UPDATE 1-Cameco cuts long-term uranium output goal on slow nuclear growth

Wed Oct 31, 2012 11:11pm EDT

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Oct 31 (Reuters) - Canada's Cameco Corp on Wednesday lowered its long-term uranium production target by 10 percent, a sharp shift in strategy in response to slower demand growth for the fuel after the Fukushima nuclear disaster.

The uranium market has been in a downward spiral since a massive earthquake and tsunami struck Japan in March 2011, crippling the Fukushima-Daiichi atomic power plant.

Countries from Japan to Germany have reduced their dependence on nuclear power in the aftermath of the worst meltdown since Chernobyl, sending the spot price for uranium, the material that fuels reactors, sharply lower.

Cameco, the world's largest publicly listed uranium producer, reported a 50 percent drop in adjusted third-quarter profit as prices and sales volumes sagged.

With a reduction in net new reactors being built over the next decade, Cameco said it has cut its long-term uranium output target to 36 million pounds a year by 2018, from a previous goal of 40 million pounds.

The Saskatoon, Saskatchewan-based company said it has slowed development work at its Millennium project in Canada's uranium-rich Athabasca basin, along with projects in Kazakhstan and Australia, until market conditions improve.

The focus will now be on bringing the company's Cigar Lake project, also in the Athabasca region, into production, along with brownfield growth around its existing mines in the area.

"By taking these actions, we expect to spread our capital spending over a longer period and decrease project-related expenses," said Chief Executive Tim Gitzel in a statement. "Our focus will be on execution and reducing costs without compromising on our values."

Cameco will continue minimal work on all its major projects to ensure that when demand for more production returns, it will be poised to be one of the first to respond.

Cameco expects 80 net new nuclear reactors to be built over the next decade, down from a previous estimate of 95 net new reactors. Currently, 64 reactors are under construction around the world.

ON TRACK

Cameco remains on track to produce some 21.7 million pounds of uranium this year, and said it expects to meet its sales forecast of 31 million to 33 million pounds, with a large percentage of deliveries in the fourth quarter.

In the quarter ended Sept. 30, Cameco's adjusted earnings were C$52 million ($52 million), or 13 Canadian cents a share. That compared with C$104 million, or 26 Canadian cents a share, a year earlier.

Including one-time foreign exchange derivative gains, earnings were C$82 million, or 21 Canadian cents a share, in the third quarter, compared with C$39 million, or 10 Canadian cents a share, in the year-ago period.

Revenue fell 23 percent to C$408 million on lower uranium sales and a drop in the realized uranium price.

Uranium sales were down 29 percent in the quarter, while the realized uranium price fell 6 percent to $44.49 a pound.

Cameco also said it boosted its capital spending budget for 2012 to C$730 million, up from an early estimate of C$680 million, due to changes in the scope and scheduling of some of its Canadian projects.

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