Cameco: uranium prices too low to restart McArthur River mine operation
Saskatoon – Cameco Corp. had to lay off hundreds of employees at two uranium mining operations and its head office because the market remains oversupplied and prices are too low to restart idled production, Cameco chief executive Tim Gitzel told analysts Thursday.
The Saskatoon-based company said last November that temporary closures at its McArthur River and Key Lake processing operations were expected to last 10 months, putting 845 people temporarily out of work.
But Cameco announced Wednesday that the shut-down would be extended indefinitely and about 550 employees at the two operations will be laid off permanently, while 200 will remain on board for care and maintenance.
Cameco will also cut about 150 positions at its corporate office, including employees and vacancies, to further cut costs.
“These were difficult decisions to make, because of the impact they will have on our employees, their families and other stakeholders. But we must take these actions to ensure the long-term sustainability of the company,” Gitzel said in a conference call Thursday.
He added that Cameco’s long-standing policy is to avoid building up an inventory of excess uranium. Furthermore, market prices are currently too low to “turn our operations back on.”
“McArthur River/Key Lake is either producing at 18 million pounds per year or it is not producing. Given the high fixed cost component, it does not make economic sense to run it at lower volumes.”
The job cuts were announced along with Cameco’s latest financial report, which included a net loss of $76 million for the second quarter, compared to a net loss of $2 million for the same period last year.
Gitzel said there is some reason to think demand for uranium _ used primarily for nuclear-powered electricity generators _ will rise as more Japanese reactors come back online.
Japan cut back on its nuclear power production after a 2011 earthquake and tsunami severely damaged the Fukushima Daiichi power plant _ shaking public confidence in industry and government safeguards.
China is also preparing to bring more electric power reactors on stream, and that could help increase demand incrementally, he said.
But Gitzel said it’s difficult to predict the potential impact of a U.S. threat to hit imported uranium with tariffs under the same national security clause that has been used to justify tariffs on imported steel and aluminum.
“It certainly has added to the confusion in the market, I would say.”