Financial Notes

Cameco has a long-term revolving credit facility available until August 16, 2000 which has a limit of $250,000,000 provided by a syndicate of Canadian banks. As a result, outstanding commercial paper has been classified as long term. In addition, Cameco has a $15,000,000 overdraft facility and $218,000,000 ($100,000,000 (CDN) and $82,000,000 (US)) in letter of credit facilities. Outstanding letters of credit at December 31, 1997 amounted to $117,487,000.

The repayment schedule below represents Cameco's one-third share of Kumtor Gold Company principal repayments on debt and Cameco's share savings plan payments, over the next five years and thereafter:

Pursuant to the terms of the Kumtor financing arrangements [note 17], Cameco has guaranteed, subject to exclusions in respect of defined political force majeure events, the repayment of Kumtor's senior debt. Cameco's contingent obligations under these guarantees exceed the amount included in Cameco's long-term debt as at December 31, 1997 by $253,781,000.

Cameco has interests in the following significant uranium and gold joint ventures:

The non-Cameco operating companies are owned by the respective joint venture participants.

Certain producing and non-producing properties are conducted through joint ventures under which production is allocated to each of the joint venture participants. The joint venture participants derive revenue directly from the sale of such production. Cameco's share of the assets and liabilities of these joint ventures is as follows:

For the Kumtor gold joint venture, which obtains revenue from the sale of products, Cameco's share of the assets and liabilities, revenue and expenses is as follows:

Cameco has contributed $45,000,000(US) in equity, loaned $107,437,276 (US) in the form of subordinated debt under the financing agreements, and arranged $265,000,000 (US) in senior debt and $20,000,000 (US) in third party subordinated debt.

Cameco guarantees repayment of KGC senior debt in the event of certain project related defaults. This guarantee would not apply to certain political force majeure events. Political risk insurance covers $155,000,000 (US) in senior debt.

Commissioning of the mill facilities began prior to December 31, 1996 and commercial production was reached in May 1997.

Cameco has proportionately consolidated its one-third interest in KGC.

KGC's long-term debt at December 31, is as follows:

Cameco's one-third proportionate share of KGC senior debt is $126,891,000 (1996 - $120,981,000, 1995-$31,692,000) and of KGC's third party subordinated debt is $9,577,000 (1996 - $9,130,000, 1995-$9,101,000) [note 8].

KGC carries out a gold price hedging program. The objective is to establish prices for a portion of future production to enhance the ability to service project debt in the event of reduced prospective gold prices. At December 31, 1997 Cameco's one-third share of KGC's hedging program represented 237,000 ounces at an average price of $346 (US). Cameco's share of the mark-to-market gain was $10,600,000 (US).

Under terms of the plan Cameco agreed to provide financing to employees to purchase the bonds, and agreed to partially match the employees' repayment of the loans. Loan balances are required to be fully repaid at the time of exchange. Cameco's estimated maximum commitment under this matched repayment program is $1,430,000.

The outstanding bonds and loans receivable are as follows:

Under the stock option plan, participants are eligible to receive loans from Cameco to assist in the purchase of common shares pursuant to the exercise of certain options. The maximum term of the loans is 10 years from the date of the grant of the related option. These loans bear interest at a rate equivalent to the regular dividends paid on the common shares to which these loans were provided. Common shares purchased by way of a company loan are held in escrow in the account of the optionee and are pledged as security until the loan has been repaid in full.

Outstanding loans are shown as a reduction from share capital.

To hedge risks associated with fluctuations in the market price for uranium, Cameco seeks, when market conditions permit, to maintain a portfolio of uranium contracts with a variety of delivery dates and pricing mechanisms which provide protection from price volatility. To hedge risks associated with gold prices and foreign currency exchange rates, Cameco employs a number of financial instruments. Cameco uses a series of put and call options to establish a minimum and maximum price range for gold sales and exchange rates for sales denominated in US dollars. Cameco also enters into forward sales contracts which establish a price for future deliveries of gold and US dollars.

Financial assets which are subject to credit risks include cash and securities, accounts receivable and commodity and currency instruments. Cameco mitigates credit risk on these financial assets by holding positions with a variety of large creditworthy institutions. Sales of uranium are to creditworthy utility customers with short payment terms.

Except as disclosed below, the fair market value of Cameco's financial assets and financial liabilities approximate net book value as a result of the short-term nature of the instrument or the variable interest rate associated with the instrument.

Currency

Cameco has sold forward $365,000,000 (US) at an average exchange rate of $1.408 at various dates until 1999.

Cameco has hedge positions to sell $20,000,000 (US) with an average minimum exchange rate of $1.410 and an average maximum exchange rate of $1.542 that mature early in 1998.

At December 31, 1997, the net mark-to-market loss of Cameco's foreign currency instruments was $6,200,000 (CDN).

Commodity

At December 31, 1997, Cameco's share of Kumtor and Contact Lake gold hedging positions consists of:

At December 31, 1997, the net mark-to-market gain on the above instruments was $14,200,000 (US).