Fourth quarter results by segment
Uranium
| Three months ended December 31 |
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|---|---|---|---|
| Highlights | 2011 | 2010 | change |
| Production volume (million lbs) | 6.6 | 6.4 | 3% |
| Sales volume (million lbs) | 13.8 | 9.1 | 52% |
| Average spot price ($US/lb) | 51.79 | 58.29 | (11)% |
| Average long-term price ($US/lb) | 62.50 | 64.33 | (3)% |
| Average realized price | |||
| ($US/lb) | 52.09 | 48.51 | 7% |
| ($Cdn/lb) | 53.08 | 50.10 | 6% |
| Average unit cost of sales ($Cdn/lb) (including D&A) | 30.29 | 29.38 | 3% |
| Revenue ($ millions) | 731 | 457 | 60% |
| Gross profit ($ millions) | 314 | 189 | 66% |
| Gross profit (%) | 43 | 41 | 5% |
Production volumes were 3% higher due to slightly higher output at Rabbit Lake and Inkai, partially offset by slightly lower output at McArthur River/Key Lake and Smith Ranch-Highland. See Operating properties for more information.
Uranium revenues were up 60% due to a 6% increase in the Canadian dollar average realized price, and a 52% increase in sales volumes.
Our realized prices this quarter were higher than the fourth quarter of 2010 mainly due to higher US dollar prices under market related contracts, partially offset by a less favourable exchange rate. In the fourth quarter of 2011, our realized foreign exchange rate was $1.02 compared to $1.03 in the prior year.
Total cost of sales (including D&A) increased by 56% ($417 million compared to $268 million in 2010). This was mainly the result of the following:
- the 52% increase in sales volumes
- higher royalty charges due to higher deliveries of Saskatchewan-produced material and higher realized prices
- average unit costs for produced uranium were 2% higher
- partially offset by 33% lower average unit costs for purchased uranium due to fewer purchases at spot prices
The net effect was a $125 million increase in gross profit for the quarter.
The following table shows the costs of produced and purchased uranium incurred in the reporting periods (non-IFRS measures see below). These costs do not include selling costs such as royalties, transportation and commissions, nor do they reflect the impact of opening inventories on our reported cost of sales.
| Three months ended December 31 |
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|---|---|---|---|
| ($Cdn/lb) | 2011 | 2010 | change |
| Produced | |||
| Cash cost | 17.44 | 15.94 | 9% |
| Non-cash cost | 5.52 | 6.52 | (15)% |
| Total production cost | 22.96 | 22.46 | 2% |
| Quantity produced (million lbs) | 6.6 | 6.4 | 3% |
| Purchased | |||
| Cash cost | 18.86 | 28.14 | (33)% |
| Quantity purchased (million lbs) | 2.3 | 4.3 | (47)% |
| Totals | |||
| Produced and purchased costs | 21.90 | 24.74 | (11)% |
| Quantities produced and purchased (million lbs) | 8.9 | 10.7 | (17)% |
Cash cost per pound, non-cash cost per pound and total cost per pound for produced and purchased uranium presented in the above table are non-IFRS measures. These measures do not have a standardized meaning or a consistent basis of calculation under IFRS. We use these measures in our assessment of the performance of our uranium business. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance and ability to generate cash flow.
These measures are non-standard supplemental information and should not be considered in isolation or as a substitute for measures of performance prepared according to accounting standards. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently so you may not be able to make a direct comparison to similar measures presented by other companies.
To facilitate a better understanding of these measures, the table below presents a reconciliation of these measures to our unit cost of sales for the fourth quarters of 2011 and 2010.
| Three months ended December 31 |
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|---|---|---|
| ($ millions) | 2011 | 2010 |
| Cost of product sold | 336.8 | 230.9 |
| Add / (subtract) | ||
| Royalties | (61.3) | (18.2) |
| Standby charges | (6.0) | (6.4) |
| Other selling costs | (2.8) | (7.9) |
| Change in inventories | (108.2) | 24.6 |
| Cash operating costs (a) | 158.5 | 223.0 |
| Add / (subtract) | ||
| Depreciation and amortization | 80.1 | 37.3 |
| Change in inventories | (43.7) | 4.4 |
| Total operating costs (b) | 194.9 | 264.7 |
| Uranium produced & purchased (millions lbs) (c) | 8.9 | 10.7 |
| Cash costs per pound (a ÷ c) | 17.81 | 20.84 |
| Total costs per pound (b ÷ c) | 21.90 | 24.74 |
Fuel services
| (includes results for UF6, UO2 and fuel fabrication) | |||
|---|---|---|---|
| Three months ended December 31 |
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| Highlights | 2011 | 2010 | change |
| Production volume (million kgU) | 3.1 | 3.9 | (21)% |
| Sales volume (million kgU) | 7.2 | 6.3 | 14% |
| Realized price ($Cdn/kgU) | 14.66 | 14.59 | – |
| Average unit cost of sales ($Cdn/kgU) (including D&A) | 11.18 | 12.49 | (10)% |
| Revenue ($ millions) | 106 | 91 | 16% |
| Gross profit ($ millions) | 25 | 13 | 92% |
| Gross profit (%) | 24 | 14 | 71% |
Production volumes were 21% lower than in 2010 due to the decrease in production of UF6. We reduced our production forecast in the third quarter as a result of unfavourable market conditions.
Total revenue increased by 16% due to a 14% increase in sales volumes and a slight increase in realized price.
The total cost of sales (including D&A) increased by 4% ($81 million compared to $78 million in the fourth quarter of 2010) due to the increase in sales volumes. When compared to 2010, the average unit cost of sales was 10% lower primarily due to higher cost recoveries in 2011.
The net effect was a $12 million increase in gross profit.
Electricity
| (100% – not prorated to reflect our 31.6% interest) | |||
|---|---|---|---|
| Highlights | Three months ended December 31 |
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| ($ millions except where indicated) | 2011 | 2010 | change |
|
|||
| Output - terawatt hours (TWh) | 6.2 | 6.6 | (6)% |
| Capacity factor (the amount of electricity the plants actually produced for sale as a percentage of the amount they were capable of producing) |
86% | 91% | (6)% |
| Realized price ($/MWh) | 531 | 60 | (12)% |
| Average Ontario electricity spot price ($/MWh) | 27 | 32 | (16)% |
| Revenue | 338 | 393 | (14)% |
| Operating costs (net of cost recoveries) | 271 | 225 | 20% |
| Cash costs | 220 | 183 | 20% |
| Non-cash costs | 51 | 42 | 21% |
| Income before interest and finance charges | 67 | 168 | (60)% |
| Interest and finance charges | 7 | 7 | – |
| Cash from operations | 114 | 147 | (22)% |
| Capital expenditures | 84 | 38 | 121% |
| Distributions | 65 | 120 | (46)% |
| Capital calls | 10 | – | – |
| Operating costs ($/MWh) | 421 | 34 | 24% |
| Highlights | Three months ended December 31 |
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|---|---|---|---|
| ($ millions except where indicated) | 2011 | 2010 | change |
| BPLP's earnings before taxes (100%) | 60 | 161 | (63)% |
| Cameco's share of pretax earnings before adjustments (31.6%) | 19 | 51 | (63)% |
| Proprietary adjustments | (2) | (2) | – |
| Earnings before taxes from BPLP | 17 | 49 | (65)% |
Total electricity revenue decreased 14% due to lower output and a lower realized price. Realized prices reflect spot sales, revenue recognized under BPLP's agreement with the OPA, and financial contract revenue. BPLP recognized revenue of $147 million this quarter under its agreement with the OPA, compared to $114 million in the fourth quarter of 2010. The equivalent of about 66% of BPLP's output was sold under financial contracts this quarter, compared to 45% in the fourth quarter of 2010. From time to time BPLP enters the market to lock in gains under these contracts.
The capacity factor was 86% this quarter, down from 91% in the fourth quarter of 2010 due to a higher volume of outage days during the year's planned outages compared to last year's planned outages.
Operating costs were $271 million compared to $225 million in 2010 due to higher maintenance costs incurred during outage periods and increased staff costs.
The result was a 65% decrease in our share of earnings before taxes.
BPLP distributed $65 million to the partners in the fourth quarter. Our share was $21 million. BPLP capital calls to the partners in the fourth quarter were $10 million. Our share was $3 million. The partners have agreed that BPLP will distribute excess cash monthly, and will make separate cash calls for major capital projects.