Cameco CEO cites worst conditions in 30 years

Uranium market conditions in 2016 were the toughest that Cameco Corp. CEO Tim Gitzel has seen in his 30 years in the business, but he says he remains cautiously optimistic about the longterm picture.

“We’ve been saying for some time that uranium prices are neither rational nor sustainable,” Gitzel told investors during a conference call Friday to discuss its dismal 2016 earnings. “Current prices are failing to incent the investment decisions required to ensure reliable supply is available to meet growing demand out into the future.”

C a mec o reported a fourth- quarter net loss attributable to shareholders of $ 144 million, or 36 cents per share, which was more than 10 times larger than the loss of $ 10 million, or three cents per share, reported in the year- earlier period. The fourth quarter of 2016 included an impairment charge of $ 238 million. The company booked a $210 million impairment charge in the 2015 quarter.

Revenues fell nine per cent to $ 887 million during the quarter. The company’s fullyear loss was $62 million.

Still, Cameco said it is encouraged by Kazakhstan’s announcement that it will cut 2017 production by 10 per cent, bolstering optimism about long- term fundamentals of uranium. Spot prices have increased by 40 per cent and term prices are up about eight per cent since a low in December.

“But let me be clear, our optimism is best described as cautious optimism — we are far from a true incentive price for sustainable production” and further cuts might be needed, unless term contracts return in meaningful quantities, Gitzel said.

“Optimistic because it appears that the pain of low uranium prices is driving meaningful supply discipline and this discipline is provoking a strengthening uranium price. Cautious because market challenges continue, challenges that might frustrate recent increases in the uranium price.”

The entire nuclear industry is still feeling the aftershock of the 2011 Fukushima nuclear disaster, with prices in the doldrums and customers re- evaluating contracts as they eye prices much lower than those in deals previously struck with Cameco.

Cameco said earlier this month it has rejected Tokyo Electric Power Company Holdings Inc.’s attempt to cancel its contract — a move that would mean $1.3 billion in lost revenue — as the Saskatoon-based uranium giant works to protect deals signed with customers before the market tanked. Cameco said it is pursuing legal action.