Uranium Price Sensitivity (2008)
For the remainder of 2008, a $10.00 (US) per pound change in the market price for uranium from $64.50 (US) per pound (reflecting the Ux Consulting (UxC)) weekly spot price indicator at August 11, 2008 would change revenue by $37 million (Cdn) and net earnings by $26 million (Cdn). This sensitivity is based on an expected effective exchange rate of $1.00 (US) being equivalent to about $1.06 (Cdn) as a result of our currency hedge program.
Uranium Price Sensitivity (2008 to 2012)
The table below shows an indicative range of average prices that Cameco would expect to realize under its sales portfolio at this time. The prices shown in the table are intended to provide the reader with a general indication of how Cameco's expected realized prices for uranium may tend to vary with changes in spot market prices. This information will change as Cameco enters into new contracts. Due to the number of variables affecting Cameco's realized prices, we have made a simplifying assumption regarding spot prices. We set the spot price at the levels noted and calculated our expected realized prices accordingly. For example, under the $80.00 (US) spot price scenario, the calculation of realized prices assumes the spot price reaches $80.00 (US) at July 31, 2008 and remains at that level through 2012. Each column in the table should be read assuming the column header spot price remains constant for the entire five-year period. Actual realized prices in any given year will differ from what is shown in the table due to the fact that we are continually signing new contracts, with first deliveries beginning as far out as five years or more after contract signing.
As shown in the table, in the $20.00 (US) scenario, Cameco would expect the average realized price to exceed the spot price over the next five years, reaching almost double the spot price by 2012. In the $140.00 (US) scenario, Cameco would achieve average realized prices of nearly 60% of the spot price by 2012. These prices are in current dollars, which are dollars in the year they are actually received or paid.
The uranium price sensitivity table for the period 2008 to 2012 below has been updated to reflect deliveries made and contracts entered into during the first half of 2008.
Cameco Expected Average Realized Uranium Price (Rounded to the nearest $1.00) Current US $/lb U3O8 |
|||||||
$20 |
$40 |
$60 |
$80 |
$100 |
$120 |
$140 |
|
2008 |
$ 35.00 |
$ 37.00 |
$ 39.00 |
$ 41.00 |
$ 44.00 |
$ 46.00 |
$ 48.00 |
2009 |
$ 28.00 |
$ 33.00 |
$ 38.00 |
$ 43.00 |
$ 48.00 |
$ 52.00 |
$ 57.00 |
2010 |
$ 33.00 |
$ 38.00 |
$ 46.00 |
$ 52.00 |
$ 59.00 |
$ 65.00 |
$ 72.00 |
2011 |
$ 36.00 |
$ 40.00 |
$ 48.00 |
$ 54.00 |
$ 61.00 |
$ 68.00 |
$ 75.00 |
2012 |
$ 38.00 |
$ 41.00 |
$ 49.00 |
$ 57.00 |
$ 66.00 |
$ 75.00 |
$ 83.00 |
This price table is forward-looking information and is based upon the material assumptions, and subject to the material risks, discussed under the heading "Caution Regarding Forward-Looking Information and Statements", as well as the following key assumptions and material risks which could cause actual prices to vary:
- sales volume of 34 million pounds for 2008 (which has been adjusted for the accounting requirements of the loan agreements) and a sales volume of about 30 million pounds for each year thereafter. Variations in our actual sales volume could lead to materially different results;
- utilities will take the maximum quantities allowed under their contracts, unless a delivery notice reducing the maximum quantity under a contract has been provided, which is subject to the risk that they take lower quantities resulting in materially different realized prices;
- Cameco will defer a portion of deliveries under contract for 2009 through 2011 by exercising its rights to do so under supply interruption provisions;
- all volumes for which there are no existing sales commitments will be delivered at the spot price assumed for each scenario, which is subject to the risk that sales are at prices other than spot prices which could result in materially different realized prices;
- the average long-term price indicator in a given year will be equal to the average spot price for that entire year. Fluctuations in the spot price or the long-term price during the course of a year could lead to materially different results; and
- an inflation rate of 2.5%. Variations in the inflation rate could have a material impact on actual results.
The assumptions stated above, including our annual sales volumes and the price realized from them, are made solely for the purpose of the foregoing price table and do not necessarily reflect our views of anticipated results.