Cameco says 13 of 14 drill holes needed in flooded mine are completed
Mon Mar 19, 4:51 PM
SASKATOON (CP) - Cameco Corp. shares (TSX: CCO.TO) traded higher on Monday as investors appeared to take some comfort in the company's latest plan for its flooded Cigar Lake mining project, even though the uranium mine will be two years late and cost nearly $180 million more than originally expected.
Research Capital analyst Brian Mok said Cameco's announcement removes an "overhang of not knowing" and investors may take some reassurance from a target date for the mine to start - even though it will be late and over budget.
"That's good that they finally put something out there, just stating exactly what their target is," Mok said in an interview. "Whether they make that is an entirely different debate, but at least they've got a milestone out there."
Cameco shares gained $1.97 or about 4.6 per cent to trade for $45.18 on the Toronto Stock Exchange on Monday.
The Saskatoon-based company said it is now aiming to have its Cigar Lake project in production by 2010. The original target date was 2008.
The Saskatoon-based company also said its share of the capital costs related to Cigar Lake's production startup have risen from the last estimate of $330 million to $508 million. Cameco has already spent $234 million on construction so far, with another $274 million remaining.
But despite the increased capital costs, Cameco insists Cigar Lake, in northern Saskatchewan, remains a financially attractive project.
"The economics of the mine remain robust under a wide range of scenarios," Cameco CEO Jerry Grandey told a conference call with analysts.
Grandey said 13 of the 14 drill holes planned for reinforcing and sealing off the water inflow area are complete, while concrete is required in two locations underground - one near the rockfall to seal off where the water entered the mine and another in a nearby tunnel to provide reinforcement.
In addition to the capital costs, Cameco said its share of flood remediation is estimated at $46 million and will be expensed in the year they occur. The company spent and expensed $5 million of that amount in 2006.
Cameco said it will file a technical report on the mine's progress with Canadian securities regulators by the end of the month.
Mok said he will be looking in that report for any hint about how the flooding might affect the operating cost of the mine as well as the details of the cost escalations in building the mine.
"My hope is that they will give some indication as to how or what their previously budgeted operating costs are," he said.
The flooding at Cigar Lake sent uranium prices soaring in last year.
Last April, water flooded a shaft at Cigar Lake used mainly for underground ventilation. Then in October, two massive bulkheads failed to hold back water from a flood after a rock slide in a shaft about a half-kilometre underground, flooding the entire mine.
In 2006, Cameco saw its fourth-quarter earnings fall by more than half that of the previous year.
It earned $83 million, or 23 cents a share, in the last three months of 2005, but only brought in $40 million, or 11 cents a share, for the three months ended Dec. 31, 2006.
But its 2007 outlook remains rosy. It says its revenue from its uranium business is forecast to grow by 45 per cent and its fuel services business will be 20 per cent higher than that of 2006.
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