Cameco increases interest in Cigar Lake uranium mine, extends life by production cut-back

Saskatoon-based Cameco (TSX: CCO; NYSE: CCJ) and French-owned Orano Canada will both increase their stake in the Cigar Lake operation, which is the world’s largest high-grade uranium mine.

Idemitsu Canada has agreed to sell its 7.875% interest in the Cigar Lake joint venture, with 4.522% of the mine ownership moving to Cameco (to bring it to 54.547%) and 3.353% going to Orano (to bring the French share to 40.453%.

TEPCO Resources, a subsidiary of Tokyo Electric Power Company, will retain its 5% share in Cigar Lake.

Cigar Lake has reserves of 152.4Mlbs of proven and probable uranium oxide, and resources comprising 103.7Mlbs uranium oxide (measured and indicated), and 22.9Mlbs (inferred).

The increased ownership will boost Cameco’s share of reserves and resources by 12.6Mlbs.

‘One of the best uranium mines’

Cameco president and chief executive officer Tim Gitzel said Cigar Lake is “one of the best most prolific uranium producing assets on the planet”.

“As the operator of Cigar Lake since 2002, it’s an asset we know incredibly well.

“It’s a proven, permitted and fully licensed mine in a safe and stable jurisdiction,” he added.

The 2022 production outlook for Cigar Lake is 15Mlbs, making it the largest uranium producer this year.

Curtailed production

Cameco said its present plan is to curb Cigar Lake’s annual production from 15 million pounds of uranium oxide in 2022 to 13.5Mlb from 2024.

This reduction, to 25% below licensed capacity, will extend the mine and align production with “market opportunities”, according to the company.

Curtailing production is also expected to allow more time to evaluate the feasibility of extending the mine life beyond its current reserve base, while also continuing to supply Orano’s McClean Lake mill.

More improvement in uranium market required

Cameco said this reduced production plan will remain in place until the company sees further improvement in the uranium market and contracting progress.

This suggests that Cameco is perhaps not as bullish on the price outlook as some new potential entrants to uranium mining have been in recent weeks.

Or it could be Cameco’s strategy to play down the outlook to discourage new competitors.

On 11 March, spot uranium prices nudged US$60/lb – the highest they had been since 2011 following Japan’s Fukushima nuclear emergency and shutdown.

The spot price has retreated since then, with the last reported level being US$52.75/lb.

That is still close to what companies will need to justify mine development, although such aspiring miners would be looking for higher long-term contract prices.