e6vk
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
For the month of October, 2007
Cameco Corporation
(Commission file No. 1-14228)
2121-11th Street West
Saskatoon, Saskatchewan, Canada S7M 1J3
(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
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Exhibit No. |
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Description |
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Page No. |
1.
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Press Release dated
October 31, 2007 and Interim Management
Discussion and Analysis and Unaudited
Consolidated Financial Statements and Notes for
the period ended September 30, 2007. |
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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.
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Date: October 31, 2007 |
Cameco Corporation
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By: |
Gary M.S. Chad
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Gary M.S. Chad, Q.C. |
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Senior Vice-President,
Governance,
Legal and Regulatory Affairs, and
Corporate Secretary |
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TSX: CCO NYSE: CCJ
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website: cameco.com currency: Cdn |
2121 11th Street West, Saskatoon, Saskatchewan, S7M 1J3 Canada
Tel: (306) 956-6200 Fax: (306) 956-6201
Cameco Reports Strong Third Quarter Earnings
Saskatoon, Saskatchewan, Canada, October 31, 2007 . . . . . . . . . . . . . .
Cameco Corporation today reported increased net earnings for the third quarter of 2007 due to
higher earnings in the uranium business driven by significant increases in the realized selling
price and higher deliveries. Results from the electricity and gold businesses were also stronger
due to higher realized prices.
This quarter we set a new Cameco record for the average price we received for our uranium, said
Jerry Grandey, Camecos president and CEO. Our long-term contracting strategy will ensure that we
continue to enjoy expanding margins and strong cash flow.
Our increasing financial strength allows us to invest in our assets, the best in the industry,
while simultaneously pursuing growth when and where it is most promising for our shareholders, he
added.
All numbers in this release are in Canadian dollars, unless otherwise stated. For a more detailed
discussion of our financial results, see the managements discussion and analysis (MD&A) following
this news release.
Third Quarter 2007
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Three Months Ended |
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Financial Highlights |
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September 30 |
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($ millions except per share amounts) |
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2007 |
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2006 |
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Change % |
Revenue |
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681 |
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360 |
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89 |
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Cash provided by operations 1 |
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450 |
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79 |
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470 |
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Net earnings |
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91 |
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73 |
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25 |
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Earnings per share (EPS) basic ($) |
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0.26 |
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0.21 |
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24 |
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EPS diluted ($) |
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0.25 |
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0.20 |
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25 |
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Adjusted net earnings 2 |
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275 |
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44 |
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525 |
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EPS adjusted and diluted ($) 2 |
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0.74 |
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0.12 |
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517 |
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1 |
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After working capital changes. |
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2 |
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Net earnings for the three-month period ended September 30, 2007 has been adjusted to
exclude: an after-tax loss of $125 million ($0.33 per share diluted) as the result of the
agreements reached among Cameco, Centerra and the Kyrgyz government and an after-tax expense
of $59 million ($0.16 per share diluted) related to an amendment to the companys stock option
program. Net earnings for the three-month period ended September 30, 2006 has been adjusted to
exclude a net gain of $29 million ($0.08 per share diluted) on the sale of our interest in the
Fort à la Corne diamond project. Adjusted net earnings is a non-GAAP measure used to provide a
more representative comparison of the financial results. |
For the three months ended September 30, 2007, our adjusted net earnings were $275 million ($0.74
per share adjusted and diluted), $231 million higher than the adjusted net earnings of $44 million
($0.12 per share adjusted and diluted) recorded in the third quarter of 2006. The increase was due
to higher earnings in the uranium business driven by significant increases in the realized selling
price and deliveries. Results from the electricity and gold businesses were also stronger due to
higher realized prices.
Revenue of $681 million in the third quarter of 2007 was 6% lower than in the second quarter due
primarily to lower deliveries in the uranium business partially offset by the realized selling
price of $56.78 per pound, an all time high.
In the third quarter of 2007, we generated $450 million in cash from operations compared to $79
million in the third quarter of 2006. The increase of $371 million was attributable to the higher
realized prices in the uranium business and a decrease in working capital related mainly to a
decline in receivables in the third quarter of 2007.
In our uranium business, revenue increased by $273 million to $409 million due to a 136% increase
in the realized selling price and a 31% increase in reported sales volumes.
The increase in the average realized price for the third quarter of 2007 was primarily the result
of higher uranium spot prices, which averaged $96.33 (US) per pound compared to $50.83 (US) in the
same quarter of 2006.
For our fuel services business, revenue was $54 million, an increase of $15 million compared to the
same period in 2006 due to a 5% increase in reported sales volumes and a 19% increase in the
average realized price.
Camecos pre-tax earnings from the Bruce Power Limited Partnership (BPLP) amounted to $49 million
during the third quarter compared to $31 million over the same period in 2006. This increase in
2007 was due to improved realized prices and higher generation in the quarter.
For gold, revenue increased by $18 million to $104 million compared to the third quarter of 2006.
Once again, Cameco has converted the strength in uranium markets to increased net earnings and
cash flow for our shareholders, said Grandey. These financial results are built on discipline and
long-term thinking and we remain on that course.
- 2 -
Year to Date 2007
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Nine Months Ended |
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Financial Highlights |
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September 30 |
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($ millions except per share amounts) |
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2007 |
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2006 |
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Change % |
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Revenue |
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1,816 |
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1,320 |
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38 |
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Cash provided by operations 1 |
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744 |
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405 |
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84 |
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Net earnings |
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355 |
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335 |
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6 |
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Earnings per share (EPS) basic ($) |
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1.00 |
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0.96 |
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4 |
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EPS diluted ($) |
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0.96 |
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0.91 |
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5 |
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Adjusted net earnings 2 |
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539 |
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233 |
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131 |
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EPS adjusted and diluted ($) 2 |
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1.45 |
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0.64 |
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127 |
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1 |
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After working capital changes. |
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2 |
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Net earnings for the nine months ended September 30, 2007 has been adjusted to
exclude: an after-tax loss of $125 million ($0.33 per share diluted) as the result of the
agreements reached among Cameco, Centerra and the Kyrgyz government and an after-tax expense
of $59 million ($0.16 per share diluted) related to an amendment to the companys stock option
program. Net earnings for the nine months ended September 30, 2006 have been adjusted to
exclude a $73 million ($0.19 per share diluted) recovery of future income taxes related to
reductions in federal and provincial income tax rates and to exclude a net gain of $29 million
($0.08 per share diluted) on the sale of our interest in the Fort à la Corne diamond project.
Adjusted net earnings is a non-GAAP measure used to provide a more representative comparison
of the financial results. |
For the nine months ended September 30, 2007, our adjusted net earnings were $539 million ($1.45
per share adjusted and diluted), $306 million higher than the adjusted net earnings of $233 million
($0.64 per share adjusted and diluted) recorded in 2006. The increase was due to higher earnings in
the uranium business resulting from a significant increase in the realized selling price driven by
the rise in the spot price of uranium, partially offset by the recognition of $23 million in
remediation expenses for Cigar Lake. Profits from the electricity business were lower than in 2006
due to lower generation.
In the first nine months of 2007, we generated $744 million in cash from operations compared to
$405 million in 2006. The increase of $339 million was related to the higher revenues and a
decrease in working capital related mainly to a reduction in accounts receivable in the year.
At September 30, 2007, our consolidated net debt to capitalization ratio was 9%, compared to 12% at
the end of 2006.
Outlook for Fourth Quarter 2007
We expect consolidated revenue for the fourth quarter of 2007 to be about 10% lower than in the
third quarter. This is largely due to lower anticipated reported sales volumes and an expected
decrease in the average realized price for uranium.
While cash from operations increased by $371 million in the third quarter of 2007 compared to the
third quarter of 2006, this trend is not expected to continue for the fourth quarter. Due to timing
of sales, we expect a significant increase in accounts receivable and a corresponding decrease in
cash provided by operations in the fourth quarter.
- 3 -
Projections for the quarter assume no major changes in the ability of Camecos business units to
supply product and services and no significant changes in our current estimates for price and
volume.
Outlook for the Year 2007
In 2007, Cameco expects consolidated revenue to grow by about 30% over 2006 due largely to higher
revenue from the uranium business. We had forecast a 40% increase in consolidated revenue in our
second quarter report based on a uranium spot price of $120 (US) per pound, reflecting the UxC spot
price at July 23, 2007. Our third quarter forecast for the year is based on a uranium spot price of
$80.00 (US) per pound, reflecting the industry average spot price at September 30, 2007.
We expect uranium revenue to increase by about 65% due to stronger average realized prices under
our contracts relative to 2006.
We anticipate revenue from the fuel services business to be nearly 5% higher than in 2006 due to an
anticipated increase in the average realized selling price. Reported sales volumes are expected to
be about 5% lower than in 2006.
BPLP revenues in 2007 are projected to be about 7% higher than in 2006 due to higher expected
realized prices. This outlook for BPLP assumes the B units will achieve a targeted capacity factor
of about 90%.
Gold revenue is expected to be similar to 2006 due to higher expected realized gold prices,
partially offset by lower production.
While year-to-date cash from operations increased by $339 million over 2006, this difference is
expected to diminish over the balance of the year. In the fourth quarter 2007, our sales are
heavily weighted to December and, thus, we expect a significant increase in accounts receivable and
a corresponding decrease in operating cash flow.
The financial outlook noted above for the company is forward-looking information and is based on
the following key assumptions:
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no significant changes in our estimates for sales volumes, purchases and prices, |
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a uranium spot price of $80.00 (US) per pound, reflecting the industry average spot
price at September 30, 2007, |
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an average gold spot price of about $650 (US) per ounce, |
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no further disruption of supply from our facilities other than as disclosed, |
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no disruption of supply from third-party sources, and |
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a US/Canadian spot exchange rate of $1.00. |
If actual events differ from assumptions set out above, Camecos 2007 financial results may differ
materially from the above forecast.
For 2007, the effective tax rate is expected to be in the range of 10% to 15% compared to 6% in
2006. Our effective tax rate varies from the Canadian statutory tax rate primarily due to
differences between Canadian tax rates and rates applicable to subsidiaries in other countries.
- 4 -
This range is based on the projected distribution of income among the various tax jurisdictions
being weighted less heavily toward foreign subsidiaries compared to 2006.
Share Repurchase Program
On September 6, 2007, the company announced an open market share repurchase program. Under the
program, Cameco has the ability to purchase, for cancellation, up to approximately 17.7 million of
its common shares, representing 5% of the approximately 353.9 million issued and outstanding common
shares as of September 5, 2007. The program will continue until September 10, 2008 unless the
company purchases the maximum allowable number of common shares sooner or terminates the program.
Through September 30, 2007, Cameco had repurchased 6.8 million shares at a total cost of $308
million.
Port Hope Conversion Facility
On July 13, 2007, contamination of the soil under the uranium hexafluoride (UF6) plant
was discovered. After initial localized investigations, production of UF6 was suspended
on July 19, 2007 to allow a comprehensive investigation. Cameco and independent consultants have
developed environmental management and corrective action plans that will prevent further migration
of contamination and prevent recurrence. The health and safety of employees and the public have not
been jeopardized.
UF6 production is now expected to resume late in the first quarter of 2008, subject to
regulatory approvals. Cameco plans to meet scheduled UF6 deliveries for the remainder of
the year based on existing supplies. We have sufficient UF6 inventory on hand to meet
delivery commitments through the end of the first quarter of 2008, assuming customers do not
accelerate deliveries and other UF6 production and purchases proceed as planned.
For more information, see discussion under Port Hope Conversion Facility in the MD&A following
this news release.
Kyrgyz Agreement
As previously announced, Cameco and Centerra signed binding agreements with the Kyrgyz government,
which are expected to provide additional business certainty for mining operations at Kumtor,
further align the parties business interests and support Centerras growth plans. These agreements
are subject to a number of conditions including approval by the Parliament of the Kyrgyz Republic.
However, the Parliament was dissolved before deliberations on the agreements could be completed.
Parliamentary elections have been scheduled for December 16, 2007. The parties have agreed to
extend the deadline for closing the agreements from October 31, 2007 to February 15, 2008.
As a result of its agreement, Cameco has recorded an after tax loss of $125 million. For more
information, see discussion under Kyrgyz Republic in the MD&A following this news release as well
as note 16 of the unaudited interim financial statements.
The political situation in the Kyrgyz Republic continues to evolve and there remains a risk of
political instability.
- 5 -
Cigar Lake
Construction at Cigar Lake was about 60% complete when we experienced a rockfall causing a flood of
the underground development in October 2006.
Initial remediation activities such as drilling holes for pouring concrete and dewatering are now
complete, as well as reinforcement of the adjacent tunnel.
We are making progress on the activities required prior to completing the next major milestone
which is dewatering. For example, we expect to complete the concrete barrier plug and seal off the
inflow area in about six more weeks. In December, we anticipate having a target date for
dewatering.
We are also carrying out other assessments, completing the corrective actions we committed to do
following the root cause investigation and pursuing regulatory approval to proceed with the next
phases of remediation.
As previously announced, completing the second shaft as a priority item and the delay in some
remediation activities would set back the planned production startup date from 2010 to 2011. We
have now made the decision to complete this shaft prior to completion of some of the underground
mine development program and some of the remediation activities are taking longer than anticipated.
As a result, the production startup date is now expected to be 2011, at the earliest. We will be
able to provide a firmer production startup date after the mine has been dewatered and the
condition of the underground development has been assessed.
For more information, see discussion under Cigar Lake in the MD&A following this news release.
Forward-Looking Statements
Statements contained in this news release, which are not historical facts, are forward-looking
statements that involve risks, uncertainties and other factors that could cause actual results to
differ materially from those expressed or implied by such forward-looking statements. For more
detail on these factors, see the section titled Caution Regarding Forward-Looking Information in
the MD&A that follows this news release, the section titled Risks and Risk Management in the
companys 2006 Annual Financial Review and the section titled Risk Factors in the companys 2006
Annual Information Form.
Conference Call
Cameco invites you to join its third quarter conference call on Wednesday, October 31, 2007 at 1:00
p.m. Eastern time (11:00 a.m. Saskatoon time).
The call will be open to all investors and the media. To join the conference on Wednesday, October
31, please dial (416) 695-9712 or (877) 323-2090 (Canada and US). An audio feed of the call will be
available on our website at cameco.com. See the link on the home page on the day of the call.
- 6 -
A recorded version of the proceedings will be available:
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on our website, cameco.com, shortly after the call, and |
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on post view until midnight, Eastern time, Friday, November 30, 2007, by calling (416)
695-5800 or (800) 408-3053 (pass code 3238220 #). |
Additional Information
Additional information on Cameco, including its annual information form, is available on SEDAR at
sedar.com and the companys website at cameco.com.
Profile
Cameco, with its head office in Saskatoon, Saskatchewan, is the worlds largest uranium producer, a
significant supplier of conversion services and one of two Candu fuel manufacturers in Canada. The
companys competitive position is based on its controlling ownership of the worlds largest
high-grade reserves and low-cost operations. Camecos uranium products are used to generate clean
electricity in nuclear power plants around the world, including Ontario where the company is a
partner in North Americas largest nuclear electricity generating facility. The company also
explores for uranium in North America and Australia, and holds a majority interest in a mid-tier
gold company. Camecos shares trade on the Toronto and New York stock exchanges.
- End -
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Investor & media inquiries:
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Alice Wong
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(306) 956-6337 |
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Investor inquiries:
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Bob Lillie
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(306) 956-6639 |
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Media inquiries:
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Lyle Krahn
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(306) 956-6316 |
- 7 -
Third Quarter Managements Discussion and Analysis
The following discussion of the financial condition and operating results of Cameco Corporation
should be read in conjunction with the unaudited interim consolidated financial statements and
notes for the period ended September 30, 2007, as well as the audited consolidated financial
statements for the company for the year ended December 31, 2006 and managements discussion and
analysis (MD&A) of the audited financial statements, both of which are included in the 2006 Annual
Financial Review as well as the companys 2006 Annual Information Form. The financial statements
have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). The
2006 Annual Financial Review and the Annual Information Form are available on the companys website
at cameco.com.
Statements contained in this MD&A, which are not historical facts, are forward-looking statements
that involve risks, uncertainties and other factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements. For more detail on
these factors, see the section titled Caution Regarding Forward-Looking Information in this MD&A,
the section titled Risks and Risk Management in the companys 2006 Annual Financial Review, and
the section titled Risk Factors in the companys 2006 Annual Information Form.
- 8 -
Note: All dollar amounts are expressed in Canadian dollars unless otherwise stated.
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Three months ended |
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Nine months ended |
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September 30 |
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September 30 |
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Change |
Financial Highlights |
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2007 |
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2006 |
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2007 |
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2006 |
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Revenue ($ millions) |
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681 |
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360 |
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1,816 |
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1,320 |
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38 |
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Earnings from operations ($ millions) |
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102 |
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71 |
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407 |
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300 |
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36 |
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Cash provided by operations 1
($ millions) |
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450 |
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79 |
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744 |
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405 |
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84 |
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Net earnings ($ millions) |
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91 |
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73 |
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355 |
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335 |
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6 |
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Earnings per share (EPS) basic ($) |
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0.26 |
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0.21 |
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1.00 |
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0.96 |
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4 |
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EPS diluted ($) |
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0.25 |
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0.20 |
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0.96 |
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0.91 |
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5 |
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Adjusted net earnings ($ millions) 2 |
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275 |
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44 |
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539 |
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233 |
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131 |
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EPS adjusted and diluted ($)2 |
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0.74 |
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0.12 |
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1.45 |
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0.64 |
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127 |
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Average uranium (U3O8)
spot price ($US/lb U3O8) |
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96.33 |
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50.83 |
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102.39 |
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44.40 |
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131 |
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Average realized uranium price |
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$US/lb U3O8 |
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52.76 |
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20.12 |
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37.24 |
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19.96 |
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87 |
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$Cdn/lb
U3O8 |
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56.78 |
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24.10 |
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42.13 |
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23.99 |
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76 |
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Average realized electricity price ($/MWh) |
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53 |
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48 |
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52 |
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49 |
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6 |
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Average Ontario electricity spot price per
megawatt hour ($/MWh) |
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47 |
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46 |
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48 |
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48 |
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0 |
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Average realized gold price ($US/ounce) |
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680 |
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617 |
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665 |
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595 |
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12 |
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Average spot market gold price ($US/ounce) |
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680 |
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622 |
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666 |
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601 |
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11 |
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1 |
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After working capital changes. |
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2 |
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Net earnings for the three- and nine-month periods ended September 30, 2006 and 2007
have been adjusted to exclude a number of items, which are discussed immediately below.
Adjusted net earnings is a non-GAAP measure used to provide a more representative comparison
of the financial results. |
FINANCIAL RESULTS
Consolidated Earnings
Cameco recorded a number of amounts related to unusual items in net earnings for 2007 and 2006.
Adjusted net earnings for the third quarter of 2007 totalled $275 million, $231 million higher
than the adjusted net earnings $44 million recorded in the third quarter of 2006. Adjusted net
earnings for the first nine months of 2007 totalled $539 million compared to $233 million in the
same period of 2006. The following table outlines the adjustments to net earnings.
- 9 -
Adjusted Net Earnings
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Three months ended |
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Nine months ended |
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September 30 |
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September 30 |
($ millions) |
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2007 |
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2006 |
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2007 |
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2006 |
Net earnings (per GAAP) |
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$ |
91 |
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$ |
73 |
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$ |
355 |
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$ |
335 |
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Adjustments |
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Agreement with Kyrgyzstan |
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125 |
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125 |
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Stock option plan amendment |
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59 |
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59 |
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Change in income tax rates |
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(73 |
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Gain on sale of interest
in Fort à la Corne |
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(29 |
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(29 |
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Adjusted net earnings |
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$ |
275 |
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$ |
44 |
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$ |
539 |
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$ |
233 |
|
Third Quarter
In the third quarter of 2007, Cameco recorded an after-tax loss of $125 million ($0.33 per share
diluted) as the result of the agreements reached among Cameco, Centerra and the government of
Kyrgyz Republic (for more details see discussion under Kyrgyz Republic later in this MD&A). Also
in the third quarter of 2007, Cameco recorded an after-tax expense of $59 million ($0.16 per share
diluted) due to the previously reported amendment to the companys stock option program under which
a cash settlement feature was introduced. In the third quarter of 2006, Cameco recorded a net gain
of $29 million ($0.08 per share diluted) due to the sale of its interest in the Fort à la Corne
diamond project. Consolidated net earnings in the following discussion are adjusted to exclude
these items in order to provide a more meaningful basis for period-to-period comparisons of the
financial results. Adjusted net earnings, a non-GAAP measure, should be considered as supplemental
in nature and not a substitute for related financial information prepared in accordance with GAAP.
For the three months ended September 30, 2007, our adjusted net earnings were $275 million ($0.74
per share adjusted and diluted), $231 million higher than the adjusted net earnings of $44 million
($0.12 per share adjusted and diluted) recorded in the third quarter of 2006. The increase was due
to higher earnings in the uranium business driven by significant increases in the realized selling
price and deliveries. Results from the electricity and gold businesses were also stronger due to
higher realized prices. For details on the uranium, fuel services, electricity and gold businesses,
see Business Segment Results later in this report.
In the third quarter of 2007, our total costs for administration, exploration, interest and other
were $35 million, a decrease of $13 million compared to the same period in 2006. Administration
costs were $7 million higher attributable to higher stock-based compensation expenses. The rise in
stock compensation reflects an increase of $2.88 in our share price since July 27, 2007 when the
stock option plan was amended. Exploration expenditures were $1 million higher, at $20 million,
with uranium exploration expenditures up $3 million to $16 million (focused in Saskatchewan,
Australia and Nunavut). Gold exploration expenditures at Centerra Gold Inc. (Camecos 53% owned
subsidiary) were $2 million lower compared to the third quarter of 2006. Interest and other charges
were $21 million lower than in the third quarter of 2006 primarily due to the recognition of gains
on foreign exchange contracts that do not
- 10 -
qualify for hedge accounting. During the quarter, Cameco discontinued hedge accounting for certain
foreign exchange contracts that had been designated as cash flow hedges of future USD-denominated
sales. Revised forecasts indicated that certain amounts could no longer be considered probable in
the originally specified time periods. As a result, Cameco reclassified a gain of $15 million to
earnings from accumulated other comprehensive income. In addition, we recognized gains of $16
million on foreign exchange contracts that have not been accounted for as hedging items. These
gains were partially offset by foreign exchange losses recognized on USD-denominated asset balances
due to the appreciation of the Canadian dollar during the quarter.
In the third quarter of 2007, our effective tax rate rose to 8% from the 5% reported in the third
quarter of 2006 due to the distribution of our taxable income between Canada and other countries.
In the third quarter of 2007, a higher proportion of income was earned in Canada, where tax rates
are higher than those of the other jurisdictions. For more information about income taxes, refer to
note 11 of the unaudited interim consolidated financial statements for the period ended September
30, 2007.
Earnings from operations increased to $102 million in the third quarter of 2007, from $71 million
in the third quarter of 2006. The aggregate gross profit margin rose to 51% from 19% in 2006.
Year to Date
In addition to the adjustments to net earnings in the third quarters of 2006 and 2007 noted above,
Cameco recorded a non-cash recovery of $73 million ($0.19 per share diluted) of future income taxes
related to reductions in federal and provincial income tax rates in the second quarter of 2006.
Consolidated earnings in the following discussion are adjusted to exclude these items in order to
provide a more meaningful basis for period-to-period comparisons of the financial results. Adjusted
net earnings, a non-GAAP measure, should be considered as supplemental in nature and not a
substitute for related financial information prepared in accordance with GAAP.
For the nine months ended September 30, 2007, our adjusted net earnings were $539 million ($1.45
per share adjusted and diluted), $306 million higher than the adjusted net earnings of $233 million
($0.64 per share adjusted and diluted) recorded in 2006. The increase was due to higher earnings in
the uranium business resulting from a significant increase in the realized selling price driven by
the rise in the spot price of uranium, partially offset by the recognition of $23 million in
remediation expenses for Cigar Lake. Profits from the electricity business were lower than in 2006
due to lower generation. For details on the uranium, fuel services, electricity and gold
businesses, see Business Segment Results later in this report.
In the first nine months of 2007, our total costs for administration, exploration, interest and
other were $131 million, a decrease of $5 million compared to the same period of 2006.
Administration costs were $13 million higher due largely to higher costs for systems enhancements
($5 million) and stock compensation ($4 million). We also incurred higher administration costs
related to maintaining the workforce including salary increases, higher employment levels and costs
associated with recruiting and retention. Exploration expenditures were $6 million higher, at $50
million, with uranium exploration expenditures up $10 million to $35 million. Gold exploration
expenditures at Centerra were $4 million lower compared to 2006. Interest and other charges were
$24 million lower than in 2006 due to the recognition of a $49 million gain on foreign exchange
contracts that do not qualify for hedge accounting, partially offset by foreign exchange losses
recorded on USD-denominated asset balances.
- 11 -
In the first nine months of 2007, our effective tax rate decreased slightly to 8% from the 10%
reported in 2006 due to the distribution of our taxable income between Canada and other countries.
In the first nine months of 2007, a lower proportion of income was earned in Canada. Since Canadian
tax rates are higher than those of the other jurisdictions, the net result was a decrease in our
effective tax rate. For more information on income taxes, refer to note 11 of the unaudited interim
consolidated financial statements for the period ended September 30, 2007.
Earnings from operations increased to $407 million in 2007, from $300 million in 2006. The
aggregate gross profit margin rose to 42% from 29% in 2006.
Quarterly Financial Results ($ millions except per share amounts)
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
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|
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|
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|
Highlights |
|
2007 |
|
2006 |
|
2005 |
|
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
Revenue |
|
|
681 |
|
|
|
725 |
|
|
|
410 |
|
|
|
512 |
|
|
|
360 |
|
|
|
417 |
|
|
|
543 |
|
|
|
522 |
|
Net earnings |
|
|
91 |
|
|
|
205 |
|
|
|
59 |
|
|
|
40 |
|
|
|
73 |
|
|
|
150 |
|
|
|
112 |
|
|
|
83 |
|
EPS basic ($) |
|
|
0.26 |
|
|
|
0.58 |
|
|
|
0.16 |
|
|
|
0.11 |
|
|
|
0.21 |
|
|
|
0.43 |
|
|
|
0.32 |
|
|
|
0.24 |
|
EPS diluted ($) |
|
|
0.25 |
|
|
|
0.55 |
|
|
|
0.16 |
|
|
|
0.11 |
|
|
|
0.20 |
|
|
|
0.40 |
|
|
|
0.31 |
|
|
|
0.23 |
|
EPS adjusted &
diluted ($) |
|
|
0.74 |
|
|
|
0.55 |
|
|
|
0.16 |
|
|
|
0.11 |
|
|
|
0.12 |
|
|
|
0.21 |
|
|
|
0.31 |
|
|
|
0.21 |
|
Cash from operations |
|
|
450 |
|
|
|
155 |
|
|
|
139 |
|
|
|
13 |
|
|
|
79 |
|
|
|
40 |
|
|
|
286 |
|
|
|
91 |
|
Revenue of $681 million in the third quarter of 2007 was 6% lower than in the second quarter due
primarily to lower deliveries in the uranium business partially offset by the realized selling
price of $56.78/lb, an all time high. Revenue in the uranium and fuel services businesses is driven
by timing of customer requirements. In 2007, reported sales are more heavily weighted in the second
quarter of the year.
Cash from operations tends to fluctuate largely due to the timing of deliveries and product
purchases in the uranium and fuel services businesses.
Cash Flow
In the third quarter of 2007, we generated $450 million in cash from operations compared to $79
million in the third quarter of 2006. The increase of $371 million was attributable to the higher
realized prices in the uranium business and a decrease in working capital related mainly to a
decline in receivables in the third quarter of 2007.
In the first nine months of 2007, we generated $744 million in cash from operations compared to
$405 million in 2006. The increase of $339 million was related to the higher revenues and a
decrease in working capital related mainly to a reduction in receivables in the year.
Balance Sheet
At September 30, 2007, our total long-term debt was $694 million, representing a decrease of $10
million compared to December 31, 2006. Included in the September 30, 2007 balance sheet was $192
million, which represents our proportionate share of Bruce Power Limited Partnerships (BPLPs)
capital lease obligation. At September 30, 2007, our consolidated net debt to capitalization ratio
was 9%, compared to 12% at the end of 2006.
- 12 -
Over the first nine months of 2007, our product inventories decreased by $22 million compared to
December 31, 2006, due primarily to decreased levels of uranium inventory as uranium sales exceeded
production and purchases in the first nine months of 2007.
At September 30, 2007, our consolidated cash balance totalled $403 million, with Centerra holding
$133 million of this amount.
Compared to December 31, 2006, our accounts payable and accrued liabilities balance has increased
by $217 million due primarily to the amendment to the stock option program, which causes the
in-the-money value of the options to be recorded as a liability. Refer to note 13 of the unaudited
interim consolidated financial statements for the period ending September 30, 2007. The increase
also reflects accruals under our share repurchase program. Payment is typically made three days
after the commitment to purchase and at September 30, 2007, we had $85 million outstanding to
complete a purchase under our share repurchase program.
Cameco has a number of investments in publicly traded entities. The following table illustrates the
book and market values for our more significant holdings.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book Value |
|
Market Value1 |
Investment ($ millions) |
|
Sept. 30/07 |
|
Sept. 30/07 |
|
Dec. 31/06 |
Centerra Gold Inc. 2 |
|
$ |
350 |
|
|
$ |
1,025 |
|
|
$ |
1,504 |
|
UEX Corporation |
|
|
15 |
|
|
|
237 |
|
|
|
220 |
|
UNOR Inc. |
|
|
8 |
|
|
|
8 |
|
|
|
14 |
|
Western Uranium Corporation |
|
|
14 |
|
|
|
14 |
|
|
|
N/A |
|
Cue Capital |
|
|
4 |
|
|
|
4 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
391 |
|
|
$ |
1,288 |
|
|
$ |
1,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Market value is calculated as the number of shares held by Cameco multiplied by the
closing share price as quoted on the TSX on September 30, 2007 and December 31, 2006.
|
|
2 |
|
The book value for Centerra reflects the dilution of Camecos interest resulting from
the agreement with the Kyrgyz government, whereas the market value for Centerra does not reflect
the dilution arising from the agreement. |
Share Repurchase Program
On September 6, 2007, the company announced an open market share repurchase program on the Toronto
Stock Exchange. Under the program, Cameco has the ability to purchase, for cancellation, up to
approximately 17.7 million of its common shares, representing 5% of the approximately 353.9 million
issued and outstanding common shares as of September 5, 2007. The program will continue until
September 10, 2008 unless the company purchases the maximum allowable number of common shares
sooner or terminates the program. Through September 30, 2007, Cameco had repurchased 6.8 million
shares at a total cost of $308 million.
Foreign Exchange Update
Cameco sells most of its uranium and fuel services in US dollars, while most of its production of
uranium and fuel services are in Canada. As a result, these revenues are denominated mostly in US
dollars, while production costs are denominated primarily in Canadian dollars.
- 13 -
We attempt to provide some protection against exchange rate fluctuations by planned hedging
activity designed to smooth volatility. Hedging activities partly shelter our uranium and fuel
services revenues against declines in the US dollar in the shorter term. Our strategy is to hedge
net exposure based on a declining range over a rolling 60-month period. For the 0 to 12-month
period, the target is to hedge 35% to 100% of net exposure. This range declines over each
subsequent period to where, in the final 12-month period, between 48 and 60 months, the target
range is 0% to 10%.
Cameco also has a natural hedge against US currency fluctuations, as a portion of its annual cash
outlays, including purchases of uranium and fuel services, is denominated in US dollars. The
influence on earnings from purchased material in inventory is likely to be dispersed over several
fiscal periods and is difficult to identify.
At each balance sheet date, Cameco calculates the mark-to-market value of all foreign exchange
contracts with that value representing the gain or loss that would have occurred if the contracts
had been closed at that point in time. We account for foreign exchange contracts that meet certain
defined criteria (specified by GAAP) using hedge accounting. Under hedge accounting, mark-to-market
gains or losses are included in earnings only at the point in time that the contract is designated
for use. At September 30, 2007, the mark-to-market gain on all foreign exchange contracts was $185
million compared to an $84 million gain at June 30, 2007. Of the $185 million mark-to-market gain,
a $172 million gain relates to the fair market value of the spot price of the contracts that
qualify for hedge accounting and an $13 million gain relates to the market value of the forward
points and contracts that do not qualify for hedge accounting. In all other circumstances, gains or
losses in foreign currency derivatives are reported in earnings as they occur.
During the quarter, the Canadian dollar strengthened against the US dollar from $1.06 at June 30,
2007 to $1.00 at September 30, 2007.
At September 30, 2007, we had foreign currency contracts of $1,706 million (US) and EUR 102 million
that were accounted for using hedge accounting and foreign currency contracts of $487 million (US)
that did not meet the criteria for hedge accounting. The foreign currency contracts are scheduled
for use as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2008 |
|
2009 |
|
2010 |
|
2011 |
$ millions (US) |
|
|
257 |
|
|
|
946 |
|
|
|
510 |
|
|
|
380 |
|
|
|
100 |
|
EUR millions |
|
|
19 |
|
|
|
40 |
|
|
|
20 |
|
|
|
15 |
|
|
|
8 |
|
The US currency contracts have an average effective exchange rate of $1.11 (Cdn) per $1.00 (US),
which reflects the original foreign exchange spot prices at the time contracts were entered into
and includes net deferred gains.
Timing differences between the maturity dates and designation dates on previously closed hedge
contracts may result in deferred gains or deferred charges. At September 30, 2007, net deferred
gains totaled $36 million. These deferred balances are recognized in accumulated other
comprehensive income along with $172 million of the mark-to-market gain on our cash flow
- 14 -
hedges. Please see the Consolidated Statements of Shareholders Equity and Comprehensive Income
and notes 1 and 3 of the unaudited consolidated financial statements dated September 30, 2007. The
resulting net $208 million pre-tax gain will be brought into earnings, by year, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2008 |
|
2009 |
|
2010 |
|
2011 |
$ millions (Cdn) |
|
|
13 |
|
|
|
86 |
|
|
|
58 |
|
|
|
43 |
|
|
|
8 |
|
In the third quarter of 2007, most of the net inflows of US dollars were hedged with currency
derivatives. Net inflows represent uranium and fuel services sales less US dollar cash expenses and
US dollar product purchases. For the uranium and fuel services businesses in the third quarter of
2007, the effective exchange rate, after allowing for hedging, was about $1.08. Results from the
gold business are translated into Canadian dollars at prevailing exchange rates.
BPLP Financial Instruments
To mitigate risks associated with the fluctuations in the market price for electricity, BPLP enters
into various sales contracts that qualify as cash flow hedges. These cash flow hedges are required
to be measured at their fair value and at September 30, 2007, the mark-to-market gain on these
contracts was $79 million (Camecos share). This amount has been recognized in accumulated other
comprehensive income and will be brought into earnings, by year, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2008 |
|
2009 |
|
2010 |
$ millions (Cdn) |
|
|
13 |
|
|
|
33 |
|
|
|
17 |
|
|
|
16 |
|
Outlook for Fourth Quarter 2007
We expect consolidated revenue for the fourth quarter of 2007 to be about 10% lower than in the
third quarter. This is largely due to anticipated lower reported sales volumes and an expected
decrease in the average realized price for uranium.
While cash from operations increased by $371 million in the third quarter of 2007 compared to the
third quarter of 2006, this trend is not expected to continue for the fourth quarter. Due to timing
of sales, we expect a significant increase in accounts receivable and a corresponding decrease in
cash provided by operations in the fourth quarter.
Projections for the quarter assume no major changes in the ability of Camecos business units to
supply product and services and no significant changes in our current estimates for price and
volume.
Outlook for the Year 2007
In 2007, Cameco expects consolidated revenue to grow by about 30% over 2006 due largely to higher
revenue from the uranium business. The decrease from last quarters forecast results from our
revised uranium revenue forecast. We now expect uranium revenue to increase over 2006 revenue by
about 65% rather than 75% primarily due to the decline in the spot price for uranium during the
third quarter. The second quarter forecast was based on a uranium spot price of $120 (US) per
pound, reflecting the UxC price as of July 23, 2007. The third quarter forecast is based on $80
(US) per pound, the industry average spot price as of September 30, 2007 as noted in the
- 15 -
assumptions below. The benefit of higher uranium revenue is offset slightly as Cameco anticipates
its share of Cigar Lake remediation expenses will be $29 million in 2007 and will reduce pre-tax
earnings accordingly. For further details on the uranium business outlook, see Uranium Outlook for
the Year 2007 later in this MD&A.
We anticipate that revenue from the fuel services business will be about 5% higher than in 2006 due
to an increase in the average realized selling price. Reported sales volume is anticipated to be 5%
lower than in 2006. Costs associated with the temporary shutdown of our Port Hope UF6
conversion facility will be expensed as incurred until production resumes.
For 2007, we anticipate BPLP revenue to be about 7% higher than in 2006 due to higher expected
realized prices. This outlook for BPLP assumes the B units will achieve a targeted capacity factor
of about 90%.
Gold production (100% basis) in 2007 is expected to range between 550,000 and 560,000 ounces. The
gold revenue is expected to be similar to 2006 due to higher expected realized gold prices, offset
partially by lower production.
For the balance of 2007, every one-cent increase/decrease in the US to Canadian dollar exchange
rate would result in a corresponding increase/decrease in net earnings of about $3 million (Cdn).
While year-to-date cash from operations increased by $339 million over 2006, this difference is
expected to diminish over the balance of the year. In the fourth quarter of 2007, our sales are
heavily weighted to December and, thus, we expect a significant increase in accounts receivable and
a corresponding decrease in operating cash flow.
The financial outlook noted above for the company is forward-looking information and is based on
the following key assumptions:
|
|
|
no significant changes in our estimates for sales volumes, purchases and prices, |
|
|
|
|
a uranium spot price of $80.00 (US) per pound, reflecting the industry average spot
price at September 30, 2007, |
|
|
|
|
an average gold spot price of about $650 (US) per ounce, |
|
|
|
|
no further disruption of supply from our facilities other than as disclosed, |
|
|
|
|
no disruption of supply from third-party sources, and |
|
|
|
|
a US/Canadian spot exchange rate of $1.00. |
If actual events differ from assumptions set out above, Camecos 2007 financial results may differ
materially from the above forecast.
Administration costs are projected to be about 15% greater than in 2006. The increase reflects
higher charges for stock-based compensation, information systems and process enhancements, and
costs to maintain the workforce. Exploration costs are expected to be about $68 million in 2007. Of
this, $45 million is targeted for uranium, a 41% increase over 2006.
For 2007, the effective tax rate is expected to be in the range of 10% to 15% compared to 6% in
2006. Our effective tax rate varies from the Canadian statutory tax rate primarily due to
differences between Canadian tax rates and rates applicable to subsidiaries in other countries.
This range is based on the projected distribution of income among the various tax jurisdictions
being weighted less heavily toward foreign subsidiaries compared to 2006.
- 16 -
Outlook Information
For additional discussion on the companys business prospects for the fourth quarter of 2007 and
for the full year, see the outlook section under each business segment.
BUSINESS SEGMENT RESULTS
Camecos results come from four business segments:
|
|
Nuclear electricity generation |
URANIUM
Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30 |
|
September 30 |
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
Revenue ($ millions) |
|
|
409 |
|
|
|
136 |
|
|
|
1,051 |
|
|
|
561 |
|
Gross profit ($ millions) |
|
|
274 |
|
|
|
27 |
|
|
|
568 |
|
|
|
160 |
|
Gross profit % |
|
|
67 |
|
|
|
20 |
|
|
|
54 |
|
|
|
29 |
|
Earnings before taxes ($
millions) |
|
|
251 |
|
|
|
14 |
|
|
|
509 |
|
|
|
132 |
|
Average realized price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($US/lb) |
|
|
52.76 |
|
|
|
20.12 |
|
|
|
37.24 |
|
|
|
19.96 |
|
($Cdn/lb) |
|
|
56.78 |
|
|
|
24.10 |
|
|
|
42.13 |
|
|
|
23.99 |
|
Sales volume (million lbs)1 |
|
|
7.2 |
|
|
|
5.5 |
|
|
|
24.7 |
|
|
|
23.1 |
|
Production volume (million lbs) |
|
|
4.2 |
|
|
|
5.9 |
|
|
|
14.3 |
|
|
|
15.5 |
|
|
|
|
1 |
|
Revenue on 2.6 million pounds previously deferred due to standby product loans was
recognized in the second quarter of 2007 as a result of the cancellation of two of the product
loan agreements. |
Uranium Results
Third Quarter
Compared to the third quarter of 2006, revenue from our uranium business increased by $273 million
to $409 million due to a 136% increase in the realized selling price and a 31% increase in reported
sales volumes. The timing of deliveries of uranium products within a calendar year is at the
discretion of customers. Therefore, our quarterly delivery patterns can vary significantly. The
increase in the average realized price for the third quarter of 2007 was primarily due to higher
uranium spot prices, which averaged $96.33 (US) per pound compared to $50.83 (US) in the same
quarter of 2006. Realized prices under fixed-price contracts were also stronger.
Our total cost of products and services sold, including depreciation, depletion and reclamation
(DDR), increased to $135 million in the third quarter of 2007 from $109 million in the third
quarter of 2006 due to the rise in reported sales volumes and a 5% increase in the unit cost of
product sold. The unit cost of product sold increased primarily as a result of higher royalty
charges, which increase with the realized price.
- 17 -
Our earnings before taxes from the uranium business increased to $251 million, from $14 million in
the third quarter of last year. The gross profit margin increased to 67% compared to 20% in the
third quarter of 2006.
Year to Date
As a result of terminating two loan agreements in April of 2007, the year-to-date results include
recognition of previously deferred revenue totalling $39 million and the associated costs of sales
on 2.6 million pounds of U3O8.
Compared to the first nine months of 2006, revenue from our uranium business rose by 87% to $1,051
million due to a 76% increase in the realized selling price. Reported sales volumes were 7% higher
than in 2006. The timing of deliveries of uranium products within a calendar year is at the
discretion of customers. Therefore, our quarterly delivery patterns can vary significantly. The
increase in the average realized price in 2007 was largely due to higher uranium spot prices, which
averaged $102.39 (US) per pound compared to $44.40 (US) in the first nine months of 2006. Realized
prices under fixed price contracts were also stronger than in 2006.
In 2007, our total cost of products and services sold, including depreciation, depletion and
reclamation (DDR), increased to $483 million from $401 million in 2006 due to an 11% rise in the
unit cost of product sold. The unit cost increased primarily as a result of higher charges for
royalties and an 8% decline in uranium production. Royalty charges increase as the realized price
increases and we have recorded $13 million in tiered royalties in the first nine months of 2007.
Our earnings before taxes from the uranium business increased to $509 million, from $132 million in
2006, primarily as a result of the rise in the realized price.
Uranium Outlook for Fourth Quarter 2007
In the fourth quarter of 2007, we expect reported sales volumes in our uranium business to be about
6 million pounds, down from the 7 million pounds reported in the third quarter due to normal
variations in the timing of customer requirements. Uranium revenue in the fourth quarter is
expected to be about 25% lower than in the third quarter due to lower deliveries and lower realized
prices. Our average realized price will be negatively impacted by the decline in the uranium spot
price during the third quarter. The unit cost of product sold is projected to be similar to the
third quarter.
Uranium Outlook for the Year 2007
In 2007, uranium deliveries are expected to total 30 million pounds U3O8.
As previously disclosed, we had almost 4 million pounds of uncommitted uranium available to sell in
2007. Approximately 3 million pounds have been committed for sale in 2007 at spot market prices.
The remaining 1 million pounds has been placed into long-term contracts with deliveries in 2008 and
beyond. The 3 million pounds of sales are included in the 2007 uranium deliveries projection of 30
million pounds noted above. Of the 3 million pounds, approximately 2 million pounds were delivered
in the first nine months of 2007.
However, due to the influence of the product loan agreements, the reported sales volume for revenue
purposes in 2007 is projected to be about 31 million pounds, down from the 33 million
- 18 -
pounds reported in the second quarter. In the second quarter, we had assumed that the remaining
product loan would be terminated in 2007 resulting in the previously deferred sales of uranium
being recognized in 2007. However, we now expect to terminate the loan in 2008 and therefore, the
deferred revenue would then be recognized in 2008.
For 2007, we now expect our reported revenue to be about 65% greater than in 2006, due to a 70%
increase in our realized price (based on the September 30, 2007 industry average spot price of
$80.00 (US) per pound), partially offset by a 3% decrease in reported sales volumes. Changes in the
uranium spot price would impact the prices we realize under our contracts. See the section titled
Uranium Price Sensitivity (2007 to 2017) below for more information.
Camecos share of uranium production for 2007 is projected to total between 19.8 and 20.1 million
pounds of U3O8, down from our second quarter estimate of 20.6 million pounds
due to a forecast reduction in Rabbit Lake production. This compares to 20.9 million pounds
produced in 2006. These quantities do not include Inkai production, as the mine is not yet in
commercial operation.
The unit cost of product sold is projected to increase by about 15% as a result of higher royalty
costs due to an increase in the realized price, the impact of tiered royalty charges and increased
production costs expected to be incurred in 2007.
Cameco did not pay provincial tiered royalties in 2006 and prior years due to the availability of
prescribed capital allowances that reduce uranium sales subject to tiered royalties. Capital
allowances have been fully exhausted during 2007 and, therefore, Cameco is paying tiered royalties
this year. We currently estimate that tiered royalties will reduce pre-tax earnings by
approximately $20 million ($14 million after tax) in 2007. Once Cigar Lake commences production, we
will be eligible for capital allowances related to the mine expansion, estimated to be about $325
million. We will not be required to pay tiered royalties until the additional allowances are fully
exhausted. The capital allowance is calculated based on a prescribed formula. Tiered royalties are
paid only on sales of uranium produced at Saskatchewan mines.
The uranium business outlook for the fourth quarter and 2007 is forward-looking information and is
based on the following key assumptions:
|
|
|
no significant changes in our estimates for sales volumes, costs, purchases and prices, |
|
|
|
|
a uranium spot price of $80.00 (US) per pound, reflecting the industry average price at
September 30, 2007, no disruption of supply from our mines or third-party sources, and |
|
|
|
|
a US/Canadian spot exchange rate of $1.00. |
If actual events differ from assumptions set out above, results for Camecos 2007 uranium business
in the fourth quarter and 2007 may differ materially from the above forecast.
Uranium Price Sensitivity 2007
For the remainder of 2007, a $10.00 (US) per pound change in the uranium spot price from $80.00
(US) per pound would change revenue by $14 million (Cdn) and net earnings by $9 million (Cdn). This
sensitivity is based on an expected effective exchange rate of $1.00 (US) being equivalent to about
$1.05 (Cdn) as a result of our currency hedge program. The spot price noted is the industry average
spot price at September 30, 2007.
- 19 -
Uranium Price Sensitivity (2007 to 2017)
Cameco has multi-year contracts in place for its uranium supply. Our current contract portfolio
reflects a mix of pricing, where 60% of the volume will be priced at a market price near the time
of delivery. The newer contracts with market pricing will typically include floor prices and are
not limited by ceiling prices, while some of the older contracts with market pricing will be
constrained by ceiling prices. The remaining 40% of the volume has prices fixed at the time of
contract signing. The fixed prices as well as the ceiling and floor prices are escalated by an
inflation index. As such, Camecos expected realized prices will vary to some extent with changes
in market prices.
The table below shows an indicative range of average prices that Cameco would expect to realize
under its sales portfolio at this time. The prices shown in the table are forward-looking
information and are intended to provide the reader with a general indication of how Camecos
expected realized prices for uranium may tend to vary with changes in spot market prices. This
information will change as Cameco enters into new contracts. Due to the number of variables
affecting Camecos realized prices, we have made a simplifying assumption regarding spot prices. We
set the spot price at the levels noted and calculated our expected realized prices at each spot
price level for the period of the table. For example, under the $80 (US) spot price scenario, the
calculation of realized prices assumes the spot price reaches $80 (US) at October 1, 2007 and
remains at that level through 2017. Each column in the table should be read assuming the column
header spot price for the entire 10-year period. Actual realized prices in any given year will
differ from what is shown in the table due to the fact that we are continually signing new
contracts, with first deliveries beginning as far out as four years after contract signing. This
analysis makes a number of other assumptions that are set out below.
As shown in the table, in the $20.00 (US) scenario, Cameco would expect the average realized price
to exceed the spot price over the next 10 years, reaching a high of more than 200% of the spot
price in 2013. In the $140.00 (US) scenario, Cameco would achieve average realized prices of more
than 70% of the spot price by 2014 and beyond. These prices are in current dollars, which are
dollars in the year they are actually received or paid.
It is useful to provide an overview of the changes in expected realized prices in 2008 compared to
the information published in the second quarter of 2007. The general trend is a decline in the
expected realized prices across different levels of spot price. This is largely due to recent
changes in scheduled deliveries for 2008 and Camecos decision to terminate the remaining product
loan in 2008. The loan termination results in the company recognizing revenue in 2008 on previously
deferred sales of uranium, which were under legacy contracts at prices considerably lower than
current market prices.
In addition, it should be noted that the 30 million pound sales volume assumption below is not a
forecast for 2008 sales. We will provide a forecast of 2008 sales volume in our fourth quarter
report when more accurate information is available.
- 20 -
Cameco Expected Average Realized Uranium Price Constant Volumes
(In brackets, expressed as a % of Spot Price)
Current US $/lb U3O8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$20 |
|
$40 |
|
$60 |
|
$80 |
2007 |
|
$ |
35.75 |
|
|
|
(179 |
%) |
|
$ |
36.50 |
|
|
|
(91 |
%) |
|
$ |
37.25 |
|
|
|
(62 |
%) |
|
$ |
38.25 |
|
|
|
(48 |
%) |
2008 |
|
$ |
25.25 |
|
|
|
(126 |
%) |
|
$ |
31.00 |
|
|
|
(78 |
%) |
|
$ |
36.25 |
|
|
|
(60 |
%) |
|
$ |
41.25 |
|
|
|
(52 |
%) |
2009 |
|
$ |
27.00 |
|
|
|
(135 |
%) |
|
$ |
32.75 |
|
|
|
(82 |
%) |
|
$ |
38.25 |
|
|
|
(64 |
%) |
|
$ |
42.75 |
|
|
|
(53 |
%) |
2010 |
|
$ |
32.25 |
|
|
|
(161 |
%) |
|
$ |
38.25 |
|
|
|
(96 |
%) |
|
$ |
46.75 |
|
|
|
(78 |
%) |
|
$ |
53.25 |
|
|
|
(67 |
%) |
2011 |
|
$ |
37.25 |
|
|
|
(186 |
%) |
|
$ |
41.00 |
|
|
|
(103 |
%) |
|
$ |
48.75 |
|
|
|
(81 |
%) |
|
$ |
54.75 |
|
|
|
(68 |
%) |
2012 |
|
$ |
36.25 |
|
|
|
(181 |
%) |
|
$ |
39.75 |
|
|
|
(99 |
%) |
|
$ |
48.75 |
|
|
|
(81 |
%) |
|
$ |
56.50 |
|
|
|
(71 |
%) |
2013 |
|
$ |
41.00 |
|
|
|
(205 |
%) |
|
$ |
46.50 |
|
|
|
(116 |
%) |
|
$ |
56.50 |
|
|
|
(94 |
%) |
|
$ |
66.00 |
|
|
|
(83 |
%) |
2014 |
|
$ |
37.75 |
|
|
|
(189 |
%) |
|
$ |
44.75 |
|
|
|
(112 |
%) |
|
$ |
55.75 |
|
|
|
(93 |
%) |
|
$ |
66.00 |
|
|
|
(83 |
%) |
2015 |
|
$ |
35.50 |
|
|
|
(178 |
%) |
|
$ |
43.25 |
|
|
|
(108 |
%) |
|
$ |
55.25 |
|
|
|
(92 |
%) |
|
$ |
66.50 |
|
|
|
(83 |
%) |
2016 |
|
$ |
36.75 |
|
|
|
(184 |
%) |
|
$ |
44.75 |
|
|
|
(112 |
%) |
|
$ |
56.50 |
|
|
|
(94 |
%) |
|
$ |
67.50 |
|
|
|
(84 |
%) |
2017 |
|
$ |
31.75 |
|
|
|
(159 |
%) |
|
$ |
43.00 |
|
|
|
(108 |
%) |
|
$ |
57.25 |
|
|
|
(95 |
%) |
|
$ |
70.50 |
|
|
|
(88 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$100 |
|
$120 |
|
$140 |
2007 |
|
|
|
|
|
|
|
|
|
$ |
39.00 |
|
|
|
(39 |
%) |
|
$ |
39.75 |
|
|
|
(33 |
%) |
|
$ |
40.50 |
|
|
|
(29 |
%) |
2008 |
|
|
|
|
|
|
|
|
|
$ |
46.25 |
|
|
|
(46 |
%) |
|
$ |
51.25 |
|
|
|
(43 |
%) |
|
$ |
56.25 |
|
|
|
(40 |
%) |
2009 |
|
|
|
|
|
|
|
|
|
$ |
47.50 |
|
|
|
(48 |
%) |
|
$ |
52.25 |
|
|
|
(44 |
%) |
|
$ |
57.00 |
|
|
|
(41 |
%) |
2010 |
|
|
|
|
|
|
|
|
|
$ |
60.50 |
|
|
|
(61 |
%) |
|
$ |
67.50 |
|
|
|
(56 |
%) |
|
$ |
74.75 |
|
|
|
(53 |
%) |
2011 |
|
|
|
|
|
|
|
|
|
$ |
61.50 |
|
|
|
(62 |
%) |
|
$ |
68.25 |
|
|
|
(57 |
%) |
|
$ |
75.00 |
|
|
|
(54 |
%) |
2012 |
|
|
|
|
|
|
|
|
|
$ |
65.00 |
|
|
|
(65 |
%) |
|
$ |
73.50 |
|
|
|
(61 |
%) |
|
$ |
82.25 |
|
|
|
(59 |
%) |
2013 |
|
|
|
|
|
|
|
|
|
$ |
75.50 |
|
|
|
(76 |
%) |
|
$ |
85.25 |
|
|
|
(71 |
%) |
|
$ |
95.00 |
|
|
|
(68 |
%) |
2014 |
|
|
|
|
|
|
|
|
|
$ |
76.25 |
|
|
|
(76 |
%) |
|
$ |
87.00 |
|
|
|
(73 |
%) |
|
$ |
97.75 |
|
|
|
(70 |
%) |
2015 |
|
|
|
|
|
|
|
|
|
$ |
77.25 |
|
|
|
(77 |
%) |
|
$ |
88.50 |
|
|
|
(74 |
%) |
|
$ |
100.00 |
|
|
|
(71 |
%) |
2016 |
|
|
|
|
|
|
|
|
|
$ |
77.75 |
|
|
|
(78 |
%) |
|
$ |
88.75 |
|
|
|
(74 |
%) |
|
$ |
99.75 |
|
|
|
(71 |
%) |
2017 |
|
|
|
|
|
|
|
|
|
$ |
83.50 |
|
|
|
(84 |
%) |
|
$ |
96.75 |
|
|
|
(81 |
%) |
|
$ |
110.00 |
|
|
|
(79 |
%) |
The following are the key assumptions applied by Cameco in the price table above:
|
|
annual sales deliveries of 30 million pounds for 2007, adjusted for the accounting
requirements of the loan agreements. In 2008 through 2017, we have chosen to use a single
average annual sales volume of 30 million pounds in calculating the expected average realized
uranium price. This is not a forecast as actual sales levels will vary and are dependent upon
uranium production, other supply sources, customer requirements and timing of deliveries and
Camecos growth plans. Cameco will provide an annual sales forecast for the upcoming year in
its fourth quarter report, |
|
|
utilities take maximum quantities where they can, |
|
|
estimates of sales deliveries assume no further interruption in the companys supply from
its own production or from third parties beyond that disclosed, |
|
|
2007 sales volumes are fully committed. The company is heavily committed in the next
several years, with significant uncommitted volumes in the later years, |
|
|
where baseload contracts for Cigar Lake material are impacted, deliveries are deferred to
the end of those contracts, |
|
|
no additional deferrals of deliveries resulting from the supply interruption provisions in
our contracts have been included for 2008 as the impact of those provisions is expected to be
minimal in this year, |
|
|
while the decision has yet to be finalized, for the purposes of this price sensitivity
analysis, additional deferrals have been assumed for the years 2009 through 2011 on the
assumption |
- 21 -
|
|
we exercise the supply interruption provisions in our contracts. We estimated the deferral
amounts based on our overall total contract portfolio, |
|
|
due to the termination of two product loans, we have recognized revenue in 2007 on
previously deferred sales of uranium, which were under legacy contracts at prices considerably
lower than current market prices, |
|
|
the remaining product loan is assumed to be terminated in 2008 resulting in the company
recognizing revenue in 2008 on previously deferred sales of uranium, which were under legacy
contracts at prices considerably lower than current market prices, |
|
|
all uncommitted volumes are assumed to be delivered at the spot price, |
|
|
the average long-term price indicator in a given year is assumed to be equal to the average
spot price for that entire year, |
|
|
all other price indicators are assumed to trend toward the spot price, |
|
|
the average realized prices estimated at each assumed spot price for 2007 include the
actual $102.39 (US) average spot price for the first nine months of the year, and |
|
|
an inflation rate of 2.5%. |
If actual events differ from assumptions set out above, Camecos realized uranium prices may differ
materially from the indicative range of prices set out in the table above.
Uranium Contracting
As we have discussed in the past, our contracting objective is to secure a solid base of earnings
and cash flow to allow us to maintain our core asset base and pursue growth opportunities over the
long term.
As noted earlier, our current portfolio reflects a 60/40 mix of market-related and fixed pricing
(escalated by inflation) mechanisms. Given current contracting terms available in the market, we
are signing both market-related and fixed-price contracts. The overall strategy will continue to
focus on achieving longer contract terms of up to 10 years or more, with floor prices that provide
downside protection, and retaining an adequate level of upside potential.
In general, most new offers include price mechanisms with a mix of market-related and fixed
components. The fixed-price component is generally near the industry long-term price indicator at
the time of offer and is adjusted by inflation. The market-related component includes a floor price
(escalated by inflation). While the level of floor prices secured will depend on the prevailing
market prices at the time of signing, recently they have been in the mid $40 (US) range. In some
cases, where the duration of the contract is long, for example 10 years or more, we agreed to have
a limited price reopener after five years of deliveries have been made.
Cameco has a variety of supply sources including primary production, firm commitments for long-term
purchases, inventories of about six months forward sales and uranium from opportunistic purchases
in the spot market.
Uranium Market Update
Uranium Spot Market
The industry average spot price (TradeTech and UxC) on September 30, 2007 was $80.00 (US) per pound
U3O8. However, on October 1, 2007, UxC published a spot price of $75.00 (US)
per pound, equal to the TradeTech price at September 30, 2007. This is down 45% from $135.50
- 22 -
(US) at June 30, 2007 and compares to $54.88 (US) on September 30, 2006 and $45.75 (US) on June 30,
2006.
Spot market volume reported for the third quarter of 2007 was 2 million pounds
U3O8 and 13 million pounds in the first nine months of 2007. This compares to
12 million pounds in the third quarter of 2006 and 30 million pounds in the first nine months of
2006.
Buyers entered the third quarter of 2007 with reduced purchasing power following the 43% increase
in the average spot price during the second quarter. This resulted in a number of buyers purchasing
much smaller volumes due to budget limitations, as well as, a decrease in speculative buying in the
third quarter. As demand declined, spot prices began to fall, with the TradeTech published price
reaching a low of $75 (US) per pound during the third quarter. The decrease in price resulted in a
number of uranium auctions being cancelled. Sellers were reluctant to complete a sale at the lower
prices, contributing further to the lower spot market volumes discussed above.
It is expected that spot market demand will increase in the fourth quarter, largely as a result of
discretionary demand. Recently, we have seen the spot price increase to $85 (US) as buying interest
returns.
Uranium Long-Term Market
The industry average long-term price (TradeTech and UxC) on September 30, 2007 was $95.00 (US) per
pound U3O8, no change in price from June 30, 2007. This compares to $54.50
(US) on September 30, 2006 and $46.75 (US) on June 30, 2006.
The long-term market remained active in the third quarter as utilities continued to seek secure
supply with reliable primary suppliers in an effort to mitigate supply risk. Long-term contracting
in 2007 is expected to be in the order of 200 million pounds U3O8, similar to
the volumes contracted in 2006.
Uranium Operations Update
Uranium Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
Camecos share of |
|
September 30 |
|
September 30 |
|
2007 planned |
production (million lbs U3O8) |
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
production |
McArthur River/Key Lake |
|
|
2.6 |
|
|
|
3.9 |
|
|
|
9.2 |
|
|
|
9.9 |
|
|
|
13.1 |
|
Rabbit Lake |
|
|
0.9 |
|
|
|
1.1 |
|
|
|
3.0 |
|
|
|
3.7 |
|
|
|
4.0 - 4.3 |
|
Smith Ranch/ Highland |
|
|
0.5 |
|
|
|
0.7 |
|
|
|
1.5 |
|
|
|
1.4 |
|
|
|
1.9 |
|
Crow Butte |
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.6 |
|
|
|
0.5 |
|
|
|
0.8 |
|
Total1 |
|
|
4.2 |
|
|
|
5.9 |
|
|
|
14.3 |
|
|
|
15.5 |
|
|
|
19.8 20.1 |
|
|
|
|
1 |
|
These quantities do not include Inkai production, as the mine is not yet in commercial
operation. |
- 23 -
McArthur River/Key Lake
Camecos share of production at McArthur River/Key Lake in the third quarter of 2007 was 2.6
million pounds U3O8. This was lower than the planned quarterly production of
3.3 million pounds, primarily due to startup delays following a scheduled maintenance shutdown.
Camecos production of 9.2 million pounds U3O8 for the first nine months of
2007 is lower than for the same period of 2006.
Camecos share of production for the fourth quarter of 2007 is targeted to be 3.9 million pounds
U3O8, the same level of production as the second quarter of 2007 and the
third quarter of 2006. Planned production for 2007 remains 13.1 million pounds (Camecos share of
the licensed limit).
As previously reported, we have applied to increase the annual licensed production capacity at the
McArthur River mine and the Key Lake mill to 22 million pounds U3O8 from the
current 18.7 million pounds. This application had been undergoing an environmental assessment (EA),
which has been temporarily halted as the company develops and implements a plan to reduce selenium
and molybdenum discharges in the mill effluent.
Before we can achieve the full increase in production at the McArthur River/Key Lake operations,
there are a number of activities that need to be completed. We need to:
|
|
|
resubmit the environmental assessment (EA), |
|
|
|
|
obtain regulatory approvals for the EA as well as licence approval to operate at higher
production levels, |
|
|
|
|
demonstrate the effectiveness of our plan to reduce selenium and molybdenum discharges
in the mill effluent, |
|
|
|
|
transition to new ore zones at the McArthur River mine and |
|
|
|
|
complete the revitalization work at the Key Lake mill. |
As such, we anticipate it will be a number of years before we can achieve the full planned increase
at these operations. Increased annual production to an intermediate level between 18.7 and 22
million pounds may be possible prior to the completion of the Key Lake mill revitalization work,
but will require completion of the other items noted.
Cameco continues to implement its plan to reduce selenium and molybdenum discharges in the mill
effluent. We expect to complete the first phase of this plan in the first part of 2008 through
modifications to the effluent treatment process. We anticipate these changes will significantly
reduce selenium and molybdenum discharges in the mill effluent.
Mine planning, development and freeze-hole drilling for the McArthur River transition are ongoing.
We have increased the number of drills available for freeze hole drilling to seven and crews are in
place. Two drills in the fleet are using a modified drilling method, which may allow for drilling
productivity improvements.
Pre-feasibility assessment work continues for revitalization of the Key Lake mill and completion of
this assessment is now anticipated in the first quarter of 2008.
At McArthur River, tunnelling of the north exploration drift continued during the quarter. This
development is intended to follow up on surface exploration drilling results from 2005 and 2006.
- 24 -
The north exploration development will continue into 2008, followed by an underground
diamond-drilling program to delineate targets previously identified from surface in order to
develop mine plans.
Rabbit Lake
Rabbit Lake produced 0.9 million pounds U3O8 during the third quarter.
Production for the first nine months of 2007 was 3.0 million pounds. For the first three quarters
of 2007, both tonnage and mill head grade were lower than in the same period in 2006. Changes to
the mine plan, which were necessary while we carried out work to obtain regulatory approvals for a
new mining zone, contributed to the production shortfall during the first six months of 2007.
Although mine plan adjustments were made, production from the new zone has been restricted by
higher than anticipated radon gas levels. Steps taken to manage workers radon exposure have slowed
production. As a result, production is expected to be lower than forecast for the remainder of
2007. Rabbit Lake is now expected to produce between 4.0 and 4.3 million pounds
U3O8 in 2007, down from our second quarter forecast of 5.1 million pounds.
We have been successful at extending the mine life at Rabbit Lake by finding incremental reserves.
However, to access these new reserves, continual adjustments to the mine plan are necessary to
accommodate required changes to mine development and ventilation, thereby causing variability in
the production rate. Ongoing mine planning will focus on identifying ways of smoothing production
in future years.
We continue our exploration program near the Rabbit Lake operation. The underground drilling
reserve replacement program has been extended to include drilling to the end of 2007 and beyond. We
drilled 53,000 metres in the first nine months of 2007 to test the north zone beyond the area where
reserves were identified in 2006, as well as a target south of the mine. Both areas continue to
provide good indications of mineralization.
As previously reported, we have submitted an EA to process a little over one half of the future
uranium production from Cigar Lake at the Rabbit Lake mill beginning in the second to third year of
Cigar Lake production and to expand the Rabbit Lake tailings facility. A CNSC hearing to consider
the EA is expected by the end of the first quarter of 2008.
Engineering work for the expansion of the Rabbit Lake in-pit tailings management facility began in
the first quarter of 2007. Earthwork is expected to begin in the second quarter of 2008, subject to
regulatory approvals.
Smith Ranch-Highland and Crow Butte
Smith Ranch-Highland and Crow Butte in situ recovery (ISR) mines produced 0.7 million pounds
U3O8 in the third quarter of 2007. For the first three quarters of 2007,
these operations produced 2.1 million pounds, up from 1.9 million pounds produced in the same
period of 2006. Planned production for 2007 has been increased to about 2.7 million pounds from
2.4 million pounds due to better than expected performance of our wellfields in Wyoming.
Cigar Lake
Cameco began construction of the Cigar Lake mine on January 1, 2005. Construction was about 60%
complete, when we experienced a rockfall causing a flood of the underground development in October
2006.
- 25 -
Cameco continues to make progress on its remediation plan, which began in November 2006. The
initial remediation activities such as drilling holes for pouring concrete and dewatering are now
complete, as well as, reinforcement of the adjacent tunnel.
The next major milestone is dewatering the mine. There are a number of activities that must be
completed before we can begin dewatering, including:
|
|
|
pour a concrete plug and seal the inflow area with grout, |
|
|
|
|
confirm the effectiveness of the plug and seal, |
|
|
|
|
assess the pore water pressure, rock quality and structure above two other areas in the
mine, and |
|
|
|
|
submit an application and receive regulatory approval to dewater the mine. |
We are making progress on these activities. At the same time, we are also carrying out other
assessments to develop plans for mine development and completion of the second shaft.
The following is an update on the key activities underway for achieving dewatering and other
necessary work.
Activities for Achieving Dewatering
Concrete plug
The concrete barrier plug is nearing completion after pouring approximately 1,000 cubic metres of
concrete in the tunnel in the vicinity of the original inflow. Our current efforts are directed at
sealing the top and bottom of the plug by injecting grout around and below the concrete.
During the third quarter, we started to pour cement and inject grout behind the plug and up into
the source of the water inflow. However, this activity was put on hold in order to finish sealing
the barrier plug to ensure the cement and grout injected into the rock fall goes up into the
formation to seal the water source rather than flow back around the plug. Progress has been slower
than anticipated but we are now confident the barrier plug is effectively isolating the rock fall
area from the rest of the mine. Attention will now be redirected to the rock pile behind the plug
and the source of the water inflow. We expect sealing of the inflow area to take about six more
weeks to complete.
Before dewatering, we plan to conduct a preliminary test of the effectiveness of the plug and
sealed rockfall area by drawing down the water level in the shaft to an intermediate stage and
measuring the water inflow. The plug and seal will be considered effective if the total mine water
inflow is limited to a rate considered safe for mine re-entry. Dewatering will be possible after
the plug and seal are proven to be effective, subject to our completing all of the necessary
technical assessments and obtaining regulatory approval.
Assessments
Prior to dewatering, we need to conduct a geotechnical assessment to determine if depressurization,
reinforcement or other precautionary measures are necessary in two other areas of the mine. To
ascertain this, we are drilling a number of holes to assess the pore water pressure, as well as
rock quality and structure in these two areas. Two of four planned holes have been completed and
two are in progress. Depending on the results of the first four holes, some additional holes may be
required. We expect results from this assessment to be available by year end.
- 26 -
Regulatory Approval for Dewatering
In addition to the technical work, we need to complete the corrective actions we committed to do
following the root cause investigation, as well as file for and receive regulatory approval to
proceed with the next phases of remediation. In December, we anticipate we will have a more
specific target date for dewatering when we have made further progress on the geotechnical
assessments and on the corrective actions committed to by Cameco to the CNSC (discussed below).
Major Steps After Dewatering
|
|
Assessment of Underground |
|
- |
|
includes mine re-entry, establishment of safe staging areas and safe mine access,
inspection of underground status, and if required, initiation of ground freezing from
surface; |
|
- |
|
includes pouring an engineered bulkhead to completely plug the inflow area and any
remedial work necessary to secure the mine; |
|
- |
|
includes ventilation, pumping systems and electrical systems, among others; |
|
|
Return to Pre-flood Construction and Mine Development Activities. |
All of these steps will be subject to regulatory approval. In addition, the construction and mine
development activities will be the subject of a future licence application once a definitive mine
development plan is established based on knowledge of the mine condition and the information from
the additional assessments described.
Other Cigar Lake Activities
Licence Renewal
Cameco has filed an application with the CNSC to renew and amend the Cigar Lake construction
licence that will be reviewed at a commission hearing on November 1, 2007. The scope of the licence
will cover the approved surface construction activities and the mine remediation plan. We
anticipate a decision by the CNSC in December 2007. The resumption of pre-flood underground
construction and development activities will require a subsequent amendment to the construction
licence. This will be initiated once the mine development plan and scope are clearly defined.
In reviewing the subsequent license amendment, the CNSC will consider the progress Cameco has made
on the corrective actions it committed to make such as providing better management oversight and
accountability. This includes putting the necessary structure, people, and processes in place to
ensure there is accountability for meeting more rigorous standards for governance, quality and
safety throughout the organization.
Cameco continues to make progress in all these areas.
Other Assessments Underway
Cameco is undertaking further assessment of the rock structure around the partially completed
second shaft. We have initiated several geophysical surveys from surface (borehole seismic,
vertical seismic, induced polarization, gravity survey, etc) to gather more detailed images of the
structures and geology in and around the mine and shaft 2 workings to better facilitate the mine
- 27 -
remediation and future mine planning. It is expected these programs will be essentially complete in
the next six months or so; however, initial results from these programs are already being
incorporated in the plans.
Surface Construction
During the third quarter, construction of the surface shaft 2 ventilation fans and the slurry
load-out facilities was initiated and modifications to the dewatering ponds to provide additional
holding capacity and the installation of water-handling piping infrastructure were completed.
Production Restart
As previously announced, completing the second shaft as a priority item and the delay in some
remediation activities would set back the planned production startup date from 2010 to 2011. We
have now made the decision to complete the second shaft prior to completion of some of the
underground mine development program and some of the remediation activities are taking longer than
anticipated. As a result, the production startup date is now expected to be 2011, at the earliest.
We will be able to provide a firmer production startup date after the mine has been dewatered and
the condition of the underground development has been assessed and the findings incorporated in the
new mine development and production plans. As noted above there are a number of conditions and
activities that must be completed, including corrective actions, before dewatering can begin.
The Cigar Lake expected production date is forward-looking information and is based upon the
following key assumptions:
|
|
timely completion of the remediation activities described in the Cigar Lake discussion
above; |
|
|
|
timely completion of the second shaft and underground development; |
|
|
|
certain assumptions regarding the timing of regulatory approvals, including for conducting
surface construction and remediation activities, completing the second shaft, re-commencing
underground development and commencing production; |
|
|
|
certain assumptions regarding the condition of the existing underground workings, which
condition will not be known until the mine has been dewatered; and |
|
|
|
that the information obtained after dewatering the underground workings does not impact our
mine development and production plans in a material way. |
Cigar Lake is a challenging deposit to develop and mine. These challenges include control of
groundwater and weak ground formations. If actual events differ from the key assumptions set out
above, the commencement date of production from Cigar Lake may differ materially from the above
forecast.
Next Update
We will provide an update for Cigar Lake after we have received the licensing decision from the
CNSC, anticipated in December.
Contracting
As previously disclosed, Cameco has protection in most of its contracts providing the right to
reduce, defer or cancel volumes on a pro-rata basis if we experience a meaningful shortfall in
planned production. All contracts also contain standard force majeure protection. We plan to review
our delivery commitments from 2009 to 2011 to determine if we need to apply supply interruption in
these years.
- 28 -
Inkai
At the Inkai ISR project in Kazakhstan, there are two production areas currently in development
(blocks 1 and 2). At block 1, construction is underway for the commercial processing facility. In
2007, we expect to begin commissioning the facility, subject to regulatory approvals. We expect
startup of commercial production in 2008, subject to the availability of acid as noted below.
At block 2, the test mine produced about 0.1 million pounds U3O8 during the
third quarter of 2007. We plan to apply for a mining licence in 2007. Commercial development of
block 2 is planned for 2008.
During the third quarter of 2007, an issue emerged that could affect start dates and production
estimates for Inkai. A fire at one acid plant in Kazakhstan and a delay in the startup of a new
plant has limited the availability of acid required for mining. Inkai and other ISR operations in
Kazakhstan are receiving acid allotments. These allotments could continue through the second
quarter of 2008 or longer, through Kazatomprom, Camecos state-owned joint venture partner in the
project. Inkai is reviewing alternative supply options. The restricted acid supply is expected to
impact Inkai production in the fourth quarter of 2007 and in 2008.
As previously reported, production from blocks 1 and 2 is expected to total 5.2 million pounds
(Camecos share is 60% or 3.1 million pounds) per year by 2010. However, a recently signed
non-binding memorandum of understanding (MOU) between Cameco and Kazatomprom provides for the
doubling of future production capacity from the Inkai uranium deposit, raising the total annual
production capacity to 10.4 million pounds on a timeframe yet to be confirmed.
While the existing project ownership would not change, Camecos share of the additional capacity
under the MOU will be 50%, raising Camecos share of the future annual production at Inkai to 5.7
million pounds.
In addition to the increased production, Cameco will work with Kazatomprom under the MOU to study
the feasibility of constructing a uranium conversion facility in Kazakhstan and elsewhere. Cameco
would provide the technology and potentially hold an interest of up to 49% in the facility, at the
companys discretion.
Cameco anticipates that binding agreements will be signed in 2008 and that various government
approvals will be required as the agreements are implemented.
New legislation in Kazakhstan recently took effect allowing the government to renegotiate
previously signed subsoil use agreements. Cameco does not have any reason to believe the new law
will be applied to uranium projects in Kazakhstan. However, it is a concern going forward and we
continue to monitor how the government uses this new legislation.
A one-time commercial discovery bonus will be payable when Inkai receives confirmation of
Kazakh-defined recoverable reserves located in a particular licensed area. The bonus is calculated
as 0.05% of the value of Kazakh-defined recoverable reserves. Inkai expects to pay this bonus in
the fourth quarter, which is estimated to range between $5 million and $20 million (US), with
respect to block 2. The bonus is paid to the Kazakh government. The Kazakh-defined reserves do not
conform with, and are not equivalent to, reserves classified under Canadian securities laws. Some
reserve categories used by Kazakhstan overlap with multiple Canadian
- 29 -
resource categories, and contrary to Canadian standards, Kazakh-defined reserves can be based on
the equivalent of inferred resources. The reconciliation of Kazakh-defined reserves to Canadian
resources and reserves definitions will be required for future disclosure.
Uranium Production Outlook
We are providing an update for our near-term production outlook with the information currently
available in the table below.
Camecos Share of Production (million pounds U3O8) Excluding Cigar
Lake1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Forecast |
|
2007 |
|
2008 |
|
2009 |
|
2010 |
|
2011 |
McArthur River/Key Lake 2 |
|
|
13.1 |
|
|
|
13.1 |
|
|
|
13.1 |
|
|
|
13.1 |
|
|
|
13.1 |
|
Rabbit Lake 3 |
|
|
4.0 - 4.3 |
|
|
|
4.5 |
|
|
|
3.2 |
|
|
|
1.8 |
|
|
|
3.1 |
|
US ISR4 |
|
|
2.7 |
|
|
|
2.7 |
|
|
|
2.9 |
|
|
|
3.8 |
|
|
|
4.6 |
|
Inkai |
|
|
0.4 |
|
|
|
1.2 |
|
|
|
3.0 |
|
|
|
3.1 |
|
|
|
3.1 |
|
Total |
|
|
20.2 20.5 |
|
|
|
21.5 |
|
|
|
22.2 |
|
|
|
21.8 |
|
|
|
23.9 |
|
|
|
|
1 |
|
A revised production forecast for Cigar Lake will be provided after the mine has been
dewatered and the condition of the underground development has been assessed. |
|
2 |
|
Cameco has applied to increase its licensed capacity from 18.7 million pounds to 22
million pounds (Camecos share 70%), but is awaiting regulatory approval. Until approval has
been received, the production forecast has been left at the current licensed capacity. Once
approval has been received, it is expected to take about two years to ramp up production to a
sustained higher level. (See discussion in the Uranium Operations Update section of this
report under the heading McArthur River/Key Lake). |
|
3 |
|
The Rabbit Lake production forecast is based on proven and probable reserves as well
as blending lower-grade material. We are optimistic that some of the existing resources will
be reclassified as reserves and add to production in the latter years. In addition, ongoing
mine planning will focus on identifying means of smoothing the production profile in future
years. |
|
4 |
|
Refers to Camecos Smith Ranch-Highland and Crow Butte ISR operations in the US. |
When compared to the estimates provided in the first quarter of 2007, the major change is with
Rabbit Lake production, which has generally declined in each year other than 2011. This variability
is due to changes made to the mine plan as we assess the best way to extract the remaining
reserves. As noted, we will focus on identifying ways of smoothing Rabbit Lake production in future
years.
As we have noted in the past, Cameco purchases and resells significant quantities of uranium.
Consequently, we sell more uranium than we produce from our minesites. Cameco has multi-year
purchase agreements in place, the most significant being our purchase of uranium derived from
blended-down Russian highly enriched uranium (HEU), under which we expect to purchase about 7
million pounds uranium equivalent annually over the period covered by the above table. We also have
other committed term purchase arrangements for smaller annual quantities. In addition, we make
short-term and spot market purchases.
The current uranium production and HEU purchase forecast noted above for the company is
forward-looking information and is based upon the following key assumptions:
|
|
|
the companys forecast production for each operation is achieved, |
|
|
|
|
the companys schedule for the development and rampup of production from Inkai is
achieved, which requires, among other things, resolution of the issues surrounding acid
availability required for mining, |
- 30 -
|
|
|
the company is able to obtain or maintain the necessary permits and approvals from
government authorities to achieve the forecast production, |
|
|
|
|
there is no disruption in production due to natural phenomena, labour disputes or other
development and operation risks, and |
|
|
|
|
the HEU supplier complies with its delivery commitments. |
No assurance can be given that the indicated quantities will be produced. Expected future
production is inherently uncertain, particularly in the latter years of the forecast, and could
materially change over time. If actual results differ from the assumptions set out above, Camecos
uranium production and HEU purchases may differ materially from the above forecast.
Uranium Exploration Update Third Quarter 2007
Saskatchewan Exploration
Drilling programs on Camecos eastern Athabasca Basin exploration projects were completed by the
end of the third quarter.
On the Dawn Lake project, drilling at Collins Creek comprised 14 drill holes totalling nearly 3,000
metres. The summer program was aimed at closing off existing drill sections and starting the 25
metres in-fill work. Several significant mineralized intercepts were encountered including one
drill hole, which intersected 25 metres of 1.4% eU3O81 in the
sandstone above the unconformity. Camecos interest in the Dawn Lake project is 57.5%.
In the third quarter, a revised resource estimate for the Millennium deposit was completed,
incorporating the last two drill holes from the 2006 drilling program and the recent structural
interpretation. The indicated resources have increased approximately 20% due primarily to an
increase in grade. Indicated resources are now estimated at 469,000 tonnes averaging 4.5%
U3O8 (46.8 million pounds U3O8) while inferred
resources remain at 214,000 tonnes averaging 2.1% U3O8 (9.7 million pounds
U3O8). Camecos interest in the Millennium deposit is 42.0%.
Feasibility related activities on the Millennium deposit continued during the third quarter,
including the processing of the 3D seismic survey data, environmental baseline studies,
metallurgical testing, underground design, and surface facility designs. Drilling along the
prospective trend that hosts the Millennium deposit was completed by the end of September. A total
of almost 4,400 metres were completed in 10 holes.
Drilling to evaluate the P2 trend north of the McArthur River mine was completed early in July. In
total, approximately 13,800 metres were drilled in 25 holes using a combination of conventional and
directional drilling. Continued testing of the P2 structure at regular 200-metre intervals towards
the northern property boundary, which is a distance of nine kilometres northeast of the mine, is
planned for 2008. Camecos ownership of the McArthur River joint venture is 69.8%.
On the AREVA operated Cree Zimmer project, surrounding the Key Lake operation, drilling commenced
in mid August and continued through to the end of September. Thirteen drill holes totalling about
3,100 metres were drilled in the P-zone and along the Key Lake fault southwest
|
|
|
1 |
|
Equivalent % U3O8, which is based
on downhole radiometrics. The chemical assay is pending. |
- 31 -
of the historic
deposits. The best hole of the summer program intersected three zones of weak to moderate
mineralization. It was designed to test approximately 20 metres north of known
mineralization and to test below the historical drilling. Camecos ownership of the Cree Zimmer
joint venture is 83.3%.
On the Waterbury/Cigar Lake Joint Venture project operated by AREVA, the dominant activity was
drilling at Cigar East and Tibia Lake. The drilling program consisted of 12 holes for a total of
about 6,000 metres. Nine drill holes tested the Cigar East area and three drill holes investigated
the Tibia Lake area. The drilling in the Cigar East area extended the mineralization intersected in
2006 over a strike length of approximately 120 metres. Mineralization was intersected in four drill
holes. Drilling in the Tibia area intersected prospective sandstone alteration, large zones of
structural deformation, favorable basement lithologies and weak mineralization in two of the three
drill holes. Camecos interest in the Waterbury property is 50.0%.
Drilling continued on the Virgin River project (98% UEM inc., 2% Coronation Mines) with the
objective of defining the limits of the Centennial zone mineralization discovered in 2004. The
Centennial zone has now been defined over a strike length of at least 550 metres and remains open
for expansion along the strike to the south. During the third quarter, intersection of the
highest-grade uranium mineralization to date was encountered, and validated a newly developed
geological interpretation of the mineralizing system. The next phase of drilling is scheduled to
begin in January, and will focus on testing the new interpretation in more detail.
Canadian Exploration
During the quarter, two drill holes were completed on the Cameco, wholly owned Otish project in
Quebec. One of these holes intersected mineralization of 1.06%
eU3O82 over nearly 16 metres in the original zone. Mapping and
sampling programs were also completed during the quarter on three Cameco-owned projects in Nunavut
and the Northwest Territories.
Strategic Alliances
Cameco augments its exploration activity with partnerships, joint ventures and equity investments
in other companies to ensure that we have an opportunity to participate in the development of a
range of new deposits.
In the third quarter, three new strategic alliances were announced:
|
|
|
Investment |
|
Geographic Location of Exploration Assets |
Western Uranium Corporation
|
|
United States and Canada |
Vena Resources Inc.
|
|
Peru |
Cue Capital Corp.
|
|
Paraguay |
Cameco is making investments in these companies in return for the right to acquire a controlling
interest in these companies land holdings, where and if, a significant economic discovery is made.
|
|
|
2 |
|
Equivalent % U3O8, which is based
on downhole radiometrics. The chemical assay is pending. |
- 32 -
FUEL SERVICES
Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30 |
|
September 30 |
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
Revenue ($ millions) |
|
|
54 |
|
|
|
39 |
|
|
|
162 |
|
|
|
141 |
|
Gross profit ($ millions) |
|
|
(2 |
) |
|
|
(3 |
) |
|
|
12 |
|
|
|
13 |
|
Gross profit % |
|
|
(4 |
) |
|
|
(8 |
) |
|
|
7 |
|
|
|
9 |
|
Earnings before taxes ($ millions) |
|
|
(3 |
) |
|
|
(3 |
) |
|
|
10 |
|
|
|
11 |
|
Sales volume (million kgU)1 |
|
|
4.4 |
|
|
|
4.2 |
|
|
|
10.6 |
|
|
|
11.9 |
|
Production volume (million kgU) |
|
|
1.0 |
|
|
|
3.4 |
|
|
|
8.1 |
|
|
|
9.2 |
|
|
|
|
1 |
|
Kilograms of uranium (kgU) |
Fuel Services Results
Third Quarter
In the third quarter of 2007, revenue from our fuel services business was $54 million, an increase
of $15 million compared to the same period in 2006 due to a 5% increase in reported sales volumes
and a 19% increase in the average realized price.
Total cost of products and services sold, including DDR, increased by 33% to $56 million from $42
million in 2006. In addition to the higher deliveries, the cost of products sold was impacted by
the shutdown of the Port Hope UF6 conversion plant. For more details on the plant shut
down, see the discussion under Port Hope Conversion Facility later in this report. All costs
associated with the UF6 conversion plant ($8 million) have been expensed as incurred
since the shutdown. See note 18 of the unaudited consolidated financial statements for more
information.
In the third quarter of 2007, the company recorded a loss before taxes in fuel services of $3
million, the same as in 2006.
Year to Date
As a result of terminating two product loan agreements in April of 2007, the year-to-date results
include recognition of previously deferred revenue totalling $3 million and the associated costs on
conversion services deliveries of 0.4 million kgU.
In the first nine months of 2007, revenue from our fuel services business was $162 million, an
increase of $21 million compared to the same period in 2006, as the impact of a decline in reported
sales volumes was offset by an increase in the realized price. Most conversion sales are at fixed
prices and have not yet fully benefited from the significant increase in UF6 spot prices
but the trend has been positive.
Total cost of products and services sold, including DDR, increased to $150 million from $128
million in 2006. The effect of the lower volume was offset by higher costs, which were largely
attributable to the shutdown of the UF6 conversion plant and the mix of products
delivered in 2007. A higher proportion of sales were attributable to fabrication in 2007.
- 33 -
In the first nine months of 2007, earnings before taxes were $10 million, compared to $11 million
in 2006 and the gross profit percentage decreased to 7% from 9% in the first nine months of 2006.
Fuel Services Outlook for Fourth Quarter 2007
For the fourth quarter of 2007, our fuel services revenue is projected to be about 50% higher than
that of the third quarter due to an expected increase in deliveries. It is anticipated that the
average realized price will be slightly higher.
Fuel Services Outlook for the Year 2007
Cameco expects 2007 revenue from the fuel services business to be nearly 5% higher than in 2006 due
to an anticipated increase in the average realized selling price. Reported sales volumes are
expected to be about 5% lower than in 2006.
Reported sales volume from fuel services in 2007 is expected to total 17.6 million kgU, down from
our earlier estimate of 19.1 million kgU. As we have previously indicated, Camecos sales targets
are typically not fully committed as we enter a year. We have decided not to pursue further sales
of conversion beyond the 17.6 million kgU given the temporary suspension of UF6
production noted below. This compares to sales of 18.5 million kgU in 2006. The total cost of
product sold is expected to increase due largely to the expensing of standby costs incurred during
the shutdown of the UF6 plant. For more details on the plant shut down, see the
discussion under Port Hope Conversion Facility later in this report.
The fuel services business segment outlook for the fourth quarter and 2007 is forward-looking
information and is based on the following key assumptions:
|
|
|
no significant changes in our estimates for sales volumes, costs, and prices, |
|
|
|
|
no further disruption of supply from our facilities, |
|
|
|
|
no disruption of supply from third-party sources, and |
|
|
|
|
a US/Canadian spot exchange rate of $1.00. |
If actual events differ from the assumptions set out above, the results for Camecos fuel services
business segment in the fourth quarter and in 2007 may differ materially from the above forecast.
Fuel Services Price Sensitivity Analysis
The majority of fuel services sales are at fixed prices with inflation escalators. In the short
term, Camecos financial results for fuel services are relatively insensitive to changes in the
spot price for conversion. Newer fixed-price contracts generally reflect longer-term prices at the
time of contract award. Therefore, in the coming years, our contract portfolio for conversion
services will be positively impacted by these higher fixed-price contracts.
- 34 -
UF6 Conversion Market Update
Spot market and long-term UF6 conversion prices were steady over the quarter. Outlined
below are the industry average spot market prices (TradeTech and UxC) for North American and
European conversion services.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept 30/07 |
|
June 30/07 |
|
Sept 30/06 |
|
June 30/06 |
Average spot market price
($US/kgU) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America |
|
|
11.13 |
|
|
|
11.63 |
|
|
|
11.63 |
|
|
|
11.63 |
|
Europe |
|
|
11.15 |
|
|
|
11.15 |
|
|
|
12.00 |
|
|
|
12.00 |
|
Outlined below are the industrys average long-term prices (TradeTech and UxC) for North American
and European conversion services.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept 30/07 |
|
June 30/07 |
|
Sept 30/06 |
|
June 30/06 |
Average long-term price
($US/kgU) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America |
|
|
12.25 |
|
|
|
12.25 |
|
|
|
12.25 |
|
|
|
12.25 |
|
Europe |
|
|
13.00 |
|
|
|
13.00 |
|
|
|
13.50 |
|
|
|
13.50 |
|
Fuel Services Operations Update
Blind River Refinery
We produced 1.9 million kgU as UO3 in the third quarter of 2007 compared to 3.2 million
kgU in the third quarter of 2006. Total UO3 production for the first nine months of 2007
was 8.3 million kgU compared to 13.5 million kgU for the same period in 2006. Limited supply of
uranium feed for the plant has resulted in lower UO3 production in 2007.
Production at the Blind River refinery has been constrained due to the lack of uranium feed, as
deliveries continue to fall short of plan. Under our conversion services contracts, customers
supply the uranium concentrates to be processed. In the past, many customers stored large
inventories at our facility, providing ample feedstock for the refinery. Customers now hold
virtually no inventory as concentrates and provide the feedstock on a just-in-time basis.
Shipments of UO3 were made to Springfields Fuels Limited (SFL) in the third quarter so
that they could maintain adequate inventories.
We have received comments from various federal agencies on the draft EA submitted in support of our
application to increase the licensed capacity of the refinery to 24 million kgU as UO3.
We have addressed the agency questions and anticipate the CNSC will issue its draft screening
report for public comment during the fourth quarter. Final approval is expected by the end of the
first quarter of 2008.
- 35 -
Port Hope Conversion Facility
Camecos Port Hope conversion facilities produced 0.9 million kgU as UF6 and UO2
in the third quarter of 2007, compared to 3.2 million kgU in the third quarter of 2006. The
lower production reflects suspended operation of the UF6 plant as described below and a
summer shutdown of the UO2 plant. Conversion production was 7.6 million kgU for the
first nine months of 2007 compared to 8.6 million kgU for of the same period in 2006.
On July 13, 2007, contamination of the soil under the UF6 plant was discovered. After
initial localized investigations, production of UF6 was suspended on July 19, 2007 to
allow a comprehensive investigation. Relevant regulatory agencies were notified and continue to
receive daily updates. The local community was also advised of the situation and is being updated.
Extensive work has been carried out to determine the extent of the contamination, assess possible
methods of managing it, and determine how to prevent future contamination. On October 24, 2007,
Cameco received test results from a groundwater sample taken in the conversion facilitys parking
lot indicating levels of uranium, arsenic and potassium above historic results from regular
monitoring wells in the same area. These results indicate that the contamination may have passed
under a municipal road that runs through the site. Drilling and sampling to determine the extent of
the contamination will continue in the fourth quarter. The concentrations of these materials are
very low, measured in parts per million, and the contamination remains isolated.
Camecos priority now is to prevent further spread of the contamination. We have begun installation
of a control system intended to block the flow of groundwater in this area. Water collected through
the system will be treated to remove contaminants before release to the environment. These measures
will be part of a broader system to be installed subject to regulatory approval.
Three extensive reports on the situation at the UF6 plant have been provided to the
regulators and a significant development report was presented to the CNSC on September 13, 2007.
The most recent report, submitted on October 15, 2007, provided a root cause analysis of the
contamination and corrective actions that will be carried out in the plant. In essence, corrosive
chemicals and other liquids contacted floor structures such as pits and trenches that were not well
designed for holding liquids over extended periods.
This situation will not be allowed to continue. Cameco has changed its operating practices to
ensure that greater attention is paid to proper use and maintenance of in-ground structures.
Cameco has already begun to act on the report by developing a plan to address the corrective action
recommendations resulting from the root cause analysis. One immediate action taken was
establishment of a task force, led by a third-party consultant that has developed design criteria
for in-ground structures and liquid management practices. Cameco will also develop and install a
new groundwater monitoring system that will provide early detection of leaks from the
UF6 plant and the ability to assess the effectiveness of the groundwater control
measures that will be put in place.
Despite the problems arising from past practices, the health and safety of employees and the public
have not been jeopardized.
- 36 -
Approval by CNSC staff is required to restart UF6 production. UF6 production
is now expected to resume late in the first quarter of 2008 subject to regulatory approvals.
In addition to our production at the Port Hope facility, we expect to secure up to another 4.4
million kgU as UF6 from the SFL facility in 2007.
Cameco plans to meet scheduled UF6 deliveries for the remainder of the year based on
existing inventory and production from the SFL facility. Cameco has sufficient UF6
inventory on hand to meet delivery commitments through the end of the first quarter of 2008,
assuming customers do not accelerate deliveries and other UF6 production and purchases
proceed as planned.
Suspension of UF6 production does not affect uranium dioxide (UO2) production
or other activities at the site.
The CNSC has not yet issued the draft scope for the required EA of the Vision 2010 project to clean
up and modernize the Port Hope conversion facility site. Cameco expects to receive the draft EA
scope in the fourth quarter of 2007. The CNSC has indicated that the EA scope is not likely to be
finalized until mid 2008.
Fuel Manufacturing
The production of fuel bundles was suspended for a number of weeks during the third quarter of 2007
after a customer raised concerns about a defective fuel bundle manufactured by Zircatec, that was
discharged from a reactor on August 9, 2007. A root-cause analysis of the defective bundle was
conducted with the help of Nuclear Safety Solutions, an external consultant. All aspects of the
manufacturing process that might have led to the defective bundle were considered. As a result of
the investigation, Zircatec has introduced a more rigorous process review and control regime to
ensure customer expectations are met. Although no definitive cause of the defective bundle was
identified, some possibilities were recognized, which has led to some manufactured bundles being
tracked closely. The investigation will not be completed until the customer has completed its
post-irradiation examination early in 2008.
On October 1, 2007 Zircatec resumed production. The shortfall in production will be made up during
the coming months. A shortfall in bundle production that occurred in 2006 was made up by the end of
the second quarter of 2007.
Based on the EA guidelines for the modifications to the Zircatec plant required to produce slightly
enriched uranium (SEU) fuel for Bruce Power, a draft EA screening report was produced by the CNSC
and sent out for a 30-day public comment period on September 19, 2007. This report will be revised
by CNSC staff and presented for consideration by the commission at a future hearing.
- 37 -
NUCLEAR ELECTRICITY GENERATION
Highlights
Bruce Power Limited Partnership (100% basis)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30 |
|
September 30 |
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
Output - terawatt hours (TWh) |
|
|
6.8 |
|
|
|
6.5 |
|
|
|
18.6 |
|
|
|
19.8 |
|
Capacity factor (%) 1 |
|
|
96 |
|
|
|
92 |
|
|
|
88 |
|
|
|
94 |
|
Realized price ($/MWh) |
|
|
53 |
|
|
|
48 |
|
|
|
52 |
|
|
|
49 |
|
Average Ontario electricity spot
price ($/MWh) |
|
|
47 |
|
|
|
46 |
|
|
|
48 |
|
|
|
48 |
|
($ millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electricity revenue |
|
|
362 |
|
|
|
312 |
|
|
|
960 |
|
|
|
964 |
|
Operating costs 2 |
|
|
206 |
|
|
|
206 |
|
|
|
674 |
|
|
|
577 |
|
Cash costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- operating & maintenance |
|
|
124 |
|
|
|
134 |
|
|
|
448 |
|
|
|
366 |
|
- fuel |
|
|
19 |
|
|
|
17 |
|
|
|
49 |
|
|
|
48 |
|
- supplemental rent 3 |
|
|
28 |
|
|
|
28 |
|
|
|
85 |
|
|
|
85 |
|
Non cash costs (amortization) |
|
|
35 |
|
|
|
27 |
|
|
|
92 |
|
|
|
78 |
|
Income before interest
and finance charges |
|
|
156 |
|
|
|
106 |
|
|
|
286 |
|
|
|
387 |
|
Interest and finance charges |
|
|
(6 |
) |
|
|
12 |
|
|
|
0 |
|
|
|
35 |
|
Earnings before taxes |
|
|
162 |
|
|
|
94 |
|
|
|
286 |
|
|
|
352 |
|
Cash from operations |
|
|
174 |
|
|
|
194 |
|
|
|
341 |
|
|
|
433 |
|
Capital expenditures |
|
|
15 |
|
|
|
32 |
|
|
|
57 |
|
|
|
65 |
|
Operating costs ($/MWh) |
|
|
30 |
|
|
|
33 |
|
|
|
36 |
|
|
|
30 |
|
Distributions |
|
|
125 |
|
|
|
135 |
|
|
|
270 |
|
|
|
415 |
|
|
|
|
1 |
|
Capacity factor for a given period represents the amount of electricity actually
produced for sale as a percentage of the amount of electricity the plants are capable of
producing for sale. |
|
2 |
|
Net of cost recoveries. |
|
3 |
|
Supplemental rent is about $28.3 million per operating reactor for 2007. |
In the third quarter of 2007, BPLP generated cash from operations of $174 million compared to $194
million in the third quarter of 2006. The decrease reflects increased working capital requirements,
which more than offset the higher revenues. Capital expenditures for the third quarter of 2007
totalled $15 million compared to $32 million during the same period in 2006.
BPLP also distributed $125 million to the partners in the third quarter, with Camecos share being
$40 million. The partners have agreed that all future excess cash will be distributed on a monthly
basis and that separate cash calls will be made for major capital projects.
- 38 -
Camecos Earnings from BPLP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30 |
|
September 30 |
($ millions) |
|
2007 |
|
2006 |
|
2007 |
|
2006 |
BPLPs earnings before taxes (100%) |
|
|
162 |
|
|
|
94 |
|
|
|
286 |
|
|
|
352 |
|
Camecos share of pre-tax earnings
before adjustments |
|
|
51 |
|
|
|
30 |
|
|
|
90 |
|
|
|
111 |
|
Proprietary adjustments |
|
|
(2 |
) |
|
|
1 |
|
|
|
1 |
|
|
|
4 |
|
Pre-tax earnings from BPLP |
|
|
49 |
|
|
|
31 |
|
|
|
91 |
|
|
|
115 |
|
Third Quarter
Earnings Before Taxes
Camecos pre-tax earnings from BPLP amounted to $49 million during the third quarter compared to
$31 million over the same period in 2006. This increase in 2007 was due to improved realized prices
and higher generation in the quarter.
Output
BPLP achieved a capacity factor of 96% in the third quarter of 2007, compared to 92% in the same
period of 2006. During the third quarter of 2007, the BPLP units generated 6.8 TWh of electricity
compared to 6.5 TWh in 2006.
Outlined below are the maintenance activities for BPLP that occurred during the third quarter of
2007.
Unplanned Outages
|
|
|
|
|
Bruce B Unit 6
|
|
|
|
There was an 8-day outage on Unit B6 to repair a
heat transport system leak. |
During the third quarter of 2007, the B reactors were offline for eight days, due to unplanned
outages. In the third quarter of 2006, the B reactors experienced 24 days of outages.
Price
For the third quarter of 2007, BPLPs electricity revenue increased to $362 million from $312
million over the same period in 2006 due to a stronger price and higher output.
The realized price achieved from a mix of contract and spot sales averaged $53 per MWh in the
quarter, which was 10% higher than the realized price last year. During the quarter, the Ontario
electricity spot price averaged $47 per MWh, compared to $46 per MWh in the third quarter of 2006.
To reduce its exposure to spot market prices, BPLP has a portfolio of fixed-price sales contracts.
During the third quarter of 2007, about 30% of BPLP output was sold under fixed-price contracts,
down from the 53% level during the same period in 2006.
Cameco provides guarantees of up to $47 million to customers under these contracts. At September
30, 2007, Camecos actual exposure under these guarantees was nil. In addition, Cameco has agreed
to provide up to $133 million in guarantees to CNSC and $58 million to
- 39 -
Ontario Power Generation
Inc. (OPG) to support other Bruce Power commitments. Of these
amounts, corporate guarantees have been issued for $24 million to the CNSC and $58 million to OPG
at September 30, 2007.
Costs
Operating costs (including amortization) were $206 million in the third quarter of 2007, unchanged
compared to the same period of 2006. About 95% of BPLPs operating costs are fixed. As such, most
of the costs are incurred whether the plant is operating or not. On a per MWh basis, the operating
cost in the third quarter of 2007 was $30, compared to $33 in the third quarter of 2006.
Year to Date
Earnings Before Taxes
For the nine months ended September 30, 2007, BPLP earnings before taxes were $286 million compared
to $352 million in 2006. The lower earnings are a result of lower electricity generation and higher
operating costs. For the year to date, Camecos earnings before tax from BPLP amounted to $91
million compared to $115 million over the same period in 2006.
Output
For the first nine months of the year, the BPLP units achieved a capacity factor of 88%, compared
with 94% in the same period last year. These units produced 18.6 TWh during the first nine months
of 2007, a decrease of 1.2 TWh over the same period last year due primarily to the planned outage
of unit 6, which was completed in April.
Price
For the first nine months of 2007, BPLPs electricity revenue totalled $960 million, compared to
$964 million in 2006. During the period, BPLPs realized price averaged $52 per MWh from a mix of
contract and spot sales compared with $49 per MWh during the same period last year. The Ontario
electricity spot price averaged about $48 per MWh during the first nine months of the year,
unchanged from a year ago.
During the first nine months of 2007, about 37% of BPLPs output was sold under fixed-price
contracts compared to 50% in the same period in 2006.
Costs
For the first nine months of 2007, operating costs were $674 million, compared with $577 million in
the same period in 2006. This increase primarily reflects the additional costs associated with the
unit B6 planned outage, additional overtime to maintain the base work programs, winter storm
coverage during the first quarter and higher post-employment benefits and other employee-related
costs.
BPLP Outlook Considerations
The results from BPLP are influenced by a number of factors including operating performance, costs
and realized price. The operating performance is affected by planned and unplanned outages. Total
costs are relatively insensitive to changes in output, as about 95% of BPLPs operating costs are
fixed and most of the costs are incurred whether the plant is operating or not. As a result, unit
costs are dependent on output and subject to large variability if output changes. Cameco reports
BPLP costs net of recoveries. Realized prices are made up of a mixture of sales
- 40 -
under contract at
fixed prices and sales in the Ontario spot electricity market. The
Ontario spot price is dependent on a number of factors such as the supply of and demand for electricity. Demand
for electricity is very sensitive to Ontario weather patterns.
BPLPs Outlook for Fourth Quarter 2007
In the fourth quarter of 2007, there are no planned outages. As a result, BPLPs average unit costs
are expected to be about $30 per MWh, approximately the same as in the third quarter of 2007.
For the fourth quarter of 2007, we anticipate BPLP revenue to be approximately the same as in the
third quarter, as generation and the estimated average realized price are expected to be similar.
BPLPs Outlook for 2007
In 2007, capacity factors for the B units are expected to average about 90% compared to 91%
achieved in 2006. After investing significant capital on refurbishing the B units over the past few
years, we anticipate continued reliable performance with the only planned outage being the one
completed in April.
For 2007, the average unit cost is expected to rise to about $35 per MWh compared to $31 in 2006.
Total costs are expected to rise by 10% in 2007 over 2006. The increase is due primarily to a rise
in staff costs, the costs associated with the planned outage, higher fuel costs as well as lower
incidental recoveries compared to 2006. In addition, higher amortization expenses are expected in
2007, reflecting the addition of the new capital projects.
For 2007, we anticipate BPLP revenue to be 7% higher than in 2006 due to higher expected realized
prices, which are made up of fixed contract prices and Ontario spot market electricity prices. In
2006, the average realized price was $48 per MWh.
The fourth quarter and 2007 outlook for BPLP is forward-looking information and assumes that the B
units will achieve their targeted capacity factor and that there will be no significant changes in
current estimates for costs and prices. If actual events differ from these assumptions, BPLPs
results for the fourth quarter and 2007 may differ materially from the above forecast.
Electricity Price Sensitivity Analysis
For the remainder of 2007, BPLP has about 2.5 TWh under contract, which would represent about 36%
of Bruce B generation at its planned capacity factor. For the remainder of 2007, a $1.00 per MWh
change in the spot price for electricity in Ontario would change Camecos after-tax earnings from
BPLP by about $1 million.
GOLD
Cameco owns approximately 53% of Centerra, which is listed on the Toronto Stock Exchange under the
symbol CG. Centerra owns and operates two gold mines: Kumtor, which is located in the Kyrgyz
Republic and Boroo located in Mongolia.
- 41 -
Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30 |
|
September 30 |
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
Revenue ($ millions) |
|
|
104 |
|
|
|
86 |
|
|
|
317 |
|
|
|
314 |
|
Gross profit ($ millions) |
|
|
23 |
|
|
|
10 |
|
|
|
87 |
|
|
|
90 |
|
Gross profit % |
|
|
22 |
|
|
|
12 |
|
|
|
27 |
|
|
|
29 |
|
Realized price (US$/ounce) |
|
|
680 |
|
|
|
617 |
|
|
|
665 |
|
|
|
595 |
|
Sales volume (ounces) |
|
|
144,000 |
|
|
|
124,000 |
|
|
|
427,000 |
|
|
|
464,000 |
|
Gold production (ounces) 1 |
|
|
137,000 |
|
|
|
126,000 |
|
|
|
423,000 |
|
|
|
444,000 |
|
|
|
|
1 |
|
Represents 100% of production from the Kumtor and Boroo mines. |
Gold Results
Third Quarter
For the three months ended September 30, 2007, revenue from our gold business increased by $18
million to $104 million compared to the third quarter of 2006. The increase in revenue was due to
higher production and an improved realized gold price. The realized price for gold rose to $680
(US) per ounce in the quarter compared to $617 (US) per ounce in the third quarter of 2006, due to
higher spot prices.
Kumtors production was 78,000 ounces compared to 53,000 ounces in the third quarter of 2006. This
increase was due to increased throughput and a higher mill head grade that averaged 2.1 grams per
tonne (g/t) in the quarter compared to 1.6 g/t in the same period in 2006.
Production at Boroo was 59,000 ounces in the quarter compared to 73,000 ounces in the third quarter
of 2006. The average head grade of ore fed to the mill was 3.6 g/t compared 4.2 g/t the same period
last year.
Year to Date
For the nine months ended September 30, 2007, revenue from our gold business increased by $3
million to $317 million compared to 2006. The increase in revenue was due to a higher realized gold
price, which offset the impact of lower output. Production at Kumtor continues to be impacted by
the pitwall movement that occurred in July 2006. The realized price for gold rose to $665 (US) per
ounce in 2007 compared to $595 (US) per ounce in 2006, due to higher spot prices.
Kumtors production was 227,000 ounces compared to 241,000 ounces in the first nine months of 2006.
The mill head grade has averaged 2.3 g/t, unchanged compared to 2006, but recoveries were lower in
2007 due to lower throughput as a result of increased downtime at the mill to complete repairs.
Centerra is extending the Kumtor pit to access high-grade ore as discussed in Camecos first
quarter report. In a news release issued on July 19, 2007, Cameco announced that after preliminary
analysis, Centerras independent geotechnical experts recommended using flatter angles on the pit
wall to provide greater stabilization. The lower slope angles require the removal of more waste
than previously planned delaying access to the high-grade ore until the second
- 42 -
half of 2008 causing estimated production at Kumtor to fall to 300,000 ounces in 2007. Further
technical assessment, such as additional geotechnical drilling, till analysis, de-watering tests
and geophysical surveys is ongoing. Centerra expects to provide with its year-end results a revised
outlook for life-of-mine production including an assessment, if any, of the impact on the reserves
and resources.
Production at Boroo was 196,000 ounces year to date compared to 203,000 ounces in the first nine
months of 2006. The average head grade of ore fed to the mill was 3.8 g/t compared to 4.1 g/t in
the same period last year.
Gold Outlook for the Year 2007
Overall, 2007 production, on a 100% basis, is expected to range between 550,000 and 560,000 ounces
of gold. At Kumtor, gold production for the full year 2007 is expected to be approximately 300,000
ounces. At Boroo, on a 100% basis, we expect production to total 250,000 to 260,000 ounces of gold
in 2007. Gold revenue in 2007 is expected to be similar to revenue in 2006 due to higher gold
prices, partially offset by lower production. This outlook for the gold business is forward-looking
information and is based on the following key assumptions:
|
|
|
Centerras forecast production is achieved, |
|
|
|
|
spot gold price of $650 (US) per ounce, and |
|
|
|
|
a US/Canadian spot exchange rate of $1.00. |
If actual events differ from the assumptions set out above, Camecos 2007 results from its gold
segment may differ materially from the above forecast.
Business Developments/Political Updates
Kyrgyz Republic
The political situation in the Kyrgyz Republic continues to evolve and there remains a risk of
political instability.
During the first quarter of 2007, the Kyrgyz Parliament began to consider draft legislation that,
among other things, challenges the legal validity of Kumtor agreements with the Kyrgyz Republic,
proposes recovery of additional taxes on amounts relating to past activities, and provides for the
transfer of gold deposits (including Kumtor) to a state-owned entity. If enacted, there would be a
substantial risk of harm to the value of Camecos investment in Centerra.
During the third quarter, Cameco and Centerra signed binding agreements with the Kyrgyz government,
which are expected to provide additional business certainty for mining operations at Kumtor,
further align the parties business interests and support Centerras growth plans. The parties have
agreed to extend the deadline for closing the transactions contemplated by the agreements from
October 31, 2007 to February 15, 2008.
Under the terms of the agreements, the Kyrgyz government and Kyrgyzaltyn JSC, a joint stock company
owned by the Kyrgyz government, agree to support Centerras continuing long-term development of the
Kumtor project and agree to facilitate eventual divestiture of Camecos interest in Centerra. In
return, the Kyrgyz government will receive 32.3 million shares (22.3 million net from Cameco and 10
million treasury shares from Centerra) upon closing of the
- 43 -
definitive legal agreements. Of these, 15 million shares will be received immediately and
17.3
million shares will be held in escrow until the earliest of:
|
|
|
Camecos holdings of Centerras issued and outstanding shares fall below 17.3 million
shares, |
|
|
|
|
the volume-weighted average closing price of Centerras shares on the TSX being no less
than $13.30 for at least seven business days, or |
|
|
|
|
the fourth anniversary of the closing. |
After the transfer of all the shares is completed, Cameco will own about 41% of Centerra, the
Kyrgyz Republic will own about 29% and the public shareholders will own the remaining 30%. When
Camecos ownership interest falls below 50%, we will no longer consolidate Centerras financial
results and will instead account for Centerra using the equity method.
These agreements are subject to a number of conditions including the approval by Parliament of the
Kyrgyz Republic. There can be no assurance that parliamentary approval will be received or that the
other conditions will be satisfied.
The Kyrgyz government submitted the agreements for parliamentary approval in early September 2007.
The Parliament began to deliberate the issue during the first half of October. On October 8, 2007,
the Parliament asked the parliamentary committee on industry and trade to review the agreements and
give its conclusion. On October 10, 2007 the chair of the committee requested additional time for
consideration, and the Parliament scheduled its final voting on the issue for October 22, 2007, but
Parliament was dismissed prior to voting.
On October 21, 2007, a constitutional referendum was held in, and passed by citizens of, the Kyrgyz
Republic. It is reported that the new constitution includes a proportional representation system of
voting for Parliament, gives Parliament more power in forming the government, limits the
presidents ability to dismiss Parliament and increases the number of deputies.
On October 22, 2007, the president of the Kyrgyz Republic dismissed the Parliament effective that
day. Parliamentary elections have been scheduled for December 16, 2007.
On October 24, 2007, the president accepted the resignations of the prime minister and cabinet;
however the president directed them to continue to perform their duties until a new cabinet is
formed following the parliamentary elections.
As noted above, the parties have agreed to extend the deadline for closing the transactions
contemplated by the agreements from October 31, 2007 to February 15, 2008. Cameco has recorded a
charge of $105 million ($125 million after a net tax expense of $20 million) as a result of its
agreement to transfer 22.3 million Centerra shares to the Kyrgyz Republic. Refer to note 16 of the
unaudited interim financial statements.
Mongolia
On August 3, 2007 Centerras subsidiary Boroo Gold Company entered into an amended Boroo stability
agreement with the government of Mongolia. Centerra and the Mongolian government agreed that,
effective January 1, 2007, the Boroo project will be subject to the generally applicable 25%
corporate income tax rate, which will apply until the termination of the Boroo stability agreement
in July 2013. Under the previous agreement, Centerra was subject to income tax at the rate of 20%
for the three-year period commencing March 1, 2007 and 40% thereafter.
- 44 -
In addition, effective August 3, 2007, the mineral royalty payable will be 5% rather than the 2.5%
previously applicable. This agreement with the Mongolian government reaffirms the applicability of
the Boroo stability agreement.
The Mongolian Parliament continues to debate recent changes to mining legislation and the
applicability of the windfall profit tax as well as state participation in various mining projects.
The windfall tax applies at the rate of 68% on sales of gold above $500 (US) per ounce. Under the
new minerals law, a deposit may be deemed to be a mineral deposit of strategic importance. If a
deposit is deemed strategic, the state may take up to a 34% interest in those strategic deposits in
respect of which exploration was funded privately, or a 50% interest in those strategic deposits in
respect of which exploration was funded by Mongolia. On February 6, 2007, Parliament designated the
Boroo deposit as strategic but resolved that Mongolia would take no interest, as the deposit would
continue to be subject to the terms of the existing stability agreement. While the Mongolian
government has acknowledged that neither the windfall profit tax nor the strategic deposit
provisions will apply to the Boroo mine, it has not yet agreed to provide similar protection to
Centerras Gatsuurt project and may yet determine Gatsuurt to be of strategic importance.
Pursuant to an agreement between Centerra Gold Mongolia Limited (CGM) and Gatsuurt LLC, an arms
length Mongolian limited liability company, under which CGM acquired the Gatsuurt licences, CGM
agreed to transfer the licence that covers the central zone of the Gatsuurt property to Gatsuurt
LLC if CGM did not complete a feasibility study by December 31, 2005. CGM completed a feasibility
study in December 2005. In early 2006 Gatsuurt LLC informed Centerra that it does not believe that
CGM complied with its obligation. In December 2006, Gatsuurt LLC began proceedings in the Mongolian
national arbitration court (MNAC) alleging non-compliance by CGM and seeking the return of the
licence. CGM believes that the Gatsuurt LLC claim is without merit and on July 10, 2007 filed a
petition with Mongolias district court contesting the jurisdiction of the MNAC. In its first
hearing on procedural matters, held on July 20, 2007, the MNAC decided to suspend its proceedings,
pending a decision by the Mongolian district court as to MNACs jurisdiction. On July 25, 2007, the
Mongolian district court returned CGMs petition, without a decision on the jurisdictional issue,
to permit CGM to supplement its submissions. All proceedings were suspended in August 2007 pending
the outcome of ongoing settlement discussions.
Centerra was in discussions with the Mongolian government in 2006 and during the first half of 2007
regarding an investment agreement in respect of the Gatsuurt project. The parties temporarily
deferred those discussions pending a resolution on Centerras Boroo stability agreement with the
government, which was amended as of August 3, 2007. Centerra also received a letter from the
minister of finance confirming the governments willingness to conclude an investment agreement in
respect of the Gatsuurt project and to advance the approval and registration of reserves with the
applicable Mongolian authorities, and anticipates such registration may be completed this fall. An
agreement on Gatsuurt will solidify Centerras current position in Mongolia, provide for a stable
operational environment, and allow Centerra to review its exploration and growth strategy. Centerra
is preparing to advance discussions with the Mongolian government regarding an investment agreement
for Gatsuurt now that a resolution of outstanding issues concerning the Boroo stability agreement
has been reached.
On March 13, 2007, Centerra suspended its development operations at Gatsuurt, other than those
necessary to maintain the property in good standing and comply with permits, pending finalization
of the terms of an investment agreement with the Mongolian government and
- 45 -
resolution of the Gatsuurt LLC claim. As at September 30, 2007, Centerra has expended an aggregate
of $19 million (US) on the exploration and development of Gatsuurt project, and the property has a
recorded book value of $2.3 million (US). Upon a satisfactory investment agreement being reached
and the final settlement of the Gatsuurt LLC claim, Centerra expects to begin the first stage of
development of Gatsuurt. The first stage, budgeted at $20 million (US), entails constructing a
54-kilometre access road and mine facilities at Gatsuurt, procuring required mobile mining
equipment and expanding the camp at Boroo to allow for processing of Gatsuurt ore. Centerras
reported mineral reserves and resources for the Gatsuurt property are not materially affected by
any of the legal, title, taxation or socio-political issues discussed above.
On October 17, 2007, Centerra completed the acquisition of the remaining indirect 5% minority
interest in Boroo Gold Company and a net profits interest in the Ikh Dishir deposit for $8.3
million (US). In addition, a Centerra subsidiary also has a one-year exclusive option to indirectly
acquire eleven exploration licenses for $1.2 million (US).
Gold Market Update
The average spot market gold price during the third quarter of 2007 was $680 (US) per ounce, an
increase of 9% compared to $622 (US) per ounce in 2006.
Gold Price Sensitivity Analysis
For the remainder of 2007, a $25.00 (US) per ounce change in the gold spot price would change
Camecos revenue by about $3 million (Cdn), cash flow by about $3 million (Cdn) and net earnings by
less than $2 million (Cdn).
NUCLEAR INDUSTRY DEVELOPMENTS
United States
NRG Energy, Inc. and South Texas Project Nuclear Operating Company filed a combined construction
and operating licence (COL) application on September 24 with the US Nuclear Regulatory Commission
(NRC) to build and operate two nuclear units at the South Texas Project nuclear power station site.
The new advanced boiling water reactors are expected to come on line in 2014 and 2015, and total
capacity will equal or exceed 2,700 MW. The NRC will now begin an acceptance review process,
expected to take about two months, and will then begin its detailed review process that could take
up to 42 months.
On September 27, the Tennessee Valley Authoritys (TVA) board of directors voted to apply, on
behalf of NuStart Energy Development Consortium, for a COL for potential new reactors at the
Bellefonte nuclear site. The NuStart Energy Development consortium, of which TVA is a member, will
apply with the NRC to build two Westinghouse AP1000 reactors at Bellefonte. According to TVA
spokesman John Moulton, the licensing review process for the potential new reactors will last a
minimum of 42 months. If the NRC approves the licence, a decision will be made on whether or not to
build the plant.
The US and India have completed negotiations on a bilateral agreement (also known as the 123
Agreement) for peaceful nuclear co-operation that would allow US and Indian companies to
participate in each others civil nuclear energy sector. While a significant step forward, before
trading can begin the Indian government must approve the deal and negotiate safeguards with the
- 46 -
International Atomic Energy Agency (IAEA), the Nuclear Suppliers Group must unanimously approve a
waiver of the guidelines that prohibit trade with India and the US Congress must approve the 123
Agreement.
On August 2, US utility TVA approved a recommendation to complete the second unit at Watts Bar
nuclear power plant in Tennessee. The cost is estimated to be $2.49 billion (US) and is scheduled
for completion by 2013. TVA operates six units at three generating sites, including the Browns
Ferry 1, which was successfully restarted in May 2007.
Europe
According to various news sources, Electricité de France (EdF) believes it could complete a new
reactor in the UK by 2017. By 2025, EdF wants to bring a total of four reactors online in the UK.
Asia
On August 18, construction officially began at the Hongyanhe nuclear power plant in northeast
China. A total of six, 1,000-megawatt reactors are planned including four reactors in the plants
first phase. Eighty-five percent of the equipment used will be of Chinese origin. The plants first
reactor is expected to commence operation in 2012, and three additional reactors should come online
by 2014.
On August 16, Unit 2, a VVER-1000 reactor at the Tianwan nuclear power plant in Chinas Jiangsu
Province, began commercial operation. Unit 1 at Tianwan began commercial operation about three
months ago. China is expected to award Russia with a contract to build two more VVER-1000 reactors
at Tianwan.
Westinghouse Electric and Shaw group signed multibillion-dollar contracts to build four AP 1000
nuclear reactors units in China. Two units will be built at the Sanmen nuclear plant in Zhejiang
province, and two will be built at the Haiyang nuclear plant in Shandong province. Construction is
expected to begin in 2009, with the first unit at Sanmen starting operations in late 2013. The
remaining three units are expected to be operational in 2014 and 2015.
Korea Hydro & Nuclear Power Co. has received approval from South Koreas Ministry of Commerce,
Industry and Energy to build two APR-1400 reactors, a new South Korean design, at the Shin Kori
nuclear power plant. The company expects to complete the first reactor in 2013 and the second unit
by 2014. Long-term plans in South Korea also call for the construction of two more APR-1400
reactors at the Ulchin nuclear power plant, which could be operational in 2016.
Other
For the first time since it voted to ban uranium mining and exploration in the Nunavut territory in
the 1990s, Canadas largest Inuit organization, the Nunavut Tunngavik, enacted a pro-uranium
development policy on September 18, 2007. The guiding principle of the policy is that uranium
exploration and mining must be accomplished in an environmentally and socially responsible way,
and the uranium that results from the mining shall only be used for peaceful and environmentally
friendly purposes. Currently, Cameco has three exploration projects underway in Nunavut.
- 47 -
On September 7, 2007, Australian Prime Minister John Howard and Russian President Vladimir Putin
signed a bilateral agreement on peaceful nuclear co-operation which, when ratified, would allow
Australia to export its uranium to Russia. Under an earlier 1990 agreement, Australian uranium
could be processed in Russia, but only for third-party countries.
LIQUIDITY AND CAPITAL RESOURCES
On August 20, 2007, Cameco provided information on its short-term investment portfolio in light of
disruptions in global credit markets. As at September 30, 2007, all of Camecos investments in
asset-backed commercial paper have been repaid to Cameco except for $13 million invested in two
Canadian market trusts: $7.5 million in Apsley Trust, managed by Metcalf & Mansfield and $5.5
million in Planet Trust, managed under Coventree Capital. Cameco has assessed the recoverability of
these investments and determined that it is unlikely the full value will be recovered. As a result,
we have reduced the carrying value of these investments by $2 million in the quarter.
Credit Ratings
The following table provides Camecos third party ratings for our commercial paper, senior debt and
convertible debentures, as of September 30, 2007:
|
|
|
|
|
Security |
|
DBRS |
|
S&P |
Commercial Paper |
|
R-1 (low) |
|
A-1 (low)* |
Senior Unsecured Debentures |
|
A (low) |
|
BBB+ |
Convertible Debentures |
|
BBB (high) |
|
Not Rated |
|
|
|
* |
|
A-1 (low) is the Canadian National Scale Rating while the Global Scale Rating is A-2. |
Please see Camecos 2006 Annual Information Form dated March 30, 2007, under the heading Rating of
Securities at page 107 for further information regarding these third party ratings of the above
noted Cameco securities.
Debt
In addition to cash from operations, debt is used to provide liquidity. Cameco has sufficient
borrowing capacity to meet its current requirements with access to about $780 million in unsecured
lines of credit.
Cameco has in place a $500 million, five-year, unsecured revolving credit facility. In addition to
direct borrowings under the facility, up to $100 million can be used for the issuance of letters of
credit and, to the extent necessary, up to $400 million may be allocated to provide liquidity
support for the companys commercial paper program. The facility ranks equally with all of Camecos
other senior debt. At September 30, 2007, there were no amounts outstanding under this credit
facility.
- 48 -
Cameco may borrow directly from investors by issuing up to $400 million in commercial paper. At
September 30, 2007, there were no amounts outstanding under the commercial paper program.
Various financial institutions have entered into agreements to provide Cameco up to approximately
$280 million in short-term borrowing and letters of credit facilities. These arrangements are
predominantly used to fulfill regulatory requirements to provide financial assurance for future
decommissioning and reclamation of our operating sites. At September 30, 2007, outstanding letters
of credit amounted to $203 million under these facilities. Cameco has established separate letter
of credit facilities to support the standby product loan facility described below.
Product Loan Facilities
Cameco has arranged for a standby product loan facility with one of its customers. The arrangement,
which was finalized in July of 2006, allows Cameco to borrow up to 2.6 million pounds
U3O8 equivalent (or 1.0 million kgU as UF6) over the period 2006
to 2008 with repayment in 2008 and 2009. Under the loan facility, standby fees of 2.25% are payable
based on the market value of the facility, and interest is payable on the market value of any
amounts drawn at the rate of 4.0% per annum. Any borrowings will be secured by letters of credit
and are repayable in kind.
Revenue from future deliveries to this counterparty (up to the limit of the loan facility) will be
deferred until the loan arrangement has been terminated, or if drawn upon, when the loan is repaid
and that portion of the facility is terminated.
The market value of the facility is based on the quoted market price of the products and at
September 30, 2007 was approximately $220 million (US). As at September 30, 2007, the company did
not have any loan amounts outstanding under this facility.
Cameco has established $150 million (US) of letter of credit facilities maturing in 2010 to support
this standby product loan facility. At September 30, 2007, there were no amounts outstanding under
these letter of credit facilities. We expect to terminate the product loan facility in 2008. Once
it is terminated, these facilities will be cancelled.
Debentures
Camecos senior unsecured debentures consist of $300 million of debentures that bear interest at
the rate of 4.7% per annum and mature September 16, 2015.
Convertible Debentures
Cameco has $230 million outstanding in convertible debentures. The debentures bear interest at 5%
per annum, mature on October 1, 2013, and at the holders option are convertible into common shares
of Cameco. The debentures are redeemable by the company beginning October 1, 2008 at a redemption
price of par plus accrued interest. Refer to note 7 in the Notes to Consolidated Financial
Statements dated December 31, 2006.
- 49 -
BPLP
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 million revolving credit facility that is available until July 21, 2009 as well as
$103 million of letter of credit facilities. At September 30, 2007, BPLP had $15 million
outstanding under the revolving credit facility and $30 million outstanding under the letter of
credit facilities.
Centerra
Centerra Gold Mongolia LLC, a subsidiary of Centerra, has a $10 million (US) demand credit facility
that bears interest at LIBOR + 2.5%, is secured by the Gatsuurt mining licence, and is guaranteed
by Centerra. At September 30, 2007, Centerra had $10 million (US) outstanding under this facility.
Debt Covenants
Cameco is bound by certain covenants in its general credit facilities. The financially related
covenants place restrictions on total debt, including guarantees, and set minimum levels of net
worth. As at September 30, 2007, Cameco met these financial covenants and does not expect its
operating and investment activities in 2007 to be constrained by them.
Contractual Cash Obligations
There have been no material changes to Camecos contractual cash obligations since December 31,
2006, including payments due for the next five years and thereafter. For further information on
these contractual obligations, refer to the MD&A in Camecos 2006 Annual Financial Review.
Commercial Commitments
There have been no material changes to Camecos commercial commitments since December 31, 2006. For
further information on these commercial commitments, refer to the MD&A in Camecos 2006 Annual
Financial Review.
OUTSTANDING SHARE DATA
At September 30, 2007, there were 349 million common shares and one Class B share outstanding. In
addition, there were 6.6 million stock options outstanding with exercise prices ranging from $3.13
to $46.88 per share. Cameco also has convertible debentures in the amount of $230 million
outstanding. This issue may be converted into a total of 21.2 million common shares at a conversion
price of $10.83 per share. The debentures are redeemable by Cameco beginning on October 1, 2008 at
a redemption price of par plus accrued interest. At current share prices, we expect existing
holders to convert to equity. During the third quarter of 2007, Cameco repurchased 6.8 million
shares.
- 50 -
AMENDMENT TO THE EMPLOYEE STOCK OPTION PROGRAM
On July 27, 2007, the Board of Directors approved an amendment to the companys stock option
program that allows eligible option holders to elect cash settlement upon exercise of the option.
Settling options in cash reduces the need to issue shares and permits Cameco to apply a portion of
its future free cash flows to, in effect, repurchase shares that would otherwise have been issued,
thereby mitigating the dilution of shareholders interests. In addition, payments made to employees
under the cash settlement alternative are deductible for tax purposes.
With the introduction of the cash settlement feature, we are required to classify the stock options
as liabilities rather than as equity. As a result, we recorded a charge of approximately $94
million in the third quarter and a corresponding $35 million recovery of future income taxes. The
foregoing values are based on a share price of $43.00, which was the closing price on the Toronto
Stock Exchange on July 27, 2007. Going forward, the liability for the outstanding options subject
to cash settlement will be remeasured using the companys share price at the balance sheet date.
NEW ACCOUNTING STANDARDS
In May 2007, the Accounting Standards Board issued CICA Handbook Section 3031, Inventories, which
supersedes Handbook Section 3030 and converges with the IASBs recently amended standard IAS 2,
Inventories.
The standard introduces significant changes to the measurement and disclosure of inventory. The
measurement changes include; the elimination of LIFO, the requirement to measure inventories at the
lower of cost and net realizable value, the allocation of overhead based on normal capacity, the
use of the specific cost method for inventories that are not ordinarily interchangeable or goods
and services produced for specific purposes, the requirement for an entity to use a consistent cost
formula for inventory of a similar nature and use, and the reversal of previous write-downs to net
realizable value when there is a subsequent increase in the value of inventories. Disclosures of
inventories have also been enhanced. Inventory policies, carrying amounts, amounts recognized as an
expense, write-downs and the reversals of write-downs are required to be disclosed.
This new standard will apply to Cameco effective January 1, 2008 and is not expected to have a
material impact on its consolidated financial statements.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the most recent interim period, there have been no changes in Camecos policies and
procedures and other processes that comprise its internal control over financial reporting, that
have materially affected, or are reasonably likely to materially affect, the companys internal
control over financial reporting.
QUALIFIED PERSONS
The disclosure of scientific and technical information regarding the following Cameco properties in
this news release and MD&A were prepared by or under the supervision of the following qualified
persons for the purpose of National Instrument 43-101:
- 51 -
|
|
|
|
|
Qualified Persons |
|
Properties |
|
|
David Bronkhorst, general manager,
McArthur River, Cameco |
|
McArthur River/Key Lake |
|
|
Les Yesnik, general manager, Key Lake mill, Cameco
|
|
|
|
|
C. Scott Bishop, chief mine engineer,
Cigar Lake project, Cameco
|
|
Cigar Lake |
|
|
Ian Atkinson, vice-president, exploration, Centerra Gold
|
|
Kumtor |
CAUTION REGARDING FORWARD-LOOKING INFORMATION
Statements contained in this MD & A, which are not historical facts, are forward-looking statements
that involve risks, uncertainties and other factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements. Factors that could
cause such differences, without limiting the generality of the following, include: the impact of
the sales volume of fuel fabrication services, uranium, conversion services, electricity generated
and gold; volatility and sensitivity to market prices for uranium, conversion services, electricity
in Ontario and gold; competition; the impact of change in foreign currency exchange rates (such as
Canadian/US rates) and interest rates; imprecision in decommissioning, reclamation, reserve and tax
estimates; litigation or arbitration proceedings; inability to enforce legal rights; defects in
title; environmental and safety risks including increased regulatory burdens and long-term waste
disposal (such as the risk of uranium and production-associated chemicals affecting the soil at the
Port Hope UF6 conversion plant); unexpected or challenging geological or hydrological conditions
(including at the McArthur River and Cigar Lake deposits); adverse mining conditions; political
risks arising from operating in certain developing countries (including the Kyrgyz Republic,
Kazakhstan and Mongolia); terrorism; sabotage; a possible deterioration in political support for
nuclear energy; changes in government regulations and policies, including tax and trade laws and
policies; demand for nuclear power; replacement of production (including through placing Inkai and
Cigar Lake into production and transitioning to new mining zones at McArthur River); failure to
obtain or maintain necessary permits and approvals from government authorities; legislative and
regulatory initiatives regarding deregulation, regulation or restructuring of the electric utility
industry in Ontario; Ontario electricity rate regulations; natural phenomena including inclement
weather conditions, fire, flood, underground floods, earthquakes, pit wall failure (including
further highwall ground movement at the Kumtor mine) and cave-ins; ability to maintain and further
improve positive labour relations; strikes or lockouts; operating performance, disruption in the
operation of, and life of the companys and customers facilities; availability of reagents and
supplies critical to production (including the availability at the companys operations in
Kazakhstan); decrease in electrical production due to planned outages extending beyond their
scheduled periods or unplanned outages; success of planned development projects (including the
remediation of and return to pre-flood construction and development at Cigar Lake); and other
development and operating risks.
- 52 -
Although Cameco believes that the assumptions inherent in the forward-looking statements are
reasonable, undue reliance should not be placed on these statements, which only apply as of the
date of this report. Cameco disclaims any intention or obligation to update or revise any
forward-looking statement, whether as a result of new information, future events or otherwise.
|
|
|
|
|
Investor & media inquiries: |
|
Alice Wong |
|
(306) 956-6337 |
|
Investor inquiries: |
|
Bob Lillie |
|
(306) 956-6639 |
|
Media inquiries: |
|
Lyle Krahn |
|
(306) 956-6316 |
INVESTOR INFORMATION
|
|
|
|
|
Common Shares
|
|
Inquiries
|
|
Transfer Agent |
CCO
|
|
Cameco Corporation
|
|
CIBC Mellon Trust Company |
Toronto Stock Exchange
CCJ
New York Stock Exchange
|
|
2121 11th Street West
Saskatoon, Saskatchewan
S7M 1J3
|
|
320 Bay Street, P.O. Box 1
Toronto, Ontario
M5H 4A6 |
Convertible Debentures
|
|
Phone: 306-956-6200
|
|
Phone: 800-387-0825 |
CCO.DB
|
|
Fax: 306-956-6318
|
|
(North America) |
Toronto Stock Exchange
|
|
Web: cameco.com
|
|
Phone: 416-643-5500 |
|
|
|
|
(outside North America) |
- End -
- 53 -
Cameco Corporation
Highlights
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(as adjusted - |
|
|
(as adjusted - |
|
|
|
note 1(b)) |
|
|
note 1(b)) |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
Sept 30/07 |
|
|
Sept 30/06 |
|
|
Sept 30/07 |
|
|
Sept 30/06 |
|
|
Financial (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
681 |
|
|
$ |
360 |
|
|
$ |
1,816 |
|
|
$ |
1,320 |
|
Earnings from operations |
|
|
102 |
|
|
|
71 |
|
|
|
407 |
|
|
|
300 |
|
Net earnings |
|
|
91 |
|
|
|
73 |
|
|
|
355 |
|
|
|
335 |
|
Adjusted net earnings (i) |
|
|
275 |
|
|
|
44 |
|
|
|
539 |
|
|
|
233 |
|
Cash provided by operations |
|
|
450 |
|
|
|
79 |
|
|
|
744 |
|
|
|
405 |
|
Working capital (end of period) |
|
|
|
|
|
|
|
|
|
|
699 |
|
|
|
896 |
|
Net debt to capitalization |
|
|
|
|
|
|
|
|
|
|
9 |
% |
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings - Basic |
|
$ |
0.26 |
|
|
$ |
0.21 |
|
|
$ |
1.00 |
|
|
$ |
0.96 |
|
- Diluted |
|
|
0.25 |
|
|
|
0.20 |
|
|
|
0.96 |
|
|
|
0.91 |
|
- Diluted, adjusted (i) |
|
|
0.74 |
|
|
|
0.12 |
|
|
|
1.45 |
|
|
|
0.64 |
|
Dividend |
|
|
0.05 |
|
|
|
0.04 |
|
|
|
0.15 |
|
|
|
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of paid common
shares outstanding (in thousands) |
|
|
353,113 |
|
|
|
351,629 |
|
|
|
353,071 |
|
|
|
350,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average uranium spot price for the period (US$/lb) |
|
$ |
96.33 |
|
|
$ |
50.83 |
|
|
$ |
102.39 |
|
|
$ |
44.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales volumes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Uranium (in thousands lbs U3O8) |
|
|
7,202 |
|
|
|
5,497 |
|
|
|
24,709 |
|
|
|
23,051 |
|
Fuel services (tU) |
|
|
4,435 |
|
|
|
4,168 |
|
|
|
10,598 |
|
|
|
11,864 |
|
Gold (troy ounces) |
|
|
144,000 |
|
|
|
124,000 |
|
|
|
427,000 |
|
|
|
464,000 |
|
Electricity (TWh) |
|
|
2.2 |
|
|
|
2.1 |
|
|
|
5.9 |
|
|
|
6.3 |
|
Note: Currency amounts are expressed in Canadian dollars unless stated otherwise.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Camecos |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
Cameco Production |
|
|
Share |
|
|
Sept 30/07 |
|
|
Sept 30/06 |
|
|
Sept 30/07 |
|
|
Sept 30/06 |
|
|
Uranium production (in thousands lbs U3O8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
McArthur River |
|
|
69.8 |
% |
|
|
2,604 |
|
|
|
3,927 |
|
|
|
9,194 |
|
|
|
9,873 |
|
|
|
Rabbit Lake |
|
|
100.0 |
% |
|
|
915 |
|
|
|
1,137 |
|
|
|
3,033 |
|
|
|
3,734 |
|
|
|
Crow Butte |
|
|
100.0 |
% |
|
|
173 |
|
|
|
176 |
|
|
|
554 |
|
|
|
543 |
|
|
|
Smith Ranch Highland |
|
|
100.0 |
% |
|
|
498 |
|
|
|
659 |
|
|
|
1,499 |
|
|
|
1,426 |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
4,190 |
|
|
|
5,899 |
|
|
|
14,280 |
|
|
|
15,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel services (tU) |
|
|
100.0 |
% |
|
|
1,015 |
|
|
|
3,373 |
|
|
|
8,071 |
|
|
|
9,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold (troy ounces) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kumtor |
|
|
100.0 |
% |
|
|
78,000 |
|
|
|
53,000 |
|
|
|
227,000 |
|
|
|
241,000 |
|
|
|
Boroo |
|
|
100.0 |
% |
|
|
59,000 |
|
|
|
73,000 |
|
|
|
196,000 |
|
|
|
203,000 |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
137,000 |
|
|
|
126,000 |
|
|
|
423,000 |
|
|
|
444,000 |
|
|
|
|
|
|
|
(i) |
|
Net earnings for the three and nine month periods ended September 30, 2007 have been adjusted to exclude $59 million ($0.16 per share diluted) in
net earnings related to the stock compensation transition to cash settlement as well as $125 million ($0.33 per share diluted) in net earnings related
to the restructuring of Centerra. Net earnings for the nine month period ended September 30, 2006 has been adjusted to exclude $73 million ($0.19
per share diluted) in net earnings related to the recovery of taxes due to tax legislation changes enacted by the provincial and federal governments.
Net earnings for the three and nine month periods ended September 30, 2006 have been adjusted to exclude $29 million ($0.08 per share diluted) in
net earnings related to a gain on sale of our interest in the Fort a la Corne Joint Venture. Adjusted net earnings is a non-GAAP measure. Cameco
believes the exclusion of these items provides a more meaningful basis for period-to-period comparisons of the companys financial results. |
2
Cameco Corporation
Consolidated Statements of Earnings
(Unaudited)
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(as adjusted - |
|
|
(as adjusted - |
|
|
|
note 1(b)) |
|
|
note 1(b)) |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
Sept 30/07 |
|
|
Sept 30/06 |
|
|
Sept 30/07 |
|
|
Sept 30/06 |
|
|
Revenue from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and services |
|
$ |
681,065 |
|
|
$ |
360,284 |
|
|
$ |
1,815,823 |
|
|
$ |
1,319,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and services sold |
|
|
290,448 |
|
|
|
245,011 |
|
|
|
886,649 |
|
|
|
792,788 |
|
Depreciation, depletion and reclamation |
|
|
46,341 |
|
|
|
46,450 |
|
|
|
168,867 |
|
|
|
141,023 |
|
Administration |
|
|
34,566 |
|
|
|
27,406 |
|
|
|
111,896 |
|
|
|
99,201 |
|
Restructuring of gold business [note 16] |
|
|
105,000 |
|
|
|
|
|
|
|
105,000 |
|
|
|
|
|
Stock option plan amendment [note 13] |
|
|
94,175 |
|
|
|
|
|
|
|
94,175 |
|
|
|
|
|
Exploration |
|
|
20,015 |
|
|
|
18,674 |
|
|
|
49,746 |
|
|
|
43,467 |
|
Cigar Lake remediation |
|
|
4,650 |
|
|
|
|
|
|
|
23,309 |
|
|
|
|
|
Research and development |
|
|
931 |
|
|
|
556 |
|
|
|
2,768 |
|
|
|
1,883 |
|
Interest and other [note 8] |
|
|
(19,248 |
) |
|
|
1,791 |
|
|
|
(30,354 |
) |
|
|
(6,284 |
) |
Loss (gain) on sale of assets [note 9] |
|
|
1,792 |
|
|
|
(50,323 |
) |
|
|
(3,101 |
) |
|
|
(52,284 |
) |
|
|
|
|
578,670 |
|
|
|
289,565 |
|
|
|
1,408,955 |
|
|
|
1,019,794 |
|
|
Earnings from operations |
|
|
102,395 |
|
|
|
70,719 |
|
|
|
406,868 |
|
|
|
299,826 |
|
Other income (expense) [note 10] |
|
|
(5,550 |
) |
|
|
14,703 |
|
|
|
(8,105 |
) |
|
|
10,790 |
|
|
Earnings before income taxes and minority interest |
|
|
96,845 |
|
|
|
85,422 |
|
|
|
398,763 |
|
|
|
310,616 |
|
Income tax expense (recovery) [note 11] |
|
|
7,852 |
|
|
|
4,499 |
|
|
|
31,192 |
|
|
|
(60,303 |
) |
Minority interest |
|
|
(2,240 |
) |
|
|
8,179 |
|
|
|
12,956 |
|
|
|
35,546 |
|
|
Net earnings |
|
$ |
91,233 |
|
|
$ |
72,744 |
|
|
$ |
354,615 |
|
|
$ |
335,373 |
|
|
Basic earnings per common share [note 12] |
|
$ |
0.26 |
|
|
$ |
0.21 |
|
|
$ |
1.00 |
|
|
$ |
0.96 |
|
|
Diluted earnings per common share [note 12] |
|
$ |
0.25 |
|
|
$ |
0.20 |
|
|
$ |
0.96 |
|
|
$ |
0.91 |
|
|
See accompanying notes to consolidated financial statements
Cameco Corporation
Consolidated Balance Sheets
(Unaudited)
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
(as adjusted - |
|
|
|
note 1(a)) |
|
|
|
As At |
|
|
|
Sept 30/07 |
|
|
Dec 31/06 |
|
|
Assets |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
403,317 |
|
|
$ |
334,089 |
|
Accounts receivable |
|
|
246,942 |
|
|
|
402,847 |
|
Inventories |
|
|
394,760 |
|
|
|
416,479 |
|
Supplies and prepaid expenses |
|
|
216,505 |
|
|
|
191,831 |
|
Current portion of long-term receivables, investments and other [note 4] |
|
|
195,148 |
|
|
|
9,178 |
|
|
|
|
|
1,456,672 |
|
|
|
1,354,424 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
3,434,308 |
|
|
|
3,312,152 |
|
Long-term receivables,
investments and other [note
4] |
|
|
421,807 |
|
|
|
293,714 |
|
Goodwill |
|
|
154,014 |
|
|
|
180,139 |
|
|
|
|
|
4,010,129 |
|
|
|
3,786,005 |
|
|
Total assets |
|
$ |
5,466,801 |
|
|
$ |
5,140,429 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
609,600 |
|
|
$ |
392,679 |
|
Dividends payable |
|
|
17,356 |
|
|
|
14,092 |
|
Current portion of long-term debt |
|
|
8,595 |
|
|
|
7,900 |
|
Current portion of other liabilities [note 5] |
|
|
34,778 |
|
|
|
40,737 |
|
Future income taxes |
|
|
87,034 |
|
|
|
46,289 |
|
|
|
|
|
757,363 |
|
|
|
501,697 |
|
|
|
|
|
|
|
|
|
|
Long-term debt [note 6] |
|
|
685,563 |
|
|
|
696,691 |
|
Provision for reclamation |
|
|
224,852 |
|
|
|
228,496 |
|
Other liabilities [note 5] |
|
|
256,379 |
|
|
|
232,641 |
|
Future income taxes |
|
|
276,827 |
|
|
|
339,451 |
|
|
|
|
|
2,200,984 |
|
|
|
1,998,976 |
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
446,231 |
|
|
|
400,071 |
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
|
|
|
|
|
|
Share capital [note 7] |
|
|
825,540 |
|
|
|
812,769 |
|
Contributed surplus [note 7] |
|
|
228,736 |
|
|
|
540,173 |
|
Retained earnings |
|
|
1,735,442 |
|
|
|
1,428,206 |
|
Accumulated other comprehensive income [note 1] |
|
|
29,868 |
|
|
|
(39,766 |
) |
|
|
|
|
2,819,586 |
|
|
|
2,741,382 |
|
|
Total liabilities and shareholders equity |
|
$ |
5,466,801 |
|
|
$ |
5,140,429 |
|
|
See accompanying notes to consolidated financial statements
Cameco Corporation
Consolidated Statements of Shareholders Equity
(Unaudited)
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(as adjusted - |
|
|
|
|
|
|
note 1) |
|
|
Nine Months Ended |
|
|
Sept 30/07 |
|
Sept 30/06 |
|
Share capital |
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
812,769 |
|
|
$ |
779,035 |
|
Shares repurchased [note 7] |
|
|
(16,235 |
) |
|
|
|
|
Stock option plan |
|
|
29,006 |
|
|
|
31,421 |
|
Debenture conversions |
|
|
|
|
|
|
62 |
|
|
Balance at end of period |
|
$ |
825,540 |
|
|
$ |
810,518 |
|
|
|
|
|
|
|
|
|
|
|
Contributed surplus |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
540,173 |
|
|
$ |
529,245 |
|
Shares repurchased [note 7] |
|
|
(291,833 |
) |
|
|
|
|
Stock option plan amendment [note 13] |
|
|
(21,875 |
) |
|
|
|
|
Stock-based compensation |
|
|
8,203 |
|
|
|
15,000 |
|
Options exercised |
|
|
(5,932 |
) |
|
|
(6,245 |
) |
Debenture conversions |
|
|
|
|
|
|
(8 |
) |
|
Balance at end of period |
|
$ |
228,736 |
|
|
$ |
537,992 |
|
|
|
|
|
|
|
|
|
|
|
Retained earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
1,428,206 |
|
|
$ |
1,108,748 |
|
Transition
adjustment - financial instruments [note 1] |
|
|
5,343 |
|
|
|
|
|
Net earnings |
|
|
354,615 |
|
|
|
335,373 |
|
Dividends on common shares |
|
|
(52,722 |
) |
|
|
(42,167 |
) |
|
Balance at end of period |
|
$ |
1,735,442 |
|
|
$ |
1,401,954 |
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period [note 1] |
|
$ |
(39,766 |
) |
|
$ |
(53,397 |
) |
Transition
adjustment - financial instruments [note 1] |
|
|
38,839 |
|
|
|
|
|
Net change in foreign currency translation adjustments |
|
|
(120,827 |
) |
|
|
(24,149 |
) |
Net change in gains on derivatives designated as cash flow hedges |
|
|
157,215 |
|
|
|
|
|
Net change in losses on assets available-for-sale |
|
|
(5,593 |
) |
|
|
|
|
|
Balance at end of period |
|
$ |
29,868 |
|
|
$ |
(77,546 |
) |
|
Total retained earnings and accumulated other comprehensive income |
|
$ |
1,765,310 |
|
|
$ |
1,324,408 |
|
|
Shareholders equity at end of period |
|
$ |
2,819,586 |
|
|
$ |
2,672,918 |
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period consists of: |
|
|
|
|
|
|
|
|
Unrealized foreign currency translation losses |
|
$ |
(160,593 |
) |
|
$ |
(77,546 |
) |
Gains on derivatives designated as cash flow hedges |
|
|
196,054 |
|
|
|
|
|
Unrealized loss on available-for-sale securities |
|
|
(5,593 |
) |
|
|
|
|
|
Balance at end of period |
|
$ |
29,868 |
|
|
$ |
(77,546 |
) |
|
Cameco Corporation
Consolidated Statements of Comprehensive Income
(Unaudited)
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(as adjusted - |
|
|
|
|
|
(as adjusted - |
|
|
|
|
|
|
note 1) |
|
|
|
|
|
note 1) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
Sept 30/07 |
|
Sept 30/06 |
|
Sept 30/07 |
|
Sept 30/06 |
|
Net earnings |
|
$ |
91,233 |
|
|
$ |
72,744 |
|
|
$ |
354,615 |
|
|
$ |
335,373 |
|
Other comprehensive income (loss), net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized foreign currency translation gains (losses) |
|
|
(33,220 |
) |
|
|
1,808 |
|
|
|
(120,827 |
) |
|
|
(24,149 |
) |
Net gains on derivatives designated as cash flow hedges |
|
|
100,679 |
|
|
|
|
|
|
|
196,400 |
|
|
|
|
|
Net gains on derivatives designated as cash flow hedges
transferred to net earnings |
|
|
(22,341 |
) |
|
|
|
|
|
|
(39,185 |
) |
|
|
|
|
Net losses on assets available-for-sale |
|
|
(5,593 |
) |
|
|
|
|
|
|
(5,593 |
) |
|
|
|
|
|
Other comprehensive income (loss) |
|
|
39,525 |
|
|
|
1,808 |
|
|
|
30,795 |
|
|
|
(24,149 |
) |
|
Total comprehensive income |
|
$ |
130,758 |
|
|
$ |
74,552 |
|
|
$ |
385,410 |
|
|
$ |
311,224 |
|
|
See accompanying notes to consolidated financial statements
Cameco Corporation
Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(as adjusted - |
|
|
|
|
|
(as adjusted - |
|
|
|
|
|
|
note 1(b)) |
|
|
|
|
|
note 1(b)) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
Sept 30/07 |
|
Sept 30/06 |
|
Sept 30/07 |
|
Sept 30/06 |
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
91,233 |
|
|
$ |
72,744 |
|
|
$ |
354,615 |
|
|
$ |
335,373 |
|
Items not requiring (providing) cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and reclamation |
|
|
46,341 |
|
|
|
46,450 |
|
|
|
168,867 |
|
|
|
141,023 |
|
Provision for future taxes [note 11] |
|
|
(41,633 |
) |
|
|
(19,929 |
) |
|
|
(108,179 |
) |
|
|
(135,309 |
) |
Deferred revenue recognized |
|
|
(8,198 |
) |
|
|
(13,854 |
) |
|
|
(31,946 |
) |
|
|
(39,655 |
) |
Unrealized losses (gains) on derivatives |
|
|
(37,715 |
) |
|
|
3,413 |
|
|
|
(51,519 |
) |
|
|
698 |
|
Stock-based compensation [note 13] |
|
|
9,663 |
|
|
|
2,881 |
|
|
|
19,063 |
|
|
|
15,000 |
|
Stock option plan amendment [note 13] |
|
|
94,175 |
|
|
|
|
|
|
|
94,175 |
|
|
|
|
|
Loss (gain) on sale of assets [note 9] |
|
|
1,792 |
|
|
|
(50,323 |
) |
|
|
(3,101 |
) |
|
|
(52,284 |
) |
Equity in loss of associated companies [note 10] |
|
|
2,375 |
|
|
|
663 |
|
|
|
5,466 |
|
|
|
4,576 |
|
Restructuring of gold business [note 16] |
|
|
105,000 |
|
|
|
|
|
|
|
105,000 |
|
|
|
|
|
Minority interest |
|
|
(2,240 |
) |
|
|
8,179 |
|
|
|
12,956 |
|
|
|
35,546 |
|
Other operating items [note 15] |
|
|
188,791 |
|
|
|
28,937 |
|
|
|
178,285 |
|
|
|
99,740 |
|
|
Cash provided by operations |
|
|
449,584 |
|
|
|
79,161 |
|
|
|
743,682 |
|
|
|
404,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of net business assets, net of cash acquired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(83,856 |
) |
Additions to property, plant and equipment |
|
|
(130,870 |
) |
|
|
(111,652 |
) |
|
|
(359,012 |
) |
|
|
(310,983 |
) |
Increase in long-term receivables, investments and other |
|
|
(30,026 |
) |
|
|
(1,675 |
) |
|
|
(40,489 |
) |
|
|
(27,125 |
) |
Proceeds on sale of property, plant and equipment |
|
|
6 |
|
|
|
44,783 |
|
|
|
4,898 |
|
|
|
46,358 |
|
|
Cash used in investing |
|
|
(160,890 |
) |
|
|
(68,544 |
) |
|
|
(394,603 |
) |
|
|
(375,606 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares repurchased |
|
|
(223,971 |
) |
|
|
|
|
|
|
(223,971 |
) |
|
|
|
|
Decrease in debt |
|
|
(3,559 |
) |
|
|
(11,200 |
) |
|
|
(5,850 |
) |
|
|
(155,000 |
) |
Increase in debt |
|
|
|
|
|
|
|
|
|
|
4,740 |
|
|
|
|
|
Short-term financing |
|
|
|
|
|
|
|
|
|
|
10,949 |
|
|
|
|
|
Issue of shares |
|
|
1,123 |
|
|
|
7,272 |
|
|
|
23,074 |
|
|
|
25,176 |
|
Dividends |
|
|
(17,696 |
) |
|
|
(14,052 |
) |
|
|
(49,459 |
) |
|
|
(38,576 |
) |
|
Cash used in financing |
|
|
(244,103 |
) |
|
|
(17,980 |
) |
|
|
(240,517 |
) |
|
|
(168,400 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash during the period |
|
|
44,591 |
|
|
|
(7,363 |
) |
|
|
108,562 |
|
|
|
(139,298 |
) |
Exchange rate changes on foreign currency cash balances |
|
|
(10,281 |
) |
|
|
(205 |
) |
|
|
(39,334 |
) |
|
|
(10,766 |
) |
Cash at beginning of period |
|
|
369,007 |
|
|
|
480,697 |
|
|
|
334,089 |
|
|
|
623,193 |
|
|
Cash at end of period |
|
$ |
403,317 |
|
|
$ |
473,129 |
|
|
$ |
403,317 |
|
|
$ |
473,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
11,244 |
|
|
$ |
8,980 |
|
|
$ |
35,098 |
|
|
$ |
31,127 |
|
Income taxes paid |
|
$ |
25,047 |
|
|
$ |
37,700 |
|
|
$ |
133,349 |
|
|
$ |
92,693 |
|
|
See accompanying notes to consolidated financial statements
Cameco
Corporation
Notes to Consolidated
Financial statements
(Unaudited)
1. |
|
Accounting Policies |
|
|
|
These consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles (GAAP) and follow the same accounting principles
and methods of application as the most recent annual consolidated financial statements
except for the recent accounting standards adopted described in (a). Since the interim
financial statements do not include all disclosures required by GAAP, they should be read in
conjunction with Camecos annual consolidated financial statements included in the 2006
annual financial review. Certain comparative figures for the prior period have been
reclassified to conform to the current periods presentation. |
|
(a) |
|
Financial Instruments Recognition and Measurement, Hedges and Comprehensive
Income |
|
|
|
|
On January 1, 2007, Cameco adopted the standards issued by the Canadian Institute of
Chartered Accountants (CICA) relating to financial instruments, hedges and other
comprehensive income, as described in note 3(a) of the consolidated financial statements
for the year ended December 31, 2006. In accordance with the new standards, prior
periods have not been restated except for the new accounting policies affecting the
cumulative translation account (note 1(a)(iv)). |
|
|
|
|
On January 1, 2007, Cameco recognized all of its financial assets and liabilities in the
consolidated balance sheets according to their classification. Any adjustment made to a
previous carrying amount was recognized as an adjustment to the balance of retained
earnings at that date or as the opening balance of accumulated other comprehensive
income (AOCI), net of income taxes. Cameco has added two new statements to the
consolidated financial statements entitled Consolidated Statements of Shareholders
Equity and Consolidated Statements of Comprehensive Income. |
|
(i) |
|
Financial Assets and Financial Liabilities |
|
|
|
|
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 (OCI) until realized, at which time they will be recorded in
the consolidated statements of earnings. On transition, there was no impact to Cameco
as the accounting was either unchanged or the area was not applicable at January 1,
2007. |
|
|
|
|
Other significant accounting implications arising upon the adoption of the financial
instrument standards includes the use of the effective interest method of
amortization for any transaction costs or fees, premiums or discounts earned or
incurred for financial instruments measured at amortized cost. On transition, there
was no impact to Cameco on the amortization of these fees although applicable issue
costs, which were previously recognized as deferred charges, were reclassified to
their related financial liabilities. As a result, on transition Cameco recorded a net
decrease in long-term receivables, investments and other of $7,372,000 and a decrease
in long-term debt of $7,372,000. |
|
|
|
|
The fair market value of Camecos financial assets and liabilities approximates the
carrying amount as a result of the short-term nature of the instruments, or the
variable interest rate associated with the instruments, or the fixed interest rate of
the instruments being similar to market rates. |
Cameco Corporation
Notes to Consolidated Financial Statements
(Unaudited)
|
(ii) |
|
Financial Instruments Risk Management |
|
|
|
|
The majority of revenues at Cameco are derived from the sale of uranium products,
electricity through its investment in Bruce Power L.P. (BPLP), and gold through its
investment in Centerra Gold Inc. (Centerra). Camecos uranium product financial
results are closely related to the long and short-term market price of uranium sales
and conversion services. Prices fluctuate and can be affected by demand for nuclear
power, worldwide production and uranium levels, and political and economic conditions
in uranium producing and consuming countries. BPLPs revenue from electricity is
affected by changes in electricity prices associated with an open spot market for
electricity in Ontario. Centerras gold revenue is largely dependent on the market
price of gold, which can be affected by political and economic factors, industry
activity and the policies of central banks with respect to their level of gold held
as reserves. Financial results for Cameco are also impacted by changes in foreign
currency exchange rates and other operating risks. Finally, certain financial assets
are subject to credit risks including cash and securities, accounts receivable, and
commodity and currency instruments. |
|
|
|
|
To mitigate risks associated with the fluctuations in the market price for uranium
products, Cameco seeks to maintain a portfolio of uranium product sales contracts
with a variety of delivery dates and pricing mechanisms that provide a degree of
protection from price volatility. To mitigate risks associated with the fluctuations
in the market price for electricity, BPLP enters into various energy and sales
related contracts that qualify as cash flow hedges as disclosed in note 1(a)(iii) and
note 3, derivatives. |
|
|
|
|
To mitigate risks associated with foreign currency on its sale of uranium products,
Cameco enters into forward sales contracts to establish a price for future delivery
of the foreign currency. The majority of the contracts qualify as a cash flow hedge
as disclosed in note 1(a)(iii) and note 3, derivatives. |
|
|
|
|
To mitigate risks associated with certain financial assets, Cameco will hold
positions with a variety of large creditworthy institutions. Sales of uranium
products, with short payment terms, are made to customers that management believes
are creditworthy. |
|
|
(iii) |
|
Hedge Accounting and Derivatives |
|
|
|
|
The purpose of hedging transactions is to modify Camecos exposure to one or more
risks by creating an offset between changes in the fair value of, or the cash flows
attributable to, the hedged item and the hedging item. Hedge accounting ensures that
the offsetting gains, losses, revenues and expenses are recognized to net earnings in
the same period or periods. When hedge accounting is appropriate, the hedging
relationship will be designated as a fair value hedge, a cash flow hedge, or a
foreign currency risk hedge related to a net investment in a self-sustaining foreign
operation. |
|
|
|
|
At the inception of a hedging relationship, 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. The
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 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. |
|
|
|
|
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 OCI until the hedged items are recognized in the consolidated
statements of earnings. |
|
|
|
|
At January 1, 2007, Cameco did not have any fair value hedges or hedges of net
investments in self-sustaining foreign operations. Upon adoption of the new
standards, Cameco measured its cash flow hedges at fair value, which resulted in a
decrease in other liabilities of $1,444,000 and an increase in AOCI of $1,444,000
pre-tax. Cameco also recognized an increase in long-term receivables, investments and
other of $54,567,000 and an increase of $54,567,000 in AOCI pre-tax for BPLPs
various energy and sales related cash flow hedges. |
Cameco Corporation
Notes to Consolidated Financial Statements
(Unaudited)
|
|
|
Derivatives may be embedded in other financial instruments (the host instrument).
Prior to the adoption of the new standards, most embedded derivatives were not
accounted for separately from the host instrument except in cases such as Camecos
unsecured convertible debentures where the fair value of the option component was
reflected separately in contributed surplus. Under the new standards, embedded
derivatives are treated as separate derivatives when their economic characteristics
and risks are not clearly and closely related to those of the host instrument, the
terms of the embedded derivative are the same as those of a stand-alone derivative,
and the combined contract is not held for trading or designated at fair value. These
embedded derivatives are measured at fair value with subsequent changes recognized in
gains or losses on derivatives within interest and other on the consolidated
statements of earnings. |
|
|
|
|
Upon adoption of the new standards, Cameco recognized embedded foreign currency
derivatives on certain of its uranium products sales contracts. As a result, Cameco
recorded a net increase in long-term receivables, investments and other of $8,348,000
and an increase of $8,348,000 in retained earnings pre-tax. |
|
|
(iv) |
|
Cumulative Translation Account |
|
|
|
|
Prior to the adoption of the financial instrument standards at January 1, 2007,
exchange gains and losses arising from the translation of the financial statements of
a self-sustaining foreign operation were recorded in the cumulative translation
account as a separate component of shareholders equity. Upon adoption of the new
standards, the exchange gains and losses are to be recognized in a separate component
of other comprehensive income with restatement of prior periods. The effect of the
change in policy is to adjust the opening balance of AOCI by $53,397,000 and
eliminate the cumulative translation account. |
The following table summarizes the opening adjustments, gross and net of future income
taxes, required to adopt the new standards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained Earnings |
|
AOCI |
(thousands) |
|
Gross |
|
Net |
|
Gross |
|
Net |
|
Cash flow hedges |
|
$ |
|
|
|
$ |
|
|
|
$ |
56,011 |
|
|
$ |
38,839 |
|
Recognition of embedded derivatives on
sales contracts |
|
|
8,348 |
|
|
|
5,343 |
|
|
|
|
|
|
|
|
|
|
Net |
|
$ |
8,348 |
|
|
$ |
5,343 |
|
|
$ |
56,011 |
|
|
$ |
38,839 |
|
|
|
(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 effect of the change in policy on the statement of earnings for the quarter ended
September 30, 2006 was a $1,719,000 increase in earnings ($0.01 per share) while the
effect for the nine months ended September 30, 2006 was a $1,768,000 reduction in
earnings ($0.01 per share). |
Cameco Corporation
Notes to Consolidated Financial Statements
(Unaudited)
2. |
|
New Accounting Pronouncements |
|
(a) |
|
Inventories |
|
|
|
|
In May 2007, the Accounting Standards Board issued Handbook Section 3031, Inventories,
which supersedes Handbook Section 3030 and converges with the IASBs recently amended
standard IAS 2, Inventories. |
|
|
|
|
The standard introduces significant changes to the measurement and disclosure of
inventory. The measurement changes include; the elimination of LIFO, the requirement to
measure inventories at the lower of cost and net realizable value, the allocation of
overhead based on normal capacity, the use of the specific cost method for inventories
that are not ordinarily interchangeable or goods and services produced for specific
purposes, the requirement for an entity to use a consistent cost formula for inventory
of a similar nature and use, and the reversal of previous write-downs to net realizable
value when there is a subsequent increase in the value of inventories. Disclosures of
inventories have also been enhanced. Inventory policies, carrying amounts, amounts
recognized as an expense, write-downs and the reversals of write-downs are required to
be disclosed. |
|
|
|
|
This new standard will apply to Cameco effective January 1, 2008 and is not expected to
have a material impact on its consolidated financial statements. |
3. |
|
Derivatives |
|
|
|
The following table summarizes the fair value of derivatives and classification on the
September 30, 2007 balance sheet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
(thousands) |
|
Cameco |
|
BPLP |
|
Total |
|
Non-hedge derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
Embedded
derivatives - sales contracts |
|
$ |
10,694 |
|
|
$ |
5,471 |
|
|
$ |
16,165 |
|
Foreign currency contracts |
|
|
12,759 |
|
|
|
|
|
|
|
12,759 |
|
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts |
|
|
171,736 |
|
|
|
|
|
|
|
171,736 |
|
Energy and sales contracts |
|
|
|
|
|
|
85,243 |
|
|
|
85,243 |
|
|
Net |
|
$ |
195,189 |
|
|
$ |
90,714 |
|
|
$ |
285,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification: |
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term receivables, investments
and other [note 4] |
|
$ |
148,783 |
|
|
$ |
41,021 |
|
|
$ |
189,804 |
|
Long-term receivables, investments and other [note 4] |
|
|
68,739 |
|
|
|
49,985 |
|
|
|
118,724 |
|
Current portion of other liabilities [note 5] |
|
|
(17,644 |
) |
|
|
|
|
|
|
(17,644 |
) |
Other liabilities [note 5] |
|
|
(4,689 |
) |
|
|
(292 |
) |
|
|
(4,981 |
) |
|
Net |
|
$ |
195,189 |
|
|
$ |
90,714 |
|
|
$ |
285,903 |
|
|
The following tables summarize different components of the (gains) and losses on
derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2007 |
|
|
|
|
|
|
|
(thousands) |
|
Cameco |
|
BPLP |
|
Total |
|
Non-hedge derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
Embedded derivatives sales contracts |
|
$ |
523 |
|
|
$ |
|
|
|
$ |
523 |
|
Foreign currency contracts |
|
|
(16,223 |
) |
|
|
|
|
|
|
(16,223 |
) |
Energy and sales contracts |
|
|
|
|
|
|
(2,782 |
) |
|
|
(2,782 |
) |
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
Energy and sales contracts |
|
|
|
|
|
|
(3,066 |
) |
|
|
(3,066 |
) |
Ongoing hedge inefficiency |
|
|
(1,737 |
) |
|
|
|
|
|
|
(1,737 |
) |
Ineligible for hedge accounting |
|
|
(15,355 |
) |
|
|
|
|
|
|
(15,355 |
) |
|
Net |
|
$ |
(32,792 |
) |
|
$ |
(5,848 |
) |
|
$ |
(38,640 |
) |
|
Cameco Corporation
Notes to Consolidated Financial Statements
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2007 |
|
|
|
|
|
|
|
(thousands) |
|
Cameco |
|
BPLP |
|
Total |
|
Non-hedge derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
Embedded
derivatives - sales contracts |
|
$ |
(3,557 |
) |
|
$ |
|
|
|
$ |
(3,557 |
) |
Foreign currency contracts |
|
|
(10,968 |
) |
|
|
|
|
|
|
(10,968 |
) |
Energy and sales contracts |
|
|
|
|
|
|
(5,942 |
) |
|
|
(5,942 |
) |
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
Energy and sales contracts |
|
|
|
|
|
|
(5,467 |
) |
|
|
(5,467 |
) |
Ongoing hedge inefficiency |
|
|
(7,927 |
) |
|
|
|
|
|
|
(7,927 |
) |
Ineligible for hedge accounting |
|
|
(15,355 |
) |
|
|
|
|
|
|
(15,355 |
) |
|
Net |
|
$ |
(37,807 |
) |
|
$ |
(11,409 |
) |
|
$ |
(49,216 |
) |
|
Over the next twelve months, based on current exchange rates, Cameco expects an estimated
$77,400,000 of pre-tax gains from the foreign currency cash flow hedges to be reclassified
through other comprehensive income to net earnings. The maximum length of time Cameco hedges
its exposure to the variability in future cash flows related to foreign currency on
anticipated transactions is five years.
Over the next twelve months, based on current prices, Cameco expects an estimated
$39,500,000 of pre-tax gains from BPLPs various energy and sales related cash flow hedges
to be reclassified through other comprehensive income to net earnings. The maximum length of
time BPLP is hedging its exposure to the variability in future cash flows related to
electricity prices on anticipated transactions is five years.
Cameco Corporation
Notes to Consolidated Financial Statements
(Unaudited)
4. |
|
Long-Term Receivables, Investments and Other |
|
|
|
|
|
|
|
|
|
|
|
As At |
(thousands) |
|
Sept 30/07 |
|
Dec 31/06 |
|
BPLP |
|
|
|
|
|
|
|
|
Capital lease receivable from Bruce A L.P. |
|
$ |
97,360 |
|
|
$ |
97,518 |
|
Derivatives [note 3] |
|
|
91,006 |
|
|
|
|
|
Receivable from Ontario Power Generation |
|
|
5,024 |
|
|
|
11,281 |
|
Accrued pension benefit asset |
|
|
10,612 |
|
|
|
11,992 |
|
Kumtor Gold Company |
|
|
|
|
|
|
|
|
Reclamation trust fund |
|
|
4,783 |
|
|
|
6,999 |
|
Equity accounted investments |
|
|
|
|
|
|
|
|
UNOR Inc. (market value $7,948) |
|
|
7,617 |
|
|
|
8,893 |
|
UEX Corporation (market value $237,127) |
|
|
14,991 |
|
|
|
19,151 |
|
Minergia S.A.C. (privately held) |
|
|
624 |
|
|
|
|
|
Available-for-sale securities |
|
|
|
|
|
|
|
|
Western Uranium Corporation |
|
|
14,357 |
|
|
|
|
|
Cue Capital Corp. |
|
|
3,971 |
|
|
|
|
|
Derivatives [note 3] |
|
|
217,522 |
|
|
|
433 |
|
Deferred charges
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
53,745 |
|
|
|
75,854 |
|
Debt issue costs [note 1] |
|
|
|
|
|
|
7,372 |
|
Investment in Huron Wind L.P. |
|
|
2,186 |
|
|
|
2,340 |
|
Advances receivable |
|
|
68,120 |
|
|
|
46,094 |
|
Asset-backed commercial paper in default [note 8] |
|
|
11,000 |
|
|
|
|
|
Accrued pension benefit asset |
|
|
6,558 |
|
|
|
7,889 |
|
Other |
|
|
7,479 |
|
|
|
7,076 |
|
|
|
|
|
616,955 |
|
|
|
302,892 |
|
Less current portion |
|
|
(195,148 |
) |
|
|
(9,178 |
) |
|
Net |
|
$ |
421,807 |
|
|
$ |
293,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
As At |
(thousands) |
|
Sept 30/07 |
|
Dec 31/06 |
|
Deferred sales |
|
$ |
112,413 |
|
|
$ |
107,330 |
|
Derivatives [note 3] |
|
|
22,333 |
|
|
|
10,127 |
|
Deferred currency hedges [note 1] |
|
|
|
|
|
|
26,333 |
|
Accrued post-retirement benefit liability |
|
|
13,425 |
|
|
|
12,166 |
|
Zircatec acquisition holdback |
|
|
10,000 |
|
|
|
20,000 |
|
BPLP |
|
|
|
|
|
|
|
|
Accrued post-retirement benefit liability |
|
|
102,404 |
|
|
|
86,856 |
|
Derivatives [note 3] |
|
|
292 |
|
|
|
|
|
Deferred
revenue - electricity contracts |
|
|
214 |
|
|
|
856 |
|
Other |
|
|
30,076 |
|
|
|
9,710 |
|
|
|
|
|
291,157 |
|
|
|
273,378 |
|
Less current portion |
|
|
(34,778 |
) |
|
|
(40,737 |
) |
|
Net |
|
$ |
256,379 |
|
|
$ |
232,641 |
|
|
Cameco Corporation
Notes to Consolidated Financial Statements
(Unaudited)
6. |
|
Long-Term Debt |
|
|
|
The fair value of the outstanding convertible debentures, based on the quoted market price
of the debentures at September 30, 2007, was approximately $981,310,000. |
|
|
|
Cameco has arranged for a standby product loan facility with one of its customers. The
arrangement, which was finalized in 2006, allows Cameco to borrow up to 2,600,000 pounds
U3O8 equivalent over the period 2006 to 2008 with repayment in 2008
and 2009. Of this material, up to 1,000,000 kilograms of uranium can be borrowed in the form
of UF6. Under the loan facility, standby fees of 2.25% are payable based on the
market value of the facility, and interest is payable on the market value of any amounts
drawn at a rate of 4.0%. Any borrowings will be secured by letters of credit and are payable
in kind. |
|
|
|
Revenue from future deliveries to this counterparty (up to the limit of the loan facility)
will be deferred until the loan arrangement has been terminated, or if drawn upon, when the
loan is repaid and that portion of the facility is terminated. |
|
|
|
The market value of the available facility is based on the quoted market price of the
products at September 30, 2007 and was approximately $220,210,000 (US). As at September 30,
2007, the company did not have any loan amount outstanding under the facility. |
|
|
|
Previously, Cameco had two other product loan arrangements with another one of its
customers. These arrangements had allowed Cameco to borrow up to 2,960,000 pounds
U3O8 equivalent. Of this material, up to 400,000 kilograms of uranium
could be borrowed in the form of UF6. During the second quarter, Cameco
terminated these two arrangements. Cameco recognized in its earnings $41,645,000 of the
revenues, and the related costs, that had been deferred in 2006 and cancelled $150,000,000
(US) of related letter of credit facilities. |
|
7. |
|
Share Capital |
|
(a) |
|
At September 30, 2007, there were 347,117,058 common shares outstanding. This
balance is net of 1,806,300 shares that were repurchased in September, but not
cancelled until early October. |
|
|
(b) |
|
Options in respect of 6,526,928 shares are outstanding under the stock option
plan and are exercisable up to 2017. Upon exercise of certain existing options,
additional options in respect of 18,300 shares would be granted. For the quarter ended
September 30, 2007, 37,950 options were exercised (2006 795,125). For the nine
months ended September 30, 2007, 1,657,726 options were exercised (2006 2,526,939). |
|
|
(c) |
|
On September 6, 2007, Cameco announced an open market share repurchase program
for cancellation of up to 17,700,000 of its common shares, representing 5% of its
common shares then outstanding. This repurchase program is authorized to be in effect
until September 10, 2008. As at September 30, 2007 6,833,300 shares had been
repurchased under this program at a cost of $308,068,000. The excess of the repurchase
cost of these shares over their book value, amounting to $291,833,000, has been charged
to contributed surplus. |
8. Interest and Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
(thousands) |
|
Sept 30/07 |
|
Sept 30/06 |
|
Sept 30/07 |
|
Sept 30/06 |
|
Interest on long-term debt |
|
$ |
11,485 |
|
|
$ |
10,377 |
|
|
$ |
32,667 |
|
|
$ |
33,552 |
|
Other interest and financing charges |
|
|
1,471 |
|
|
|
1,601 |
|
|
|
7,199 |
|
|
|
2,436 |
|
Write-down of investment in commercial paper |
|
|
2,000 |
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
Interest income |
|
|
(5,767 |
) |
|
|
(6,333 |
) |
|
|
(22,359 |
) |
|
|
(19,843 |
) |
Foreign exchange losses |
|
|
17,912 |
|
|
|
444 |
|
|
|
22,245 |
|
|
|
274 |
|
Losses (gains) on derivatives |
|
|
(38,640 |
) |
|
|
3,413 |
|
|
|
(49,216 |
) |
|
|
698 |
|
Capitalized interest |
|
|
(7,709 |
) |
|
|
(7,711 |
) |
|
|
(22,890 |
) |
|
|
(23,401 |
) |
|
Net |
|
$ |
(19,248 |
) |
|
$ |
1,791 |
|
|
$ |
(30,354 |
) |
|
$ |
(6,284 |
) |
|
During the third quarter of 2007, Cameco discontinued hedge accounting for certain foreign
exchange contracts that had been designated as cash flow hedges of future USD-denominated
sales. Revised forecasts indicated that it was no longer probable that certain transactions
would occur as anticipated in the originally specified time periods. As a result, Cameco
reclassified a gain of $15,000,000 to earnings from accumulated other comprehensive income.
Cameco Corporation
Notes to Consolidated Financial Statements
(Unaudited)
At September 30, 2007, Cameco held $13,000,000 in asset-backed commercial paper that was in
default. These investments were initially classified as held-to-maturity instruments and
were carried at amortized cost. Due to lack of liquidity and a yield on these instruments,
an impairment loss of $2,000,000 was recognized in the quarter. It is possible that the
amount ultimately recovered may differ from this estimate. Cameco continues to investigate
the implications of the default and the remedies available. In addition, these investments
have been reclassified as long-term assets [note 4] rather than cash due to uncertainty as
to the timing of collection.
9. |
|
Loss (Gain) on Sale of Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
(thousands) |
|
Sept 30/07 |
|
Sept 30/06 |
|
Sept 30/07 |
|
Sept 30/06 |
|
Sale of geological data |
|
$ |
|
|
|
$ |
|
|
|
$ |
(4,391 |
) |
|
$ |
|
|
Interest in Fort a la Corne Joint Venture |
|
|
|
|
|
|
(44,782 |
) |
|
|
|
|
|
|
(44,782 |
) |
Voting rights in Fort a la Corne Joint Venture |
|
|
|
|
|
|
(5,889 |
) |
|
|
|
|
|
|
(5,889 |
) |
Other |
|
|
1,792 |
|
|
|
348 |
|
|
|
1,290 |
|
|
|
(1,613 |
) |
|
Net |
|
$ |
1,792 |
|
|
$ |
(50,323 |
) |
|
$ |
(3,101 |
) |
|
$ |
(52,284 |
) |
|
10. |
|
Other Income (Expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
(thousands) |
|
Sept 30/07 |
|
Sept 30/06 |
|
Sept 30/07 |
|
Sept 30/06 |
|
Equity in loss of associated companies |
|
$ |
(2,375 |
) |
|
$ |
(663 |
) |
|
$ |
(5,466 |
) |
|
$ |
(4,576 |
) |
Insurance settlement (Kumtor) |
|
|
|
|
|
|
15,366 |
|
|
|
|
|
|
|
15,366 |
|
Claim settlement [note 17(b)] |
|
|
(3,175 |
) |
|
|
|
|
|
|
(3,175 |
) |
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
536 |
|
|
|
|
|
|
Net |
|
$ |
(5,550 |
) |
|
$ |
14,703 |
|
|
$ |
(8,105 |
) |
|
$ |
10,790 |
|
|
11. |
|
Income Tax Expense (Recovery) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
(thousands) |
|
Sept 30/07 |
|
Sept 30/06 |
|
Sept 30/07 |
|
Sept 30/06 |
|
Earnings before income taxes and
minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
$ |
(217,187 |
) |
|
$ |
39,245 |
|
|
$ |
(277,965 |
) |
|
$ |
43,070 |
|
Foreign |
|
|
314,032 |
|
|
|
46,177 |
|
|
|
676,728 |
|
|
|
267,546 |
|
|
|
|
$ |
96,845 |
|
|
$ |
85,422 |
|
|
$ |
398,763 |
|
|
$ |
310,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
$ |
26,803 |
|
|
$ |
25,208 |
|
|
$ |
77,508 |
|
|
$ |
62,910 |
|
Foreign |
|
|
22,682 |
|
|
|
(780 |
) |
|
|
61,863 |
|
|
|
12,096 |
|
|
|
|
$ |
49,485 |
|
|
$ |
24,428 |
|
|
$ |
139,371 |
|
|
$ |
75,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
$ |
(44,320 |
) |
|
$ |
(16,134 |
) |
|
$ |
(103,365 |
) |
|
$ |
(130,032 |
) |
Foreign |
|
|
2,687 |
|
|
|
(3,795 |
) |
|
|
(4,814 |
) |
|
|
(5,277 |
) |
|
|
|
$ |
(41,633 |
) |
|
$ |
(19,929 |
) |
|
$ |
(108,179 |
) |
|
$ |
(135,309 |
) |
|
Income tax expense (recovery) |
|
$ |
7,852 |
|
|
$ |
4,499 |
|
|
$ |
31,192 |
|
|
$ |
(60,303 |
) |
|
Cameco Corporation
Notes to Consolidated Financial Statements
(Unaudited)
In March, the federal government introduced amendments to the Canadian Income Tax Act that provide
for a 0.5% reduction in the general corporate income tax rate. The federal tax rate will decline in
2011 from 19% to 18.5%. This legislation was substantively enacted in June.
Under Canadian accounting rules, the cumulative effect of a change in income tax legislation
on future income tax assets and liabilities is included in a companys financial statements
in the period of substantive enactment. Accordingly, Cameco reduced its balance sheet
provision for future income taxes and recognized a non-cash income tax adjustment of
$3,000,000 ($0.01 per share diluted) in the second quarter of 2007.
Other comprehensive income included on the consolidated statements of shareholders equity
and the consolidated statements of comprehensive income is presented net of income taxes.
The following income tax amounts are included in each component of other comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
Three |
|
|
|
|
Months |
|
Nine Months |
|
|
Ended |
|
Ended |
(thousands) |
|
Sept 30/07 |
|
Sept 30/07 |
|
Net gains on derivatives designated as cash flow hedges |
|
$ |
53,166 |
|
|
$ |
98,728 |
|
Net gains on derivatives designated as cash flow hedges transferred
to net earnings |
|
|
(10,956 |
) |
|
|
(18,560 |
) |
|
Total income tax expense included in OCI |
|
$ |
42,210 |
|
|
$ |
80,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(as adjusted |
|
|
|
|
|
(as adjusted - |
|
|
|
|
|
|
note 1(b)) |
|
|
|
|
|
note 1(b)) |
|
|
Three Months Ended |
|
Nine Months Ended |
(thousands) |
|
Sept 30/07 |
|
Sept 30/06 |
|
Sept 30/07 |
|
Sept 30/06 |
|
Basic earnings per share computation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
91,233 |
|
|
$ |
72,744 |
|
|
$ |
354,615 |
|
|
$ |
335,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding |
|
|
353,113 |
|
|
|
351,629 |
|
|
|
353,071 |
|
|
|
350,904 |
|
|
Basic earnings per common share |
|
$ |
0.26 |
|
|
$ |
0.21 |
|
|
$ |
1.00 |
|
|
$ |
0.96 |
|
|
Diluted earnings per share computation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
91,233 |
|
|
$ |
72,744 |
|
|
$ |
354,615 |
|
|
$ |
335,373 |
|
Dilutive effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures |
|
|
2,399 |
|
|
|
2,241 |
|
|
|
7,196 |
|
|
|
6,724 |
|
|
Net earnings, assuming dilution |
|
$ |
93,632 |
|
|
$ |
74,985 |
|
|
$ |
361,811 |
|
|
$ |
342,097 |
|
|
Weighted average common shares outstanding |
|
|
353,113 |
|
|
|
351,629 |
|
|
|
353,071 |
|
|
|
350,904 |
|
Dilutive effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures |
|
|
21,209 |
|
|
|
21,209 |
|
|
|
21,209 |
|
|
|
21,209 |
|
Stock options |
|
|
4,324 |
|
|
|
4,496 |
|
|
|
3,494 |
|
|
|
4,760 |
|
|
Weighted average common shares
outstanding, assuming dilution |
|
|
378,646 |
|
|
|
377,334 |
|
|
|
377,774 |
|
|
|
376,873 |
|
|
Diluted earnings per common share |
|
$ |
0.25 |
|
|
$ |
0.20 |
|
|
$ |
0.96 |
|
|
$ |
0.91 |
|
|
Cameco Corporation
Notes to Consolidated Financial Statements
(Unaudited)
13. |
|
Stock-Based Compensation |
|
|
|
Stock Option Plan |
|
|
|
Cameco has established a stock option plan under which
options to purchase common shares may be granted to officers and other employees of Cameco. 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. |
|
|
|
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 23,987,439 shares have been issued. |
|
|
|
On July 27, 2007, Camecos board of directors approved an amendment to the companys stock
option program introducing a cash settlement feature for the exercise of employee stock
options. The cash settlement feature allows option holders to elect to receive an amount in
cash equal to the intrinsic value, being the excess market price of the common share over
the exercise price of the option, instead of exercising the option and acquiring common shares. All outstanding stock options are now classified as liabilities and are carried at
their intrinsic value. The intrinsic value of the liability is marked to market each
period. The intrinsic value is amortized to expense over the shorter of, the period to
eligible retirement, or the vesting period. Previously, all stock options were classified
as equity and were accounted for using the fair value method. Under this method, the
compensation cost of options granted was measured at estimated fair value at the grant date
and recognized over the shorter of, the period to eligible retirement, or the vesting
period. The impact of the reclassification of the stock options at July 27, 2007 was an
increase in liabilities of $116,050,000, a decrease in contributed surplus of $21,875,000
and a decrease to earnings of $94,175,000. In addition, a future tax recovery of
$35,225,000 was recorded. |
|
|
|
For the quarter ended September 30, 2007, the amount recorded for stock option expense was
$9,663,000 (2006 $2,881,000). For the nine months ended September 30, 2007, the amount
recorded was $19,063,000 (2006 $15,000,000). These amounts are exclusive of the expense
recorded upon adoption of the cash settlement feature on July 27, 2007. |
|
|
|
The fair value of the options granted prior to July 27, 2007 was determined using
the Black-Scholes option-pricing model with the following assumptions: |
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
Sept 30/07 |
|
Sept 30/06 |
|
Number of options granted |
|
|
973,475 |
|
|
|
1,528,130 |
|
Average strike price |
|
$ |
46.82 |
|
|
$ |
41.04 |
|
Expected dividend |
|
$ |
0.20 |
|
|
$ |
0.16 |
|
Expected volatility |
|
|
36 |
% |
|
|
35 |
% |
Risk-free interest rate |
|
|
4.0 |
% |
|
|
4.0 |
% |
Expected life of option |
|
3.5 years |
|
|
4 years |
|
Expected forfeitures |
|
|
15 |
% |
|
|
15 |
% |
Weighted average grant date fair values |
|
$ |
14.30 |
|
|
$ |
13.19 |
|
14. |
|
Goodwill |
|
|
|
Cameco tests goodwill for possible impairment on an annual basis and at any other time if an
event occurs or circumstances change that would more likely than not reduce the fair value
of a reporting unit below its carrying amount. During the third quarter of 2007, Cameco
completed the goodwill impairment test for all reporting units. The results of this test
have indicated there is no impairment. |
Cameco Corporation
Notes to Consolidated Financial Statements
(Unaudited)
15. |
|
Statements of Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
(thousands) |
|
Sept 30/07 |
|
Sept 30/06 |
|
Sept 30/07 |
|
Sept 30/06 |
|
Inventories |
|
$ |
33,452 |
|
|
$ |
(78,073 |
) |
|
$ |
(12,055 |
) |
|
$ |
(98,391 |
) |
Accounts receivable |
|
|
96,586 |
|
|
|
129,698 |
|
|
|
196,021 |
|
|
|
228,261 |
|
Accounts payable and accrued liabilities |
|
|
53,227 |
|
|
|
(33,838 |
) |
|
|
2,440 |
|
|
|
(43,353 |
) |
Other |
|
|
5,526 |
|
|
|
11,150 |
|
|
|
(8,121 |
) |
|
|
13,223 |
|
|
Total |
|
$ |
188,791 |
|
|
$ |
28,937 |
|
|
$ |
178,285 |
|
|
$ |
99,740 |
|
|
16. |
|
Restructuring of the Gold Business |
|
|
|
During the first quarter of 2007, the Parliament of the Kyrgyz Republic accepted in the
first reading and returned to committee for further deliberation draft legislation that,
among other things, challenges the legal validity of Kumtor Gold Company (Kumtor)
agreements with the Kyrgyz Republic, proposes recovery of additional taxes on amounts
relating to past activities, and provides for the transfer of gold deposits (including
Kumtor) to a state-owned entity. If the law is enacted, there would be a substantial risk
of harm to Centerras rights and therefore the value of Camecos investment in Centerra. |
|
|
|
|
As a result, Cameco and Centerra entered into discussions with the Kyrgyz Government. These
discussions resulted in the signing of two agreements, both dated August 30, 2007, between
the Government of the Kyrgyz Republic and, respectively, Cameco and Centerra. Under the
terms of the agreements, the Kyrgyz Government and Kyrgyzaltyn JSC, a joint stock company
owned by the Kyrgyz Government, agree to support Centerras continuing long-term
development of the Kumtor project and agree to facilitate eventual divestiture of Camecos
interest in Centerra. In return, the Kyrgyz Government will receive 32,305,238 shares
(22,305,238 net from Cameco and 10,000,000 treasury shares from Centerra) upon closing of
the definitive legal agreements. Of these, 15,000,000 shares will be received immediately
and 17,305,238 shares will be held in escrow to be released within four years subject to a
number of conditions, including the approval by the Parliament of the Kyrgyz Republic. On
October 22, 2007, the President of the Kyrgyz Republic dismissed the Kyrgyz Parliament
effective that day. Parliamentary elections are scheduled for December 16, 2007. |
|
|
|
|
These agreements were originally to expire on October 31, 2007, but the parties have agreed
to extend the deadline for closing the transactions to February 15, 2008. The conditions
that gave rise to these agreements still exist and Cameco believes
the number of Centerra shares that would have been transferred to the Kyrgyz Government is indicative of the
ultimate cost to remedy those conditions. Thus, Cameco has recorded a charge of
$105,000,000 ($125,000,000 after a net tax expense of $20,000,000). |
17. |
|
Commitments and Contingencies |
|
|
|
The following represent the material legal claims against the company and its subsidiaries. |
|
(a) |
|
On February 12, 2004, Cameco, Cameco Bruce Holdings II Inc., BPC Generation
Infrastructure Trust and TransCanada Pipelines Limited (collectively, the Consortium)
sent a letter to British Energy Limited and British Energy International Holdings Limited
(collectively, BE) requesting, amongst other things, indemnification for breach of a
representation and warranty contained in the February 14, 2003 Amended and Restated Master
Purchase Agreement. The alleged breach is that the Unit 8 steam generators were not in
good condition, repair and proper working order, having regard to their use and age. This
defect was discovered during a
planned outage conducted just after closing. As a result of this defect, the planned outage
had to be significantly extended. The Consortium has claimed damages in the amount of
$64,558,200 being 79.8% of the $80,900,000 of damages actually incurred, plus an
unspecified amount to take into account the reduced operating life of the steam generators.
A decision to proceed with arbitration has been made but formal commencement of proceedings
has not taken place because counsel for the Consortium and BE have yet to agree on the
composition of the arbitration panel.
|
Cameco Corporation
Notes to Consolidated Financial Statements
(Unaudited)
|
|
|
In anticipation of this claim, BE issued on February 10, 2006 and then served on
Ontario Power Generation Inc. and Bruce Power LP a Statement of Claim. This Statement
of Claim seeks damages for any amounts that BE is found liable to pay to the
Consortium in connection with the Unit 8 steam generator arbitration described above,
damages in the amount of $500,000,000, costs and pre and post judgment interest
amongst other things. A decision to proceed with arbitration and an agreement with
BEs counsel to approach a sole arbitrator has been made. It is anticipated that a
meeting with the potential arbitrator will take place in the next few weeks and,
assuming that he is prepared to act as arbitrator, that a schedule for the arbitration
will then be set. |
|
|
|
|
Management is of the opinion, after review of the facts with counsel, that this action
against Bruce Power LP will not have a material financial impact on Camecos financial
position, results of operations and liquidity. |
|
(b) |
|
Pursuant to an agreement between Centerra Gold Mongolia Limited (CGM) and Gatsuurt
LLC, an unrelated Mongolian company, under which CGM acquired the Gatsuurt licenses, CGM
agreed to transfer the principal license covering the Gatsuurt property to Gatsuurt LLC if
CGM did not complete a feasibility study by December 31, 2005. CGM completed a feasibility
study in December 2005. Gatsuurt LLC informed
Centerra that it does not believe that CGM complied with its obligation and began
proceedings in the Mongolian National Arbitration Court (MNAC) alleging non-compliance by
CGM and seeking the return of the principal license for the Gatsuurt property. CGM believes
that the Gatsuurt LLC claim is without merit and on July 10, 2007 filed a petition with
Mongolias District Court contesting the jurisdiction of the MNAC. On July 25, 2007, the
Mongolian District Court returned CGMs petition, without a decision on the jurisdictional
issue, to permit CGM to supplement its submissions. All proceedings were suspended in
August 2007 pending the outcome of settlement discussions. CGM and Gatsuurt LLC have
reached an agreement in principle to suspend, and upon signing a definitive agreement, to
terminate the arbitration proceedings between CGM and Gatsuurt LLC. In anticipation of a
settlement, CGM has recorded a $3,000,000 (US) charge as an estimate of the cost to settle
the matter. |
|
(c) |
|
Cameco, as a partner in BPLP, has provided the following financial
assurances, with varying terms to 2018: |
|
(i) |
|
Licensing assurances to Canadian Nuclear Safety
Commission of up to $133,300,000. At September 30,
2007, Camecos actual exposure under these assurances was $23,700,000. |
|
|
(ii) |
|
Guarantees to customers under power sale agreements of up to $47,000,000. Cameco
did not have any actual exposure under these guarantees at September 30, 2007.
|
|
|
(iii) |
|
Termination payments to Ontario Power Generation Inc. pursuant to the lease
agreement of $58,300,000. |
18. |
|
Port Hope Conversion Facility |
|
|
|
On July 13, 2007, Cameco discovered uranium and other production-associated chemicals in
the soil beneath its Port Hope uranium hexafluoride
(UF6) conversion plant. As a result, full
production of
UF6 has been suspended
until Cameco has determined the source of the chemicals and developed appropriate plans.
Preliminary estimates indicate that the clean up of the contaminated area will cost
approximately $3,000,000 and Cameco has accrued that amount as an operating expense in
2007. The assessment of the extent of the contamination is ongoing and the cost estimate is
subject to change. The provision will be revised as better information becomes available. |
Cameco Corporation
Notes to Consolidated Financial Statements
(Unaudited)
19. |
|
Segmented Information |
|
|
|
For the three months ended September 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel |
|
|
|
|
|
|
|
|
|
Inter- |
|
|
|
|
Uranium |
|
Services |
|
Electricity |
|
Gold |
|
Segment |
|
Total |
|
Revenue |
|
$ |
409,491 |
|
|
$ |
53,880 |
|
|
$ |
114,669 |
|
|
$ |
103,671 |
|
|
$ |
(646 |
) |
|
$ |
681,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and services sold |
|
|
119,169 |
|
|
|
50,537 |
|
|
|
54,055 |
|
|
|
67,369 |
|
|
|
(682 |
) |
|
|
290,448 |
|
Depreciation, depletion and reclamation |
|
|
16,027 |
|
|
|
5,654 |
|
|
|
11,646 |
|
|
|
13,014 |
|
|
|
|
|
|
|
46,341 |
|
Restructuring costs [note 16] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,000 |
|
|
|
|
|
|
|
105,000 |
|
Exploration |
|
|
15,829 |
|
|
|
|
|
|
|
|
|
|
|
4,186 |
|
|
|
|
|
|
|
20,015 |
|
Cigar Lake remediation |
|
|
4,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,650 |
|
Research and development |
|
|
|
|
|
|
931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
931 |
|
Other expense |
|
|
2,343 |
|
|
|
|
|
|
|
|
|
|
|
3,175 |
|
|
|
|
|
|
|
5,518 |
|
Loss on sale of assets |
|
|
|
|
|
|
|
|
|
|
1,801 |
|
|
|
|
|
|
|
|
|
|
|
1,801 |
|
Non-segmented expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
and minority interest |
|
|
251,473 |
|
|
|
(3,242 |
) |
|
|
47,167 |
|
|
|
(89,073 |
) |
|
|
36 |
|
|
|
96,845 |
|
Income tax expense [note 11] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,852 |
|
Minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,240 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
91,233 |
|
|
For the three months ended September 30, 2006 (as adjusted note 1(b))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel |
|
|
|
|
|
|
|
|
|
Inter- |
|
|
|
|
Uranium |
|
Services |
|
Electricity |
|
Gold |
|
Segment |
|
Total |
|
Revenue |
|
$ |
135,562 |
|
|
$ |
39,153 |
|
|
$ |
102,358 |
|
|
$ |
85,528 |
|
|
$ |
(2,317 |
) |
|
$ |
360,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and services sold |
|
|
86,459 |
|
|
|
38,377 |
|
|
|
56,499 |
|
|
|
65,545 |
|
|
|
(1,869 |
) |
|
|
245,011 |
|
Depreciation, depletion and reclamation |
|
|
21,910 |
|
|
|
3,687 |
|
|
|
10,754 |
|
|
|
10,164 |
|
|
|
(65 |
) |
|
|
46,450 |
|
Exploration |
|
|
12,272 |
|
|
|
|
|
|
|
|
|
|
|
6,402 |
|
|
|
|
|
|
|
18,674 |
|
Research and development |
|
|
|
|
|
|
556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
556 |
|
Other expense |
|
|
656 |
|
|
|
|
|
|
|
|
|
|
|
(15,366 |
) |
|
|
|
|
|
|
(14,710 |
) |
Loss on sale of assets |
|
|
349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
349 |
|
Non-segmented expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,468 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
and minority interest |
|
|
13,916 |
|
|
|
(3,467 |
) |
|
|
35,105 |
|
|
|
18,783 |
|
|
|
(383 |
) |
|
|
85,422 |
|
Income tax expense [note 11] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,499 |
|
Minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
72,744 |
|
|
Cameco Corporation
Notes to Consolidated Financial Statements
(Unaudited)
For the nine months ended September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel |
|
|
|
|
|
|
|
|
|
Inter- |
|
|
|
|
Uranium |
|
Services |
|
Electricity |
|
Gold |
|
Segment |
|
Total |
|
Revenue |
|
$ |
1,050,506 |
|
|
$ |
162,097 |
|
|
$ |
304,033 |
|
|
$ |
317,082 |
|
|
$ |
(17,895 |
) |
|
$ |
1,815,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and services sold |
|
|
401,777 |
|
|
|
135,727 |
|
|
|
177,270 |
|
|
|
190,075 |
|
|
|
(18,200 |
) |
|
|
886,649 |
|
Depreciation, depletion and reclamation |
|
|
81,018 |
|
|
|
13,954 |
|
|
|
34,101 |
|
|
|
39,794 |
|
|
|
|
|
|
|
168,867 |
|
Restructuring costs [note 16] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,000 |
|
|
|
|
|
|
|
105,000 |
|
Exploration |
|
|
34,575 |
|
|
|
|
|
|
|
|
|
|
|
15,171 |
|
|
|
|
|
|
|
49,746 |
|
Cigar Lake remediation |
|
|
23,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,309 |
|
Research and development |
|
|
|
|
|
|
2,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,768 |
|
Other expense |
|
|
5,449 |
|
|
|
|
|
|
|
|
|
|
|
3,175 |
|
|
|
|
|
|
|
8,624 |
|
Loss (gain) on sale of assets |
|
|
(4,897 |
) |
|
|
|
|
|
|
1,801 |
|
|
|
|
|
|
|
|
|
|
|
(3,096 |
) |
Non-segmented expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
and minority interest |
|
|
509,275 |
|
|
|
9,648 |
|
|
|
90,861 |
|
|
|
(36,133 |
) |
|
|
305 |
|
|
|
398,763 |
|
Income tax expense [note 11] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,192 |
|
Minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
354,615 |
|
|
For the nine months ended September 30, 2006 (as adjusted note 1(b))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel |
|
|
|
|
|
|
|
|
|
Inter- |
|
|
|
|
Uranium |
|
Services |
|
Electricity |
|
Gold |
|
Segment |
|
Total |
|
Revenue |
|
$ |
561,060 |
|
|
$ |
140,548 |
|
|
$ |
316,081 |
|
|
$ |
314,339 |
|
|
$ |
(12,408 |
) |
|
$ |
1,319,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and services sold |
|
|
333,758 |
|
|
|
116,964 |
|
|
|
157,574 |
|
|
|
193,158 |
|
|
|
(8,666 |
) |
|
|
792,788 |
|
Depreciation, depletion and reclamation |
|
|
67,558 |
|
|
|
10,996 |
|
|
|
32,673 |
|
|
|
31,058 |
|
|
|
(1,262 |
) |
|
|
141,023 |
|
Exploration |
|
|
24,548 |
|
|
|
|
|
|
|
|
|
|
|
18,919 |
|
|
|
|
|
|
|
43,467 |
|
Research and development |
|
|
|
|
|
|
1,883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,883 |
|
Other expense |
|
|
3,401 |
|
|
|
|
|
|
|
|
|
|
|
(15,366 |
) |
|
|
|
|
|
|
(11,965 |
) |
Gain on sale of assets |
|
|
(296 |
) |
|
|
|
|
|
|
|
|
|
|
(1,317 |
) |
|
|
|
|
|
|
(1,613 |
) |
Non-segmented expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes and
minority interest |
|
|
132,091 |
|
|
|
10,705 |
|
|
|
125,834 |
|
|
|
87,887 |
|
|
|
(2,480 |
) |
|
|
310,616 |
|
Income tax recovery [note 11] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60,303 |
) |
Minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
335,373 |
|
|