Cigar Lake is a uranium mine located in the Athabasca Basin, 660 km north of Saskatoon, Saskatchewan, Canada. The deposit is flat, sandwiched between sandstone overlaid atop basement gneiss and plutonic rocks. This is the highest grading uranium deposit in the world, representing over 100x the world average. Cigar Lake is 50% owned by Cameco, with the remainder owned by AREVA, Idemitsu, and TEPCO. Cigar Lake was first discovered in 1981 and while construction began in 2005, water inflow issues delayed commercial production until 2015.
Cigar Lake faces challenging conditions of groundwater inflow, weak rock, relatively thin and flat orebody, and the need for radiation protection. The underground mine is accessed via twin shafts. Production mining uses a non-entry mining method designed for Cigar Lake, Jet Boring System (JBS). Ore is accessed from below, where a hole is drilled into the frozen ground, and a cylinder of ore is cut with high pressure water, the slurry is then transported via conveyance. The void is filled with concrete before the rig proceeds to mine the next JBS cavity. Due to poor ground conditions, development mining uses the New Austrian Tunnelling Method (NATM), a multi-stage sequential mechanical excavation technique with shotcrete and yielding elements in the ground support. Bulk freezing is performed from surface freeze holes, and is used to 1) increase stability, 2) minimize water inflow, and 3) reduce radiation from radon-dissolved water. Production mining occurs at a rate of 100 tpd to 200 tpd, with 90% mine recovery and 26% dilution. Ore is transported as a slurry for processing at AREVA’s McClean Lake mill, where 98.5% recovery is expected. Life of mine is presently 13 years, with a maximum production of 18 M lbs U3O8 produced for a total of 218.3 M lbs at a grade of 16.7% U3O8.
| Classification | Tonnes (‘000 t) | Grade (% U3O8) | Contained (M lbs U3O8) | Cameco’s Share (M lbs U3O8) |
|---|---|---|---|---|
| Reserve | 601.8 | 16.70 | 221.6 | 110.9 |
| Resource (M+I) | 20.3 | 7.38 | 3.3 | 1.6 |
| Inferred | 284.7 | 16.43 | 103.1 | 51.6 |
Conditions at Cigar Lake have been extremely challenging prior and during commercial production and have resulted in exorbitant costs and delays. C$2.9 B in CAPEX has been sunk so far with an additional spend of $1.2 B planned over LOM. LOM average cost is C$12,869/t (all in) and C$6,820/t (OPEX only), equating to a cost of C$35.40/lb U3O8 (all in) and C$18.76/lb U3O8 (OPEX only). Cameco’s share of pre-tax NPV8% is $2.1 B with pre-tax IRR of 9.5%. Using a Uranium price of US$58.69/lb and C$/US$ exchange rate of 1.16, the project appears to be sensitive to discount rates. Fortunately, uranium prices currently sit at a 50% premium and the Canadian dollar is currently devalued by about 20%, factoring favourably towards this project. Inferred Resources add almost 50% at similar grades and will likely receive an upgrade with additional drilling. Flat, massive deposits are typically well defined, improving the probability of conversion, likely adding five to ten years of mine life. If uranium prices are maintained or continue to rise, the future is bright for Cigar Lake.
The information presented above does not constitute investment advice. This is a summary from the NI43-101 Technical Report effective Dec 31, 2015 (INSERT), with commentary from the author. Statements above do not represent the views of Cameco. If any discrepancies arise, the information contained within the NI43-101 are official and final. For latest depletion data, please refer to the AIF update.