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Saskatoon, Saskatchewan, Canada, and Washington, DC, March 24, 1999
Cameco Corporation of Canada, along with COGEMA of France and Nukem of the United States and Germany, (collectively, the companies), today announced they have signed a commercial agreement with Techsnabexport (Tenex), the commercial arm of the Russian Federation Ministry of Atomic Energy (MINATOM), for the purchase of natural uranium derived from highly enriched uranium (HEU) contained in Russian nuclear weapons.
The weapons-derived uranium is the result of a 20-year agreement signed in 1993 between the United States and the Russian Federation (the HEU agreement). Under the HEU agreement, 500 metric tons of HEU are to be diluted in Russia and delivered to the United States as low-enriched uranium (LEU), suitable for use in nuclear energy plants. The LEU being delivered during the 20-year period represents approximately 400 million pounds of natural uranium as U3O8, of which more than 40 million pounds has been delivered and purchased by the United States.
Under the terms of the commercial agreement, of the approximately 360 million pounds U3O8 scheduled for delivery from Russia to the United States over the 15-year term remaining in the HEU agreement, the companies have exclusive options to purchase about 260 million pounds. The balance of about 100 million pounds U3O8 is available to Tenex.
As required by the HEU agreement, the conclusion of the commercial agreement has been approved by the governments of the United States and the Russian Federation.
The commercial agreement is structured to strictly comply with the HEU agreement and various implementing agreements between the United States and Russia, as well as US and Russian legal requirements. These bilateral agreements and legal requirements, among other things, provide for the creation of stockpiles of uranium in both the United States and Russia, establish the rules governing the disposition of the uranium held therein, and govern the level of sales in the United States market.
The uranium in the US stockpile is comprised of 28 million pounds U3O8 of Russian weapons-derived uranium resulting from the 1997 and 1998 deliveries purchased by the Department of Energy (DOE), plus another 30 million pounds of DOE uranium, all of which is to be held in inventory for a period of 10 years, after which it may be used or sold in accordance with US legislation.
The Russian stockpile will be comprised of all weapons-derived uranium which is not purchased by the companies or by Tenex or a Tenex affiliate, and therefore, returned to Russia pursuant to Russian/US bilateral agreements. From the Russian stockpile, approximately 6.7 million pounds U3O8 per year may be withdrawn by Tenex for blending HEU to produce LEU for delivery to the United States in accordance with the HEU agreement. In accordance with the terms of the bilateral agreements, the remainder of the weapons-derived uranium returned to Russia will be held in the Russian stockpile until it equals in size the US stockpile of 58 million pounds. Uranium in excess of this quantity can be sold by Russia into contracts existing on the date of the closing of the commercial agreement. Disposition of uranium to and from the Russian stockpile will be monitored by the United States government.
Under the terms of the commercial agreement, the companies are able, at their respective options, to purchase a majority of the weapons-derived uranium upon delivery in the United States or, under certain circumstances, from the Russian stockpile referenced above, subject to conditions imposed by the government of the Russian Federation in terms of minimum prices and US quota allocation. The portion of the uranium that may be purchased by Tenex or its authorized affiliate is subject to similar conditions. Assuming the companies fully exercise their options, allocation of the material available to the companies is Cameco 45%, COGEMA 45% and Nukem 10% until 2002 when the split will become 42.5%, 42.5% and 15%, respectively. Cameco's potential share of the material represents more than 100 million pounds U3O8 over the 15-year period and provides an additional source of supply to its customers. Quantities purchased by the companies will be resold by them in international markets. (The current market value of the uranium which the companies are entitled to buy is $2.8 billion US based on today's spot market price of $10.75 US per pound U3O8.)
"The commercial agreement has taken many years to negotiate," commented Bernard Michel, Cameco's chair, president and chief executive officer. "The considerable efforts of the two governments to agree upon an appropriate framework will now allow the commercial implementation of the HEU agreement as first envisaged in 1993 when it was signed. It should permit the Russian Federation to receive maximum value for its weapons-derived uranium, thereby encouraging the process of disarmament. At the same time, the commercial agreement will provide Cameco with additional business opportunities using an alternate source of uranium."
"Equally important," said Michel, "the actions of the two governments and the signing of the commercial agreement remove some major uncertainties that have influenced the market for many years. And, by purchasing this uranium, the industry will be able to contribute in a meaningful way to the destruction of nuclear weapons."
Already, since the signing of the 1993 HEU agreement, some 2,300 Russian nuclear warheads have been dismantled.
Cameco is the world's largest publicly traded 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 refining and conversion 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.
Certain statements in this news release constitute forward-looking statements as defined in the United States Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Cameco or of the uranium or gold business to be materially different from future results, performance or achievements express or implied by those forward-looking statements. These factors are discussed in greater detail in Cameco's most recent Annual Information Form and Management Discussion and Analysis on file with the Canadian provincial securities regulatory authorities and the United States Securities and Exchange Commission.
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For more information, click on this link to read the backgrounder PDF file or click on this link to read the backgrounder file.
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 |