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    Uranium Prices Surge After Flood Closes Cameco Mine (Update2)

    By Christopher Donville and Gavin Evans

    Oct. 31 (Bloomberg) -- Uranium prices surged 7 percent to a record after Cameco Corp., the world's largest supplier, said a flood at an unfinished mine in Canada will delay initial shipments of the nuclear fuel by at least a year.

    Uranium rose to $60 a pound from $56 in a weekly posting by Roswell, Georgia-based Ux Consulting Co. Ux's price is based on the company's assessment of the uranium market and is widely used within the nuclear industry.

    ``It is the largest weekly increase on record'' in the 20 years the company has published uranium prices, Ux executive Eric Webb said in an interview today.

    Uranium, the raw material in reactor fuel, has risen more than sixfold since October 2001. Speculation is growing that 28 reactors under construction and a further 62 plants planned may outstrip available supplies. About 16 percent of the world's electricity was generated at 440 reactors last year, according to World Nuclear Association data.

    ``Anyone who sells at these levels is going to be very disappointed in the coming weeks,'' Kevin Bambrough, a strategist at Sprott Asset Management Inc. in Toronto, said before Ux Consulting released its latest price assessment. ``The price is going higher.''

    During the last record rally, uranium rose as high as $43.40 a pound in May 1978, said Thomas Neff, a nuclear expert at the Massachusetts Institute of Technology in Cambridge. Adjusted for inflation, that price would be about $111.65 in today's dollars, he said.

    Ux Consulting's price has risen 80 percent in the past year.

    Under Water

    Saskatoon, Saskatchewan-based Cameco said Oct. 23 that construction of its Cigar Lake, Saskatchewan, mine may be delayed by at least a year after a rock fall triggered a subterranean flood. The company had planned to open the mine next year.

    The delay at Cigar Lake will mean buyers who were counting on 7 million to 8 million pounds of supply from the new mine's initial production will have to find it somewhere else, analysts said. Cameco expects the mine to eventually produce 18 million pounds a year.

    Cigar Lake's proven and probable reserves of 232 million pounds have a gross value of about $13.92 billion, based on the current spot price. Rock at Cigar Lake on average is 19 percent uranium, a concentration exceeded only by the 25 percent grade at Cameco's deposit at McArthur River, Saskatchewan.

    The mine at Cigar Lake is 50 percent owned by Cameco, with the remainder held by AREVA Resources Canada Inc., Idemitsu Uranium Exploration Canada Ltd. and TEPCO Resources Inc.

    Cameco is scheduled to announce its third-quarter earnings today after the close of trading in New York and will conduct a conference call on Nov. 1 that may include new information about its flooded uranium mine.

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