Cameco CEO Sees Uranium Supply CrunchBy: Reuters
11th March 2009

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TORONTO - A uranium supply crunch could be around the corner due toindustry-wide cuts to development projects, rising demand, anduncertainty about Russia's plans for its decommissioned nucleararsenal, the CEO of top uranium producer Cameco Corp said on Wednesday.


Speaking at the Reuters Global Mining and Steel Summit in New York, Cameco Chief Executive Jerry Grandeyalso said the company planned to take advantage of low valuations amonguranium miners to make acquisitions, and said deals worth more than $2billion were a possibility.


"We know that if we're going to do a big deal in the M&A spherewe will have to go back and market it to our shareholders, we'reperfectly happy to do that," he said, adding that by "big deal" hemeant something worth $1 billion to $2 billion or a little more.


Such a deal would position the company to take advantage of whatGrandey expects to be a situation where uranium will be in high demandbecause of cuts among miners left underfunded due to tight creditconditions.


"I think the financial crisis is clearly impacting the ability of every supplier to raise capital," he said.


"When you see project cancellations, you see expansion derail, yousee some projects that will just go slower. That is just simply takingaway future supply and sowing the seeds of the next spike in theuranium price."


Spot uranium prices have been among the most volatile in theresource sector over the past decade, rising from a low of $7 a poundin 2000 to a high of $136 a pound in 2007. Prices have since come down,and were at $43.50 on Wednesday.


Despite the recent decline, Grandey said the industry's mined outputstill lags consumption that has risen due to the resurgence of nuclearpower as a non-greenhouse gas producing alternative to fossil fuelgeneration.


He said global mined output is 115 million pounds a year, comparedwith consumption of about 180 million pounds that he expects to grow atbetween 2 and 3 percent per year.


RUSSIAN NUKES


The shortfall has been made up by stockpiles, as well as annualsales of about 24 million pounds of uranium from decommissioned Russiannuclear weapons, which Cameco manages along with two partners under a1999 commercial agreement.


That deal expires in 2013, and Grandey said questions linger abouthow much uranium Russia may sell past that date, and how much may havedegraded past the point where it can be sold. He said many expectRussian sales could fall by half.


"Somewhere between 24 and 12 million pounds of supply will drop out after 2013," he said.


Also factoring into the picture is the future of Cameco's Cigar Lakemine, which Cameco had initially expected to come to production by2007, but has been continuously delayed following a flood in 2006.

Cameco had hoped to bring the mine -- which had beenexpected to produce 18 million pounds a year -- to production by 2011.The company recently dropped that target, and Grandey said he didn'twant to speculate when it might be up and running.

However, he said he was confident the high-grade mine would come to production at some point.


"We are absolutely dedicated to moving this project along," he said.

Edited by: Reuters