Cameco, the big Canadian uranium producer, sprung a major surprise on Thursday night, our time, when it revealed a net loss for the second quarter, thanks to the higher costs of closing a mine in Canada and the slide in world uranium prices.
The fall has take global uranium prices to their lowest levels in over a decade – which was one of the drivers for the mine closure in April.
Uranium prices have slumped in the wake of the Fukushima nuclear accident in Japan in 2011, with spot prices recently trading at 11-year lows. This is party due to the buildup of inventory of the material.
In fact world uranium prices have fallen from about $US70 a pound in 2011 to less than $US30.
Cameco’s net loss was $C137 million compared to a profit of $C88m in the June, 2015 quarter. The loss included a $C124.4m impairment charge of due to the suspension of its Rabbit Lake mine.
Cameco cut its annual production target from 30 million pounds a year to 25.8 million pounds.
“Market conditions have become increasingly challenging over the past five years,” Cameco’s CEO, Tim Gitzel said in a statement.
“Primary supply has simply not responded to decreased demand, and coupled with an abundance of secondary material available today, the uranium market continues to be oversupplied.”
The company said uranium sales volumes fell 37% to 4.6 million pounds in the second quarter, while its average realized price per pound fell about 8%. Revenue fell 17.5% to $C466 million
In addition, Cameco said other factors weighing on the market were reactor retirement announcements in the US as well as the Brexit vote in the UK, which it said has increased uncertainty around the country’s new reactor building program.
But that might be looking better with reports the French power company, EDF (which is the builder), has approved the massive (near $A50 billion) Hinkley Point nuclear power station deal.
There was no official confirmation on Friday morning in Australia and the story has been complicated by the resignation of an EDF director on Thursday during board discussions on the contract
Cameco accounts for around 18% of global uranium production from mines in Canada, the US. The company’s shares have fallen 18% since the April decision to suspend operations at the mine. 500 jobs were lost when that decision was made. The company also scaled back operations at its US operations.
