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Saskatoon, Saskatchewan, Canada, February 4, 1999
Cameco Corporation today reports the following:
- 1998 financial results
- increased reserves at McArthur River
- 1998 uranium market summary
- restated reserves for the Kumtor gold mine
- dividend for first quarter 1999
Financial Results
Cameco generated record cash from operations in 1998. After working capital changes, cash from operations was $235 million ($4.11 per share) up 45% from 1997. The improvement reflects primarily the inclusion of financial results from the recent acquisition of Uranerz Exploration and Mining Limited and Uranerz U.S.A., Inc. (Uranerz), a decrease in uranium purchases by the company and the collection of interest payments from Cameco's subordinated loans to the Kumtor Gold Company.
With record revenue of $719 million and a $24 million writedown after tax, the company posted net earnings attributable to common shares of $44 million ($0.76 per share) compared to $82 million ($1.51 per share) in 1997. Earnings from operations were $104 million in 1998 compared to $151 million the previous year.
"We are pleased with our significant cash flow and given the depressed markets which we faced in 1998, we believe our results speak well of Cameco's strength under adverse conditions," said Bernard Michel, Cameco's chair, president and chief executive officer.
The 1998 earnings were impacted by smaller margins due to lower uranium prices and increased sales of higher cost purchased uranium. Administration expenses were up 45% reflecting a provision made for severance costs at the Rabbit Lake operation and overhead costs no longer reimbursed by Uranerz which was Cameco's joint venture partner in the past.
Low uranium and gold prices led the company to writedown $16 million in non-producing US uranium properties, and in addition, $12 million reflecting a decline in the carrying value of investments in companies related to non-Kumtor gold activities. These writedowns, which total $24 million ($0.42 per share) after deferred tax provisions, have no cash implications.
"Despite challenging market conditions, Cameco achieved record levels of uranium and gold production and sales in 1998," said Michel.
Total revenue grew by 12% to $719 million in 1998 from $643 million in 1997. In 1998, nuclear products and services accounted for 80% of total revenue with the remainder coming from gold-related activities.
The company's uranium sales volume in 1998 was up about 10% from 1997, but the average selling price decreased compared with 1997, the uranium spot price having declined 27% in 1998.
In conversion services, sales volumes were up 6%, while average selling prices increased marginally.
Gold sales increased by 35% to 234,000 ounces in 1998 compared to the previous year.
The company invested $694 million in 1998, mostly for the acquisition of Uranerz, a 6.45% interest in Energy Resources of Australia and capital expenditures including $120 million for the development of McArthur River and Cigar Lake.
This compares with $325 million invested in 1997 for the purchase of Power Resources, Inc. (PRI), capital expenditures and completion of funding of Kumtor.
Acquisition and capital expenditures were financed primarily from $235 million of cash from operations, a net increase in debt of $252 million and net proceeds of $177 million from the issue of preferred securities in the US market. Each preferred security represents $25 (US) principal amount of junior subordinated debentures with a term of 49 years.
Long-term debt has increased by $426 million to $569 million at December 31, 1998 reflecting the refinancing of a previous short-term debt and the partial funding of the Uranerz acquisition. The company's ratio of total debt to capital was 24% at year end.
"This acquisition was an important milestone which consolidated Cameco's leadership in the uranium industry and left intact our conservative financial structure," said Michel. "It gives us increased flexibility to manage the transition to our new mines, McArthur River and Cigar Lake."
These two deposits are the world's largest, highest-grade, known uranium deposits, forming the cornerstones of Cameco's future.
At the McArthur River project, surface and underground development remains on schedule. "We are also pleased to announce the reserves at McArthur River have increased by 35% to 255 million pounds U3O8," said Michel. Reserves and resources now total 483 million pounds (Cameco's share is 84%).
Uranium Market Summary
Only about 10 million pounds U3O8 were traded on the uranium spot market in 1998, less than half the volume traded in the previous year. Spot market volume was less than 10% of the western world's uranium consumption in 1998.
The weak spot market was primarily due to lower utility and producer demand. Utilities in particular withdrew from the spot market for a variety of reasons including reductions in their inventories and deferred requirements.
Long-term contract price indicators published in the industry fell by 11% during 1998 to $11.10 (US) per pound U3O8, demonstrating more resilience than the spot price.
"The spot market is already showing signs of improvement in 1999 as utilities and producers purchase for actual and discretionary needs. Since the end of 1998, the uranium spot price has increased by 20% to $10.50 (US) per pound U3O8." said Michel. "We remain convinced that the long-term fundamentals for the uranium industry are strong and we have demonstrated our confidence in the future of the industry by both our acquisition of Uranerz and our investments in McArthur River and Cigar Lake."
Kumtor Gold Reserves and Resources Restatement
"The Kumtor gold operation continues to outperform expectations, achieving, in 1998, production of 645,000 ounces at an average cash cost of $179 (US) per ounce," said Michel. "However, with the persistent low gold price, we believe it is prudent to restate the Kumtor reserves." Cameco is one-third owner and operator of the Kumtor project.
As of December 31, 1998, the total remaining open pit reserves have been restated down to 4.4 million ounces and the resources have been revised up to 6.6 million ounces. The average grade for the remaining reserves has increased to 4.88 grams per tonne.
| Kumtor Reserves and Resources | Dec 31/98 | Dec 31/97 | Change |
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| Reserves (million ounces) | 4.4 | 8.6 | - 3.4* |
| Grade of reserves (grams/tonne) | 4.88 | 3.54 | +1.34 |
| Resources (million ounces) | 6.6 | 3.9 | +2.7 |
| Grade of resources (grams/tonne) | 3.67 | 3.75 | -0.08 |
| * adjusted for 1998 production | |||
The reserves published since year-end 1994 were established using a gold price of $375 (US) per ounce while the current reserves are based on $325 (US) per ounce. The LME (London Metal Exchange) gold price averaged $294 (US) per ounce in 1998. As of December 31, 1998, Kumtor had about 750,000 ounces hedged at an average price of $307 (US) per ounce.
Dividend Announcement
Cameco also announced today that the company's board of directors declared its regular quarterly dividend of $0.125 per share payable April 15, 1999 to shareholders of record on March 31, 1999.
Profile
Cameco is the world's largest uranium producer. The company operates underground uranium mines in Saskatchewan, Canada, in situ leach uranium facilities in Wyoming and Nebraska in the United States, uranium processing facilities in Ontario, Canada and a gold mine in Kyrgyzstan, Central Asia. The company's uranium products are used to generate electricity in nuclear energy plants around the world, providing one of the cleanest sources of energy available today.
Forward Looking Statements
Statements contained in this news release which are not historical facts are forward-looking statements that involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Such factors include among others: volatility and sensitivity to market prices for uranium and gold, competition, the impact of changes in foreign currency exchange rates, environmental risks, political risk arising from operating in certain developing countries, changes in government regulations, and policies including trade laws and policies, demand for nuclear power, replacement of production, receipt of permits and approvals from government authorities as well as other operating and development risks.
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For further information, please contact:
| Alice Wong Director, Investor & Corporate Relations Cameco Corporation Phone: (306) 956-6337 Fax: (306) 956-6318 |
Elaine Kergoat Manager, Media & Public Relations Cameco Corporation Phone: (306) 956-6315 Fax: (306) 956-6318 |
1998 Highlights
| FINANCIAL | 1998 | 1997 | Change |
| ($ millions except per share amounts) | |||
| Revenue | $719 | $643 | 12% |
| Earnings from operations | $104 | $151 | -31% |
| Net earnings attributable to common shares | $44 | $82 | -46% |
| Cash from operations | $235 | $162 | 45% |
| Earnings per share | $0.76 | $1.51 | -50% |
| Cash flow per share | $4.11 | $2.98 | 38% |
| Weighted average number of paid common shares (millions) | 57 | 54 | 6% |
| Total debt to capital ratio | 0.24 | 0.14 | 71% |
| PRODUCTION (Cameco Share) | |||
| Uranium concentrates (million lbs. U3O8) | 27 | 19 | 42% |
| Uranium conversion (tU) | 11,169 | 12,594 | -11% |
| Gold (oz) | 244,387 | 202,454 | 21% |
If you would like to receive a 32-page fax containing the notes to the consolidated financial statements, please call Cameco's fax service at 1 (877) 556-1566 or contact the investor and corporate relations department at (306) 956-6400.