. Are investors thinking the same way?
Bill
Uranium prices will improve when the oversupply of the powder gets to the point of the need for more production. When there is a shortage of uranium then we will start to see the improvement in the price of the commodity. It is important for Japan to come back on line with their reactors and as the new reactors come to life around the world we will improvement. Patience!!!