Cost cutting at Cameco

20 January 2017

Canada’s Cameco said on 17 January that it will continue cutting costs by eliminating about 120 jobs from its McArthur River, Cigar Lake and Key Lake operations in northern Saskatchewan by the end of May.

The changes represent about 10% of the workforce at its three major facilities in the province. Cameco also plans to implement changes to the air commuter service by which employees and contract workers get to and from the mine and mill sites in northern Saskatchewan, as well as work schedule changes to achieve additional cost savings. These changes will begin in April and are expected to be completed during 2018.

Cameco president and CEO Tim Gitzel said:  “These are necessary actions to take in a uranium market that has remained weak and oversupplied for more than five years.” Cameco said it expects to report a net loss for 2016, following adjustments, including impairment charges, of between CAD180m ($137m) and CAD220m.   "While it is not our usual practice to disclose earnings expectations, we are announcing our earnings expectations for 2016 in advance of our participation in upcoming investor conferences due to the significant discrepancy between analyst earnings estimates and our current expectations," the company noted.   Cameco is one of the world’s largest uranium producers as well as a significant supplier of conversion services and one of two fuel manufacturers in Canada for Candu nuclear reactors

In 2016, Cameco implemented a number of strategic initiatives hoping to strengthen its core business and enhance financial performance. These included suspending production at the Rabbit Lake operation and curtailing its US mining operations; signing of a collaboration agreement with the aboriginal communities located near its Saskatchewan operations; restructuring of its NUKEM segment and corporate office departments and consolidation of office space.

The company's legal costs related to its tax dispute with the Canada Revenue Agency also increased as it prepared its case to be heard in the Tax Court of Canada, which started in October. The total estimated cost for all these items is approximately $120m in 2016 but they were offset in part by the $59m of additional income generated by the termination of two long-term supply contracts in the third quarter of 2016. Cameco also recorded an impairment charge for the Rabbit Lake mine and mill in conjunction with the suspension of production.

Cameco is planning a number of actions in 2017 intended to further reduce costs and improve efficiency at its uranium mining operations.

The workforce at the McArthur River, Key Lake and Cigar Lake operations is expected to be reduced by about 10% or 120 employees in total. The reduction is planned to be conducted in stages and expected to be completed by the end of May. Affected employees will be offered exit packages that include transition assistance.

The cost-cutting measures in Saskatchewan are not expected to impact production. However as a result of cost cutting measures planned at its Inkai joint venture in Kazakhstan, Cameco expects to produce almost 10% less from that mine in 2017.



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