* 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 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
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
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
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
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.