Consolidated Financial Results
Improved Earnings per Share Before Writedown
For the nine months ended September 30, 2000, Cameco recorded net
earnings of $30 million ($0.54 per share) before a one-time, non-cash
charge of $121 million after tax ($2.16 per share).
Including the writedown, the company posted a net loss of $91 million
($1.62 per share). The charge follows a review of the carrying value
of all Cameco's uranium mining and conversion fixed assets prompted
by the continuing delay in the recovery of uranium prices. The review
was based on forward price projections by third-party industry experts
and on Cameco's own forecast. The impact on earnings amounted to
$121 million, net of a $7 million deferred tax recovery.
This represents all of the value associated with the company's
ISL uranium producing assets at Highland (Wyoming) and Crow Butte
(Nebraska) as well as a portion of the carrying values of some ISL
properties designated for future development.
The purchase of the majority of these assets (through the purchase
of shares of Power Resources, Inc.) was negotiated in 1996 when
the spot market price exceeded $16.00 (US) per pound. Since that
time, the spot market price has declined significantly and at September
30, 2000 was $7.40 (US) per pound.
Cameco plans to continue to produce 800,000 pounds U3O8
per year at Crow Butte and to gradually reduce annual production
at Highland to 300,000 pounds by 2003, with the option of increasing
production when prices warrant.
The writedown, combined with cost-cutting initiatives, is expected
to have a favourable impact on future costs. Cameco will continue
to maintain its US presence and leverage its ISL investment in the
development of cost-competitive production centres in other areas
of the world.
Earnings Comparisons
Excluding the effect of this writedown and the gain on sale and
writedown recorded during the same period last year, earnings would
have been $30 million ($0.54 per share) in 2000 compared to $25
million ($0.44 per share) for the first nine months of 1999. The
reason for this improvement was lower expenses for interest, exploration
and income tax which together exceeded the reduction in gross profits.
Weaker realized prices for both nuclear and gold products and lower
deliveries of uranium concentrates have had a negative influence
on gross profits. In 2000, lower prices have caused the overall
gross profit margin to decline to 23% from 25% in 1999.
Cash Flow
During the first nine months, Cameco generated cash from operations,
after working capital changes, of $140 million ($2.51 per share)
compared to $175 million ($3.06 per share) in 1999. This decrease
was related primarily to lower revenue which was the result of reduced
volume and weaker prices.
Capital expenditures for property, plant and equipment, primarily
for the development and commissioning of the McArthur River mine,
declined by $93 million to $81 million.
Balance Sheet
At September 30, 2000, total uranium inventories declined by 5%
to $402 million compared to $421 million at December 31, 1999.
Compared to the end of 1999, both accounts receivable and accounts
payable have declined significantly. Receivables, which reflect
sales revenue, are typically higher in December than at any other
time of the year. Payables have declined due mainly to the timing
of product purchases.
Cameco has now completed its share repurchase program. A total
of 2.9 million shares were repurchased at a cost of $59 million
or $20.39 per share.
Segmented Financial Results
Nuclear Business
During the first nine months of 2000, revenue from the nuclear
business decreased by 13% to $368 million compared to $421 million
in 1999 due primarily to lower deliveries of uranium concentrates.
The U3O8
sales volume was 12% lower than in the first nine months of 1999.
This volume decrease was due to normal variations in delivery patterns
and it is expected that much of the shortfall will be made up by
year's end. A 6% decline in the average realized price for uranium
concentrates also had a negative influence on revenue. This reflected
weaker spot prices which were on average 18% lower than in the first
nine months of 1999. The average realized price for conversion services
also decreased by about 4% but remained well above the current spot
price level for conversion services.
The total cost of products and services sold, including depreciation,
depletion and reclamation, was $30 million less than the $311 million
reported in 1999, reflecting the decreased sales volume. The unit
cost for uranium was comparable to 1999 while the unit costs for
conversion services have increased moderately due to lower production.
Excluding the effect of the writedown and last year's gain on sale,
pre-tax profits from the nuclear business fell by $21 million or
21% compared to 1999 and the gross profit margin dropped to 23%
from 26% a year earlier.
Gold Business
During the first nine months of 2000, revenue from the gold business
was equal to the $76 million reported in 1999 as greater sales volume
offset an 8% decline in the average realized selling price. Cameco's
average realized price for gold has declined from $345 (US) to $320
(US) per ounce due to less favourable hedge positions.
Year-to-date 2000, gold production at Kumtor was 7% greater than
in the previous year. Production in the third quarter of 2000 improved
by 21% over the same period in 1999 due mainly to higher grade ore,
averaging 5.20 grams per tonne, up from 4.57 grams. Kumtor's cash
cost per ounce was $165 (US) to date in 2000 compared to $178 (US)
in 1999.
In 2000, the gross profit margin for gold was 23% compared to 16%
in 1999. The effect of the lower gold price has been more than offset
by reduced unit cash costs and a lower depreciation rate.
Kumtor Gold Company's hedge position at the end of September was
949,690 ounces, one-third being Cameco's share. It is expected that
these hedges will yield prices ranging from $310 (US) to $320 (US)
per ounce.
The mark-to-market gain on Cameco's share of the hedge position
was $8 million (US) at September 30, 2000 based on a spot market
gold price of $274 (US) per ounce.
Outlook
In 2000, Cameco expects annual uranium sales volumes to be down
marginally compared to 1999. Although the average spot price for
the year is expected to be about 18% lower than in 1999, the impact
on the average realized uranium price is forecast to be only a fraction
of that decline as a result of floor prices in certain contracts
and of the mix of pricing mechanisms in the company's long-term
contract portfolio. About 60% of Cameco's contracts are sensitive
to changes in the spot price at the time of delivery. The remaining
40% typically have either a fixed price or a base price which is
escalated by inflation or other factors.
For the remainder of the year, a $1.00 (US) change in the U3O8
spot price from current levels would change revenue by about $2
million (Cdn), net earnings by about $1 million (Cdn) and cash flow
by about $2 million (Cdn).
The fourth quarter will have the largest uranium and conversion
sales volumes of the year although realized uranium pricing is projected
to be slightly below the average for the year.
Cameco's uranium production for 2000 is expected to be about 16
million pounds, down slightly from last year, and includes the revised
production schedule for 2000 at McArthur River. During the two-year
rampup phase at the McArthur River mine, uranium production costs
are expected to be higher than at full production of 18 million
pounds which is expected in 2002.
Kumtor's total production for 2000 is expected to be about 650,000
ounces (Cameco's share is one-third), an increase over 1999 due
to increases in average grade and mill feed tonnages. The cash cost
per ounce in 2000 is projected to be approximately $160 (US) per
ounce.
Regarding capital expenditures, Cameco's corporate-wide forecast
is about $115 million for the year.
Uranium Spot Market
The uranium spot market volume for the nine months to September
30 was about 8 million pounds U3O8
compared to 19 million pounds for the same period in 1999. For the
year, the spot market volume is expected to be only about 12 to
14 million pounds U3O8,
compared to 24 million pounds last year. The restricted spot price
averaged $7.40 (US) per pound U3O8
on September 30, 2000, a decrease of 9% from $8.10 (US) at the end
of the second quarter. During the quarter, spot market supplies
were more than sufficient to meet the limited demand.
The spot market price for uranium conversion services increased
slightly, ending the quarter at $2.50 (US) per kgU. The conversion
market remains over-supplied due to the availability of secondary
supplies.
Uranium Long-Term Market
In the quarter, the long-term market was active, continuing the
trend that began late in 1999. Long-term market volumes are expected
to reach up to 80 million pounds U3O8
for the year compared to about 60 million pounds in 1999.
The long-term price indicator published by TradeTech concerning
deliveries to take place before 2008 edged slightly lower in the
quarter, down $0.25 (US) to end the quarter at $9.25 (US) per pound
U3O8.
Market Developments
The Swedish government has decided not to close the second Barseback
nuclear power plant in July 2001, as previously announced, citing
the lack of emissions-free replacement power and the potential for
power shortages in southern Sweden.
In Switzerland, after a national referendum rejected new energy
taxes to subsidize the development of renewable energy sources,
the parliament has decided not to place time limits on the operation
of its nuclear plants.
In the Czech Republic the first unit of the Temelin nuclear plant
started generating electricity in October and a second unit is expected
to start generating in about 15 months.
In Taiwan, it was announced in late October that the construction
of the Lungmen nuclear plant would be cancelled. The Legislative
Yuan, which had already allocated funds to build the project, has
announced its intention to challenge this decision.
Operation and Development Updates
During the quarter at McArthur River, efforts were directed to
improving the high grade ore mining and handling systems. McArthur
River mine production of 2.7 million pounds U3O8
was achieved in the quarter, bringing the year-to-date total to
6.3 million pounds. For the full year, production of some 10 million
pounds (Cameco's share is 70%) is anticipated, down slightly from
the previous forecast.
Commercial production at McArthur River was achieved as of November
1, 2000, the company being satisfied that mine commissioning is
substantially complete and well on its way to achieving, as planned,
the nominal 18 million pounds annual capacity in 2002.
Cameco's share of production at the Key Lake mill, including McArthur
River ore, is 4.7 million pounds U3O8
to September 30, 2000. Cameco's share of production from all mine
operations, to date is 11.2 million pounds.
Investment in Bruce Power
On October 12, 2000, the company announced its investment in a
15% interest in the Bruce Power Limited Partnership (Bruce Power)
which is 85% owned by British Energy (BE). Cameco will contract
with Bruce Power to manage its fuel procurement activities and therefore
views this investment as an extension of its core business in uranium
and conversion services. The arrangement secures a significant amount
of long-term uranium business for the company and is an attractive
investment in a growth sector of the economy. Cameco's investment
is expected to have a positive impact on cash flow from operations
and significantly increase earnings after two years. The deal is
expected to close late in 2000.
In July 2000, Bruce Power entered into a long-term lease arrangement
with Ontario Power Generation Inc. relating to the facilities at
the Bruce nuclear site. This agreement is expected to close in the
summer of 2001.
BE has a track record of safety and operational excellence and
is an international pioneer in the world's increasingly deregulated
electricity markets. BE has offered the two main unions at the Bruce
site a 5% interest in Bruce Power.
Other Corporate Updates
On October 6, 2000, Cameco became part of the Dow Jones Sustainability
Group Index—the first index to track the performance of the world's
leading sustainability-driven companies. The index measures the
long-term shareholder value created by a group of companies that
responsibly manage the economic, environmental and social parts
of their businesses.
Due to the recently called Canadian federal election, proposed
legislation introduced by the federal government to allow more foreign
ownership of the company's shares will not proceed at this time.
The new federal government will decide whether or not to proceed
with the legislation. The proposed changes would have allowed individual
non-residents to hold a maximum of 15% of the company's shares,
up from 5%, and non-residents in total to vote up to 25% of the
company's shares, up from 20%.
Forward-Looking Statements
Certain statements in this report to shareholders 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 nuclear or gold business to be materially different from future
results, performance or achievements expressed or implied by those
forward-looking statements. These factors are discussed in greater
detail in Cameco's most recent annual information form and management's
discussion and analysis on file with the Canadian provincial securities
regulatory authorities and the United States Securities and Exchange
Commission.
For Further Information Contact:
Bob Lillie
Manager, Investor Relations
Cameco Corporation
Phone: (306) 956-6639
Fax: (306) 956-6318
|
Elaine Kergoat
Manager, Media and Public Relations
Cameco Corporation
Phone: (306) 956-6315
Fax: (306) 956-6318 |
Profile
Cameco, with its head office in Saskatoon, Saskatchewan, is the
world's largest uranium supplier. The company's competitive position
is based on its large high grade reserves and low-cost operations.
Cameco is also one of the world's largest commercial providers of
uranium conversion services. 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 also produces gold. The company's shares trade on
the Toronto and New York stock exchanges.
Investor Information
Common Shares
CCO
The Toronto Stock Exchange
CCJ
New York Stock Exchange
Preferred Securities
CCJPR
New York Stock Exchange
|
Investor Inquiries
Cameco Corporation
2121, 11th Street West
Saskatoon, Saskatchewan
S7M 1J3
Phone: (306) 956-6400
Fax: (306) 956-6318
Web: www.cameco.com
|
Transfer Agent
CIBC Mellon Trust Company
320 Bay Street, P.O. Box 1
Toronto, Ontario
M5H 4A6
Phone: 800-387-0825 (North America)
Phone: (416) 643-5500 (outside North America)
|
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