Patience Pays Off For Cameco In Centerra Sale

After years of talking about selling its stake in Centerra Gold (CG-T) to focus on its core uranium business, Cameco (cco-t, ccj-n) has successfully struck while the gold price is hot.

In early December, Canada’s heavyweight uranium producer announced it was selling 88.62 million shares it holds in Centerra for $10.25 per share to a syndicate of underwriters led by CIBC World Markets and RBC Capital Markets.

Cameco said it will use the roughly $872 million in proceeds for general corporate purposes and to expand its uranium business as it seeks to double its production.

In addition to selling the 88.62 million shares, under an agreement it reached with the government of the Kyrgyz Republic in April, Cameco must also transfer 25.3 million of its Centerra shares to state-owned Kyrgazaltyn, a mining company in the Kyrgyz Republic.

The transactions eliminate Cameco’s 48.5% stake in the gold company. Saskatoon-based Cameco spun off its gold assets as Torontobased Centerra in 2004.

Centerra owns two gold mines: the Kumtor mine in the Kyrgyz Republic, and the Boroo mine in Mongolia. It also has interests in gold exploration properties such as the Gatsuurt property in Mongolia near its Boroo mine, as well as properties in Nevada, Turkey and Russia.

Centerra’s two gold mines produced over 748,888 oz. gold in 2008 at a total cash cost of US$483 per oz., which ranked Centerra as a leading North American gold producer and the largest Western- based gold producer in Central Asia and the former Soviet Union.

The company expects to produce 620,000-630,000 oz. gold this year at an estimated total cash cost of US$410-US$450 per oz.

At presstime in Toronto, Cameco was trading at $33.35 per share and over the last year it has traded in a range of $16.01-33.85 per share. Centerra was trading at $10.48 per share and has traded in 52-week band of $3.21-$15.10 per share.