UPDATE 2-Cameco gets extension for Cigar Lake overhaul

(Adds details on Cigar Lake, Rabbit Lake operations from company announcement, stock close)

TORONTO, Dec 3 (Reuters) - Cameco Corp. (CCO.TO) has been granted a two-year license extension to continue overhauling its flooded Cigar Lake uranium mine in Saskatchewan, the Canadian Nuclear Safety Commission said on Monday.

In a decision released on its Web site, the CNSC said the license will be valid until Dec. 31, 2009. The mine flooded last year.

Cigar Lake is expected to eventually produce 18 million pounds of uranium annually, or more than 10 percent of global production. Cameco, the world's biggest uranium miner, has said it could reach production as early as 2011.

In a statement issued on Monday evening, Cameco confirmed the license and said it plans to provide an update on Cigar Lake operations on Dec. 19.

The delay in reaching production -- Cigar Lake had originally been expected to begin producing this year -- has contributed to uranium prices soaring to a record high earlier this year.

"The amended license will authorize Cameco Corporation to carry out limited remediation activities at the Cigar Lake mine site," CNSC said in its decision.

A CNSC tribunal heard Cameco's application for a license extension early last month.

The regulator's staff at the time advised approving a plan that would feature more oversight of the overhaul.

The mine, located about 660 km (410 miles) north of Saskatoon, Saskatchewan, is 50 percent owned by Cameco and 37 percent owned by French uranium miner Areva (CEPFi.PA) . Cameco operates the site.

Cameco also said on Monday it would would take additional time to staunch increased water inflow at its Rabbit Lake mine in Saskatchewan before resuming underground mining.

"The company has set a preliminary target of the first quarter of 2008 to seal off the increased water flow. Mining will resume when the water flow has been sufficiently reduced to provide an adequate margin of surface water handling capacity," Cameco said.

Cameco said it has produced 3.7 million pounds of uranium at Rabbit Lake so far this year and estimates annual production for 2007 will be 3.8 to 4.0 million pounds from stockpiled ore.

The company said it planned to permanently seal off the area affected by the water inflow, mainly by using the customary process of building concrete barriers or bulkheads.

Cameco said it does not anticipate layoffs among its 270 employees at Rabbit Lake, but some may be reassigned to other tasks. There are also 220 contractor employees whose schedules may be adjusted to meet priorities on site, it said.

Cameco's shares fell C$1.72 to C$39.75 on the Toronto Stock Exchange on Monday.

(Additional reporting by Robert Melnbardis in Montreal) (Reporting by Cameron French; Editing by Rob Wilson and Carol Bishopric)