Cameco Announces 2000 Financial Results

Saskatoon, Saskatchewan, Canada, February 6, 2001

Cameco Corporation today reports its 2000 financial results.

CONSOLIDATED FINANCIAL RESULTS

Net earnings in 2000 were $45 million ($0.81 per share) compared to $42 million ($0.72 per share) in 1999 before including the effects of special items in both years. Improved results reflected lower expenses for interest, exploration and income tax, which together exceeded a reduction in gross profits.

Including the special items in both years, the company posted a net loss of $87 million ($1.57 per share) in 2000 compared to net earnings of $71 million ($1.24 per share) in 1999.

In 2000, cash provided by operations, including changes in operating assets and liabilities, was $224 million ($4.04 per share) compared to $249 million ($4.35 per share) in 1999.

"Prices for our gold and nuclear products remained under great pressure during 2000," said Bernard Michel, Cameco's chair and chief executive officer. "But despite these weak markets, we increased net earnings, before special items, by 7% from a year ago. In addition, we continue to generate strong cash flows which are indicative of the company's exceptional asset base and balanced marketing strategy."

Two special charges were taken in 2000: a one-time, non-cash charge of $128 million ($121 million after tax or $2.17 per share) related to the writedown of its US in situ leach assets in the third quarter and a provision of $20 million ($11 million after tax or $0.20 per share) for the management of low-level radioactive wastes in Ontario.

The writedown followed 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 $20 million provision represents Cameco's remaining liability for certain specified wastes accumulated by one of Cameco's predecessor companies, Canada Eldor Inc. A cost sharing formula agreement stipulates that all additional costs related to this material will be the responsibility of the federal government.

In 1999, net earnings included the effects of a one-time gain on sale and a writedown.

In 2000, total revenue fell by 7% to $689 million from the record level of $742 million in 1999. Cameco's realized prices have fallen as a result of the low uranium spot prices, which affect some long-term contracts, and the expiration of favourably priced uranium contracts and gold hedges.

The overall gross profit margin fell to 23% in 2000 from 24% a year ago. It has averaged 27% over the last five years.

NUCLEAR BUSINESS SEGMENT

Revenue

In 2000, Cameco's revenue from the nuclear business declined by 9% to $580 million due mainly to decreases in realized prices for and volumes of uranium concentrates. The average realized price for U₃O₈ was 6% lower than in the previous year reflecting the decline in the spot price and the expiration of some high-priced contracts. Concentrate deliveries were 4% lower than the record sales volumes reported in 1999. Revenue was also negatively influenced by lower deliveries for conversion services which fell by 5% compared to 1999.

Cost of products and services sold

The cost of products and services sold was $365 million in 2000, representing a decrease of $14 million or 4% due mainly to the lower volumes delivered. Royalty costs, which are included in the costs of goods and services sold, fell by $9 million.

The unit cash cost for conversion services rose 8% due to reduced production which was 17% lower than in 1999.

Depreciation, depletion and reclamation

Depreciation, depletion and reclamation charges totaled $86 million for 2000, a decline of $11 million or 11% compared to the previous year. The lower charges can be attributed to the reduced volumes and the higher percentage of sales commitments filled by purchased U₃O₈. Depreciation is allocated only to produced material.

Gross Profit

In 2000, gross profit in the nuclear business decreased by 19% to $129 million compared to $159 million in 1999. The decline resulted primarily from lower uranium prices and higher unit inventory costs for both uranium and conversion services. The gross profit margin fell to 22% from 25% a year earlier.

"Production costs are expected to improve once McArthur River reaches full annual production of 18 million pounds U₃O₈," said Michel. "The operation is expected to produce 18 million pounds in 2002."

GOLD BUSINESS SEGMENT

Revenue

In 2000, revenue from the gold business was $109 million (Cdn), an improvement of 2% from 1999. This increase was due mainly to a 10% rise in sales volume from the Kumtor mine in Kyrgyzstan. The effect of increased sales was partially offset by a lower average realized gold price which fell 7% to $314 (US) per ounce from $338 (US) a year ago.

The average spot market price for gold during 2000 was $279 (US) per ounce unchanged from 1999. At December 31, 2000, Kumtor Gold Company's (KGC) hedge position was 958,940 ounces, one-third being Cameco's share. It is expected that these hedges will yield prices ranging from $308 (US) to $319 (US) per ounce. The mark-to-market gain on Cameco's share of the hedge position at year end was $7 million (US) based on a spot gold price of $273 (US) per ounce.

Cost of products and services sold

For 2000, the cost of products and services sold was $49 million, a decline of $1 million due primarily to lower unit cash costs. At Kumtor, cash operating costs declined to $153 (US) per ounce from $179 (US) in 1999, due mainly to a 10% increase in production. Increased production was the result of higher mill throughput, improved mill recoveries and a higher ore grade, which averaged 4.65 grams per tonne, compared to 4.54 grams the previous year. The unit cash cost is calculated in accordance with the standards established by The Gold Institute.

Depreciation, depletion and reclamation

In 2000, depreciation, depletion and reclamation charges amounted to $31 million representing a decline of $9 million or 23% compared to 1999. This reduction was mainly due to a lower depreciation rate which fell to $93 (US) per ounce from $132 (US) in 1999 as the result of a 1999 writedown. The reduction in the depreciation rate was partially offset by the increased sales volume.

Gross Profit

Gross profit from the gold business was $29 million in 2000, up $12 million or 71% compared to 1999. The gross profit margin for gold was 26% compared to 16% a year earlier. The effect of the lower gold price was more than offset by the reduced unit cash cost and depreciation rate.

CONSOLIDATED CORPORATE EXPENSES

Administration

In 2000, administration expenses rose by about $2 million to $38 million compared to the prior year. The majority of this increase can be attributed to increased provisions for employee pension and other post-retirement benefits.

Interest and Other

Expenses for interest and other decreased by $9 million compared to 1999 due mainly to foreign exchange gains, lower debt levels and higher interest income. In 2000, the average outstanding debt was $327 million compared to $480 million in 1999. Interest income from Cameco's subordinated loan to KGC was greater in 2000 due to compounding of interest and an increase in the rate to 12.5% from 11.3% a year earlier.

These benefits were partially offset by a reduction in the rate of interest capitalization following the declaration of commercial production at McArthur River effective November 1, 2000. Interest continues to be capitalized on the Cigar Lake project.

Income Taxes

In 2000, income tax expense was $35 million representing an increase of $37 million compared to 1999. The income tax expense in each of these years was significantly influenced by special items.

Before the special items, income taxes were $51 million in 2000, down $11 million from the previous year. The effective tax rate for 2000 declined to 49% from 55%. The lower effective rate was mainly the result of a greater proportion of pre-tax earnings being derived from gold operations outside of Canada, which are subject to a lower tax rate.

Income tax expense includes large corporations tax which amounted to $5 million in each of 2000 and 1999.

CASH RESOURCES

Operating activities

In 2000, the company's operating activities provided cash of $224 million ($4.04 per share) compared to $249 million ($4.35 per share) in 1999. This decline is mainly attributable to the reduced gross profit caused by lower prices for the company's nuclear products and services. The effect of the lower gross profit was partially offset by the receipt of interest payments on Cameco's subordinated loan to KGC. The interest payment received was $26 million (US) and included all interest accrued to December 1, 2000.

Also contributing to cash flow in 2000 was a reduction of the company's large uranium inventory.  Total product inventories at the end of 2000 amounted to $365 million, $56 million or 13% lower than the previous year end. In part, this is a result of the company's plan to coordinate the reduction of U₃O₈ inventories with the ramp up of production at the McArthur River mine.

Excluding changes in operating assets and liabilities, cash provided by operations was $201 million ($3.62 per share) compared to $228 million ($3.97 per share) in 1999.

Debt

During the year, total outstanding debt declined by $65 million to end the year at $294 million. The total debt-to-capitalization ratio fell to 14% from 16%.

"Cameco's strong balance sheet provides the company with financial flexibility as we look forward to better commodity prices," said Michel.

Investing activities

In 2000, the company's expenditures for property, plant and equipment amounted to $95 million, a decline of $117 million due mainly to the completion of the McArthur River mine. The company spent $47 million at McArthur River compared to $106 million in 1999. Cameco's share of development costs at the Cigar Lake project was $17 million compared to $34 million a year earlier due to the reduction in activity while the pre-feasibility study was being revised.

During the year, the company also received a $10 million (US) repayment of principal on its subordinated loan to KGC. This was the first payment against the principal amount and at December 31, 2000, the outstanding balance was $97 million (US). In 1999, investing activities also included net proceeds of $239 million related to the sale of uranium interests.

Financing activities

In 2000, financing activities used $152 million primarily for debt repayment, preferred securities charges, dividends and share repurchases. In total, the company repurchased 2.9 million shares at an average price of $20.39 per share. In 1999, cash used in financing activities was $277 million due primarily to a $225 million net repayment of debt.

QUARTERLY FINANCIAL HIGHLIGHTS

URANIUM/CONVERSION SPOT MARKET SUMMARY FOR 2000

In 2000, about 15 million pounds U₃O₈, or 10% of the western world's uranium consumption, were sold on the spot market. This compares to 25 million pounds in 1999 and an average of 15% of consumption over the last five years.

The uranium spot price ended the year at $7.10 (US) per pound U₃O₈, compared to $9.60 (US) per pound at the end of 1999. Lower demand coupled with the presence of aggressive inventory sellers caused the spot price to soften during much of the year before leveling off in the fourth quarter to its lowest point since 1974.

Spot prices for UF₆ conversion services ended the year at $3.25 (US) per kilogram of uranium as UF₆. The spot price fell from $2.55 (US) at year end 1999 to a low of $2.35 (US) in August 2000 before recovering in the fourth quarter. Prices had been driven to low levels due to the availability of significant secondary supplies and low demand for spot UF₆ conversion.

"Despite the price trends in 2000, the long-term uranium market outlook remains positive and new mine development will be needed to meet anticipated uranium requirements," said Michel. "World uranium production continues to be about half of requirements, a situation which is not sustainable over the long term."

LONG-TERM URANIUM MARKET

Historically about 85% of all uranium is sold under long-term, multi-year contracts with deliveries starting one to three years after signing. Volume contracted by western world utilities in the long-term market in 2000 was about 70 million pounds U₃O₈, compared to 60 million pounds in 1999. Annual western world consumption in 2000 was about 142 million pounds U₃O₈.

Long-term contract price indicators published in the industry fell by 10% during 2000 to $9.25 (US) per pound U₃O₈, reflecting the aggressiveness of some suppliers. Continuing low spot prices create the expectation of plentiful and inexpensive supplies and thus have a negative impact on long-term prices.

"We believe that utility uncovered demand —uranium not yet under contract to meet reactor requirements— increases significantly beyond 2003," said Michel. " As more long-term contracts expire and must be replaced, demand in the spot and long-term markets is likely to grow. This should apply some upward pressure on prices unless an unanticipated source of secondary supply is identified to help satisfy this demand."

During 2000, Cameco concluded contracts for about 34 million pounds U₃O₈ for future delivery. This compares with contracts for 25 million pounds signed in 1999.

The company has more than 100 million pounds U₃O₈ and more than 46,000 tonnes of uranium conversion under contract for delivery over the next decade.

FOREIGN OWNERSHIP RESTRICTIONS

The federal government introduced legislation recently to allow more foreign ownership of the company's shares. The proposed changes would allow individual non-residents to hold a maximum of 15%, up from 5%, and non-residents in total to vote up to 25%, up from 20%. The ownership limit for an individual Canadian shareholder is unchanged at 25%.

OUTLOOK FOR 2001

Uranium Production

McArthur River mine is expected to achieve its monthly design capacity of 1.5 million pounds U₃O₈ consistently some time in 2001. Accordingly, unit production costs are expected to decrease during 2001 as the rate of production increases.

The Rabbit Lake mill is scheduled to close in the second quarter of 2001 and is expected to return to operations in 2002 depending on market conditions.

Unit production costs are expected to be higher because fixed costs have to be allocated over fewer pounds of production. Cameco's share of uranium production is projected to remain unchanged in 2001 at about 16.4 million pounds. Production levels are projected as follows:

•     McArthur River	10.5
•     Key Lake	0.4
•     Rabbit Lake	4.0
•     Crow Butte	0.8
•      Highland	0.7
Total	16.4	million pounds U3O8

At the Port Hope plants, conversion production of 9,900 tonnes of uranium is planned.

Uranium Market

It is difficult to forecast how uranium buyers and sellers will carry out purchasing and selling activities in 2001. Some inventory sellers may have satisfied their near-term financial needs and may be less aggressive in the spot market this year. Accordingly, some industry experts are predicting that uranium prices will begin to recover in 2001. 

Conversion spot prices have continued to strengthen since the end of the year and are currently reported at $3.65 (US)/kgU.

Long-term market demand in 2001 is expected to remain similar to 2000 volumes.

Nuclear Earnings

Cameco's nuclear revenue in 2001 is expected to decline about 8% reflecting the historically low level at which the uranium spot price began the year. Nuclear sales volumes are projected to be similar to 2000 levels. About 60% of Cameco's long-term contracts contain pricing which references the spot price at the time of delivery. In 2001, a $1.00 (US) change in the uranium spot price would change revenue by about $16 million (Cdn), net earnings by $8 million (Cdn) and cash flow by $14 million (Cdn). While conversion prices are expected to hold, secondary UF₆ supplies could adversely affect them.

Nuclear margins are expected to decline in 2001 reflecting the lower revenue. Also, care and maintenance costs at the Rabbit Lake operation will hamper margins.

In addition, the financial difficulties of two customers in California, if left unresolved, may adversely impact revenue and earnings in 2001. The total effect will not be known until there is a resolution to their situation.

Gold Earnings

Gold production at Kumtor is expected to rise to about 680,000 ounces (Cameco's share is one-third) reflecting marginal increases in average grade and mill feed tonnage. The average realized gold price (including the hedge positions at the end of 2000) is expected to decline to about $285 (US) per ounce but should be offset partially by lower cash costs resulting from the higher planned output levels. Therefore, gold margins are forecasted to decline in comparison to 2000.

Capital and Development Expenditures

Cameco's capital and development expenditures are expected to total about $105 million in 2001 and are planned to be spent in the following areas:

(in millions $)	Planned 2001	Actual 2000
Development
McArthur River	$10	$47
Inkai	6	3
Cigar Lake	5	17
Sustaining Capital & Other  Investment	19	28
Bruce Power	65	0
Total	$105	$95

The company expects to spend about $10 million at McArthur River mostly for mine development and evaluation drilling.

Cameco plans to spend $6 million at Inkai, an in situ leach project in Kazakhstan, which contains large uranium resources and is undergoing geological evaluation during 2001.

Cameco's share of Cigar Lake capital expenditures in 2001 is estimated at $5 million. Given the time needed for licensing and construction, production is unlikely to begin before 2005. The application for the construction license will be submitted to the regulators during 2001 and is expected to be approved in 2002. Construction could then proceed if market conditions are favourable. It is anticipated that engineering and construction would take about 27 months. At full production, Cigar Lake is expected to produce 18 million pounds U₃O₈ annually.

The company announced its intention to invest in the Bruce Power Partnership in October 2000. The first significant cash investment of $65 million will occur upon the closing of the agreement between Bruce Power and Ontario Power Generation during the first half of 2001. The impact of the Bruce Power investment on Cameco's 2001 earnings is expected to be slightly negative while revised operating practices are implemented. Significant earnings contribution is expected in 2003. The timing of deregulation is not expected to materially change the financial impact to Cameco.

The balance of  $19 million is to be used for sustaining capital at the operating nuclear and gold facilities.

Corporate Expenses

Administration and exploration expenses are expected to decline by more than 10% from 2000.

Interest expense may be higher in 2001 as the capitalization of interest against the McArthur River mine ceased once it entered commercial operations. Approximately $12 million was capitalized against the McArthur River mine in 2000.

The effective tax rate should decline as a higher proportion of earnings is expected to be generated in a lower tax jurisdiction outside of Canada.

First Quarter 2001

Revenue in the first quarter is expected to be weak due to low prices and unusually low delivery volumes. This is likely to result in a net loss for the first quarter, which is not indicative of the results expected for the year. About 10% of the year's nuclear deliveries and revenue are expected in the first quarter. Customers specify the timing of deliveries.

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 16, 2001 to shareholders of record on March 30, 2001.

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.

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.

CONFERENCE CALL

Cameco is hosting a conference call on Wednesday, February 7, 2001 from 11:00 a.m. to 12:00 noon Eastern time (10:00 a.m. to 11:00 a.m. Saskatoon time) to discuss the year-end results. To join the call, dial (416) 641-6655 or (800) 387-2195 and an operator will put you through. A recorded version will be available on the company's web site www.cameco.com approximately two hours after the call or by telephone replay until midnight Wednesday, February 21 by calling (416) 626-4100 and entering the code 17644172.

For further information, please contact:

Rita Mirwald Senior Vice-President,  Human Resources & Corporate Relations Cameco Corporation Phone:(306) 956-6313 Fax:(306) 956-6312

Bob Lillie Manager, Investor Relations Cameco Corporation Phone:(306) 956-6639 Fax:(306) 956-6318