Cameco's Cigar Lake operations. Submitted/Herald file photo
Lower electricity prices and higher costs squeezed Cameco Corp.'s first-quarter profits, and the uranium miner said Friday it is lowering its 2011 revenue forecasts because of the high Canadian dollar.
Net earnings at the Saskatoon-based company dropped 36 per cent from $143 million to $91 million during the first three months of 2011. The profits amounted to 23 cents per share, compared to 36 cents per share during the same quarter last year.
Cameco is the world's biggest uranium miner, with operations in North America and internationally that help supply fuel to run the world's nuclear power plants. The company is also a signifcant minority partner in the Bruce Nuclear Generating Station on the shores of lake Erie in southwestern Ontario.
The plant, with 3,800 employees, is the largest nuclear operation in North America. It's a partnership owned by Cameco, natural gas shipper TransCanada Corp. (TSX:TRP), the OMERS municipal workers' pension fund in Ontario and a union group.
In its financial report,Cameco said adjusted earnings per share, which strip out the effects of one-time items, were $85 million, or 21 cents per share, compared to $112 million, or 28 cents per share during the first quarter of 2010.
The earnings missed the average analyst estimate of 31 cents per share.
Revenues declined six per cent to $454 million, well below expectations of $540 million.
Cameco said lower prices affected its electricity revenues from the Bruce plant and fuel services businesses, as did lower uranium sales.
The miner expects 2011 uranium revenues to increase by 10 to 15 per cent over least year, a pullback from its previous target of between 15 and 20 per cent. The reduction is due to a strengthening Canadian dollar, which has the effect of squeezing exports.
Consolidated revenues are now expected to increase by five to 10 per cent over 2010, versus its previous forecast of between 10 and 15 per cent.
Cameco (TSX:CCO) was one of several uranium miners to see its stock plummet amid a crisis at Japan's Fukushima nuclear power plant, which was badly damaged in a devastating earthquake and tsunami in March.
In a statement, Cameco chief executive Jerry Grandey said the situation at Fukushima is stabilizing.
“In the short-term, we may see delays as the industry pauses to learn the lessons from Fukushima,” he said.
“However, a number of countries have already reaffirmed that building new nuclear reactors is essential to meeting long-term energy demand in their rapidly developing economies.”
New global uranium supplies will be needed to meet the needs of those nuclear building programs, he added.
“That's why our strategy to double annual uranium production by 2018 from our world-leading asset base is unshaken.”
Cameco plans to expand mines in the next few years, and expects it won't need significant additional funding.
The company has been looking to expand its relationship with China in recent quarters, signing two supply contracts last year with Chinese utilities and saying it would like to grow its partnership further with the Asian market.
Earlier this year, Cameco signed a deal to buy uranium produced at the Sotkamo nickel-zinc mine in eastern Finland.
Cameco operates mines, mills, conversion plants and exploration projects in Saskatchewan, Ontario, the United States and Australia.
The company and other major global uranium producers are cashing in on soaring uranium demand from China and other parts of Asia as those countries embark on a big nuclear power plant building boom to meet future electricity demands from their soaring economies.
Cameco shares rose 25 cents to $27.93 in morning trading on the Toronto Stock Exchange.
— By Lauren Krugel