Cameco at risk of losing $1.3B uranium contract with Japanese nuclear firm
The Canadian mining company says it will fight a Tokyo Electric Power termination notice that invokes "force majeure" citing the 2011 Fukushima nuclear accident and fresh government regulations
SASKATOON—Shares in Cameco Corp. fell more than 10 per cent Wednesday after it said it’s prepared to fight Tokyo Electric Power Co.’s attempt to terminate a multi-year supply contract that would be worth about $1.3 billion in revenue through 2028.
Shares in Canada’s largest uranium company fell $2.02 or about 12 per cent to $14.55 on the Toronto Stock Exchange in early trading.
Cameco announced before stock markets opened Wednesday that TEPCO has refused to accept a scheduled uranium delivery.
It said the Japanese power company has cited forces beyond its control—specifically government regulations arising from the 2011 Fukushima nuclear accident—that have prevented the operation of TEPCO’s nuclear plants.
The company insisted that there’s no basis for terminating the contract and considers TEPCO to be in default. It said it will pursue its rights—including binding arbitration.
Cameco president and CEO Tim Gitzel said the company has worked for six years with TEPCO—which operates the Fukushima plant—revising the contract but only received confirmation Tuesday that TEPCO would terminate the deal.
“Now we will vigorously pursue remedies to recover value for our shareholders and other stakeholders, as we have done successfully in the past,” Gitzel said.
Cameco estimates the revenue at risk this year is $126 million, out of between $2.1 billion and $2.2 billion from all sources including TEPCO, but adds it has it has sufficient financial capacity to manage the lost revenue.
A termination would affect about 9.3 million pounds of uranium supplied by Cameco through 2028, including about 855,000 pounds annually in 2017, 2018 and 2019.
As the nuclear power industry struggles, Cameco has made several cost-cutting moves over the past year. It closed its Rabbit lake mine in Saskatchewan last year, eliminating 500 jobs, and announced earlier this month it would lay off another 120 across the province to cut expenses.
Cameco warned investors on Jan. 18 that analyst estimates were too high. Analyst had estimated 86 cents per share of adjusted earnings and a net profit of 96 cents per share for the full year ended Dec. 31 As of Tuesday, the estimates had been lowered to 46 cents per share of adjusted earnings and net income was estimated at 48 cents per share.