Canadian uranium mining company Cameco has announced plans to suspend production at its McArthur River mine and Key Lake mill in northern Saskatchewan by the end of January due to continued weak uranium prices. The suspension and temporary layoff of about 845 workers are expected to last ten months, it said.
Cameco hopes to meet its commitments to customers from inventory and other supply sources during the suspension, which will be reviewed on an ongoing basis "until inventory is sufficiently drawn down or market conditions improve". Cameco said it would continue to evaluate the "optimal mix" of its sources of uranium supply to feed into its contract portfolio, which could lead to further changes to its inventory position, production profile or purchasing activity.
Although uranium prices have fallen by more than 70% since the Fukushima accident in March 2011, Cameco said it had been partially sheltered from the full impact of weak prices by its portfolio of long-term contracts. However, those deals are running out, and the company needs to take steps to generate cash flow if prices do not improve.
Cameco's president and CEO Tim Gitzel explained: "With the continued state of oversupply in the uranium market and no expectation of change on the immediate horizon, it does not make economic sense for us to continue producing at McArthur River and Key Lake when we are holding a large inventory, or paying dividends out of proportion with our earnings." Cameco estimates its share of the costs to maintain both operations during the suspension at CAD 6.5-7.5m ($5.1-5.9m) a month.
More details will be provided in the company’s fourth-quarter results, to be released in February.
Photo: McArthur River was the world’s top uranium mine in 2016 with production of 6945tU (Source: Cameco)