UPDATE 3-Cameco profit slips; shares up on stronger prices

Mon Nov 8, 2010 5:01pm EST

* Q3 adjusted EPS C$0.20 vs C$0.24 a year earlier

* Revenue down 24 pct to C$419 mln

* Shares end 8.5 pct higher in Toronto on uranium prices (Updates with closing stock price; in U.S. dollars unless noted)

TORONTO, Nov 8 (Reuters) - Shares of Cameco Corp (CCO.TO) surged on Monday after a weekend jump in uranium prices, even as the Canadian miner said its quarterly operating profit dropped on higher spending and a decline in sales volumes.

Cameco also raised its 2010 uranium production forecast and lowered its capital expenditure outlook for the year, dulling the sting of the 15 percent drop in its third-quarter operating profit.

The Saskatchewan-based company said it expects to deliver a third of its overall uranium sales for 2010 in the fourth quarter, signaling a strong performance for the final three months of the year.

"The uranium spot price has increased 10.6 percent to $57.50 per pound over the weekend," said Macquarie analyst Duncan McKeen, in a note to clients. "This significant increase follows a number of weeks of upward movement to the spot price."

Shares of smaller rivals Uranium One UUU.TO, First Uranium FIU.TO and Denison Mines (DML.TO) all posted gains on the Toronto Stock Exchange on Monday.

UPBEAT FORECAST

The company expects uranium production to be 22 million pounds this year, compared with its previous estimate of 21.5 million pounds, with increased production at Rabbit Lake in Saskatchewan and Inkai in Kazakhstan.

Cameco also expects capital expenditures to come in at about C$475 million in 2010, down from its previous estimate of C$510 million, due to changes in the scheduling of some projects.

The company said it does not expect this reduction in its 2010 capital expenditure budget to affect its long-term goal of doubling uranium output by 2018.

QUARTERLY RESULTS

Excluding gains from financial instruments and other one-time items, Cameco reported adjusted earnings of C$80 million, or 20 Canadian cents a share. That compared with a profit of C$94 million, or 24 Canadian cents a share, a year earlier.

Net income in the quarter was C$98 million, or 25 Canadian cents a share. That compared with a year-before profit of C$172 million, or 44 Canadian cents a share.

Quarterly revenue fell 19 percent to C$419 million, due to a 33 percent decrease in uranium sales volumes.

Analysts, on average, had forecast adjusted earnings of 21 Canadian cents a share, on revenue of C$467.2 million, according to Thomson Reuters I/B/E/S.

"While uranium sales in the third quarter were lower compared to a year ago, gross profit in our core business actually increased due to higher realized prices and lower product costs," Chief Executive Jerry Grandey noted on a conference call.

Cameco shares closed 8.5 percent higher at $35.98 on the Toronto Stock Exchange, and 7.46 percent higher at C$35.74 on the New York Stock Exchange. ($1=$1.00 Canadian) (Reporting by Euan Rocha, editing by Frank McGurty)

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