Cues from Cameco

“In 2012 we adjusted our growth strategy to increase annual supply to 36 million pounds of U3O8 by 2018 (previous target was 40 million pounds by 2018),” Carey Hyndman, a spokesperson for the company, told Uranium Investing News. “We expect to grow production primarily from brownfield expansions and development projects. Our greenfield projects will provide options and will be advanced at a pace measured to market opportunities.”

The company has indeed been busy working on its growth strategy. In the latter half of 2012, Cameco made a number of acquisitions that it believes will serve it well in the future. These include attaining majority ownership of the Millennium project in Saskatchewan and acquiring nuclear fuel product and service broker and trader NUKEM as well as the Yeelirrie project in Australia.

“In the context of our uranium growth strategy, we are currently focused on brownfield expansion (around existing infrastructure) and on developing projects with greater near-term certainty,” Hyndman said.

The uranium miner is also interested in growth markets and in particular is taking advantage of the opportunities presented by reactors being built in China, India and the Middle East. The company sees the progress on intergovernmental agreements as a positive factor that will lead to Canadian uranium being supplied many of those markets. Currently, Cameco has two long-term supply agreements with Chinese utilities and is continuing to look for more opportunities.

Near-term benefits

There are several catalysts on the horizon for uranium, including Japan’s reactors coming back online post-Fukushima, the end of the Highly Enriched Uranium (HEU) program in the United States and the influx of proposed and planned reactors world wide. As a result, analysts are calling uranium the number-one contrarian investment in the current market, with prices getting reading to soar at some point in the near-term future. Should all the stars line up as market watchers hope, Cameco could be the first to benefit from the coming rise in prices.

“We have a number of projects that are ready to respond, should the market reflect a need for more uranium,” Hyndman said.

When demand increases, investors can expect Cameco to ramp up production at Inkai (Kazakhstan), develop the Millennium project (Saskatchewan) and develop the Kintyre project (Australia) and/or the Yeelirrie project (Australia) once the markets take a turn for the better.

Cigar Lake start up

The development of Cameco’s Cigar Lake deposit was brought to an abrupt stop in June of 2005 when extreme flooding caused a delay and what was initially expected to be a six-month setback turned into an indefinite delay. Now, in 2013, the company has received its operating license from the Canadian Nuclear Safety Commission and is targeting a startup in Q4 2013.

“We have worked very hard to address the water inflow risk by increasing our pumping, water treatment and surface storage capacities, modifying the underground mine layout to increase the distance from water-bearing rock formations, and by increasing the use of freeze technology. We continue to make solid progress at Cigar Lake and the operating license was an important part of our path forward,” Hyndman said. “The jet boring system continues to be tested and we are preparing for commissioning in ore in mid-2013. We remain on track for the first packaged pounds of U3O8 in the fourth quarter of 2013.”

Acquisitions? 

The Athabasca Basin is Canada’s most prolific region for uranium. With current prices, the high-grade deposits of the basin have made it one of the only profitable regions operating. That explains the flurry of activity that has surrounded the region, with exploration companies staking their claims where they can, hoping to develop the next great deposit.

With that in mind, Uranium Investing News had to ask what Cameco thinks of the aggressive exploration efforts being made in the Athabasca Basin.

“What’s good for the industry, is good for Cameco. More investment means more development of possible projects, so that is always encouraging,” Hyndman said.

Not to be overlooked, a big player in the region will no doubt be keeping an eye out for acquisition targets. Without giving away too much, Cameco offered some insight on the criteria that it uses when gauging potential targets.

“Timing, price, project fundamentals and many other factors will be considered when we look at corporate development opportunities that could benefit Cameco.”