TORONTO (miningweekly.com) – Cameco Corp, the world's biggest uranium miner, revealed on Friday that it has increased its spot-market purchases of the nuclear fuel, after identifying “trading opportunities” during the first quarter, and said it plans to buy more uranium during the course of the year.

The development had a negative effect on first quarter earnings, because spot prices for uranium, although currently low, are still well above Cameco's cost of production, and this pushes the recorded unit cost of sale upwards.

However, the company is hoping to gain from expected higher prices in the future.

“Down the road, we will realise additional earnings and revenue, as we deliver the purchased material to our customers,” CEO Jerry Grandey said on a conference call.

The global spot market for uranium is thinly traded, because most of the metal is sold to utilities through long-term contracts.

The spot price for uranium touched an all-time high of $136/lb in 2007, before falling sharply. Prices fell as low as $40/lb in the first quarter of this year, but have since recovered to $45/lb.

“The market, obviously, has gone up and down and we try to take advantage of those movements,” Grandey said.

“We understand too that, by being a participant, we can hopefully influence what happens in the market.”

Grandey said that there are ten new nuclear reactors currently under construction, with 95 new reactors expected to come onstream in the next 10 years.

Many of the new nuclear capacity will be coming online in Asia, and Chinese utilities have become significant buyers of uranium in the spot market, said marketing and business development vice president George Assie.

About half of the spot market purchases are being made by utilities, “and a big portion of that can be attributed to the Chinese”, he said.

For the full year, Cameco expects its overall costs of sales to rise by 15% to 20% as a result of the speculative buying.

STILL LOOKING

The company is also “continually looking” for potential acquisition opportunities, but remains cautious of overpaying for assets, Grandey said.

“We are not going to do something that's stupid, where valuations are high.”

In February, the company sold shares in a bought-deal offering to raise C$460-million, which it said would allow it to take advantage of opportunities created by the current environment.

Earlier this year, the company also extended a short-term loan that it took out last June, and negotiated another $100-million in available credit, which could be used for acquisitions.

Cameco shares rose 6,4% on Friday, to C$29,15 apiece by 16:36 in Toronto.