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Saskatoon, Saskatchewan, Canada, July 19, 2002
Cameco Corporation previously reported the failure of a pit wall on July 8, 2002 at the Kumtor gold mine in Kyrgyzstan. A preliminary assessment of the expected impact on its 2002 mining plan and operating results has now been completed.
Overview
The rock slide involved approximately 7.5 million tonnes of
rock which is expected to be removed over the next year at
a projected cost of about $1 (US) per tonne. No gold reserves
have been lost as a result of the rock slide as this wall
failure lies entirely within the ultimate pit limit that includes
another cut behind the failure zone. However, the timing of
access to some high-grade ore has been altered. Cameco's 2002
net earnings are expected to be adversely impacted by approximately
$35 million (Cdn).
Revised Mining Plan
Worker safety will remain of the utmost importance. On site
geotechnical experts will continue to provide the company
with their assessment of wall conditions and worker safety
in all areas of the pit particularly around the rock slide.
Kumtor's gold production plan has been revised for 2002 to approximately 500,000 ounces (Cameco's share is one-third) at an average grade of 3.5 grams per tonne (g/t), a recovery rate of 77% and an estimated cash cost of about $210 (US) per ounce. This revised cash cost reflects the lower grade of the mill feed and the costs for removing the rock slide material. No allowance has been made at this time for possible proceeds from insurance.
Prior to the pit wall incident, the company had forecast production of 700,000 ounces at 4.9 g/t, a recovery rate of 81%, and a cash cost of $147 (US) per ounce. Mill feed remains unchanged at 5.5 million tonnes. Prior to the incident, approximately 300,000 ounces had been poured in 2002.
The mining plan had anticipated that work in the high-grade zone of the mine would begin this month and continue into 2003. As this zone is now partly under and exposed to the rock slide, the mill is expected to process lower grade material averaging 3.1 g/t for the remainder of 2002 when mill feed will be supplied from the stockpile and from mine production which resumed on July 15, 2002. The company's preliminary estimate is that normal operations will resume in mid-2003 with the mining of the high-grade zone.
The three blast hole drills covered by the slide have now been recovered. One drill will be back in service in a few days and attempts are being made to salvage one drill from parts of the remaining two.
Loan Payments
The current balance of Kumtor Gold Company's (KGC) senior
debt is $77 million (US). The next principal payment of $18
million (US) plus interest, is due on December 1, 2002. Current
estimates indicate that KGC will have sufficient funds to
make this payment.
Cameco's subordinated loan to KGC currently has an outstanding balance of $65 million (US). The next expected principal payment of about $10 million (US) plus interest scheduled for December 2002 will be deferred.
Hedge Position
Cameco expects that 200,000 ounces of Kumtor's gold hedges
will be rolled forward to future periods. Although this action
will not have a cash impact, such redesignation of hedge contracts
will have a $2 million adverse impact on Cameco's earnings.
This has been included in the earnings reduction figure mentioned
above.
Profile
Cameco, with its head office in Saskatoon, Saskatchewan, is
the world's largest uranium supplier. 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.
Caution Regarding Forward-Looking Information
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. Factors that could cause such differences, without
limiting the generality of the following, include: volatility
and sensitivity to market prices for uranium, electricity
in Ontario and gold; the impact of the sales volume of uranium,
conversion services, electricity generated and gold; competition;
the impact of change in foreign currency exchange rates and
interest rates; imprecision in reserve estimates; environmental
and safety risks including increased regulatory burdens; unexpected
geological or hydrological conditions; political risks arising
from operating in certain developing countries; a possible
deterioration in political support for nuclear energy; changes
in government regulations and policies, including trade laws
and policies; demand for nuclear power; replacement of production
and failure to obtain necessary permits and approvals from
government authorities; legislative and regulatory initiatives
regarding deregulation, regulation or restructuring of the
electric utility industry in Ontario; Ontario electricity
rate regulations; weather and other natural phenomena; ability
to maintain and further improve positive labour relations;
operating performance of the facilities; success of planned
development projects; and other development and operating
risks.
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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 |