Cameco officially restarts production at McArthur River/Key Lake following four-year shutdown

Cameco (TSX: CCO; NYSE: CCJ) announced on Wednesday that the first pounds of uranium ore from the McArthur River mine in Saskatchewan have now been milled and packaged at the Key Lake mill, marking the achievement of initial production as these facilities transition back into normal operations.

"McArthur River and Key Lake are among the best and most prolific uranium assets on the planet, and after building homes for these pounds in our long-term contract portfolio, we are delighted to have them back in production," stated Cameco president and CEO Tim Gitzel in a news release.

"Market conditions have continued to strengthen since we announced their planned restart, with growing geopolitical uncertainty adding to energy security concerns worldwide, and the ongoing global emphasis on decarbonization and electrification only gaining momentum."

Production was suspended at McArthur River and Key Lake for approximately four years beginning in January 2018 due to persistent weakness in the global uranium market.

In February 2022, with an improving market and an increase in long-term contracting activity adding significant volumes to the company's portfolio, Cameco announced the next phase of its supply discipline, which included the planned restart of both operations.

Cameco's McArthur River uranium mine in Saskatchewan, as seen in 2014. Credit: Cameco.

This initial production is a "significant milestone" for the operations and comes as the result of completing critical automation upgrades, maintenance readiness checks, and restaffing, recruitment and training for key positions at both facilities, Cameco says.

There are now approximately 730 employees and long-term contractors working at the mine and mill - more than half being of Indigenous heritage - with additional hiring planned going forward. The sites will continue with final commissioning activities to ensure target production rates can be met and normal operating conditions are being achieved.

McArthur River/Key Lake are expected to produce up to 2 million lb. (100% basis) of uranium concentrate (U3O8) in 2022. Starting in 2024, Cameco plans to produce 15 million lb. of U3O8 per year from these operations, 40% below their annual licensed capacity.

Cameco expects the return to production at McArthur River/Key Lake will lead to a significant improvement in the company's future financial performance.

"We anticipate it will be positive for cash flow and will allow us to source more of our committed sales from lower-cost produced pounds. In addition, we will no longer be required to expense care and maintenance costs directly to cost of sales. Until we achieve a reasonable production rate, however, we expect to incur between $15 million and $17 million per month in operational readiness costs, which will be expensed directly to cost of sales," Gitzel said.

In the third quarter of 2022, the company had booked a $20 million loss, which was considerably less than the $72 million loss posted in the prior-year quarter, reflecting normal quarterly variations in contract deliveries and efforts to ramp up production by 2024.

Also this week, the company said it had signed a uranium apply agreement with China Nuclear International Corp., a subsidiary of the China National Nuclear Corp., earlier this year. Terms of the agreement will not be disclosed, but contract volumes comprise part of the 50 million lb. that Cameco has added to its long-term uranium contract portfolio so far this year.

"China is counting on nuclear energy to play a major role in its commitment to achieve net-zero emissions, and CNNC is a large and growing part of that effort," Gitzel said on the news. "Cameco is very pleased to continue increasing our contribution towards the attainment of China's important climate goals."

Shares of Cameco closed 3.7% lower at market close Wednesday. Its market capitalization is $13.7 billion.