Canadian uranium giant Cameco has slashed the value of its massive Kintyre uranium project by $C168 million ($162.5 million), fanning further industry speculation that the project will not be developed within the next decade.
In a move which highlights the still fragile uranium market, Cameco unveiled the writedown at the weekend, reducing the price of the 61.7 million pound deposit - WA's third biggest - by almost one third.
Commenting in its December quarter report, the company said the combination of a weak uranium market, the absence of any increase in Kintyre's resource last year and its decision not to proceed with a feasibility study meant it was "appropriate to recognise an impairment charge for this asset".
Cameco, the world's biggest publically listed uranium company, bought Kintyre from Rio Tinto for $516 million in a 70-30 venture with Japan's Mitsubishi Development in 2008.
Speaking to _WestBusiness _yesterday, Cameco Australia managing director Brian Reilly hosed down speculation that the writedown had anything to do with the project's future. He said the company was still committed to developing it, but only when market conditions improved.
He said to imply Kintyre would not be developed in the next decade was unfair.
"We see short-term flatness, mid-term uncertainty but long-term fundamentals that are very strong," Mr Reilly said.
"You can't just turn a lever to get the supply side in a position to respond to that demand, so we'll get these projects ready and when the market's ready we'll be ready.
"It's an important asset to us (and) we've made a commitment to WA - that was shown through the purchase of Yeelirrie (WA's biggest deposit which Cameco bought off BHP in August for $US430 million)."
Patersons Securities analyst Simon Tonkin said although the asset writedown looked like a response to market conditions and its purchase price, it seemed Cameco was weighing up between Kintyre and Yeelirrie to see which was the most attractive.
"Both projects make sense at a price of $80 per pound, but the way we're going with prices it's a bit difficult to push both to development," Mr Tonkin said.
Despite triggers such as the return of a pro-nuclear government in Japan, a commitment from China to build more nuclear reactors and industry claims of a looming supply gap, the uranium market has been lethargic at best during the first six weeks of the year. It was trading at $43.30/lb yesterday and had not broken through the $50/lb barrier since mid-July.
Cameco announced in September it would need a spot price of $67/lb to break even at Kintyre. When it bought Kintyre in 2008, the uranium price was hovering around the $80/lb mark, after hitting a record of $136/lb in June 2007.