Cameco CEO ‘suprised’ after $1.3B uranium contract cancelled

A Japanese utility’s decision to abruptly end a uranium supply contract worth about $1.3 billion

CALGARY — A Japanese utility’s decision to abruptly end a uranium supply contract worth about $1.3 billion from now through 2028 came “out of the blue,” the CEO of Cameco Corp. said Wednesday.

Tim Gitzel said Tokyo Electric Power Co. or TEPCO sent a notice on Jan. 24 saying it wanted to terminate a long-term contract signed in 2009 and would not accept delivery of a shipment due Wednesday.

Gitzel said TEPCO confirmed the notice Tuesday despite Cameco’s attempts in the interim to discuss possible remedies.

“We were very surprised to get that notice,” Gitzel said in an interview, adding that Saskatoon-based Cameco (TSX:CCO) considers TEPCO to be in default and will pursue all legal “rights and remedies.”

He said the Japanese power company cited forces beyond its control — specifically government regulations arising after the 2011 earthquake and tsunami wiped out reactors at TEPCO’s Fukushima facility — that have prevented the operation of its nuclear plants.

“The Fukushima accident happened six years ago and we’ve been dealing with them since then,” said Gitzel.

“They’ve taken delivery under this contract in 2014, 2015 and 2016, so we’re a bit perplexed as to why now all of a sudden they think there’s a case of, as they say, ‘force majeure.”’

Shares in Cameco, the world’s largest publicly-traded uranium producer by volume, closed Wednesday at $14.70 on the Toronto Stock Exchange, down $1.87 or 11.3 per cent.

TEPCO did not respond to an email request for comment.

Cameco estimated the revenue at risk this year as a result of TEPCO’s decision is $126 million, out of $2.1 billion to $2.2 billion in total revenue from all sources.

A termination would jeopardize about 9.3 million pounds of uranium to be supplied by Cameco through 2028.

The company recently reported deliveries of about 31.5 million pounds of uranium last year at an average realized price of $54.46 per pound.

Gitzel said the short notice won’t cause any logistical problems for Cameco because delivery is usually made through a “book transfer” and likely involves no physical movement of product.

He said TEPCO, like other customers, has been stockpiling its reactor fuel as it awaits approval to restart its power plants.

Analyst David Talbot of Dundee Capital Markets said in a note to investors that Cameco has a winning record in previous contract disputes.

He said the company reported cash payments of $46.7 million and $12.3 million last year to allow two customers to cancel long-term contracts for deliveries through to 2020 and 2022, respectively.

Nick Carter, vice-president of uranium at Ux Consulting Co., an American firm that monitors the industry, said he believes TEPCO is the first Japanese utility to terminate a long-term contract — although many others have tried to renegotiate contracts to reduce volumes or prices or delay shipments.

Cameco, which reports 2016 financial results on Feb. 9, warned on Jan. 18 that analyst earnings estimates were too high.

It also said it would lay off 120 employees or 10 per cent of staff at its mining operations to reduce costs and improve efficiency.

Just Posted

WATCH: Christmas Wish Breakfast toy donations almost double

All toys donated Sunday will be given to the Red Deer Christmas Bureau and Red Deer Salvation Army

VIDEO: ‘Party bus’ goes up in flames in Vancouver

Fire crews responded to the late night blaze

Mothers Against Drunk Driving hold candlelight vigil

Four-and-a-half years ago Marilyn Rinas’ husband was killed in a collision with… Continue reading

Thousands expected at memorial for fallen police officer in Abbotsford, B.C.

ABBOTSFORD, B.C. — The streets of Abbotsford, B.C., will be lined with… Continue reading

One person dead, five others injured in early-morning crash in Kingston, Ont.

KINGSTON, Ont. — A man who was checking the damage on his… Continue reading

VIDEO: Replay Red Deer: Nov. 19

Watch news highlights from the week of Nov. 13

CP Holiday train to stop in Ponoka for another year

The popular train will feature entertainment from Colin James and Emma-Lee

Kittens rescued after allegedly being tossed from vehicle

Couple finds abandoned kittens new home through Facebook

VIDEO: ‘Party bus’ goes up in flames in Vancouver

Fire crews responded to the late night blaze

Chicken crosses B.C. road, stops traffic

Rooster makes early morning commuters wait in Maple Ridge

Red Deerian honours her brother who died in a motorcycle collision

Houaida Haddad is encouraging Red Deer residents to donate blood

Red Deer County firefighters to be recognized for Waterton help

RCMP brass will give formal recognition Monday

Ron James tries to lighten humanity’s load through humour

The comedian returns to Red Deer for shows Dec. 1 and 2

100+ Women Red Deer donate to Christmas Bureau

About $14,000 will help with Christmas hampers and toys

Most Read


Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month