Cigar Lake Rumor Costs Cameco Shareholders US$771 Million Paper Loss
Cameco: ‘No Definitive Source’ for the Rumor
On the three-month anniversary of Cameco’s initial announcement that the Cigar Lake uranium mine had been flooded, Cameco (CCJ) shares repeated October’s share price dive. Cameco’s shares on the New York Stock Exchange dropped more than 5 percent, shaving more than $771 million off the company’s market capitalization. CCJ shares changed hands at more than twice the three-month trading volume average. It was the worst daily share price decline since Cameco announced the flood would delay the company’s uranium mining operation.
This past Friday evening, Rudi Filapek-Vandyck, editor of the Sydney-based financial news website FNArena.com, emailed and asked if we could inquire or knew about a report rumored to have been written by one of Canada’s leading asset management firms. The rumor was built upon hearsay that a prestigious firm had expressed an opinion “that Cigar Lake may never come online and that the flooding of the mine still hasn’t been arrested by Cameco.”
We immediately dismissed the rumor, knowing well the opinion of the gentleman allegedly expressing that commentary, and asked the editor to directly contact him to discredit this rumor. After all, we had heard a number of conclusions about Cigar Lake’s fate from a number of sources, starting on the day Cameco first announced the flooding through to the present. Most opinions were far removed from anyone knowledgeably close to the remediation efforts.
Yesterday afternoon, this message was posted on Canada’s StockHouse.com message board, “Rumour out of Australia trading desk this morning (full disclosure - I am close to an institutional trader) that Cigar lake may be scratched all together. We know that Cameco is giving an update to the market in early Tuesday on the project.”
Around the same time, Bloomberg News reporter Christopher Donville issued a news report with this headline, “Cameco Plunges on Speculation Mine Delay May be More Extensive.” He quoted Cameco Corp media relations spokesman Lyle Krahn, who told Donville in a telephone interview that speculation about Cigar Lake being delayed indefinitely is “absolutely untrue.”
We emailed FNArena.com about contacting the institutional trading desks in Sydney, hoping he might find someone willing to discuss the source of the rumor. At the same time, we telephoned Cameco’s Lyle Krahn to discuss today’s Cigar Lake rumor. Krahn told us, “We haven’t been able to trace back the rumors to anyone. There is no definitive source for these rumors. At various times, people have come up with various rumors.” He pointed out, “We are monitoring the rumors. Nothing we have heard so far has been true, and I don’t want to repeat the rumors.”
Anyone closely following the Yahoo Finance boards or the Cigar Lake developments has heard various rumors. Canadian Press reporter Maria Babbage accurately summarized the gist of the rumor mongering in a Monday evening article, “…it is not known when the mine will actually be able to come into production and some market watchers have speculated that the mine may never start commercial production.”
After weeks of idle chitchat about Cigar Lake’s future, why did Cameco’s shares plunge on Monday? Why not this past Friday, the first trading day after Cameco announced when it would hold the company's earnings conference call?
We would like to believe it is something simple. Perhaps it was because Cameco Corp failed to mention when it would update shareholders about Cigar Lake in last Thursday afternoon’s release. On January 19th, Cameco announced it would hold a conference call on February 7th to discuss fourth-quarter earnings and ‘company developments.’ We observed this omission in a weekend article about the ‘snoozing’ uranium price. Donville also highlighted this in today’s Bloomberg News report.
In a subsequent interview with Maria Babbage, Lyle Krahn said, “We had promised an update in January, and we will issue it in January.” We asked Krahn about his company’s December 21st news release, which stated, “Cameco will issue another news release in January to update progress…” Krahn told us the news release would come out by the end of January. When we pointed out the month was nearly ending and February 7th was not that far away, he responded, “We will issue a separate news release by the end of January updating our progress, as we promised in the December news release.”
As he said to Babbage, Krahn told StockInterview, “Work is progressing as expected – drilling holes and pouring concrete.” Krahn was referring to the December 21st comments made by Cameco Corp chief operating officer Terry Rogers about remediation efforts taking place at Cigar Lake. The company expected to be ‘pouring concrete’ by December, but revised this to January after finding the drilling through Athabasca sandstone ‘more challenging than anticipated.’
In our correspondence with Filapek-Vandyck at FNArena, he wrote to us as we wrapped up this part of the story, “Several brokers picked up the Cameco ‘rumour’ this morning (Tuesday, January 23). I have seen no indication that any of them did yesterday.” One of FNArena’s leads brought in a December research report issued by Resource Capital Research, which stated on Page 5, “Cameco indicates it is confident it will be able to complete development of the project, though industry sources suggest this is unlikely before 2010.”
Filapek-Vandyck wrote, “We spoke to Resource Capital Research analyst John Wilson. He stands by his source and the information provided to him, but he obviously doesn't want to give us any insights in who his source is.” Wilson also told FNArena that a large cap like Cameco is unlikely to fall by five percent because of online message board rumors alone. As we all agreed, “Some institutions must have jumped upon the rumor.”
Why today? Perhaps it is because Monday was the first day the front month the February call and put options began on Cameco shares. Generally, traders roll over their positions into the next series, or change their convictions about the direction of their stock investment, about one week to prior, or the week of, the expiration of the previous options series.
What is known is that someone issued a rumor, or perhaps organized a rumor campaign, possibly to bring down the shares of Cameco on Monday. It may very well have started in Australia, or taken hold in that country. We continue to investigate as this is a developing story. FNArena.com will be working on the story from Australia, and as we have done in the past, our news services will exchange what we discover during the course of our investigations.
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