Cameco pares Q2 loss as uranium contract business grows

Canada's largest uranium producer Cameco (TSX: CCO) says it has managed to narrow its June-quarter headline loss despite a 32% drop in overall revenue. The quarter also saw its long-term uranium supply contract portfolio expand.

In addition to the nine million pounds of uranium oxide in long-term sales contracts finalized in April, Cameco added another seven million pounds under contract in the latest three-month period. It brought the total volume contracted in the year to date to 16 million lb.

It still pales in comparison to peak contracting that followed the 2007 price peak at US$137 per lb.

Despite the near-term costs of Cameco's care-and-maintenance strategy for its top-tier assets, including the suspensions at Cigar Lake, the company has a strong balance sheet, ending the quarter with about $1.2 billion dollars in cash.

Examining drill core at Cameco's Cigar Lake uranium mine in northern Saskatchewan. Credit: Cameco.

The adjusted loss for the three months ended June 30 were $38 million or C10 cents per share, compared with a loss of $65 million or 16 cents per share in the second quarter of 2020. Analysts on average expected Cameco to post a net loss of 3c per share on $379 million of revenues, according to financial data firm Refinitiv.

Revenues fell to $359 million from $525 million a year earlier.

"We are not at the regular tier-one run rate of our business," says CEO Tim Gitzel in a media release.

The loss included $8 million in care and maintenance costs from the four-month suspension of production until the restart of the Cigar Lake mine in mid-April. The continued payment of salaries was covered by receiving $9 million from the Canadian Employment Wage Subsidy program.

According to Gitzel, the company is "taking the necessary steps", including investing in digital and automation technologies, "that will allow us to align our production decisions with our contract portfolio", and reduce costs.

Gitzel says traditional and non-traditional uses of nuclear power should grow with the increasing focus on electrification and phasing out of carbon intensive sources of energy continues.

Uranium spot prices are trending higher above the US$30 per pound level and ended June at 32.30 per lb according to UxC data.

As of Wednesday afternoon, the company's Toronto-quoted equity trade 4.5% higher at $22.44 a share, capitalizing it at $8.92 billion. Shares are up 38.5% in the 12-month frame after hitting the period high of $26.80 in June.