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article imageCameco suspends uranium production at Canadian sites

By Karen Graham     Jul 27, 2018 in Business
Saskatoon - In the face of rock-bottom uranium prices, Cameco Corporation is indefinitely shutting down its Key Lake mill and McArthur River mines in Saskatchewan, laying off close to 700 employees.
With the closures in Saskatchewan, the company will be laying off 550 workers that include those who were on temporary layoff since January this year. An additional 150 employee positions at the corporate office will be cut as the company attempts to further reduce costs.
The company says it will keep 200 employees at its McArthur River and Key Lake sites to maintain the facilities.
CBC Canada is reporting that employees permanently laid off by Cameco say they were blindsided by the company's decision to make a temporary suspension in production permanent.
Sunset uranium mine in Wyoming  now in the process of being reclaimed. The reclamation includes the ...
Sunset uranium mine in Wyoming, now in the process of being reclaimed. The reclamation includes the mitigation of surface and underground hazards including highwalls, pits, open shafts, spoil piles and substandard water. The goal is to eliminate hazards to public health and safety, and control environmental degradation, while being sensitive to public concerns and landowner issues.
"We were told up till yesterday we would be returning to our jobs in November of 2018," said Denis O'Hara, the president of Local 8914 of United Steelworkers union, which represents Cameco employees.
"And now we have been blindsided," said O'Hara, who was also laid off.
Weak uranium market
The layoffs and halt in production reflect a weakened uranium market - even while the global outlook remains positive. If this sounds strange, it actually is descriptive of the conflicting forces at work on the global scale.
Cameco chief executive Tim Gitzel tried to explain this to investors on Thursday, pointing out that the outlook for the industry is positive, with 57 new nuclear reactors planned, including 14 expected to come online this year.
Damage at Fukushima s Daiichi
Damage at Fukushima's Daiichi
Net losses for the second quarter ending on June 30, 2018, came to $76 million and adjusted net losses of $28 million due to lower gross profit in its uranium and fuel services segments.
Gitzel told the Financial Post that an oversupply of uranium has kept prices so low that it's actually cheaper to buy the uranium rather than produce it.
“For everyone in the industry, I think it’s a confusing time, and I think that’s led to a bit of a paralysis in the market, where buyers are sitting on the sidelines saying ‘What is going on here?’”
Main processing plant (MPP) at Inkai.
Main processing plant (MPP) at Inkai.
Cameco Corp.
“We have not seen the improvement needed in the uranium market to restart McArthur River and Key Lake. This means we will extend the suspension of production at McArthur River and Key Lake for an indeterminate duration. It was a difficult decision to make, because of the impact it will have on our employees, their families, and other stakeholders, but we must take this action to ensure the long-term sustainability of the company.”
Long-term contracts a thing of the past?
Many market analysts date the beginning of the uranium market problems with the destruction of the Fukushima nuclear reactor in Japan in 2011. This resulted in Japan taking all its reactors offline for some time. Doing so created a demand imbalance in the market.
Dev Randhawa, chief executive of Fission Uranium Corp., a Canadian exploration company, said the Fukushima event and what happened in its aftermath caused spot prices to crash and sent shock-waves throughout the market.
Cameco Corp.
“It changed the way people bought uranium,” said Randhawa. “Instead of buying it five to 10 years out, they’re doing shorter contracts.” As for Cameco, the suspension of operations will take about 18 million pounds of uranium off the market, or 15 percent of the world's supply.
Randhawa says this action "may nudge the market up." With uranium selling at $23 a pound now, he says estimated prices would have to reach $40 a pound to make a difference in Cameco's operations.
O'Hara, however, is somewhat pessimistic, saying uranium pricing is outside his scope of understanding, but he thinks its political. “Anything I would say about the uranium market or the industry is that it’s political,” he said. “Unless you’re sitting in the boardrooms, you would never know what’s going on.”
About Cameco Corporation
Cameco Corporation was formed in 1988 by the merger and privatization of two crown corporations: the federally owned Eldorado Nuclear Limited and Saskatchewan-based Saskatchewan Mining Development Corporation. Full privatization occurred in February 2002.
Located in northern Saskatchewan  Rabbit Lake is the longest producing uranium operation in Saskatch...
Located in northern Saskatchewan, Rabbit Lake is the longest producing uranium operation in Saskatchewan.
Cameco Corp.
Over a period of several years, starting in 1996, Cameco acquired Power Resources, the largest uranium producer in the United States. Two years later, Cameco acquired Canadian-based Uranerz Exploration and Mining Limited and Uranerz U.S.A., Inc. And in 2012, it acquired a nuclear fuel intermediary Nukem Energy.
Cameco operates uranium mines in North America and Kazakhstan, including McArthur River-Key Lake, the world's largest uranium producer, and Cigar Lake, the world's highest grade uranium mine, both in Saskatchewan.
In Ontario, Cameco operates a uranium refinery in Blind River and a uranium conversion facility in Port Hope, which has faced opposition from some community groups. Cameco is also the exclusive supplier to Bruce Power, which supplies 30 percent of Ontario's electricity through its nuclear generating plant.
As for the suspensions in production this week, they are related to previous halts in production. In 2016, Cameco suspended operations at its Rabbit Lake mine, due to low uranium prices. In 2017, it suspended operations for at least 10 months at its McArthur River mine and Key Lake mill.
More about cameco Corporation, uranium production, Layoffs, market surplus, uranium prices
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