Citing a declining uranium market and product oversupply, Cameco Corporation announced on Wednesday that it will temporarily shut down operations at two of its key sites in northern Saskatchewan.
By the end of January, the Saskatoon-based company will suspend work at its Key Lake milling site and its McArthur River mining site for ten months each.
The move results in the layoff of 845 combined workers at the two sites, plus a 32-cent reduction in dividend money paid out to public shareholders of the company. Share dividends will be reduced from $0.40 to $0.08 for 2018.
“With the continued state of oversupply in the uranium market and no expectation of change on the immediate horizon, it does not make economic sense for us to continue producing at McArthur River and Key Lake when we are holding a large inventory, or paying dividends out of proportion with our earnings,” Cameco’s president, Tim Gitzel, said.
Of the 845 workers to be laid off, 560 are employees of the company, while 285 are contractors, according to Gitzel.
He estimated that two-thirds of the 560 employees are unionized, about 372 people.
Early Thursday morning, Gitzel said the company wants to try to “soften the impact” that the layoffs will have.
For the non-unionized employees, that means, “we’ll look at a top-up plan or a sub-plan of the insurable earnings, unemployment earnings, they would get to keep their benefits going.
“And we’ll keep it, we’ll put it at a level that will make it quite attractive for them to be ready to come back.”
As for the unionized employees, Gitzel said “it’s something we have to negotiate and discus with the union. So that’s to be done yet.”
He emphasized that the layoffs are temporary.
United Steelworkers Local 8914 represents those in-scope employees. A member of the union was not available for comment by press time.
Cameco will keep 210 workers – 160 employees and 50 contractors – to keep the two sites in maintenance and shutdown sates during the work stoppage.
Job data on the company’s website from Dec. 31, 2016 shows that Cameco employed 1,299 people at Key Lake and McArthur River, 54 per cent of whom are from northern Saskatchewan.
Assuming that number doesn’t include contractors, that would mean Cameco has seen a staff decrease of 454 people in a ten-month period.
Prince Albert’s airport is regularly used by Cameco workers to fly to its Key Lake and McArthur River sites, which sit 572 km and 644 km north of Prince Albert, respectively.
Mayor Greg Dionne said the work stoppages at Cameco’s sites will affect business at the airport, mostly through a decrease in parking fees by would-be users of the airport.
“This isn’t the first time this has happened. They use shutdowns to control inventory. And of course we don’t want it to last longer than it has to,” he said.
This 10-month shutdown is longer than past ones, according to Dionne.
“(Financially), it’s been minor (in the past), because the shutdowns have always been temporary, because you can always recover form a short, temporary closure.
“But if it’s extended for long, than it will affect us longer.”
Those financial impacts will only affect the 2018 budget, he said. “We’re always conservative when we estimate the revenue we’re going to get from parking because of that reason. It could go up or down.”
Unlike other commodities, uranium does not trade on an open market. Prices are published by independent market consultants, according to Cameco.
The five-year trend of the price of uranium per pound shows an overall decline going back to Nov. 1, 2012.
As of that date, its spot price was listed at $42.25 and its long-term price was $59.50.
As of Oct. 31 this year, uranium’s spot price was $20.08 per pound and its long-term price was $30 per pound.