Fuel Cycle
Vol. 8 No. 357 December 16, 2009
By Dan Yurman, Contributing Reporter

Cameco (TSX:CCO) has announced it would divest its entire interest in Centerra Gold, for which it expects to reap an estimated C$872 million in net proceeds. The company also promised shareholders that it would give its highest priority to
uranium mining and nuclear energy. Cameco holds almost 114 million common shares, about 48% of Centerra. At the Dec. 14 Centerra (TSE:CG) share price of $10.45, Cameco’s stake is worth $1.19 billion.

In a statement it released on Dec. 8 Cameco said it would use the net proceeds “primarily to grow its core uranium business as it pursues its target of doubling uranium production.”

Lyle Krahn, a Cameco spokesman, told FCW that in effect there were two transactions the company would complete to divest itself of the gold mining venture. The first is to offer 88.6 million shares of Centerra for public sale in Canada and by private placement elsewhere.

The second is the transfer of 25.3 million common shares of Centerra to state-owned Kyrgazaltyn JSC, pursuant to an April
24 agreement between Cameco and the Kyrgyz Republic.

Divestment Now Makes Sense
A senior industry executive familiar with the Kyrgyz gold mine told FCW that the transfer came about because the Kyrgyz government had claimed that it had not received full value out of its deal with Cameco, in view of the rapid rise in gold prices over the past year. Exiting the gold mine is a “good deal for Cameco,” he said, as it would resolve the regulatory issues associated with the mine. It would have been hard to pursue the matter in court there, and it could have become a sinkhole for Cameco’s time and treasure.

In past years Cameco had benefited from the gold mine, which buffered the harsh financial impact of very low uranium prices in the 1990s. But at this point the divestment makes sense, as it lifts from Cameco’s shoulder the burden of political risk associated with operating in an unstable political regime.

Krahn did note that Cameco would use the proceeds in pursuing its goal of doubling its annual uranium production from 20 million to 40 million pounds by 2018. But he sidestepped an inquiry as to whether Cameco would use the proceeds to fund acquisitions. “We have the financial flexibility to look for opportunities to increase uranium production,” he told FCW.

One of Cameco’s targets could be the British government’s stake in Urenco, which is reportedly to be offered for sale—assuming the Dutch and German governments do not exercise their rights first, said the executive. But the current owners of Urenco might insist that Cameco first let go of its 24% stake in GE-Hitachi subsidiary Global Laser Enrichment, which is developing the competing Silex uranium-enrichment laser technology.

The industry executive dismissed rumors that Cameco might buy a stake in Paladin or the whole company outright, however, which he said would not make financial sense due to the cost. He also pointed out that Cameco does not have a stake in Africa, which he thought would be the next major source of production. “You have to be there,” he said. “The only question is, what is the right project.”

The company could also just buy uranium on the spot market.

In August 2008, Cameco, in a 70-30 joint venture with Mitsubishi Development Pty Ltd., acquired from Rio Tinto the Kintyre uranium exploration project in Western Australia.

The Vancouver Sun reported last week that Cameco Chief Executive Jerry Grandey said Cameco would consider acquisitions and joint ventures with customers in Asia.

Uravan Minerals CEO Larry Lahusen told FCW the company is moving out of its current uranium projects, in the Thelon Basin in the Northwest Territory due to nonsensical environmental objections, and in Nunavut because “there are too many headwinds with aboriginal land claims that are not getting resolved by the federal government.”

In Nunavut it was taking too long to resolve complicated land issues. “We’re tired of it. If you can’t get a drill on the land, your investment there is worthless,” he said. Meanwhile, environmental groups in the Thelon Basin have claimed the drill rigs would disrupt caribou calving grounds. “Drills don’t bother caribou,”
he insisted.

To address these issues, the firm would have to expensive environmental impact statements with no guarantee they
could proceed with exploration. “We’re not going to do it. It is untenable,” he said. “As a uranium junior our investors have no patience with these kinds of delays.”

Now Uravan (CVE:UVN) has started acquiring a land position in the Athabasca Basin, Saskatchewan—and is looking for more. This is a significant first step in taking a major position in the richly endowed uranium district. “We know we can go there and be successful without all this other stuff,” Lahusen said.

No uranium mines are producing in Quebec, but the Dec. 11 Toronto Globe & Mail reported that more than 80 exploration
projects are now active there.

Now 23 area physicians in the town of Sept-Iles, apparently organized by the antinuclear group Sept-lles Sans Uranium, have threatened to resign unless the province bans uranium mining, claiming that drilling by Terra Ventures (CVE:TAS) 13 kilometers outside the town could contaminate local drinking water.

Anti-uranium activist Marc Fafard led a march of over 1,000 people through the town against uranium mining on Sunday.
Reportedly the local chamber of commerce and city council joined the doctors in the march.

Steve Aplin, vice president for Energy & Environment at the management-consulting firm HDP Group in Montreal, told FCW
in an e-mail that the protest, which resembles a recent doctors’ protest in Australia, looks like “copycat environmentalism.”

“Something is definitely afoot in Quebec. Whatever organized effort is happening in Sept Iles, it’s working. The town council
adopted two resolutions for a moratorium on exploration. Plus, the official opposition party in Quebec, the Parti Quebecois, is now officially antinuclear.

“The mainstream media in Canada always watches and reports on this kind of thing, and always does the both-sides-of-thestory thing, even if one side has less facts than the other.”

The Quebec Mineral Exploration Association criticized the protest, noting that the doctors had not backed up their claims with scientific data, and denying that the exploration activities pose a health threat. Director General Jean-Pierre Thomassin told Canadian news outlets the protest was “strictly a fear campaign,” adding that uranium explorers had invested $250 million in the province in the past year. If the province banned uranium mining it would have to compensate the companies, he added.

John Kotek, a partner at the Boise, Idaho public relations firm Gallatin Group, told FCW that project proponents must engage with the community. Medical and environmental experts can help the residents distinguish between real and imagined risks, and the proponents must explain how it will mitigate them. “It is complicated and time intensive but it can be done,” Kotek added.