Cameco

Cameco

May 13, 2008 08:15 ET

Cameco Reports Strong First Quarter Earnings

SASKATOON, SASKATCHEWAN--(Marketwire - May 13, 2008) -

ALL AMOUNTS ARE STATED IN CDN $

Cameco Corporation (TSX:CCO) (NYSE:CCJ) today reported first quarter 2008 net earnings of $133 million ($0.37 per share diluted), 125% higher than in the first quarter of 2007 due to improved results in the uranium and gold businesses.

"Cameco's strength is reflected in our financial performance," said Jerry Grandey, Cameco's president and CEO. "And our future is secured by the long-term demand for clean energy around the world."

Note: All dollar amounts are expressed in Canadian dollars unless otherwise stated. Cameco's unaudited first quarter financial statements and management's discussion and analysis are available on our company's website cameco.com, on SEDAR at sedar.com and on EDGAR at sec.gov/edgar.shtml.



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Three months ended
Financial Highlights March 31 Change
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2008 2007 %
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Revenue ($ millions) 593 409 45
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Net earnings ($ millions) 133 59 125
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Earnings per share (EPS) - basic ($) 0.39 0.17 129
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EPS - diluted ($) 0.37 0.16 131
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Cash provided by operations (1)
($ millions) 146 139 5
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(1) After working capital changes.



Revenue of $593 million in the first quarter of 2008 was 45% higher than in the first quarter of 2007 due to increases in the realized selling prices for uranium and gold and an increase in the reported sales volume for uranium.

Interest and other charges were $36 million higher than in the first quarter of 2007 due primarily to the recognition of $34 million in mark-to-market losses on hedge contracts that do not qualify for hedge accounting.

In the first quarter of 2008, we recorded an income tax expense of $17 million compared to net recovery of $16 million in 2007. This change was due to the distribution of our taxable income between Canada and other countries.

In the first quarter of 2008, administration costs were $30 million lower due to reduced stock-based compensation expenses. The decline in stock compensation expense is due to a decline in our share price during the quarter.

Cameco's results come from four business segments:



URANIUM

Highlights
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Three months ended
March 31
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2008 2007
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Revenue ($ millions) 338 183
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Gross profit ($ millions) 169 60
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Gross profit % 50 33
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Average realized price
($US/lb) 40.85 24.00
($Cdn/lb) 44.68 28.91
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Sales volume (million lbs)(1) 7.4 6.3
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Production volume (million lbs) 3.7 4.5
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(1) Revenue in the amount of $85 million on 2.6 million pounds previously
deferred due to a standby product loan was recognized in the first
quarter of 2008 as a result of the cancellation of a product loan
agreement.


Uranium Results

For the first quarter of 2008, revenue from our uranium business increased by $155 million to $338 million compared to the same period in 2007 due to a 55% increase in the average realized selling price and a 17% increase in reported sales volumes. Our realized prices lag the market and continued to rise in the quarter despite lower market prices.

Our total cost of products and services sold, including depreciation, depletion and reclamation (DD&R), increased to $168 million in the first quarter of 2008 from $123 million in the first quarter of 2007 due to the rise in reported sales volumes and an increase in the unit cost of product sold. The unit cost increased by 15% as a result of higher production costs and higher royalty charges, which increase with the realized price.



Uranium Production
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Three months ended
Cameco's share of March 31 2008 planned
production (million --------------------- production
lbs U3O8) 2008 2007 (1)(2)
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McArthur River/Key Lake 3.1 2.7 13.1
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Rabbit Lake 0 1.1 3.6
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Smith Ranch/ Highland 0.4 0.5 1.8
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Crow Butte 0.2 0.2 0.9
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Total 3.7 4.5 19.4
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(1) These quantities do not include Inkai production, as the mine is not yet
in commercial operation. Production at Inkai in 2008 is estimated at 1.2
million pounds subject to the availability of acid.
(2) See the section titled "Cameco's Uranium Supply Outlook" in the annual
MD&A for more information about assumptions and risk factors associated
with this production forecast, which remains unchanged from the forecast
presented in our annual MD&A.


FUEL SERVICES

Highlights
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Three months ended
March 31
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2008 2007
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Revenue ($ millions) 59 44
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Gross profit ($ millions) 3 9
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Gross profit % 5 20
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Sales volume (million kgU)(1) 3.4 2.4
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Production volume (million kgU)(2) 2.1 5.3
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(1) Kilograms of uranium (kgU)
(2) Production volume includes UF6, UO2, fuel fabrication, and UF6 supply
from Springfields Fuels Ltd. (SFL).


Fuel Services Results

In the first quarter of 2008 revenue from our fuel services business was $59 million, an increase of $15 million compared to the same period in 2007 due to a 42% increase in reported sales volumes, partially offset by a 5% decline in the average realized price.

Total cost of products and services sold, including DD&R, increased by 60% to $56 million from $35 million in 2007. The cost of products sold was impacted by the shutdown of the Port Hope UF6 conversion plant, with $14 million of associated costs expensed during the first quarter.

Cameco's Port Hope fuel services production and SFL supply totalled 2.1 million kgU in the first quarter of 2008 compared to 5.3 million kgU in the first quarter of 2007. The decrease is a result of the suspension of UF6 production at Port Hope.

Shutdown of the Port Hope UF6 plant reduced demand for UO3 in the first quarter of 2008. The Blind River refinery produced 3.2 million kgU as UO3 in the first quarter of 2008 compared to 3.6 million kgU for the first quarter of 2007.

NUCLEAR ELECTRICITY GENERATION

Highlights

Cameco owns 31.6% of the Bruce Power Limited Partnership (BPLP). During the first quarter, Cameco's pre-tax earnings from BPLP amounted to $6 million compared to $11 million over the same period in 2007. This decrease in the first quarter of 2008 was due to lower generation as a result of more outage days during the quarter compared to the same period last year, partially offset by higher realized prices and lower operating costs in the quarter.

BPLP achieved a capacity factor of 72% in the first quarter of 2008, compared to 78% in the same period of 2007 due to a greater number of outage days during the quarter.

GOLD

Cameco owns approximately 53% of Centerra Gold Inc., which owns and operates two gold mines.



Highlights (represents 100% as Cameco fully consolidates Centerra's results)
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Three months ended
March 31
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2008 2007
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Revenue ($ millions) 113 96
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Gross profit ($ millions) 44 24
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Gross profit % 39 25
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Realized price (US$/ounce) 909 645
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Sales volume (ounces) 124,000 128,000
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Gold production (ounces) 120,000 133,000
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For the three months ended March 31, 2008, revenue from our gold business increased by $17 million to $113 million compared to the first quarter of 2007. The increase in revenue was due to an improved realized gold price partially offset by lower sales. The realized price for gold rose to $909 (US) per ounce in the quarter compared to $645 (US) per ounce in the first quarter of 2007, due to higher spot prices.

OUTLOOK FOR THE YEAR 2008

During the first quarter of 2008, there were no material changes to Cameco's 2008 consolidated outlook or our 2008 outlook for each business segment contained in Cameco's annual MD&A. For the convenience of the reader, we have summarized Cameco's 2008 consolidated outlook and 2008 outlook for each business segment in a table called "2008 Financial Outlook" on our website at cameco.com.

Uranium Price Sensitivity (2008 to 2012)

The uranium price sensitivity table for the period 2008 to 2012 included in our annual MD&A has been updated in our first quarter MD&A to reflect the deliveries that were made and contracts that were entered into during the quarter.

For the complete table of expected average realized uranium prices and accompanying assumptions please see our first quarter MD&A available on our website at cameco.com.

COMPANY UPDATES

As previously announced, we continue to anticipate production startup at Cigar Lake in 2011 at the earliest. We will be able to provide a firmer production date after the mine has been dewatered, the condition of the underground development has been assessed, and the findings incorporated in the new mine development and production plans. See the section titled "Uranium - Cigar Lake" in our first quarter 2008 MD&A.

In addition, as previously announced, we continue to project UF6 production to resume at our Port Hope UF6 plant in the third quarter of 2008 at the earliest. CNSC staff approval is required to fully restart the plant.

Transitioning to the second new mining area at McArthur River is progressing but activities are behind schedule for 2009 production. Performance in this specific area of the mine is dictated by conditions and risk reduction activities. As a result of the delays encountered, a production contingency plan has been developed. The plan includes mining from areas that are within the protection of the existing freezewall and is intended to reduce the risk of production not achieving the licensed capacity in 2009. During the summer, we expect to complete the engineering for the contingency plan. We do not expect the delays encountered will have any impact on production beyond 2009.

Inkai and other ISR operations in Kazakhstan continue to receive reduced acid allotments from Kazatomprom, Cameco's state-owned joint venture partner in Inkai. Inkai has contracted with an alternative acid supplier and has secured the necessary transportation logistics to partially mitigate the effect of the acid shortage. We continue to acidify the existing wellfield at the block 2 test plant and began acidifying the new commercial wellfield at block 1. However, the acid shortage may reduce Inkai's 2008 planned uranium production of 1.2 million pounds by up to 50%. We are reviewing whether this will affect the timing of declaring Inkai to be in commercial production.

Cameco is aware of media reports that the Supreme Court of the Kyrgyz Republic has issued an order to the Kyrgyz government suspending certain agreements and licences related to the Kumtor gold mine. According to the reports, the order will remain in effect until claims currently before the lower court are resolved. These proceedings were initiated by the vice-speaker of the Kyrgyz parliament. Centerra Gold Inc., the mine operator, is seeking further information including clarification from the government. Cameco and Centerra are not party to any of the proceedings, did not receive any notice of the application to the Supreme Court and have not received any official notice of the order. Disputes with respect to the project are subject to international arbitration.

QUALIFIED PERSONS

The disclosure of scientific and technical information regarding the following Cameco properties in this news release were prepared by or under the supervision of the following qualified persons for the purpose of National Instrument 43-101:



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Qualified Persons Properties
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- David Bronkhorst, general manager, McArthur River
operation, Cameco McArthur
- Les Yesnik, general manager, Key Lake operation, Cameco River/Key Lake
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- C. Scott Bishop, chief mine engineer, Cigar Lake project, Cigar Lake
Cameco
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- Ian Atkinson, vice-president, exploration, Centerra Gold Kumtor
Inc.
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CAUTION REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS

Statements contained in this news release which are not current statements or historical facts are "forward-looking information" (as defined under Canadian securities laws) and "forward-looking statements" (as defined in the U.S.
Securities Exchange Act of 1934, as amended) which may be material and that involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by them. Sentences and phrases containing words such as "believe", "estimate", "anticipate", "plan", "predict", "goals", "targets", "projects", "may", "hope", "can", "will", "shall", "should", "expect", "intend", "is designed to", "continues", "with the intent", "potential", "strategy" and the negative of these words, or variations of them, or comparable terminology that does not relate strictly to current or historical facts, are all indicative of forward-looking information and statements. Examples of forward-looking information and statements include, but are not limited to: our planned uranium production for 2008 and the transition to a second new area at the McArthur River mine for 2009 production.

The material risk factors that could cause actual results to differ materially from the forward-looking information and statements contained in this news release and the material risk factors or assumptions that were used to develop them and also include, without limitation: our assumptions regarding production levels, sales volumes, purchases and prices, which are subject to the risk of being materially lower than anticipated; the risk of volatility and sensitivity to market prices for uranium, conversion services, electricity in Ontario and gold, which we have assumed will remain relatively constant; the assumption regarding the B units of BPLP reaching their targeted capacity factor and that there will be no significant changes in current estimates for costs and prices, and the risk that those assumptions vary adversely; the risk of significant increases in competition levels, which we have assumed will remain constant or decline; the risk of material adverse changes in foreign currency exchange rates and interest rates, which we have assumed will remain constant or improve in our favour; our assumptions regarding production, decommissioning, reclamation, reserve and tax estimates, and the risk that our assumptions are incorrect; the risk of material litigation or arbitration proceedings (including as the result of disputes with joint venture partners) and the adverse outcome of such proceedings, which we have assumed will not occur; the risk we may not be able to enforce legal rights which we have assumed to be enforceable; our assumption that there are no material defects in title to properties, and the risk that such defects occur; environmental and safety risks including increased regulatory burdens and long-term waste disposal, which we have assumed will not adversely affect us; unexpected or challenging geological, hydrological or mining conditions which deviate significantly from our assumptions regarding those conditions; the assumption that we will be successful in resolving issues raised by the Wyoming Department of Environmental Quality regarding Smith Ranch
- Highland, which we have assumed can be resolved in a timely manner; political risks arising from operating in certain developing countries, including the risks of terrorism and sabotage, which we have assumed will not occur; the risk of adverse changes in government legislation, regulations and policies , which we have assumed will not occur; the assumed demand level for nuclear power and the risk that the actual demand level will be significantly lower; the risk of uranium and conversion service providers failure to fulfill delivery commitments or to require material amendments to agreements relating thereto, which we have assumed will not occur; failure to obtain or maintain necessary permits and approvals from government authorities, which we have assumed may be obtained and maintained; the risk of natural phenomena including inclement weather conditions, fire, flood, underground floods, earthquakes, pitwall failure and cave-ins, which we have assumed will not occur; our assumptions regarding the ability of the company's and customers' facilities to operate without disruption, including as a result of strikes or lockouts, and the risk that such disruptions may occur; assumptions regarding the availability of reagents and supplies critical to production, and the risk that they may not be available; our assumed level of electrical production, and the risk that actual levels may be lower due to planned outages extending beyond their scheduled periods or unplanned outages; assumptions regarding uranium spot prices, gold spot prices and the US/Canadian spot exchange rate, which are subject to the risk of fluctuations that would be materially adverse to us; that the schedule for the development and rampup of production at Inkai is achieved, which is subject to the risk of delay; and other development and operating risks.

There may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. These factors are not intended to represent a complete list of the material risk factors that could affect Cameco. Additional risk factors are noted elsewhere in this news release, in Cameco's current annual information form and in Cameco's current annual and first quarter 2008 MD&A.

The forward-looking information and statements included in this news release represent Cameco's views as of the date of this news release and should not be relied upon as representing Cameco's views as of any subsequent date. While Cameco anticipates that subsequent events and developments may cause its views to change, Cameco specifically disclaims any intention or obligation to update forward-looking information and statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable securities laws. Forward-looking information and statements contained in this news release about prospective results of operations, financial position or cash flows that is based upon assumptions about future economic conditions and courses of action is presented for the purpose of assisting Cameco's shareholders in understanding management's current views regarding those future outcomes, and may not be appropriate for other purposes.

There can be no assurance that forward-looking information and statements will prove to be accurate, as actual results and future events could vary, or differ materially, from those anticipated in them. Accordingly, readers of this new release should not place undue reliance on forward-looking information and statements.

QUARTERLY DIVIDEND NOTICE

Cameco announced today that the company's board of directors approved a quarterly dividend of $0.06 per share on the outstanding common shares of the corporation that is payable on July 15, 2008, to shareholders of record at the close of business on June 30, 2008.

CONFERENCE CALL

Cameco invites you to join its first quarter conference call on Tuesday, May 13, 2008 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 Tuesday, May 13, please dial (416) 641-6143 or (866) 300-7687 (Canada and US). A live 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.

A recorded version of the proceedings will be available:

- on our website, cameco.com, shortly after the call, and

- on post view until midnight, Eastern time, Friday, June 13, 2008 by calling (416) 695-5800 or (800) 408-3053 (passcode 3257872 #).

ADDITIONAL INFORMATION

A full copy of Cameco's 2008 first quarter management's discussion and analysis and financial statements and notes (unaudited) can be obtained at cameco.com.

Additional information on Cameco, including its annual information form, is available on SEDAR at sedar.com and the company's website at cameco.com.

PROFILE

Cameco, with its head office in Saskatoon, Saskatchewan, is the world's largest uranium producer, a significant supplier of conversion services and one of two Candu fuel manufacturers in Canada. The company's competitive position is based on its controlling ownership of the world's largest high-grade reserves and low-cost operations. Cameco's uranium products are used to generate clean electricity in nuclear power plants around the world, including Ontario where the company is a limited partner in North America's 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. Cameco's shares trade on the Toronto and New York stock exchanges.

Contact Information

  • Cameco Corporation
    Investor & media inquiries
    Alice Wong
    (306) 956-6337
    or
    Investor inquiries
    Bob Lillie
    (306) 956-6639
    or
    Media inquiries
    Lyle Krahn
    (306) 956-6316
    Website: www.cameco.com