On the first trading day of 2016, the uranium spot price was sitting a mere quarter of a dollar higher than its 2015 close, at $34.50 per pound of U3O8. But despite this weak pricing environment, three Athabasca Basin uranium companies have come forward with strong plans for 2016.
One of those is Cameco (TSX:CCO,NYSE:CCJ), the world’s second-largest uranium producer. This week, the company announced plans to increase the production rate at its Cigar Lake mine to 16 million pounds of packaged uranium concentrate.
Of course, this production target is subject to obtaining regulatory approval. Ore produced from Cigar Lake is milled and packaged at the McClean Lake operation, which is owned and operated in majority by AREVA (EPA:AREVA). As it stands, McClean Lake is only approved for annual production of 13 million pounds. AREVA plans to submit an application to the Canadian Nuclear Safety Commission to increase McLean Lake’s licensed annual production limit so that it falls in line with Cameco’s production expectations.
Cigar Lake was first put into production in May 2015. Cameco originally anticipated reaching a 2015 production target of between 6 and 8 million pounds of uranium from Cigar Lake. However, on December 15 of last year, Cameco announced that the Northern Saskatchewan mine had surpassed 10 million pounds of production. Investors can look forward to Cigar Lake’s final 2015 production results in Cameco’s fourth quarter results, which are slated for release next month.
Cigar Lake is owed in majority by Cameco, which has a 50.025-percent stake in the mine; meanwhile, AREVA Resources Canada (EPA:AREVA) owns 37.1 percent and Idemitsu Canada Resources owns 7.875 percent. TEPCO (TSE:9501) accounts for the remaining 5 percent. For its part, McClean Lake is owned 70 percent by AREVA, 22.5 percent by Denison Mines (TSX:DML,NYSEMKT:DNN) and 7.5 percent by Ourd Canada.
Also this week, Denison Mines announced its uranium exploration plans for 2016, noting that it will be starting an exploration drill program on January 12. Furthermore, the company is looking to spend roughly US$13 million on Canadian exploration and evaluation; it is expecting revenue of $5.4 million from McClean Lake.
In its release, Denison also discusses plans for increasing production at McLean Lake. “With the significant increase in toll milling revenue expected from McClean Lake this year, we are pleased to announce that Denison’s 2016 financial plan is funded, and will allow the Company to focus on increasing its resource base in the Athabasca Basin and advancing the Wheeler River project,” CEO David Cates states.
The company is also awaiting the results of a preliminary economic assessment for Wheeler River.
Finally, up-and-coming uranium exploration and development company NexGen Energy (TSXV:NXE) announced assay results from an additional seven angled drill holes from its summer 2015 program at the Rook I property in the Athabasca Basin. While all seven holes returned significant and extensive uranium mineralization, the company has pointed in particular to hole AR-15-59c2, which intersected 36.5 meters at 10.11 percent U3O8, including 3.5 meters at 52.33 percent U3O8.
With assay results now out of the way, the company will be moving ahead with its winter 2016 drill program. The program will include 30,000 meters of drilling and an increase to six diamond drill rigs in an attempt to improve logistics. NexGen has a budget of $12 million, and is aiming to complete further core drilling at the Arrow zone, step-out drilling along strike from the Arrow zone and drilling at the Bow discovery.
Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.
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