Cameco, Orano suspend Saskatchewan operations due to COVID-19

Cameco’s Cigar Lake uranium mine in northern Saskatchewan. Credit: Cameco.

Uranium companies Cameco (TSX: CCO; NYSE: CCJ) and Orano Canada are suspending mining and processing activities at their operations in northern Saskatchewan due to COVID-19.

The two companies jointly agreed to suspend production activities: Cameco operates the high-grade underground Cigar Lake mine, with processing of the ore at Orano’s McClean Lake mill.

A production ramp-down will take place in the coming days ahead of a four-week care and maintenance period, which may be extended as the situation unfolds.

Government precautions and restrictions, coupled with concerns among leaders of remote communities and challenges with maintaining physical distancing at the sites all factored into the companies’ decisions to wind down their activities.

The operations produced 4 million lb. U3O8  so far this year; Cameco’s share is 50% of this output.

In its release, Cameco indicated that its 2020 attributable Cigar Lake production guidance of 9 million lb. U3O8 may be impacted. In addition to the Saskatchewan operation, the company holds a 40% stake in the Inkai in-situ uranium mine in Kazakhstan, which churned out a total of 8.3 million lb. U3O8  last year.

Cameco has a 50% stake in the Cigar Lake mine (37.1% Orano Canada, a French nuclear company, 7.9% Idemitsu Canada, a Japanese petroleum company, and 5% TEPCO Resources, also known as Tokyo Electric Power Company).

In a research note to clients on March 24, London-based Alexander Pearce of BMO Capital Markets modelled a 12-week suspension that would remove “about 5 million lb. U3O8 from primary supply this year (~2.7 million lb. attributable to Cameco), or ~3% of global demand.”

“Suspending Cigar Lake, the world’s largest remaining producing uranium mine (even temporarily) has the potential to significantly increase the supply deficit beyond our current estimate of ~20 million lb. this year, which could act to provide some support to the uranium price (currently ~US$24/lb.),” Pearce stated.

“As a reminder, whilst not totally immune to a COVID-19 virus linked economic slow-down, base load nuclear uranium demand is less likely to be impacted near term.”


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