October 23, 2009 / 1:57 PM / 9 years ago

UPDATE 2-Cameco resumes pumping out of Cigar Lake mine

* World’s largest unmined uranium deposit flooded in 2006

* Could produce more than 10 pct of global supply

* Expects to take 6-12 months to pump out mine

By Cameron French

TORONTO, Oct 23 (Reuters) - Cameco Corp (CCO.TO) (CCJ.N) has resumed draining its flooded Cigar Lake project and expects to have the mine pumped out sometime next year, the big Canadian uranium producer said on Friday.

Cigar Lake, the world’s richest unmined uranium deposit, flooded during construction in 2006 and flooded again during repairs in 2008, prompting the company to suspend predictions of when it may come to production.

Cameco is the majority owner of the deposit, which lies beneath waterlogged sandstone in northern Saskatchewan’s Athabasca Basin. France’s Areva CEPFi.PA owns 37 percent.

The mine should one day produce more than 10 percent of global mined output, and is key to Cameco’s plans to roughly double its annual uranium production over the next decade.

In a statement, Cameco said the source of the 2008 water inflow on the 420-metre (1,378-foot) level has been sealed, and noted that level was not part of future mine plans.

“It is currently expected to take six to 12 months to dewater and secure the mine, depending on what conditions are found in the shaft and the underground workings,” the company said.

Once the mine is pumped out, Cameco will be able to see how much damage has been done over the past three years, and at will provide a estimated production start at that time.

Ray Goldie, an analyst at Salman Partners, said the progress update was in line with what the company had suggested and with what he had expected.

“They’re on track, is the way we’d put it,” he said, adding that he expects production by early 2013.

Goldie said any additional postponement could be viewed as much a positive as a negative for Cameco, as an extended delay would create shortages of uranium that would boost prices and benefit the company’s other operations.

The risk of a further delay would include the possibility additional costs, he said.

Spot uranium UX-U308-SPT was at $47.75 a pound this week.

It hit a record of $136 a pound in mid-2007, driven in part by worries of pinched supply following the initial Cigar Lake flooding, as well as by expectations of rising demand as several nations have planned new nuclear generating stations.

Cameco stock was down 11 Canadian cents at C$32.55 on the Toronto Stock Exchange.

Shares of uranium producers jumped earlier this week on reports that the huge Olympic Dam copper-uranium mine in Australia would be shut for an extended period following damage to its main shaft. Olympic Dam is owned by BHP Billiton (BHP.AX).

$1=$1.05 Canadian Additional reporting by Ashutosh Joshi in Bangalore; editing by Rob Wilson

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