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Cameco restarts production at McArthur River/Key Lake following four-year shutdown

McArthur River/Key Lake, located in northern Saskatchewan, Canada, are the world’s largest high-grade uranium mine and mill. Credit: Cameco

Cameco (TSX: CCO; NYSE: CCJ) announced on Wednesday that the first pounds of uranium ore from the McArthur River mine have now been milled and packaged at the Key Lake mill, marking the achievement of initial production as these facilities transition back into normal operations.

“McArthur River and Key Lake are among the best and most prolific uranium assets on the planet, and after building homes for these pounds in our long-term contract portfolio, we are delighted to have them back in production,” Cameco CEO Tim Gitzel said in a news release.

“Market conditions have continued to strengthen since we announced their planned restart, with growing geopolitical uncertainty adding to energy security concerns worldwide, and the ongoing global emphasis on decarbonization and electrification only gaining momentum,” Gitzel said.

Production was suspended at McArthur River and Key Lake for approximately four years beginning in January 2018 due to persistent weakness in the global uranium market.

In February 2022, with a notable market improvement underway and an increase in long-term contracting activity adding significant volumes to our portfolio, Cameco announced the next phase of its supply discipline, which included the planned restart of both operations.

This initial production is a “significant milestone” for the operations and comes as the result of completing critical automation upgrades, maintenance readiness checks, and restaffing, recruitment and training for key positions at both facilities, Cameco said.

There are now approximately 730 employees and long-term contractors working at the mine and mill – more than half being of Indigenous heritage – with additional hiring planned going forward. The sites will continue with final commissioning activities to ensure target production rates can be met and normal operating conditions are being achieved.

McArthur River/Key Lake are expected to produce up to 2 million pounds (100% basis) of uranium concentrate (U3O8) in 2022. Starting in 2024, Cameco plans to produce 15 million pounds of U3O8 per year from these operations, 40% below their annual licensed capacity.

Cameco expects the return to production at McArthur River/Key Lake will lead to a significant improvement in the company’s future financial performance.

“We anticipate it will be positive for cash flow and will allow us to source more of our committed sales from lower-cost produced pounds. In addition, we will no longer be required to expense care and maintenance costs directly to cost of sales. Until we achieve a reasonable production rate, however, we expect to incur between C$15 million and C$17 million per month in operational readiness costs, which will be expensed directly to cost of sales,” Gitzel said.

In the third quarter of 2022, the company had booked a C$20 million loss, which was considerably less than the C$72 million loss posted in the prior-year quarter, reflecting normal quarterly variations in contract deliveries and efforts to ramp up production by 2024.

Shares of Cameco closed 3.7% lower at market close Wednesday. Its market capitalization was C$13.7 billion.