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Cameco lifts Q4 earnings 14% on better uranium prices

Cameco lifts Q4 earnings 14% on better uranium prices

Photo by Bloomberg

9th February 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Canadian uranium producer Cameco on Friday reported that its fourth-quarter net earnings rose 14% to C$73-million, or C$0.18 a share, or C$9-million year-on-year over the C$64-million, or C$0.16 a share, recorded a year earlier, as the average realised uranium price in the period increased by 6% and costs declined.

During the three months ended December 31, Cameco booked a C$126-million impairment charge related to its Rabbit Lake operation, as several projects related to the planned production over the remaining life of the Eagle Point mine was deferred.

Excluding special items, the miner’s adjusted profit rose 37% for the three months ended December to C$205-million, or C$0.52 a share, beating Bay Street analysts’ average forecast of earning C$0.29 a share on revenue of C$782.16-million.

For the quarter, Cameco reported a 9% dip in revenue to C$889-million, mainly owing to selling 16% fewer pounds of yellowcake at 10.7-million pounds in the quarter.

Output rose 9% to 8.2-million pounds of uranium.

Cameco noted that the market remained in a state of oversupply, with a number of factors contributing, particularly primary supplies continuing to perform relatively well, enrichers underfeeding their plants in reaction to excess enrichment capacity – which created another source of uranium that was being put onto the spot market – and Japanese reactors remaining idled, meaning their inventories continued to grow.

Following Japan’s Fukushima earthquake in 2011, many significant utilities and other parties operating in the uranium market retreated from the commodity, eventually pushing uranium’s price down from $70/lb to as low as $34.50/lb. Late last year, however, the spot price started rising again to as high as $44/lb. This was owing to the expansion of demand from China, significant spot sales to utilities, as well as Japan, in December, approving the restarting of certain nuclear reactors.

Cameco expected to produce between 25.3-million pounds and 26.3-million pounds of uranium this year, an improvement over the 23.3-million pounds produced during the 12 months ended December.

The company expected revenue to slide by about 5% in 2015, as a result of an expected decrease in uranium and fuel services sales volumes. The company expected uranium sales to range from 31-million pounds to 33-million pounds in 2015 compared with the 33.9-million pounds sold in 2014.

Cameco also reduced its capital budget from between C$400-million to C$450-million to about $370-million for 2015 and from between C$500-million to C$550-million to between $300-million and $350-million for 2016. 

This was owing to the scrapping of its fixed production target and the decrease in spending on the related projects. The company said, as the market started to signal that new production was needed, it planned to increase its capital expenditures accordingly.

Cameco's TSX-listed stock  rose 5.4% on Monday to C$19.91 apiece, having dropped almost 7% in the past 12 months.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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