Cameco CEO sees uranium supply crunch and M&A

By Cameron French - Analysis

TORONTO (Reuters) - A uranium supply crunch could be around the corner due to industry-wide cuts to development projects, rising demand, and uncertainty about Russia's plans for its decommissioned nuclear arsenal, the CEO of top uranium producer Cameco Corp (CCO.TO: Quote) said on Wednesday.

Speaking at the Reuters Global Mining and Steel Summit in New York, Cameco Chief Executive Jerry Grandey also said the company planned to take advantage of low valuations among uranium miners to make acquisitions, and said deals worth more than $2 billion were a possibility.

"We know that if we're going to do a big deal in the M&A sphere we will have to go back and market it to our shareholders, we're perfectly happy to do that," he said, adding that by "big deal" he meant something worth $1 billion to $2 billion or a little more.

Such a deal would position the company to take advantage of what Grandey expects to be a situation where uranium will be in high demand because of cuts among miners left underfunded due to tight credit conditions.

"I think the financial crisis is clearly impacting the ability of every supplier to raise capital," he said.

"When you see project cancellations, you see expansion derail, you see some projects that will just go slower. That is just simply taking away future supply and sowing the seeds of the next spike in the uranium price."

Spot uranium prices have been among the most volatile in the resource sector over the past decade, rising from a low of $7 a pound in 2000 to a high of $136 a pound in 2007. Prices have since come down, and were at $43.50 on Wednesday.

Despite the recent decline, Grandey said the industry's mined output still lags consumption that has risen due to the resurgence of nuclear power as a non-greenhouse gas producing alternative to fossil fuel generation.