Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Uranium giant Cameco reported $137M loss in its Q2 due to Rabbit Lake impairment, mark-to-market losses on foreign exchange derivatives and depressed uranium prices.
As of mid-afternoon eastern time, Cameco (NYSE:CCJ) shares were down 7.8% to $9.83, near a 52-week low. The company under-performed analyst expectations.
“Cameco reported a Q2/16 adjusted EPS loss of $0.14/share, which was substantially below our forecast of $0.06/share earnings and the consensus estimate of $0.15/share earnings,” wrote analyst Rob Chang in a note from Cantor Fitzgerald’s equity research division.
“Revenues of $466M were below our estimate of $603M and consensus estimates averaging $557M.”
Cameco suspended Rabbit Lake operation in the second quarter incurring an impairment charge of of the full carrying value, $124M.
In its news release, Cameco didn’t see much improvement for the uranium market in 2016:
The second quarter of 2016 continued much the same as the first – with demand remaining low and uranium prices depressed. That is as expected, given that there have been no events to catalyze a change in the current state of the market.
In Japan, reactors continue to progress towards restart at a very slow pace, facing further challenges in the form of injunctions from the lower courts. Adding pressure to the market were a number of premature reactor retirement announcements in the United States, as well as the vote by the United Kingdom to leave the European Union, which has increased uncertainty around their new build program.
On the other side of the equation, supply continued to be readily available, with secondary supplies abundant and no interruptions to primary supply.
Making positive news for the industry were two new reactor startups – one in China and one in the United States – bringing the total for the year to five.
Note: Author holds shares in Cameco. Image of Cameco Nuclear, Port Hope, Ontario taken by Robert Taylor.
