Cigar Lake to Change Uranium Mining in Canada

After years of delays and setbacks, Cameco, Areva and its two Japanese partners have finally succeeded in bringing the Cigar Lake uranium mine into production. This is big news for thousands of patient investors and the Canadian uranium industry as a whole.

Cameco, the project operator and 50% stakeholder, made history Monday when it began water jet boring its underground deposit of uranium.

Water jet boring is a mining technology developed specifically for the Cigar Lake project and other underground projects in this region of Saskatchewan. Cameco Corp. (CCO:TSX) is making history at its underground Cigar Lake uranium project by utilizing this technology on a large scale. Cameco's peers will be watching closely to see how successful this technology is. If this technology is succesful, it will open a new, more profitable and feasible way to extract uranium from these types of underground deposits. It will be a game changer.

Jet boring uses water under high pressure to carve out cavities in the orebody and then collects the resulting ore slurry through pipes. At Cigar Lake, the mining process also involves backfilling the cavities in the orebody with concrete once the ore is removed. Cigar Lake is the latest mine to come online in the ever expanding Athabasca Basin region of Saskatchewan.

Cigar Lake Mine

Cameco has recently climbed from a 52-week low of $17.89 in early October to over $22 per share on December 19th 2013. Cameco’s share price has been punished over the years, amidst weak uranium prices as well as delays and cost overruns at its Cigar Lake uranium mine.

In Cameco's Q2 financial report released in August of 2013, it reported:

We expect consolidated capital expenditures to be about $685 million compared to our previous estimate of $655 million mainly due to increased costs at Cigar Lake. In 2013, we expect our capital cost for Cigar Lake will be about $260 million compared to our previous estimate of $182 million due to additional scope, increased costs at the mine and mill and the inclusion of some capital costs that will be incurred subsequent to the mining of the first ore and not included in our previous estimate.

http://www.cameco.com/media/news_releases/2013/?id=738

Cigar Lake is the world's second largest high-grade uranium deposit, with grades that are 100 times the world average. It’s the chance of not only discovering, but developing assets such as Cigar Lake that have many junior resource investors fixated on companies such as Fission Uranium.

Uranium ore from Cigar Lake will be trucked 70 kilometres east, to Areva's mill at McClean Lake. Cameco's 50% share of the deposit's proven and probable reserves is 108.4 million pounds U3O8 at an average grade of 18.3%. In an investor Webcast on Wednesday, company officials commented that, "Cameco is on track to begin ore production at Cigar Lake during the first quarter of 2014."

Despite weak uranium prices, world leading resource companies, such as Cameco, are preparing for increased demand and higher uranium prices in 2014 and beyond.


Uranium Price - 6 Month Chart

top image is sourced from en.wikipedia.org