The company had expected to produce 300,000 pounds of milled uranium this year, but on Monday said it will be unable to meet that target.
In the grand scheme of things, it's a "very slight" setback, said CEO Tim Gitzel in an interview.
After years of delays caused by massive underground flooding, Cigar Lake was on the brink of finally starting up, with 97 per cent of the construction complete.
Workers were doing some final testing when some safety issues came to light.
"We've been working on this for such a long time," said Gitzel. "Let's fix it — fix it right before we start so we don't have to go back."
Cigar Lake is centred on a "very technically challenging, sophisticated ore body," he said, adding that it was not entirely unexpected that some issues would arise when starting up such a complicated project.
"While we're not happy with these delays, we have to keep in mind that Cigar Lake is a long-term project that we expect to last for many, many years," he said on a conference call earlier Monday.
"It is an important source of what will be low-cost production for Cameco and a key component of our strategy to increase annual production to 36 million pounds by 2018."
Gitzel said a small amount of water — about what would come out of a garden hose — was seeping out of "run of mine" areas, or ROMs. Those are underground tanks where ore chips are separated from water before they can be ground up.
Because that water would have come into contact with radon-bearing ore, the water leak posed a safety concern for workers.
Cameco decided to line those tanks with steel before the mine can begin production.
In addition, some extra metallurgical testing found some tweaks need to be made at the McLean Lake uranium mill, operated by French nuclear giant Areva. There was a danger of hydrogen building up, so Areva is adding extra ventilation and other safety measures at the facility.
Those modifications are expected to be complete during the second quarter of 2014.
The additional work is not expected to have a material impact on the costs of the mine and mill. Cameco owns 50 per cent of Cigar Lake, with its share of the capital cost currently pegged at $1.3 billion.
Cigar Lake was repeatedly beset by flooding beginning in 2006. Crews safely re-entered its main working level 480 metres underground after it was pumped out in early 2010.
At the time, the revised target for production was mid-2013.
Dundee Capital Markets analyst David Talbot reduced his share price target for Cameco to $24.50 from $25.50, but still rates it as a "buy."
"Cameco remains our top pick of the producers, especially in a depressed uranium price environment," he wrote in a research note.
Besides Cameco and Areva, the Cigar Lake project owners include Idemitsu Resources Canada Inc. with eight per cent and Tepco Resources Inc. with five per cent.
The McClean Lake joint venture is 70 per cent owned and operated by Areva. The other McClean Lake joint venture partners are Denison Mines Corp. (TSX:DML), 22.5 per cent and OURD (Canada) Co. Ltd., 7.5 per cent.
About three quarters of McLean Lake's capacity will be used to process Cigar Lake ore.
Cameco shares closed down 14 cents at $20.39 Monday on the Toronto Stock Exchange.
— By Lauren Krugel in Calgary.