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Saskatoon, Saskatchewan, Canada, February 3, 2000
Cameco Corporation today reports its 1999 financial results in accordance with Canadian generally accepted accounting principles.
Financial Results
Cameco generated record cash from operations in 1999. After working capital changes, cash provided by operations was $249 million ($4.35 per share), up 5% compared to $237 million ($4.13 per share) in 1998. Before working capital changes, cash provided by operations was $228 million in 1999 compared to $222 million in 1998.
In 1999, net earnings attributable to common shares were $71 million ($1.24 per share) compared to $44 million ($0.76 per share) in 1998.
"We are pleased with our significant cash flow yet disappointed with the level of earnings which were achieved in spite of very difficult uranium and gold markets," said Bernard Michel, Cameco's chair, president and chief executive officer.
Earnings in 1999 were significantly impacted by two items; the gain on the sale of uranium property interests and the writedown of gold assets.
The sale of uranium interests resulted in a net gain of $72 million, of which $59 million is recorded as deferred income tax recovery, and the remainder appears as a gain on the sale of property interests.
The company reduced the carrying value of its gold assets in 1999 which resulted in a $43 million charge to earnings, net of a $6 million deferred tax recovery. About $40 million of this charge relates to the company's investment in Kumtor and $3 million has been taken against Cameco's investments in other gold companies.
Excluding the gain on the sale of uranium property interests and the writedown of gold assets, 1999 net earnings would have been $42 million ($0.72 per share). This compares to $71 million ($1.24 per share) in 1998 after adjusting for that year's writedown of certain uranium properties and gold interests.
Total revenue grew by 3% to a record $742 million in 1999 from $719 million in 1998. In 1999, nuclear products and services accounted for more than 85% of total revenue with the remainder coming from gold-related activities.
In 1999, consolidated earnings were negatively influenced by reduced operating profits from the gold business due to lower realized prices, decreased sales volumes and higher depreciation charges. In the nuclear business, weaker prices for uranium and conversion services were more than offset by increased sales volumes.
Cameco also recorded higher charges for interest and preferred securities in the year but these increases were offset by lower costs for exploration and administration, which declined by 26% and 10% respectively compared to 1998.
Nuclear Business
In 1999, nuclear revenue increased to $634 million from $576 million last year due primarily to the sale of a record volume of U3O8 (uranium concentrates) up 14% from 1998. The influence of the greater volume was partially offset by an average realized price which was 3% lower as a result of the decline in the uranium spot price.
In conversion services, sales volumes were up 11%, while average realized prices declined by 2%.
Cost of products and services sold, including depreciation, depletion and reclamation, were marginally lower on a per unit basis but in total increased by 12% reflecting the higher uranium and conversion volumes.
Unit costs for uranium sold were slightly lower in 1999 compared to 1998 due mainly to a decline in the cost of acquired material. The company continues to sell more uranium than it produces and, therefore, purchases additional quantities to meet its sales commitments.
"As we make the transition to our new uranium mine at McArthur River, cost levels will be variable and at times higher than what we have experienced in the past," said Michel. "However, once we reach full production, we expect the costs to be lower than our historical costs, which are among the lowest in the world."
Cameco has more than 100 million pounds U3O8 and almost 50,000 tonnes of conversion services under contract for delivery over the next decade.
Gold Business
Gold revenue declined by 25% to about $107 million compared to 1998 due to lower prices and reduced sales volume. The average realized gold price declined to $338 (US) per ounce for 1999 compared to $380 (US) per ounce in 1998. Sales volume declined by 14% to about 205,000 ounces due to the planned decrease in Kumtor gold production and the closure of the Contact Lake operation after completion of mining in 1998. Depreciation expense rose as a result of a reduction in reserves in 1999. Kumtor's total cash cost per ounce was $179 (US), the same as in 1998, and is calculated in accordance with standards of The Gold Institute.
Kumtor Gold Company's (KGC) hedge position at the end of 1999 was 1,133,900 ounces at an average expected price ranging from $305 (US) to $320 (US) per ounce. These positions were primarily held in the form of forward sales contracts and covered the equivalent of almost two years' production. The unrealized mark-to-market gain on KGC's hedge position at the end of 1999 was $7 million (US) based on a market spot gold price of $290 (US) per ounce.
The carrying value of Cameco's interest in KGC at December 31, 1999 was $127 million (US).
KGC should be able to meet its payment obligations to its senior lenders if gold prices average at least $220 (US) per ounce over the remaining life of the mine. Following scheduled debt repayments of $49 million (US) during 1999, KGC's outstanding senior indebtedness was $191 million (US), all of which is guaranteed by Cameco.
Investing Activities/Financial Position
Cameco generated positive cash flow of $37 million from its investing activities in 1999 due to the sale of uranium property interests. Net proceeds of $239 million from the sale were largely offset by capital expenditures of $212 million related mainly to the development of McArthur River and Cigar Lake.
This compares with $694 million invested in 1998, primarily 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.
Total debt has decreased by $242 million to $359 million at December 31, 1999. The company's ratio of total debt to capital was 16% at year end. Cameco used the proceeds from the sale of property interests to reduce long-term indebtedness.
Uranium Market Summary
Long-term contract price indicators published in the industry fell by 10% to $10.00 (US) per pound U3O8 at the end of 1999 reflecting the low level of long-term contracting activity in 1999, particularly during the first three quarters of the year, and the aggressiveness of some suppliers.
In 1999, the western world long-term market volume, contracted for delivery over multiple years, is estimated to total 50 million pounds U3O8 . This is the same amount contracted for in 1998, which was considered an extremely low level of activity reflecting inventory drawdown by utilities and suggesting a return to higher, more normal levels in the near future.
The 1999 spot market volume is estimated to total about 24 million pounds U3O8, more than double the 1998 level of 11 million pounds.
"While the volume picked up during 1999 compared to 1998, the aggressive marketing by inventory sellers in need of cash kept the uranium spot price under pressure for most of the year," said Michel.
Even with the aggressive sellers, the uranium spot price ended 1999 at $9.60 (US) per pound U3O8 up 10% from $8.75 at the end of 1998.
"We expect to see continued volatility in spot prices in 2000," said Michel. "However, given that mine production continues to supply only one-half of consumption, we are convinced that the longer-term supply/demand fundamentals and outlook for price remain very positive."
Outlook for 2000
While selling uranium only on the long-term market, about 60% of Cameco's sales volume is affected by the spot price at the time of delivery. In 2000, a $1.00 (US) change in the uranium spot price would change revenue by about $17 million (Cdn), earnings by $7 million (Cdn) and cash flow by $13 million (Cdn).
"Uranium and gold prices continue to be depressed as we begin 2000. If prices remain at these levels, we anticipate a small drop in revenues for 2000. However, even with low commodity prices, we expect to generate strong cash flow - sufficient to fund our anticipated capital expenditures and dividends, pay down debt and continue to repurchase shares," said Michel.
Share Repurchase Program
Cameco repurchased 535,000 shares in 1999 at an average price of $23.15. "We believe that, considering the company's own longer-term outlook and its current share price, the purchase of our shares is simply a good way to invest a small portion of our funds on behalf of shareholders," said Michel. Cameco began its share repurchasing program in October 1999.
Dividend Announcement
Cameco also announced today that the company's board of directors declared its regular quarterly dividend of $0.125 per share payable April 14, 2000 to shareholders of record on March 31, 2000.
Profile
Cameco, with its head office in Saskatoon, Saskatchewan, is the world's largest uranium producer and is a significant producer of gold. The company's uranium products are used to generate electricity in nuclear energy plants around the world, providing one of the cleanest sources of energy available today. Cameco's shares trade on the Toronto and New York stock exchanges.
Forward-Looking Statements
Statements contained in this news release which are not historical facts are forward-looking statements that involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Such factors include among others: volatility and sensitivity to market prices for uranium and gold, competition, the impact of changes in foreign currency exchange rates, environmental risks, political risk arising from operating in certain developing countries, changes in government regulations, and policies including trade laws and policies, demand for nuclear power, replacement of production, receipt of permits and approvals from government authorities as well as other operating and development risks.
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For further information, please contact:
| Elaine Kergoat Manager, Media & Public Relations Cameco Corporation Phone:(306) 956-6315 Fax:(306) 956-6318 |
Bob Lillie Senior Investor Relations Analyst Cameco Corporation Phone:(306) 956-6639 Fax:(306) 956-6318 |
If you would like to receive a 33-page fax containing the notes to the consolidated financial statements, please call Cameco's fax service at 1 (877) 556-1566 or contact the investor and corporate relations department at (306) 956-6400.
| 1999 Highlights | ||||||
| FINANCIAL | 1999 | 1998 | Change | |||
| ($ millions except per share amounts) | ||||||
| Revenue | $742 | $719 | 3% | |||
| Earnings from operations | $79 | $104 | -24% | |||
| Net earnings attributable to common shares | $71 | $44 | 61% | |||
| Cash from operations | $249 | $237 | 5% | |||
| Earnings per share | $1.24 | $0.76 | 63% | |||
| Cash flow per share | $4.35 | $4.13 | 5% | |||
| Weighted average
number of paid common shares (millions) |
57.4 | 57.3 | 0% | |||
| Total debt to capital ratio | 0.16 | 0.24 | -33% | |||
| PRODUCTION (Cameco Share) | ||||||
| Uranium concentrates (million lbs U3O8) | 16.8 | 27.5 | -39% | |||
| Uranium conversion (tU) | 11,231 | 11,169 | 1% | |||
| Gold (oz) | 203,508 | 244,387 | -17% | |||