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Cameco examines assets
By Cassandra Kyle, The StarPhoenix May 27, 2010
Cameco CEO Jerry Grandey speaks to the media after the company's annual general meeting on Wednesday
Photograph by: Richard Marjan, The StarPhoenix, The StarPhoenix
Cameco Corp. has the uranium it needs to meet its goal of doubling production of the element by 2018, but that hasn't stopped the company from looking at potential new assets, its CEO said Wednesday.
While there is "no planned acquisition," Jerry Grandey said, a Cameco team of geologists is always on the search for new opportunities, the chief executive explained at the company's annual meeting in Saskatoon.
Under its "Double U" strategy, Cameco plans to increase its uranium production to 40 million pounds annually over the next eight years.
"We built up an asset base of properties, resources and reserves that are indeed spectacular within the nuclear industry," Grandey said about the company's portfolio.
"So (our) 480 million pounds of proven and probable reserves -- at the highest calibre of reserves you can have -- put us in a position where the growth that we want to achieve can all be done with those properties, those assets, that we spent all this time acquiring. But it doesn't mean we don't look."
Like the acquisition Cameco made of the Kintyre uranium property in Australia, spending $346.5 million in 2008 for a 70 per cent interest in the site, Grandey said the uranium giant won't hesitate to move if the right opportunity comes along.
"If we identified and see that in paying the acquisition price we can still add value to Cameco's shareholders, then we go after it aggressively -- but nothing is planned currently," he said.
The company plans to increase its capital spending this year in order to prepare its properties -- in Saskatchewan and overseas -- to bring on more uranium production as part of its Double U strategy. Grandey expects Cameco's capital budget to rise to between $500 million and $600 million in 2010, surpassing 2009's capital expenditures of approximately $400 million.
The new capital will go, in part, toward bringing projects such as Western Australia's Kintyre, northern Saskatchewan's Cigar Lake and Kazakhstan's Inkai uranium projects into production.
"The business is interesting in that our customers use uranium whether the economy is strong or weak and we're committed now for about six or seven years -- fully committed -- out into the future.
"So our revenue base, our margins, our cash flow, are very predictable. And that gives us -- along with $1.3 billion in the bank -- it gives us a lot of confidence that the growth plans can be funded internally," Grandey said.
In Saskatchewan, the company is focused on advancing its Cigar Lake and Millennium properties. The CEO anticipates the Millennium site will start producing just in time to contribute to the Double U goal. With resources of 60 million pounds of uranium, the company expects ore from the site will come online in 2016 or 2017.
"By world standards Millennium is a very large deposit, by Saskatchewan standards it's medium-sized to small," Grandey said of the site.
Cameco's plan to start production at Cigar Lake in mid-2013, meanwhile, is still on-target, the CEO said. After flooding at the site in 2006 and 2008, the company is bringing in double the amount of water pumping capacity to the area and plans to develop the site's underground tunnels between thicker layers of the region's prevalent water-saturated sandstone.
"You get setbacks in lots of facets of life, and this was a tremendously frustrating one, make no mistake about it," Grandey said about the delays at Cigar Lake. "But the value of that ore body, and the need for energy, drives you to say 'we're going to succeed.' "
Also at the meeting, Cameco shareholders re-elected the company's board of directors and voted more than 90 per cent in favour of a "say-on-pay" regarding executive compensation.
"When you get 90 per cent or more people voting in favour of what we've done, I think that reflects a very, very thorough understanding that we've got a responsible board approach to it," Grandey said.
Cameco Corp. brought in record net earnings of $1.1 billion in 2009, and ended the first quarter of this year with net earnings of $142 million.
ckyle@sp.canwest.com
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