Cameco reports first quarter financial results

Cameco reports first quarter financial results 
SASKATOON, SASKATCHEWAN -- (Marketwired) -- 05/01/13 --  


 
--  strong first quarter production 
--  first quarter financial results as expected 
--  at Cigar Lake, continued progress towards first production in mid-2013 
--  completed the acquisition of NUKEM Energy GmbH 
--  the government of Saskatchewan announced changes to the provincial
    royalty system to encourage continued investment in Saskatchewan's
    uranium mining industry 

 
Cameco (TSX:CCO) (NYSE:CCJ) today reported its consolidated financial
and operating results for the first quarter ended March 31, 2013 in
accordance with International Financial Reporting Standards (IFRS).  
"Our results this quarter are consistent with what we had projected,"
said Tim Gitzel, president and CEO. "Deliveries from our uranium
segment and revenue from Bruce Power were low, and resulted in lower
net earnings.  
"We remain on track with our annual outlook, and have increased our
focus on streamlining and efficiency in order to remain competitive
in today's uncertain environment.  
"We are confident in the future growth for the industry, but also
know the importance of being responsive to current market conditions
by taking action today to remain a profitable, low cost producer for
years to come." 


 
                                                      THREE MONTHS          
                                                    ENDED MARCH 31          
------------------------------------------------------------------          
HIGHLIGHTS                                                                  
($ MILLIONS EXCEPT WHERE INDICATED)                 2013      2012  CHANGE  
----------------------------------------------------------------------------
Revenue                                              444       466      (5)%
----------------------------------------------------------------------------
Gross Profit                                          95       150     (37)%
----------------------------------------------------------------------------
Net earnings attributable to equity holders            9       129     (93)%
----------------------------------------------------------------------------
  $ per common share (diluted)                      0.02      0.33     (94)%
----------------------------------------------------------------------------
Adjusted net earnings (see non-IFRS)                  27       121     (78)%
----------------------------------------------------------------------------
  $ per common share (adjusted and diluted)         0.07      0.31     (77)%
----------------------------------------------------------------------------
Cash provided by operations (after working                                  
 capital changes)                                    269       374     (28)%
----------------------------------------------------------------------------

 
FIRST QUARTER  
Net earnings attributable to equity holders (net earnings) this
quarter were $9 million ($0.02 per share diluted) compared to $129
million ($0.33 per share diluted) in the first quarter of 2012. In
addition to the items noted below, net earnings were impacted by
mark-to-market losses on foreign exchange derivatives.  
On an adjusted basis, our earnings this quarter were $27 million
($0.07 per share diluted) compared to $121 million ($0.31 per share
diluted) (see non-IFRS measure) in the first quarter of 2012, mainly
due to: 


 
--  lower earnings from our uranium segment based on lower sales volumes and
    lower realized prices 
--  lower earnings from our electricity segment based on lower generation
    and higher operating costs 
--  higher expenditures for administration due to the addition of NUKEM's
    administration and advisory fee, and costs for corporate restructuring
    as described in our first quarter MD&A 

 
See Financial results by segment for more detailed discussion. 
Uranium market update  
Since the previous quarter, the uranium market has seen little
change. Near to medium-term uncertainty continues to impede a
recovery, with neither buyers nor suppliers seeming to feel much
pressure to contract. Most suppliers have significant commitments out
to 2016, and utilities are well covered for a similar period. As a
result, over this quarter, volumes contracted have remained low, and
uranium prices have been relatively stable.  
As we have noted in previous quarters, we believe the market will
remain in this 'wait-and-see' mode until catalyzed by events such as
reactor restarts in Japan and a significant return to long-term
contracting by utilities. We expect to see both of these catalysts
realized, though the timing remains unclear. In our view, utilities
are beginning to move into the window of time during which they would
normally begin contracting for requirements in 2016, and, as the
regulatory process is worked through in Japan, we believe reactors
will be restarted in 2013. The process began in January, when the
Nuclear Regulatory Authority (NRA) issued draft safety guidelines
outlining the proposed requirements for restart. The guidelines have
now been released for public comment, with the final guidelines
expected in July. We are in frequent contact with our Japanese
utility customers and understand that they are investing
significantly to prepare their nuclear assets to meet the
requirements for restart.  
While we watch to see how the near term will evolve, we believe the
long-term picture for nuclear continues to be strong. Our current
estimates project nuclear generating capacity will reach about 510
gigawatts by 2022 from today's 392 gigawatts, which represents
average annual growth of 3%. Of this expected growth, approximately
65 new reactors (65 gigawatts of generating capacity) are under
construction today. Much of this growth is coming from India and
China, which together plan to bring eight new reactors online this
year. Canada recently finalized the details of the Nuclear
Cooperation Agreements with both countries, enabling Canada, and
Cameco, to take part in the opportunity these countries represent to
the nuclear industry by allowing deliveries of Canadian material.  
The other side of the equation is supply, which faces challenges both
from primary and secondary sources. Secondary sources, which have
historically kept supply in balance with demand, continue to
diminish, particularly with the end of the Russian Highly Enriched
Uranium commercial agreement this year. The end of this agreement
will remove more pounds from the market than our total annual
production, and there is no secondary source of similar scale
expected. But future primary supply is also starting to suffer as a
number of projects were cancelled or deferred in 2012 while the
uranium spot price remained at a level well below that required to
incentivize new projects. This primary supply uncertainty comes at a
time when demand growth is on the horizon. However, the reduction in
future primary supply does not directly impact the near-term market
and there are indications that some supply projects, primarily driven
by sovereign interests, may proceed despite market conditions.  
Despite the current challenging industry environment, we are well
positioned to continue to succeed. We have advantages like extensive
mineral reserves and resources, low cost operations, a strong sales
contract portfolio, experienced employees and a growth strategy that
will allow us to remain competitive in challenging environments,
while maintaining the ability to respond quickly with additional
production when the market signals that more supply is required. 
Outlook for 2013  
Our outlook for 2013 reflects the growth expenditures necessary to
help us achieve our strategy. Our consolidated outlook for revenue
and direct administration costs have increased due to the inclusion
of NUKEM. Our outlook for sales volumes from our fuel services
segment has also changed and we explain the change below. We do not
provide an outlook for the items in the table that are marked with a
dash.  
See Financial results by segment for details.  
2013 FINANCIAL OUTLOOK  
NUKEM is included in the consolidated amounts and our outlook for the
NUKEM segment has been added to the table below. Starting this
quarter, IFRS 11 - Joint Arrangements requires that we account for
our interest in BPLP using equity accounting. BPLP is not included in
consolidated amounts due to the change in accounting.  


 
                                       FUEL                                 
               CONSOLIDATED URANIUM    SERVICES     NUKEM       ELECTRICITY 
----------------------------------------------------------------------------
Production     -            23.3       15 to 16     -           -           
                            million    million kgU                          
                            lbs                                             
----------------------------------------------------------------------------
Sales volume   -            31 to 33   Increase     9 to 11     -           
                            million    5% to 10%    million lbs             
                            lbs                     U3O8, 0.5               
                                                    million SWU             
----------------------------------------------------------------------------
Capacity       -            -          -            -           88%         
factor                                                                      
----------------------------------------------------------------------------
Revenue        Increase     Increase   Increase     $500 to     Decrease    
compared to    25% to 30%   0% to      5% to 10%    $600        5% to 10%   
2012                        5%(1)                   million                 
----------------------------------------------------------------------------
NUKEM          -            -          -            $100 to     -           
Operating cash                                      $125                    
flows                                               million                 
----------------------------------------------------------------------------
NUKEM gross    -            -          -            3% to 5%    -           
profit                                                                      
----------------------------------------------------------------------------
Average unit   -            Increase   Decrease     -           Increase    
cost of sales               0% to      0% to 5%                 25% to 30%  
(including                  5%(2)                                           
D&A)                                                                        
----------------------------------------------------------------------------
Direct         Increase     -          -            $10 to 12   -           
administration 0% to 5%                             million                 
costs compared                                                              
to 2012(3)                                                                  
----------------------------------------------------------------------------
Exploration    -            Decrease   -            -           -           
costs compared              5% to 10%                                       
to 2012                                                                     
----------------------------------------------------------------------------
Tax rate       Recovery of  -          -            Expense of  -           
               15% to 20%                           30% to 35%              
----------------------------------------------------------------------------
Capital        $655         -          -            -           $93 million 
expenditures   million(4)                                       (our share) 
----------------------------------------------------------------------------
(1) Based on a uranium spot price of $40.50 (US) per pound (the Ux spot     
    price as of April 29, 2013), a long-term price indicator of $57.00 (US) 
    per pound (the Ux long-term indicator on April 29, 2013) and an exchange
    rate of $1.00 (US) for $1.00 (Cdn).                                     
(2) This increase is based on the unit cost of sale for produced material   
    and committed long-term purchases. If we decide to make discretionary   
    purchases in 2013 then we expect the overall unit cost of product sold  
    to increase further.                                                    
(3) Direct administration costs do not include stock-based compensation     
    expenses.                                                               
(4) Does not include our share of capital expenditures at BPLP.             

 
We now expect an increase of 5% to 10% for sales volumes in our fuel
services segment (previously an increase of up to 5%), due to
increased fuel services production (15 to 16 million KgU compared to
13 to 14 million KgU in 2012) and increased sales commitments in
2013.  
In our uranium and fuel services segments, our customers choose when
in the year to receive deliveries, so our quarterly delivery
patterns, sales volumes and revenue, can vary significantly. We
expect our uranium deliveries for the second quarter will be greater
than the first quarter. Uranium sales for the balance of 2013 are
expected to be more heavily weighted (about 60%) to the second half
of the year. However, not all delivery notices have been received to
date, which could alter the delivery pattern. Typically, we receive
notices six months in advance of the requested delivery date. 
SENSITIVITY ANALYSIS  
For the rest of 2013:  


 
--  a change of $5 (US) per pound in both the Ux spot price ($40.50 (US) per
    pound on April 29, 2013) and the Ux long-term price indicator ($57.00
    (US) per pound on April 29, 2013) would change revenue by $56 million
    and net earnings by $30 million 
--  a change of $5/MWh in the electricity spot price would change our 2013
    net earnings by $1 million based on the assumption that the spot price
    will remain below the floor price of $52.34/MWh provided under BPLP's
    agreement with the Ontario Power Authority (OPA) 
--  a one-cent change in the value of the Canadian dollar versus the US
    dollar would change revenue by $9 million and adjusted net earnings by
    $5 million, with a decrease in the value of the Canadian dollar versus
    the US dollar having a positive impact. This sensitivity is based on an
    exchange rate of $1.00 (US) for $1.00 (Cdn). 

 
ADJUSTED NET EARNINGS (NON-IFRS MEASURE)  
Adjusted net earnings is a measure that does not have a standardized
meaning or a consistent basis of calculation under IFRS (non-IFRS
measure). We use this measure as a more meaningful way to compare our
financial performance from period to period. We believe that, in
addition to conventional measures prepared in accordance with IFRS,
certain investors use this information to evaluate our performance.
Adjusted net earnings is our net earnings attributable to equity
holders, adjusted to better reflect the underlying financial
performance for the reporting period. The adjusted earnings measure
reflects the matching of the net benefits of our hedging program with
the inflows of foreign currencies in the applicable reporting period,
and has been adjusted for impairment charges on non-producing
properties.  
Adjusted net earnings is non-standard supplemental information and
should not be considered in isolation or as a substitute for
financial information prepared according to accounting standards.
Other companies may calculate this measure differently, so you may
not be able to make a direct comparison to similar measures presented
by other companies.  
The table below reconciles adjusted net earnings with our net
earnings. 


 
                                                              THREE MONTHS  
                                                             ENDED MARCH 31 
                                                        --------------------
($ MILLIONS)                                                 2013      2012 
----------------------------------------------------------------------------
Net earnings attributable to equity holders                     9       129 
----------------------------------------------------------------------------
Adjustments                                                                 
  Adjustments on derivatives(1)(pre-tax)                       25       (11)
  Income taxes on adjustments to derivatives                   (7)        3 
----------------------------------------------------------------------------
Adjusted net earnings                                          27       121 
----------------------------------------------------------------------------
(1) In 2008, we opted to discontinue hedge accounting for our portfolio of  
    foreign currency forward sales contracts. Since then, we have adjusted  
    our gains or losses on derivatives to reflect what our earnings would   
    have been had hedge accounting been applied.                            

 
CRA Disclosure  
Since 2008, the Canada Revenue Agency (CRA) has disputed the offshore
marketing company structure and related transfer pricing methodology
we used for certain intercompany uranium sale and purchase
agreements, and issued notices of reassessment for our 2003 through
2007 tax returns. We believe the ultimate resolution of this matter
will not be material to our financial position, results of operations
and cash flows in the year(s) of resolution.  
There have been no fact changes in this case since we first disclosed
it in 2008. However, in 2013, we were required to report separately
the cash payment to CRA of approximately $27 million for taxes,
interest and instalment penalties. Until 2013, we had not been
required to make any significant cash tax payments due to the
availability of elective deductions and tax loss carryovers. However,
we were required to make small cash payments for interest and
instalment penalties, which totaled about $13 million. These amounts
were not reported separately as they were not material in any given
year. Transfer pricing is a complex area of tax law, and it is
difficult to predict the outcome of a case like ours as there are
only a handful of reported court decisions on transfer pricing in
Canada. However, tax authorities generally test two things:  


 
--  the governance (structure) 
--  the price 

 
As the majority of our customers are located outside Canada, we
established an offshore marketing subsidiary. For this subsidiary to
be able to enter into sales agreements, it must be backed up by a
supply of uranium, which is made possible by our intercompany
purchase and sales agreements as well as uranium supply agreements
with third parties. We have arm's-length transfer price arrangements
in place, which expose both parties to the risks and the rewards
accruing to it under this portfolio of purchase and sales contracts.  
With respect to the contract prices, they are generally comparable to
those established in sales contracts between arm's-length buyers and
sellers at the time. Based on an analysis of our contract portfolio
and other contracts entered into at the time, we have recorded a
cumulative tax provision of $65 million, where an argument could be
made that our transfer price may have fallen outside of an
appropriate range of pricing in uranium contracts for the period from
2003 to March 31, 2013.  
We are confident that we will be successful in our case; however, the
Canadian Income Tax Act includes provisions that require certain
companies to pay 50% of the cash tax plus related interest and
instalment penalties at the time of reassessment. For the years 2003
through 2007, the CRA issued notices of reassessment for
approximately $1.3 billion of additional income for Canadian tax
purposes, which would result in a related tax expense of about $380
million. Once elective deductions and tax loss carryovers were
applied to the amounts reassessed in 2012, as well as interest and
instalment penalties, the resulting amount payable was approximately
$54 million, 50% of which, or $27 million, we remitted in 2013.
Adding the $13 million remitted in previous years brings the total
cash paid to CRA to $40 million. No transfer pricing penalties have
been assessed.  
Using the methodology we believe the CRA will continue to apply, and
including the $1.3 billion already reassessed, we expect to receive
notices of reassessment for a total of approximately $4.9 billion in
income as taxable in Canada for the years 2003 through 2012, which
would result in a related tax expense of approximately $1.4 billion.
Cash taxes payable would be between $800 million and $850 million. In
addition, we estimate there would be interest and instalment
penalties applied that would be material to Cameco. We would be
responsible for remitting 50% of the cash taxes, or between $400
million and $425 million, plus related interest and instalment
penalties assessed, which would be material to Cameco.  
Under the Canadian Tax Act, the amount required to be remitted each
year will depend on the amount of income reassessed in that year and
the availability of elective deductions and tax loss carryovers;
however, we expect it will generally follow the schedule in the table
below. 


 
                                                                            
MARCH 31, 2013 ($ MILLIONS)  2003 - 2013 2014 - 2016 2017 - 2023       TOTAL
----------------------------------------------------------------------------
50% of cash taxes payable in                                                
 the period(1)                        18     50 - 75   325 - 350   400 - 425
----------------------------------------------------------------------------
(1) These amounts do not include interest and instalment penalties, which   
    totaled approximately $22 million to March 31, 2013.                    

 
In light of our view of the likely outcome of the case as described
above, we expect to recover the amounts remitted to CRA, including
the $40 million already paid.  
The case on the 2003 reassessment is expected to go to trial in the
fall of 2014. If this timing is adhered to, we expect to have a Tax
Court decision in 2015.  
Caution about forward-looking information relating to our CRA tax
dispute  
This discussion of our expectations relating to our tax dispute with
CRA and future tax reassessments by CRA, including the amounts of
future additional taxable income, additional tax expense, cash taxes
payable and interest and possible penalties thereon and related
remittances, and timing of a Tax Court decision, is forward-looking
information that is based upon the assumptions and subject to the
material risks discussed under the heading Caution about
forward-looking information and also on the more specific assumptions
and risks listed below. Actual outcomes may vary significantly.  
Assumptions 


 
--  the CRA will reassess us for the years 2008 through 2012 using a similar
    methodology as for the years 2003 through 2007, with the time lag for
    the reassessments for each year being similar to what has occurred to
    date 
--  we will be able to apply elective deductions and tax loss carryovers to
    the extent anticipated 
--  the CRA will not seek to impose transfer pricing penalties in addition
    to interest charges and instalment penalties 
--  we will be substantially successful in our dispute with the CRA and the
    cumulative tax provision of $65 million to date will be adequate to
    satisfy any tax liability resulting from the outcome of the dispute to
    date. 

 
Material risks that could cause actual results to differ materially  


 
--  the CRA reassesses us for years 2008 through 2012 using a different
    methodology than for years 2003 through 2007, or we are unable to
    utilize elective deductions and loss carryovers to the same extent as
    anticipated, resulting in the required cash payments to CRA pending the
    outcome of the dispute being higher than expected 
--  the time lag for the reassessments for each year is different than for
    those to date 
--  the CRA may seek to impose transfer pricing penalties 
--  we are unsuccessful and the outcome of our dispute with CRA results in
    significantly higher cash taxes, interest charges and penalties than the
    amount of our cumulative tax provision, which could have a material
    adverse effect on our liquidity, financial position, results of
    operations and cash flows 
--  cash tax payable increases due to unanticipated adjustments by CRA not
    related to transfer pricing 
 
                                                                            
Financial results by segment                                                
                                                                            
Uranium                                                                     
                                                                            
                                                     THREE MONTHS           
                                                    ENDED MARCH 31          
                                              --------------------          
HIGHLIGHTS                                          2013      2012  CHANGE  
----------------------------------------------------------------------------
Production volume (million lbs)                      5.9       4.8      23% 
----------------------------------------------------------------------------
Sales volume (million lbs)                           5.1       8.2     (38)%
----------------------------------------------------------------------------
Average spot price ($US/lb)                        42.71     51.73     (17)%
Average long-term price ($US/lb)                   56.50     60.33      (6)%
Average realized price                                                      
  ($US/lb)                                         48.42     48.69      (1)%
  ($Cdn/lb)                                        48.25     49.32      (2)%
----------------------------------------------------------------------------
Average unit cost of sales ($Cdn/lb)                                        
 (including D&A)                                   31.90     31.99       -  
----------------------------------------------------------------------------
Revenue ($ millions)                                 247       406     (39)%
----------------------------------------------------------------------------
Gross profit ($ millions)                             84       143     (41)%
----------------------------------------------------------------------------
Gross profit (%)                                      34        35      (3)%
----------------------------------------------------------------------------

 
FIRST QUARTER  
Production volumes this quarter were 23% higher compared to the first
quarter of 2012, due mainly to higher production at McArthur
River/Key Lake and Inkai. See Operations and development project
updates for more information.  
Uranium revenues were down 39% due to a 38% decrease in sales volumes
and a 2% decrease in the Canadian dollar average realized price.  
Our realized prices this quarter were lower than the first quarter of
2012, mainly due to lower US dollar prices under market related
contracts. In the first quarter of 2013, the uranium spot price
averaged $42.71 (US), 17% lower than the $51.73 (US) in the first
quarter of 2012.  
Total cost of sales (including D&A) decreased by 38% ($163 million
compared to $263 million in 2012). This was mainly the result of a
38% decrease in sales volumes, and lower royalty charges due to the
slightly lower realized price and reduced deliveries of
Saskatchewan-produced material. In the first quarter of 2013, total
royalty charges were $14 million compared to $33 million in the first
quarter of 2012.  
The net effect was a $59 million decrease in gross profit for the
quarter.  
The table below shows the costs of produced and purchased uranium
incurred in the reporting periods (which are non-IFRS measures, see
the paragraphs below the table). These costs do not include selling
costs such as royalties, transportation and commissions, nor do they
reflect the impact of opening inventories on our reported cost of
sales. 


 
                                                     THREE MONTHS           
                                                    ENDED MARCH 31          
------------------------------------------------------------------          
($CDN/LB)                                           2013      2012  CHANGE  
----------------------------------------------------------------------------
Produced                                                                    
  Cash cost                                        19.12     22.39     (15)%
  Non-cash cost                                     8.44      7.51      12% 
----------------------------------------------------------------------------
  Total production cost                            27.56     29.90      (8)%
----------------------------------------------------------------------------
  Quantity produced (million lbs)                    5.9       4.8      23% 
----------------------------------------------------------------------------
Purchased                                                                   
  Cash cost                                        33.44     34.64      (3)%
----------------------------------------------------------------------------
  Quantity purchased (million lbs)                   2.3       1.4      64% 
----------------------------------------------------------------------------
Totals                                                                      
  Produced and purchased costs                     29.21     30.97      (6)%
----------------------------------------------------------------------------
  Quantities produced and purchased (million                                
   lbs)                                              8.2       6.2      32% 
----------------------------------------------------------------------------

 
Cash cost per pound, non-cash cost per pound and total cost per pound
for produced and purchased uranium presented in the above table are
non-IFRS measures. These measures do not have a standardized meaning
or a consistent basis of calculation under IFRS. We use these
measures in our assessment of the performance of our uranium
business. We believe that, in addition to conventional measures
prepared in accordance with IFRS, certain investors use this
information to evaluate our performance and ability to generate cash
flow.  
These measures are non-standard supplemental information and should
not be considered in isolation or as a substitute for measures of
performance prepared according to accounting standards. These
measures are not necessarily indicative of operating profit or cash
flow from operations as determined under IFRS. Other companies may
calculate these measures differently so you may not be able to make a
direct comparison to similar measures presented by other companies.  
To facilitate a better understanding of these measures, the following
table presents a reconciliation of these measures to our unit cost of
sales for the first quarters of 2013 and 2012. 


 
CASH AND TOTAL COST PER POUND RECONCILIATION                                
                                                                            
                                                     THREE MONTHS           
                                                   ENDED MARCH 31           
------------------------------------------------------------------          
($ MILLIONS)                                       2013      2012   CHANGE  
----------------------------------------------------------------------------
Cost of product sold                              144.0     231.1      (38)%
Add / (subtract)                                                            
  Royalties                                       (14.4)    (33.4)     (57)%
  Standby charges                                  (8.1)     (7.1)      14% 
  Other selling costs                               2.8      (1.9)    (247)%
  Change in inventories                            65.4     (32.7)    (300)%
----------------------------------------------------------------------------
Cash operating costs (a)                          189.7     156.0       22% 
Add / (subtract)                                                            
  Depreciation and amortization                    19.5      31.9      (39)%
  Change in inventories                            30.3       4.1      639% 
----------------------------------------------------------------------------
Total operating costs (b)                         239.5     192.0       25% 
----------------------------------------------------------------------------
  Uranium produced & purchased (millions lbs)                               
   (c)                                              8.2       6.2       32% 
----------------------------------------------------------------------------
Cash costs per pound (a / c)                      23.14     25.16       (8)%
Total costs per pound (b / c)                     29.21     30.97       (6)%
----------------------------------------------------------------------------

 
ROYALTIES  
The government of Saskatchewan has recently approved changes to both
the basic and tiered royalty systems for uranium as described below.  
The basic royalty is equal to 5% of gross sales of Saskatchewan
uranium (gross sales) and is reduced by the Saskatchewan resource
credit (SRC), which, effective April 1, 2013, is equal to 0.75% of
gross sales. Prior to the changes approved by the government on March
20, 2013, the SRC was equal to 1% of gross sales.  
The government has also changed tiered royalties from a revenue-based
system to a modified profit-based system retroactive to January 1,
2013. Under the new system, a 10% tiered royalty will be charged on
profit up to $22/kg U3O8 ($9.98/lb) and a 15% tiered royalty will be
charged on profit in excess of $22/kg U3O8. Profit will be determined
as gross sales less certain operating costs, exploration costs and
actual capital costs. Costs will be deductible as incurred at the
discretion of the producer, subject to transitional rules.  
The overall structure is expected to be positive over the next 15
years, although the magnitude of the impact will not be known until
the provincial regulations are finalized. The exact timing of this
step will not impact the date the new tiered royalty system takes
effect.  
In addition, as a resource corporation in Saskatchewan, we pay a
corporate resource surcharge equal to 3% of gross sales.  


 
Fuel services                                                               
                                                                            
(includes results for UF6, UO2 and fuel fabrication)                        
                                                      THREE MONTHS          
                                                    ENDED MARCH 31          
                                              --------------------          
HIGHLIGHTS                                          2013      2012  CHANGE  
----------------------------------------------------------------------------
Production volume (million kgU)                      4.7       4.5       4% 
----------------------------------------------------------------------------
Sales volume (million kgU)                           3.4       2.9      17% 
----------------------------------------------------------------------------
Average realized price ($Cdn/kgU)                  19.60     20.57      (5)%
----------------------------------------------------------------------------
Average unit cost of sales ($Cdn/kgU)                                       
 (including D&A)                                   16.27     16.65      (2)%
----------------------------------------------------------------------------
Revenue ($ millions)                                  66        60      10% 
----------------------------------------------------------------------------
Gross profit ($ millions)                             11        11       -  
----------------------------------------------------------------------------
Gross profit (%)                                      17        18      (6)%
----------------------------------------------------------------------------

 
FIRST QUARTER  
Total revenue increased by 10% due to a 17% increase in sales
volumes, offset by a 5% decrease in realized price.  
The total cost of products and services sold (including D&A)
increased by 15% ($55 million compared to $48 million in the first
quarter of 2012) due to the increase in sales volumes, offset by a
decrease in the average unit cost of sales. When compared to 2012,
the average unit cost of sales was 2% lower due to the mix of fuel
services products sold.  
The net effect was no change in gross profit. 


 
NUKEM                                                                       
                                                THREE MONTHS                
                                              ENDED MARCH 31                
                               -----------------------------                
($ MILLIONS EXCEPT WHERE                            PURCHASE                
 INDICATED)                              NUKEM    ACCOUNTING   CONSOLIDATED 
----------------------------------------------------------------------------
Uranium sales (million lbs)                2.3             -            2.3 
----------------------------------------------------------------------------
Conversion sales (million kgU)             0.3             -            0.3 
----------------------------------------------------------------------------
Revenue                                    132            (1)           131 
----------------------------------------------------------------------------
Cost of product sold (including                                             
 D&A)                                      103            24            127 
----------------------------------------------------------------------------
Gross profit                                29           (25)             4 
----------------------------------------------------------------------------
Net earnings                                14           (17)            (3)
----------------------------------------------------------------------------
Adjustments on derivatives(1)                2             -              2 
----------------------------------------------------------------------------
Adjusted net earnings(1)                    16           (17)            (1)
----------------------------------------------------------------------------
Cash provided by operations                 99             -             99 
----------------------------------------------------------------------------
(1) Adjustments relate to unrealized gains and losses on foreign currency   
    forward sales contracts (see non-IFRS)                                  

 
On January 9, 2013, we completed the acquisition of NUKEM Energy GmbH
(NUKEM) from Advent International (Advent) and other shareholders.
NUKEM is one of the world's leading traders and brokers of nuclear
fuel products and services.  
NUKEM was acquired for cash consideration of EUR107 million ($140
million (US)). We also assumed NUKEM's net debt which amounted to
about EUR79 million ($104 million (US)) on January 9, 2013.
Acquisition related costs of $4 million (2012) and an advisory fee of
$3 million (2013) have been expensed and included in administration
expense in the consolidated statement of earnings. We received the
economic benefits of owning NUKEM as of January 1, 2012; however, in
accordance with accounting requirements, our financial reporting will
reflect results from January 9, 2013 forward.  
The purchase agreement also includes an earn-out provision that could
provide Advent with a share of NUKEM's earnings under certain
conditions for the years 2012 through 2014. The earn-out is based on
NUKEM exceeding certain minimum threshold levels of earnings before
interest, taxes, depreciation and amortization (EBITDA), as specified
and defined in the purchase agreement. The EBITDA is derived from
NUKEM's audited financial statements. For 2012, the earn-out amount
was $8 million (US) as EBITDA for the year exceeded the payout
threshold of $115 million (US). If payable, the next earn-out payment
will be made in 2015.  
For accounting purposes, the purchase price is allocated to the
assets and liabilities acquired based on their fair values as of the
acquisition date. The purchase price allocation is provided in the
table below. We believe that these values are representative of the
transaction; however, it is possible that the final allocation will
differ.  
Much of the purchase price was related to nuclear fuel inventories
and the portfolio of sales and purchase contracts acquired. The
amounts attributed to inventory and contracts were based on market
values as at the acquisition date. They will be charged to earnings
in the period(s) in which related transactions occur. The amount
categorized as goodwill reflects the value assigned to the expected
future earnings capabilities of the organization. This is the
earnings potential that we anticipate will be realized through new
business arrangements. Goodwill is not amortized and is tested for
impairment at least annually.  


 
PURCHASE PRICE ALLOCATION
                                                               $US MILLIONS 
----------------------------------------------------------------------------
Net assets                                                                  
  Working capital                                                       (22)
  Inventory                                                             165 
  Sales, purchase contracts and other intangibles                        88 
  Goodwill                                                               88 
  Debt                                                                 (117)
  Deferred taxes                                                        (54)
----------------------------------------------------------------------------
Net assets acquired                                                     148 
----------------------------------------------------------------------------
Financed by                                                                 
  Cash                                                                  140 
  Additional consideration (earn-out provision)                           8 
----------------------------------------------------------------------------
Liabilities and equity                                                  148 
----------------------------------------------------------------------------

 
FIRST QUARTER  
During the first three months of 2013, NUKEM delivered 2.3 million
pounds of uranium and 0.3 million kgU of conversion services. On a
consolidated basis, NUKEM contributed $131 million in revenues, $4
million in gross profit and an adjusted net loss (see non-IFRS
measure) of $1 million as administrative and financing charges more
than offset gross profits in the quarter. NUKEM's contribution to our
earnings is significantly impacted by our purchase price accounting.
Excluding the impact of the purchase accounting, NUKEM's adjusted net
earnings (see non-IFRS measure) were $16 million for the quarter.
NUKEM generated strong cash flows of $99 million from its operating
activities during the first quarter due largely to a drawdown of
inventory and the collection of accounts receivable.  
As noted above, much of the NUKEM purchase price was attributable to
inventories and the portfolio of contracts. With respect to nuclear
fuel inventories, amounts assigned were based on market values as of
the date of acquisition. As these quantities are delivered to NUKEM's
customers, we will adjust the cost of product sold to reflect the
values at the acquisition date, regardless of NUKEM's historic costs. 
As of the date of the purchase agreement, had NUKEM's sales and
purchase contracts been settled, it would have realized significant
financial benefit and as a result, we paid a premium to acquire the
portfolio. Accordingly, a portion of the purchase price has been
attributed to the various contracts. In our accounting for NUKEM, we
will amortize the amounts assigned to the portfolio in the periods in
which NUKEM transacts under the relevant contracts. The net effect is
a reduction in reported profit margins relative to NUKEM's results.
We expect the majority of the amount allocated to the contract
portfolio will be amortized within two years. 
Electricity results  
FIRST QUARTER  
Total electricity revenue decreased 14% this quarter due to lower
output and lower realized price. Realized prices reflect spot sales,
revenue recognized under BPLP's agreement with the OPA, and financial
contract revenue. BPLP recognized revenue of $124 million this
quarter under its agreement with the OPA, compared to $185 million in
the first quarter of 2012. The equivalent of about 77% of BPLP's
output was sold under financial contracts this quarter, compared to
62% in the first quarter of 2012. From time to time, BPLP enters the
market to lock in gains under these contracts. Gains on BPLP's
contract activity in the first quarter of 2013 were lower than the
same period in 2012.  
The capacity factor was 78% this quarter, down from 85% in the first
quarter of 2012. There were 70 planned and nine unplanned outage days
in the quarter, compared to 46 planned and five unplanned outage days
in the first quarter of 2012.  
Operating costs were $283 million compared to $255 million in 2012
due to higher maintenance costs incurred primarily as a result of
more planned outage days in the first quarter.   
The result was a $1 million loss before taxes in the first quarter of
2013 compared to $79 million in earnings before taxes in the first
quarter of 2012.  
BPLP distributed $100 million to the partners in the first quarter.
Our share was $32 million. BPLP capital calls to the partners in the
first quarter were $7 million. Our share was $2 million. The partners
have agreed that BPLP will distribute excess cash monthly, and will
make separate cash calls for major capital projects. 
FLOOR PRICE AGREEMENT EXTENSION  
Bruce Power and the OPA reached an agreement to amend the Bruce Power
Refurbishment Implementation Agreement to extend the floor price from
the original Bruce B unit end of life dates between 2016 and 2019, to
between 2019 and 2020. It does not change the price of the Bruce B
floor.  
Operations and development project updates  
Production in our uranium segment this quarter was 1.1 million pounds
higher than the first quarter of 2012.  


 
URANIUM PRODUCTION                                                          
                                                     THREE MONTHS           
                                                    ENDED MARCH 31          
                                              --------------------          
CAMECO'S SHARE                                                              
(MILLION LBS)                                       2013      2012   CHANGE 
----------------------------------------------------------------------------
McArthur River/Key Lake                              3.5       2.9       21%
----------------------------------------------------------------------------
Rabbit Lake                                          1.1       1.0       10%
----------------------------------------------------------------------------
Smith Ranch-Highland                                 0.3       0.2       50%
----------------------------------------------------------------------------
Crow Butte                                           0.2       0.2        - 
----------------------------------------------------------------------------
Inkai                                                0.8       0.5       60%
----------------------------------------------------------------------------
Total                                                5.9       4.8       23%
----------------------------------------------------------------------------

 
McArthur River/Key Lake  
Production for the quarter was 21% higher compared to the same period
last year due to the timing of the annual maintenance shutdown. The
mill will be shut down for three weeks in May to complete planned
work. We expect our share of production this year will be 13.2
million pounds U3O8.  
We are continuing to advance the underground exploration drifts to
the southwest and northeast directions and will focus on developing
zone 4 and areas at the south end of the underground mine workings.  
We are continuing to advance work on the environmental assessment for
the Key Lake extension project. We plan to submit the final
environmental impact statement for review by the provincial and
federal regulators and pursue the required regulatory approvals in
2013. 
Rabbit Lake  
Production remains on track for the year. To ensure the most
efficient operation of the mill throughout the year, we continually
manage ore supply and, therefore, experience large variations in mill
production from quarter to quarter. 
Smith Ranch-Highland and Crow Butte  
At our US operations, production for the quarter was slightly higher
than the first quarter of 2012.  
Our ability to bring new wellfields into production in both Wyoming
and Nebraska continues to be affected by the lengthened review
process to obtain regulatory approvals. The operating environment is
becoming more complex as public interest and regulatory oversight
increase.  
At Smith Ranch-Highland, we are finishing construction of the
satellite plant and the first wellfields at North Butte, with
production expected to begin in the second quarter. North Butte is
expected to contribute approximately 300,000 pounds in 2013 and
rampup to a target annual production rate of more than 700,000 pounds
per year by 2015. 
Inkai  
Production was 60% higher for the quarter compared to the same period
last year. We have continued to bring on new wellfields to maintain a
higher head grade in the wellfield production mix, which has resulted
in the higher first quarter production. The higher head grade and
other improvements to the extraction processes allow the Inkai
operation to produce at its design capacity of 5.2 million pounds per
year.  
Cigar Lake  
We continued to make solid progress at Cigar Lake in the first
quarter and expect commissioning in ore in mid-2013, with the first
packaged pounds in the fourth quarter.  
During the quarter, the first jet boring unit completed a successful
test program in waste rock. The second jet boring unit is expected to
be shipped to site and moved underground in the second quarter.  
Installation of the underground and surface infrastructure required
to begin commissioning in ore in mid-2013 is ongoing and progressing
well.  
Cigar Lake's licence from the Canadian Nuclear Safety Commission
(CNSC) expires at the end of 2013. The current licence allows for
various mine construction activities as well as mining of ore for
commissioning purposes. We made an application to the CNSC in 2012 to
amend the current licence, ahead of its expiry date. The application
included a request for a ten-year term. The CNSC held a public
hearing on April 3, 2013. We expect a decision during the second
quarter and anticipate that Cigar Lake will have the full operating
licence in mid-2013. 
Fuel services  
Fuel services produced 4.7 million kgU in the first quarter, 4%
higher than the same period last year. We increased our production
target in 2013 to between 15 million and 16 million kgU, so quarterly
production is anticipated to be higher than comparable periods in
2012.  
The current collective agreements with unionized employees at the
Port Hope conversion facility will expire on June 30, 2013.
Bargaining began in April 2013. There is risk to production if we are
unable to reach an agreement and a work stoppage occurs. 
Qualified persons  
The technical and scientific information discussed in this document
for our material properties (McArthur River/Key Lake, Inkai and Cigar
Lake) was approved by the following individuals who are qualified
persons for the purposes of NI 43-101: 


 
 McArthur River/Key Lake                                                    
 
--  David Bronkhorst, vice-president, Saskatchewan mining south, Cameco 
 
Cigar Lake                                                                  
 
--  Grant Goddard, vice-president, Saskatchewan mining north, Cameco 
 
Inkai                                                                       
 
--  Alain G. Mainville, director, mineral resources management, Cameco 

 
CAUTION ABOUT FORWARD-LOOKING INFORMATION  
This document includes statements and information about our
expectations for the future. When we discuss our strategy, plans,
future financial and operating performance, or other things that have
not yet taken place, we are making statements considered to be
forward-looking information or forward-looking statements under
Canadian and United States securities laws. We refer to them in this
document as forward-looking information.
Key things to understand about the forward-looking information in
this document: 


 
--  It typically includes words and phrases about the future, such as:
    anticipate, believe, estimate, expect, plan, will, goal, target,
    forecast, project, strategy and outlook (see examples below). 
--  It represents our current views, and can change significantly. 
--  It is based on a number of material assumptions, including those we have
    listed below, which may prove to be incorrect. 
--  Actual results and events may be significantly different from what we
    currently expect, due to the risks associated with our business. We list
    a number of these material risks below. We recommend you also review our
    annual information form and our annual and first quarter MD&A, which
    include a discussion of other material risks that could cause actual
    results to differ significantly from our current expectations. 
--  Forward-looking information is designed to help you understand
    management's current views of our near and longer term prospects, and it
    may not be appropriate for other purposes. We will not necessarily
    update this information unless we are required to by securities laws. 

 
Examples of forward-looking information in this document 


 
--  our expectations about 2013 and future global uranium supply,
    consumption, demand, and nuclear generating capacity, including the
    discussion under the heading Uranium market update 
--  the outlook for each of our operating segments for 2013, and our
    consolidated outlook for the year 
--  our expectations about changes to Saskatchewan uranium royalty systems 
--  our expectations relating to our tax dispute with Canada Revenue Agency
    (CRA) and future tax reassessments by CRA 
--  our future plans for each of our uranium operating properties and
    development project 
--  our expectations regarding Cigar Lake 

 
Material risks  


 
--  actual sales volumes or market prices for any of our products or
    services are lower than we expect for any reason, including changes in
    market prices or loss of market share to a competitor 
--  we are adversely affected by changes in foreign currency exchange rates,
    interest rates or tax rates, or we are unsuccessful in our dispute with
    the CRA 
--  our production costs are higher than planned, or necessary supplies are
    not available, or not available on commercially reasonable terms 
--  our estimates of production, purchases, costs, decommissioning or
    reclamation expenses, or our tax expense estimates, prove to be
    inaccurate 
--  we are unable to enforce our legal rights under our existing agreements,
    permits or licences, or are subject to litigation or arbitration that
    has an adverse outcome 
--  there are defects in, or challenges to, title to our properties 
--  our mineral reserve and resource estimates are not reliable, or we face
    unexpected or challenging geological, hydrological or mining conditions 
--  we are affected by environmental, safety and regulatory risks, including
    increased regulatory burdens or delays 
--  we cannot obtain or maintain necessary permits or approvals from
    government authorities 
--  we are affected by political risks in a developing country where we
    operate 
--  we are affected by terrorism, sabotage, blockades, civil unrest, social
    or political activism, accident or a deterioration in political support
    for, or demand for, nuclear energy 
--  we are impacted by changes in the regulation or public perception of the
    safety of nuclear power plants, which adversely affect the construction
    of new plants, the relicensing of existing plants and the demand for
    uranium 
--  there are changes to government regulations or policies that adversely
    affect us, including tax and trade laws and policies 
--  our uranium and conversion suppliers fail to fulfill delivery
    commitments 
--  our Cigar Lake development, mining or production plans are delayed or do
    not succeed, including as a result of any difficulties encountered with
    the jet boring mining method or our inability to acquire any of the
    required jet boring equipment 
--  our McArthur River development, mining or production plans are delayed
    or do not succeed 
--  we are affected by natural phenomena, including inclement weather, fire,
    flood and earthquakes 
--  our operations are disrupted due to problems with our own or our
    customers' facilities, the unavailability of reagents, equipment,
    operating parts and supplies critical to production, equipment failure,
    lack of tailings capacity, labour shortages, labour relations issues
    (including an inability to renew agreements with unionized employees at
    McArthur River, Key Lake or the Port Hope conversion facility), strikes
    or lockouts, underground floods, cave ins, ground movements, tailings
    dam failures, transportation disruptions or accidents, or other
    development and operating risks 
--  NUKEM's actual uranium sales volume, cash flows and revenue in 2013 and
    in the future are lower than expected due to losses in connection with
    spot market purchases, counterparty default on payment or other
    obligations, counterparty insolvency or other risks 
--  departure of key personnel at NUKEM could have an adverse effect on
    continuing operations 

 
Material assumptions 


 
--  our expectations regarding sales and purchase volumes and prices for
    uranium, fuel services and electricity 
--  our expectations regarding the demand for uranium, the construction of
    new nuclear power plants and the relicensing of existing nuclear power
    plants not being more adversely affected than expected by changes in
    regulation or in the public perception of the safety of nuclear power
    plants 
--  our expected production level and production costs 
--  the assumptions regarding market conditions upon which we have based our
    capital expenditure expectations 
--  our expectations regarding spot prices and realized prices for uranium 
--  our expectations regarding tax rates and payments, the outcome of the
    dispute with the CRA, foreign currency exchange rates and interest rates
--  our decommissioning and reclamation expenses 
--  our mineral reserve and resource estimates, and the assumptions upon
    which they are based, are reliable 
--  the geological, hydrological and other conditions at our mines 
--  the success of our Cigar Lake development, mining and production plans,
    including the success of the jet boring mining method at Cigar Lake and
    that we will be able to obtain the additional jet boring systems we
    require on schedule 
--  the success of our McArthur River development, mining and production
    plans 
--  our ability to continue to supply our products and services in the
    expected quantities and at the expected times 
--  our ability to comply with current and future environmental, safety and
    other regulatory requirements, and to obtain and maintain required
    regulatory approvals 
--  our operations are not significantly disrupted as a result of political
    instability, nationalization, terrorism, sabotage, blockades, civil
    unrest, breakdown, natural disasters, governmental or political actions,
    litigation or arbitration proceedings, the unavailability of reagents,
    equipment, operating parts and supplies critical to production, labour
    shortages, labour relations issues (including an inability to renew
    agreements with unionized employees at McArthur River, Key Lake or the
    Port Hope conversion facility), strikes or lockouts, underground floods,
    cave ins, ground movements, tailings dam failure, lack of tailings
    capacity, transportation disruptions or accidents or other development
    or operating risks 
--  NUKEM's actual uranium sales volume, cash flows and revenue in 2013 and
    in the future will be consistent with our expectations 
--  key personnel will remain with NUKEM 

 
Quarterly dividend notice  
We announced today that our board of directors approved a quarterly
dividend of $0.10 per share on the outstanding common shares of the
corporation that is payable on July 15, 2013, to shareholders of
record at the close of business on June 28, 2013. 
Conference call  
We invite you to join our first quarter conference call on Wednesday
May 1, 2013 at 1:00 p.m. Eastern. 
The call will be open to all investors and the media. To join the
call, please dial (866) 240-9772 (Canada and US) or (416) 340-8530.
An operator will put your call through. A live audio feed of the
conference call will be available from a link at cameco.com. See the
link on our 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 
--  on post view until midnight, Eastern, June 1, 2013 
    by calling (800) 408-3053 or (905) 694-9451 (Passcode 7039949#) 

 
Additional information  
You can find a copy of our first quarter MD&A and interim financial
statements on our website at cameco.com, on SEDAR at sedar.com and on
EDGAR at sec.gov/edgar.shtml.  
Additional information, including our 2012 annual management's
discussion and analysis, annual audited financial statements and
annual information form, is available on SEDAR at sedar.com, on EDGAR
at sec.gov/edgar.shtml and on our website at cameco.com. 
Profile  
We are one of the world's largest uranium producers, a significant
supplier of conversion services and one of two Candu fuel
manufacturers in Canada. Our competitive position is based on our
controlling ownership of the world's largest high-grade reserves and
low-cost operations. Our uranium products are used to generate clean
electricity in nuclear power plants around the world, including
Ontario where we are a limited partner in North America's largest
nuclear electricity generating facility. We also explore for uranium
in the Americas, Australia and Asia. Our shares trade on the Toronto
and New York stock exchanges. Our head office is in Saskatoon,
Saskatchewan.  
As used in this news release, the terms we, us, our and Cameco mean
Cameco Corporation and its subsidiaries, including NUKEM Energy Gmbh
(NUKEM), unless otherwise indicated. 
Contacts:
Cameco
Investor inquiries:
Rachelle Girard
(306) 956-6403 
Cameco
Media inquiries:
Gord Struthers
(306) 956-6593