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UPDATE 2-Cameco CEO projects big rise in uranium output
May 27, 2009 / 9:07 PM / 8 years ago

UPDATE 2-Cameco CEO projects big rise in uranium output

* CEO sees dramatic increase in worldwide demand

* Cameco production to rise 75 pct in 10 years

* CEO confident of supply agreement with China (Adds CEO comments on China, Port Hope, Centerra; in U.S. dollars unless noted)

By Rod Nickel

SASKATOON, Saskatchewan, May 27 (Reuters) - Cameco Corp (CCO.TO) will have to expand uranium production “dramatically” over the next decade in order to meet rising demand for the nuclear fuel, the company’s chief executive said on Wednesday.

“The uranium industry is capable of responding to the growth in demand and Cameco will play a major role,” President and CEO Jerry Grandey told the company’s annual meeting.

In 10 years, Cameco will go from producing 20 million pounds annually to 35-36 million, Grandey told reporters. That will come either through the expansion of existing projects or by opening new mines.

The company, the world’s biggest producer, projects 2 billion pounds of uranium will be needed over the next decade to fuel nuclear generating stations.

Rising world demand stems from a growing hunger for electrical power and the awareness of nuclear energy’s low greenhouse gas emissions, Grandey said. He noted the U.S. government’s continued financial backing for new nuclear plants under President Barack Obama.

Grandey said the Nuclear Energy Institute, an industry advocate, expects four to eight reactors to be built in the United States in the next 10 years. He said construction began on 10 new reactors around the world in 2008, the largest number of starts in 23 years.

Cameco is exploring new zones to sustain future production at its McArthur River mine in the Canadian Prairie province of Saskatchewan, the world’s top producing mine. It is also making steady progress on remediating its Cigar Lake mine in Saskatchewan, Grandey said, adding he could not estimate when production would begin. The mine flooded in 2006.

Cameco is negotiating a potential supply agreement with China, Grandey confirmed, but he declined to estimate such a deal’s potential size.

“We hope, as time goes on, to get a greater presence in that market on a sustained basis. Do I think we’ll succeed? Absolutely.”

Grandey said Cameco can afford to make acquisitions, but there are few opportunities of interest.

The price of uranium is looking to balance in the range of $40 to $60 per pound, but Grandey said he expects “a lot of volatility” this year.

Cameco suspended production last December of uranium hexafluoride (UF6) -- used in uranium enrichment -- at its Port Hope, Ontario, plant, due to a contract dispute with a key chemical supplier. Production will ramp up slowly, Grandey said, starting early in the third quarter.

Meanwhile, Grandey said Cameco hasn’t decided how it will divest its stake in Centerra Gold (CG.TO), whether by a secondary share issue or finding a strategic buyer, but said the company is in no rush.

Centerra has reached an agreement with the Kyrgyz government over its Kumtor gold mine, which will see Cameco’s stake fall as low as 38 percent from 53 percent. Grandey has said Cameco will eventually sell off its stake.

Cameco’s shares closed 38 Canadian cents, or 1.3 percent, lower at C$28.67 on the Toronto Stock Exchange on Wednesday.

$1=$1.12 Canadian Editing by Rob Wilson

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