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Exclusive: Cameco explores U.S. mines sale as uranium slump drags on - CEO
March 6, 2017 / 6:18 PM / 7 months ago

Exclusive: Cameco explores U.S. mines sale as uranium slump drags on - CEO

Cameco CEO Tim Gitzel speaks with the media after the company's annual general meeting in Saskatoon, Saskatchewan May 28, 2014. REUTERS/David Stobbe

TORONTO (Reuters) - Canada’s Cameco Corp (CCO.TO), the world’s second-biggest uranium producer, is exploring the sale of its U.S. production facilities, its chief executive said on Monday, as a six-year industry slump drags on.

Cameco, which has been cutting costs and curbing production, is in the early stages of evaluating the sale of its mines in Wyoming and Nebraska, but also wants clarity on U.S. President Donald Trump’s plans for nuclear power, Chief Executive Tim Gitzel said in a telephone interview.

“We are in the process of looking at divesting those assets. We’re not very far into it, so I can’t say too much, but it’s something we’re looking at,” Gitzel said, speaking from Saskatoon, Saskatchewan, where Cameco is based.

Earnings of uranium producers have been hurt by low prices amid surplus supplies, tracing back to the 2011 Fukushima tsunami that led to the shutdown of all of Japan’s nuclear reactors. A few have since come back online.

Cameco shares were slightly up in Toronto at C$14.54, after spiking higher minutes after Reuters reported on the possible sale.

Cameco’s U.S. mines can annually produce 1 million to 2 million pounds of uranium, used to make fuel for nuclear reactors. Those mines - while much smaller than Cameco’s mines in northern Canada, which are among the world’s biggest - are seen as an important foothold in the United States, a big uranium consumer with little domestic production.

Canada is the second-biggest uranium producer, after Kazakhstan.

The U.S. mines use the in-situ technique of removing ore by injecting a chemical solution into wells, while leaving rock in place. Gitzel declined to place a value on the mines.

The U.S. mines have been the subject of speculation since late last year, but Gitzel has not previously commented publicly. Cameco has probably been open to selling for some time, said David Talbot, analyst at Eight Capital.

The assets are attractive, but liabilities related to reclaiming groundwater and future decommissioning of the mines may limit interest, two U.S. producers said.

The cost of reclaiming and decommissioning the U.S. mines is estimated at C$257 million, Cameco spokesman Gord Struthers said.

“It’s a heavy lift (financially),” said Paul Goranson, executive vice president at Energy Fuels Inc (UUUU.A). The liabilities do not rule out a sale to a small U.S. producer, but they would need careful management, Goranson said, adding that larger players could have interest.

The chief financial officer of Ur-Energy Inc (URG.A), Roger Smith, said the miner would be interested in Cameco’s undeveloped U.S. assets, but Cameco might package them with the mines, which are “not a good fit.”

As it ponders selling the mines, Cameco is also seeking clarity on Trump’s plans for nuclear power, and especially the views of U.S. Energy Secretary Rick Perry, Gitzel said.

Gitzel said he was closely watching whether the United States follows through with a border tax on imported commodities, which could make U.S.-based production more valuable.

Cameco would not sell its biggest-producing Canadian mines - the “crown jewels” - or its best development projects, Gitzel said.

Reporting by Rod Nickel in Toronto; Editing by Bernadette Baum and Leslie Adler

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