Bloomberg News

Cameco Falls After Cutting Uranium Output Forecast Through 2015

November 07, 2011

Nov. 7 (Bloomberg) -- Cameco Corp., the world’s largest uranium producer, tumbled the most in almost eight months after cutting its production forecast through 2015 and increasing the size of a credit facility.

Output will be 121.3 million pounds in the period, reflecting lower-than-expected output in the U.S. and Kazakhstan, Saskatoon, Saskatchewan-based Cameco said today in a statement on its website. It predicted 123.1 million pounds on Aug. 4.

The credit facility was expanded to C$1.9 billion ($1.9 billion) from C$1.2 billion to allow for “potential opportunities” and to protect against “unexpected changes that could alter the company’s business plans,” Chief Financial Officer Grant Isaac said in a conference call.

“The market could be thinking that this is just the start of additional production downgrades, Bart Jaworski, a Vancouver- based analyst at Raymond James Inc., said in a telephone interview. The enlarged facility may be regarded as ‘‘a sign of weakness or a signal of the company’s concern for the future.’’

Cameco dropped 6.5 percent to C$20.35 in Toronto, the biggest decline since March 16.

Net income slid 60 percent to C$39.5 million, or 10 cents a share, from C$97.5 million, or 25 cents, a year earlier. Revenue climbed 26 percent to C$527 million from C$419.5 million.

Higher Costs

Earnings excluding losses on foreign-exchange derivatives were 26 cents a share, less than the 32-cent average of 10 estimates compiled by Bloomberg.

The cost of uranium sales rose to C$27.59 a pound from C$23.61. Cameco attributed the increase to costs paid to France’s Areva SA relating to the McClean Lake mill in Saskatchewan.

Uranium sales rose 29 percent to 7.2 million pounds, less than the 9.5 million pounds estimated by Greg Barnes, a Toronto- based analyst at TD Newcrest Inc. About 2.5 million pounds were deferred by customers to the current quarter from earlier this year, Ken Seitz, Cameco’s vice president of marketing and business development, said on the call.

‘‘Quarterly sales volume volatility is not unusual” and was the “main reason behind the miss,” Barnes said in a note.

Cameco, which plans to double its annual output to 40 million pounds by 2018, made a C$520 million takeover bid in August for Canada’s Hathor Exploration Ltd., owner of the Roughrider uranium deposit in Saskatchewan. Vancouver-based Hathor said last month it agreed to be taken over by London- based Rio Tinto Group for C$578 million.

Cameco Chief Executive Officer Timothy Gitzel declined to comment on the Hathor bid during the call.

Cameco reaffirmed its full-year forecast that sales will gain 5 percent to 10 percent. It cut its capital expenditure projection to C$575 million from C$590 million. Full-year uranium output will be 21.7 million pounds, compared with previous forecast of 21.9 million pounds.

--Editors: Simon Casey, Steven Frank

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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