Canada’s top uranium producer Cameco (TSX:CCO) (NYSE:CCJ) is temporarily closing two of its operations in northern Saskatchewan, leaving 845 people without work for at least 10 months, in what is the latest evidence of the tough times the sector is facing worldwide.
The Saskatoon, Saskatchewan-based company said it would suspend production from its flagship McArthur River mine in Saskatchewan, the world’s biggest uranium mine, and the Key Lake mill by the end of January. It cited a six-year long rout in the prices for the radioactive metal as the main cause for the move. It also said it would cut its annual dividend to $0.08 per common share in 2018 from Cdn$0.10.
Cantor Fitzgerald analyst Rob Chang qualified the news Thursday as “a tough but necessary move.” He noted the company has said that with uranium prices currently around $20 a pound, it could purchase uranium at prices lower than its all-in sustaining cost.
“We view this as a prudent move and applaud all producers who elect to take this route as it saves a company’s in-situ inventory and works to reduce the excess inventories in the market,” Chang wrote.
Uranium prices have fallen more than 70% since the Fukushima disaster in 2011, remaining low since then as a result of oversupply and excess inventory in the industry.
To decrease costs, Cameco has taken drastic measures including the suspension of Rabbit Lake in 2016, which left 500 people unemployed. The company has also stopped development and curtailed production at its US operations, reduced workforce across all sites including head office, changed air commuter services for operations in Saskatchewan, changed shift schedules at two Saskatchewan sites, and downsized corporate office functions including a consolidation of its global marketing activities.
At McArthur River, Cameco is keeping 210 workers to ensure the facilities are maintained during the shutdown period. Once operations are halted there, Cameco will only have its Cigar Lake, Saskatchewan mine and the Inkai mine in Kazakhstan producing significant volumes of uranium.
The news follows the publication of a surprise loss in the third quarter this year, occasion in which the miner also announced it was cutting full-year production outlook to 24.0 million pounds from an earlier forecast for 25.2 million pounds.