Cameco Finally Gets Some Good News

Uranium miner Cameco Corp. (CCJ) has been besieged by operational problems over the last couple of years, but there was some good news on Wednesday. The company said its Rabbit Lake mine in Saskatchewan is up and running after water inflow problems forced a closure in November. That was a faster clean-up than expected.

RBC Capital Markets analyst Fraser Phillips reduced his 2008 production estimate on Cameco after the closure was first announced, and assumed no first quarter production from Rabbit Lake. But now that operations are up and running, milling operations and uranium production are expected to resume later this quarter, slightly ahead of his expectations.

Despite the company's well-documented problems, Mr. Phillips noted that Cameco "remains the leader" in the uranium industry, with the largest and highest quality assets. "However, continuing delays and uncertainty around Cigar Lake are cause for concern. On top of this, there is a risk of a significant increase in costs through 2013 if the HEU [Russian nuclear agreement] is renegotiated," he wrote in a note to clients.

He is maintaining a "sector perform" rating on the stock until there is more clarity on those issues.