Cameco Corp. is just months away from opening its Cigar Lake uranium project, the world's second-largest high-grade uranium deposit, more than thirty years after it was discovered and just as global prices for the nuclear fuel show promise of a rebound.
"We're on track with Cigar Lake. We said we'd be starting the mining in mid-2013 and we will and we'll have first production from the mill in 2013," said Tim Gitzel, chief executive officer of the Saskatchewan-based owner of uranium projects in Canada, the United States, Australia and Kazakhstan.
"It's been a long project. A long time. That ore body was discovered in 1981 and here we are now, not decades or years but mere months away from first production, so we're pretty excited about it," he said on the sidelines of the annual Prospectors and Developers Association of Canada (PDAC) conference in Toronto.
Cigar Lake will supply uranium for some 20 or 30 years. Cameco, the world's biggest publicly traded uranium producer, is the 50 per cent owner of the northern Saskatchewan mine, which has ore grades that are among the world's highest, at 100 times the world average.
It will come on stream at a time when the industry is eyeing a recovery in prices that have been depressed for nearly two years, when a massive earthquake and subsequent tsunami hit Japan in March, 2011, forcing the shutdown of some nuclear power plants around the world amid renewed fears about safety.
The tsunami saw Japan shut 50 nuclear plants and debate a complete eradication of nuclear power after the world's worst nuclear disaster since Chernobyl in 1986 and the Three Mile Island accident in the United States in 1979. It took a change in government to put the nuclear program back on track, although under stringent new guidelines, some of which are still being worked out.
"We believe that the program will restart this year, we're thinking perhaps six reactors restarted this year and then ramping up over the next several years," Mr. Gitzel said. "We've been really spending a lot of time watching Japan. It's the big catalyst that everyone's been watching."
He also pointed to China, which lifted a time-out on construction approvals for new reactors last fall. The Asian powerhouse has 16 reactors in operation, 29 under construction and probably another 15 planned by 2020, Mr. Gitzel said, all of which spells good news for uranium prices that are so low that most new mine projects are not viable.
Uranium, a heavy metal discovered more than 200 years ago and a source of concentrated energy, is trading at around $42 (U.S.) a pound, far from the $70 a pound minimum that most mines require to be feasible.
"So, we see the demand line rising ... We see the supply line tight. New projects? There aren't very many of them and I can tell you at $42 a pound there's not many, if any, that make economic sense," Mr. Gitzel said.
RBC Dominion Securities has a long-term uranium price forecast of $65 a pound, which it raised earlier this week from $60.
"If you want to incent new production, you're looking north of $70 a pound for new projects, whether in Africa or Australia or even in Canada. I think that's what we are going to have to see on a sustained basis before producers are going to want to invest the big dollars it takes to bring on new production."
The brighter outlook for uranium prices may be one of the few bright spots in the outlook for metal commodities. The PDAC conference, which draws some 30,000 participants from around the world, unfolds in Toronto as the mining industry faces its bleakest times in years, with forecasters bearish on the future prices of many metals.