By Rod Nickel
Feb 7 Cameco Corp, the world's
third-largest uranium producer, on Friday scrapped its lofty
production target for the radioactive metal due to excess global
supply in an uncertain market.
The Saskatoon, Saskatchewan-based company also reported an
increase in fourth-quarter profit, but it fell short of Street
Uranium prices have been weak since an earthquake and
tsunami struck Japan in March 2011, crippling the
Fukushima-Daiichi atomic power plant, and leading it to shut
down nearly all of its reactors.
Cameco said on Friday that challenges caused by the unclear
pace at which Japan will re-start some of its reactors and by
bloated global uranium supplies appear likely to persist for the
near to medium term. In such a market, maintaining a fixed
production target makes little sense, Cameco said, and it
dropped its previous target of boosting supplies to 36 million
pounds by 2018.
"That uncertainty has lasted for longer than had been
expected," said Chief Executive Tim Gitzel, in a statement.
"Although we still have an extensive portfolio of assets from
which we can increase our production, the market incentive must
Cameco, which owns the world's largest-producing uranium
mine at McArthur River, Saskatchewan, forecast production of
23.8 to 24.3 million pounds of uranium in 2014, up modestly from
23.6 million pounds last year.
Even as it removed its production target, Cameco said it
still expects to bring its high-grade Cigar Lake uranium mine in
northern Saskatchewan into production in the first quarter, with
ore processing to begin at Areva SA's McClean Lake
mill by the end of the second quarter.
Cameco said uranium sales should range from 31 million to 33
million pounds in 2014, with overall revenue ranging from flat
to up five percent, due to higher realized uranium prices. It
sold 32.8 million pounds last year.
The spot uranium price has edged higher recently to around
$35.50 per pound of uranium as of Jan. 27, according to Ux
Consulting Company, moving slightly off its eight-year low of
$34.50 reached in December.
Cameco's shares reached nearly two-year highs in late
January after Japan's trade ministry said on Jan. 15 that it
would approve a revival plan for the utility responsible for the
Fukushima nuclear disaster, Tokyo Electric Power Co.
There are also signs that excess uranium supplies are
thinning out, with many analysts predicting a shortage by 2016.
Australia's Paladin Energy Ltd on Friday said it
would suspend production at its Kayelekera mine in Malawi until
the uranium price recovers. The mine accounts for about 2
percent of global supply.
Last year, the Russia-United States highly enriched uranium
agreement expired, removing a major source of secondary uranium
Net earnings for Cameco's fourth quarter rose to C$64.1
million, or 16 Canadian cents per share, including a
C$70-million impairment charge on its agreement with Talvivaara
Mining Company Plc to purchase uranium produced at a nickel-zinc
mine in Finland.
In the year-earlier quarter, Cameco earned C$40.9 million,
or 10 Canadian cents per share and booked a C$168 million
write-down on an exploration project in Australia.
Adjusted earnings were C$150 million or 38 Canadian cents
per share, down from C$233 million or 59 Canadian cents a year
On that basis, analysts were expecting earnings per share of
54 Canadian cents, according to Thomson Reuters I/B/E/S.
Revenue in the fourth quarter rose 15 percent to C$977
million, surpassing expectations for C$919.8 million.
Cameco's uranium sales fell 12 percent to 12.7 million
pounds in the quarter, while its average realized uranium price
slipped four percent to $47.76 per pound.