Cameco suspends production at McArthur River and Key Lake

Cameco (TSX: CCO; NYSE: CCJ) will indefinitely suspend production at its McArthur River and Key Lake uranium mines in Saskatchewan, and, as a result, permanently lay off 550 site employees. It will also shrink its corporate office workforce by 150 positions. Some are currently vacant.

Cameco initially suspended operations at the two sites in January, laying off some employees at the time. It had planned to reopen the sites after 10 months.

The facilities have operated since 1999 and 1983. As of December 2017, they combined for 250.7 million proven and probable lb. uranium grading 9.63% uranium.

Approximately 200 employees will stay at McArthur and Key Lake to keep the facilities on care and maintenance.

“It was a difficult decision to make because of the impact it will have on our employees, their families and other stakeholders, but we must take this action to ensure the long-term sustainability of the company,” Cameco president and CEO Tim Gitzel said in a press release.

The company announced adjusted net losses of $28 million for 2018’s second quarter, compared to $44 million for the same period of the previous year. It expects to generate $1.9 billion in revenue for the year, down from $2.1 billion in 2017. The company expects its revenue will fall to $1.47 billion in 2019.

“Our results reflect the impact of a weak uranium market and the deliberate actions we have taken, driven by the goal of increasing long-term shareholder value,” Gitzel said.

In an analyst report, BMO Capital Markets said that the move “should accelerate the rate of inventory consumption, which should help support the uranium price,” but “is negative for Cameco’s earnings in the near-term.”

Cameco shares closed at $14.26 per share on the day of the announcement. At press time they had jumped to $14.94 per share. The company has a $5.6-billion market capitalization.