Cameco Corp. and Rio Tinto uranium earnings fell in the second quarter amid depressed U3O8 prices in a market still grappling with the impacts of the 2011 Fukushima disaster in Japan.
Prices sank after the failure of the Fukushima reactor as some countries curtailed nuclear power output, recently trading in the mid-US$20/lb range on the spot market, down significantly from a decade ago.
Cameco, a major uranium miner, reported a C$23 million second-quarter loss attributable to equity holders, down 70% year over year from a C$76 million loss. Revenue for the quarter was C$388 million, up 17% from C$333 million in 2018. The company, which suspended key operations due to low uranium prices, has relied on the spot market rather than production for much of its purchases to meet sales contracts.
President and CEO Timothy Gitzel said on a July 25 conference call that Cameco had sales commitments of between 30 million and 32 million pounds in its uranium segment, requiring delivery of about 21 million to 23 million pounds of purchased uranium to reach its 2019 delivery commitments.
"The majority of these volumes, more than 70%, are expected to come from the spot market," he said.
Cameco's uranium production in the second quarter totaled 2.5 million pounds, down year on year from 2.9 million pounds. Its sales climbed from 5.3 million pounds to 6.6 million pounds of uranium over the same period, as its average realized price decreased to C$44.31/lb from C$44.91/lb.
Rio Tinto reported US$146 million in uranium revenue in the first half to June 30, down from US$201 million in revenue in the prior-year period, while uranium EBITDA increased to US$39 million from US$14 million. It produced 3.36 million pounds of uranium, up 10% year over year from 3.05 million pounds.
Subsequent to reporting its half-year results, Rio Tinto closed the sale of its 68.6%-owned Rossing uranium mine in Namibia to China National Nuclear Corp. for an initial US$6.5 million cash payment and a contingent payment of up to US$100 million. The mining giant expects to recognize a loss of approximately US$300 million related to the sale.
Rio Tinto also holds 68.4% of Energy Resources of Australia Ltd., which operates the Ranger mine in Australia's Northern Territory. Another shareholder recently accused Rio Tinto of plotting a takeover of Energy Resources of Australia in relation to funding for the rehabilitation of the site.
Meanwhile, JSC National Atomic Co. Kazatomprom reported an 11% year-over-year increase in attributable uranium production to 3,163 tonnes in the second quarter with uranium sales volumes up 15% to 3,780 tonnes. It reported average realized prices of US$27.69/lb, up 14% year over year.
Kazatomprom has also signaled that it would extend production cuts beyond 2020 into 2021, amid ample supply for the near-term market. "As the largest uranium producer in the world, Kazatomprom recognizes the need for global output to better align with current demand," World Nuclear News recently quoted the state-owned firm as saying.
BHP Group produced about 3,565 tonnes of U3O8, or around 7.9 million pounds, during the fiscal year ended June 30 at the polymetallic Olympic Dam operation in South Australia, according to S&P Global Market Intelligence data. BHP CEO Andrew Mackenzie said in an Aug. 20 earnings call that the operation could be expanded but it would depend on potential volume.
"But before we can grow volume, we have to get really convinced ... year after year that we can stabilize production at 200,000 tonnes of copper per year," he said.
In the U.S., potential policy changes in the sector are on the radar. While President Trump declined quota recommendations following a national security investigation into U.S. uranium imports, he struck a working group in mid-July to advise within 90 days on the broader implications for nuclear power and uranium supply.
U.S. uranium producers, tiny by global standards, hope to reap the benefits of domestic quotas or other measures to boost U.S. production.
