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Saskatoon, Saskatchewan, Canada, February 6, 1998
Cameco Corporation reported today annual earnings from operations increased by 4% to $151 million in 1997 despite the significant decline of about 23% in the average uranium spot price from the previous year. Earnings from operations exceeded the record 1996 level due to the significant increase in gold sales after the Kumtor mine began commercial production in May 1997.
After the introduction of a non-cash income tax, which increased the tax expense to $65 million in 1997 from $5 million in 1996, Cameco posted net earnings of $82 million ($1.51 per share). This compares to net earnings of $138 million ($2.60) in 1996.
"We are pleased with our earnings from operations given the depressed commodity markets, " said Bernard Michel, Cameco's chair, president and chief executive officer. "As expected, the deferred income tax has affected our net earnings, but we continued to have strong cash flow from operations. In addition, Cameco posted several records during 1997 including revenue, production, sales volume and contracts concluded for uranium."
Revenue grew by 9% to $643 million in 1997 from $591 million in 1996. In 1997, uranium products and services accounted for 84% of total revenue with the remainder coming from gold.
Cameco maintained its market share of about 15% of the western world's uranium consumption and approximately 20% of the western world's conversion services.
Cameco sold a record volume of U3O8 (uranium concentrates) in 1997, up about 5% from 1996 but the average realized selling prices were approximately 8% lower due to the decline in the uranium spot price.
In conversion services, average selling prices increased by almost 4%, however, sales volumes were down by about 8%.
In 1997, the company generated cash flow from operations (earnings before interest, taxes, depreciation and amortization or EBITDA) of $266 million ($4.88 per share), up by 12% from 1996 reflecting the positive contribution from gold activities. Future cash flow from Kumtor is underpinned by 710,000 ounces hedged at a minimum of $346 (US) per ounce.
These strong cash flows were used to pay $27 million in dividends and to fund $126 million of investments of which $76 million was spent on McArthur River and Cigar Lake -the world's two largest, highest-grade uranium deposits. These remarkable deposits are the foundation of Cameco's future growth.
Cash provided by financing activities amounted to $258 million in 1997, an increase of $274 million compared to 1996. The majority of this increase reflects Cameco's public share offering of 4 million shares which yielded net proceeds of $195 million. In addition, an increase in debt was required to finance the purchase of Power Resources, Inc., the largest uranium producer in the United States.
The uranium spot price fell by $4.50 (US) per pound U3O8 during the first eight months last year to a low of $10.20 (US) per pound then rebounded by $1.85 (US) to end the year at $12.05 (US) per pound.
"Utilities avoided the spot market in 1997 after securing additional volumes in 1996 through long-term contracts," said Michel. "This acted to reduce spot demand. In addition, a few suppliers were engaged in distress selling. Weak spot demand and ample supply resulted in a soft spot price for the first eight months of the year."
In the latter half of the year, the spot market became more active and, by year end, almost 21 million pounds U3O8 had been traded, up 7% from 1996.
Long-term contract price indicators published in the industry fell by as much as 23% to $11.50 (US) per pound U3O8 before recovering to end the year at $12.50 (US) per pound.
"Because the spot market remains thinly traded, we expect to see continued volatility in the spot price in 1998," said Michel. "This contrasts sharply with the long-term market outlook, where consumption continues to outstrip production by almost 50%." Long-term fundamentals for the uranium industry remain strong.
During 1997, Cameco contracted to sell about 32 million pounds U3O8 for deliveries extending well into the next decade. This represents an increase of 3% over volumes contracted in 1996.
With these new commitments, Cameco maintains more than 100 million pounds U3O8 and more than 50,000 tonnes of uranium conversion services under long-term contracts.
Cameco also announced today that the company's board of directors declared its regular quarterly dividend of $0.125 per share payable April 15, 1998 to shareholders of record on March 31, 1998.
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 |
Elaine Kergoat Manager, Media & Public Relations Cameco Corporation Phone: (306) 956-6315 Fax: (306) 956-6318 |
If you would like to receive a 28-page fax containing the notes to the consolidated financial statements, please call Cameco's fax service at 1 (888) 495-4154 or contact the investor and corporate relations department at (306) 956-6400. It is also available at www.cameco.com/investor, the company's website.