Uranium production not where we would like it to be – Cameco CEO
Canadian uranium über miner Cameco announced Monday it was lowering its 2011 production outlook by 1%, decreasing UF6 conversion production, and reducing this year’s capex to $575 million. During a conference call with analysts and journalists Monday, Cameco CEO Tim Gitzel said, “Production is not quite where we wanted it to be, mostly because of maturing well fields at Inkai and permitting delays at Smith Ranch in Wyoming.”“However, we are pleased to report that we expect production at our McArthur River-Key Lake project to increase, which offsets some of the shortfall in the U.S. and Kazakhstan,” he added.
Cameco now expects uranium production to be 21.7 million pounds this year, down from the previous 2011 guidance of 21.9 million pounds. Uranium production for the first nine months of the year was 15.8 million pounds, 4% lower than the 16.5 million pounds produced in the first nine months of last year.
For the third quarter of this year uranium production dropped 5% from 5.6 million pounds in third-quarter 2010 to 5.3 million pounds.
Uranium hexafluoride or UF6 conversion dropped 1% during the first nine months of this year from 16.5 million pounds during the first nine months of 2010 to 11.6 million pounds. For the third quarter of 2011, UF6 production jumped 22% from 2.3 million pounds in third-quarter 2010 to 2.8 million pounds.
Due to unfavorable market conditions for UF6 conversion, Cameco is reducing production this year from the previous guidance of 15 million to 16 million kgU [uranium kilograms] to between 14 million to 15 million kgU.
During Monday’s conference call, Cameco officials characterized the uranium market as uncertain and expect the uncertainty to continue in the near to medium term as the industry continues to determine the extent to which short- to medium-term demand has been impacted by the March nuclear incident in Japan. “The biggest drivers of uncertainty are concerns about excess German and Japanese uranium inventories and the extent to which deferrals and/or cancellations under sales contracts will introduce additional volumes into the market,” said Cameco.
Nevertheless, Cameco explained, “We are in the enviable position of being heavily committed under long-term sales contracts until 2016. With more than 33 million pounds of uranium under contract, we expect to have a solid revenue stream for years to come, even in the event of declaring market prices. With a target of 40% fixed-priced contract and 60% market-related, our portfolio is designed to give us increasing leverage when uranium prices increase, and to protect us when prices decline.”
FINANCIALS
Adjusted net earnings for the first nine months of this year dropped 16% from Cdn$307 million or 78-cents per share for the first nine months of 2010 to C$259 million or 66-cents per share.
For the third-quarter 2011, Cameco reported adjusted net earnings of C$104 million or 26-cents per share, a 30% increase over the net earnings of C$80 million or 20-cents per share for the same quarter of last year.
“Our outlook for 2011 reflects the expenditures necessary to help us achieve our strategy,” Cameco said. “Our outlook for uranium production, exploration, fuel services production, direct administrative costs and capital expenditures has changed from the outlook included in our second quarter MD&A.”
Cameco has lowered its 2011 capex estimate from the previous guidance of $590 million to $575 million due to changes in project scheduling. “We do not expect this reduction in capital expenditures in 2011 will impact our plans to double uranium production to 40 million pounds by 2018,” the company said.
Exploration costs are expected to increase 0% to 5% this year (previously forecast to be a 5% to 10% decrease) based on increased evaluation activities at Kintyre. Exploration expenses in the first nine months of the year increased from C$68 million in 2010 to $71 million. Exploration this year is focused on Canada, Australia, Kazakhstan and the U.S.
Cameco now expects uranium production to be 21.7 million pounds this year, down from the previous 2011 guidance of 21.9 million pounds. Uranium production for the first nine months of the year was 15.8 million pounds, 4% lower than the 16.5 million pounds produced in the first nine months of last year.
For the third quarter of this year uranium production dropped 5% from 5.6 million pounds in third-quarter 2010 to 5.3 million pounds.
Uranium hexafluoride or UF6 conversion dropped 1% during the first nine months of this year from 16.5 million pounds during the first nine months of 2010 to 11.6 million pounds. For the third quarter of 2011, UF6 production jumped 22% from 2.3 million pounds in third-quarter 2010 to 2.8 million pounds.
Due to unfavorable market conditions for UF6 conversion, Cameco is reducing production this year from the previous guidance of 15 million to 16 million kgU [uranium kilograms] to between 14 million to 15 million kgU.
During Monday’s conference call, Cameco officials characterized the uranium market as uncertain and expect the uncertainty to continue in the near to medium term as the industry continues to determine the extent to which short- to medium-term demand has been impacted by the March nuclear incident in Japan. “The biggest drivers of uncertainty are concerns about excess German and Japanese uranium inventories and the extent to which deferrals and/or cancellations under sales contracts will introduce additional volumes into the market,” said Cameco.
Nevertheless, Cameco explained, “We are in the enviable position of being heavily committed under long-term sales contracts until 2016. With more than 33 million pounds of uranium under contract, we expect to have a solid revenue stream for years to come, even in the event of declaring market prices. With a target of 40% fixed-priced contract and 60% market-related, our portfolio is designed to give us increasing leverage when uranium prices increase, and to protect us when prices decline.”
FINANCIALS
Adjusted net earnings for the first nine months of this year dropped 16% from Cdn$307 million or 78-cents per share for the first nine months of 2010 to C$259 million or 66-cents per share.
For the third-quarter 2011, Cameco reported adjusted net earnings of C$104 million or 26-cents per share, a 30% increase over the net earnings of C$80 million or 20-cents per share for the same quarter of last year.
“Our outlook for 2011 reflects the expenditures necessary to help us achieve our strategy,” Cameco said. “Our outlook for uranium production, exploration, fuel services production, direct administrative costs and capital expenditures has changed from the outlook included in our second quarter MD&A.”
Cameco has lowered its 2011 capex estimate from the previous guidance of $590 million to $575 million due to changes in project scheduling. “We do not expect this reduction in capital expenditures in 2011 will impact our plans to double uranium production to 40 million pounds by 2018,” the company said.
Exploration costs are expected to increase 0% to 5% this year (previously forecast to be a 5% to 10% decrease) based on increased evaluation activities at Kintyre. Exploration expenses in the first nine months of the year increased from C$68 million in 2010 to $71 million. Exploration this year is focused on Canada, Australia, Kazakhstan and the U.S.
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