April 6 (Bloomberg) -- Cameco Corp., the world's largest uranium supplier, said an accident at a Saskatchewan mine- construction project will delay start-up by six months, which may boost prices for the nuclear fuel.

The Cigar Lake project, partly owned by Areva SA's Cogema unit, is now due to start production in late 2007, Saskatoon, Saskatchewan-based Cameco said in a statement. The mine's C$520 million ($450 million) budget, which had already risen from C$450 million, may increase by another C$104 million, it said.

Prices for uranium have gained 80 percent in the past year because demand from electric utilities rose faster than mine output, leading to lower stockpiles. The Cigar Lake deposit, located about 660 kilometers (410 miles) north of Saskatoon, is the world's second-largest high-grade uranium reserves.

``The key thing with uranium is there are limited sources of new supply coming on and any hiccup on the supply side of things is going to compound things,'' said Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney. ``This has to have an impact on sentiment and on fundamentals as well, and that has to have an impact on pricing.''

Construction of Cigar Lake was delayed after water yesterday leaked into a ventilation shaft at the project. The accident didn't injure any workers and had no impact on the environment, Cameco said. Workers are building what would be the company's second-largest mine, Cameco spokesman Lyle Krahn said in an interview.

The daily spot uranium price rose 0.9 percent on March 31 to $40.60 a pound, according to Metal Bulletin Plc. Prices have risen about four-fold in the past three years.

``Given that the price has been very sensitive to any news on the market side, there is a potential that this may cause the price to tighten because of market psychology,'' Alice Wong, a Cameco spokeswoman, said in an interview. ``The supply is still coming on so it shouldn't be a huge factor, but given that the market is very sensitive to any news right now I think that you may see some reaction in the price.''

Water filled the shaft, which runs as much as 392 meters (1,286 feet) below ground and is 6 meters wide, the company said. The shaft doesn't connect with any other part of the project.

``Preliminary reports indicate that there was a valve that was used to cut off water from the bottom, and it broke,'' Krahn said.

Cost overruns, which the company had started estimating before the leak and which will include expenses related to the accident, will be 10 percent to 20 percent more than the C$520 million previously forecast, the company said.

Cameco shares fell 19 cents to C$45.28 on the Toronto Stock Exchange. The stock has climbed 23 percent this year.

Idemitsu Kosan Co., Japan's second-largest oil refiner, and Tokyo Electric Power Co., Asia's biggest power producer, also have stakes in Cigar Lake, according to Cameco's Web site.

To contact the reporters on this story: Danny King in San Francisco at dking19@bloomberg.net Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

Last Updated: April 7, 2006 00:56 EDT