August 15, 2008 / 2:48 PM / in 9 years

Cameco stock drops as mine delay, prices stir worry

TORONTO (Reuters) - Shares of Cameco Corp fell more than 7 percent on Friday, as analysts slashed price targets for the company’s shares on worries of weaker realized uranium prices and news of additional flooding at Cameco’s Cigar Lake uranium project in Saskatchewan.

UBS analyst Brian MacArthur cut his 12-month price target for the company’s shares to C$41 from C$48, citing the higher risks of bringing Cigar Lake to production.

The mine development, which is key to Cameco’s plans to expand its production by about 80 percent over the next eight years, first flooded while under construction in 2006.

The company had been in the process of pumping water out on Tuesday when additional flooding forced it to stop and allow the mine to fill back up. Cameco had planned to have Cigar Lake in production by as early as 2011.

The mine has the potential to produce 18 million pounds of uranium a year, more than 10 percent of global output.

Cameco’s shares dropped 3.4 percent on Wednesday after the company reported the new flooding. On Friday, the stock was down 7.1 percent at C$30.95 on the Toronto Stock Exchange, underperforming other mining stocks, which were also in retreat.

Blackmont Capital analyst George Topping cut his target on Cameco to C$50.55 from C$55.40, predicting Cigar Lake won’t open until the end of 2013.

“The re-flooding of the Cigar Lake mine is a significant setback,” Topping said in a note.

RBC Capital Markets analyst Fraser Phillips chopped his target to C$44 from C$50, citing expectations of lower realized uranium prices in the second half of the year. He also predicted further delays for Cigar Lake.

Cameco reported a 27 percent drop in quarterly profit on Thursday on lower uranium sales, and also trimmed its 2008 production outlook.

($1=$1.06 Canadian)

Reporting by Cameron French; Editing by Peter Galloway

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