Cameco not shy over Kazakh risks

Plans to continue its investment

Sylvia Westall, Reuters 

June 29, 2009

Cameco not shy over Kazakh risksCameco Corp., the world’s biggest uranium producer, will press ahead with investments in Kazakhstan despite a probe into the uranium sector in the Central Asian state, the head of the Canadian uranium miner said.

“We are quite committed to Kazakhstan, yes, any time there’s a change, sudden or not sudden, people get a little bit unsettled,” said Jerry Grandey, Cameco’s chief executive.

His reassurance follows the accusation by Kazakhstan’s KNB security service that the former head of state uranium company, Kazatomprom, Mukhtar Dzhakishev, illegally took over state-owned uranium deposits and sold them to foreign companies, a charge he has denied.

Mr. Dzhakishev was dismissed and arrested last month.

“From our perspective the investment environment is still quite positive,” Mr. Grandey said on the sidelines of a uranium symposium held by the Vienna-based International Atomic Energy Agency.

He had told reporters earlier that the probe, which does not affect Cameco’s deals with the Kazakh company, had hurt the overall business climate there.

Cameco will continue its “very aggressive” exploration program in Kazakhstan and is still willing to invest further if current projects go well, Mr. Grandey said.

Kazakhstan sits on a fifth of global uranium reserves.

Kazakhstan is keen to develop its uranium reserves as the nuclear fuel becomes ever more important to countries that are turning to atomic energy to replace fossil fuels and reduce carbon emissions.

Mr. Grandey said he also saw opportunities in India, which, along with China, is expected to become one of the world’s top consumers of nuclear fuel, but added that obstacles remain.

“There’s all kinds of opportunities to be identified, that we need to be talking about, but until there is a nuclear-cooperation agreement in place, there will be no serious exchange, because India can’t source uranium from Canadian mines,” he said.

India signed a nuclear cooperation agreement with the United States last year, but negotiations between India and Canada on a similar agreement are ongoing.

Mr. Grandey said Cameco was pursuing a conservative growth strategy overall. “Market valuations of the likely [takeover] targets are, in my view, expensive,” he said, referring to speculation the company was actively seeking to buy companies.

“I’m a little surprised at the strength [of the uranium price] right now because it is usually the summer lull,” Mr. Grandey said.

Spot uranium is trading at US$54 a pound, according to a weekly report from Ux Consulting.

Mr. Grandey said utilities were well covered for supply over the next two to three years due to long-term contracts and their buying in the spot market would therefore be discretionary. If the price were to fall below US$40, “Cameco would be fine,” he said. “[But] if prices get below US$40 you will see some of the new entrants, over time, being forced to shut down.”

He said remediation was going well at Cameco’s Cigar Lake mine in Saskatchewan, which flooded while under construction in 2006 and again last year.