Cigar Lake report due next month: Cameco

Vancouver – Uranium giant Cameco (CCO-T) posted sharply lower fourth-quarter profits due to problems at its Cigar Lake mine in Saskatchewan, and said preliminary cost estimates will take longer than initially anticipated.

But the Saskatoon-based company forsees a 25% rise in annual revenue this year due to higher sales from its uranium and fuel services divisions.

“Cigar Lake is an extremely valuable deposit that will play a pivotal role in Cameco’s future,” said Cameco chief executive officer Jerry Grandey during a conference call with analysts, February 7.

“While we work on Cigar Lake, the uranium production from our existing operation ensures we remain the largest producer in the world and we are planning for the future production.”

The company took a $15 million write down related to Cigar Lake, which was flooded last April and again in October, as well as another $5 million in costs related to remediation activities at the project in the fourth quarter.

Cameco said two drill rigs on site working around the clock have drilled eight of the 14 drill holes planned for reinforcing and sealing off the flooded area.

The company had hoped to provide preliminary cost estimates and timelines for the remediation in February, but now says a technical report on the project will not be finished until late March, when the company hopes to have a better idea of when the mine will be put into production.

Meanwhile, Cameco reported a profit of $40 million or 11 per share for the three months ended Dec. 31, 2006, down from a profit of $83 million or 23 in same period a year ago.

Revenue in the quarter slipped to $512 million from $522 million.

The company realized an average price of US$65.21 per pound for its uranium in the fourth quarter, compared to US$34.79 a year earlier.

In addition to charges related to Cigar Lake, the company attributed its lower profits to lower earnings from its electricity and gold businesses.

Pre-tax earnings from the Bruce Power Ltd. Partnership were $13 million in the quarter, down from $30 million a year ago, due to a lower average realized electricity prices.

Looking ahead to 2007, Cameco said revenue from its uranium business is forecast to grow by 45% due to stronger average realized contract prices compared to 2006, while its fuel services business will be about 20% higher than in 2006.