* Province's new formula to reflect miners' actual costs
* Will save Cameco, Areva combined C$15 mln in 2013-14
* Savings would grow over time, removing some risk
By Rod Nickel
WINNIPEG, Manitoba, March 22 (Reuters) - The Western Canadian province of Saskatchewan is cutting its tax on uranium mining in hopes of spurring construction of more mines and boosting its revenues, a top government official said on Friday.
The provincial government is proposing the first changes in 12 years to its system of charging royalties to uranium miners, calling the old formula a barrier to investment. Low uranium prices in the two years since the Fukushima meltdown in Japan have led to delays in some mine projects, but miners see a brighter outlook as new reactors are built.
The adjustments would save the two uranium miners in the province, Cameco Corp and Areva SA, only a combined C$15 million ($14.7 million) in Saskatchewan's fiscal year 2013-14.
But those savings are set to grow as the formula will reflect the miners' actual costs in future years, and remove some of their risk from unforeseen events, said Kent Campbell, deputy minister of Saskatchewan's Ministry of the Economy.
"The biggest thing is it helps to de-risk projects," Campbell said in an interview.
"It was very clear that (miners) felt the economics of future greenfield projects would not work if the system was not changed."
Mining for uranium in Saskatchewan's northern Athabasca basin comes with high costs, including scarce labor and potential flooding, Campbell said.
Rio Tinto PLC and a host of junior mining companies own deposits in the basin, along with Cameco and Areva.
Saskatchewan's proposed changes are contained in its 2013/14 budget, which was unveiled this week. The new royalty regulations may take two to three months to become official, but will be retroactive to Jan. 1, 2013, Campbell said.
Since 2001, Saskatchewan has charged miners a base royalty rate on the value of production, as well as a tiered royalty rate on profits. Those profits, however, were calculated on a fixed estimate of each mine's costs, and companies complained that their actual costs were as much as 50 percent higher because of unforeseen and inflationary expenses.
The base royalty rate will stay in place, along with a condensed system of tiered tax rates on profit. But the profit tax will now factor in the miners' actual costs.
Such changes in one of the richest uranium regions in the world would reduce the effective total royalty to between 7 and 8 percent of revenue from the current 10 to 12 percent, and add to earnings, said analyst Edward Sterck of BMO Capital Markets, in a note to clients.
Cameco and Areva are expected to pay roughly C$70 million to C$80 million combined in uranium royalties to Saskatchewan in 2013/14.
Saskatchewan expects its uranium royalties to generate C$5 billion over the next 14 years as sales climb, compared with C$900 million during the past 14. Canada recently negotiated access for uranium shipments to China and India, where much of the nuclear power industry's expansion is taking place.
Areva is a minority partner with Cameco in the Cigar Lake mine, which is due to start production this year and also hopes to restart its mill at McClean Lake.
"We're making major investments in Saskatchewan," said Areva spokesman Jarret Adams. "Obviously, this is giving us confidence."
Cameco, which is exploring a possible mine called Millennium, also said it welcomed the change.
On the other side of the ledger, Saskatchewan is trimming the size of its resource credit, which also applies to coal, energy and potash producers, from 1 percent to 0.75 percent. That change will earn Saskatchewan an extra C$22 million for 2013/14, spread across the mining and energy industry.