Cameco’s net earnings came in at $55 million for the period. A decision has not yet been made on when its suspended operations will come back online.

Major uranium producer Cameco (TSX:CCO,NYSE:CCJ) released its Q1 results on Friday (April 27), pointing to positives in a market that remains downtrodden.

“We continue to focus on what we can control,” said President and CEO Tim Gitzel. The company’s net earnings came in at $55 million for the period, with adjusted net earnings clocking in at $23 million.

Cameco saw losses in both categories in the year-ago period, and says that the improvements seen in Q1 were largely the result of the restructuring of its Inkai joint venture, along with higher realized prices and deliveries in its uranium segment. It also restructured a contract with a utilities customer in Q1.

The company’s first-quarter uranium output came in at 2.4 million pounds, down 64 percent from the same time last year. However, its sales volume rose 16 percent year-on-year to reach 6.6 million pounds, while revenue grew 38 percent to hit $359 million. Gross profit was up 77 percent at $359 million.

The drastic fall in Cameco’s uranium production is the result of its decision to put the McArthur River mine and Key Lake million operations on care and maintenance. The company made the decision at the end of last year, and according to Gitzel, work has now wound down at both sites.

The move sparked hopes of a rebound in the uranium space, but so far there has been little movement in prices. Gitzel said during a conference call on Friday that at the moment Cameco has “made no decisions regarding the timing of a restart.” The company also had little to report about its ongoing legal battles with Canada Revenue Agency and with TEPCO.

Cameco’s expected uranium output for 2018 stands at about 9 million pounds, but its total delivery commitments for the year are 37 to 38 million pounds. Gitzel said the outstanding amount will come from purchases, as well as from the company’s existing inventory.

“You can expect us to be active buyers in the spot market when it makes sense for us to do so,” he said. “This activity may mean we give up some margin at times, [but] our goal is to responsibly manage our supply. We believe this will provide us the flexibility and opportunities we need to meet our delivery commitments.” Gitzel added that Cameco’s main goal is to “preserve the value of its tier-one assets.”

Overall, Gitzel said Cameco is “cautiously more optimistic than [it was] a year ago” about the uranium market. While he pointed to negative developments like Belgium’s decision to phase out nuclear power and reactor closures in the US, he also identified several positive drivers.

Those include reactor restarts in Japan, reactor construction in China and plans for additional reactors in India and the Middle East. On the supply side, Gitzel noted that Paladin Energy (ASX:PDN) may put its Langer Heinrich mine on care and maintenance, and said the US Department of Energy has suspended sales of excess uranium for the remainder of 2018.

Long term, said Gitzel, the current uranium supply/demand balance is not sustainable. In particular, he pointed out that demand is growing, but due to the current price environment little money is being dedicated to exploration. “Something has to change — we can’t continue in this manner, we can’t expect production to be there when it’s needed,” he said.

Cameco’s share price was sitting at C$13.53 on the TSX as of Monday (April 30) at 11:20 a.m. PST, up 11.81 percent year-to-date. On the NYSE it was at US$10.52, up 8.67 percent from the start of the year.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.



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