Quarterly Report - 2021 - Q1
On May 7, 2021, Cameco (TSX: CCO; NYSE: CCJ) reported its consolidated financial and operating results for the first quarter ended March 31, 2021 in accordance with International Financial Reporting Standards (IFRS).
“Our first quarter results were as expected,” said Tim Gitzel, Cameco’s president and CEO. “With the continued execution of our strategy and the unplanned disruptions due to the COVID-19 pandemic, we are not at the regular tier-one run rate of our business. However, despite the near-term costs of our strategy and associated with the precautionary production suspension at Cigar Lake, we ended the quarter with over a billion dollars in cash. And, we were successful in adding 9 million pounds U3O8 to our long-term contract portfolio.
“Additionally, we were pleased to announce in February that the Supreme Court of Canada dismissed Canada Revenue Agency’s request for leave to appeal in our tax dispute. This fully and finally resolves the tax years 2003, 2005 and 2006. We have followed the law and believe the CRA should return our $785 million in cash and letters of credit held as security.
“In April, we announced the restart of Cigar Lake as we have greater certainty that the mine will be able to operate safely and sustainably. Health and safety is always our top priority and we will continue to monitor the COVID-19 pandemic and the situation in the province.
“Globally, we see demand for both traditional and non-traditional uses of nuclear power growing as the increasing focus on electrification while phasing out carbon intensive sources of energy continues to take hold. In Europe, we have seen nuclear move another step closer to being included in the EU sustainable finance taxonomy following a rigorous scientific assessment that concluded there are no scientific arguments supporting its exclusion. In addition, at the recent global leaders’ summit on climate, aggressive plans to reduce carbon emissions and achieve net-zero carbon goals were discussed, with the US announcing a goal to cut up to 52% of its greenhouse gas emissions by 2030 leveraging existing and advanced nuclear reactor technology in its clean energy initiatives.
“We are excited about the future of nuclear power generation, about the fundamentals of uranium supply and demand and about the prospects for our company. We remain committed to our tier-one strategy and to our vision. Our vision to energize a clean-air world recognizes that we have an important role to play in enabling the vast reductions in greenhouse gas emissions required to accomplish the targets being set by countries and companies around the world to achieve a resilient, net-zero carbon economy.
“And, as we seek to achieve our vision, we are committed to doing so in a manner that reflects our values. Sustainability is at the heart of what we do. Embedded in all our decisions is a commitment to addressing the environmental, social and governance risks and opportunities that we believe will make our business sustainable over the long term. In these uncertain times, perhaps more than ever, it will be critical that we continue to work together to build on the strong foundation we have already established.”
- Net loss of $5 million; adjusted net loss of $29 million: Results are driven by normal quarterly variations in contract deliveries and our continued execution on all strategic fronts. This quarter was also impacted by additional care and maintenance costs of $33 million resulting from the proactive suspension of production at the Cigar Lake mine for about four months starting in December 2020 in response to the COVID-19 pandemic. While production was suspended we kept and continued to pay all our employees. These costs were partially offset by the receipt of $12 million from the Canadian Employment Wage Subsidy. Adjusted net earnings is a non-IFRS measure, see page 3.
- Cigar Lake restart: We safely restarted Cigar Lake in April, with the first shipment of ore sent to the McClean Lake mill at the end of April. The further COVID-related precautions we implemented, the licensed COVID-19 testing facility at the mine site and the ongoing provincial vaccine rollout program provided us with greater certainty around our ability to operate safely and sustainably. We will closely monitor the COVID-19 case counts and the ongoing success of the vaccine rollout and will continue to have regular dialogue with public health authorities and northern Saskatchewan leaders. We will not be in a position to provide additional outlook for 2021 until we know the rate at which we will be able to sustainably operate the Cigar Lake mine.
- Contracting continues: In April, we finalized and executed an additional 9 million pounds U3O8 in long-term sales contracts which had been under negotiation. And our pipeline remains large. Contracting is not tied to a year-end or quarter-end and we expect to update our contracting success as contracts are executed.
- Strong balance sheet: As of March 31, 2021, we had $1 billion in cash and short-term investments and $1 billion in long-term debt. In addition, we have a $1 billion undrawn credit facility. We expect our cash balances and operating cash flows to meet our capital requirements during 2021, therefore, we do not anticipate drawing on our credit facility this year.
- Supreme Court of Canada dismisses Canada Revenue Agency leave request: On February 18, 2021, the Supreme Court of Canada (Supreme Court) dismissed Canada Revenue Agency’s (CRA) application for leave to appeal the June 26, 2020 decision of the Federal Court of Appeal (Court of Appeal). The dismissal means that the dispute for the 2003, 2005 and 2006 tax years is fully and finally resolved in our favour. Additionally, we received $10.3 million from CRA on April 20, 2021 which includes payment of the legal fees awarded by the Tax Court of Canada as well as the cost awards related to the Court of Appeal and Supreme Court decisions. Timing of any further payments remains uncertain.
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