Cameco lowers 2010 uranium sales forecast

Production and Markets

Cameco Corporation, the world’s largest listed uranium producer, says it expects to sell 30Mlb (13,612t) of uranium in the year to end-December, compared with a previous forecast of 31-33Mlb.

The company attributed the lower sales expectations on the deferral of deliveries by some customers to 2011 and to the “discretionary nature” and lower prices on the spot market.

According to Cameco volumes on the spot market, where purchases call for delivery within one year, the volume reported for the second quarter of 2010 was about 9.6 million pounds U3O8. This is well below the record 24.3Mlb purchased in the second quarter of 2009. For the first half of the year, spot purchases totalled 22.7Mlb compared with 32.3Mlb for the same period in 2009.

The company added: “Utilities are well covered under existing contracts and have been building inventory levels of U3O8 since 2004, so we expect uranium demand in the near term to remain discretionary.”

Uranium revenues are expected to decline by 10-15% over 2009, compared with a previous expectation of a 5-10% decline, due to the lower sales.

The company sold 14.9Mlb in the first six months to end-June, compared with 15.1Mlb by the same time last year. The company realised an average price of US$41.76/lb sold compared with US$38.86/lb previously.

In its June quarter results announcement on Friday the company said that it had generated net earnings of US$68 million off revenue of US$546 million. This was 72% lower than a year ago, when the company generated a profit of US$247 million of US$646 million in revenue.

The company says the profit drop was largely due to US$46 million in after-tax expenses for mark-to-market losses on financial instruments, compared with gains of US$107 million a year earlier.