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« Eagle Plains Up Over 77% Since Our BUY | Main | Brazil Budgeting $540 Million for Nuclear Programme »
Thursday
Jul122007

More Trouble for Cameco at Cigar Lake

Cameco is in more trouble at Cigar Lake as they have announced that the mine will not be online until 2011.

More Trouble for Cameco at Cigar Lake

According to the news release by Cameco, more flooding and dewatering issues have further hampered the world's largest undeveloped uranium project.

Cigar Lake was supposed to produce 9 million pounds of U3O8 annually with its originally estimated proven reserves of 113 million pounds. The project is a joint venture owned by Cameco, Areva Resources Canada, Idemitsu Canada Resources, and TEPCO Resources.

Taking Cigar Lake out of the uranium market is like taking Saudi Arabia out of the oil market. It creates a devastating supply squeeze that could push the uranium price and so uranium shares to extreme heights.

We are of the opinion that Cameco don't actually know the problem at the project. They have to find out what the problem is before they can even contemplate fixing it. At the moment their tactics are appear to be on a “hit and miss basis” with the company trying all sorts of strategies that are to no avail.


Cameco COO Tim Gitzel said that they were “making steady progress in bringing the project into production”. Well this latest release sounds nothing like steadily progress to us, it is a step back as it means that Cameco shareholders have to wait another year until Cameco think they can get the project back online...and it might not even come online then.

We are staying out of Cameco and in our smaller uranium stocks, which we believe will be more successful and profitable over the years to come.

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Reader Comments (18)

May see some more recovery from the "near-termers" such as Uranium One, Paladin and Denison and maybe even from U Participation. How about a counter bid for Uramin from Cameco?

July 12, 2007 | Unregistered Commenterbob

Perhaps, or will somebody buy Cameco...

http://www.uranium-stocks.net/there-is-always-a-bigger-fish/

July 12, 2007 | Unregistered CommenterUranium Stocks

Remember that the Canadian govt views Cameco as a strategic resource and will not permit ownership by one party (esp foreign) of more than 25%. Also who wants a flooded mine (or is that where the "Bigger Fish" comes in?

July 12, 2007 | Unregistered Commenterbob

A Canadian takeover is still a possibilty though.

July 12, 2007 | Unregistered CommenterUranium Stocks

Wow, bold and unsubstantiated assertions about the Cigar Lake problem! As far as I can tell they did not mention any new flooding or dewatering problems, but did say that the process of remediation might take longer than planned. They did not say that the timetable has been set back by one year with certainty.

As for the idea that they have no real idea as to the cause of the problem, where did you get that from?

Here is the key part of the press release:

"Completion of the second phase had been expected by the end of the third quarter of 2007. Cameco now expects it will require a number of additional months to seal the inflow and dewater the mine.

In addition, in order to ensure a more conservative approach, we and our partners are examining whether an alternative route out of the mine is required prior to beginning excavation in areas at elevated risk of water inflow, and whether the second shaft needs to be completed to provide additional underground ventilation. Completing the second shaft as a priority item and the delay in completing phase two, as noted above, would set back the planned production startup date from late 2010 to 2011. We anticipate that by year end we will make a decision on the second shaft. A revised production forecast will be provided after the decision is made on the second shaft, the mine has been dewatered and the condition of the underground development has been assessed."

There is nothing at all in the report to suggest that their strategy has failed. It is a complex operation that will be technically challenging to complete and success or failure will not be clear for some time.

July 12, 2007 | Unregistered Commenterdcpc

You make the point perfectly in your last sentence - markets HATE uncertainty. That's why there was a bump in the price of near-termers yesterday, carried through today (coupled with all the other factors. Who knows, we may even see the spot price react upwards........

July 12, 2007 | Unregistered Commenterbob

I have read Cameco's releases right off their website, and if you read them with a magnifying glass, you will see how they downplay the issues. It is not the technology that is holding them up, although that is very daunting and expensive. But there are regulatory hurdles that are beyond their means to control, and I am referring to the the permit to dewater the mine. That is highly radioactive water, now, and Cameco admits that they do not have the necessary permits to continue with the dewatering of the mine. (see their March/April releases). They have stated very clearly that their timeline for remediation is dependent on many factors working out, factors they have no control over. Unfortunately, they make these statements deep into the releases and the media tends to overlook these (buried) statements. It just seems that Cameco is drawing this out without giving any certainty to an end date. I can appreciate they are trying to maintain shareholder value, but what of th eutilities that are depending on Cigar Lake production? Personally, I think Cameco is buying time until other ventures and mines they have will be able to take up the shortfall in the Cigar Lake production, but that is just my opinion, not based on facts.

July 13, 2007 | Unregistered Commenterstoneygulch

dcpc,

You are correct in that Cameco did not say 2011 with certainty, but they had previously said 2010 and now they are saying maybe 2010-2011. In effect what Cameco are doing is letting the market down gently. They do not want to flood the market with the news that it may be up to 10 years (excuse the pun).

Stoneygulch is spot on talking about hidden statements. Too often many people just take a look at a press release headline and maybe the first paragraph and then make a judgement and move on. It is not coincidence that this is where the significant parts of the new release are placed.
We tend to agree that Stoneygulch is also bang on when saying that Cameco are buying time to look for something to make up for the Cigar Lake disaster.

The main issue here is that Cameco will understate their problems with this project. There is no problem with that, that’s their job and they are trying to present the best case to shareholders. One must not take everything at face value but read between the lines and one must do one's own research and analysis in order to form an opinion on what is going to happen.

July 13, 2007 | Unregistered CommenterUranium Stocks

Thanks for your generous support of my comments. I'm curious that you think CCO may be available for buyout. Could you comment on that, and who you think would be able to afford such a thing? You mention a possible Canadian suitor, but I cannot think of anyone with the financial clout, at least in the uranium sector, to effect this.

July 13, 2007 | Unregistered Commenterstoneygulch

Thanks for pointing out that I should read between the lines of press releases. My objection to the post stands and particularly that it accused Cameco of having little understanding of the problem (no evidence). Unsubstantiated claims like this do not help anyone to understand the issue.

Indeed there are problems with radioactive water and that, at least, is an excellent point. However, there are methods of removing radionuclides from large volumes of water, such as barium chloride precipitation. If this radioactive water issue were insurmountable, I doubt that Cameco would be spending so much money on remediation.

July 13, 2007 | Unregistered Commenterdcpc

We didn't see anything in Cameco's news release about spending 'so much money' on remediation and thats the point, it is vague as we have no idea how much is being spent.

"We anticipate that by year end we will make a decision on the second shaft." The point here is that Cameco still don't have a good handle on the problem therefore a definite solution is not obvious. Until then the end date for this remedial work is a floating target still to be pinned down.

July 13, 2007 | Unregistered CommenterUranium Stocks

They have drilled a number of holes in preparation for concrete injection and have hired engineering firms to assess and plan remedies for the problem. Do you imagine that this was all done for a few dollars?

The second shaft appears to be a potential safety issue as well as a source of further ventilation. Why on earth does this suggest that 'they do not have a good handle on the problem' and that a definite solution is 'not obvious'. Your turn of phrase is unfortunate and suggests a bumbling company.

Perhaps a good deal of wishful thinking underlies your reading of press releases, rather than 'reading between the lines'. It very much suits those of us who invest in near term producers that Cameco might fail to salvage Cigar Lake. That's fine, but it is prudent investing to consider the alternative that Cameco might succeed and bring on substantial production.

July 13, 2007 | Unregistered Commenterdcpc

Honestly, dcpc, you are not reading what we are writing, but appear to be only seeing what you want to see. I stated very clearly that Cameco is burying the news deep into their very long press releases, at points where most media will have ceased to read. I never once said that I was reading between the lines. It is in black and white that CCO stated there are many factors that would have to occur for any of their projected timelines to occur. The first one is that they do not have the permits to de-water the mine. This is not a technicla issue, as you seem to keep focusing on that. This is a regulatory issue that CCO has no control over. It is quite possible that the Canadian government sees the de-watering differently than CCO, and they might not grant the permit. Then there are other permits that CCO referred to in their press relaese, again deeply buried, that they will need before remediation can even begin. This is what we are talking about; it is not an issue with me whether they have the technology to remediate, I see CCO with deep pockets. But until they receive permits, this is NOT a done deal. I believe that is what Uranium-stock is referring to when they say the real time-line is just a moving target. But I know this from my study of human nature and the human mind; when a person is blind to the truth, there is very little I, or anyone else, can do to bring them to open their mind. I am sorry to be so harsh with you, but I hope you will pause and give my statements some thought, and consider what others are saying as being closer to the truth.

July 13, 2007 | Unregistered Commenterstoneygulch

Listen, Stoneygulch, I have no problem with you being 'harsh' with me. A decent, polite debate helps to understand the issues. You appear to believe that you have a better handle on the truth than I. Good luck to you. I have no issue with your central point at all. There are permitting issues and I am very aware of that. I am also aware that Cameco is of some significance to the economy of Saskatchewan and that the government there will be well motivated to work with them. Let me make it clear that the statement that I have most problems with is this one:

"We are of the opinion that Cameco don’t actually know the problem at the project. They have to find out what the problem is before they can even contemplate fixing it. At the moment their tactics are appear to be on a “hit and miss basis” with the company trying all sorts of strategies that are to no avail."

The claims made are rather silly, frankly, portraying a company that is floundering to deal with a crisis that they do not even understand. What are "all the strategies that were tried to no avail"? As I read the press releases, Cameco has been consistent in its plan to drill, inject concrete, dewater, freeze the water ingress area. They are now suggesting an addition to the plan with new shaft. The timeline is shifting during the execution of a plan that is unprecedented, none too surprising. The company says that they are making steady progress yet it "sounds nothing like steadily(sic) progress to us". Come on, they have always given tentative timelines! The opening of this item says nothing about permits, a genuine issue as I have said. Hyperbole like this never helped anyone make an investment decision.

July 14, 2007 | Unregistered Commenterdcpc

The flooding of Cigar Lake in Oct. was the second occurrence of flooding at this mine. The first was in April 2006. There has been a question hanging in the air about whether CCO knew that another flood was likely. This is an unanswered question and is of no real concern to me, but the insurance companies may be trying to solve this. However, we have been given no news regarding whether there is indeed coverage under CCO's insurance policy. Secondly, they have made bold statements that they will drill holes and pour concrete to seal the fault area; however, they have not definitively stated that their efforts have been successful. There was a lot of ballyhoo back in March about this, so I wonder if they have succeeded.

I would still have to agree with Uranium-Stocks that their efforts are hit and miss. There has never been such an occurence of flooding in a uranium mine before, so they have no definitive workable plan. They are "trying" different things based on available information from mishaps at other mining ventures, but none had problems so unique.

Although you state, " I have no problem with you being 'harsh' with me" you do make another statement that I appear to believe I have a better handle on the truth than you do. That is an absurd statement to make and it appears it may come as a retaliatory thrust; hardly a good statement in a polite debate. I never really thought my comments were inferring that; however, by steering clear of Cameco has allowed me to invest in other producing uranium companies. Surely you have to agree that SXR, PDN, FRG, LAM, and MGA have all outperformed CCO since the October flood. So I think that would show that I am not basing my belief on the good luck you wish for me. As a matter of fact, the very reason these companies are doing so well is the flood at Cigar Lake and the uncertainty surrounding the remediation plan. If the utilities that depend on uranium have as strong a belief as you seem to in the remediation efforts, then they are taking very big risks of not having the supply they need. Somehow, this doesn't make sense that they could live with this uncertainty.

Another point I would like to make is the efforts of SXR to become No. 1 in the world, and surpass CCO. Neal Froneman has made this a public statement. I expect there are other large companies that can smell the blood, too, and are formulating similar plans, but I do not know this for a fact. I do see Cameco making huge efforts to bring other mines on stream and going into JVs. This may be the plan that will save them in the end; however, there is still hope the Cigar Lake mine will be operational one day.

Quite frankly, from an investment point of view, wouldn't your money be better utilized by investing in companies that are having a greater rate of return on the investment dollar? And wouldn't it be wise to watch CCO from the sidelines and get back in when and if they achieve success at Cigar Lake? CCO is a blue chip company, and yet the risk level has increased significantly since Cigar Lake. My understanding is that one reason that CCO share price is still up is that there are not enough companies with volume to satisfy the large pension funds and mutual funds seeking to invest in uranium. So those conservative fund managers, not knowing any better, are sinking their capital into CCO. However, we are seeing dramatic increases in the volume of shares for SXR and PDN. SXR traded over 11 million shares on either Wed. or Thurs.

In closing, the supposed hyperbole is really based on many other articles that Uranium-Stocks has published, so I know how they can make these simple statements. Their back-up is based on past articles.
Thanks for the debate.

July 14, 2007 | Unregistered Commenterstoneygulch

This discussion is off the track of the point that I was making (which point has not been addressed). I have no intention of offending you in any way, Stoneygulch. Nor have I ever implied that CCO is a good investment, or that alternatives are not better. Before I close this off I should point out this remark:

"I am sorry to be so harsh with you, but I hope you will pause and give my statements some thought, and consider what others are saying as being closer to the truth"

My interpretation of this remark is that it implies that I need to reconsider my position in light of the idea that your statements are closer to the truth. That is why I stated that you appear to believe that you have a better handle on the truth than I. If I have this wrong, my apologies. However, I don't think it fair to imply that I am impolite.

July 15, 2007 | Unregistered Commenterdcpc

Dear Sir
What is wront with Uranium 1, UUU.TO? Tuesday the titel lost around 17% out of the blue. I now where could find any informatiaon! Many thanks for your kind help¨

Best regards,
Karl

November 1, 2007 | Unregistered CommenterBula Karl

Karl,

This article might help you: .

November 2, 2007 | Unregistered CommenterUranium Stocks

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