Cameco Sales to Fall; Cigar Lake Faces Further Delay (Update2)By...

Cameco Sales to Fall; Cigar Lake Faces Further Delay (Update2)

By Yuriy Humber and Christopher Donville

Oct. 31 (Bloomberg) -- Cameco Corp., the world's largest uranium supplier, said lower prices will cut fourth-quarter revenue and production at its Cigar Lake mine won't start until 2011 ``at the earliest.''

The Saskatoon, Saskatchewan-based company, which also enriches uranium and mines gold, said sales will drop about 10 percent from the third quarter and expects to generate less cash from operations. Uranium spot prices have declined 38 percent since June as nuclear utilities suspend purchases.

Sales will also suffer as problems continue at Cigar Lake, which was contracted to begin operations this year and supply about a 10th of global consumption, or 18 million pounds of uranium. Repairs to the mine, the world's biggest untapped source of uranium which was flooded a year ago, is taking longer than forecast, Cameco said today in a statement.

``It's a slight negative for Cameco and a slight positive for the price of uranium,'' Kenneth van der Vlugt, a senior vice president with Raymond James Financial Inc. which brokers uranium, said by phone from Dusseldorf, Germany.

Delays to production at Cigar Lake helped push uranium prices as high as $138 a pound in June, increasing costs for utilities that run nuclear reactors.

``I wish I had some action in the uranium miners because I think they will get a boost from their competitor's short-term woes,'' said Yolanda Holtzee, who managed Seattle-based Alcap LLP. Holtzee sold her uranium stocks in the summer.

Profit Rises

Cameco's third-quarter profit rose to C$102 million ($106.7 million), or 25 cents a share, from C$73 million, or 20 cents, a year earlier, the release said.

Cameco said it sold uranium for an average $52.76 a pound in the quarter, compared with $20.12 a year earlier, as hedge funds and other speculators competed with nuclear power companies for supplies of the radioactive metal. The average price of uranium for immediate delivery in the period was $107.17, double what it was a year earlier.

Cigar Lake is half-owned by Cameco, with 37 percent held by a unit of Paris-based Areva SA, the world's biggest reactor maker, 8 percent by Idemitsu Canada Resources Ltd. and 5 percent by Tepco Resources Inc.