Cameco ups stake in Cigar Lake uranium mine

Cameco Corp. [CCO-TSX, CCJ-NYSE] has struck a deal to acquire Idemitsu Canada Resources Ltd.’s 7.87% stake in the Cigar Lake uranium joint venture for $107 million. As a result, Cameco’s ownership interest in the Cigar Lake mine in northern Saskatchewan will increase by 4.522 percentage points to 54.547%

Orano Canada Inc.’s share will rise by 3.53 percentage points to 40.453%, while TEPCO Resources Inc. will continue to hold the remaining 5.0%.

Idemitsu Canada Resources Ltd. is a unit of the Japanese petroleum company the Idemitsu Kosan Company Ltd.

Cigar Lake is the globe’s largest operating uranium mine, accounting for 13% of the world’s mine supply and 10% of total supply, including secondary material. Cameco is the mine operator.

Cigar Lake can produce 18 million pounds of U308, but is expected to produce 15 million pounds of uranium concentrate on a 100% basis this year.

“As the world’s largest high-grade uranium mine, Cigar Lake is quite simply one of the most prolific uranium producing assets on the planet,” said Cameco President and CEO Tim Gitzel. “Cameco is very pleased to increase our ownership stake in this outstanding tier one operation,” he said.

“As the operator of Cigar Lake since 2002, its an asset we know incredibly well. It’s a proven, permitted and full licensed mine in a safe and stable jurisdiction that operates with the tremendous participation and support of our neighbouring Indigenous communities.”

Subject to certain regulatory approvals and other standard closing conditions, the transaction is expected to close in the second quarter of 2022.

The Cigar Lake reserve and resource base includes proven and probable reserves estimated at 152.4 million pounds of U308, measured and indicated resources of 103.7 million pounds and inferred resources of 22.9 million pounds.

Cameco’s increased share in the operation will therefore provide the company with access to an additional 6.9 million pounds of proven and probable reserves, 4.7 million pounds of measured and indicated resources and 1.0 million pounds of inferred resources.

Spot uranium is currently trading at US$53 a pound, after increasing from around US$28 a pound in February 2021.

Cameco said its current plant is to reduce annual production at Cigar Lake to 13.5 million pounds of U308 (100% basis), 25% below licensed capacity, starting in 2024. Extending the mine life at Cigar Lake by aligning production with market opportunities and our contract portfolio is consistent with Cameco’s tier-one strategy, and is expected to allow more time to evaluate the feasibility of extending the mine life beyond its current reserve base while continuing to supply ore to Orano’s McClean Lake mill, the company said.

“This will remain our production plan until we see further improvement in the uranium market and contracting progress, demonstrating Cameco’s ongoing commitment to a be a responsible supplier of uranium fuel,” the company added.

On May 10, 2022, Cameco shares closed at $28.02 and currently trade in a 52-week range of $41.05 and $19.68.