Analyst Actions: Credit Suisse on Cameco Corp. - "Investor Day Highlights: Notes from the Road"
Event: Cameco Corp. ( CCO ) recently hosted an Investor Day and operations tour of its McArthur River mine in Saskatchewan. Following our visit, we are maintaining our Neutral rating and TP of C$28/share.
Impact: Neutral. CCO was very confident on its progress at Cigar Lake and its ability to meet its first ore production target of 4Q13, as well as the long-term prospects for future uranium supply/demand. While near-term prospects for uranium pricing are relatively weak, CCO sees prices bottoming around current levels, with excess inventory management having a stabilizing effect on prices.
McArthur River Operations Update: CCO has thus far been successful at mitigating the risk to production in 2013 associated with the transition to mining the upper areas of Zone #4 through improvements on cycle times, using blast-hole stoping in smaller, lower-grade areas of the mine away from the freezewalls, and sequence changes around Zone #2-Panel 5. At mid-year, CCO's share of production at McArthur River was at 48% of its annual production target of 13.1Mln lbs (or 6.3Mln lbs).
Valuation: Our TP of C$28 is based on 1.2x our cash-adjusted NAVPS (C$23) or the mid-point of the historical valuation range of 1.2-1.4x (peak valuation 1.6x). We remain Neutral on Cameco as we believe the shares will reflect general sentiment towards uranium/nuclear industry fundamentals, which we view as tepid in the medium-term. Equity catalysts and positive uranium price momentum will be driven by stronger evidence of the following key factors over the next 12 months: (i) clarity surrounding the nuclear outlook for Japan; (ii) resumption of approvals for new nuclear reactors in China; (iii) clarity over Russian supplies post expiry of the HEU supply agreement in 2013; and (iv) slower uranium production growth rates from Kazakhstan