Vision and Strategy

Cameco's vision is to be a dominant nuclear energy company producing uranium fuel and generating clean electricity. Our key strategy to deliver this vision is to sustain and grow uranium production in a way that is safe, clean, cost-effective and community supported, with a profitably integrated fuel services business.

Consolidated Financial Performance in 2008

Cameco had record adjusted net earnings¹ of $589 million in 2008, 3% higher than adjusted net earnings of $572 million in 2007. We enjoyed record consolidated revenues of nearly $2.9 billion, 24% higher than the previous record of $2.3 billion achieved in 2007. Cash provided by operations in 2008 of $708 million, was down 12% from the record $801 million reached in 2007. This decrease of $93 million was mainly attributable to the higher working capital requirements in 2008.

Key Achievements, Developments and Challenges in 2008

Achievements

• Cameco acquired a 70% interest in Kintyre, an advanced exploration project in Australia, to further our strategy to expand our portfolio of uranium assets. If successfully developed, Kintyre will add potential for open pit production and offers geographic diversification.
• Cameco also acquired a 24% interest in Global Laser Enrichment (GLE) based in North Carolina. GLE is developing a third-generation uranium enrichment process using laser technology. This investment extends our involvement in the nuclear fuel cycle.

Developments

• Despite supply shortages, construction and development of the Inkai project in Kazakhstan advanced and we expect to declare commercial production in 2009.
• At the McArthur River mine, the transition to new mining areas continued with production expected to begin in 2009 and 2010.

Challenges

• During the year, our operating mines and mills experienced several production challenges. The challenges were largely related to reagent supply and aging infrastructure. We have addressed the issues affecting 2008 production and, over the next several years, plan to continue refurbishing our asset base to ensure their long-term, efficient operation.
• In September, the Port Hope UF₆ plant was restarted upon completion of a year-long rehabilitation program. However, operations were suspended at the end of November because we were unable to resolve a contract dispute with our sole supplier of hydrofluoric acid. Because of contract negotiations and logistical issues, supply arrangements are not expected to be established before mid-2009, with production resuming thereafter.
• Cigar Lake rehabilitation continued. The original water inflow area was successfully sealed and dewatering of the mine began in the summer of 2008. However, in August a new inflow occurred, causing dewatering to be suspended. The location of this inflow has been identified on the 420 metre level, and preparation for sealing of the inflow area is underway. It is expected to take most of 2009.

Uranium Industry Fundamentals

Cameco remains optimistic about the prospects for nuclear energy around the world. Nuclear energy is widely recognized as a critical component of the solution to global environmental issues and concerns about energy security. We noted the following during 2008:

• In the global fleet of existing reactors, modest capacity growth continues with ongoing improvements in capacity factors, plant power uprates, and plant life extensions.
• New-build projects continue to be announced in current nuclear power jurisdictions and also in the developing world, with some countries such as China, Russia and India pursuing aggressive construction programs. However, the current financial crisis may slow or delay the new build program.
• The NEI reported that in 2007, US nuclear power plants continued to enjoy the lowest average direct costs of 1.76 cents (US) per kilowatt hour, for baseload, non-hydro, electricity production.
• Despite the significant decrease in the uranium price since the beginning of 2008, the long-term uranium market fundamentals remain positive as:
  • Worldwide production continues to be outstripped by demand.
  • Demand that could not be satisfied through mine production was met by the consumption of various secondary supplies, including those of the Russian and US governments. The large majority of these secondary supplies are finite and additional primary production is required to meet future reactor requirements.