Cameco Corp (TSX: CCO) has placed its Cigar Lake mine on care and maintenance while suspending production at the mine site as a result of the growing impact of the COVID-19 pandemic on the firms workforce. With cases rising within Saskatchewan, the company has suspended operations temporarily due to the increasing risks.
A total of about 300 employees are said have been employed by the mine, with an unknown portion to be impacted by the decision to idle operations at the mine until further notice, however employment reductions are said to be significant. The decision follows six positive tests at the firms northern operations in recent weeks, three of which were at the Cigar Lake operations.
As a result of the suspension, the company has indicated that it will be purchasing uranium on the market to meet its prior sales commitments, with the idling of production expected to cost the company anywhere from $8 million to $10 million per month. Additional costs will likely be incurred as well due to the need to purchase uranium, which is at a higher cost per pound than production. Costs however are not anticipated to impact the company’s results until the first quarter of 2021 due to timing.
As of September 30, the Cigar Lake mine had produced 2.3 million pounds of uranium concentrate for Cameco, with the company now indicating that prior guidance for 5.3 million pounds by year end is now no longer expected to be met.
The company appears well positioned to weather the storm, given that it currently has $793 million in cash on hand, along with an undrawn $1.0 billion credit facility.
The timing of the restart of the Cigar Lake operations is said to be dependent on the COVID-19 pandemic and the impact it has on the availability of the workforce required to safely operate the mine, along with the views of public health authorities.
Cameco Corp last traded at $18.06 on the TSX.
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