Cameco has revised its 2008 uranium production forecasts, and First Uranium has announced a delay in commissioning the uranium plant at Ezulwini, but both companies' third quarter reports suggest that, although not immune to uncertainty in world financial markets, they feel well placed to weather the storm.
Cameco's uranium results have been impacted by higher costs and lower production. Uranium revenue of C$396 million ($322 million) for the quarter was down on the similar period in 2007, mainly due to lower prices under market-related contracts, while unit production costs had increased. Reduced production across all Cameco's sites, including the Inkai project in Kazakhstan, is reflected in a revision of forecast uranium production for 2008 to 8030 tonnes U3O8 (6810 tU), down from the previous figure of 8890 tonnes U3O8 (7540 tU).
Fuel services have been adversely affected by the closure of its uranium hexafluoride (UF6) plant at Port Hope for over a year since the discovery of production chemicals in ground water, the company said. Although the plant is now operating again, a contractual dispute with the company's supplier of hydrofluoric acid (HF), a vital feedstock for the process, continues to cast uncertainty over future production levels. The company says transport issues make it unlikely that an alternative source will be secured until the second half of 2009, and until then, it must buy HF on the spot market - an expensive and unreliable option.
Like most other companies, with the capital market for debt effectively shut down, Cameco was re-examining its expenditures during the current budget planning process. "However, unlike most companies, we have exceptionally reliable revenue streams," said Jerry Grandey, Cameco's president and CEO.
Delays at Ezulwini
Commissioning of the uranium production plant at First Uranium's Ezulwini uranium mine has been delayed and is not now not expected until 2009, the company has announced. The uranium plant at the South African gold and uranium mine had been expected to start up in October 2008. In the company's quarterly results summary, First Uranium president and CEO Gordon Miller said that despite construction delays he was still confident that the plant would be commissioned early in 2009, and there would be sufficient capacity to process all the ore available from the underground development within the fiscal year. "We remain on track to achieve our long-term objective to become one of the world’s lowest cost uranium producers," he said.
Current mine production, which was being stockpiled separately ready to feed the 100,000 tonne per month uranium plant during its commissioning phase, will now be milled through the gold circuit with the uranium-bearing tailings being redeposited on the tailings dam for introduction to the uranium circuit upon commissioning.
Earlier in the year, First Uranium announced plans to build its own a sulphuric acid plant to ensure low-cost supplies of the reagent which is crucial in uranium extraction. However, citing a "recent softening" of sulphuric acid prices, it has now deferred its final decision on building the plant until sulphuric acid prices stabilize.