flood at cigar project spurs 52pc profit drop

CAMECO
TheStar.com - Business - Uranium producer stumbles
Uranium producer stumbles

Flood at Cigar project spurs 52% profit drop

Feb 08, 2007 04:30 AM
SASKATOON–Cameco Corp. reported a 52 per cent drop in fourth-quarter profits due to problems at its Cigar Lake project and said completion of preliminary cost estimates to repair the mine will take longer than expected.


Net income fell to $40.3 million, or 11 cents a share, from $83 million, or 23 cents, a year earlier, the Saskatoon-based company said.

Sales fell 2 per cent to $512 million as lower shipments eroded the benefit of surging prices.

An October flood that halted construction at the Cigar Lake mine in Saskatchewan led to $20 million in costs, and lower electricity prices reduced profit at the company's nuclear-power venture in Ontario.

A 36 per cent jump in the uranium price was erased by a 42 per cent drop in shipments, Cameco said.

Because of the flood, Cameco said, it would reschedule some planned deliveries of uranium from the unfinished mine.

The company had hoped to provide preliminary cost estimates and timelines for the mine's remediation in February, but said yesterday that a technical report on the project will not be finished until late March, when it hopes to have a better idea of when the mine will be able to be put into production.

Cameco, the world's largest producer of uranium, is reinforcing "the impression some investors have that the company is not fully participating in the uranium boom," said Kevin Bambrough, a strategist at Sprott Asset Management Inc. in Toronto. Sprott does not own shares of Cameco.

Excluding one-time items, Cameco earned 15 cents a share. Nine analysts had estimated fourth-quarter profit of 22 cents.

"Quarterly results are not a good indicator of Cameco's annual results," which were the highest ever, said Jerry Grandey, Cameco CEO.

Profit from Cameco's share of the Bruce Power Ltd. venture in Ontario fell 57 per cent to $13 million as mild weather hurt demand.


Capital spending is expected to increase 12 per cent to $517 million, with exploration spending to rise to $45 million from $32 million.


The company forecast revenue from its uranium business will grow by 45 per cent this year due to stronger prices, while its fuel services business will be about 20 per cent higher.

Revenue is expected to increase 25 per cent.

from the star's wire services