May 1, 2012 / 2:19 PM / 6 years ago

UPDATE 2-Cameco shares rise as profit gain tops estimates

* Q1 EPS C$0.33 v. C$0.23 yr ago, topping estimates

* Shares close up 2.79 percent at C$22.47 in Toronto

* Company says to take $30 mln hit on canceled contract

* Sales to fall in Q2, gains expected in Q4 (Adds CEO comments from conference call, updates shares)

May 1 (Reuters) - Cameco Corp, the world’s largest publicly traded uranium producer, reported a 45 percent boost in first-quarter profit as sales volumes rose, a higher-than-expected result that sent its shares more than 4 percent higher on Tuesday,

The Saskatoon, Saskatchewan-based miner said net profit climbed to C$132 million ($133.6 million), or 33 Canadian cents a share, from C$91 million, or 23 Canadian cents, a year earlier.

Excluding one-time items, earnings rose to C$124 million, or 31 Canadian cents a share, up from C$85 million, or 21 Canadian cents. That topped analysts’ average estimate of 28 Canadian cents, according to Thomson Reuters I/B/E/S.

Sales volumes rose 33 percent, boosting first quarter revenues by 22 percent to C$563 million. But Cameco warned that sales will fall in the second quarter, with most of its 2012 uranium deliveries scheduled for the fourth quarter.

Cameco also warned that it expects to cancel one of its long-term sales contracts in the second quarter at a cost of $30 million, as the company negotiates with customers in the aftermath of last year’s Fukushima nuclear disaster in Japan. The company did not identify the customer or say if the customer was Japanese.

The canceled contract covers deliveries of 3.4 million pounds of uranium from 2012 through 2016. Cameco expects to sell that uranium to other customers at a higher price.

Cameco maintained its forecast for production of 21.7 million pounds of uranium in 2012, with anticipated sales of 31 million to 33 million pounds. It produced 4.8 million pounds and sold 8.1 million pounds in the first quarter.

Shares closed nearly 3 percent higher at C$22.47 on Tuesday on the Toronto Stock Exchange.

JAPAN WORRIES

Despite solid demand for uranium, Japan remains the “biggest question mark” weighing on the uranium market and the price of the material used to fuel nuclear reactors, Chief Executive Tim Gitzel said during a conference call with investors.

The country has shut down all but one of its reactors for maintenance since March 2011, when a massive earthquake and tsunami crippled the Fukushima Daiichi power plant and triggered the world’s worst nuclear accident since Chernobyl.

The Fukushima disaster led countries around the world to review their nuclear programs, with Germany ultimately deciding to phase out atomic power by 2022. Japan has not yet made clear what role nuclear will play in its future.

“We believe Japan’s reactors will eventually be brought back online,” said Gitzel. “Not just because the country needs power and reliance on other energy sources is costly, but because we see the Japanese companies continuing to invest in uranium mining and exploration.”

Cameco is partners with Japan’s Mitsubishi Corp on developing the Kintyre uranium project in Australia, while Tokyo Electric Power Co Inc (Tepco) and Idemitsu Kosan Co Ltd are partners on the Cigar Lake mine in Saskatchewan.

GROWTH SPOTLIGHT

Cameco plans to spend C$620 million on mine development projects in 2012, with existing cash balance and operating cash flows covering its capital requirements.

The Canadian miner, which has operations in Canada, the United States, Australia and Kazakhstan, said it remains focused on bringing the long-delayed Cigar Lake mine into production by mid 2013.

A feasibility study for its Millennium project, also in Saskatchewan, is due later this year and a pre-feasibility study on the Kintyre project is expected within weeks, Gitzel said.

Cameco plans to increase output to 40 million pounds a year by 2018 to meet growth in demand from such countries as China, India and South Korea.

$1=$0.99 Canadian Reporting by Julie Gordon; Editing by Frank McGurty

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