Cameco reported loses of $37 million in the second quarter, due to production decreases at its Cigar Lake facility in Northern Saskatchewan and its strategy of investing in digital and automation technologies.
Non-essential personnel were temporarily evacuated from Cigar Lake in early July due to a threat of a nearby wildfire.
Cameco said it expects to produce up to 12 million pounds of uranium from Cigar Lake, provided there are no further production disruptions.
“This quarter was also impacted by additional care and maintenance costs of $8 million resulting from the proactive suspension of production at the Cigar Lake mine for about four months until its restart in mid-April,” said Cameco. “While production was suspended, we kept and continued to pay all our employees. These costs were offset by the receipt of $9 million from the Canadian Employment Wage Subsidy for the quarter.”
The company issued its revised 2021 outlook, focused on reducing administration, exploration, operating and capital expenditures. Yet, the largest costs come from care and maintenance for both the McArthur River/Key Lake and for Cigar Lake.
In order to meet is committed uranium sales, Cameco will have to purchase from the market, at a cost higher than producing it from Cigar Lake.
“We are not at the regular tier-one run rate of our business. We are taking the steps we believe are necessary, including investing in digital and automation technologies, to support the restart of our tier-one assets to create a more flexible asset base that will allow us to align our production decisions with our contract portfolio commitments and opportunities,” said CEO Tim Gitzel. “[This] allow us to eliminate the care and maintenance costs incurred while our tier-one production is suspended, and to benefit from the very favourable life-of-mine economics our tier-one assets provide.”
However, despite the production setbacks and strategic investments Cameco produced 7 million pounds of uranium for the quarter and 16 million pounds for the year. Its balance sheet is strong with $1.2 billion in cash.