Cameco provides production, market update

Cameco provided a market update regarding challenges at the Cigar Lake mine and Key Lake mill that are expected to impact its 2023 production forecast. At the Cigar Lake mine, the company now expects to produce up to 16.3M pounds of uranium concentrate this year, a reduction from the previous forecast of 18M pounds U3O8. Production from the McArthur River/Key Lake operations for 2023 is anticipated to be 14M pounds U3O8, down from the previous forecast of 15M pounds U3O8. As previously reported, mining activities at the Cigar Lake operation were initiated from a new zone in the orebody in the second quarter of this year, which impacted productivity. As mining activities continued in the west pod during the third quarter, equipment reliability issues emerged which further affected performance. The mine is scheduled to enter its planned annual maintenance shutdown that will run through most of September. At the Key Lake mill, ramp up activities remain ongoing. However, as noted in our second quarter MD&A, there is continued uncertainty regarding planned production in 2023 at Key Lake due to the length of time the facility was in care and maintenance, the operational changes that were implemented, availability of personnel with the necessary skills and experience, and the impact of supply chain challenges on the availability of materials and reagents. These factors have combined to impact production at Key Lake, leading to the reduced forecast. The McArthur River mine continues to operate well and is expected to achieve its planned production for the year. Any ore from McArthur River that is not immediately processed at Key Lake will be stored in inventory for future milling. Cameco says the company’s strategy of full-cycle value capture. Any pounds it does not produce this year will remain available and, with increasing supply pressures, potentially become more valuable when delivered in the future. Cameco has exposure to higher prices under the market-related contracts in our long-term portfolio and a pipeline of contracting discussions underway, which it expects will also benefit from the increased focus on securing access to scarce supplies and generate long-term value for Cameco. “This expected production shortfall further highlights the growing security of supply risk at a time when we believe the demand outlook is stronger and more durable than ever and where the risk has shifted from producers to utilities. Uncertainty about where nuclear fuel supplies will come from to satisfy growing demand continues to drive long-term contracting, with clear evidence that the broader uranium market is moving toward replacement rate contracting for the first time in over a decade. This is the type of contracting necessary to promote the price discovery already seen in the enrichment and conversion markets and that is expected to incentivize investments in the supply needed to satisfy the growing long-term requirements,” the company adds. This unplanned event may lead to variability in the other outlook provided in its second quarter MD&A for 2023; however, it is too soon to quantify what the impact might be.