Cameco Declares Commercial Production At Cigar Lake

Cameco Declares Commercial Production at Cigar LakeAfter some difficulties reaching its operating targets at the Cigar Lake mine in Northern Saskatchewan, Cameco (TSX:CCO,NYSE:CCJ) announced Friday that the operation was in commercial production as of May 1.

While the news could be considered business as usual, it's worth recognizing given all the challenges Cameco has overcome as operator of the mine, which President and CEO Tim Gitzel has dubbed one of "the most technically challenging mining projects in the world."

One of the reasons Cigar Lake is so challenging is that the deposit is located between 410 and 450 meters below the surface in the Athabasca Basin, where water-saturated sandstone meets with the underlying basements rocks. As Zimtu Capital analyst Derek Hamill told The Energy Report last year, "the entire deposit needs to be frozen in order to prevent flooding," and that has had its own set of challenges.

For example, the process of freezing the ore zone and surrounding ground by circulating a brine solution through cased holes drilled both at surface and underground has been used to prevent water from entering the production areas and to help stabilize weak rock formations. But while this process has proved to be a viable solution, the company hit a minor snag this past July when the freezing took longer than expected — ultimately, Cameco had to halt activity at the mine just months after its March 2014 start date.

At the time, the company said in a press release, "[g]iven that the McClean Lake mill has not yet started processing Cigar Lake ore, we have decided to temporarily stop jet-boring at Cigar Lake to allow the ore body to freeze more thoroughly in these areas. The additional freezing will allow more continuous production at the mine once the mill is operational." Mining at Cigar Lake resumed at the beginning of September 2014, with ore being delivered to the McClean Lake mill for processing.

Those issues make the news that Cigar Lake is now in commercial production encouraging. According to Cameco, the operation remains on track to achieve its annual production target of 6 to 8 million packaged pounds of uranium for the year. Its long-term production target of 18 million pounds by 2018 also remains in place, and market watchers will no doubt be looking to see whether activity at the mine will now proceed as planned.

At end of day Monday, Cameco's share price was up 1.33 percent, trading at C$19.04.


Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.

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