- McArthur River/Key Lake, located in northern Saskatchewan, Canada is the world's largest high-grade uranium operation.
- In service since 1999 and 1983 respectively, Cameco operates the ISO 14001 certified locations, which have collectively produced 535 million lbs using a variety of mining methods.
This year, in alignment with our efforts to reduce costs, our production plan included an extended summer shutdown during the third quarter. The shutdown, consisted of a four-week vacation period in July, followed by a two-week maintenance period at McArthur River and a four-week maintenance period at Key Lake. Production was expected to restart at the end of August, however, work on the calciner at Key Lake took longer than expected. Also, there was additional work required on the calciner in October, resulting in an unplanned outage at Key Lake. As a result, we lowered our 2017 production target to 11.5 million pounds (Cameco’s share) from 12.6 million pounds (Cameco’s share). Production from McArthur River/Key Lake for the year was 16.1 million pounds; our share was 11.2 million pounds. This was 11% lower than 2016 and 3% lower than our previous forecast for the year.
During the year, we reduced the workforce by about 10%, and made changes to the commuter flight services at the site. These measures were made to further reduce costs and improve efficiency at the operation.
McArthur River/Key Lake Production
Cameco's Share (million lbs)
|3 months ended
|2017||2016||2017||2016||2017 Plan||2018 Plan|
- 1We reduced our initial 2017 production plan to 24.0 million pounds (from 25.2 million pounds) due to reductions at McArthur River/Key Lake and Smith Ranch-Highland in the third quarter.
Key Lake mill upgrades
The Key Lake mill began operating in 1983 and we have continually upgraded circuits with new technology to simplify operations, improve environmental performance, and allow the mill’s nominal annual production rate to closely follow production from the McArthur River mine. As part of the mill upgrades, a new calciner was installed at the Key Lake mill to accommodate an eventual annual production increase to 25 million pounds.
During the fourth quarter we announced our plan to temporarily suspend production at the McArthur River/Key Lake operation in 2018. As a result, we have re-evaluated the project to complete the new calciner at Key Lake, which was undertaken to allow for increased production. Given the production suspension, current market conditions, and that we have determined the existing calciner has sufficient capacity to reliably meet our ongoing production requirements it has been determined that no further investment will be made to complete the project. As a result, we have recognized an impairment charge related to the new calciner of $55 million.
New mining areas
We must bring on new mining zones to sustain production. The two new areas under active development included: the upper central portion of zone 4, and zone 1. In the fourth quarter of 2017, sufficient development and construction was complete to enable initial production from the upper central part of zone 4.
In 2017, zone 1 freeze drilling was advanced from 48% to 90% completion. In addition, construction of the brine distribution piping system was advanced to approximately 20% completion. Remaining freeze drilling and brine distribution construction will be deferred until after mine restart.
In 2017, the south freeze plant construction and commissioning was completed followed by a 3 month operating period when chilled brine was supplied to zone 4. The plant has been since shut-down for the care and maintenance period and will be restarted when freezing of Zone 1 is ready to begin.
The mine life of McArthur River/Key Lake has been extended from 2037 to 2038 as a result of the planned temporary production suspension in 2018. See mineral reserves and resources for more information.
In 2017, we continued with underground infill definition drilling of zone B in order to provide the information required for more detailed mining plans. Underground exploration drilling has been halted during the care and maintenance period.
Planning for the future
Due to continued uranium price weakness, and in accordance with our announcement at the end of 2017, we have temporarily suspended production. During January 2018, activities at the mine and mill were focused on putting the operation into a state of safe care and maintenance. As a result of the suspension, and the time required to restart the mine and mill, we do not expect the operation to produce any significant amount of uranium in 2018. The cost to maintain both operations during the suspension is expected to range between $6.5 million and $7.5 million per month.
Once the market signals that new supply is needed and a decision is made to begin increasing annual production, we will undertake the work necessary to optimize the capacity of both the McArthur River mine and Key Lake mill with a view to achieving annual licensed capacity of 25 million pounds per year (100% basis). We expect that this paced approach will allow us to extract maximum value from the operation as the market transitions.
Environment & Safety
Worker safety, environmental monitoring and proper decommissioning, after mining is completed, are of the utmost importance to Cameco.
Reserves & Resources
Our mineral reserves and resources are the foundation of our company and fundamental to our success.
Caution about forward-looking information
This page may contain forward-looking information that is based upon the assumptions and subject to the material risks discussed on page 2 of Cameco's most recent Quarterly MD&A.