Cameco extends shutdown of Saskatchewan uranium operation

Canada’s Cameco (TSX:CCO) (NYSE:CCJ), the world’s largest publicly traded uranium producer, announced this week the extended shutdown of the McArthur River and Key Lake operation, located in northern Saskatchewan.

“Due to continued market weakness, in July 2018, Cameco made the decision to extend the planned 10-month production suspension of this operation for an indeterminate duration,” the company’s website reads.

This decision implies the firing of about 550 employees at the mining sites, while another 150 were laid off from the corporate head office in Saskatoon. A reduced workforce of some 200 people will remain at McArthur River and Key Lake to keep the facilities in a state of safe care and maintenance.

“It was a difficult decision to make, because of the impact it will have on our employees, their families, and other stakeholders, but we must take this action to ensure the long-term sustainability of the company,” Cameco’s President and CEO, Tim Gitzel, said in a media statement.

As a result of the layoffs, management expects to incur between $40 million and $45 million in severance costs in the third quarter.

Gitzel said that this resolution reflects the impact of a weak uranium market that is not giving any signs of improvement. “We will not produce from our tier-one assets to deliver into an oversupplied spot market. Until we are able to commit our production under long-term contracts that provide an acceptable rate of return for our owners, we do not plan to restart,” he wrote in the statement.

The prairie firm is also dealing with growing uncertainty given U.S. President Donald Trump’s threats to extend tariffs to uranium imports.

Joint venture partner Orano agreed to extend the suspension, the press release reads. In exchange, Cameco agreed to extend its repayment of up to 5.4 million pounds of uranium concentrates.

It was in late-2017 when the Saskatchewan-based miner announced the initial suspension of activities at the world’s largest high-grade uranium operation. Back then, the company cited a six-year-long rout in the prices for the radioactive metal.

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