No more closures, layoffs despite Q1 loss, Cameco says
SASKATO O N Losses continue to pile up for Cameco Corp., but the uranium mining firm’s chief executive says the “difficult” cost-cutting measures it undertook last year are starting to work and that it doesn’t have plans for more layoffs or mine closures.
Cameco’s decision to close its Rabbit Lake mine and lay off staff from its headquarters and other mines led to a 30 per cent reduction in its mining costs and a 27 per cent cut to its administrative expenses, Tim Gitzel said Friday.
“It hasn’t been easy, I will freely admit that,” he said after the company reported losing $18 million in the first quarter of 2017, which comes on the heels of the $62-million loss it sustained in 2016.
“Six years is a long time to be in a down market. But that’s where it’s at. We can’t control the market; all we can control is how the company operates in it … We’re going to work our way through this.”
Cameco’s difficulties stem from the 2011 Fukushima Daiichi nuclear disaster, which forced the shutdown of 54 Japanese reactors and sent uranium prices spiralling downward, from around US$70 per pound to below US$30 per pound. The company responded by shuttering Rabbit Lake, curtailing its U.S. in situ recovery operations, cutting about 10 per cent of its corporate workforce and, more recently, eliminating 120 jobs from its remaining operations in Saskatchewan.
The layoffs at the McArthur River and Cigar Lake mines and Key Lake mill are nearly complete, Gitzel said. The company will always examine ways to operate more efficiently, but does not have plans to further reduce its operations, he added.
The loss Cameco reported Friday comes on revenues totalling $393 million and is attributable to factors such as typically slow first quarter sales, severance costs, unfavourable exchange rates and the unexpected loss of a $1.2 billion sales contract.
In the first three months of 2016, by comparison, the uranium miner made $78 million on $408 million in revenue. The loss it reported last year was largely due to massive writedowns related to Rabbit Lake and a development project in Australia.
While it remains unclear when prices — which put around half of all global production “underwater” — will recover, the prospect of more reactor restarts in Japan and 57 new nuclear plants under construction worldwide are en- couraging, he said.
But while Cameco remains “cautiously optimistic” about prices recovering as nuclear becomes a more attractive baseload power option in a world increasingly concerned about climate change, there are long-term concerns too, Gitzel added.
Few if any uranium companies are spending money to develop new projects — Cameco has three: Millennium in Saskatchewan plus two in Western Australia — and that could become a problem as producing mines near the end of their lives, he said.
“Cigar Lake, our shiny new project, has reserves in phase one to about 2027. That’s nine and a half years from now. We should be thinking about what’s coming after that. We’re not. Not in this market.”