* Company forecasts stronger uranium sales in 2011
* Sees more long-term contracts with China
(Adds detail, CEO comments)
By Julie Gordon
TORONTO, Feb 14 (Reuters) - Shares of Cameco Corp (CCO.TO) rose more than 6 percent on Monday, after the uranium producer reported higher-than-expected earnings and its chief executive highlighted growing demand from China for nuclear fuel.
China is building 25 nuclear reactors and plans for more as part of its ambitious strategy to expand nuclear power output by 2020, Cameco Chief Executive Jerry Grandey said during a call with investors.
The Canadian-based uranium producer signed long-term supply contracts with the two top power utilities in China in 2010.
“I think over time we would expect to attain additional supply contracts with China,” said Grandey. “And frankly look at expanding the relationship in other areas as well.”
Cameco plans to double annual uranium production to 40 million pounds a year by 2020, with production of 21.9 million pounds in 2011.
“That’s the best guess of what we could do in 2011,” said Grandey of the target. “One always hopes you can do better, as we did in 2010.”
The Saskatoon, Saskatchewan-based company produced 22.8 million pounds of uranium in 2010.
Over the next five years, the company plans to expand production at its mines in the United States, as well as from its Inkai project in Kazakhstan.
Cameco also sees the Cigar Lake mine, which flooded in 2006, coming online in 2013 with limited production.
Cameco reported a lower net profit late on Friday, but fourth-quarter earnings were up 12 percent after stripping out the impact of a one-time 2009 gain.
The uranium producer’s underlying profit benefited from higher uranium prices and lower production costs, easily beating analyst expectations.
“Cameco remains the leader in the uranium industry,” said RBC Capital Markets analyst H. Fraser Phillips in a note to clients. “We believe the shares will continue to benefit from strong uranium markets and have further upside potential.”
Cameco said it would boost sales in 2011 to 31 million to 33 million pounds of uranium, versus 29.6 million pounds in 2010.
Analysts expect demand for uranium to stay strong throughout 2011 as Asia builds more reactors, and nuclear power gains in popularity around the world.
Cameco’s shares rose as much as 6.58 percent to C$44.28 on the Toronto Stock Exchange on Monday, before falling back slightly to C$43.74.
Reporting by Julie Gordon; Editing by Frank McGurty