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Cameco optimistic despite early losses

Tuesday, 1 May 2007

Canada-based uranium producer Cameco expects its 2007 revenues to grow by 50%, despite a 47% fall in first quarter net earnings relative to the same period in 2006. The company expects to be able to sell almost 4 million pounds of uranium into new market-related contracts this year, rather than into 'legacy' contracts.

Canada-based uranium producer Cameco expects its 2007 revenues to grow by 50%, despite a 47% fall in first quarter net earnings relative to the same period in 2006.

A 48% fall in the volume uranium sales for the first quarter of 2007 was the result of the timing of sales deliveries, which the company points out are at the discretion of the customer. Recent increases in uranium prices were not sufficient to offset the decline in sales for the quarter, but Cameco remains upbeat about the outlook for the rest of the year.

The company expects to be able to sell almost 4 million pounds of uranium into new market-related contracts this year, rather than into 'legacy' contracts. This would mean that the prices realized for the contracts would reflect current uranium prices, which are much higher than the prices in the legacy contracts, which were drawn up when prices were lower.

"The nuclear industry is strong now with a promising future," noted Cameco president and chief executive officer Jerry Grandey, speaking in a teleconference to investors.

Cameco is the world's largest uranium producer, with a share of 20% of world output. It produces uranium from four operating mines in Canada and the USA, and is developing two new mines, at Cigar Lake in Canada and at Inkai in Kazakhstan. The Cigar Lake mine suffered a serious setback following a dramatic rock fall and water inflow in October 2006, but the company reports that work is proceeding on schedule with a five-phase plan to restore the underground workings, with a view to a 2010 operation start up. Production at Inkai is expected to start in late 2007.

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