Cameco will restart its Cigar Lake uranium mine in Saskatchewan, Canada in early September, "providing it is safe to do so," after shutting the facility March 23 due to the coronavirus pandemic, the producer said July 29.
"We will not be able to make up the lost production and are therefore targeting our share of 2020 production [from Cigar Lake] to be up to 5.3 million pounds [U3O8] in total," CEO Tim Gitzel said in the company's second-quarter 2020 earnings statement.
Prior to the pandemic, the company said February 7 in its 2019 annual report that it planned to produce 9 million lb in 2020.
Cameco owns 50% of Cigar Lake. Orano Canada owns 37.1%, Idemitsu Canada Resources 7.875% and TEPCO Resources 5%.
The company reported a net loss of C$53 million ($39.72 million) in Q2. Cameco said the loss was due to an increase in spot purchases of uranium at higher prices, as well as additional care and maintenance costs of C$37 million resulting from the temporary closure of Cigar Lake, the Blind River refinery and the Port Hope uranium hexafluoride conversion plant due to the pandemic. Blind River and Port Hope were shut in March, but restarted operations in May.
Cameco posted a loss of C$23 million in Q2 2019.
The company posted revenue of C$525 million in Q2, compared with C$388 million a year earlier.
Increase in purchases
Cameco began a spot uranium purchasing program in 2018 when it shut its McArthur River uranium mine due to market conditions in order to make up for the loss of 9 million lb U3O8 from its share of the mine and fulfill deliveries to utility customers.
"We expect an increase in our required spot market purchasing in 2020 to meet our delivery commitments and to maintain our desired inventory levels," Cameco said in its statement.
Gitzel said during an earnings call July 29 that Cameco was "active on this front" in Q2, buying 14.7 million lb U3O8 at an average price of $31.30/lb. The majority of the purchases were spot market purchases, he added.
In addition, Gitzel said the company will continue to buy uranium for 2020 deliveries and could also purchase for 2021 this year.
Cameco recorded no uranium production in Q2, though sales increased to 9.2 million lb. The company produced 2.5 million lb and sold 6.6 million lb in the same period a year ago.
Market sources have said they expected Cigar Lake to restart at the end of this year or early next year, and were surprised by the plan for a September restart.
An intermediary said July 29 that the restart is "shocking," given that the number of positive novel coronavirus tests in Saskatchewan continues to rise.
A producer said July 29, "Cameco has got to know that the restart is going to have a dampening effect on price."
A utility fuel buyer agreed, saying July 29 he expects the price for delivery to Cameco "to drift down" to $30/lb.
S&P Global Platts assessed the 12-month average of uranium spot prices, based on the mean of assessed activity for U3O8 delivered over the next 12 months, at $32.65/lb at 1 pm ET (1700 GMT) July 29.
