UPDATE 1-Cameco to suspend Port Hope UF6 output

TORONTO, Nov 28 (Reuters) - Cameco Corp (CCO.TO) said on Friday it will suspend production of uranium hexafluoride (UF6) at its Port Hope plant in Ontario due to a contract dispute with its supplier of hydrofluoric acid.

Output of UF6 will be halted until the second half of 2009, by which time Cameco expects to either resolve the dispute or secure acid from other sources. Because of the dispute, the company, the world's largest uranium producer, has been buying acid on the spot market at a much higher cost.

"Cameco is in discussions to broaden its sources of HF while at the same time seeking to resolve the dispute with the current supplier," the world's top uranium producing company said in a statement.

Cameco expects to meet UF6 deliveries to customers in the first half of 2009, and will have to lay off some workers -- likely less than 100, it said. About 440 people work at Port Hope.

Its shares were down 67 Canadian cents, or 3.1 percent, at C$20.98 on the Toronto Stock Exchange.

The Port Hope facility, located on the shores of Lake Ontario 100 km (62 miles) east of Toronto, is one of only three commercial suppliers of UF6 in the western world. The material is enriched and fabricated at other sites into fuel pellets used in most nuclear reactors.

Cameco told the union representing workers at the plant earlier this month that it would probably suspend operations in December due to the acid shortage.

Port Hope also produces uranium dioxide, which is used to manufacture fuel for Canadian Candu nuclear reactors. That operation is not affected.

The operation was just reopened in September following a 14-month shutdown after the discovery of uranium and arsenic contamination in the soil and groundwater beneath the plant.

($1=$1.24 Canadian) (Reporting by Cameron French; editing by Rob Wilson)