UPDATE 2-Cameco profit climbs, plans to boost output

Tue May 4, 2010 3:41pm EDT

* Q1 EPS C$0.36 vs C$0.22 a year earlier

* Adjusted EPS C$0.28 vs C$0.27

* Plans to boost production to 40 mln pounds

* Shares up 1 percent at C$25.03 (Adds quotes, details, background, share price)

By Cameron French

TORONTO, May 4 (Reuters) - Cameco Corp's (CCO.TO) first-quarter profit jumped 73 percent thanks to a one-time gain and higher earnings from its nuclear fuel services and power-generation businesses, the company said on Tuesday.

The top Canadian uranium producer also said it aimed to boost uranium production as countries turn increasingly to nuclear power as a source of low-emissions electricity production.

Cameco said it plans to nearly double uranium production to 40 million pounds annually over the next eight years to satisfy rising demand for nuclear fuel as nuclear power generation capacity expands.

"The nuclear renaissance is unfolding in Asia, getting traction in the developed world and emerging in many other countries," Cameco Chief Executive Jerry Grandey said on a conference call.

"At last count there were 53 plants under construction with many more planned," he added.

While China is expected to be active in securing uranium for new reactors, Cameco officials said China had yet to lock in significant volumes in long-term contracts.

"I would expect ... that should change here over the near term," said George Assie, vice-president of marketing.

He said China has probably bought about 2 million pounds of uranium on the spot market so far in 2010. He predicted Chinese purchases will total 5 million to 6 million pounds this year.

Uranium spot prices were at $41.75 a pound this week.

EARNINGS CLIMB

Cameco earned C$142 million, or 36 Canadian cents a share, in the quarter ended March 31. That compared with a profit of C$82 million, or 22 Canadian cents a share, in the year-before period.

Excluding a gain of C$31 million for unrealized mark-to-market gains on financial instruments, Cameco earned 28 Canadian cents a share.

That exceeded expectations of a profit of 24 Canadian cents a share, according to analysts polled by Thomson Reuters I/B/E/S.

Overall, quarterly revenue fell 2 percent to C$485 million.

Uranium revenue slid 9 percent, as sales volumes weakened and realized prices fell 2 percent in Canadian dollar terms. The drop in sales came despite a 27 percent rise in production.

Grandey noted that Cameco expects uranium deliveries to be more heavily weighted in the second and fourth quarters.

Revenue from the nuclear fuel services and electricity generation divisions -- Cameco owns 31.6 percent of Ontario's Bruce Power LP -- each jumped 11 percent.

CIGAR LAKE

Cameco's expansion plans rely heavily on production from its 50 percent owned Cigar Lake project in Saskatchewan, which was on track to produce 18 million pounds a year before it flooded in 2006. France's Areva CEPFi.PA owns a minority stake.

The company has been struggling to overhaul the project over the past four years, and now expects output in 2013.

Grandey said he had been down the recently pumped-out mine in the past five weeks.

"Things surprisingly look very well," he said.

Cameco also plans to raise production at its flagship McArthur River mine in Saskatchewan, its Inkai mine in Kazakhstan, and its smaller U.S. operations.

Beyond that, the company also owns the Kintyre project in Australia and the Millennium project in Saskatchewan.

At mid-afternoon, the company's shares were up 25 Canadian cents, or 1 percent at C$25.03 on a day when most of Toronto's mining stocks were weaker.

($1=$1.01 Canadian) (Additional reporting by Euan Rocha; editing by Rob Wilson)

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