By Rod Nickel
Feb 7 (Reuters) - Cameco Corp, the world's third-largest uranium producer, on Friday scrapped its lofty production target for the radioactive metal due to excess global supply in an uncertain market.
The Saskatoon, Saskatchewan-based company also reported an increase in fourth-quarter profit, but it fell short of Street expectations.
Uranium prices have been weak since an earthquake and tsunami struck Japan in March 2011, crippling the Fukushima-Daiichi atomic power plant, and leading it to shut down nearly all of its reactors.
Cameco said on Friday that challenges caused by the unclear pace at which Japan will re-start some of its reactors and by bloated global uranium supplies appear likely to persist for the near to medium term. In such a market, maintaining a fixed production target makes little sense, Cameco said, and it dropped its previous target of boosting supplies to 36 million pounds by 2018.
"That uncertainty has lasted for longer than had been expected," said Chief Executive Tim Gitzel, in a statement. "Although we still have an extensive portfolio of assets from which we can increase our production, the market incentive must be there."
Cameco, which owns the world's largest-producing uranium mine at McArthur River, Saskatchewan, forecast production of 23.8 to 24.3 million pounds of uranium in 2014, up modestly from 23.6 million pounds last year.
Even as it removed its production target, Cameco said it still expects to bring its high-grade Cigar Lake uranium mine in northern Saskatchewan into production in the first quarter, with ore processing to begin at Areva SA's McClean Lake mill by the end of the second quarter.
Cameco said uranium sales should range from 31 million to 33 million pounds in 2014, with overall revenue ranging from flat to up five percent, due to higher realized uranium prices. It sold 32.8 million pounds last year.
The spot uranium price has edged higher recently to around $35.50 per pound of uranium as of Jan. 27, according to Ux Consulting Company, moving slightly off its eight-year low of $34.50 reached in December.
Cameco's shares reached nearly two-year highs in late January after Japan's trade ministry said on Jan. 15 that it would approve a revival plan for the utility responsible for the Fukushima nuclear disaster, Tokyo Electric Power Co.
There are also signs that excess uranium supplies are thinning out, with many analysts predicting a shortage by 2016.
Australia's Paladin Energy Ltd on Friday said it would suspend production at its Kayelekera mine in Malawi until the uranium price recovers. The mine accounts for about 2 percent of global supply.
Last year, the Russia-United States highly enriched uranium agreement expired, removing a major source of secondary uranium supply.
Net earnings for Cameco's fourth quarter rose to C$64.1 million, or 16 Canadian cents per share, including a C$70-million impairment charge on its agreement with Talvivaara Mining Company Plc to purchase uranium produced at a nickel-zinc mine in Finland.
In the year-earlier quarter, Cameco earned C$40.9 million, or 10 Canadian cents per share and booked a C$168 million write-down on an exploration project in Australia.
Adjusted earnings were C$150 million or 38 Canadian cents per share, down from C$233 million or 59 Canadian cents a year earlier.
On that basis, analysts were expecting earnings per share of 54 Canadian cents, according to Thomson Reuters I/B/E/S.
Revenue in the fourth quarter rose 15 percent to C$977 million, surpassing expectations for C$919.8 million.
Cameco's uranium sales fell 12 percent to 12.7 million pounds in the quarter, while its average realized uranium price slipped four percent to $47.76 per pound.