Vancouver – Mine development at Cameco‘s (CCO-T, CCJ-N) 50%-owned Cigar Lake uranium project in the Athabasca Basin of northern Saskatchewan was dealt a significant blow following a rock fall and major flooding event that will completely fill the underground workings over the next few days.
Flooding was initially expected to only fill a portion (about 40%) of the workings but a bulkhead door seal failure caused continued water inflow to exceed pumping capacity, resulting in full abandonment of the underground workings. The company confirmed all workers were safely moved to surface and there were no injuries. Additionally, no environmental impact is expected from the incident.
Cameco, as project operator, is now looking at how to restore access to the mine where production was slated to commence in early-2008. A revised production schedule will be reviewed once the flooding is dealt with. The company will have to now remediate the workings from surface and will pump out the mine once it can control the water inflow. It reports current water treatment capacity of 500 cubic metres per day and a daily contingency capacity of about 830 cubic metres plus a containment pond in place.
Cigar Lake is the world’s largest undeveloped high-grade uranium deposit, hosting proven and probable reserves of 551,000 tonnes grading 19.06% U3O8 (more than 232 million contained lbs. of U3O8). At the current U3O8 spot price of US$56 per lb., insitu ore value is about US$13 billion. The planned mine is expected to have a production life of 20-to-30 years with about half the ore being processed at Cameco’s nearby Rabbit Lake facility that has been in operation since 1975.
Cameco’s partners at Cigar Lake are Areva Resources Canada, a subsidiary of French energy giant Areva (ARVCF-Q), that holds 37% interest, Idemitsu Uranium Exploration Canada (owned by Japan’s largest independent oil company Idemitsu Kosan) owning 8% and TEPCO Resources (owned by Tokyo Electric Power Company) with 5% of the project.
Water flow can be a common issue in the sandstone-hosted environment of Athabasca Basin uranium deposits. Underground mining operations use technologies such as large rock freezing devices to stop the groundwater flow through the porous rock.
The company states it is adequately positioned to meet its contractual supply obligations but also disclosed its contracts are covered by a supply disruption clause. Possible expansion or extension of operations at Rabbit Lake and McArthur River will be evaluated to counter the delay of output from Cigar Lake, especially given the metal’s significant recent price rise.
The delay in bringing Cigar Lake on-stream will likely trigger a further rise in uranium prices. A number of advanced-stage uranium explorers all saw share price gains following the anticipated future supply crunch resulting from the mine flood.
Fortunately, the company was still in construction-phase at the project and only had limited underground equipment in place (primarily a heat exchanger and pumps) and had yet to install any processing equipment in the workings.
Following a brief trading halt, shares of Cameco shed over 9% following the reported event to close off $4.00 at $38.95 apiece on strong volume. The company produces about 20% of the world’s uranium from operations in Saskatchewan (McArthur River, Key Lake and Rabbit Lake) and the United States (Smith Ranch-Highland in Wyoming and Crow Butte in Nebraska). Additionally, it is bringing its 60%-owned Inkai insitu leach operation in Kazakhstan into production by 2008.
Be the first to comment on "Cameco’s Cigar Lake suffers major setback"