As the Canadian government introduces stricter measures to curb COVID-19, Cameco and Orano will temporarily close related projects.
As stricter measures are introduced by the Canadian government to try to quell the spread of COVID-19, two of Saskatchewan’s leading uranium producers have announced plans to temporarily shutter related projects.
Sector major Cameco (TSX:CCO,NYSE:CCJ), along with Orano, will close the Cigar Lake uranium mine (Cameco) and the McClean Lake mill (Orano) to ensure employee and community safety.
The announcement was made jointly because ore from Cigar Lake is processed at the McClean Lake mill, making a simultaneous closure necessary.
“We are in unprecedented and challenging times,” said Cameco President and CEO Tim Gitzel.
He continued, “Our leadership team took a measured approach and weighed many factors in assessing the situation both globally and locally to make this decision, which takes into account the specific and unique circumstances at Cigar Lake, a remote, isolated fly-in/fly-out northern Saskatchewan operation.”
While neither company has any reported COVID-19 cases among employees, the decision was still made to ramp down production in the coming days and leave the projects on care and maintenance for at least four weeks; at that time a decision to restart or prolong the halt will be made.
“We are all in this together,” said Orano Canada President and CEO Jim Corman. “Our operations work in tandem, and our communities are all interconnected … McClean Lake will safely be put into care and maintenance within the next few days and we will continue to assess the situation, always keeping health and safety at the forefront.”
Cigar Lake is a key mine in the uranium industry, producing 18 million pounds annually and accounting for 13 percent of global supply. During peak operations, both sites employ roughly 300 people. Cameco will reduce its staff to 35 during care and maintenance.
Uranium is a key fuel in the electricity generation cycle and is used by nuclear reactors, which supply thousands of hours of electricity globally.
“We have the tools we need to deal with the current uncertain environment,” Gitzel said. ”We will work with our customers to help meet their delivery needs and enable them to continue to provide the 24-hour nuclear power their governments and communities will need to rely on to run hospitals, care facilities, clinics and communities during this time of extraordinary uncertainty.”
While Gitzel remains confident that the company will be able to meet all its delivery requirements, he did note that the prolonged impact of closures related to COVID-19 and states of emergency could affect Cameco’s 2020 outlook — but it is still too early to tell.
The uranium sector has faced pressure from low spot prices for the past four years, keeping the fuel below US$30 a pound.
This latest round of closures brought on by the COVID-19 outbreak could move prices higher if supply constraints reduce the amount of material on the spot market.
Shares of Cameco were up 4 percent on Tuesday (March 24), selling for C$9.51 on the TSX.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.