The Saskatoon, Sask.-based company has agreed to buy the Smith Ranch in situ leach mine and various other ISL properties in Wyoming from Rio Algom, a subsidiary of
Financial details were not disclosed, but Cameco figures the deal will be accretive to earnings in 2002 and to cash flow beginning next year.
BHP Billiton says the arrangement completes its exit from uranium production, part of its planned divestment of non-core businesses.
Under the deal, Cameco will assume the mine’s decommissioning liabilities, estimated at US$11 million, and will also buy US$6 million worth of Rio Algom’s uranium inventory.
The mine includes a U3O8 mill with an annual capacity of 2 million lbs. The mill, which began operating in 1997, is less than 5 km from Cameco’s Highland ISL facility. The company expects the proximity of the operations to generate savings. Cameco’s subsidiary, Power Resources, which already runs the Highland facility, will also operate Smith Ranch.
In 2001, Smith Ranch churned out 930,000 lbs. U3O8, while Highland produced 695,000 lbs.
At the end of 2001, proven reserves at Smith Ranch stood at 8.9 million lbs. U3O8. Probable reserves were pegged at 18 million lbs. U3O8.
Says Cameco’s chief executive officer, Bernard Michel: “These are the right assets in the right place at the right price. ISL reserves are the most economic after our large, high-grade reserves in Saskatchewan, and Smith Ranch is right next to our existing U.S. operations. We are obtaining these assets at a time when the uranium price is low but on a rising trend.”
Recent spot prices for U3O8 are in the range of US$9.90 per lb., up from a low of US$7.10 per lb. in late 2000.
Cameco has already secured forward sales commitments for more than 900,000 lbs. U3O8 from Smith Ranch at prices substantially higher than the current long-term price direction of US$10.40 per lb.
In situ leaching at Smith Ranch involves pumping a solution of native groundwater and sodium bicarbonate down through the deposit via an injection well. The uranium dissolves into the solution, which is then pumped back to the surface. The uranium is extracted at a central processing facility and the mining solution recycled.
The deal has yet to be approved by regulators but is expected to close within 45 days.
Cameco also produces about 250,000 oz. gold annually through a one-third interest in the Kumtor mine in Kyrgyzstan. Starting in 2003, the advanced, 49.4%-owned Boroo gold deposit in Mongolia is expected to add 74,000 oz. to the major’s annual production.
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