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Uranium demand rising while supply remains uncertain: Cameco

Demand for uranium is growing at the same time supply is becoming less certain, said Cameco President and CEO Tim Gitzel July 28.

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"Since 2011, about 1.6 billion pounds of uranium have been consumed in reactors, and only about half of that or 800 million pounds have been placed under long-term [utility] contracts," Gitzel said in a second-quarter earnings call.

"This has led to a growing wedge of uncovered uranium requirements," he said.

"We're also seeing increased demand for uranium from financial funds and junior uranium companies," Gitzel said.

"Through the end of June this year, more than US$550 million has flowed into the uranium market via junior uranium companies and financial funds. This money has been used to purchase approximately 16 million pounds of uranium with more expected."

At the same time, however, "uranium supply is becoming less certain due to years of persistently low prices," he added.

Uranium mines around the world have been mothballed for several years due to low prices.

Cameco purchased 2.4 million lb U3O8 in the second quarter, under a strategy it adopted in 2018 after mothballing its McArthur River uranium mine in northern Saskatchewan, the company said.

Under the strategy, Cameco is continuing to produce at its Cigar Lake uranium mine, also in northern Saskatchewan, and purchasing U3O8 in the spot market to make up for the shortfall in mined uranium and delivering the material into contracts.

Of the 2.4 million lb Cameco purchased, 1.4 million lb were bought from its Inkai joint venture with Kazatomprom at US$28.70/lb.

The company had said in its first-quarter earnings report May 7 it planned to buy between 11 million and 13 million lb and deliver between 23 million and 25 million lb to customers in 2021.

Cigar Lake produced 1.3 million lb during Q2, the result of being placed on standby from December to April due to coronavirus concerns.

Care and maintenance costs for production suspensions at McArthur River, the Key Lake mill where McArthur River ore is processed, and other mining operations in Canada and the US are expected to total between C$185 million and C$215 million in 2021, Cameco said.

The company said the combined cost to purchase and produce the 3.7 million lb uranium in Q2 totaled C$37.73/lb, roughly C$7/lb higher than the production costs at Cigar Lake the past two years.

It delivered 6 million lb to customers during Q2 at an average realized price of U$33.56/lb.

Cameco said it added 7 million lb to its long-term contract book, bringing the total contracted so far in 2021 to 16 million lb.

The company posted a net loss of C$37 million on C$359 million in revenue for the quarter, with uranium revenue totaling C$252 million, 41% lower than the C$426 million a year earlier.