* Another setback for start-up of new mine

* Production set for Q1/14, processing for Q2/14

* Shares down 1.2 pct

Sept 9 (Reuters) - Cameco Corp said on Monday it needs to complete additional work at its Cigar Lake project in northern Saskatchewan, delaying the start-up of the high-grade uranium mine until the first quarter of 2014 and cutting its 2013 production forecast.

Canada's largest uranium producer also said more mill modifications were needed before the ore can be processed at the nearby McClean Lake mill, which is operated by Areva SA , the French nuclear company that also holds a major stake in the Cigar Lake project. Cameco now expects processing to start in the second quarter of 2014.

Cigar Lake, located in the uranium-rich Athabasca Basin in Saskatchewan, was originally expected to open in 2007, but was twice delayed by flooding. Construction of the mine is now 97 percent complete.

The latest delay will have a minor impact on forecast uranium production in 2013, reducing it by the 300,000 pounds the company expected to see from the mine this year.

Still, Cameco said it did not expect another material effect on the capital cost of the project after warning in August that its share of the total capital cost for the mine would increase 15 percent to 25 percent from the previous estimate of C$1.1 billion ($1.06 billion).

Due to the flooding risk, the ore body must be frozen before mining, with the ore removed by a jet boring process. Cameco said it identified additional work during the commissioning process that will delay jet boring of the ore.

The company said it planned to provide an update on production and costs at Cigar Lake in early 2014.

Cameco shares were down 28 Canadian cents to C$20.25 by midmorning on the Toronto Stock Exchange.