Cameco Corp. President and CEO Tim Gitzel
Cameco Corp. President and CEO Tim Gitzel (Source: Canadian Business)
  • With an increase in COVID-19 cases across Saskatchewan, Cameco (CCO) has been forced to suspend production at its Cigar Lake uranium mine
  • The company has had six positive tests at its northern operations in recent weeks, three of which were at Cigar Lake
  • With the shutdown now in place, the company does not expect to achieve its 2020 production target of 5.3 million pounds
  • While the project is on care and maintenance, Cameco expects to incur costs of between C$8 million and $10 million per month
  • Cameco is currently up 6 per cent to $18.03 per share

With an increase in COVID-19 cases across Saskatchewan, Cameco (CCO) has been forced to suspend production at its Cigar Lake uranium mine.

Located in the northwest of the province, Cigar Lake is the world’s highest-grade uranium mine. As operator of the project, Cameco holds a majority 50.025 per cent stake, while Orano Canada, Idemitsu Canada Resources and TEPCO Resources hold a 37.1 per cent, 7.875 per cent and 5 per cent interest, respectively.

At the peak of production, Cigar Lake had 300 workers on site. But, with a resurgence in the number of cases of the virus, there is increased uncertainty over the continued access to qualified operational personnel.

“We have had six positive tests at our northern operations in recent weeks, including three at Cigar Lake,” said Tim Gitzel, President and CEO of Cameco.

“While the protocols we have put in place have to date allowed us to effectively manage these cases, there are broader risks we don’t control,” he added.

Today’s announcement noted that the company’s uranium deliveries to date have not been materially affected by the pandemic. As of September 30, 2020, Cigar Lake had produced 2.3 million pounds of uranium concentrates.

However, with the temporary suspension now in place, Cameco does not expect to achieve its 2020 production target of 5.3 million pounds.

Instead, the company will now increase its purchases to secure the uranium it needs in order to meet its sales commitments.

While on a care and maintenance schedule, Cigar Lake is anticipated to insure costs of between C$8 million and $10 million per month, which will be expensed directly to the cost of sales. The purchase of third-party uranium, which comes at a higher price compared to uranium produced in-house, may also lead to additional costs.

That said, the company maintains a strong balance sheet, with $793 million in cash and short-term investments and $1 billion in long-term debt as of September 30.

As such, and with a further $1 billion on an undrawn credit facility, Cameco says it will have sufficient flexibility to meet its capital requirements for the rest of 2020.

“The timing of the restart and the production rate will depend on how the COVID-19 pandemic is impacting the availability of the required workforce at Cigar Lake, how cases are trending in Saskatchewan, in particular in northern communities, and the views of public health authorities,” Tim continued.

Cameco is currently up 6 per cent to $18.03 per share at 10:31am EST.

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