StockInterview.com - Reality Check in the Uravan Uranium Mining District

July 12, 2007
By James Finch

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Cameco Corp’s Uranium Mining Risks at Cigar Lake

Risk Factors Highlighted

10 drill holes are needed for concrete pouring and grouting to remediate the area of the rock fall and water inflow. Source: Cameco Corp

Because most investors don’t read ‘risk factors’ at the end of news releases, we hoped to point out the risk factors found in Cameco Corp’s (NYSE: CCJ) news release, published after market on Wednesday.

We have neither editorialized nor commented on this news release. Instead we identified and isolated several points investors should mark for future reference. We also emboldened and/or underlined important words, phrases or sentences to highlight the significance of these risk factors.

No words have been removed or added to Cameco’s risk factors. We did add Cameco Corp photos.

We more closely reviewed the risk factors at Cigar Lake after reading this in the recent news release:

“Completing the second shaft as a priority item and the delay in completing phase two, as noted above, would set back the planned production startup date from late 2010 to 2011. We anticipate that by year end we will make a decision on the second shaft. A revised production forecast will be provided after the decision is made on the second shaft, the mine has been dewatered and the condition of the underground development has been assessed.”

Cigar Lake is a challenging deposit to develop and mine.

These challenges include:

control of groundwater,

weak ground formations,

and radiation protection.

The sandstone overlying the basement rocks contains significant water at hydrostatic pressure.

Schematic Geotechnical Model of the (Cigar Lake) Deposit. Source: Cameco Corp – N1 431-101 Technical Report: March 30, 2007.

Freezing the ground is expected to result in several enhancements to the ground conditions, including:

minimizing the risk of water inflows from saturated rock above the unconformity;

reducing radiation exposure from radon dissolved in the ground water; and

increasing rock stability.

However, freezing will only reduce, not eliminate, these challenges.

There is also the possibility of a water inflow during the drilling of holes to freeze the ground.

At Cigar Lake, the innovative jetboring mining method loosens the ore with jets of high-pressure water. Source: Cameco Corp

Therefore, the risk of water inflows at Cigar Lake remains.

Three Dimensional of Mining Method.
Source: Cameco Corp NI 43-101 Technical Report: March 30, 2007.

The consequences of another water inflow will depend upon the magnitude, location and timing of any such event, but could include:

a significant delay in Cigar Lake's remediation,
development or production,
a material increase in costs,
a loss of mineral reserves or
require Cameco to give notice to many of its customers that it is declaring an interruption in planned uranium supply.

Such consequences could have a material adverse impact on Cameco. Water inflows are generally not insurable.

Cigar Lake's remediation and production schedules are based upon certain assumptions regarding the condition of the underground infrastructure at the mine.

The condition of this underground infrastructure, however, will not be known until the mine is dewatered.

If the underground infrastructure has been impaired, this could adversely impact our schedules and cost estimates.

The outcome of each phase of remediation will impact the schedule of each subsequent phase of remediation and the planned commencement of production in 2010 or 2011.

For example, if the plug is not successful in securing the inflow area, then ground freezing, already incorporated in aspects of the remediation plan, will also be utilized to secure the inflow area.

If this situation occurs, there could be:

a delay in the remediation schedule

and the commencement of production.

Remediation and production schedules will be impacted by regulatory approvals.

We have not yet received regulatory approval to dewater the underground development and initiate the installation of surface freezing infrastructure during the second and third phases of the remediation plan.

This approval is required to move forward with our planned strategy to move the project to production.

Working with the regulatory authorities to receive approvals for additional corrective actions which may result from current inflow investigations may impact our remediation and production schedules.

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