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Liquidity & Capital Resources

At the end of 2013, we had cash and short-term investments of $229 million in a mix of short-term deposits and treasury bills, while our total debt amounted to $1.4 billion.

We have large, creditworthy customers that continue to need uranium even during weak economic conditions, and we expect the uranium contract portfolio we have built to provide a solid revenue stream for years to come.

We expect to invest in our production capacity at a pace aligned with market signals. We have a number of alternatives to fund our investments, including using our current cash balances, drawing on our existing credit facilities, entering new credit facilities, using our operating cash flow, and raising additional capital through debt or equity financings. We are always considering our financing options so that we can take advantage of favourable market conditions when they arise. However, we expect our existing cash balances and operating cash flows will meet our anticipated 2014 capital requirements without the need for significant additional funding.

Financial condition

  2013 2012
Cash position ($ millions)
(cash, cash equivalents, short-term investments, less bank overdraft)
188 799
Cash provided by operations ($ millions)
(net cash flow generated by our operating activities after changes in working capital)
530 579
Cash provided by operations/net debt
(net debt is total consolidated debt, less cash position)
46% 103%
Net debt/total capitalization
(total capitalization is total long-term debt and equity)
17% 9%

Credit ratings

The credit ratings assigned to our securities by external ratings agencies are important to our ability to raise capital at competitive pricing to support our business operations. Our investment grade credit ratings reflect the current financial strength of our company.

Third-party ratings for our commercial paper and senior debt as of December 31, 2013:

Security DBRS S&P
  1. 1 Canadian National Scale Rating. The Global Scale Rating is A-2.
Commercial paper R-1 (low) A-1 (low)1
Senior unsecured debentures A (low) BBB+

The rating agencies may revise or withdraw these ratings if they believe circumstances warrant. A change in our credit ratings could affect our cost of funding and our access to capital through the capital markets.


($ millions) 2013  2012 
Cash, cash equivalents and short-term investments at beginning of year 799  1,202 
Cash from operations 530  579 
Investment activities    
Additions to property, plant and equipment and acquisitions (898) (1,248)
Other investing activities (6) (23)
Financing activities    
Change in debt (18) 485 
Interest paid (66) (44)
Issue of shares
Dividends (158) (158)
Exchange rate on changes on foreign currency cash balances (1)
Cash, cash equivalents and short-term investments, less bank overdraft at end of year 188  799 

Cash from operations

Cash from operations was 8% lower than in 2012 mainly due to working capital requirements largely offset by higher profits in the uranium business and the addition of NUKEM. Not including working capital requirements, our operating cash flows in the year were up $103 million. See note 24 to the financial statements.

Investing activities

Cash used in investing includes acquisitions and capital spending.

Acquisitions and divestitures

On January 9, 2013, we completed the acquisition of NUKEM by paying a total of $140 million (US) and assuming its net debt of $111 million (US). In the third quarter of 2013, as part of our strategy to focus on projects that provide the most certainty in the near term, we divested our interests in Argentina and Peru and recorded a loss of $15 million.

On January 30, 2014, we signed an agreement with BPC Generation Infrastructure Trust to sell our 31.6% limited partnership interest in BPLP and related entities for $450 million. The effective date for the sale is December 31, 2013. We expect to realize an after tax gain of approximately $129 million on this divestiture.

Under the agreements governing BPLP, the limited partners have rights of first offer upon a sale by us. Closing of the transaction is subject to completion or waiver of the right of first offer process by the other limited partners and receipt of certain regulatory approvals.

Capital spending

We classify capital spending as sustaining, capacity replacement or growth. As a mining company, sustaining capital is the money we spend to keep our facilities running in their present state, which would follow a gradually decreasing production curve, while capacity replacement capital is spent to maintain current production levels at those operations. Growth capital is money we invest to generate incremental production, and for business development.

Cameco’s share ($ millions) 2013 Plan 2013 Actual 2014 Plan
  1. 1 We updated our 2013 capital cost estimate in the Q2 MD&A to $685 million.
Sustaining capital      
McArthur River/Key Lake 55 64 30
Cigar Lake 15
Rabbit Lake 70 50 40
US ISR 5 5 5
Inkai 7 1 5
Fuel services 10 8 10
Other 23 9 10
Total sustaining capital 170 137 115
Capacity replacement capital      
McArthur River/Key Lake 75 73 60
Cigar Lake 25
Rabbit Lake 5 3 15
US ISR 30 22 20
Inkai 20 16 15
Total capacity replacement capital 130 114 135
Growth capital      
McArthur River/Key Lake 55 29 75
US ISR 30 33 10
Millennium 5 5 5
Inkai 21 9 5
Cigar Lake 260 284 145
Fuel services 4 2 5
Total growth capital 375 362 245
Talvivaara 10 10
Total uranium & fuel services 6851 623 495
Electricity (our 31.6% share of BPLP) 80 75

Capital expenditures were 9% below our 2013 plan, mainly due to variances at Rabbit Lake, Inkai, and McArthur River/Key Lake caused by a change in the timing of expenditures.

Outlook for investing activities

(Cameco’s share in $ millions) 2015 Plan 2016 Plan
Total uranium & fuel services 400-450 500-550
Sustaining capital 160-175 220-240
Capacity replacement capital 150-170 165-175
Growth capital 90-105 115-135

We expect total capital expenditures for uranium and fuel services to decrease by about 21% in 2014.

Major sustaining, capacity replacement and growth expenditures in 2014 include:

  • McArthur River/Key Lake – At McArthur River, the largest project is the upgrade of the electrical infrastructure at about $56 million. Mine development is also planned at about $105 million. Other projects include expansion of freeze capacity and other site facility and equipment purchases. At Key Lake, projects will be undertaken to finish work on the calciner and upgrade site electrical services.
  • US in situ recovery (ISR) – Continued work on the development of the North Butte mine represents a large portion of our wellfield construction expenditures in the US. Well installation at other mine units is also significant.
  • Rabbit Lake – At Eagle Point, the largest component is mine development at about $24 million, along with mine equipment upgrades and purchases. Work on various mill facility and equipment replacements will also continue.
  • Cigar Lake – Underground mine development makes up the largest portion of capital at the Cigar Lake site, at about $30 million. Completion of various mine facilities will continue into 2014, as well as the purchase of mine equipment in order to ramp up to full production. Our share of the costs to modify the McClean Lake mill are expected to be about $100 million in 2014.

We previously estimated capital costs on our brownfield expansions and development project to be between $135 and $190 million per year for the next three years. We now estimate capital costs for our brownfield expansions and development project to be about $245 million in 2014 due to the delayed startup of Cigar Lake production and additional costs at the McClean Lake mill. Growth capital is then expected to be between $90 and $135 million per year for 2015 and 2016.

The removal of our fixed production target allows us to better align our capital spending with market signals. As the market begins to signal new production is needed, we plan to increase our capital expenditures to allow us to be among the first to respond to the growth we see coming.

This information regarding currently expected capital expenditures for future periods is forward-looking information, and is based upon the assumptions and subject to the material risks discussed on here. Our actual capital expenditures for future periods may be significantly different.

Financing activities

Cash from financing includes borrowing and repaying debt, and other financial transactions including paying dividends and providing financial assurance.

Long-term contractual obligations

December 31 ($ millions) 2014 2015 And
2017 And
2019 And
Long-term debt 300 1,000 1,300
Interest on long-term debt 63 111 97 210 481
Provision for reclamation 18 71 65 669 823
Provision for waste disposal 2 4 5 7 18
Other liabilities 46 46
Total 83 486 167 1,932 2,668

We have unsecured lines of credit of about $2.2 billion, which include the following:

  • A $1.25 billion unsecured revolving credit facility that matures November 1, 2018. Each year on the anniversary date, and upon mutual agreement, the facility can be extended for an additional year. In addition to borrowing directly from this facility, we can use up to $100 million of it to issue letters of credit and we may use it to provide liquidity for our commercial paper program, as necessary. We may increase the revolving credit facility above $1.25 billion, by increments of no less than $50 million, up to a total of $1.75 billion. The facility ranks equally with all of our other senior debt. At December 31, 2013, there were no amounts outstanding under this facility.
  • Approximately $799 million in short-term borrowing and letters of credit provided by various financial institutions. We use these facilities mainly to provide financial assurance for future decommissioning and reclamation of our operating sites, and as overdraft protection. At December 31, 2013, we had approximately $791 million outstanding in letters of credit.

In total, we have $1.3 billion in senior unsecured debentures outstanding:

  • $300 million bearing interest at 4.7% per year, maturing on September 16, 2015
  • $500 million bearing interest at 5.67% per year, maturing on September 2, 2019
  • $400 million bearing interest at 3.75% per year, maturing on November 14, 2022
  • $100 million bearing interest at 5.09% per year, maturing on November 14, 2042

We have issued a $73 million (US) promissory note to GLE to support future development of its business. As of December 31, 2013, GLE requested drawings of $63 million (US) in principal and $8 million (US) in interest. The remaining balance of $10 million (US) was drawn on February 4, 2014.

Debt covenants

Our revolving credit facility includes the following financial covenants:

  • our funded debt to tangible net worth ratio must be 1:1 or less
  • other customary covenants and events of default

Funded debt is total consolidated debt less the following: non-recourse debt, $100 million in letters of credit, cash and short-term investments.

Not complying with any of these covenants could result in accelerated payment and termination of our revolving credit facility. At December 31, 2013, we complied with all covenants, and we expect to continue to comply in 2014.

Off-balance sheet arrangements

We had two kinds of off-balance sheet arrangements at the end of 2013:

  • purchase commitments
  • financial assurances

Purchase commitments

December 31 ($ millions) 2014 2015 And
2017 And
2019 And
  1. 1 Denominated in US dollars, converted to Canadian dollars as of December 31, 2013 at the rate of $1.06.
Purchase commitments1 352 583 109 164 1,208

Most of these are commitments to buy uranium and fuel services products under long-term, fixed-price arrangements.

At the end of 2013, we had committed to $1.2 billion (Cdn) for the following:

  • Approximately 21 million pounds of U3O8 equivalent from 2014 to 2022.
  • Approximately 15 million kgU as UF6 in conversion services from 2014 to 2016 primarily under our agreements with Springfields Fuels Ltd. (SFL).
  • Over 1.1 million Separative Work Units (SWU) of enrichment services to meet existing forward sales commitments under agreements with a non-Western supplier.

Non-delivery by SFL under their agreements could have a material adverse effect on our financial condition, liquidity and results of operations.

SFL and the SWU supplier do not have the right to terminate their agreements other than pursuant to customary event of default provisions.

Financial assurances

December 31 ($ millions) 2013 2012 Change
Standby letters of credit 791 672 18%
BPLP guarantees 58 59 (2)%
Total 849 731 16%

Standby letters of credit mainly provide financial assurance for the decommissioning and reclamation of our mining and conversion facilities. We are required to provide letters of credit to various regulatory agencies until decommissioning and reclamation activities are complete. Letters of credit are issued by financial institutions for a one-year term.

Our total commitment for financial guarantees on behalf of BPLP was an estimated $58 million at the end of the year. See note 12 to the financial statements.

Balance sheet

December 31
($ millions except per share amounts)
2013 2012 20111 Change From
2012 To 2013
  1. 1 Our 2011 results have not been revised; at that time, we accounted for BPLP using proportional consolidation.
Inventory 913 564 494 62%
Total assets 8,039 7,431 7,616 8%
Long-term financial liabilities 1,915 1,903 1,736 1%
Dividends per common share 0.40 0.40 0.40

Total product inventories increased by 62% to $913 million this year mainly due to the addition of NUKEM inventories. Higher levels of inventory for uranium and fuel services, where the quantities sold were lower than the quantities produced and purchased for the year also affected inventory levels. The average cost of uranium was higher as the cost of material produced and purchased during the year was higher than the average cost of inventory at the beginning of the year. In addition, the weakening of the Canadian dollar increased the Canadian carrying value of inventory in our foreign subsidiaries. At December 31, 2013, our average cost for uranium was $29.15 per pound, up from $27.35 per pound at December 31, 2012. In 2012, total product inventories increased by 14% due to higher levels of uranium, where the quantities sold were lower than the quantities produced and purchased for the year.

At the end of 2013, our total assets amounted to $8.0 billion, an increase of $0.6 billion compared to 2012 due primarily to the acquisition of NUKEM in the year. In 2012, the total asset balance decreased by $0.2 billion compared to 2011 primarily due to the change in our accounting treatment for BPLP, which was revised for 2012 and not revised for 2011, largely offset by acquisitions of uranium properties in the year.

The major components of long-term financial liabilities are long-term debt, the provision for reclamation and financial derivatives. In 2013, our balance did not change significantly. In 2012, our balance increased by $0.2 billion.