Cameco Q1 net profit falls 40 per cent on weak uranium and gold results

Comment: did I hear someone say the uranium from Virginia will stay in the states, don't think so!!! Uranium Mining co are losing money so they are depending on future Nuke plants built outside US!!!

10 hours ago

TORONTO — Cameco Corp. (TSX:CCO) said Friday its first quarter profit fell by 40 per cent compared with the same period last year on weaker results from its uranium and gold businesses and higher costs.

Cameco chief executive Jerry Grandey said the company's costs of sales are expected to rise by 15 to 20 per cent as it purchases uranium at "substantially" higher prices than its cost of production to take advantage of trading opportunities.

"While we are reporting lower net earnings than the comparable quarter of 2008, a major component of that change relates to opportunities Cameco finds in the uranium market," Grandey said in a conference call Friday.

"Our reason for purchasing in the first quarter was for one purpose only: to seize trading opportunities which our marketing staff identified."

He added that he expects the higher costs to be offset down the road.

"We will realize additional revenue and earnings as we deliver the purchased material to our customers," Grandey said.

The world's biggest uranium miner, which also has nuclear power generation and gold businesses, said its first-quarter profit fell to $82 million or 22 cents a share from $133 million or 39 cents a share a year earlier. Revenues rose to $615 million from $593 million.

The Saskatoon-based company said it generated lower earnings in the uranium and gold businesses, but that was partially offset by improved results in its electricity division.

Cameco is working on exiting the gold business and expects higher uranium prices to bolster its results in the future, Grandey said.

"Investors should rest assured that our customers both current and potential need secure long-term uranium supply as nuclear power generation expands, an expansion that is real and happening now."

Ten new nuclear reactors are currently under construction and Grandey said he expects 95 new reactors to come online over the next 10 years. He said many of these reactors are in Asia, where utilities are investing in mine development and buying future supply.

"In doing so, they see that securing fuel for their reactors must cover the cost of bringing new deposits into production, and this bodes well for the long-term price of uranium," he said.

The spot price of uranium fell dramatically as the global financial crisis cut industrial demand for electricity, from US$90 a pound at the beginning of 2008 to $40 a pound in early 2009.

It has since rebounded slightly to about $44 a pound, and Grandey said he expects it has hit bottom and will continue its upward trajectory.

Cameco has uranium mines, mills, conversion plants and exploration projects in Saskatchewan, Ontario, the United States and Australia. It also has a controlling stake in Centerra Gold (TSX:CG), a Toronto-based miner with operations in central Asia.

Last month, Cameco agreed to transfer a stake in Centerra Gold to the Kyrgyz Republic in a move that resolved a dispute over the Kumtor gold mine, Centerra's main asset.

When the deal is finalized, the Central Asian government would own up to 33 per cent of Centerra, Cameco at least 37.8 per cent, and remaining shareholders about 29.2 per cent.

Cameco estimates it had a pre-tax loss of about $113 million at the end of the quarter because of the agreement, as well as an after-tax recovery of $17 million from prior years.

On the electricity side, Cameco is a key partner in the Bruce Power nuclear power plant on the shores of Lake Huron in southwestern Ontario.

Grandey cautioned that Bruce Power's earnings could decline by five to 10 per cent for 2009 because of "projected lower realized prices."

Cameco also continues to work on cleaning up flooding problems at its Cigar Lake development project in Saskatchewan, a project expected to take most of 2009 to complete.

"We know that many of you are impatient to see development resume," Grandey told investors and analysts. "We are too, but we intend to do it systematically to assure success at each stage. Like one of Faberge's eggs, the ore body is too valuable to cut corners in its development."

Cameco shares were up $1.36 or almost five per cent to $28.76 in afternoon trading on the Toronto Stock Exchange.


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