Cameco set to shut down Rabbit Lake mine
As Cameco Corp. emerges from its “toughest quarter in the toughest market” in a decade, it is on track to close down its Rabbit Lake uranium mine this fall, which will result in all but about 120 of the mine’s 600-strong staff losing their jobs.
Extremely weak uranium prices also led the Saskatoon company to “right size” its administrative operation, with “a few” people let go and possibly more to follow, according to its president and CEO.
“We’ll be looking at our activities and our departments across the company as to what we need to do, what’s nice to do and what we don’t need to do,” Tim Gitzel said in an interview.
“Obviously, with reduced activities in Rabbit Lake and in the U.S. (where Cameco curtailed production in April), it wouldn’t surprise anyone if we reduced some numbers here in Saskatoon as well,” he added.
Cameco announced its plan to close Rabbit Lake — one of three mines it operates in northern Saskatchewan — and conduct a corporate staffing review this spring, in response to prolonged weakness in the global uranium market.
Uranium prices have fallen precipitously since the 2011 Fukushima Daiichi disaster led to the shutdown of every nuclear reactor in Japan. Pounds of yellowcake that sold for US$70 before the market collapsed now trade for less than US$30.
Besides resulting in hundreds of job losses, the company’s decision to close Rabbit Lake and concentrate on its low-cost Cigar Lake and McArthur River mines cost about $35 million, and on Thursday, a $124-million impairment charge.
That charge — effectively a means of writing off assets — led the company to report a secondquarter loss of $137 million, or $0.35 per share, on revenues of $466 million, compared to the $88 million it earned in the same period last year.
Halfway through 2016, Cameco is $59 million, or $0.15 per share, in the red on revenues totalling $875 million. By comparison, the company had made $79 million, or $0.15 per share, on $1.13 billion in revenue at the same point last year.
At the same time, Cameco’s decisions to cut costs and rely on its low-cost production facilities positioned it to weather the “lower for longer” market scenario it has been anticipating, Gitzel said.
Cameco said Thursday that it has sales commitments of between 30 and 32 million pounds of uranium this year, with production guidance of 25.8 million pounds following a modest reduction in April.
“We’re good, and those (sales) contracts are in place for the next several years,” Gitzel said. “We’re heavily committed into 2019, even into 2020. And so the company will be fine, but we have to be very prudent.”
While it’s unclear when the market will recover, there are encouraging signs, including 60 new reactors under construction around the world, which are expected to increase demand for uranium, Gitzel said.
Because the company doesn’t know how long it will take for demand to creep upward, its biggest challenge over the short term will be keeping costs low, he added.
“Yes, we have to make some decisions and we regret the consequences that they have on people, but it’s our responsibility to keep the company sustainable over the long term — and we’ll do that.”