The Future is Nuclear 2005 Annual Report
         
Overview Cameco's Businesses Growth Strategy Trends in the Nuclear Power Industry Uranium Business Fuel Services Business Nuclear Electricity Generation Business Gold 2005 Fourth Quarter Consolidated Results 2004–2005 Quarterly Consolidated Financial Highlights 2005 Consolidated Results Consolidated Outlook for 2006 Liquidity and Capital Resources 2003–2005 Consolidated Financial Highlights Outstanding Share Data Risks and Risk Management Disclosure Controls and Procedures Critical Accounting Estimates Caution Regarding Forward-Looking Information Additional Information
       
     
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Cameco's Businesses

Cameco is involved in four business segments:

  • uranium,
  • fuel services,
  • nuclear electricity generation, and
  • gold.

The only significant commercial use for uranium is to fuel nuclear power plants for the generation of electricity. In recent years, nuclear plants generated about 16% of the world's electricity.

NUCLEAR FUEL

The major stages in the production of nuclear fuel are uranium exploration, mining and milling, refining and conversion, enrichment and fuel fabrication. Once a commercial uranium deposit is discovered and reserves delineated, regulatory approval to mine is sought. Following regulatory approval, the mine is developed, and ore is extracted and processed at a mill to produce uranium concentrates. Mining companies sell uranium concentrates to nuclear electricity generating companies around the world on the basis of the U3O8 contained in the concentrates. These utilities then contract with converters, enrichers and fuel fabricators to produce the required reactor fuel.

URANIUM

Cameco is the world's largest uranium producer, accounting for 20% of the world's production in 2005 and backed by more than 525 million pounds of proven and probable reserves of uranium. We have controlling ownership of the world's largest high-grade uranium reserves and low-cost operations located in northern Saskatchewan. Cameco operates four mines in Canada and the United States, and has two mines under development in Canada and Central Asia.

FUEL SERVICES

The company is an integrated uranium fuel supplier with refining facilities at Blind River and fuel services facilities (conversion and fuel fabrication) at Port Hope, both located in Ontario, Canada.

The Blind River facility refines uranium concentrates into uranium trioxide (UO3), an intermediate product in the uranium conversion process. Our Port Hope conversion services plants chemically change the form of the UO3 to either uranium hexafluoride (UF6) or uranium dioxide (UO2). Port Hope has the licensed capacity to produce almost 20% of the world's annual requirements of UF6 used in making fuel for light water reactors. In 2005, Cameco signed a toll-conversion agreement to acquire UF6 conversion services from Springfields Fuels Ltd. (Springfields) in Lancashire, United Kingdom. Under the 10-year agreement, Springfields will annually convert a base quantity of 5 million kgU as UO3 to UF6 for Cameco. This arrangement increases our UF6 conversion capacity by 40%. In addition, Port Hope is the world's only commercial producer of natural UO2, the fuel used by all Canadian-designed Candu reactors.

During early 2006, Cameco became a nuclear fuel manufacturer by acquiring Zircatec Precision Industries, Inc. (Zircatec) in Port Hope. This company manufactures fuel bundles for use in Candu reactors. With this acquisition, Cameco now covers all stages of the Candu nuclear fuel cycle.

NUCLEAR ELECTRICITY GENERATION

Cameco generates clean electricity through its 31.6% interest in the Bruce Power Limited Partnership (BPLP), which operates the four Bruce B nuclear reactors and manages the overall site located in southern Ontario. Cameco is the fuel procurement manager for uranium, conversion services and fuel fabrication for Bruce Power's four B nuclear reactors. For the Bruce A reactors, Cameco is the fuel procurement manager for conversion services and fuel fabrication. In 2005, through the Bruce Power restructuring, Cameco no longer holds a 31.6% ownership in the four A reactors. Bruce Power's four B reactors have a combined net generation capacity of about 3,200 megawatts (MW), supplying about 17% of Ontario's electricity.

GOLD

Cameco has a 52.7% interest in Centerra Gold Inc. (Centerra), which began trading on the Toronto Stock Exchange in June 2004. Cameco transferred substantially all its gold assets to Centerra as part of the strategy to unlock the value of those assets. Centerra is a growth-orientated Canadian-based gold producer focused on acquiring, exploring and developing gold properties in Central Asia, the former Soviet Union and other emerging markets. Centerra operates two gold mines, located in the Kyrgyz Republic and Mongolia.
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