Cigar Lake

Cigar Lake Production

Cameco's Share (million lbs)

There was no production in the second quarter due to the production suspension related to the COVID-19 pandemic that began in March 2020. In the second quarter of 2019, our share of production was 2.5 million pounds.

On March 23, 2020, in conjunction with Orano, we announced a temporary four-week suspension of production at Cigar Lake to deal with the impact of the COVID-19 pandemic on the operation.

On April 13, 2020, we announced an extension of the suspension for an indeterminate period. With the impact of the COVID-19 pandemic continuing to escalate, we determined that the Cigar Lake workforce needed to remain at a reduced level for longer than the initial four-week period.

The recommendations and restrictions put in place by the federal and provincial governments, the increasing significant concern among leaders in the remote isolated communities of northern Saskatchewan, and the challenges of maintaining the physical distancing at fly-in/fly-out sites needed to ensure the health and safety of our employees, were critical factors we considered in reaching our decision.

The operation remains in a safe state of care and maintenance.

Orano also extended the suspension of production at its McClean Lake mill for an indeterminate period.

Our share of the cash and non-cash costs to maintain Cigar Lake for the second quarter were about $28 million, including our contribution to the care and maintenance costs at McClean Lake. While Cigar Lake remains on care and maintenance these costs are expected to range between $8 million and $10 million per month, but the costs may be impacted by the timing of its restart and continued operation.

Providing it is safe to do so, we also plan to restart the Cigar Lake mine at the beginning of September.

We expect it will take approximately two weeks to achieve initial production and we will not make up the production lost during the shutdown. Therefore, we are targeting our share of 2020 production to be up to 5.3 million pounds in total (previously 9 million pounds).

The restart and continued operation will be dependent on our ability to establish and maintain safe and stable operating protocols along with a number of other factors, including the availability of the necessary workforce and how the COVID-19 pandemic is impacting northern Saskatchewan communities.

While health and safety are the primary considerations for the timing of our Cigar Lake mine restart decision, there were also commercial considerations, including market-related factors and the impact on our cost structure. Having the Cigar Lake mine running was part of our operating plan for 2020.

On the financial front, our strategy relies upon having Cigar Lake’s low-cost supply as part of our cost structure to help offset the costs on the operational and marketing fronts. Although Cigar Lake production is not sold in the spot market, with the announcement of its shutdown combined with the announcements of other unplanned supply disruptions due to the COVID-19 pandemic, we have seen a significant increase in the uranium spot price since March. However, its shutdown has increased our care and maintenance costs and required increased purchasing activity at a higher cost than produced pounds.

Both factors are expected to increase our average unit cost of sales for 2020.

We also have experienced delays and deferrals in project work, including lower capital expenditures, which introduces potential risk to the production rate in 2021.

With the uncertainty remaining about the September restart and continued operation of the Cigar Lake mine, the delays and deferrals of project work and therefore resulting production rate in 2020 and 2021, we believe the current plan represents an appropriate balance of the commercial considerations affecting our decision.