Production update

Production increases for this quarter and the first six months of the year were largely the result of a shorter maintenance shut-down and improved startup at the Key Lake mill during the quarter compared to 2009. We are beginning to see the benefits from our focus on reliability and maintenance over the last few years.

Operations update

At Key Lake, construction is on schedule for the acid and oxygen plants. Installation of major equipment and structural steel are in progress.

At McArthur River, production from the zone 2, panel 5 mining area continues to be strong.

In zone 4, we completed the ventilation expansion required to begin production. Development work will continue in the third quarter.

The regulator approved an amendment to our operating licence for McArthur River, giving us flexibility in the annual licensed production limit, similar to the approval Key Lake received in 2009. McArthur River mine can produce up to 21 million pounds U₃O₈ per year as long as average annual production does not exceed 18.7 million pounds. If production is lower than 18.7 million pounds in any year, we can produce more in future years until we recover the shortfall. This provides us with an opportunity to recover the almost 5 million pounds in production shortfalls that have occurred since 2003.

After the Key Lake mill is revitalized, annual production will depend mainly on mine production. We are continuing to plan for annual production of 18.7 million pounds (100% basis) for the next few years.

We expect conciliation with unionized employees at the McArthur River/Key Lake operations will begin in the fall.