November 6, 2007 / 9:29 PM / 12 years ago

Cameco sees 80 percent production rise by 2016

TORONTO, Nov 6 (Reuters) - Cameco Corp’s (CCO.TO) uranium production should grow by 80 percent over the next nine years, while signs of easing uranium prices mean the company could once again be in the hunt for acquisitions, the company’s chief executive said on Tuesday.

Speaking to investors in New York, CEO Jerry Grandey said the company’s mined production should reach 36 million pounds of uranium by 2016, just through organic growth.

“That doesn’t count on any new discoveries, potential joint ventures, or any equity investments or acquisitions,” Grandey said.

Cameco, the world’s top uranium producer, has faced criticism for not being more aggressive about acquisitions and therefore missing out on opportunities that are now too expensive because uranium prices have hit record highs this year, driving up prices of junior explorers.

But after peaking at $136 a pound earlier this year, spot prices have come down, most recently to $90 a pound, and Grandey said that could allow the company to be more aggressive.

“Over time we expect that there will emerge opportunities and then Cameco will... begin to identify better opportunities, the ones that have long term significance, then we’ll become active in the acquisition sphere,” he said.

The uranium price has risen as new and planned nuclear power plants have driven demand well above supply. Cameco and other companies have made up the shortfall by purchasing enriched uranium from decommissioned nuclear warheads and diluting it to sell on uranium markets.

Grandey said he expects to see continued reliance on these “secondary sources” of uranium, which should provide about one-quarter of the 2 billion pounds of consumption he expects over the next decade.

The company that sells Cameco the uranium from Russian warheads requested last week to renegotiate its sales agreement to reflect higher uranium prices. Grandey said he was confident a mutually satisfactory solution can be reached.

OUTPUT FROM NEW MINES

Cameco’s production outlook depends on new output from the Cigar Lake mine in northern Saskatchewan, as well as the Inkai mine in Kazakhstan.

Cigar Lake flooded while under construction and is now due to open by 2011 at the earliest, while Inkai is seen starting to produce commercially next year.

Asked about a shortage of sulfuric acid — necessary for in situ mining, which will be used at Inkai — Grandey said the company was examining its options.

“We’re looking at the possibility of building an acid plant ourselves, or maybe a regional acid plant with some of the other producers,” he said. Such plants cost in the C$30 million-C$40 million range in Canada, but the cost could be different in Kazakhstan, he said.

He said the company was also looking for acid from other sources in the region through its subsidiary Centerra Gold (CG.TO), which operates the Kumtor mine in Kyrgyzstan.

Cameco’s shares rose C$1.14 to C$45.95 on the Toronto Stock Exchange on Tuesday.

$1=$0.92 Canadian Reporting by Cameron French

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