Now that the shock of Cameco’s Rabbit Lake mine closure is wearing off, the mining company is explaining some long-term financial effects of that decision.
Cameco’s CEO Tim Gitzel has already expressed how difficult it was to lay off about 500 workers in northern Saskatchewan, and in Cameco’s first-quarter financial conference on Friday the company’s top brass described the financial struggles behind that decision.
The company has long-known it costs a lot more the produce uranium at Rabbit Lake than its other mines, like Cigar Lake and MacArthur River.
CFO Grant Isaac pointed out that Cameco makes careful calculations before they close a mine.
“Taking assets off is not costless. If it was you would see probably more production come off right around the commodity space but it does cost to do that so obviously careful analysis has to go into that,” he said.
When fielding questions from financial analysts and other Cameco stakeholders on Friday, Gitzel confirmed that the Rabbit Lake closure and curtailing of US operations was the end of cuts.
Cameco’s executive members say they’re confident that they’ve now found some stability in a tough uranium market.
The company is also painting a clearer picture of how much it will cost to keep Rabbit Lake in what’s called “care and maintenance” mode.
It will take several months to get Rabbit Lake into “Care and Maintenance” mode, and the cost of that work has already been pegged at about $35 million, Gitzel said.
Once that’s done, the company is expected to spend about $45 million per year – indefinitely – on its Rabbit Lake operation.
The company will try to reduce that price tag as much as it can, possibly down below $40 million, said Gitzel.
“We’re gonna need about 150 people. Obviously we will try to reduce those to the extent we can while keeping the assets in a safe care and maintenance mode. So we will do what we can to reduce those costs,” he said.
However, Cameco’s Senior Vice-President pointed out those costs are driven by the need to keep the mine accessible. They need to continue ventilating Rabbit Lake, pumping water from the mine to keep it from flooding, and treat the water that’s there.
Even with all that work continuing, once Rabbit Lake is in “Care and Maintenance” mode it will take 12 to 18 months to get it ready for full production again.
Cameco remains confident that uranium prices will rebound, but prices have been depressed for about five years.