Cameco halts Canadian uranium plant

Cigar Lake, in northern Saskatchewan is the world’s highest-grade uranium mine. (Image courtesy of Cameco)

Canadian uranium miner Cameco (TSX:CCO) (NYSE:CCJ) is placing its plant at the Port Hope conversion facility in Ontario on a temporary safe shutdown for four weeks.

The move comes as the company faces the increasing challenge of maintaining an adequate workforce as a result of screening protocols and other measures to combat the covid-19 pandemic.

Since the majority of the UO3 produced at the Blind River refinery is used to produce UF6 at the conversion facility, the refinery’s production would also be temporarily suspended and, where possible, summer maintenance work started.

“The UF6 plant is designed for continuous operation, and we need to prevent unplanned interruptions arising from personnel shortages,” Cameco’s chief executive, Tim Gitzel, said on Wednesday.

The operation will remain open to receive uranium concentrate deliveries

While production at the refinery is temporarily suspended, the operation will remain open to receive uranium concentrate deliveries, Cameco said.

The news come a day after uranium giant Kazatomprom said it expected to produce about 4,000 tonnes, or 17.5% less this year as measures designed to curb the spread of the novel coronavirus has hit operations.

The Kazakhstan-based producer’s guidance for 2020 was 22,750 to 22,800 tonnes, on a 100% basis.

Kazatomprom said it would provide updated production revenue, capital expenditure and costs targets on May 4. Last year, Kazakhstan accounted for more than 42% of the world’s uranium output.

Cameco had said on Tuesday the Kazatomprom cuts would also weigh on its 40% ownership in the Inkai Joint Venture, an in-situ recovery uranium mine in Kazakhstan. The mine is expected to produce about 12% fewer pounds this year, translating to about 600,000lb less uranium oxide for the miner’s account.

Last week, Cameco announced the closure for a month of Cigar Lake, which produces about 13% of global uranium mine supply. This was followed by a 21-day lockdown of mines in another important uranium supplier, Namibia. 

Before the announced output cuts, Cameco expected to buy 4.9 million pounds of uranium on the spot market this year.

Price revival

Uranium prices have been on the rise in the past two weeks as investors worried about ongoing disruption to supply, which is divided between a handful of major companies.

On Wednesday, prices hit $28.70 per pound, more than 20% higher than in March. Such an increase since a recent low is the common definition of a bull market. The last time the metal traded above $30 was in February 2016. Year to date, prices have climbed almost 18%.

Prior to Kazatomprom’s announcement, BMO Capital Markets was forecasting a deficit in uranium supply/demand balance of about 30 million pounds. The experts now figure that number will climb to 40 million pounds. 

“The additional 10 million removed from the market will only accelerate the depletion of above-ground inventories and potentially result in more utilities reclassifying excess inventories as strategic,” BMO analyst Alexander Pearce said in a note.

With construction of nuclear power plants at a 10-year low, however, uranium demand remains weak.

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