Uranium market conditions 'tough as I've seen in 30 years': Cameco CEO
Sask. mining company says lack of demand behind $62M loss, future looking more promising
Despite a bad year, Cameco CEO Tim Gitzel says he's still cautiously optimistic about the future.
This week, the uranium mining company reported a net loss of $62 million in its 2016 year-end financial numbers.
Uranium spot prices hit a 12-year low, caused by oversupply after Japan shut its power reactors down following the Fukushima nuclear disaster in 2011.
"Market conditions in 2016 were as tough as I've seen in 30 years," Gitzel said on an investors conference call. "I think it's fair to say that no one, including me, expected the market would go this low for this long."
Gitzel told investors that uranium prices are extremely low. Spot prices in December were 40 per cent lower than the beginning of 2016 and 70 per cent lower than March 2011.
"We are far from a true incentive price for sustainable production," he said. "Obviously, we're very far from requiring any new greenfield uranium projects."
Gitzel predicts market turnaround
He said the company is cautiously optimistic about a market turnaround in the next several years.
In 2016 alone, 10 new reactors came online and 58 reactors are under construction, the majority of which should be online in the next three years. About one-third of the growth is in China.
"You only need to look at the news about the choking air pollution in China to understand why nuclear is so important in that country," he said.
"India and South Korea are also significant contributors to the demand outlook."
But, for now, reduced production, layoffs
Meanwhile, Cameco is drastically reducing its production and workforce. Last year, the company cut 500 jobs at its Rabbit Lake, Sask., uranium mine, and closed the site. In January, it announced a further 120 layoffs at its other operations across northern Saskatchewan.
"In response to these tough market conditions, Cameco led the way in terms of supply discipline," said Gitzel. "We curtailed our Rabbit Lake and U.S. mining operations, and reduced our mining operations at McArthur River [in Saskatchewan]."
Last month, Japanese power company TEPCO issued a notice it was cancelling a contract with the company worth $1.3 billion through 2028. Cameco said it plans to fight the matter in court. Cameco removed all of its uranium sales to the company from its financial outlook.
- Cameco threatening legal action after Japanese company cancels major uranium contract
- Japanese power company defends decision to end Cameco uranium contract
The company's adjusted net earnings came in at $143 million for 2016, down from $344 million from a year before. Revenue dropped $323 million in 2016 to $2.43 billion.
The net loss for the fourth quarter was $144 million, compared to a net loss of $10 million for the same quarter in 2015.
With files from The Canadian Press