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    uranium investing

    Cameco Vows to Fight After TEPCO Cancels $1.3-billion Uranium Contract

    Written by Charlotte McLeod
    |
    Feb. 01, 2017 11:40AM PST

    The company said in a press release that it “sees no basis for terminating the contract, considers TEPCO to be in default, and will pursue all its legal rights and remedies.”

    The share price of Canadian uranium producer Cameco (TSX:CCO,NYSE:CCJ) dropped steeply Wednesday morning after Tokyo Electric Power Company Holdings (TEPCO) terminated its uranium supply contract with the company. 
    As of 11:10 a.m. PST, Cameco’s share price was sitting at $14.53 on the TSX, down 12.31 percent. On the NYSE it was down 12.71 percent at $11.13. The company’s 52-week range on the TSX is $9.88 to $17.67, and for most of the month it’s been trading at the higher end of that spread.
    Cameco, which produces about 18 percent of the world’s uranium at mines in Canada, the US and Kazakhstan, has vowed to fight the termination. The company said in a Wednesday press release that it “sees no basis for terminating the contract, considers TEPCO to be in default, and will pursue all its legal rights and remedies.”
    TEPCO provided Cameco with a termination notice on January 24, and confirmed on January 31 that it would not be accepting a uranium delivery from Cameco scheduled for February 1. The Japanese company has not been able to operate its nuclear plants for 18 months due to government regulations put in place after the Fukushima disaster, and is calling those circumstances a “force majeure” event.
    According to Cameco President and CEO Tim Gitzel, his company has been trying to fix the situation with TEPCO since receiving the January 24 termination notice. “During the past week we tried to engage TEPCO to obtain clarification given conflicting information we had received previously from them and only received confirmation of their intent to terminate the contract yesterday,” he said.
    The contract has been in place since 2014, and was for the delivery of over 10 million pounds of uranium. TEPCO has already received and paid for 2.2 million pounds, but an additional 9.3 million pounds worth about $1.3 billion in revenue are on the line. The remaining 9.3 million pounds were to be delivered through 2028.
    Under the contract, a period of good faith negotiations to resolve the dispute will now take place. If no resolution is reached, it will be resolved by binding arbitration. Cameco expects the process to be lengthy, especially if arbitration is involved.
    There is some concern that if TEPCO is successful in terminating its contract, other Japanese utilities may do the same. “The TEPCO force majeure notification to cancel its long-term higher-priced contract raises the question of whether other Japanese utilities may follow suit,” said Orest Wowkodaw, a Scotiabank metals and mining analyst, in a note.
    Cameco has reassured shareholders that it “has sufficient financial capacity to manage any loss of revenue in 2017 as a result of the dispute.” The company’s annual results, due for release after market close on February 9, will provide more information on its 2017 outlook.
    Don’t forget to follow us @INN_Uranium for real-time news updates!
    Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

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