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Saskatoon, Saskatchewan, Canada, July 18, 1997
Cameco Corporation today reported six-month financial results showing increased earnings from operations in the first half of 1997 compared to the same period in 1996. Net earnings declined after recording a deferred (non-cash) income tax expense of $31 million.
"Cameco's financial results remain consistent with our expectations which reflect, as it did in the first quarter, a substantial provision for deferred income taxes," said Bernard Michel, Cameco's chair, president and chief executive officer. Cameco does not expect to pay significant cash income taxes prior to the year 2000.
Earnings from operations increased by $3 million to $73 million ($1.38 per share) in the first six months of 1997 compared to the same period in 1996. This came as a result of improved gross operating margins which were partially offset by higher administration costs. However, net earnings were $42 million ($0.80 per share) compared to $68 million ($1.28 per share) for the same period due to deferred income tax expense.
Revenues for the first half of 1997 were $276 million, down $5 million from the same period in 1996, mostly as a result of a 10% decrease in sales volumes of uranium concentrates and conversion services. The decrease in volumes was due to the timing of customer deliveries. Cameco's average realized selling prices for uranium and conversion services increased modestly in the past six months compared with the same period last year.
The decline in revenues from uranium activities was partially offset by additional sales volumes of gold from the recently commissioned Kumtor gold mine in Kyrgyzstan. Gold accounted for $30 million of the 1997 six-month revenues compared to $10 million in the same period of 1996. The company's average realized selling price for gold in the first half of this year was $584 ($424 (US)) per ounce.
"We are pleased that the Kumtor gold mine is now producing in excess of nominal capacity and contributing to Cameco's revenues," said Michel. Total production at Kumtor to the end of June 1997 was 195,000 ounces, Cameco's share is one-third.
Total output from the 14,500 tonne-per-day mill is expected to exceed 400,000 ounces of gold in 1997, with cash operating costs less than $200 (US) per ounce.
During the six months, the company generated cash flow (before working capital changes) of $2.26 per share, up from $2.11 per share compared to the first six months of 1996.
After working capital changes, the company's operating activities in the first six months of the year resulted in net cash flow of less than $1 million; the amount for the comparable period last year was $39 million. The reduced cash flow can be attributed primarily to an increase in uranium purchases.
In June 1997, Cameco completed the arrangements to acquire 100% ownership in the Highland uranium mine in Wyoming, operated by PRI, through the purchase of the remaining 25% interest of the mine.
The average uranium spot price at the end of the second quarter of 1997 was $10.66 (US) per pound U3O8, down 19% from $13.18 (US) at the end of the first quarter and down 36% from $16.54 at the same time last year. There is currently more supply than demand in the spot market causing the decline.
It should be noted that in 1996, the spot market accounted for only 13% of western world uranium consumption and is expected to account for even less this year. During the first half of 1997, the volume of spot market sales was only 7 million pounds U3O8 compared to more than 12 million pounds in the same period of 1996. Volume is down considerably from the previous year primarily as a result of heavy contracting by utilities in 1995 and 1996 reducing their need to buy on the spot market this year.
"Cameco continues to sell only in the long-term market where the company has secured a solid base of contracts," said Michel.
During the six-month period, Cameco signed new long-term contracts for about 20 million pounds U3O8 and some 16,000 tonnes of uranium conversion services for delivery extending out to the years 2005 and 2008 respectively.
While Cameco sells only in the long-term market, its results are impacted by the spot price. For the second half of the year, a $1.00 (US) change in the uranium spot price would change revenues by about $7 million (CDN) and net earnings by less than $3 million (CDN).
Cameco, with its head office in Saskatoon, Saskatchewan, is the world's largest publicly traded uranium company and a growing gold producer. Its uranium products are used to generate electricity in nuclear power plants around the world, providing one of the cleanest sources of energy available today.
For further information, please contact:
| Alice Wong Director, Investor & Corporate Relations Cameco Corporation Phone: (306) 956-6337 Fax: (306) 956-6318 |
or | Elaine Kergoat Manager, Media & Public Relations Cameco Corporation Phone: (306) 956-6315 Fax: (306) 956-6318 |