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Feb 1, 2017

Cameco CEO Gitzel vows to fight Japanese uranium contract cancellation

Cameco CEO: We've handled cancellations before

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Cameco Corporation’s (CCO.TO) CEO is vowing to fight the cancellation of a contract to supply uranium to the Japanese utility at the centre of the Fukushima nuclear disaster and is rejecting the notion that this could open the floodgates to other similar contract disputes.

“To get that notice was really surprising and disappointing to us and quite frankly we don’t accept it,“ Tim Gitzel, Cameco president and CEO told BNN in an interview. 

Shares of the Saskatoon-based uranium producer slumped Wednesday after the company announced that Japan’s TEPCO is terminating a contract for delivery scheduled for February 1.

According to Cameco, TEPCO is citing force majeure as a result of new government rules stemming from the Fukushima disaster in 2011.

Gitzel says Cameco has been working with the company closely for the past six years and sees no basis for TEPCO’s decision.  ”We believe we have some legal remedies on this and we will pursue them vigorously,” he said.

Cameco says TEPCO’s cancellation affects 9.3 million pounds of uranium that were slated for delivery through 2028, valued at $1.3 billion in revenue. 

The contract dispute could “open the floodgates” to other similar moves from Japanese utilities, said Orest Wowkodaw, Scotiabank metals and mining analyst in a note to clients.  “The TEPCO force majeure notification to cancel its long-term higher-priced contract raises the question of whether other Japanese utilities may follow suit.”

Just under half of Cameco’s contract portfolio is to Asian-based utilities, says Scotiabank.  Contracts with Japanese power utilities constitute roughly 11 per cent of its business.

Gitzel downplayed the danger of more contract cancellations. “We are optimistic; we are working with our Japanese customers. We don’t think this opens any type of floodgates,” he told BNN.