Cameco's Quagmire of a Quarter

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Even the most immovable of miners are suddenly facing some tough times. Once-mighty Teck Cominco (NYSE: TCK) is suddenly holding on for dear life, while Vale (NYSE: RIO) shares are valued at one-quarter of their pre-meltdown price.

Cameco (NYSE: CCJ) is another firm that I never imagined would face such a tough slog, but here we are. The uranium mogul's recent results were mediocre at best.

A lot of folks were downright shocked when the uninterrupted, multiyear uranium-price parabola pulled back a bit last summer. Well, the price for U308's been headed down ever since. This quarter, Cameco registered 30% lower realized prices than in the prior-year period. The comparison is exaggerated by a spot market sale at the market's 2007 peak, but lower prices are certainly unwelcome in the face of rising unit costs.

Cameco's now calling for 15%-20% higher costs this year, rather than a 10%-15% bump. The main culprit has to be production, which is looking bedraggled across the board. Through the first nine months of the year, commercial production is down 19% or so. For the full year, guidance has been lowered by about 10%. That includes volumes at the troublesome Inkai project, which retains its pre-commercial status.

Fans of this firm have to keep an eye on those pounds of production. The gap between Cameco's sales and production, noted by a fellow Fool at this time last year, has widened further, to 12 million pounds. I suppose one upshot of lower spot prices is that the Russians may have less leverage to rejigger their long-term contracts concerning converted nuclear weaponry. But still, we need to see Cameco wean itself off this waning above-ground stockpile.

Much like fellow Saskatchewan slugger PotashCorp (NYSE: POT), Cameco controls an unbelievably strong position with regard to its mineral endowment. I'm not aware of equally rich uranium deposits anywhere else in the world. That asset value, combined with the firm's integration along the entire value chain -- now including enrichment, thanks to an investment in a General Electric (NYSE: GE) / Hitachi (NYSE: HIT) joint venture -- should keep Cameco from plumbing the share-price depths of base metal miners like Teck and Lundin Mining (NYSE: LMC). But if we ever do see Cameco hit single digits, I may be first in line to scoop up shares.

Cameco is rated a regal five stars in Motley Fool CAPS. Are you bullish or bearish on the uranium bruiser? Contribute your own thoughts right here.