Cameco Reports Nine-Month Financial Results for 1997

Saskatoon, Saskatchewan, Canada, October 20, 1997

Cameco Corporation today reported nine-month financial results showing modest increases in revenues and earnings from operations for the first three quarters of 1997 compared to the same period in 1996. Net earnings declined after recording a deferred (non-cash) income tax expense of $44 million.

"Net earnings are generally consistent with Cameco's expectations after taking into account the substantial provision for deferred income tax expense," said Bernard Michel, Cameco's chair, president and chief executive officer.

Cameco's consolidated revenue for the nine-month period was $463 million up from $457 million for the same period last year, despite lower uranium revenues.

Uranium revenues fell due to lower average realized selling prices for U₃O₈ which were impacted by the decline in the uranium spot price and lower sales volumes. However, the decline in uranium revenues was more than offset by higher gold sales.

Gold revenues were $66 million on sales of more than 114,000 ounces-an increase of about 83,000 ounces over the same period last year as a result of the Kumtor mine achieving commercial production in the second quarter 1997.

"I am pleased to report the Kumtor mine produced, on average, more than 50,000 ounces of gold per month during the third quarter," Michel said. "And we expect total production to be more than 450,000 ounces this year." Cameco is operator and one-third owner.

Cost of products sold, including depreciation, depletion and reclamation, increased by $0.6 million. Gold costs were up reflecting increased sales, offset almost entirely by lower graduated uranium royalties and lower UF₆ costs.

Earnings from operations were up by 4% to $113 million in the first nine months of 1997. Net earnings were $63 million compared to $106 million last year. Cameco expects 1997 net earnings to be lower than the 1996 level of $138 million primarily due to the introduction of a non-cash income tax expense. Lower uranium prices will also impact net earnings but this will be partially offset by higher gold sales.

Cash provided by operations, before changes in working capital, in the first nine months of 1997 was about $189 million, up from $179 million for the same period last year. This increase reflects the positive contribution from gold activities.

Cash provided by operations, after changes in working capital, was $44 million compared to $87 million last year. The decline resulted primarily from increased uranium purchases under long-term contracts.

Cash provided by financing activities increased by $274 million from last year reflecting Cameco's share offering of 4 million shares in September 1997 which yielded net proceeds of $195 million.

At the end of September 1997, long-term debt was $139 million, down $163 million from the last quarter as a result of the equity issue. Cameco's one-third share of Kumtor Gold Company third-party debt represents $132 million of the outstanding amount. Cameco also has $138 million of short-term debt which it may refinance before maturity and is related to the acquisition of PRI.

The uranium spot price ended the third quarter with published prices averaging $10.80 (US) per pound U₃O₈, up from $10.66 (US) at the end of the second quarter.

Third quarter spot market volume was 7.8 million pounds U₃O₈ compared to 4.6 million in the second quarter. Over the three quarters, a total of 14.2 million pounds had been traded on the spot market, compared to 15.4 million during the same period last year. Included in the spot market volume is 1 million pounds U₃O₈ of excess inventory that the US Department of Energy sold through an auction process in September. "The total volume of bids exceeded the quantity offered by a factor of six - a sign that spot market demand is strengthening," said Michel.

Long-term contract price indicators published in the industry have fallen by about 23% since the beginning of the year compared to a 26% decline in the published spot price indicators for the same period. The long-term market remains moderately active with about 60 million pounds U₃O₈ contracted in the first three quarters for delivery over multiple years.

"The long-term fundamentals for the uranium industry remain strong with consumption still outpacing mine production," said Michel. "Cameco sells only in the long-term market where we have secured a solid base of contracts for the future."

Cameco has more than 100 million pounds U₃O₈ under contract for delivery over the period 1998 to 2007. While the company has secured sales volumes under long-term contracts, some of the pricing under these agreements will be impacted by the spot price prevailing at the time of delivery.

For instance, Cameco estimates that a $1.00 (US) change in the U₃O₈ spot price for the last quarter of the year would change revenues by about $2 million (CDN) and net earnings by less than $1 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.

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