March 7, 2016 / 3:48 PM / in a year

Cameco slowly expands world's biggest uranium mine, betting on recovery

TORONTO (Reuters) - Cameco Corp is slowly expanding the world's biggest uranium mine, betting utilities that are currently well-supplied will need the radioactive metal in coming years, Chief Executive Officer Tim Gitzel said on Monday.

Cameco's McArthur River mine in northern Saskatchewan is expected to produce 20 million pounds this year but is licensed for 25 million.

The Saskatoon, Saskatchewan, company has not signed off on the full expansion but is spending C$30 million ($22.48 million) this year to gradually prepare, Gitzel said in an interview.

"Those would be some of the best pounds on the planet," he said in Toronto during the annual Prospectors & Developers Association of Canada convention. "We're doing it piecemeal, getting it ready, keeping it warm."

Cameco aims to boost McArthur's production to 22 million pounds by 2018. Gitzel declined to say how much full expansion would cost.

Spot prices of uranium, used to make fuel for nuclear power production, have been depressed since the 2011 Fukushima disaster in Japan, which led to the shutdown of all reactors in that country and generated burdensome stockpiles globally.

Cameco is also restraining its United States in situ uranium production, which involves removing ore by injecting a solution into wells while leaving the rock in place. It produces about 1.3 million pounds annually there and could crank out another 1 million if prices warrant, Gitzel said.

The company also expects to fully ramp up production at its new Cigar Lake, Saskatchewan, mine in 2017. France's Areva SA holds minority interests in the McArthur River and Cigar Lake projects.

Beyond expanding existing production sites, Cameco has plans for new mines in Canada and Australia that are currently on hold because prices are too low to justify their cost.

Gitzel said Cameco is willing to team up with Chinese companies. CGN Mining Co Limited recently became the first company from China to invest in a Canadian uranium project.

Canada allows foreign companies to invest in operating uranium mines but not to own majority stakes, although it has made rare exceptions. Gitzel said Cameco was open to Ottawa allowing foreign-run uranium mines as long as Canadian companies have similar ability to invest in those countries.

Reporting by Rod Nickel in Toronto; Editing by Lisa Von Ahn

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