Powerful Production at Cameco

It's time, once again, to check in on the king of uranium.

For the third quarter, Cameco's (NYSE: CCJ  ) revenue clocked in at $694 million, about 5% lower than last year. Adjusted per-share earnings were off 30%, hit by higher costs in the uranium and gold businesses. Cash flow was strong, however, and through the first nine months of the year, has come in 54% higher than in 2008.

Honing in on uranium, higher unit costs continue to be driven by spot market purchases that Cameco is making for trading purposes. I continue to view this activity as a bullish sign. Sales volume was off slightly from last quarter, but customer offtake is very lumpy in this business. Mined production, meanwhile, was up big. Cameco cranked out 5.6 million pounds, compared to 3.8 million last quarter, and is on target for 20 million pounds of production for the full year.

In the very short term, the troubles at BHP Billiton's (NYSE: BHP  ) Olympic Dam mine have put some spring in uranium's step. Mine mishaps aside, Cameco is very positive on uranium prices and fundamentals going forward. China's nuclear power output is set to rise six-fold by 2020. India is busily allocating new reactor construction sites to firms like General Electric (NYSE: GE  ) and Shaw Group (NYSE: SHAW  ) partner Westinghouse.

As with oil, gold, and other asset prices, uranium would of course tend to benefit from ongoing dollar weakness. The company cited analyst estimates of a $50 to $70 long-term contract level, and it agrees with that range.

On the exploration and development front, Cameco has begun confirmation drilling at Kintyre, the Australian asset picked up from Rio Tinto (NYSE: RTP  ) last year. The firm is also working to expand the resource at Inkai in Kazakhstan. There are many other exploratory efforts under way, from Niger to Peru, about which you can expect Cameco to keep tight-lipped unless and until there is major news. Cameco has such a deep pipeline that it's not nearly as hard-pressed as, say, Gold Fields (NYSE: GFI  ) to turn up new deposits, so it's not going to be throwing a huge amount of cash at grassroots exploration.