UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 Under
the Securities Exchange Act of 1934

Cameco Corporation

(Commission file No. 1-14228)

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F o       Form 40-F þ

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o       No þ

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

 

 

Exhibit Index

Exhibit No.		Description				Page No.
99.1		2006 Annual Consolidated Financial Statements.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 19, 2007		Cameco Corporation

Exhibit 99.1

CAMECO CORPORATION

2006 CONSOLIDATED FINANCIAL STATEMENTS

March 16, 2007

REPORT OF MANAGEMENT’S ACCOUNTABILITY

The accompanying consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles. Management is responsible for ensuring that these statements, which include amounts based upon estimates and judgment, are consistent with other information and operating data contained in the annual report and reflect the corporation’s business transactions and financial position.

Management is also responsible for the information disclosed in the management’s discussion and analysis including responsibility for the existence of appropriate information systems, procedures and controls to ensure that the information used internally by management and disclosed externally is complete and reliable in all material respects.

In addition, management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. The internal control system includes an internal audit function and a code of conduct and ethics, which is communicated to all levels in the organization and requires all employees to maintain high standards in their conduct of the corporation’s affairs. Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the company’s assets are appropriately accounted for and adequately safeguarded. Management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the criteria established in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the company’s system of internal control over financial reporting was effective as at December 31, 2006.

Our shareholders’ independent auditors, KPMG LLP, whose report on their examination follows, have audited management’s assessment of the effectiveness of the company’s internal control over financial reporting. In addition, KPMG LLP has audited the consolidated financial statements in accordance with Canadian generally accepted auditing standards.

The board of directors annually appoints an audit committee comprised of directors who are not employees of the corporation. This committee meets regularly with management, the internal auditor and the shareholders’ auditors to review significant accounting, reporting and internal control matters. Both the internal and shareholders’ auditors have unrestricted access to the audit committee. The audit committee reviews the financial statements, the report of the shareholders’ auditors, and management’s discussion and analysis and submits its report to the board of directors for formal approval.

“Gerald W. Grandey”		“O. Kim Goheen”
President and Chief Executive Officer		Senior Vice-President and Chief Financial Officer
March 16, 2007		March 16, 2007

AUDITORS’ REPORT

To the Shareholders of Cameco Corporation

We have audited the consolidated balance sheets of Cameco Corporation as at December 31, 2006 and 2005 and the consolidated statements of earnings, retained earnings and cash flows for each of the years in the three-year period ended December 31, 2006. These financial statements are the responsibility of the corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. With respect to the consolidated financial statements for the year ended December 31, 2006, we also conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the corporation as at December 31, 2006 and 2005 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2006 in accordance with Canadian generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the corporation’s internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 16, 2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

“KPMG LLP”

Chartered Accountants
Saskatoon, Canada

March 16, 2007

Consolidated Balance Sheets

						(As adjusted -
						note 3(b))
As at December 31		2006				2005
($Cdn thousands)
Assets
Current assets
Cash and cash equivalents		$	334,089			$	623,193
Accounts receivable			403,280				340,498
Inventories [note 4]			416,479				399,675
Supplies and prepaid expenses			191,831				152,790
Current portion of long-term receivables, investments and other [note 6]			8,745				8,303
			1,354,424				1,524,459
Property, plant and equipment [note 5]			3,312,152				2,871,337
Long-term receivables, investments and other [note 6]			293,714				196,747
Goodwill [note 22]			180,139				180,232
Total assets		$	5,140,429			$	4,772,775
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued liabilities		$	402,806			$	350,398
Dividends payable			14,092				10,487
Current portion of long-term debt [note 7]			7,900				156,699
Current portion of other liabilities [note 9]			30,881				43,725
Future income taxes [note 16]			46,289				73,910
			501,968				635,219
Long-term debt [note 7]			696,691				702,109
Provision for reclamation [note 8]			228,496				167,568
Other liabilities [note 9]			232,370				98,609
Future income taxes [note 16]			339,451				444,942
			1,998,976				2,048,447
Minority interest			400,071				360,697
Shareholders’ equity
Share capital [note 10]			812,769				779,035
Contributed surplus [note 10]			540,173				529,245
Retained earnings			1,428,206				1,108,748
Cumulative translation account [note 11]			(39,766	)			(53,397	)
			2,741,382				2,363,631
Total liabilities and shareholders’ equity		$	5,140,429			$	4,772,775

Commitments and contingencies [notes 8,24,25]

See accompanying notes to consolidated financial statements.

Approved by the board of directors
Original signed by Gerald W. Grandey and Nancy E. Hopkins

Consolidated Statements of Earnings

						(As adjusted -				(As adjusted -
						note 3(b))				note 3(b))
For the years ended December 31		2006				2005				2004
($Cdn thousands, except per share amounts)
Revenue from
Products and services		$	1,831,690			$	1,312,655			$	1,048,487
Expenses
Products and services sold			1,127,772				814,032				623,125
Depreciation, depletion and reclamation			199,665				197,516				180,229
Administration			143,014				110,187				71,844
Exploration			58,152				57,468				35,972
Cigar Lake remediation [note 12]			20,559				—				—
Interest and other [note 13]			(3,708	)			12,103				14,264
Research and development			2,682				2,410				1,911
Gain on sale of assets [note 14]			(51,826	)			(1,739	)			(1,958	)
			1,496,310				1,191,977				925,387
Earnings from operations			335,380				120,678				123,100
Earnings from Bruce Power [note 19]			—				165,775				120,722
Other income (expense) [note 15]			10,046				(13,989	)			133,421
Earnings before income taxes and minority interest			345,426				272,464				377,243
Income tax expense (recovery) [note 16]			(68,843	)			30,257				73,285
Minority interest			38,554				26,738				27,452
Net earnings		$	375,715			$	215,469			$	276,506
Basic earnings per common share [note 26]		$	1.07			$	0.62			$	0.81
Diluted earnings per common share [note 26]		$	1.02			$	0.60			$	0.77

Consolidated Statements of Retained Earnings

						(As adjusted -				(As adjusted -
						note 3(b))				note 3(b))
For the years ended December 31		2006				2005				2004
($Cdn thousands)
Retained earnings at beginning of year
As previously reported		$	1,114,693			$	938,809			$	694,423
Change in accounting policy for stock-based compensation [note 3(b)]			(5,945	)			(3,783	)			(1,504	)
As adjusted			1,108,748				935,026				692,919
Net earnings			375,715				215,469				276,506
Dividends on common shares			(56,257	)			(41,747	)			(34,399	)
Retained earnings at end of year		$	1,428,206			$	1,108,748			$	935,026

Consolidated Statements of Cash Flows

						(As adjusted -				(As adjusted -
						note 3(b))				note 3(b))
For the years ended December 31		2006				2005				2004
(Cdn$ thousands)
Operating activities
Net earnings		$	375,715			$	215,469			$	276,506
Items not requiring (providing) cash:
Depreciation, depletion and reclamation			199,665				197,516				180,229
Provision for future taxes [note 16]			(184,639	)			(51,723	)			31,058
Deferred revenue recognized			(43,449	)			(25,286	)			(19,085	)
Unrealized losses (gains) on derivatives			10,400				10,513				(7,217	)
Stock-based compensation [note 20]			17,549				16,913				9,485
Gain on sale of assets [note 14]			(51,826	)			(1,739	)			(1,958	)
Cigar Lake remediation [note 12]			15,356				—				—
Earnings from Bruce Power			—				(165,775	)			(120,722	)
Equity in (earnings) loss from associated companies [note 15]			5,320				(184	)			(990	)
Other expense (income)			—				16,577				(124,050	)
Minority interest			38,554				26,738				27,452
Other operating items [note 17]			35,375				38,517				(22,666	)
Cash provided by operations			418,020				277,536				228,042
Investing activities
Acquisition of businesses, net of cash acquired			(83,856	)			—				(3,717	)
Additions to property, plant and equipment			(459,559	)			(284,929	)			(148,273	)
Restructuring of Bruce Power			—				200,000				—
Net proceeds on sale of investment in Energy Resources Australia Ltd			—				101,956				—
Increase in long-term receivables, investments and other			(29,687	)			(6,077	)			(10,466	)
Proceeds on sale of property, plant and equipment			46,404				10,532				1,769
Cash provided by (used in) investing			(526,698	)			21,482				(160,687	)
Financing activities
Short-term financing			—				(14,544	)			14,544
Decrease in debt			(156,700	)			(167,233	)			(169,083	)
Increase in debt			—				—				100,300
Issue of debentures, net of issue costs			—				297,750				—
Issue of shares			27,058				25,199				41,281
Subsidiary issue of shares			—				—				101,234
Dividends			(52,660	)			(39,970	)			(34,262	)
Cash provided by (used in) financing			(182,302	)			101,202				54,014
Increase (decrease) in cash during the year			(290,980	)			400,220				121,369
Exchange rate changes on foreign currency cash balances			1,876				(9,662	)			(15,906	)
Increase in cash due to accounting change [note 19]			—				43,103				—
Cash at beginning of year			623,193				189,532				84,069
Cash at end of year		$	334,089			$	623,193			$	189,532
Supplemental cash flow disclosure
Interest paid		$	53,551			$	26,610			$	35,968
Income taxes paid		$	115,352			$	48,429			$	18,262

Notes to Consolidated Financial Statements

For the years ended December 31, 2006, 2005 and 2004

($Cdn thousands except per share amounts and as noted)

1.		Cameco Corporation
		Cameco Corporation is incorporated under the Canada Business Corporations Act. Cameco Corporation and its subsidiaries (collectively, “Cameco” or “the company”) are primarily engaged in the exploration for and the development, mining, refining, conversion and fabrication of uranium for sale as fuel for generating electricity in nuclear power reactors in Canada and other countries. The company has a 31.6% interest in Bruce Power L.P. (“BPLP”), which operates the four Bruce B nuclear reactors in Ontario. The company wholly owns Zircatec Precision Industries, Inc., whose primary business is the fabrication of nuclear fuel bundles. Cameco’s 52.7% subsidiary Centerra Gold Inc. (“Centerra”) is involved in the exploration for and the development, mining and sale of gold.
2.		Significant Accounting Policies

	(a)		Consolidation Principles
			The consolidated financial statements include the accounts of Cameco and its subsidiaries. Interests in joint ventures are accounted for by the proportionate consolidation method. Under this method, Cameco includes in its accounts its proportionate share of assets, liabilities, revenues and expenses.
			The consolidated financial statements are prepared by management in accordance with Canadian generally accepted accounting principles. Management makes various estimates and assumptions in determining the reported amounts of assets and liabilities, revenues and expenses for each year presented, and in the disclosure of commitments and contingencies. The most significant estimates are related to the lives and recoverability of mineral properties, provisions for decommissioning and reclamation of assets, future income taxes, financial instruments and mineral reserves. Actual results could differ from these estimates. This summary of significant accounting policies is a description of the accounting methods and practices that have been used in the preparation of these consolidated financial statements and is presented to assist the reader in interpreting the statements contained herein.
	(b)		Cash
			Cash consists of balances with financial institutions and investments in money market instruments, which have a term to maturity of three months or less at time of purchase.
	(c)		Inventories
			Inventories of broken ore, uranium concentrates, refined and converted products and gold are valued at the lower of average cost and net realizable value. Average cost includes direct materials, direct labour, operational overhead expenses and depreciation, depletion and reclamation.
	(d)		Supplies
			Consumable supplies and spares are valued at the lower of cost or replacement value.
	(e)		Investments
			Investments in associated companies over which Cameco has the ability to exercise significant influence are accounted for by the equity method. Under this method, Cameco includes in earnings its share of earnings or losses of the associated company. Portfolio investments are carried at cost or at cost less amounts written off to reflect a decline in value that is other than temporary.
	(f)		Property, Plant and Equipment
			Assets are carried at cost. Costs of additions and improvements are capitalized. When assets are retired or sold, the resulting gains or losses are reflected in current earnings. Maintenance and repair expenditures are charged to cost of production.

	(g)		Non-Producing Properties
			The decision to develop a mine property within a project area is based on an assessment of the commercial viability of the property, the availability of financing and the existence of markets for the product. Once the decision to proceed to development is made, development and other expenditures relating to the project area are deferred and carried at cost with the intention that these will be depleted by charges against earnings from future mining operations. No depreciation or depletion is charged against the property until commercial production commences. After a mine property has been brought into commercial production, costs of any additional work on that property are expensed as incurred, except for large development programs, which will be deferred and depleted over the remaining life of the related assets.
			The carrying values of non-producing properties are periodically assessed by management and if management determines that the carrying values cannot be recovered, the unrecoverable amounts are written off against current earnings.
	(h)		Property Evaluations
			Cameco reviews the carrying values of its properties when changes in circumstances indicate that those carrying values may not be recoverable. Estimated future net cash flows are calculated using estimated recoverable reserves, estimated future commodity prices and the expected future operating and capital costs. An impairment loss is recognized when the carrying value of an asset held for use exceeds the sum of undiscounted future net cash flows. An impairment loss is measured as the amount by which the asset’s carrying amount exceeds its fair value.
	(i)		Goodwill
			Acquisitions are accounted for using the purchase method whereby acquired assets and liabilities are recorded at fair value as of the date of acquisition. The excess of the purchase price over such fair value is recorded as goodwill. Goodwill is assigned to assets and is not amortized.
	(j)		Future Income Taxes
			Future income taxes are recognized for the future income tax consequences attributable to differences between the carrying values of assets and liabilities and their respective income tax bases. Future income tax assets and liabilities are measured using enacted or substantively enacted income tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on future income tax assets and liabilities of a change in rates is included in earnings in the period, which includes the enactment date. Future income tax assets are recorded in the financial statements if realization is considered more likely than not.
	(k)		Capitalization of Interest
			Interest is capitalized on expenditures related to construction or development projects actively being prepared for their intended use. Capitalization is discontinued when the asset enters commercial operation or development ceases.
	(l)		Depreciation and Depletion
			Conversion services assets, mine buildings, equipment and mineral properties are depreciated or depleted according to the unit-of-production method. This method allocates the costs of these assets to each accounting period. For conversion services, the amount of depreciation is measured by the portion of the facilities’ total estimated lifetime production that is produced in that period. For mining, the amount of depreciation or depletion is measured by the portion of the mines’ economically recoverable proven and probable ore reserves which are recovered during the period.
			Nuclear generating plants are depreciated according to the straight-line method based on the lower of useful life and remaining lease term.
			Other assets are depreciated according to the straight-line method based on estimated useful lives, which generally range from three to 10 years.
	(m)		Research and Development and Exploration Costs
			Expenditures for research and technology related to the products and processes and expenditures for geological exploration programs are charged against earnings as incurred.

	(n)		Environmental Protection and Reclamation Costs
			The fair value of the liability for an asset retirement obligation is recognized in the period incurred. The fair value is added to the carrying amount of the associated asset and depreciated over the asset’s useful life. The liability is accreted over time through periodic charges to earnings and it is reduced by actual costs of decommissioning and reclamation. Cameco’s estimates of reclamation costs could change as a result of changes in regulatory requirements and cost estimates. Expenditures relating to ongoing environmental programs are charged against earnings as incurred.
	(o)		Employee Future Benefits
			Cameco accrues its obligations under employee benefit plans. The cost of pensions and other retirement benefits earned by employees is actuarially determined using the projected benefit method pro-rated on service and management’s best estimate of expected plan investment performance, salary escalation, retirement ages of employees and expected health care costs. For the purpose of calculating the expected return on plan assets, those assets are measured at fair value. Cameco measures the plan assets and the accrued benefit obligations on December 31 each year.
			On both the Cameco-specific and BPLP-specific defined benefit pension plans, past service costs arising from plan amendments are amortized on a straight-line basis over the expected average remaining service life of the plan participants. Net actuarial gains, which exceed 10% of the greater of the accrued benefit obligation and the fair value of plan assets, are amortized on a straight-line basis over the expected average remaining service life of the plan participants.
			On the Cameco-specific retirement benefit plans that do not vest or accumulate, past service costs arising from plan amendments, and net actuarial gains and losses, are recognized in the period they arise. Conversely, the BPLP-specific amounts are amortized on a straight-line basis over the expected average remaining service life of the plan participants.
	(p)		Stock-Based Compensation
			Cameco has four stock-based compensation plans that are described in note 20. These encompass a stock option plan, a performance share unit plan, a deferred share unit plan and a phantom stock option plan.
			Options granted under the stock option plan on or after January 1, 2003 are accounted for using the fair value method. Under this method, the compensation cost of options granted is measured at estimated fair value at the grant date and recognized over the shorter of, the period to eligible retirement, or the vesting period. For options granted prior to January 1, 2003, no compensation expense was recognized when the stock options were granted. Any consideration received on exercise of stock options is credited to share capital.
			Deferred share units, performance share units and phantom stock options are amortized over their vesting periods and re-measured at each reporting period, until settlement, using the quoted market value.
	(q)		Revenue Recognition
			Cameco supplies uranium concentrates and uranium conversion services to utility customers.
			Cameco recognizes revenue on the sale of its nuclear products when persuasive evidence of an arrangement exists, delivery occurs, the related revenue is fixed or determinable and collection is reasonably assured.
			Cameco has three types of sales arrangements with its customers in its uranium and fuel services businesses. These arrangements include uranium supply, toll conversion services and conversion supply (converted uranium), which is a combination of uranium supply and toll conversion services.
			Uranium Supply
			In a uranium supply arrangement, Cameco is contractually obligated to provide uranium concentrates to its customers. Cameco-owned uranium is physically delivered to conversion facilities (“Converters”) where the Converter will credit Cameco’s account for the volume of accepted uranium. Based on delivery terms in a sales contract with its customer, Cameco instructs the Converter to transfer title of a contractually-specified quantity of uranium to the customer’s account at the Converter’s facility. At this point, Cameco invoices the customer and recognizes revenue for the uranium supply.

			Toll Conversion Services
			In a toll conversion arrangement, Cameco is contractually obligated to convert customer-owned uranium to a chemical state suitable for enrichment. The customer delivers uranium to Cameco’s conversion facilities. Once conversion is complete, Cameco physically delivers converted uranium to enrichment facilities (“Enrichers”) where the Enricher will credit Cameco’s account for the volume of accepted processed uranium. Based on delivery terms in a sales contract with its customer, Cameco instructs the Enricher to transfer title of a contractually-specified quantity of converted uranium to the customer’s account at the Enricher’s facility. At this point, Cameco invoices the customer and recognizes revenue for the toll conversion services.
			Conversion Supply
			In a conversion supply arrangement, Cameco is contractually obligated to provide uranium concentrates and conversion services to its customers. Cameco-owned uranium is converted and physically delivered to an Enricher as described in the toll conversion services arrangement. Based on delivery terms in a sales contract with its customer, Cameco instructs the Enricher to transfer title of a contractually-specified quantity of converted uranium to the customer’s account at the Enricher’s facility. At this point, Cameco invoices the customer and recognizes revenue for both the uranium supplied and the conversion service provided. It is rare for Cameco to enter into back-to-back arrangements for uranium supply and toll conversion services. However, in the event that a customer requires such an arrangement, revenue from uranium supply is deferred until the toll conversion service has been rendered.
			Revenue from deliveries to counterparties with whom Cameco has arranged a standby product loan facility (up to the limit of the loan facilities) and the related cost of sales are deferred until the loan arrangements have been terminated, or if drawn upon, when the loans are repaid and that portion of the facility is terminated.
			Cameco records revenue on the sale of gold when title passes and delivery is effected.
			Electricity sales are recognized at the time of generation, and delivery to the purchasing utility is metered at the point of interconnection with the transmission system. Revenues are recognized on an accrual basis, which includes an estimate of the value of electricity produced during the period but not yet billed.
	(r)		Amortization of Financing Costs
			Debt discounts and issue expenses associated with long-term financing are deferred and amortized over the term of the issues to which they relate.
	(s)		Foreign Currency Translation
			Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at year-end rates of exchange. Revenue and expense transactions denominated in foreign currencies are translated into Canadian dollars at rates in effect at the time of the transactions. The applicable exchange gains and losses arising on these transactions are reflected in earnings.
			The United States dollar is considered the functional currency of most of Cameco’s uranium and gold operations outside of Canada. The financial statements of these operations are translated into Canadian dollars using the current rate method whereby all assets and liabilities are translated at the year-end rate of exchange and all revenue and expense items are translated at the average rate of exchange prevailing during the year. Exchange gains and losses arising from this translation, representing the net unrealized foreign currency translation gain (loss) on Cameco’s net investment in these foreign operations, are recorded in the cumulative translation account component of shareholders’ equity. Exchange gains or losses arising from the translation of foreign debt and preferred securities designated as hedges of a net investment in foreign operations are also recorded in the cumulative translation account component of shareholders’ equity. These adjustments are not included in earnings until realized through a reduction in Cameco’s net investment in such operations.

	(t)		Derivative Financial Instruments and Hedging Transactions
			Cameco uses derivative financial and commodity instruments to reduce exposure to fluctuations in foreign currency exchange rates, interest rates and commodity prices. Cameco formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. Cameco also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Gains and losses related to hedging items are deferred and recognized in the same period as the corresponding hedged items. If derivative financial instruments are closed before planned delivery, gains or losses are recorded as deferred gains or deferred charges and recognized on the planned delivery date. In the event a hedged item is sold, extinguished or matures prior to the termination of the related hedging instrument, any realized or unrealized gain or loss on such derivative instrument is recognized in earnings.
			BPLP uses various energy and related sales contracts to reduce exposure to fluctuations in the price of electricity in Ontario. Gains or losses on hedging instruments are recognized in earnings over the term of the contract when the underlying hedged transactions occur. All energy contracts are designated as hedges of BPLP’s electricity sales.
	(u)		Earnings Per Share
			Earnings per share are calculated using the weighted average number of paid common shares outstanding.
			The calculation of diluted earnings per share assumes that outstanding options and warrants are exercised and the proceeds are used to repurchase shares of the company at the average market price of the shares for the period. The effect is to increase the number of shares used to calculate diluted earnings per share.

3.

New Accounting Pronouncements

	(a)		Financial Instruments – Recognition and Measurement, Hedges and Comprehensive Income
			In January 2005, the CICA issued three new standards: “Financial Instruments – Recognition and Measurement”, “Hedges” and “Comprehensive Income”. The main consequences of implementing these standards are described below.
			All financial assets and liabilities will be carried at fair value in the Consolidated Balance Sheets, except for items classified in the following categories, which will be carried at amortized cost: loans and receivables, held-to-maturity securities and financial liabilities not held for trading. Realized and unrealized gains and losses on financial assets and liabilities that are held for trading will be recorded in the Consolidated Statements of Earnings. Unrealized gains and losses on financial assets that are available for sale will be reported in other comprehensive income until realized, at which time they will be recorded in the Consolidated Statements of Earnings. All derivatives, including embedded derivatives that must be accounted for separately, will be recorded at fair value in the Consolidated Balance Sheets.
			For fair value hedges, changes in the fair value of the derivatives and corresponding changes in fair value of the hedged items attributed to the risk being hedged will be recognized in the Consolidated Statements of Earnings. For cash flow hedges, the effective portion of the changes in the fair values of the derivative instruments will be recorded in other comprehensive income until the hedged items are recognized in the Consolidated Statements of Earnings.
			Other comprehensive income, which comprises the above items as well as unrealized exchange gains and losses on self-sustaining foreign operations (net of hedging activities), will be included as a separate component of the new statement entitled “Statement of Shareholders’ Equity” that will be added to the consolidated financial statements.
			These new standards will apply to Cameco effective January 1, 2007. As at January 1, 2007, Cameco will recognize all of its financial assets and liabilities in the Consolidated Balance Sheets according to their classification. Any adjustment made to a previous carrying amount will be recognized as an adjustment to the balance of retained earnings at that date or as the opening balance of a separate item in accumulated other comprehensive income net of taxes. Cameco is completing its assessment of the impact these new standards will have on its consolidated financial statements.

	(b)		Stock-Based Compensation
			In July 2006, the Emerging Issues Committee (“EIC”) issued abstract No. 162, Stock-Based Compensation for Employees Eligible to Retire Before the Vesting Date. This EIC clarifies that the compensation cost attributable to options and awards, granted to employees who are eligible to retire or will become eligible to retire during the vesting period, should be recognized immediately if the employee is eligible to retire on the grant date or over the period between the grant date to the date the employee becomes eligible to retire. This EIC requires retroactive application to all stock-based compensation awards accounted for in accordance with the CICA Handbook Section 3870, Stock-Based Compensation and Other Stock-Based Payments. This differs from the current practice that recognizes the expense over the period from the grant date to the vesting date.
			The cumulative effect of the change in policy on the balance sheet at December 31, 2005 is to increase contributed surplus by $5,945,000, and decrease retained earnings by $5,945,000. The effect of the change in policy on the statement of earnings for the year ended December 31, 2005 was a $2,162,000 (2004 — $2,279,000) reduction in earnings (2005 — $0.01 per share; 2004 — $0.01 per share). The impact on 2006 financial results was negligible.

4.

Inventories

		2006				2005
Uranium
Concentrate		$	280,650			$	292,099
Broken ore			12,946				9,661
			293,596				301,760
Fuel Services			98,485				63,492
Gold
Finished			5,513				14,311
Broken ore			18,885				20,112
			24,398				34,423
Total		$	416,479			$	399,675

5.

Property, Plant and Equipment

						Accumulated
						Depreciation				2006				2005
		Cost				and Depletion				Net				Net
Uranium
Mining		$	2,818,849			$	1,485,452			$	1,333,397			$	1,329,971
Non-producing			748,442				—				748,442				577,181
Fuel Services			497,118				176,334				320,784				131,657
Electricity
Assets under capital lease			164,300				52,400				111,900				121,200
Other			514,521				114,518				400,003				399,245
Gold
Mining			912,948				559,071				353,877				277,485
Non-producing			2,876				—				2,876				2,877
Other			65,567				24,694				40,873				31,721
Total		$	5,724,621			$	2,412,469			$	3,312,152			$	2,871,337

6.

Long-Term Receivables, Investments and Other

		2006				2005
BPLP [note 19]
Capital lease receivable from Bruce A L.P.		$	97,518			$	97,454
Receivable from Ontario Power Generation (“OPG”)			11,281				19,181
Accrued pension benefit asset [note 21]			11,992				18,119
Kumtor Gold Company (“KGC”)
Reclamation trust fund			6,999				5,087
Investments in associated companies
Investment in UNOR Inc. (market value $14,452)			8,893				—
Investment in UEX Corporation (market value $219,548)			19,151				11,303
Deferred charges
Cost of sales [notes 9, 2(q)]			75,854				—
Debt issue costs			7,372				8,538
Gold hedges			593				3,291
Investment in Huron Wind L.P.			2,340				2,527
Advances receivable			46,094				21,928
Accrued pension benefit asset [note 21]			7,889				9,689
Other			6,483				7,933
			302,459				205,050
Less current portion			(8,745	)			(8,303	)
Net		$	293,714			$	196,747

BPLP leases the Bruce A nuclear generating plants and other property, plant and equipment to Bruce A L.P under a sublease agreement. Future minimum base rent sublease payments under the capital lease receivable are imputed using a 7.5% discount rate.

7.

Long-Term Debt

		2006				2005
Convertible debentures		$	207,091			$	204,577
Debentures			300,000				450,000
Capital lease obligation — BPLP [note 19]			197,500				204,231
			704,591				858,808
Less current portion			(7,900	)			(156,699	)
Net		$	696,691			$	702,109

On September 25, 2003 the company issued unsecured convertible debentures in the amount of $230,000,000. The debentures bear interest at 5% per annum, mature on October 1, 2013, and at the holder’s option are convertible into common shares of Cameco. The fair value of the conversion option associated with the convertible debentures on the date of issuance was $30,473,000, resulting in an effective interest rate of 6.85%. The amount is reflected as contributed surplus. The conversion price is $10.83 per share, a rate of approximately 92.3 common shares per $1,000 of convertible debentures. Interest is payable semi-annually in arrears on April 1 and October 1. The debentures are redeemable by the company beginning October 1, 2008 at a redemption price of par plus accrued and unpaid interest.

The fair value of the outstanding convertible debentures is based on the quoted market price of the debentures at December 31, 2006 and was approximately $957,000,000.

Cameco has $300,000,000 outstanding in senior unsecured debentures (Series C). These debentures bear interest at a rate of 4.7% per annum and mature September 16, 2015. Cameco had $100,000,000 outstanding in senior unsecured debentures (Series A) that bore interest at a rate of 6.9% per annum and were to mature July 12, 2006. Cameco also had $50,000,000 outstanding in senior unsecured debentures (Series B) that bore interest at a rate of 7.0% per annum and were to mature July 6, 2006. On January 17, 2006, Cameco redeemed in full the Series A and B debentures. The redemption prices under the trust indenture were based on the yield for a Government of Canada bond with the equivalent term to maturity plus 25 basis points for the Series A debentures and 34 basis points for the Series B debentures. The total redemption price was $152,104,000 plus accrued and unpaid interest.

Cameco has a $500,000,000 unsecured revolving credit facility that is available until November 30, 2011. Cameco may also borrow directly in the commercial paper market. These amounts, when drawn, are classified as long-term debt.

Cameco has $597,080,000 ($169,320,000 (Cdn) and $367,081,000 (US)) in letter of credit facilities. The majority of the outstanding letters of credit at December 31, 2006 relate to future decommissioning and reclamation liabilities [note 8] and amounted to $213,069,000 ($137,236,000 (Cdn) and $65,076,000 (US)) (2005 — $206,647,000 ($133,522,000 (Cdn) and $62,720,000 (US))). At December 31, 2006 there were no amounts outstanding under the $300,000,000 (US) letter of credit facility that related to the standby product loan facilities.

BPLP holds a long-term lease with OPG to operate the Bruce nuclear power facility. The term of the lease, which expires in 2018, is 18 years with an option to extend the lease for up to an additional 25 years.

BPLP has a $150,000,000 revolving credit facility that is available until July 21, 2008 as well as a $30,000,000 letter of credit facility. As at December 31, 2006, BPLP did not have any amount outstanding under these facilities.

The table below represents currently scheduled maturities of long-term debt over the next five years.

2007		$	7,900
2008			8,848
2009			10,112
2010			11,692
2011			13,272
Thereafter			652,767
Total		$	704,591

Standby Product Loan Facilities

Cameco has arranged for standby product loan facilities with two Cameco customers. The arrangements, which were finalized in 2006, allow Cameco to borrow up to 5,560,000 pounds U₃O₈ equivalent over the period 2006 to 2008 with repayment in 2008 and 2009. Of this material, up to 1,400,000 kilograms of uranium can be borrowed in the form of UF₆. Under the loan facilities, standby fees of 0.5% to 2.25% are payable based on the market value of the facilities, and interest is payable on the market value of any amounts drawn at rates ranging from 4.0% to 5.0%. Any borrowings will be secured by letters of credit and are payable in kind.

The market value of the available facilities is based on the quoted market price of the products at December 31, 2006 and was approximately $416,000,000 (US). As at December 31, 2006, the company did not have any loan amounts outstanding under the facilities.

8.		Provision for Reclamation
		Cameco’s estimates of future asset retirement obligations are based on reclamation standards that satisfy regulatory requirements. Elements of uncertainty in estimating these amounts include potential changes in regulatory requirements, decommissioning and reclamation alternatives and amounts to be recovered from other parties.
		Cameco estimates total future decommissioning and reclamation costs for its operating assets to be $312,600,000. These estimates are reviewed by Cameco technical personnel as required by regulatory agencies or more frequently as circumstances warrant. In connection with future decommissioning and reclamation costs, Cameco has provided financial assurances of $209,500,000 in the form of letters of credit to satisfy current regulatory requirements.
		Following is a reconciliation of the total liability for asset retirement obligations:

		2006				2005				2004
Balance, beginning of year		$	167,568			$	166,941			$	150,444
Acquisition of Zircatec interest [note 23]			7,129				—				—
Additions to liabilities			50,299				579				2,074
Liabilities settled			(6,420	)			(6,938	)			(4,357	)
Accretion expense			9,954				9,017				9,246
Impact of foreign exchange			(34	)			(2,031	)			(5,318	)
Acquisition of Kumtor interest			—				—				14,852
Balance, end of year		$	228,496			$	167,568			$	166,941

Following is a summary of the key assumptions on which the carrying amount of the asset retirement obligations is based:

	(i)		Total undiscounted amount of the estimated cash flows — $312,600,000.
	(ii)		Expected timing of payment of the cash flows — timing is based on life of mine plans. The majority of expenditures are expected to occur after 2013.
	(iii)		Discount rates – 5.25% to 7.50% for operations in North America; 8.00% for operations in Kyrgyzstan; 8.50% for operations in Mongolia.

The asset retirement obligations liability is comprised of:

		2006				2005
Uranium		$	118,272			$	101,573
Fuel Services			90,789				44,923
Gold			19,435				21,072
Total		$	228,496			$	167,568

Under the BPLP lease agreement, OPG, as the owner of the Bruce nuclear plants, is responsible to decommission the Bruce facility and to provide funding and meet other requirements that the Canadian Nuclear Safety Commission (“CNSC”) may require of BPLP as licensed operator of the Bruce facility. OPG is also responsible to manage radioactive waste associated with decommissioning of the Bruce nuclear plants.

9.

Other Liabilities

		2006				2005
Deferred sales [notes 6, 2(q)]		$	107,330			$	—
Deferred currency hedges			26,333				26,171
Accrued post-retirement benefit liability [note 21]			12,166				7,403
Zircatec acquisition holdback [note 23]			20,000				—
BPLP
Accrued post-retirement benefit liability [note 21]			86,856				78,149
Deferred revenue — electricity contracts			856				16,047
Other			9,710				14,564
			263,251				142,334
Less current portion			(30,881	)			(43,725	)
Net		$	232,370			$	98,609

10.		Share Capital
		Authorized share capital:

Unlimited number of first preferred shares
Unlimited number of second preferred shares
Unlimited number of voting common shares, and
One Class B share

(a)

Common Shares

Number Issued (Number of Shares)		2006				2005				2004
Beginning of year			349,570,048				346,080,138				340,616,538
Issued:
Debenture conversions			5,905				16,150				—
Stock option plan [note 20]			2,716,679				3,473,760				5,463,600
Issued share capital			352,292,632				349,570,048				346,080,138

Amount		2006				2005				2004
Beginning of year		$	779,420			$	751,145			$	711,063
Issued:
Debenture conversions			64				175				—
Stock option plan [note 20]			33,361				28,100				40,082
Issued share capital			812,845				779,420				751,145
Less loans receivable			(76	)			(385	)			(586	)
End of year		$	812,769			$	779,035			$	750,559

	(b)		Class B Share
			One Class B share issued during 1988 and assigned $1 of share capital, entitles the shareholder to vote separately as a class in respect of any proposal to locate the head office of Cameco to a place not in the province of Saskatchewan.
	(c)		Contributed Surplus

						(as adjusted -
						note 3(b))
		2006				2005
Beginning of year
As previously reported		$	523,300			$	511,674
Change in accounting policy for stock-based compensation [note 3]			5,945				3,783
As adjusted		$	529,245			$	515,457
Stock-based compensation [note 20]			17,549				16,913
Options exercised [note 20]			(6,612	)			(3,102	)
Debenture conversions			(9	)			(23	)
End of year		$	540,173			$	529,245

11.		Cumulative Translation Account
		The balance represents the cumulative unrealized net exchange loss on Cameco’s net investments in foreign operations and any foreign currency debt designated as hedges of the net investments.

12.		Cigar Lake Remediation
		As a result of the water inflow at Cigar Lake, Cameco recorded an expense of $20,559,000. Of the amount recorded, $15,356,000 related to the write-down of assets while $5,203,000 related to remediation efforts. Future costs associated with the remediation will be expensed as incurred.
		On March 16, 2007, the board of directors approved a new plan for the remediation and continued development of the Cigar Lake uranium project. Cameco’s share of additional development costs is estimated to be $274 million, bringing the total construction costs to develop the project to $508 million. In addition, Cameco expects to incur remediation expenses of $32 million in 2007 and $9 million in 2008. The new plan is subject to the approval of the partners of the Cigar Lake Joint Venture.
13.		Interest and Other

		2006				2005				2004
Interest on long-term debt		$	43,223			$	35,388			$	40,014
Redemption of preferred securities			—				—				6,817
Other interest and financing charges			4,642				1,600				3,870
Foreign exchange losses			1,413				3,719				331
(Gains) losses on derivatives			10,400				7,754				(7,217	)
Interest income			(32,348	)			(10,517	)			(4,819	)
Capitalized interest			(31,038	)			(25,841	)			(24,732	)
Net		$	(3,708	)		$	12,103			$	14,264

14.

Gain on Sale of Assets

		2006				2005				2004
Interest in Fort a la Corne Joint Venture		$	(44,782	)		$	—			$	—
Voting rights in Fort a la Corne Joint Venture			(5,889	)			(161	)			—
Other			(1,155	)			(1,578	)			(1,958	)
Net		$	(51,826	)		$	(1,739	)		$	(1,958	)

15.

Other Income (Expense)

		2006				2005				2004
Insurance settlement (Kumtor)		$	15,366			$	—			$	—
Equity in earnings (loss) of associated companies			(5,320	)			184				990
Sale of investment in Energy Resources Australia Ltd			—				83,673				—
Dividends on portfolio investments			—				2,022				1,383
Writedown of portfolio investments			—				(6,323	)			—
Restructuring of Bruce Power			—				(93,545	)			—
Restructuring of gold business			—				—				122,946
South Texas Project break fee			—				—				8,102
Net		$	10,046			$	(13,989	)		$	133,421

16.		Income Taxes
		The significant components of future income tax assets and liabilities at December 31 are as follows:

		2006				2005
Assets
Property, plant and equipment		$	173,774			$	129,823
Provision for reclamation			65,234				53,901
Foreign exploration and development			31,144				33,618
Other			37,031				53,691
Future income tax assets before valuation allowance			307,183				271,033
Valuation allowance			(128,771	)			(112,519	)
Future income tax assets, net of valuation allowance		$	178,412			$	158,514
Liabilities
Property, plant and equipment		$	502,579			$	571,585
Inventories			18,935				12,100
Long-term investments and other			42,638				93,681
Future income tax liabilities		$	564,152			$	677,366
Net future income tax liabilities		$	385,740			$	518,852
Less current portion			(46,289	)			(73,910	)
		$	339,451			$	444,942

The provision for income taxes differs from the amount computed by applying the combined expected federal and provincial income tax rate to earnings before income taxes. The reasons for these differences are as follows:

						(as adjusted -				(as adjusted -
						note 3(b))				note 3(b))
		2006				2005				2004
Earnings before income taxes and minority interest		$	345,426			$	272,464			$	377,243
Combined federal and provincial tax rate			39.3	%			42.4	%			43.5	%
Computed income tax expense			135,752				115,525				164,101
Increase (decrease) in taxes resulting from:
Reduction in income tax rates			(66,749	)			—				—
Provincial royalties and other taxes			1,092				3,079				5,541
Federal resource allowance			(6,617	)			(8,181	)			2,251
Manufacturing and processing deduction			(5,719	)			(1,321	)			(7,439	)
Difference between Canadian rate and rates applicable to subsidiaries in other countries			(133,988	)			(91,049	)			(61,398	)
Non-taxable portion of capital gain			—				(10,300	)			(28,448	)
Change in valuation allowance			19,126				17,019				(11,185	)
Capital and other taxes			2,296				8,602				5,780
Stock-based compensation plans			6,700				7,037				4,119
Recovery of taxes due to amendment of tax treatment			(16,950	)			(10,342	)			—
Other tax deductions			(3,786	)			188				(37	)
Income tax expense (recovery)		$	(68,843	)		$	30,257			$	73,285

During 2006, the federal and provincial governments enacted amendments to current tax legislation, which provided for a reduction in corporate tax rates. The cumulative effect of the change in income tax legislation on Cameco’s future income tax liability was a reduction of $73,000,000.

In addition, confirmation was received with respect to deductibility of the Saskatchewan provincial resource surcharge for years prior to 2001. As a result, a $16,950,000 reduction of future taxes was recorded.

		2006				2005				2004
Earnings before income taxes and minority interest
Canada		$	(17,703	)		$	(94,978	)		$	202,518
Foreign			363,129				367,442				174,725
		$	345,426			$	272,464			$	377,243
Current income taxes
Canada		$	91,730			$	53,719			$	34,486
Foreign			24,066				28,261				7,741
		$	115,796			$	81,980			$	42,227
Future income taxes (recovery)
Canada		$	(167,189	)		$	(56,923	)		$	38,153
Foreign			(17,450	)			5,200				(7,095	)
		$	(184,639	)		$	(51,723	)		$	31,058
Income tax expense (recovery)		$	(68,843	)		$	30,257			$	73,285

17.

Statements of Cash Flows Other Operating Items

		2006				2005				2004
Changes in non-cash working capital:
Accounts receivable		$	36,180			$	(78,552	)		$	4,660
Inventories			(63,623	)			(21,079	)			(51,913	)
Supplies and prepaid expenses			(38,393	)			(22,282	)			(16,629	)
Accounts payable and accrued liabilities			58,258				44,381				39,083
Hedge position settlements			32,113				43,571				3,634
Bruce Power distributions			—				83,740				—
Other			10,840				(11,262	)			(1,501	)
Total		$	35,375			$	38,517			$	(22,666	)

18.		Joint Ventures
		Cameco conducts a portion of its exploration, development, mining and milling activities through joint ventures. Cameco’s significant uranium joint venture interests are comprised of:

Producing:
McArthur River			69.81	%
Key Lake			83.33	%
Non-producing:
Cigar Lake			50.03	%
Inkai			60.00	%

		Uranium joint ventures allocate uranium production to each joint venture participant and the joint venture participant derives revenue directly from the sale of such product. Mining and milling expenses incurred by the joint venture are included in the cost of inventory. At December 31, 2006, Cameco’s share of property, plant and equipment in these joint ventures amounted to $1,862,000,000 (2005 — $1,714,000,000) [note 5].
		Cameco previously accounted for its investment in BPLP using the equity method. As a result of the restructuring of the partnership agreement, which provides for joint control among the three major partners, Cameco began accounting for this investment as a joint venture effective November 1, 2005 [note 19].
19.		Investment in BPLP

	(a)		Restructuring
			On October 31, 2005, a new Bruce A limited partnership was formed to hold the lease for the four Bruce A reactors. Cameco was not part of this new partnership but it has maintained its existing 31.6% interest in BPLP, which retained ownership of the four Bruce B reactors. BPLP received an initial payment for the assets transferred to the Bruce A partnership which resulted in a special distribution to the partners. Cameco’s share of the special distribution was $200,000,000. The reorganization involving Bruce A triggered a loss of about $62,000,000 (Cameco’s share after tax) and resulted in amendments to the existing partnership agreement. These amendments led to joint control among the three major partners. As a result, effective November 1, 2005, Cameco has proportionately consolidated its 31.6% interest. Prior to November 1, 2005, Cameco was using the equity method to account for this investment.
	(b)		Fuel Supply Agreements
			Cameco has entered into fuel supply agreements with BPLP for the procurement of fabricated fuel. Under these agreements, Cameco will supply uranium and conversion services and finance the purchase of fabrication services. Contract terms are at market rates and on normal trade terms. During 2006, sales of uranium and conversion services to BPLP amounted to $41,650,000 (2005 — $22,017,000), approximately 2.3% (2005 — 1.7%) of Cameco’s total revenue. At December 31, 2006, amounts receivable under these agreements totalled $15,055,000 (2005 — $26,666,000).
	(c)		Supplementary Information
			Since November 1, 2005, Cameco has proportionately consolidated its share of BPLP. For 2005, $114,000,000 of earnings before taxes was accounted for under the equity method. The following tables represent Cameco’s proportionate share of BPLP.

Balance Sheets

(Millions)		2006				2005
Current assets		$	129			$	133
Property, plant and equipment			417				415
Long-term receivables and investments			131				144
		$	677			$	692
Current liabilities		$	100			$	98
Long-term liabilities			358				354
			458				452
Equity			219				240
		$	677			$	692

Statements of Earnings

(Millions)		2006				2005				2004
Revenue		$	393			$	565			$	494
Operating costs			256				380				366
Earnings before interest and taxes			137				185				128
Interest			14				21				21
Loss on restructuring			—				47				—
Earnings before taxes		$	123			$	117			$	107

Statements of Cash Flows

(Millions)		2006				2005				2004
Cash provided by operations		$	163			$	244			$	140
Cash provided by (used in) investing			(38	)			103				(114	)
Cash used in financing			(143	)			(328	)			(33	)

20.		Stock-Based Compensation Plans
		Stock Option Plan
		Cameco has established a stock option plan under which options to purchase common shares may be granted to directors, officers and other employees of Cameco. Options granted under the stock option plan have an exercise price of not less than the closing price quoted on the TSX for the common shares of Cameco on the trading day prior to the date on which the option is granted. The options vest over three years and expire eight years from the date granted. Options granted prior to 1999 expire 10 years from the date of the grant of the option. Options have not been awarded to directors since 2003.

		Prior to 1999, participants were eligible to receive loans from Cameco to assist in the purchase of common shares pursuant to the exercise of options. The maximum term of the loans was 10 years from the date of the grant of the related option. The loans bear interest at a rate equivalent to the regular dividends paid on the common shares to which the loans were provided. Common shares purchased by way of a company loan are held in escrow in the account of the option holder and are pledged as security for the respective loan until the loan has been repaid in full. Outstanding loans are shown as a reduction of share capital [note 10].
		The aggregate number of common shares that may be issued pursuant to the Cameco stock option plan shall not exceed 43,017,198, of which 22,329,713 shares have been issued.
		Stock option transactions for the respective years were as follows:

(Number of Options)		2006				2005				2004
Beginning of year			8,723,170				9,737,340				12,240,000
Options granted			1,537,330				2,631,180				4,170,000
Options exercised [note 10]			(2,716,679	)			(3,473,760	)			(5,463,600	)
Options cancelled			(153,768	)			(171,590	)			(1,209,060	)
End of year			7,390,053				8,723,170				9,737,340
Exercisable			3,088,841				2,859,318				3,253,800

		Upon exercise of certain existing options, additional options in respect of 55,000 shares would be granted.
		Weighted average exercise prices were as follows:

		2006				2005				2004
Beginning of year		$	13.29			$	7.64			$	6.71
Options granted			41.04				27.11				11.42
Options exercised			9.84				7.16				7.20
Options cancelled			32.92				28.79				13.17
End of year		$	19.92			$	13.29			$	7.64
Exercisable		$	10.46			$	6.93			$	6.27

Total options outstanding and exercisable at December 31, 2006 were as follows:

2006						Options Outstanding								Options Exercisable
						Weighted				Weighted								Weighted
						Average				Average								Average
						Remaining				Exercisable								Exercisable
Option Price Per Share		Number				Life				Price				Number				Price
$    3.13 - 4.81			228,200				2			$	4.23				228,200			$	4.23
4.82 - 10.51			3,622,280				5				8.43				2,388,296				7.78
10.52 - 41.00			3,539,573				8				32.69				472,345				27.04
			7,390,053												3,088,841

The foregoing options have expiry dates ranging from March 3, 2007 to December 8, 2015.

		CICA Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments, establishes a fair value based method of accounting for stock-based compensation plans which Cameco has adopted effective January 1, 2003.
		For the year ended December 31, 2006, Cameco has recorded compensation expense of $17,549,000 (2005 — $16,913,000; 2004 — $9,485,000) with an offsetting credit to contributed surplus to reflect the estimated fair value of stock options granted to employees.
		The fair value of the options issued was determined using the Black-Scholes option-pricing model with the following assumptions:

		2006				2005				2004
Number of options granted			1,537,330				2,631,180				4,170,000
Average strike price		$	41.04			$	27.11			$	11.42
Expected dividend		$	0.16			$	0.12			$	0.10
Expected volatility			35	%			34	%			37	%
Risk-free interest rate			4.0	%			3.5	%			3.3	%
Expected life of option		4 years				4 years				4 years
Expected forfeitures			15	%			15	%			15	%
Weighted average grant date fair values		$	13.19			$	8.36			$	3.39

		Executive Performance Share Unit (PSU), Deferred Share Unit (DSU), and Other Plans
		Commencing in 2005, Cameco provides each planned participant an annual grant of PSUs in an amount determined by the board. Each PSU represents one phantom common share that entitles the participant to a payment of one Cameco common share purchased on the open market, or cash at the board’s discretion, at the end of each three-year period if certain performance and vesting criteria have been met. The final value of the PSUs will be based on the value of Cameco common shares at the end of the three-year period and the number of PSUs that ultimately vest. Vesting of PSUs at the end of the three-year period will be based on total shareholder return over the three years, Cameco’s ability to meet its annual cash flow from operations targets and whether the participating executive remains employed by Cameco at the end of the three-year vesting period. As of December 31, 2006, the total PSUs held by the participants was 292,150 (2005 - 196,200).
		Cameco offers a deferred share unit plan to non-employee directors. A DSU is a notional unit that reflects the market value of a single common share of Cameco. In 2006, 60% of each director’s annual retainer was paid in DSUs. In addition, on an annual basis directors can elect to receive the remaining 40% of their annual retainer and any additional fees in the form of DSUs. Each DSU fully vests upon award. The DSUs will be redeemed for cash upon a director leaving the board. The redemption amount will be based upon the weighted average of the closing prices of the common shares of Cameco on the TSX for the last 20 trading days prior to the redemption date multiplied by the number of DSUs held by the director. As of December 31, 2006, the total DSUs held by participating directors was 299,928 (2005 — 281,766).
		Cameco makes annual grants of bonuses to eligible non-North American employees in the form of phantom stock options. Employees receive the equivalent value of shares in cash when exercised. Options granted under the phantom stock option plan have an award value equal to the closing price quoted on the TSX for the common shares of Cameco on the trading day prior to the date on which the option is granted. The options vest over three years and expire eight years from the date granted. As of December 31, 2006, the number of options held by participating employees was 383,181 (2005 — 443,760) with exercise prices ranging from $4.81 to $41.00 per share (2005 - $4.81 to $27.04) and a weighted average exercise price of $18.63 (2005 — $12.12).

Cameco has recognized the following amounts for these plans:

		2006				2005				2004
Performance share units		$	4,884			$	2,011			$	—
Deferred share units			3,206				4,089				1,896
Phantom stock options			5,212				8,537				4,376

21.		Pension and Other Post-Retirement Benefits
		Cameco maintains both defined benefit and defined contribution plans providing pension and post-retirement benefits to substantially all of its employees.
		Under the defined pension benefit plans, Cameco provides benefits to retirees based on their length of service and final average earnings. The non-pension post-retirement plan covers such benefits as group life and supplemental health insurance, to eligible employees and their dependents. The costs related to the non-pension post-retirement plans are charged to earnings in the period during which the employment services are rendered. However, these future obligations are not funded.
		The effective date for the most recent valuations for funding purposes on the pension benefit plans is January 1, 2006. The next planned effective date for valuation for funding purposes of the pension benefit plans is set to be January 1, 2009. The status of the defined plans is as follows:

(a)

Accrued Benefit Obligation

		Pension Benefit Plans								Other Benefit Plans
		2006				2005				2006				2005
Balance at beginning of year		$	15,926			$	16,478			$	7,403			$	4,460
Current service cost			1,028				803				487				226
Interest cost			872				849				544				271
Actuarial loss			6,056				—				395				2,364
Plan amendments			—				—				588				258
Acquisition of Zircatec interest [note 23]			—				—				3,116				—
Benefits paid			(611	)			(2,199	)			(367	)			(176	)
Foreign exchange rate changes			1				(5	)			—				—
		$	23,272			$	15,926			$	12,166			$	7,403