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Scott Bishop, chief engineer at Cameco Corp.'s Cigar Lake uranium mine, displays a bag and concrete system that was used to seal a shaft following a 2006 flood at the mine in northern Saskatchewan on Friday, Sept. 3, 2010.

Geoff Howe/Bloomberg/Geoff Howe/Bloomberg

Cameco Corp.'s new chief executive officer says the current slump in uranium prices resulting from Japan's nuclear disaster is a chance for the company to take another look at acquisitions that may have been too expensive just a few months ago.

Tim Gitzel, who takes the top job at the world's largest publicly traded uranium producer on Friday, said Cameco will continue to look for "acquisitions or projects" that would make a good fit.

"Valuations are down … You would scrub projects again. Probably some that you might have looked at six months ago, you'd go back with a different eye again and the numbers would probably look different," Mr. Gitzel said in an interview on Wednesday. "If we find something that makes sense to us, that's available, we have the ability and capacity to move quickly on that."

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Some uranium producers have seen their stock valuations plunge by up to 50 per cent or more since Japan's earthquake and ensuing nuclear crisis struck in mid-March. Meantime, the spot price of uranium, used to fuel nuclear reactors, has also fallen, by almost 30 per cent.

Adding to depressed prices are decisions by such nations as Germany, Switzerland and Italy to phase out their nuclear energy programs due to heightened fears of the alternative energy source after the meltdown at Japan's Fukushima nuclear power plant.

While companies are cheaper today as a result of fallen uranium prices, Mr. Gitzel stressed that operating costs remain a key factor in considering future acquisitions. Mining production and construction costs are climbing around the world as a result of rising energy costs, higher inflation and labour shortages that are driving up wages.

While Mr. Gitzel wouldn't comment on whether the company is close to any deal, he said part of Cameco's acquisition criteria includes "nearer-term" projects, given that the company is already involved in a number of long-term projects worldwide.

"We look for the best projects," Mr. Gitzel said. "If there was anything nearer term - I should say within the next 10 years - that would be interesting to us."

Saskatoon-based Cameco has never purchased a controlling interest in any publicly traded company, but has minority equity stakes in several publicly traded junior explorers such as UNOR Inc., Calypso Uranium Corp. and Western Uranium Corp.

The uranium industry is small and largely dominated by large government entities, which also means there are few takeover targets.

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Still, analysts say possible takeover targets may include Hathor Exploration Ltd., which is in Cameco's backyard in Saskatchewan, or such African-focused development companies as Bannerman Resources Ltd. and Forsys Metals Corp., to name a few. Cameco may also face competition from state-owned players such as Korea Electric Power Corp (KEPCO) that are actively seeking deals to secure access to uranium.

Cameco has a reputation for being disciplined with its acquisitions, which is likely part of the reason it hasn't taken over a public company to date, said Salman Partners analyst Raymond Goldie.

Investors will be interested to see if Mr. Gitzel changes that course for Cameco.

"It's a different time now and with new management - those are two reasons to think Cameco might, for what might be the first time, do a hostile or friendly takeover of another uranium company," Mr. Goldie said.

Instead of buying a company, Cameco could also continue to buy projects as it last did in 2008 with the purchase of a 70-per-cent interest in the Kintyre uranium exploration project in Australia for $346.5-million (US), one of its largest deals to date.

Cameco itself is an unlikely takeover target given that no single shareholder can own more than 15 per cent of the company's shares and there is a 25-per-cent voting limitation on non-resident shareholders. The company is also bound to keep its head office and key senior executives, including the CEO, in Saskatchewan.

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Mr. Gitzel, 49, is currently president of Cameco and takes over as CEO from the retiring Jerry Grandey on Friday. Before joining Cameco as chief operating officer in 2007, Mr. Gitzel was executive vice-president, mining business unit, for Paris-based nuclear giant Areva.

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About the Author

Brenda Bouw is a freelance writer and editor based in Vancouver. She has more than 20 years of experience as a business reporter, including at The Globe and Mail, The Canadian Press, the Financial Post and was executive producer at BNN (formerly ROBTv). Brenda was also part of the Globe and Mail reporting team that won the 2010 National Newspaper Award for business journalism. More

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