Uranium increased the most in more than 2.5 years after major producer Cameco announced it would be putting a stop to operations at its McArthur River uranium mine amid a dispute with workers.

Cameco received a strike notice from United Steelworkers Union Local 8 914 employees at McArthur, and in response, the company issued a lockout notice.

Uranium deliveries

The Canadian company said it doesn’t expect its move to affect 2014 deliveries and that it may draw on other sources of supply such as inventories.

The McArthur mine, located in Saskatchewan, Canada is the world’s largest source of the nuclear fuel.

The tradable form of uranium (U308) rose 3.2% to $32.50 a pound on Thursday – the biggest gain since November 2011, according to market data.

Meeting obligations

The closure of McArthur should not detract from Cameco’s ability to meet its sales obligations due to other sources and the company’s existing inventories, according to reports.

The lockout at the mine follows nine months of negotiations and more than 28 face-to-face meetings with the union, as the previous four-year labour contract at MacArthur River expired 31 December.

There is an expectation that with the closure of world’s largest uranium supplier a supply shortage would ensue resulting in a hike in the market spot price for uranium – to the benefit of smaller producers.