The average uranium spot price during the first quarter was 18%
lower than last year. "Nevertheless, we are encouraged by the
15% price increase since the beginning of the year," Michel
added.
Earnings from operations declined to $3 million from $21 million
in 2000 and the overall gross profit margin was slightly lower at
22%.
Cash flow from operations totaled $28 million ($0.50 per share)
also reflecting reduced revenue in the quarter.
SEGMENTED
FINANCIAL RESULTS
Nuclear Business
During the first three months of 2001, revenue from the nuclear
business decreased by 63% to $46 million compared to $123 million
in 2000 due primarily to lower deliveries of uranium concentrates.
The U3O8
sales volume was 67% lower than in the first three months of 2000.
As the timing of deliveries of U3O8
and conversion services within a calendar year is at the discretion
of customers, Cameco's quarterly delivery patterns can vary significantly.
An 18% decline in the average realized price for uranium concentrates
also had an impact on revenue. This reduction was mainly the result
of an unusually high percentage of sales being delivered into contracts
with market-related pricing. Approximately 90% of uranium sales
were market-related compared to the historical annual average of
60%. The prices associated with these market-related contracts were
negatively influenced by the weaker spot prices.
Nuclear revenue was also impacted by lower sales of conversion
services which declined by 35% compared to the first quarter of
2000.
The total cost of products and services sold, including depreciation,
depletion and reclamation (DDR), was $38 million compared to $94
million in 2000, reflecting the decreased sales volumes. The average
unit costs for nuclear products were similar to the previous year.
However, in 2001, DDR represented a greater proportion of the total
cost of product sold due to a higher percentage of sales of produced
material compared to 2000, following the start of commercial production
at McArthur River.
Pre-tax profits from the nuclear business decreased by $21 million
or 72% and the gross profit margin declined to 18% from 24% in 2000.
Gold Business
During the first three months of 2001, revenue from the gold business
rose by $6 million or 28% compared to the same quarter a year earlier
as greater sales volume more than offset a 12% decline in the average
realized selling price. Cameco's realized price for gold declined
from $329 (US) in the first quarter last year to $288 (US) per ounce
this year due to less favourable hedge positions and lower spot
market prices.
Gold production at Kumtor was 57% greater than in the first quarter
of 2000 due mainly to higher grade ore, averaging 5.09 grams per
tonne, up from 3.64 grams. An increased recovery rate, which rose
to 83% from 79%, also contributed to the improved production. Kumtor's
cash cost per ounce was $127 (US) compared to $205 (US) in the first
quarter of 2000. The unit cash cost is calculated in accordance
with the standards established by the Gold Institute.
In 2001, the gross profit margin for gold was 29% compared to 16%
in 2000. The effect of the lower gold price has been more than offset
by the reduced unit cash cost.
Kumtor Gold Company's hedge position at the end of March was 941,000
ounces, one-third being Cameco's share. It is expected that these
hedges will yield average prices in the range of $300 (US) to $307
(US) per ounce.
The mark-to-market gain on Cameco's share of the hedge position
was $8 million (US) at March 31, 2001 based on a spot market gold
price of $258 (US) per ounce.
Corporate Expenses
Administration costs increased by $1 million while costs for exploration
and interest were similar to the previous year. Income tax expense
decreased by $10 million mainly as a result of lower operating income.
The effective income tax rate was relatively low at 12% due to a
high proportion of pre-tax profit being earned outside Canada in
jurisdictions with lower tax rates.
CASH
FLOW
During the first three months, Cameco generated cash from operations,
after working capital changes, of $28 million ($0.50 per share)
compared to $52 million ($0.92 per share) in 2000. This decrease
was related primarily to lower deliveries of nuclear products.
Capital expenditures for property, plant and equipment declined
to $12 million from $41 million due mainly to the completion of
development at McArthur River. Cameco spent about $4 million at
McArthur River in the first quarter of 2001 compared to $30 million
in the first three months of 2000.
BALANCE
SHEET
At March 31, 2001, total inventories increased by 15% to $418 million
compared to $365 million at December 31, 2000. Total volume of production
and purchases in the nuclear segment exceeded sales by a considerable
margin during the quarter.
Compared to the end of 2000, 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. The decline in payables was due mainly to the
timing of product purchases.
TRENDS
AND UNCERTAINTIES
The most significant factors impacting the financial performance
of Cameco are:
- the market price for U3O8
determined by market supply and demand forces,
- sales volumes for nuclear products,
- foreign exchange rates between the Canadian and US dollars,
- the market price for gold, and
- the unit costs of production.
Markets
Uranium Spot Market
The restricted uranium spot price on March 31, 2001 was $8.20 (US)
per pound U3O8,
an increase of about 15% from $7.10 (US) at December 31, 2000. The
average spot price for the first quarter was $7.72 (US), 18% lower
than the comparative quarter a year earlier. Spot market volume
in the first quarter was 3.1 million pounds U3O8
compared to 4.2 million pounds in the first quarter of 2000. Although
demand during the first quarter of 2001 has been weak, the spot
price has been slowly rising through the quarter.
For uranium conversion services, the spot market price increased
31% during the quarter to $4.25 (US) per kgU from US $3.25 at December
31, 2000. This compares to $2.45 (US) per kgU at the end of the
first quarter of 2000.
Uranium Long-Term Market
The long-term price indicator, published by TradeTech, was at $9.75
(US) per pound U3O8
at March 31, 2001, up modestly from the $9.25 (US) at the beginning
of the year.
Uranium Market Trends
Nuclear plants operate better
In 2000, the world average capacity factor for nuclear plants was
reported to be about 76%, up from 72% in 1995. The US nuclear fleet
claimed to achieve a record average capacity factor in 2000 of 91%,
up from 80% in 1995.
Potential for new US nuclear generating capacity
Public concern over natural gas supplies and prices have focused
attention on the growing shortage of US electric generating capacity,
including nuclear energy. The Bush administration is currently developing
a national energy policy which is expected to consider nuclear as
part of a diversified energy supply program for the US.
There are various programs which could provide additional nuclear
capacity:
- one US utility is assessing the potential restart of a shut-in
reactor,
- several partially completed reactors are being studied for possible
completion, and
- new reactor construction is being evaluated by a number of US
utilities which are expected to apply for siting licences in the
coming months. Such projects would include an evaluation of
new reactor designs which are simpler, safer and less capital
intensive.
Any additional nuclear capacity is expected to take at least 5
to 10 years before it is in operation.
A conversion competitor exits the business
On February 9, 2001, British Nuclear Fuels Limited (BNFL) announced
that it will halt production of UF6
in 2006. In the announcement, BNFL stated its decision to immediately
cease the marketing of UF6 conversion
services and to sell its uncommitted UF6
production to Cameco. BNFL's decision will eventually contribute
to a more balanced supply and demand situation for the uranium conversion
market.
Gold Market Review
During the first quarter of 2001, the average gold price was about
$264 (US) per ounce compared to $290 (US) in the first quarter of
2000. The over-riding considerations for gold's low investment value
appears to be the continuing strength of the US dollar and the supply
from central banks.
Considering existing hedge levels, Cameco's 2001 revenue would
change by approximately $1 million (US) for every change of $10
(US) per ounce in the average spot gold price. Net earnings and
cash flow would be similarly impacted.
Foreign Exchange Risk
Most of the company's revenues are in US dollars. At March 31,
2001, Cameco had sold forward $722 million (US) at an average spot
exchange rate of $1.5182. This is an increase over the December
31, 2000 position of $546 million at an average rate of $1.4950.
During the quarter, the Canadian dollar depreciated significantly
against the US dollar from $1.5002 at the end of 2000 to $1.5774
at the end of the first quarter. The company's mark-to-market loss
on its foreign exchange hedge positions increased from a year-end
level of $7 million (Cdn) to $49 million (Cdn) as at March 31, 2001.
However, due to existing hedge levels, the sensitivity of Cameco's
2001 earnings and cash flows to changes in the Canada/US exchange
rate is not material.
OUTLOOK
FOR 2001
Production
Due to better than expected operating performance, Cameco's share
of production from the McArthur River mine is expected to improve
by about 15% from the previous forecast to approximately 12 million
pounds U3O8.
Production rates during the first quarter were at the annual design
capacity of 18 million pounds (100% basis), nine months ahead of
plan. The impact on unit cost is encouraging.
Uranium Market
The long-term market is expected to be active in 2001 with contracting
projected to be about 75 million pounds U3O8,
compared to about 65 million last year.
The prospects for higher levels of demand in the long-term uranium
market are expected to strengthen further with renewed interest
in nuclear energy, particularly in the US.
Nuclear Revenue and Margins
Nuclear revenue for the year is expected to fall short of the level
achieved in 2000 reflecting lower average prices. Nuclear sales
volumes and the percentage of contracts with market-related pricing
are expected to be similar to last year. About 55% of this year's
U3O8
deliveries are scheduled for the fourth quarter compared to about
37% in the same quarter last year.
For the remainder of the year, a $1.00 (US) change in the U3O8
spot price from current levels would change revenue by about
$14 million (Cdn), net earnings by about $6 million (Cdn) and cash
flow by about $10 million (Cdn).
The effective tax rate for the year is expected to be lower than
the 48% rate in 2000 but significantly above the 12% rate in the
first quarter.
With the energy crisis in California, one of the company's utility
customers declared bankruptcy during the quarter and a second customer
continues to experience financial difficulties. As at March 31,
2001, there were no outstanding accounts receivable from these customers.
Cameco has planned deliveries to these customers later in 2001.
The impact, if any, on Cameco's earnings in 2001 is not presently
known. As much as $23 million of gross revenue could be impacted.
Second Quarter of 2001
Revenue for the second quarter is expected to be nearly double
that of the first quarter reflecting both higher volumes and prices
in the nuclear business. Accordingly, earnings are projected to
improve over those recorded in the first quarter. About 20% of the
year's nuclear deliveries and revenue is expected in the second
quarter.
Second quarter gold earnings are projected to be moderately lower
than in the first quarter due to an increase in the expected cash
cost from the $127 (US) per ounce achieved in the first quarter.
However, unit cash costs are expected to remain below the $153 (US)
recorded for 2000.
Bruce Power
After an extensive assessment process, Bruce Power has decided
to proceed with the restart of the two Bruce A nuclear reactors
whose operation was previously suspended by Ontario Hydro. The restart
program has now been launched with a plan for the two Bruce A reactors
to be back in operation by the summer of 2003, subject to regulatory
approvals.
On April 19, 2001, the Canadian Nuclear Safety Commission (CNSC)
held the second and final public hearing into Bruce Power's licence
application to operate the Bruce nuclear power stations. The commission's
decision is expected during May 2001.
A favourable decision by the CNSC would be followed by the closing
of the financial agreement between Bruce Power and Ontario Power
Generation to lease the Bruce nuclear facilities. The Cameco/Bruce
Power agreement would be effective immediately thereafter giving
Cameco a 15% ownership interest in Bruce Power. Cameco's cash expenditures,
on closing, are anticipated to be about $100 million.
PROFILE
Cameco, with its head office in Saskatoon, Saskatchewan, is the
world's largest uranium producer. 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.
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, electricity 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.
CONFERENCE
CALL
Cameco is hosting a conference call on Tuesday, May 1, 2001 from
10:00 a.m. to 11:00 a.m. Eastern time (8:00 a.m. to 9:00 a.m. Saskatoon
time) to discuss the first quarter results. To join the call, please
dial (416) 620-2400 or (888) 209-3790. A recorded version of the
call will be available approximately two hours after the call on
the company's web site www.cameco.com or by telephone replay until
midnight Tuesday, May 15 by calling (416) 626-4100 and entering
the code 18483205.
For further information, please contact:
Bob Lillie
Manager, Investor Relations
Cameco Corporation
Phone: (306) 956-6639
Fax: (306) 956-6318
|
Jamie McIntyre
Director, Investor & Corporate Relations
Cameco Corporation
Phone:(306) 956-6337
Fax:(306) 956-6318 |
INVESTOR INFORMATION
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