Cameco
President and CEO Tim Gitzel said the company was largely unaffected in
2011 by the slowdown in new reactor construction and lower uranium
prices, but the Canadian uranium miner forecast a somewhat gloomier 2012
in a conference call with analysts February 10.
Cameco
sold 32.9 million pounds of uranium in 2011 at an average realized
price of US$49.17/lb versus 29.6 million lb in 2010 at an average
realized price of US$43.63, the company said.
Revenue
for 2011 came in at C$1.6 billion, up from C$1.3 billion in 2010. Gross
profits came in at C$632 million in 2011, up from C$532 million in
2010.
Net earnings fell to C$450 million for 2011, compared with C$516 million in 2010.
The
company said net earnings were impacted by losses on foreign exchange
derivatives compared to gains in 2010 and by higher costs of sales,
lower income in electricity sales and higher taxes.
Lower 2012 revenue
In
its financial results released late February 9, the company said it
expects consolidated revenue in 2012 to be as much as 5% lower due to
lower sales volumes in the fuel services business (uranium conversion
services) and lower realized prices on uranium sales.
Uncertainty
over the status of reactors in Germany and Japan has caused concern
that, in the near to medium term, excess inventory held by these
utilities could be dumped on the market due to deferrals and/or
cancellations of deliveries under sales contracts.
“This
has caused market participants to be discretionary in their purchases,”
Cameco said. “We believe that utilities will continue to work with
producers to manage these materials and minimize the impact on the
market,” the company said.
Gitzel
said during the conference call February 10 that Cameco “had had a few
requests for deferrals and had agreed to some,” but he said he didn’t
expect these excess inventories to “hit the market in an irresponsible
way.”
In
fact, Gitzel said, Cameco was able to sell back on the market at higher
prices those quantities which Cameco had agreed to defer or cancel with
customers to date.
Based
on current spot prices, Cameco said it expects 2012 revenue should be
about 0% to 5% lower than it was in 2011 as a result of an expected
decrease in the realized price.
Double U & Inkai
Cameco’s
plans to double uranium production by 2018 to 40 million pounds -- it
was 22.4 million pounds in 2011 -- may hinge in part on its joint
venture with Kazakhstan state nuclear company Kazatomprom.
Cameco
has been trying since 2007 to significantly increase production at the
joint venture Inkai mine in Kazakhstan, but Kazatomprom is holding out
for a share of a uranium conversion facility.
Cameco currently owns 60% of JV Inkai. It is planning to spend C$10 million on capital expenditures at Inkai this year.
Cameco
said it reached a new agreement with Kazatomprom in 2011 to increase
annual production in 2012 from blocks 1 and 2 at Inkai to 5.2 million
lb/year on a 100% basis, up from the current 2.5 million lb.
However,
Kazakhstan government approval is still pending and Cameco said it
needs to finalize a binding agreement on the the 2011 memorandum before
production can be increased to 5.2 million pounds.
Under
the 2011 agreement Cameco will receive the right to 2.9 million pounds
of Inkai's annual production and receive profits on 3.0 million pounds.
Cameco
said that if Inkai does not receive the government approvals for the
increased production, or if the permits and approvals are delayed,
“Inkai may be unable to achieve its 2012 and future annual production
targets and we may have to recatagorize some of Inkai's mineral reserves
as resources.”
To
increase production at Inkai to 10 million lb uranium, Cameco’s longer
term goal, “we continued to explore with Kazatomprom the feasibility of
building a uranium conversion facility and other potential
collaborations in uranium conversion,” Cameco said.
The
talks over the uranium conversion facility, which have been ongoing
since 2007, have focused on the possibility of building a 12,000 mt UF6
conversion plant at the Ulba Metallurgical Plant in Kazakhstan and/or
expanding existing converion capacity at Westinghouse’s conversion and
fuel facilities at Springfields in the UK.--David Stellfox
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