Tuesday, May 31, 2011

Outgoing Cameco CEO slams Germany

It is a rare occasion when the boss of a multi-billion-dollar mining company like Saskatoon-based Cameco gives a tongue lashing to a government, but retiring Cameco CEO Jerry Grandey used part of his swansong earnings call to do just that. To Germany, no less. Criticising what he called a kneejerk reaction to the Japanese nuclear disaster in March, Grandey, the 30-year uranium mining veteran did not mince his words.

“So far the strident voices that oppose nuclear power have had limited effect on shaping public opinion and government policy," he said on a conference call to discuss the group's first quarter results. "The notable exception, of course, is Germany, where weak political leadership has made an illogical and emotional decision to close a number of older nuclear facilities."

He went on to highlight how many of Germany’s neighbours, including France, the Czech Republic and Poland, had decided to continue with their nuclear plans, as had India and China, albeit with a “pause” to apply lessons from the Fukushima-Daichi tragedy.

“The world of energy supply is not such a simple place,” Grandey said, pointing to the rapid urbanisation of countries like China, where energy demand is soaring – requiring a six-fold increase in power generation by 2020.

And while coal, oil and gas previously offered obvious sources of energy, the choice was not so cut-and-dried in a world that needs to cut its carbon-dioxide emissions. All told, Grandey expects the Japanese natural disasters will reduce the net gain in nuclear reactors by 2020 by just 10, and will reduce growth in uranium demand by just 4% a year.

“Very little has changed in the way we see the world,” he affirmed.

Grandey said that both public opinion and government policy had not been nearly as severely affected as by the Three Mile Island and Chernobyl nuclear disasters.

“Following these events, there were few leaders in science, academia or government who spoke in favour of nuclear power, or even dared to suggest it had a future in the global energy mix,” he said. “So far, the strident voices that oppose nuclear power have had limited effect on shaping public opinion and government policy.”

Saskatoon-based Cameco, the biggest uranium producer globally, on Friday posted net earnings $91 million CAD for the first three months of 2011, a 36% drop on the same period the previous year. This was mainly because of weaker performance in its fuel services and electricity businesses, while higher uranium prices offset a 23% production fall. Meanwhile, Cameco marketing and business development VP Ken Seitz said he expected long-term contract prices for the nuclear fuel would hold current levels of around $70/lb. Spot prices fell from over $60/lb before the Japanese disaster to $55,25 this week, in low trading volumes.

“We expect that the spread [between spot and term prices] will narrow. One’s going to move,” commented Seitz, suggesting that it might be spot prices. “Spot price volatility, absolutely, but we think that the term price will hold.”

Cameco gave up 0.5% on Friday in Toronto to trade at $27.52 CAD per share. Grandey retires at the end of the month to be replaced by Tim Gitzel.

Source: Cameco Earnings Call and Creamer Media’s Mining Weekly

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