(Adds details from conference call)
By Cameron French
TORONTO, Feb 6 (Reuters) - Cameco Corp’s (CCO.TO) profit jumped 52.5 percent in the fourth quarter despite shortfalls at its nuclear fuel division, the company said on Wednesday, while its chief executive suggested the company may soon be on the prowl for acquisitions.
Cameco, the world’s top uranium producer, has largely stayed out of the mining M&A boom over the last three years, a decision some have criticized as short-sighted, particularly as uranium spot prices jumped to record highs last year.
Speaking on a conference call, however, Chief Executive Jerry Grandey said the recent weakness in equity markets had pulled stock valuations down to the point where large deals might again be appealing.
“We’re certainty getting closer. We’ve seen a pretty dramatic decline (in valuations,)” he said.
The world’s top uranium producer earned C$61 million, or 17 Canadian cents a share, in the quarter, up from a year-earlier C$40 million, or 11 Canadian cents a share, but the results lagged the analysts’ estimate of 46 Canadian cents a share.
This was largely due to a steep pretax loss of C$36 million from the company’s nuclear fuel services division, which was hit last year by the discovery of contaminated soil at its Port Hope, Ontario, conversion plant. The plant was shut and is expected to reopen in the third quarter.
“Clearly we didn’t fully anticipate the extent of the effects of the clean-up and shut down at Port Hope on the earnings,” said Raymond Goldie, an analyst at Salman Partners.
Revenue slipped to C$494 million from $512 million, but Cameco said its results were helped by a 49 percent rise in realized uranium prices, which offset the impact of a 39 percent drop in uranium sales volumes.
For 2008, Cameco expects consolidated revenue from its nuclear fuel and electricity businesses to increase 3 percent to 10 percent, mainly due to higher revenue from the uranium side. Capital spending on its core businesses is expected to rise 77 percent to C$534 million.
Cameco said its share of uranium production for 2008 is projected to total about 21 million pounds, up slightly from the 2007 figure because of the anticipated start of commercial production at its Inkai mine in Kazakhstan.
The company’s shares eased slightly amid a generally weaker stock market on Wednesday. The shares were hit hard over much of the last year, falling more than 40 percent from highs hit last June.
In addition to Port Hope, the company has been hurt by continued delays in overhauling its flooded Cigar Lake uranium mine in Saskatchewan and by performance and licensing issues at its Centerra Gold (CG.TO) subsidiary.
Goldie said the shares, which slid 13 Canadian cents to C$32.19 on the Toronto Stock Exchange, were “woefully undervalued”.
Cigar Lake, which flooded in 2006, is now expected to open in 2011 at the earliest. Cameco said on Wednesday it believes it has sealed off the water inflow area, and hopes to pump water out of the mine in the second half of 2008, after which it will be able to give a firmer production start update.
Past expectations were for the mine to eventually produce 18 million pounds of uranium annually, more than 10 percent of global supply.
$1=$1.00 Canadian Additional reporting by Susan Taylor in Ottawa and Robert Melnbardis in Montreal; Editing by Peter Galloway