Cameco cuts uranium production guidance

While gold had a quiet week, activity was strong in the uranium sector as a major miner announced output cuts.

In a September 3 update, Cameco (TSX:CCO,NYSE:CCJ) spoke about operational challenges, saying that the Cigar Lake mine is now expected to produce up to 16.3 million pounds of U3O8 this year, down from the previous forecast of 18 million pounds. Meanwhile, output from the McArthur River/Key Lake operations is set to come in at 14 million pounds of U3O8, down from the 15 million pounds predicted earlier. Altogether that amounts to a 2023 production cut of 2.7 million pounds for Cameco.

The company offers various reasons for the decline in its news release. It states that Cigar Lake's productivity was impacted in the second quarter of this year when mining activities were initiated from a new zone in the orebody, with equipment reliability issues further affecting the asset's performance in Q3. Aside from that, while the Key Lake mill continues to ramp up, it's facing operational problems due to the length of time it was on care and maintenance.

Uranium experts have been speaking for years about the tightness of supply amid growing demand, and the news from Cameco adds support to their positive forecasts. In fact, Cameco itself discusses the growing risk of supply security in its release, saying it comes at a time when the demand outlook is "stronger and more durable than ever"

The U3O8 spot price is currently above US$60 per pound, still below its all-time high of more than US$130. Many uranium bulls believe it could reach and surpass that level during this cycle — we'll be watching to see how the situation develops.