Cameco profit down 38 percent - but raising uranium sales forecast

12 May 2009 | 04:44 Code : 19124 Geoscience events
Uranium miner Cameco Corp (CCO.TO: Quote) said on Friday its quarterly....

Uranium miner Cameco Corp (CCO.TO: Quote) said on Friday its quarterly profit fell 38 percent, missing analysts’ estimates, as costs were boosted by purchases of uranium at above-production prices for future resale.But the Canadian company raised its 2009 sales forecast slightly, and an industry report stoked hope for a rebound in uranium prices, sending Cameco’s shares 5.8 percent higher.Cameco’s uranium purchases -- part of a plan to benefit from a longer-term rise in the price -- contributed to a rise in uranium production costs to C$220 million ($186 million) in the first quarter from C$169 million in the year-before quarter and prompted the company to predict a 15-20 percent rise in the cost of sales for the year.Faced with analysts’ questions on a conference call, Cameco Cameco Chief Executive Jerry Grandey defended the purchases as a longer-term trading strategy."Down the road, we will realize additional revenue and earnings as we deliver the purchased material to our customers," he said.The higher costs helped pull down first-quarter profit to C$82 million, or 22 Canadian cents a share, from C$133 million, or 37 Canadian cents a share, a year earlier.Excluding one-time items, the company said it earned C$89 million, or 24 cents a share, missing the 33 Canadian cent a share profit expected by analysts polled by Reuters Estimates.Quarterly revenue rose 4 percent to C$615 million, as uranium production rose 26.3 percent to 4.8 million pounds, while the company also had stronger results at its electricity generation business."It looks like production was light. We had expected 5 million pounds, but they came in a bit lighter than that," said Blackmont Capital analyst George Topping, who called the results "disappointing".However, the company’s Toronto-listed shares were up C$1.60 at C$29.00 at mid-afternoon on Friday after pricing company TradeTech said in a report that its spot price for the metal had risen to $45 a pound from $44, and that the bulk of excess inventory that has been hanging over the price has been removed.Uranium spot prices have fallen by about 67 percent since hitting a record high of $136 a pound two years ago.Cameco’s shares, meanwhile, are up more than 30 percent in the past two weeks, helped by news that its Centerra Gold (CG.TO: Quote) subsidiary had reached an agreement with the Kyrgyz government over tax and ownership issues surrounding its Kumtor gold mine.Under the terms of the agreement, which was ratified this week by the Kyrgyz parliament, Cameco’s 53 percent stake in Centerra will fall, possibly as low as 38 percent.Grandey said Cameco will eventually completely divest itself of its Centerra stake.Cameco also raised its expected sales for this year to a range of 32 million and 34 million pounds of uranium from its previous range of 31 million to 33 million pounds due to new commitments for 2009 deliveries.The company now expects 2009 full-year revenue to fall by 2 to 5 percent from 2008’s C$2.86 billion. It had previously predicted a decrease of 5 to 10 percent.($1=$1.19 Canadian) (Additional reporting by Scott Anderson; editing by Peter Galloway)

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