Hundreds of jobs cut, dividends slashed as Cameco shuts 2 Sask. uranium sites

Uranium giant Cameco announced Wednesday that it plans to shut down production at two of its sites in Saskatchewan — McArthur River and Key Lake — in January. It predicts 845 jobs will be affected.

845 positions to be laid off represents 20% of company's workforce, CEO says

Bernie Clavelle, a maintenance planner at Key Lake, said he thought a shutdown might happen due to poor prices in the uranium market, but he didn't expect it to last 10 months. (Albert Couillard)

For one Cameco employee, the company shutting down production at two sites in Saskatchewan is not all that surprising.

After all, the uranium market has been poor.

"I'm shocked, but I'm not that surprised, and I'm not too concerned yet," said Bernie Clavelle, a maintenance planner at the uranium company's Key Lake site.

Cameco announced Wednesday that it plans to shut down production at two of its sites in Saskatchewan — McArthur River and Key Lake — in January. It predicts 845 jobs will be affected.

Clavelle has been at Key Lake for more than 14 years. 

Cameco CEO Tim Gitzel said they will top up direct employees' benefits, which is why Clavelle said he still has hope.

He's not looking for another job yet, but he has some concerns.

"What's next year going to look like? There's no guarantees if prices stay low … There's a chance I may have to look for other employment."

Dividend payments slashed

"We regret the impact on employees," said Cameco CEO Tim Gitzel during a conference call Thursday.

Today it makes the most sense to leaves those pounds in the ground.- Tim  Gitzel , CEO, Cameco

Premier Brad Wall said the government will provide rapid response teams to help employees facing layoffs who want to transition into a different career or who might need counselling, "because it's fairly traumatic, even for temporary loss of job."

Gitzel said the company was planning for a shutdown period of 10 months, but didn't provide a definite date for when work would resume.

"Today it makes the most sense to leaves those pounds in the ground," said Gitzel.

"We just look at this market and we say it's got a long way to go before it's adequately pricing uranium," chimed in Grant Isaac, the company's CFO.

"We don't think that's where it needs to be to pull those pounds out of our portfolio."

Cameco said Wednesday that it will change its dividend payment schedule to annually from quarterly while simultaneously reducing the overall annual payment to eight cents per common share from 40 cents.

The direct impact of the shutdown on the province's revenues will be "negligible," Wall said.

'Over-supply situation'

Nicolas Carter, executive vice-president of uranium for the American nuclear consulting firm UXC, said shutting down production is a savvy one. After Japan's Fukushima disaster, and the subsequent phasing out of Germany's nuclear program, the demand for uranium has suffered, Carter said.

"Overall demands just trended downward, with the exception of some promising areas such as China and India, but all-in-all demand has been pretty flat."

Nicolas Carter thinks the Fukishima disaster was responsible for starting a downward trend in uranium prices, which has now resulted in the potential loss of 845 Saskatchewan jobs. (Submitted by Nicolas Carter)

Indeed, at the end of October the raw uranium, or U3O8, spot price was $19.95 per pound, according to UXC.

When the cores began to melt in the Fukushima reactors, the price was over $60 per pound, Carter said.

"The market is sitting in an over-supply situation," he said.

"Probably 15 million pounds or so, on an annual basis."

Companies like Cameco reducing production should bring balance to the market and the price of uranium should rise, he said.

The bigger question in the long term, he said, is whether the uranium market will see any further reduction in demand.

"That's been an issue, especially here in the U.S. We had cheap shale gas, renewable energies, and especially in deregulated markets it's been much harder for nuclear energy to compete."

With files from Alex Soloducha