SASKATOON (CP) -- Costs at Cameco Corp.'s [TSX:CCO; NYSE:CCJ] Cigar Lake uranium project could rise by more than C$100 million from its current estimate after water flooded a mine shaft and delayed the project by an estimated six months.
Shares of Cameco Corp. fell C$2.28 or 5% to C$43 on the Toronto Stock Exchange.
The company said costs at the project was expected to rise 10 to 20% from the current estimate of C$520 million and an update would be included with the company's first-quarter results on April 28.
''We wanted to give people an estimate and some idea now,'' Cameco spokesman Lyle Krahn said Friday.
When the company announced its decision to proceed with the Cigar Lake project in December 2004 the construction budget was set at C$450 million including surface and underground facilities at Cigar Lake, as well as changes to the milling facilities at McClean Lake and Rabbit Lake where the ore will be milled.
Cameco holds a 50% stake in the Cigar Lake joint venture which also includes COGEMA Resources Inc., a subsidiary of AREVA, Idemitsu Uranium Exploration Canada Ltd. and TEPCO Resources Inc.
After markets closed Thursday, the Saskatoon-based company said construction of the six-metre-wide shaft - used mainly for underground ventilation during production - was delayed due to water leaking at the bottom about 390 metres below the surface.
A worker noticed a leak in a valve that was preventing water from coming up a drill hole and in the process of tightening, the valve broke, allowing water to enter the bottom of the shaft, the company said.
Cameco decided to allow water to ''fill to natural levels'' in the shaft, but said the water won't damage the concrete-lined shaft.
Krahn said one option is freezing around the area where the water was coming in to prevent the flooding and continue the project.
''We're looking to see if there are other options available as well, but allowing the shaft to fill didn't preclude any of the options we were aware of,'' he said.
Krahn said there are about 550 people working at the site.
''We will keep working on the site. There certainly is enough work for everybody there and we won't lay anybody off,'' he said.
Cigar Lake has proven and probable reserves of more than 232 million pounds of uranium at an average grade of 19%.
Construction began in 2005 and production is now expected to begin late next year.
When the mine reaches full production it is hoped to turn out 18 million pounds per year with a production life of 20 to 30 years.
In 2005, Cameco, the world's largest uranium producer, earned C$218 million or C$1.21 per diluted share on revenue of C$1.31 billion. That compared with a profit of C$228 million or C$1.56 per diluted share on revenue of C$1.05 billion in 2004.
(c) The Canadian Press 2005
