Management's Discussion and Analysis

RESULTS OF OPERATIONS 1999 COMPARED TO 1998

Overview of the Operating Year
Cameco realized strong cash flow and positive earnings and maintained its solid balance sheet in 1999 despite difficult markets for uranium and gold.

There were two particularly significant developments during the year which were of long-term benefit to the company. In March 1999, the company signed an historic agreement with Russia to purchase for resale natural uranium from dismantled weapons. In December 1999, the company began the commissioning of its McArthur River mine.

Cameco generated record cash from operations in 1999. After working capital changes, cash provided by operations was $249 million ($4.35 per share), up 5% compared to $237 million ($4.13 per share) in 1998. Before working capital changes, cash provided by operations was $228 million in 1999 compared to $222 million in 1998.

In 1999, net earnings attributable to common shares were $71 million ($1.24 per share) compared to $44 million ($0.76 per share) in 1998.

Earnings were significantly impacted by two items: the gain on the sale of uranium property interests and the writedown of mineral properties. Excluding these two items, 1999 net earnings attributable to common shares would have been $42 million ($0.72 per share). This compares to net earnings of $68 million ($1.19 per share) in 1998 after adjusting for that year's writedowns.

Total revenue grew by 3% to a record $742 million in 1999 from $719 million in 1998. In 1999, nuclear products and services accounted for more than 85% of total revenue with the remainder coming from gold operations.

In 1999, consolidated earnings were influenced by reduced operating profits from the gold business due to lower realized prices, decreased sales volumes and higher depreciation charges. Nuclear earnings were marginally higher in 1999 as increased sales volumes compensated for weaker realized prices. Cost reductions in administration and exploration were offset by increases in interest and preferred securities charges.

The company's adjusted earnings are summarized below:

Cameco ended the year with $407 million of working capital compared with $323 million in 1998. At December 31, 1999, total debt was $359 million, and the total debt to capitalization ratio was 16%.

Nuclear business
Cameco's nuclear business consists of exploration for uranium, of the development and operation of uranium mines, and of the refining and conversion of uranium concentrates. Uranium and uranium products are sold exclusively for the generation of electricity in nuclear power plants.

Western world uranium market
In 1999, the average month-end closing spot price for uranium was marginally lower than the year earlier. Even with aggressive sellers in the market, the uranium spot price ended 1999 at $9.60 (US) per pound U₃O₈ (uranium concentrates), up 10% from $8.75 (US) at the end of 1998.

Long-term contract price indicators published in the industry declined by 10% during the year to $10.00 (US) per pound U₃O₈ reflecting the low level of contracting activity in 1999, particularly in the first three quarters of the year, and the aggressive offers of some suppliers.

The conversion market was also impacted by abundant supplies. As a result, the conversion spot price decreased over the year by 27% to $2.55 (US) per kilogram uranium as UF₆ from $3.50 (US) one year earlier.

Revenue
In 1999, Cameco's nuclear revenue increased 10% to $634 million from $576 million last year due primarily to the sale of a record volume of U₃O₈, up 14% from 1998. The increase in volume resulted from higher deliveries under Uranerz sales contracts, which were acquired in August 1998, and the results of marketing efforts in recent years. The influence of the greater volume was partially offset by a 3% decline in the average realized price, due primarily to a higher proportion of deliveries with market-related prices. In conversion services, combined UF₆ and UO₂ sales volumes increased by 11% while average realized prices declined 1%.

Cost of products and services sold
The cost of products and services sold of $379 million increased by $42 million or 12% due mainly to the higher volumes delivered. However, U₃O₈ unit costs were down marginally, reflecting a decline in the cost of acquired material. The company continues to sell more uranium than it produces and, therefore, purchases additional quantities to meet its sales commitments. Unit costs for conversion services held steady at 1998 levels. Margins were unchanged for conversion services but lower in uranium concentrates.

Depreciation, depletion and reclamation
Depreciation, depletion and reclamation charges of $97 million rose 11% over the previous year due to the increased sales volumes in U₃O₈ and conversion services.

Uranium exploration
Uranium exploration expenditures decreased in 1999 to $11 million, a decline of $3 million from 1998. This reflects the strategy to focus predominantly on prospects in Canada and Australia which have high potential for economically attractive discoveries.

Gain on sale of property interests
In 1999, the company sold certain uranium interests for $239 million, resulting in a gain of $13 million. In addition, a $59 million recovery of deferred tax was recorded on this sale.

Gold Business
Revenue
In 1999, gold revenue was $107 million, a decline of 25% from 1998. The decrease was due to a reduced sales volume and lower realized prices. In 1999, sales volume declined by 14% to about 205,000 ounces due to the closure of the Contact Lake operation in 1998 and to a decline in Kumtor production which was expected. The average realized gold price declined to $500 per ounce ($338 (US)) for 1999 compared to $563 per ounce ($380 (US)) in 1998. The average spot market price for gold during 1999 was $279 (US) per ounce compared to $294 (US) in 1998.

Cost of products and services sold
For 1999, costs of products and services sold were $50 million, a decline of 21% from 1998 due mainly to the lower sales volume. In addition, the 1998 costs included the higher cost of production at Contact Lake mine. At Kumtor, the cash operating cost of $179 (US) per ounce was unchanged from 1998 and is calculated in accordance with the standards of The Gold Institute.

Depreciation, depletion and reclamation
Total depreciation, depletion and reclamation costs increased marginally in 1999 to $40 million. This was due mainly to an 18% increase in the depreciation rate at Kumtor reflecting the combined effect of the January 1, 1999 restatement of reserves and the September 30, 1999 writedown of assets. The 1998 costs included $9 million for charges at Contact Lake.

Gold exploration
Expenses of $11 million were incurred exploring for gold in 1999. This represents a reduction of 29% from 1998. Most of the work in 1999 was conducted in North America.

Other Corporate Expenses
Administration
In 1999, administration expenses declined by 10% to $36 million from the prior year. This reduction reflects the severance costs incurred at Rabbit Lake in 1998 and cost control initiatives undertaken in 1999. These were partially offset by costs incurred in establishing new sales offices in Europe and the United States.

Interest
Net interest expenses increased by $5 million compared to 1998. This can be attributed to lower interest income on Cameco's subordinated loan to Kumtor, which declined following a payment in December 1998 of all outstanding interest at that time.

Income taxes
In 1999, a net income tax recovery of $3 million was recorded, as a result of the sale of uranium interests, compared to income tax expense of $47 million in 1998. Before the sale and writedowns, the effective rate of income tax was 55% in 1999 compared to 43% in 1998. The lower effective income tax rate in 1998 was the result of a greater proportion of pre-tax earnings derived from gold operations outside of Canada where they are subject to a lower tax rate. The effective rate for both years was unfavourably influenced by the amount of large corporations tax, non-deductible provincial royalties and other taxes. See note 16 to the consolidated financial statements.

Writedown of mineral properties
In 1999, after a prolonged period of depressed and volatile gold prices, Cameco reduced the carrying value of its investment in the Kumtor gold mine by $46 million ($40 million after tax). The amount of the writedown was based on estimated future net cash flows assuming a future gold price of $300 (US) per ounce. In 1998, Cameco recorded a writedown of $16 million ($12 million after tax) related to certain US non-producing uranium properties.

Other expenses
In 1999, Cameco reduced the carrying values of investments in other gold interests by $4 million. This was offset by the receipt of $2 million in dividends from Energy Resources of Australia. In 1998, a writedown of $12 million on other gold investments was recorded.

Preferred securities charges
Preferred securities charges increased in 1999 to $9 million from $2 million in 1998. The preferred securities were issued in October 1998.

CASH RESOURCES
The company generated positive cash flow of $37 million from its investing activities in 1999. Net proceeds of $239 million from the sale of uranium interests were largely offset by capital expenditures of $212 million mainly related to the development of McArthur River and Cigar Lake mines. This compares with expenditures of $694 million in 1998, primarily for the acquisition of Uranerz, a 6.45% interest in Energy Resources of Australia and capital expenditures of $159 million.

In 1999, financing activities used $277 million primarily for debt repayment, dividends, preferred securities charges and the share repurchase program. During the year, the company repurchased 535,000 shares at an average price of $23.15. In 1998, cash provided by financing activities was $384 million primarily due to new financing arrangements involving debt and preferred securities.

Capital expenditures
Cameco plans to spend $104 million on capital and development expenditures in 2000. Approximately one-half of this amount will be spent on the completion of the McArthur River mine and on the development of the Cigar Lake project.

In 2000, the McArthur River mine is expected to reach commercial production and an environmental impact statement for the processing of Cigar Lake ore at Rabbit Lake is expected to be submitted to the regulatory authorities. An application for the Cigar Lake mine construction licence will be prepared during 2000 for submission in late 2000 or early 2001. Production at Cigar Lake is expected in 2003.

LIQUIDITY AND CAPITAL RESOURCES
Overview
Liquidity is the ability of the company to mobilize cash to fund its exploration, development and operating work plans. Important measures of liquidity include those summarized in the table below.

Debt
Cameco has agreements with lending institutions that provide access to approximately $636 million in unsecured lines of credit including a long-term revolving credit facility of $400 million. Interest rates on related borrowings vary and currently average 6.2% per annum. In addition, Cameco has $236 million in letters of credit and overdraft facilities. These arrangements provide operational liquidity (including backup for a $400 million commercial paper program), funding for capital expenditures and financial assurances for future reclamation obligations. For the related terms and conditions, see note eight to the consolidated financial statements. Approximately $353 million of these facilities was unused at December 31, 1999.

A $55 million short-term revolving credit facility matured in May 1999 and was not replaced. In July 1999, Cameco cancelled a $350 million bridge facility, which was due in January 2000. As credit facilities mature, the company intends to refinance as is necessary to meet liquidity requirements.

Senior debentures
In 1999, Cameco completed a $100 million capital markets debt issue in the form of senior, unsecured debentures. These debentures bear interest at 6.9% per annum and will mature on July 12, 2006. The proceeds were used to repay other indebtedness.

Kumtor Gold Company
To finance the Kumtor gold project, a consortium of financial institutions advanced $285 million (US) in senior and subordinated loans to the project through 1996. During 1999, KGC repaid $49 million (US). After these repayments, the outstanding balances were $191 million (US) on the senior debt and $20 million (US) on the subordinated debt. Since Cameco proportionately consolidates its interest in KGC, $70 million (US) ($102 million (Cdn)) of the remaining loans were included in Cameco's long-term debt. See note 19 to the consolidated financial statements.

In addition, Cameco has invested $45 million (US) as an equity contribution and provided a subordinated loan under which outstanding advances and accrued interest at the end of 1999 amounted to $107 million (US) and $12 million (US) respectively.

While the Kumtor credit facilities are an obligation of KGC, Cameco has agreed to guarantee the payment of all principal and interest that becomes due on the senior debt. This guarantee does not apply in the case of certain events of political force majeure, which are covered by political risk insurance purchased on behalf of some lenders and self-insured by other lenders. See note 19 to the consolidated financial statements.

As part of the Kumtor financing arrangements, KGC must maintain a debt reserve bank account as described in note six to the consolidated financial statements.

Cameco is bound by certain financial covenants in its credit facilities and in those of Kumtor. These covenants place restrictions on total long-term debt, including guarantees, and set minimum levels for net worth. As of December 31, 1999, Cameco met such covenant tests and does not expect its planned operating and investing activities in 2000 will be constrained by them.

For additional commentary on Cameco's operations, the following section presents the results of an earlier year-on-year comparison.

RESULTS OF OPERATIONS 1998 COMPARED TO 1997

(These results include Uranerz Exploration and Mining Limited and Uranerz U.S.A., Inc. as of August 11, 1998, the date Cameco acquired these companies).

Overview of the Operating Year
In the uranium and gold markets, 1998 was characterized by limited demand and weak prices. The effect of these conditions was to restrain revenue, profit and cash flow despite the acquisition of Uranerz Exploration and Mining Limited and Uranerz U.S.A., Inc. (Uranerz) and a full year's production from the Kumtor gold mine. The weakening of the Canadian dollar in 1998 partially offset the impact of the lower prices. In response to these conditions and to facilitate the transition to the new, richer uranium ore bodies, the company announced plans late in 1998 to conserve up to $200 million in cash primarily by restricting production over the next three years.

In 1998, after working capital changes, Cameco generated cash from operations of $237 million ($4.13 per share) up 46% from 1997. The improvement primarily reflected the inclusion of financial results from the acquisition of Uranerz, a decline in uranium purchases, and the receipt of interest payments on Cameco's subordinated loans to KGC.

In 1998, Cameco's consolidated net earnings attributable to common shares were $44 million ($0.76 per share) compared to $82 million ($1.51 per share) in 1997. The 1998 earnings were impacted by reduced margins due to lower uranium prices and increased sales of higher-cost purchased uranium. In addition, the company wrote down $16 million in non-producing US uranium properties and $12 million to reflect a decline in the value of investments in gold activities not related to Kumtor. On an after-tax basis, these non-recurring write downs totalled $24 million ($0.42 per share) and had no cash implications.

The segmented results of Cameco's two business operations follow:

Nuclear Business
Western world uranium market
In 1998, only about 10 million pounds U₃O₈ were traded on the uranium spot market. This was about 7% of the western world's uranium consumption and less than half the volume traded in the previous year. The weak spot market was primarily due to lower utility and producer demand. Utilities in particular withdrew from the spot market for a variety of reasons including reductions in their inventories and deferred requirements.

After opening the year at $12.05 (US) per pound U₃O₈ and stabilizing temporarily in the second quarter, the spot price drifted steadily toward its 1998 close of $8.75 (US), a decline of 27%.

Long-term contract price indicators published in the industry fell by 11% during 1998 to $11.10 (US) per pound U₃O₈, demonstrating more resilience than the spot price. Approximately 50 million pounds were contracted in the long-term market during 1998, about 31% less than in 1997. This was primarily due to heavy contracting from 1995 to 1997 and perceptions that prices would remain low. Contributing factors to these perceptions included the selling of uranium inventory announced by both the United States Enrichment Corporation (USEC) and the US Department of Energy as well as the uncertainty surrounding the disposition of the uranium natural feed component resulting from the US-Russia highly enriched uranium agreement.

In the conversion market, spot prices also decreased by about 31% from $5.10 (US) per kilogram uranium as UF₆ at the close of 1997 to $3.50 (US) at the end of 1998.

Revenue
In 1998, Cameco's nuclear revenue rose to $576 million, including the effect of the Uranerz acquisition, an increase of 7% from 1997. This increase reflects higher U₃O₈ sales volumes which were up 10%, due to the acquisition. This was partially offset by a small decrease in the average realized U₃O₈ price reflecting the decline in the uranium spot price, mitigated somewhat by a weaker Canadian dollar.

Cameco's conversion revenues were relatively protected from changes in the UF₆ spot price as its contracts are typically based on fixed or base-escalated pricing terms. For the year, the combined UF₆ and UO₂ conversion sales volume was up about 6% while the average selling prices increased marginally.

Cost of products and services sold
The cost of products and services sold rose to $337 million in 1998 including the cost of products associated with Uranerz. This was an increase of 25% from the previous year reflecting the higher sales volumes. In addition, the company sold about 40% more purchased uranium which generally carries a higher cost than the company's own production. The unit cost of conversion services also rose slightly in 1998.

Depreciation, depletion and reclamation
Depreciation, depletion and reclamation declined 10% to $88 million in 1998 compared to $98 million a year earlier reflecting increased sales of purchased uranium and inventory acquired from Uranerz. Depreciation is allocated to inventory which is produced, not acquired.

Uranium exploration
Spending on exploration in 1998 remained unchanged from 1997, at $15 million.

Gold Business
Revenue
Revenue from gold operations in 1998 was $143 million compared to $103 million in the previous year. Cameco's total gold sales of 239,801 ounces in 1998 were 38% higher than the previous year. 1998 was the first full year of production from the Kumtor gold mine and the last year of production from the Contact Lake gold mine. In both 1998 and 1997, revenue included approximately $5 million in management fees which Cameco earned as operator of the Kumtor mine.

The company realized an average price of $563 per ounce, ($380 (US)) in 1998. This is only a marginal decrease from 1997 because the lower US dollar gold prices were offset by the effect of a weaker Canadian dollar. Cameco's gold hedging program generated a premium of $86 (US) per ounce compared to the average market price of $294 (US) during 1998.

Cost of products and services sold
The Kumtor gold mine produced 645,161 ounces (Cameco's share 215,054 ounces) in 1998. Kumtor's strong operating performance resulted in cash costs of about $179 (US) per ounce. Production at the Contact Lake mine was 29,331 ounces (Cameco's share 19,554 ounces) in 1998.

Early in 1998, the Contact Lake mine was closed as the orebody was depleted. Milling was completed in June and decommissioning of the site has commenced. During its mine life, Contact Lake produced 190,000 ounces.

Depreciation, depletion, and reclamation
Depreciation, depletion and reclamation increased by 56% to $39 million in 1998 compared to $25 million in 1997. The two significant influences were the higher volume of Kumtor sales partially offset by reduced volumes for Contact Lake. A weaker Canadian dollar also contributed to the higher depreciation amounts as Kumtor costs are recorded in US dollars.

Restatement of gold reserves and resources
With the persistently low gold price, the company has restated the Kumtor reserves. As of December 31, 1998, the total remaining open pit reserves have been restated down to 4.4 million ounces and the resources have been revised up to 6.6 million ounces. The average grade of the remaining reserves has increased to 4.88 grams per tonne.

The reserves published since year-end 1994 were established using a gold price of $375 (US) per ounce while the December 1998 reserves are based on $325 (US). Although the quantity of reserves has been decreased, the cash flow analysis based on the higher grade indicated that no writedown of the carrying value was required.

Exploration
Gold exploration expenditures of $16 million in 1998 were down from the $18 million spent in 1997.

Non-Segmented Expenses
Administration
In 1998, the cost of administration rose $12 million to about $40 million. Of this increase, $6 million related to non-recurring severance charges at Rabbit Lake and $2 million related to costs no longer reimbursed by Uranerz which was Cameco's joint venture partner in the past.

Interest
Net interest income decreased by $6 million to $2 million in 1998. Interest expense increased because of higher debt levels in 1998 and accounting for a full year of Kumtor interest expense. In 1997, interest on the Kumtor project for the first third of the year was capitalized as the mine was still under construction.

Writedown of mineral properties
The company reviewed its US non-producing in situ leach properties in light of the uranium market environment and new geological interpretation. It concluded that the carrying values of certain properties should be written down. Accordingly, a provision of $16 million ($12 million after tax) was made.

Other income and expenses
In 1998, expenses of $12 million resulted from the writedown of carrying values for investments in gold activities not related to Kumtor. By comparison, in 1997, expenses of $4 million were recorded.

CASH RESOURCES

Operating activities in 1998 generated net cash flows, after changes in working capital, of $237 million ($4.13 per share) compared to $162 million ($2.98 per share) a year earlier. The improvement reflects primarily the inclusion of financial results from the Uranerz acquisition, a decrease in uranium purchases, and the receipt of interest payments from Cameco's subordinated loans to KGC. The payment received included all interest accrued to December 1, 1998.

The company invested $694 million in 1998, mostly for the acquisition of Uranerz, a 6.45% interest in Energy Resources of Australia and capital expenditures including $120 million for the development of McArthur River and Cigar Lake mines. This compares with $325 million invested in 1997 for the purchase of Power Resources, Inc. (PRI), capital expenditures and completion of Kumtor mine development.

In 1998, expenditures were financed primarily by a combination of cash from operations of $237 million, a net increase of $253 million in debt financing, and net proceeds of $177 million from the issue of preferred securities in the US market.

In 1997, financing activities raised a net of $258 million. Most of this funding reflects Cameco's public share offering of 4 million common shares which yielded net proceeds of $198 million. In addition, an increase in debt was required to finance other activities.

The McArthur River mine is expected to enter commercial operations in late 1999. The company announced in early 1999 that the reserves at McArthur River increased by 35% to 255 million pounds U₃O₈. Reserves and resources at December 31, 1998 totalled 483 million pounds of which Cameco's share was 84%.

This ends the discussion of the results of operations for 1998 compared to 1997.

RISKS AND UNCERTAINTIES
(at December 31, 1999)

Financial Risk
Cameco's financial performance is influenced by fluctuations in uranium and gold prices and in foreign exchange rates. To reduce the associated risks, the company uses a variety of financial instruments and management controls which add a measure of certainty to expected future cash flows. See notes 26 and 28 (c) to the consolidated financial statements.

Uranium prices
The company reduces its exposure to volatility in uranium prices by maintaining a long-term contract portfolio which is diversified by price mechanism, delivery date and geographic location of customers. For 2000, the company's sensitivity to changes in the uranium spot price is noted in the outlook section.

Limited number of customers
The company relies on a small number of customers to purchase a significant portion of its production of uranium concentrates and conversion services. For example, Cameco's five largest customers are anticipated to account for 29% of the company's contracted supply of U₃O₈ for the period 2000 through 2002. By comparison, the five largest customers accounted for 27% of the contracted supply of U₃O₈ for the period 1999 through 2001. The loss of any of the company's largest customers or curtailment of purchases by such customers, could have a material adverse effect on the company's financial condition and results of operations.

Gold prices
KGC hedges the price risk for gold in its own name. At the end of 1999, it had in place forward sale and put option agreements on 1,134,000 ounces. Cameco provides limited guarantees in support of KGC's gold hedging program. Cameco's one-third share of these agreements was 378,000 ounces consisting of 269,000 ounces in spot deferred forward contracts and 109,000 in purchased put options. The average prices for these positions are $308 (US) per ounce and $244 (US) per ounce, respectively. At the company's discretion, the put options may or may not be exercised. In addition, KGC has sold call options of which Cameco's share is 120,000 ounces at an average price of $304 (US). The mark-to-market gain on Cameco's share of these hedge positions was $2 million (US) at December 31, 1999 based on a spot market gold price of $290 (US) per ounce.

Foreign exchange risk
The majority of the company's revenues are in US dollars. At December 31, 1999, Cameco had sold forward $621 million (US) at an average spot exchange rate of approximately $1.47 per US dollar. The mark-to-market gain on these foreign exchange positions was $18 million (Cdn). Due to existing hedges, the sensitivity of the company's earnings and cash flows in 2000 to changes in the exchange rate is not material.

Political risk
The company faces the possibility of adverse political and economic conditions in Kyrgyzstan where the Kumtor mine is located. Consequently, the company has purchased political risk insurance that covers the carrying value of 90% of both its subordinated loan and equity contribution in KGC.

Operations Risk
The company began commissioning the McArthur River mine in December 1999. Through experience working on the orebody, modifications are being made to the material handling systems. At Cigar Lake, technical challenges exist regarding ground water, rock properties and radiation protection. Failure to resolve technical issues at either mine or significant delays in obtaining permits and licences for Cigar Lake could have an adverse effect on the company's future prospects.

To ensure delivery of contracted volumes during the development of Cameco's new mines, the company has adjusted its uranium inventory levels to cover approximately one year's sales. The drawdown of this inventory to normal operating levels is being co-ordinated with the ramp-up of production at McArthur River planned over the next two years.

Cameco invests in a comprehensive insurance program to manage risk in its operations and reduce its exposure to potential liabilities.

Environmental Risk
In 1999, Cameco adopted a new environmental policy and began the planning and design of a new environmental management system at its operating sites. Once implemented, this system is expected to reduce environmental risks and meet the requirements of the international standard referred to as ISO 14001.

Over the long term, the company must plan for the closure and decommissioning of its operating sites. See note nine to the consolidated financial statements. At the end of 1999, an accounting provision for future reclamation costs totalled $103 million. In order to provide financial assurances for these future work plans, Cameco has provided letters of credit (LOCs), where required by law, to the jurisdictions in which its operations are located. Cameco's LOCs totalled $131 million at the end of 1999 of which $121 million are related to reclamation and decommissioning activities. However, the new Canadian Nuclear Safety and Control Act may take effect during 2000, and may require the company to provide approximately $78 million in additional LOCs, for the decommissioning of the conversion plants.

In 1988, Cameco assumed the ownership and primary responsibility for waste management at four locations in Ontario. The applicable regulatory authorities have not yet defined a plan or time schedule for the reclamation of any of these sites. Therefore, the company has not established any accounting provision for this liability. Cameco's maximum liability for costs related to these wastes is $25 million. Approximately $5 million has been spent to date. See note 25(a) to the consolidated financial statements.

OUTLOOK FOR 2000

Nuclear
Primary production continues to supply substantially less than western world consumption with the balance coming from secondary sources.

Due to low volumes in the long-term western world market over the past few years of about 60 million pounds U₃O₈ annually, industry experts believe that demand may rebound in 2000 to about 75 million pounds U₃O₈. This should provide some upward pressure on new long-term prices.

However, in the spot market, industry experts expect volumes similar to 1999. Spot market prices will be dependent, in part, on the degree to which certain suppliers continue to sell at distress prices.

Conversion prices are expected to remain under pressure as secondary UF₆ supplies are available from various sources including supplies available through the US/Russia highly enriched uranium agreement.

Cameco's uranium sales volumes are expected to be similar to 1999 although prices and margins may be slightly weaker. About 60% of Cameco's long-term contracts contain pricing which references the spot price at the time of delivery. In 2000, a $1.00 (US) change in the uranium spot price would change revenue by about $17 million (Cdn), earnings by $7 million (Cdn) and cash flow by $13 million (Cdn).

Until McArthur River mine achieves steady-state operations expected in 2001, cost levels are expected to be variable and at times, higher than historical levels.

The company has more than 100 million pounds U₃O₈ and more than 48,000 tonnes of uranium conversion under contract for delivery over the next decade. This contract position provides a certain measure of predictability to the company's revenue and cash flow.

Gold
Gold production at Kumtor is expected to rise to about 645,000 ounces (Cameco's share one-third) due to marginal increases in average grade and mill feed tonnage.

The average realized gold price on hedges at the end of 1999 is expected to decline to about $315 (US) per ounce but will be offset by a lower depreciation rate allowing margins to improve modestly.

Based upon the approved life of mine plan, KGC should be able to meet its obligations to the senior lenders if gold prices average at least $220 (US) per ounce over the remaining life of the mine.

Liquidity
Operating cash flows are projected to be sufficient to fund capital expenditures, dividend payments, share repurchases and to repay some debt.

Caution Regarding Forward-Looking Information

The statements in the management's discussion and analysis which relate to the future are forward-looking statements and are subject to a number of risks and uncertainties. The company's results in the future may differ materially from those which are expressed or implied by these forward-looking statements.

Important factors which could cause differences include the sensitivity of the company's revenue to market prices of uranium and gold, competition, the impact of changes in foreign currency exchange rates, environmental considerations, political developments, particularly in the developing countries in which the company operates, changes in government regulations and policies including trade laws, demand for nuclear power, replacement of production, and receipt of permits and approvals from governmental authorities.