SASKATOON - Cameco Corp. (TSX:CCO) is reducing its 2008 uranium production target by one million pounds due to delays expanding some of its mines, while assuring analysts that flooding may further delay startup at Cigar Lake but won't prevent it from supplying its customers.
Cameco said its share of uranium production for 2008 is now projected to total about'.6 million pounds of U3O8, down from the previous forecast of 20.6 million pounds of the fuel used to power nuclear generating plants.
Cameco expects reduced U.S. production "as a result of delays in our ability to put new infrastructure in place such as additional wellfields," the company stated.
In addition, the company expects a decrease in production at its Inkai site in Kazakhstan because of a shortage of sulphuric acid in the Central Asian country.
And chief executive Jerry Grandey told analysts on a conference call that the company won't know when Cigar Lake in Saskatchewan will be able to begin production, which has already been delayed, until the flooding problem is figured out and fixed.
Cameco first reported flooding at Cigar Lake in October 2006 and has since been working on pumping the water out of the mine, which holds the world's highest-grade uranium.
But on Tuesday, the company had to halt that work when the volume of water flowing into the mine jumped from a steady 25 to 30 cubic metres per hour to as much as 600 cubic metres per hour.
"No doubt this is going to delay things," Grandey said on a conference call with analysts Thursday, after the company announced its second-quarter results and revised production forecast for 2008.
"We've got to understand where the inflow is coming from and once we understand that, then we're going to have to develop a plan to deal with it."
At this point, the company has no idea where the water is coming from, Grandey said.
"I can't see in the ground any better than our people at site and right now all of the information that they have says this is an investigation we now need to conduct over the next little while," Grandey said.
Earlier, the world's top uranium producer said its second-quarter earnings were affected by declines in uranium sales volumes, fuel services revenue and output from the Bruce Power nuclear generating plant in southwestern Ontario.
Those negative factors were partially offset by higher prices in uranium, which is used to fuel power plants.
Cameco said its net income fell to $150 million or 44 cents per share, from $205 million or 58 cents per share in the second quarter of 2007. Revenue was $620 million in the second quarter, down from $725 million a year earlier.
Analysts polled by Thomson Financial had on average been expecting earnings of 39 cents per share.
Thursday's results were Cameco's second best in the last eight quarters, beat only by last year's second-quarter record, Grandey said.
He said the "strong" results were "somewhat overshadowed" by persistent flooding at its Cigar Lake mine development in northern Saskatchewan.
Cigar Lake is a joint venture 50 per cent owned by Cameco, with Areva Resources Canada Inc. holding 37 per cent, Idemitsu Uranium Exploration Canada with eight per cent and Tepco Resources Inc. at five per cent.
There is no risk of Cameco's customers being left high and dry as a result of the Cigar Lake problems, Grandey said.
"One of our advantages is we've got a diversified portfolio of sources," including the Kintyre uranium deposit in Western Australia that Cameco recently purchased from mining giant Rio Tinto, he said.
The company expects to see continued volatility in uranium prices, which have rebounded to about US$65 per pound since declining to below $60 in June, Grandey said.
"The latest upturn reflects financial players stepping into the market to take advantage of soft prices," he said.
"This volatility is not surprising. The spot market is thinly traded and minor quantities either purchased or sold can have a dramatic impact on price."
In Thursday trading on the Toronto Stock Exchange, Cameco shares fell 16 cents to $32.73.
Besides its uranium businesses, Cameco is the controlling shareholder of Centerra Gold Corp. (TSX:CG). Cameco's overall results included $143 million in revenue from Centerra, up from $117 million a year earlier.
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