Cameco Production Falls On Mine Delay, But Remains RBC 'Top Pick'

Problems stabilizing walls at the Kumtor pit mine in the Kyrgyz Republic have forced Cameco Corp. (CCJ) to slash expected gold production in 2007 there by a third. Project owner and operator Centerra Gold Inc. [CG/TSX], of which Cameco owns a 53% stake, is now forecasting approximately 300,000 ounces of gold, compared to previous estimates of 450,000 ounces.

Centerra is trying to extend the pit so it can access areas of high-grade ore, but experts are recommending that the wall angles be more gradual than originally planned. Since more waste must be removed, there will be a delay in accessing the ore until the second quarter of 2008.

A pit wall at Kumtor failed back in June 2006, RBC Dominion Securities analyst H. Fraser Phillips said in a research note.

As a result of the delay, total cash costs at the mine are expected to be US$580 per ounce for 2007, compared to previous guidance of US$440 to US$450, he added. Meanwhile, Cameco’s total gold production this year is expected to be in the 550,000 to 560,000 ounce range, down from as high as 720,000 previously.

Mr. Phillips’ net asset value for Cameco falls to $57.53 from $58.34, but his price target remains at $80 per share with a “top pick” rating.

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