TORONTO (CP) -- Cameco Corp. [TSX:CCO; NYSE:CCJ] expects to find that inflation has affected costs at its troubled Cigar Lake uranium project when it does an annual update early next year but the rising expenses will not stop development, the company said Tuesday.
''The inflationary costs to the project are an item,'' Kim Goheen, chief financial officer of the world's largest uranium miner, said Tuesday of the flooded project under construction in northern Saskatchewan. But he was quick to add ''they in no way question the economics of the project, by any stretch of the imagination.''
''From an operating perspective (mine operations are) relatively small users of diesel or propane and such, so we're not sensitive to oil prices in any significant way,'' Goheen told an investor conference in Montreal.
Mining companies around the world have faced rising costs as firms rush to bring projects into production to take advantage of near-record commodity prices.
Costs at Cigar Lake have escalated since two massive bulkheads failed to hold back water from a flood following a rock slide in a shaft about a half-kilometre underground.
As a result, Saskatoon-based Cameco has said the planned production startup of the uranium mine in northern Saskatchewan would be delayed until 2011.
In March, Cameco estimated its share of capital costs at Cigar Lake at C$508 million, including C$234 million spent on construction to date, leaving C$274 million remaining.
In addition to the capital costs, Cameco has spent C$23.3 million on remediation related to the project in the first nine months of the year.
Goheen made the comments a day after the world's largest uranium producer said flooding the company's Eagle Point mine near Rabbit Lake in Saskatchewan will delay a mining restart there until early 2008 at the earliest.
''Mining will resume when the water flow has been sufficiently reduced to provide an adequate margin of surface water-handling capacity,'' the company said Monday.
The Rabbit Lake operation has about 270 Cameco employees, but the company said it did not expect any layoffs.
''Some Cameco employees may be reassigned to other tasks,'' the firm said, while another 220 contractor employees schedules may be adjusted.
Cameco said water is entering the mine at a volume of about 110 cubic metres per hour.
''The mine is currently able to remove water at approximately the same rate as all the water entering the underground areas after successfully completing a planned 25% increase to the surface water handling capacity sooner than anticipated.''
Cameco announced Nov. 28 it had temporarily reduced underground activities at the Eagle Point mine as a precaution because water flow in the area had increased.
Limited mining activity was expected at that time.
The water flow increase was from an area being mined about 90 metres below surface. All mining activities appeared normal until additional water began flowing into the area.
In 2007, Cameco has produced 3.6 million pounds of uranium at Rabbit Lake and estimates annual production will be 3.8 million to four million pounds.
Shares in the company declined 50 cents, about 1.3%, to C$39.25 in afternoon trading Tuesday on the Toronto Stock Exchange, down from a high of C$59.46 in June.
(c) The Canadian Press 2007