Cameco Surprise Loss Makes It Day’s Worst Mining Stock

Cameco Shares Plunge After Surprise 2nd-Qtr Loss
  • Canada company is biggest decliner on 98-member global index
  • Results influenced by ‘quiet market,’ CEO Tim Gitzel says

Cameco Corp. sank to a 12-year low after reporting a surprise C$137 million ($104 million) net loss in the second quarter, making Canada’s largest uranium producer the day’s worst performing mining stock.

The shares fell 11 percent to C$12.47, the lowest closing price since June 2004, making it the biggest decliner in the 98-company Bloomberg World Mining Index. The Saskatoon, Saskatchewan-based company accounts for about 18 percent of global uranium production from its mines in Canada, the U.S. and Kazakhstan, according to the company’s website.

“Utilities aren’t in a hurry to do business,” because it’s a buyer’s market amid excess supply, Chief Executive Officer Tim Gitzel said in an interview with Bloomberg TV Canada. “There’s little business going on.”

Losses were partly attributable to impairment at the company’s Rabbit Lake operation, mark-to-market losses on foreign-exchange derivatives and lower gross profit at various segments, Cameco said Thursday in a statement. The second-quarter loss compares with net income of C$88 million a year earlier. Excluding one-time items, the loss of 14 Canadian cents missed analysts’ estimates of a 13-cent profit in the quarter.

Tax Dispute

“Second-quarter earnings missed both our and consensus estimates as both a quiet market and certain one-off charges influenced the quarter,” Rob Chang, a Toronto-based analyst at Cantor Fitzgerald, said in a note. “However, some of the underperformance appears to be attributable to lumpy sales timing, as is the nature of the uranium business, since Cameco maintained it sales guidance for the year.”

A court date has been set in the first week of October to address an eight-year-old tax dispute between Cameco and the Canada Revenue Agency, Gitzel said. The agency says Cameco understated income on trades through a Swiss unit that could result in an additional tax bill of C$2.2 billion, according to its latest filing. The company says it has paid its dues in full.

“There’s a possibility to sit down before October and see if there’s any common ground,” Gitzel said. “But if not we’re heading to court the first week of October, and quite frankly I’m looking forward to it.”

Global Glut

A global uranium glut has been prolonged by a slower restart of Japanese nuclear power plants than expected following the Fukushima disaster in 2011, Gitzel said. Only two Japanese reactors are operating, though eventually as many as 35 will come on line, while fresh demand will come from China and India where dozens of new reactors are planned, he said.

“There’s no investment at all in new uranium mines so we can see the day when more uranium will be needed and it’s not going to be there,” said Gitzel, adding the company has contracts to cover the next four years. “We are optimistic about the future.”

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