Cameco suspends production at Cigar Lake

Cigar Lake mine. Image from Cameco.

Cameco (TSX: CCO; NYSE: CCJ) announced on Monday that it will temporarily suspend production at its Cigar Lake uranium mine in northern Saskatchewan over the coming weeks due to the increasing risks posed by the covid-19 pandemic.

“The safety of our workers, their families and communities is our top priority,” Cameco CEO Tim Gitzel said in a media statement.

“We have had six positive tests at our northern operations in recent weeks, including three at Cigar Lake. While the protocols we have put in place have to date allowed us to effectively manage these cases, there are broader risks we don’t control.”

On April 13, Cameco withdrew its production guidance for this year

Cigar Lake was put on care and maintenance during the first wave of the pandemic in March, and restarted operations in September.

At the peak of production this fall, there were about 300 workers on-site.

“Due to the suspension, we plan to increase our purchases in the market to secure uranium we need to meet our sales commitments,” Gitzel said.

“Our deliveries to date have not been materially impacted by covid-19, nor do we expect there will be a material impact on our remaining 2020 deliveries.”

On April 13, Cameco withdrew its production guidance for this year, Cigar Lake was previously expected to generate 9 million lb. of U3O8 for the company in 2020.

As of September 30, Cigar Lake had produced 2.3 million pounds of uranium concentrates.

While Cigar Lake is on care and maintenance, Cameco expects to incur costs of between $8 million and $10 million per month, which will be expensed directly to the cost of sales.

The Cigar Lake operation is owned by Cameco (50.025%), Orano Canada Inc. (37.1%), Idemitsu Canada Resources Ltd. (7.875%) and TEPCO Resources Inc. (5.0%).

Midday Monday, Cameco’s stock was up 4.7% on the NYSE. The company has a $5.5 billion market capitalization.