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A request to renegotiate the price Cameco Corp. (NYSE:CCJ) pays for uranium taken from dismantled Russian nuclear weapons could put even more pressure on shares of the world's largest uranium producer.

TD Securities analyst Greg Barnes expects downward pressure on Cameco shares after the foreign trade organization of Russia’s nuclear ministry asked for its deal with the Canadian company be changed to reflect higher uranium prices.

While the analyst noted that Cameco does not disclose how much it pays for the material, he told clients in a note that the price is believed to be around $10 per pound. Mr. Barnes added that this Russian uranium contributes C$0.45 to C$.50 of Cameco’s earnings per share, or 20% to 25% of its annual total.

He said that,

Since this material comprises roughly 21% of Cameco’s annual uranium sales of 32 million pounds, repricing this would lead to significant margin pressure.

RBC Dominion Securities analyst H. Fraser Phillips downgraded Cameco from “top pick” to “sector perform” on the possibility that pricing for the last few years of the agreement will be changed. He also slashed his price target by C$6 to C$54 per share.

In a note he wrote that,

While the outcome of this situation is far from certain, we believe that there is a material risk that Cameco will have to share the upside under the current contract with Tenex and have adjusted our forecasts accordingly.

Cameco shares fell more than 3% on Wednesday after the company reported third quarter results, and said that production at its Cigar Lake mine would not start until 2011 at the earliest.

Source: Analysts Downgrade Cameco as Russians Request Renegotiation of Uranuium Prices