Cameco’s Cigar Lake passes regulatory hurdle

Slowly but surely, the Cigar Lake uranium project continues to inch its way toward a production decision.

The high-grade mine, situated in northern Saskatchewan, is operated by Cigar Lake Mining, a joint venture between Cameco (CCO-T) (48.75%), French-owned Cogema Resources (36.4%), Japanese-owned Idemitsu Uranium Exploration Canada (7.9%), Japanese-owned Tepco Resources (5%) and Korea Electric Power (2%).

In November 1997, the project received conditional approval from a joint federal-provincial panel that had heard from more than 50 groups and agencies.

The panel, which had been asked to consider the desirability of mine development, also gave the thumbs-up to development of the Midwest uranium project, which, like Cigar Lake, is situated in the Athabasca basin, more than 600 km north of Saskatoon. Midwest is a joint venture involving Cogema (56%), German-owned Uranerz Exploration & Mining (20%), Denison Mines (DEN-T) subsidiary Tenwest Uranium (19.5%) and OURD Canada (4.5%).

Now, both the Saskatchewan and Canadian governments have recommended that Cigar Lake proceed to the next stage of the regulatory approval process.

Midwest has yet to be granted government approval.

In granting its approval, the Saskatchewan government indicated that Cigar Lake could be developed, operated and decomissioned in a manner that is environmentally acceptable.

“The Cigar Lake project has passed one more milestone on the road to production,” says Cameco President Bernard Michel. “We expect production to begin in 2001, subject to the timely receipt of appropriate licences from the regulators.”

A development decision will be contingent on uranium market conditions.

The approval of the panel was subject to the resolution of two issues — first, that the operator identify a suitable location for the disposal of waste rock, and second, that further assessment be undertaken relating to Cogema’s plans to dispose of mine tailings 80 km away in a mined-out pit at its McClean Lake uranium mine property.

It is expected that ore mined at Cigar Lake will be processed at the McClean Lake mill, which will be operated by Cogema.

The recommendations of the federal and provincial governments deviate from the panel’s recommendations in one respect: the ministries are calling for ongoing laboratory studies, field investigations and modelling studies while the tailings are being deposited, rather than a preliminary assessment based solely on theoretical modelling, as the panel suggested.

The governments are also calling for Cameco and Cogema to submit reports to nearby communities regarding construction, operating and environmental activities and to conduct research into waste rock disposal, liquid effluent volumes, contaminant concentrations and recycling options. They have also requested that acceptable locations be identified for the disposal of waste rock.

Michel says he is confident Cameco and Cogema can comply with these requirements.

Cigar Lake is reported to be the world’s second-largest known deposit of high-grade uranium — second only to the nearby MacArthur River mine, in which Cameco has a 56% stake and operating control. Reserves at Cigar Lake stand at 350 million lbs. grading 14% U3O8, with annual production slated to reach 18 million lbs. U3O8.

The Cigar Lake deposit was discovered in May 1981. Test mining began in late 1987, followed by a shaft-sinking program in 1988 that ultimately reached a final depth of 501 metres. Horizontal development was advanced on two levels, and test mining (using boxhole boring and high-pressure, water-jet boring) in frozen ground was carried out in 1991 and 1992. A feasibility study was delivered to the joint-venture partners the following year, and an environmental impact statement was filed in 1995. Technical challenges involving groundwater, rock properties and radiation protection were evaluated and addressed during the test mine phase.

Construction of the Cigar Lake mine is expected to employ about 400 people.

Cogema, meanwhile, reports that its licence to operate Cluff Lake has been extended by the Atomic Energy Control Board for nine months.

On the financial front, Cameco reports that its annual earnings from operations increased by 4% to a company record of $15.1 million in 1997, despite a 23% drop in the average uranium spot price from the previous year.

After the introduction of a non-cash income tax (which increased the tax expense to $65 million in 1997 from $5 million in 1996), Cameco posted net earnings of $82 million (or $1.51 per share). This compares with net earnings of $138 million ($2.60 per share) in 1996. Revenue grew by 9% to $643 million in 1997, from $591 million in 1997 (T.N.M., March 2-8/98).