The uranium industry is facing increased supply constraints as the unplanned supply disruptions related to the Covid-19 pandemic are adding to the supply curtailments that have occurred in the industry for many years.
Canadian major Cameco says in its first-quarter market update that it believes the risk to uranium supply is greater than the risk to demand, which should create a renewed focus to ensure availability of long-term supply to fuel nuclear reactors.
Nuclear power plants – deemed critical to ensure 24 hour electricity to run hospitals, care facilities and other essential services – continue to require uranium during the Covid-19 pandemic. But as the global health emergency disrupts production, the uranium market is responding, with the spot price having increased by more than 35% since Cameco announced the first disruption at its Cigar Lake mine, on March 23.
The company suspended uranium production at the Cigar Lake mine and McClean Lake mill for an indeterminate period – prior to the suspension, production was expected to be 18-million pounds in 2020. The Blind River refinery and the Port Hope UF6 conversion facility have also been suspended for a four-week period.
Kazatomprom has reduced operational activities across all uranium mines in Kazakhstan for an expected period of three months owing to the risks posed by the Covid-19 pandemic. According to Kazatomprom, this decision will result in a lower level of wellfield development activity and, as a result, an estimated reduction of up to 17.5% in total planned uranium production in Kazakhstan for 2020.
In late March, the government of Namibia halted mining activities to curb the spread of the Covid-19 outbreak, but has recently allowed for normal mining operations to resume, subject to appropriate public health measures being put in place.
“Over time, we expect this renewed focus on security of supply will provide the market with signals producers need, and will help offset any near-term costs we may incur as a result of the current disruptions to our business,” states Cameco.
The group reports that its balance sheet is strong and that it is well positioned to self-manage the risk related to the suspension of production at its operations in Canada.
Cameco has $1.2-billion in cash and short-term investments on its balance sheet and a $1-billion undrawn credit facility, which CEO Tim Gitzel says it does not expect it will need to draw on.
“Despite the disruptions to our operations as a result of Covid-19 and the prudent decisions we have made, we expect our business to be resilient. We will continue to provide the fuel required to power the nuclear reactors that will be part of the critical infrastructure needed to ensure hospitals, care facilities and other essential services are available during this pandemic.”
Cameco reported a net loss of $19-million and adjusted net earnings of $29-million. This compares with a net loss of $18-million and adjusted net loss of $33-million in the comparative period.