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Cameco battling uranium downturn, tax office, TEPCO

Nuclear Monitor Issue: 
Jim Green ‒ Nuclear Monitor editor

(Click here to view a table documenting many of the accidents, incidents and scandals that Cameco has been involved in from 1981‒2017.)

Where the nuclear power industry goes, the uranium industry follows. A decade ago, the hype about a nuclear power renaissance drove a uranium price bubble: the spot price in May 2007 was six times greater than the current price. The bubble collapsed, the nuclear power renaissance never materialized, and the uranium industry's prospects were further dimmed by the Fukushima disaster.

With the current nuclear power crisis jeopardizing the existence of industry giants like Toshiba and Westinghouse, the question arises: will the crisis create similar carnage in the uranium industry? Might it bring down a uranium industry giant like Cameco, which provides about 17% of the world's production from mines in Canada, the US and Kazakhstan?1

The short answer is that Cameco will likely survive, but the company has been downsizing continuously for the past five years. Other established uranium companies ‒ such as Paladin Resources2 and Energy Resources of Australia ‒ may not survive, and an endless stream of uranium exploration companies have gone bust or diversified into such things as medicinal marijuana production3 or property development.4

Cameco's downsizing began soon after the Fukushima disaster:

  • In December 2012, Cameco booked a C$168 million (US$124m) write-down on the value of its Kintyre uranium deposit in Western Australia.5
  • In 2014, Cameco cut its growth plans and uranium exploration expenses, warning that the "stagnant, over supplied short-term market" was not going to improve any time soon.6
  • In 2014, Cameco put its Millennium uranium project in northern Saskatchewan on hold ‒ where it remains today ‒ and asked the Canadian Nuclear Safety Commission to cease the mine approval process.7

Cameco announced in April 2016 that it was suspending uranium production at Rabbit Lake in Canada, reducing production at McArthur River / Key Lake in Canada, and slowing production at its two US uranium mines, both in-situ leach mines ‒ Crow Butte in Nebraska and Smith Ranch-Highland in Wyoming. About 500 jobs were lost at Rabbit Lake, 85 at the US mines, and corporate headquarters was downsized.8

Another 120 workers are to be sacked by May 2017 at three Canadian uranium mines ‒ McArthur River, Key Lake and Cigar Lake ‒ and production at McArthur River, already reduced, will be suspended for six weeks in mid-2017.9,10

"We regret the impact of these decisions on affected employees and other stakeholders," Cameco president and CEO Tim Gitzel said. "These are necessary actions to take in a uranium market that has remained weak and oversupplied for more than five years. While it is positive that we are starting to see other producers announce their intent to reduce supply, we have not yet seen an actual reduction in supply. Ultimately, it will be the return of both term demand and term contracting in a significant way that will signal that market fundamentals have turned more positive."11

Cameco's revenue dropped C$323 million (US$238m) in 2016 and the company posted a C$62 million (US$46m) loss for the year. The loss was largely the result of C$362 million (US$267m) in impairment charges, including C$124 million (US$91m) related to the Rabbit Lake mine and a write-off of the full C$238 million (US$176m) value of the Kintyre uranium project in Western Australia.12

"I think it's fair to say that no one, including me, by the way, expected the market would go this low and for this long," Gitzel said.13 He said "market conditions in 2016 were as tough as I have seen them in 30 years."14

Cameco's 'tier-1' mines ‒ McArthur River and Cigar Lake in Canada and the Inkai ISL mine in Kazakhstan ‒ have been largely unaffected by the cutbacks except for the slowdown at McArthur River. But the tier-1 mines aren't safe, Cameco plans to reduce production by 7% in 2017, and new mines are off the table. Gitzel said: "In fact we're far from declaring that even tier-1 production is free from the pressure of further reductions. And obviously we're very far from requiring any new greenfield uranium projects."14

Cameco is considering selling its two US uranium mines ‒ Crow Butte in Nebraska and Smith Ranch-Highland in Wyoming. Company spokesperson Gord Struthers said the company was at an "early stage" in the process and there was no target date for a decision. "Together, our US facilities have capacity to produce up to 7.5 million pounds a year and hold 93 million pounds of reserves and resources. In a different uranium market, it would be very attractive," he said.15

Analyst David Talbot said Cameco has probably been open to selling the US mines for some time.16 The mines are potentially attractive, two US producers told Reuters, but liabilities related to reclaiming groundwater and future decommissioning of the mines may limit interest. Those costs might amount to C$257 million (US$190m), Cameco said.16

TEPCO cancels billion-dollar contract

Cameco faces a new problem with notorious Japanese company TEPCO announcing on January 24 that it had issued a contract termination notice, sparking a 15% drop in Cameco's share price over the next two days.17,18,19 The termination affects about 9.3 million pounds of uranium oxide due to be delivered until 2028, worth approximately C$1.3bn (US$959m).

TEPCO argues that a "force majeure" event occurred because it has been unable to operate its nuclear plants in Japan ‒ four reactors at Fukushima Daini and seven reactors at Kashiwazaki Kariwa ‒ for some years due to government regulations relating to reactor restarts in the aftermath of the March 2011 Fukushima disaster.

Cameco plans to fight the contract termination and will pursue "all its legal rights and remedies". Tim Gitzel said: "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.'"17 TEPCO has received and paid for 2.2 million pounds of uranium oxide from Cameco since 2014.

Gitzel also noted that other Japanese utilities have successfully restarted their plants ‒ three reactors are operating and seven have been approved to restart. "It is our opinion that TEPCO doesn't like the terms it committed to, particularly the price, and they want to escape the agreement," Gitzel said.19

Financial analysts told Reuters that Cameco has a winning record in previous contract disputes with customers.18 A negotiated settlement may be the outcome. Cameco reported cash receipts of C$46.7 million and C$12.3 million last year to allow two customers to cancel long-term uranium contracts.18

Japan is "swimming – some would say drowning – in uranium", the senior editor of Platts Nuclear Publications said in early 2016.20 According to Forbes writer James Conca, Japan's existing uranium inventory will suffice to fuel the country's power reactors "for the next decade".20

Nick Carter from Ux Consulting said he believes TEPCO is the first Japanese utility to terminate a long-term contract, while many others have tried to renegotiate contracts to reduce volumes or prices or delay shipments. Gitzel acknowledged that "there is concern over the risk of contagion from the TEPCO announcement" ‒ more customers might try to cancel contracts if TEPCO succeeds.14

Tax dispute

A long-running tax dispute is starting to heat up with the October 2016 commencement of a court case brought against Cameco by the Canada Revenue Agency (CRA). The dispute has been slowly winding its way through appeals and legal motions since 2009 when Cameco first challenged the CRA's findings. The court case is likely to conclude in the coming months but the court's decision may not be finalized until late-2017 or 2018.

Cameco is accused of setting up a subsidiary in Switzerland and selling it uranium at a low price to avoid tax.21 Thus Cameco was paying the Swiss tax rate of about 10% compared to almost 30% in Canada.22 Cameco set up the subsidiary in 1999 and established a 17-year deal selling uranium at approximately US$10 a pound, far less than the average price over the 17-years period.23 Another subsidiary was established in Barbados ‒ possibly to repatriate offshore profits.22

If Cameco loses the case in the Tax Court of Canada, it could be liable for back-taxes of C$2.2 billion (US$1.62bn).23 Last year, the company spent approximately C$120 million (US$89m) on legal costs related to the tax dispute.11

Canadians for Tax Fairness24 have been arguing the case for legislative change to stop profit-shifting schemes, and for Cameco to pay up. Last year, the NGO teamed up with Saskatchewan Citizens for Tax Fairness and the international corporate watchdog, SumOfUs, to deliver a petition with 35,000 signatures to the Prime Minister's office and to Cameco's executive offices.25

Don Kossick from Canadians for Tax Fairness said: "Cameco has a corporate responsibility to pay the $2.2 billion. They use Canadian-developed technology to dig Canadian uranium out of the Canadian ground and rely on the Canadian transportation system to bring their product to market. Cameco employs Canadian workers who developed their knowledge and skills in Canadian schools, rely on Canadian hospitals if / when they get sick and rely on the stability and legal protection that Canadian democracy provides. Canadians are exasperated with this shell game."26

Kossick noted that the C$2.2 billion could easily cover the budgetary deficit in Saskatchewan that has resulted in major cuts to health, education and human services.



2. Paul Garvey, 16 Feb 2017, 'Paladin risks falling prey to Chinese nuclear firm CNNC',

3. ABC, 17 April 2015, 'Capital Mining makes bid to be first to grow medicinal cannabis',

See also:

4. Vicky Validakis, 6 June 2014, 'Price collapse sees junior miner ditch uranium to focus on property development',

5. Nick Sas, 13 Feb 2013, 'Cameco puts Kintyre on ice',

6. Cameco, 7 Feb 2014, 'Cameco Reports Fourth Quarter and 2013 Financial Results',


8. World Nuclear News, 22 April 2016, 'Cameco scales back uranium production',

9. Cameco, 17 Jan 2017, 'Cameco Announces Preliminary 2016 Earnings Expectations and Operational Changes Planned for 2017',

10. Greg Peel, 14 March 2017, 'Uranium Week: See You In Court',

11. World Nuclear News, 18 Jan 2017, ''Cameco responds to 'discrepancy' in analyst expectations',

12. The Canadian Press, 9 Feb 2017, 'Cameco swings to $62M loss on write-downs as uranium market drags',

13. Alex MacPherson, 10 Feb 2017, ''No one…expected the market would go this low and for this long': Cameco records $62-million net loss for 2016',

14. Cameco, 9 Feb 2017, 'Cameco's (CCJ) CEO Tim Gitzel on Q4 2016 Results ‒ Earnings Call Transcript',

15. World Nuclear News, 9 March 2017, 'Cameco considers future of US operations',

16. Rod Nickel, 6 March 2017, 'Exclusive: Cameco explores U.S. mines sale as uranium slump drags on – CEO',

17. 6 Feb 2017, 'Cameco and Tepco in dispute over uranium contract',

18. Dan Healing / Reuters, 1 Feb 2017, 'Cameco 'surprised' after Tepco cancels $1.3-billion uranium-supply contract',

19. David Shield / CBC News, 1 Feb 2017, 'Cameco threatening legal action after Japanese company cancels major uranium contract',

20. James Conca, 4 Jan 2016, 'As The World Warms To Nuclear Power, The Outlook For Uranium Is Up',

21. WISE Uranium,

22. Bruce Livesey, 25 April 2016, 'Did this company engineer the largest tax dodge in Canadian history?',

23. Ian Bickis, 3 Oct 2016, 'Cameco and the CRA head to court over potential $2.2-billion tax dispute', The Canadian Press,


25. Emma Paling, 23 June 2016, 'Cameco Tax Dispute: All The Things Canada Could Buy With $2.1 Billion',

26. 'Tax Court Battle: The People vs Cameco',

Cameco's uranium deposits in Western Australia

Kintyre (70% Cameco / 30% Mitsubishi)

The Martu Aboriginal people have fought against this proposed uranium mine since the 1980s. The deposit sits between two branches of a creek called Yantikutji which is connected to a complex network of surface and groundwater systems. It is also in an area that was cut out of the Karlamilyi National Park, WA's biggest National Park. Kintyre is home to 28 rare, endangered and threatened species. The project would include an open pit 1.5 km long, 1.5 km wide, it would use 3.5 million litres of water a day and leave behind 7.2 million tonnes of radioactive mine waste over the life of the project.

In June 2016, Martu Traditional Owners led a 140 km, week-long walk to protest against Cameco's proposed uranium mine at Kintyre. Aboriginal Traditional Owners are concerned the project will affect their water supplies as well as 28 threatened species in the Karlamilyi National Park.

Joining the protest walk was Anohni, the Academy Award-nominated musician from Antony and the Johnsons. She said: "It's a huge landscape – it's a really majestic place. It's really hard to put a finger on it but there's a sense of presence and integrity and patience, dignity and perseverance and intense intuitive wisdom that this particular community of people have. There is almost an unbroken connection to the land – they haven't been radically disrupted. They are very impressive people – it's humbling to be around these women. In many regards, I think the guys who run Cameco are desolate souls, desolate souls with no home, with no connection to land, with no connection to country."

Yeelirrie (100% Cameco)

Yeelirrie in the local Wongutha Aboriginal language means 'place of death'. The local community has fought against mining at Yeelirrie for over 40 years. There was a trial mine in the 1970s which was poorly managed: the site was abandoned, unfenced and unsigned with a shallow open pit and tailings left behind. The project would include a 9 km long, 1 km wide open pit, it would use 8.7 million litres of water a day and leave behind 36 million tonnes of radioactive mine waste over the life of the mine. There are many cultural heritage sites under threat from this proposal. The project was rejected by the Western Australian Environmental Protection Agency in 2016 because of the threat that 11 species of underground microfauna would become extinct. The WA Environment Minister ignored the EPA advice and approved the project anyway.