Cameco hopes to seal off water flow to Cigar Lake in Q2 Canadian Press
SASKATOON — Cameco Corp. hopes to complete the work necessary to seal off water flow to the Cigar Lake uranium mine in the second quarter, but won't be able to provide cost estimates until late March, a month later than previously expected.
The mine flooded last April and again in October, causing Cameco to delay production startup at Cigar Lake by at least a year.
Six of the 14 drill holes planned for reinforcing and sealing off the water inflow area have been completed, Cameco said Thursday. Part of the remediation plan involves drilling holes and pumping concrete through them to seal off the water, then drilling more holes to drain water from the mine.
While Cameco expects to complete the work needed to seal off water flow in the second quarter, it acknowledged the possibility that it may not meet that target.
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Its ability to finish the work by that time depends on whether the two drill rigs maintain the current round-the-clock pace, and whether the concrete hardens as planned, preventing or reducing water inflow to allow for the mine to be drained. The company currently has about 280 people working on-site and is bringing in a third drill in February.
“We are overcoming the challenges related to drilling through the Athabasca sandstone and are now making steady progress toward sealing the inflow area,” Cameco senior vice-president Terry Rogers said in a release.
Cameco said it will be able to provide an estimate for when it expects to complete the drilling of four more holes for draining the mine once it starts the work.
The Saskatoon-based company is preparing a technical report for the mine, which it expects to complete and release publicly in late March. As a result, the company won't be able to provide an estimate of preliminary costs for the work or timelines until then, instead of February, as it had previously promised.
The report will help Cameco determine whether the mine's reserves will need to be reclassified from proven to probable.
“Cigar Lake is an extremely valuable deposit that is expected to play a significant role not only in Cameco's future but as part of the world's uranium supply,” Mr. Rogers said. “Given its importance, we believe taking extra time to develop our remediation plans and estimate costs is prudent.”
But work on Cigar Lake is moving slower than expected, said Brian Mok, an analyst with Research Capital Corp.
“At least they're making some progress on the project,” he added.
“For the time being, it shows the market that they're still in control of the situation.”
Mr. Mok estimates that the reclamation work will add about $200 million to the cost of the project, which had originally been estimated at $660 million. He expecting the mine to begin production in early 2010, instead of 2008.
“This drilling that they're doing now from surface wasn't in the original budget, so I'm estimating that's going to cost quite a bit,” he said.
The flooding at Cigar Lake also sent uranium prices soaring in 2006. They nearly doubled last year, with some analysts forecasting an average price of $100 (U.S.) per pound in 2007 as demand continues to outstrip supply.
Cameco's latest update on the mine probably won't have much of an effect on uranium prices, but it might “get some deals flowing,” Mr. Mok said.
Construction at the deposit, which has estimated proven and probable reserves of more than 232 million pounds of uranium at an average grade of 19 per cent, began in January 2005. It came to a halt last April after water flooded a shaft at the project used mainly for underground ventilation during production after a valve broke, allowing water to enter the shaft.
Then in October, two massive bulkheads failed to hold back water from a flood after a rock slide in a shaft about a half kilometre underground, flooding the entire mine.
The mine is 50 per cent owned by Cameco, with Areva Resources Canada Inc. holding 37 per cent, Idemitsu Uranium Exploration Canada eight per cent and Tepco Resources Inc. five per cent. It is expected to produce 18 million pounds of uranium a year.
Earlier this week, Cameco's stock price declined five per cent with the company unable to account for the drop. Mr. Mok said there were rumours circulating at the time that the project had been suspended indefinitely.
In trading on the Toronto Stock Exchange on Thursday, the Saskatoon-based uranium company's shares fell 47 cents to close at $45.10 (Canadian), a drop of one per cent, in trading of 1.7 million shares.
ARU Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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