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ALL AMOUNTS ARE STATED IN CDN $ (UNLESS NOTED)
Cameco (News - Market indication) (NYSE:CCJ) today reported its
consolidated financial and operating results for the fourth quarter ended
December 31, 2010 and for the year.
"Cameco had an excellent year in 2010," said
CEO Jerry Grandey. "We increased production, lowered uranium unit costs,
and substantially raised our dividend. We also achieved the best safety
record in our history.
"The market ended the year very strongly, as China signed significant
long-term uranium purchasing agreements and several countries indicated their
intentions to build more nuclear reactors. Our company is well-positioned to
prosper from the growing need for clean energy now and in the future. We
remain committed to our strategy of doubling production to 40 million pounds
by 2018."
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Three months ended Year ended
Highlights December 31 December 31
($ millions except per -----------------------------------------------------
share amounts) 2010 2009 change 2010 2009 change
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Revenue 673 659 2% 2,124 2,315 (8%)
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Gross profit 245 206 19% 744 750 (1%)
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Net earnings 207 598 (65%) 515 1,099 (53%)
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$ per common share (basic) 0.52 1.52 (66%) 1.31 2.83 (54%)
$ per common share
(diluted) 0.52 1.52 (66%) 1.30 2.82 (54%)
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Adjusted net earnings
(non-GAAP, see page 8) 191 170 12% 496 528 (6%)
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$ per common share
(adjusted and diluted) 0.48 0.43 12% 1.25 1.35 (7%)
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Cash provided by operations
(after working capital
changes) 120 188 (36%) 507 690 (27%)
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Full year
Net earnings for the year were $515 million ($1.30 per share diluted)
compared to $1,099 million ($2.82 per share diluted) in 2009. In addition to
the items noted below, our net earnings were impacted by the one time gain on
the sale of our interest in Centerra Gold Inc. (Centerra) at the end of 2009
and lower unrealized gains on financial instruments this year.
On an adjusted basis, our earnings for the year were $496 million ($1.25 per
share adjusted and diluted) compared to $528 million ($1.35 per share
adjusted and diluted) (non-GAAP, see page 8). The 6% decrease resulted from:
- lower profits in our electricity business relating to lower realized
selling prices
- higher exploration expenses
- higher income taxes
- partially offset by improved profits from our uranium business relating to
lower cost of sales
See 2010 financial results by segment for more detailed discussion.
Fourth quarter
Our net earnings this quarter were $207 million ($0.52 per share diluted), a
decrease of $391 million compared to $598 million ($1.52 per share diluted)
in 2009. We had a $374 million net gain in the fourth quarter of 2009 related
to the sale of our interest in Centerra.
On an adjusted basis, our earnings this quarter were $191 million ($0.48 per
share diluted) compared to $170 million ($0.43 per share diluted) (non-GAAP,
see page 8) in the fourth quarter of 2009. The 12% increase in adjusted net
earnings was from higher profits in our uranium segment relating to a higher
average realized selling price and a lower unit cost of sales, partially
offset by lower profits in the electricity business due to a lower realized
price.
See 2010 financial results by segment for more detailed discussion.
The 2010 annual financial statements have been audited, however 2009 and 2010
fourth quarter financial information presented is unaudited. You can find a
copy of our 2010 audited financial statements on our website at cameco.com.
Our 2010 annual management's discussion and analysis will be posted on our
website on Monday, February 14, 2011.
Outlook for 2011
Over the next several years, we expect to invest significantly in expanding
production at existing mines and advancing projects as we pursue our growth
strategy. The projects are at various stages of development, from exploration
and evaluation to construction.
We expect our existing cash balances and operating cash flows will meet our
anticipated capital requirements without the need for significant additional
funding. Cash balances will decline gradually as we use the funds in our
business and pursue our growth plans.
Our outlook for 2011 reflects the growth expenditures necessary to help us
achieve our strategy. We do not provide an outlook for the items in the table
that are marked with a dash.
2011 Financial outlook(1)
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Consolidated Uranium Fuel services Electricity
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Production - 21.9 15 to 16 -
million lbs million kgU
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Sales volume - 31 to 33 Increase -
million lbs 10% to 15%
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Capacity factor - - - 89%
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Revenue compared Increase Increase Increase Decrease
to 2010 10% to 15% 15% to 20%(2) 5% to 10% 10% to 15%
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Unit cost of
product sold - Increase 0% Increase Increase
(including DDR) to 5%(3) 2% to 5% 10% to 15%
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Direct administration
costs compared to Increase - - -
2010(4) 15% to 20%
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Exploration
costs compared - Decrease - -
to 2010 5% to 10%
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Tax rate Recovery of - - -
0% to 5%
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Capital
expenditures $575 million(5) - - $80 million
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(1) Commencing January 1, 2011, we will be reporting our financial results
in accordance with International Financial Reporting Standards (IFRS).
The information in our 2011 financial outlook has been prepared in
accordance with IFRS and our policy choices thereunder to date. Further
information on our transition to IFRS is contained in our 2010 annual
management's discussion and analysis.
(2) Based on a uranium spot price of $73.00 (US) per pound (the Ux spot
price as of February 7, 2011), a long-term price indicator of $73.00
(US) per pound (the Ux long-term indicator on January 31, 2011) and an
exchange rate of $1.00 (US) for $1.00 (Cdn).
(3) This increase is based on the unit cost of sale for produced material.
If we decide to make discretionary purchases in 2011 then we expect the
overall unit cost of product sold to increase further.
(4) Direct administration costs do not include stock-based compensation
expenses.
(5) Does not include our share of capital expenditures at Bruce Power
Limited Partnership (BPLP).
Consolidated outlook
We expect consolidated revenue to be 10% to 15% higher in 2011 due to:
- higher sales volumes in the uranium and fuel services businesses
- increases in realized prices in the uranium and fuel services businesses
- partially offset by lower realized prices for electricity
We expect administration costs (not including stock-based compensation) to be
about 15% to 20% higher than they were in 2010 due to planned higher spending
in support of our growth strategy.
We expect exploration expenses to be about 5% to 10% lower than they were in
2010 due to a reduction in evaluation activities at the Kintyre project as we
near the completion of the pre-feasibility stage.
Uranium outlook
We expect to produce 21.9 million pounds of U3O8 in 2011.
Based on the contracts we have in place, we expect to sell between 31 million
and 33 million pounds of U3O8 in 2011. We expect the unit cost of sales to be
0% to 5% higher than in 2010. This increase is based on the unit cost of sale
for produced material. If we decide to make discretionary purchases in 2011
then we expect the overall unit cost of product sold to increase further.
Based on current spot prices, revenue should be about 15% to 20% higher than
it was in 2010 as a result of increases in expected realized prices and sales
volumes in 2011.
Our customers choose when in the year to receive deliveries of uranium and
fuel services products, so our quarterly delivery patterns, and therefore our
sales volumes and revenue, can vary significantly. We expect the trend in
delivery patterns in 2011 to be somewhat different than in 2010, with
deliveries heavily weighted to the second half of the year. We expect the
fourth quarter to account for about one third of our 2011 sales volumes.
Price sensitivity analysis: uranium
The table below is not a forecast of prices we expect to receive. The prices
we actually realize will be different from the prices shown in the table.
It is designed to indicate how the portfolio of long-term contracts we had in
place on December 31, 2010 would respond to different spot prices. In other
words, we would realize these prices only if the contract portfolio remained
the same as it was on December 31, 2010, and none of the assumptions we list
below change.
Expected realized uranium price sensitivity under various spot price
assumptions
(rounded to the nearest $1.00)
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($US/lb U3O8)
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Spot prices $ 20 $ 40 $ 60 $ 80 $ 100 $ 120 $ 140
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2011 38 41 47 52 57 63 68
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2012 36 40 50 58 68 77 86
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2013 43 45 54 63 73 82 90
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2014 44 47 55 64 74 83 91
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2015 40 45 55 65 75 85 94
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The table illustrates the mix of long-term contracts in our December 31, 2010
portfolio, and is consistent with our contracting strategy. It has been
updated to reflect deliveries made and contracts entered into up to December
31, 2010.
Our portfolio includes a mix of fixed-price and market-price contracts, which
we target at a 40:60 ratio. We signed many of our current contracts in 2003
to 2005, when market prices were low ($11 to $31 (US)). Those that are fixed
at lower prices or have low ceiling prices will yield prices that are lower
than current market prices. These older contracts are beginning to expire,
and we are starting to deliver into more favourably priced contracts.
Our portfolio is affected by more than just the spot price. We made the
following assumptions (which are not forecasts) to create the table:
Sales
- sales volume on average of 32 million pounds per year
Deliveries
- customers take the maximum quantity allowed under each contract (unless
they have already provided a delivery notice indicating they will take less)
- we defer a portion of deliveries under existing contracts for 2011 and 2012
Prices
- the average long-term price indicator is the same as the average spot price
for the entire year (a simplified approach for this purpose only). Since
1996, the long-term price indicator has averaged 13% higher than the spot
price. This differential has varied significantly. Assuming the long-term
price is at a premium to spot, the prices in the table will be higher.
- we deliver all volumes that we don't have contracts for at the spot price
for each scenario
Inflation
- is 2.0% per year
Cameco's share of production - annual forecast to 2015
We have geographically diversified sources of production. We expect to
produce about 125 million pounds of U3O8 over the next five years from the
properties listed below. Our strategy is to double our annual production to
40 million pounds by 2018, which we expect will come from our operating
properties, development projects and projects under evaluation.
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Current forecast
(million lbs U3O8) 2011 2012 2013 2014 2015
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McArthur River/Key Lake 13.1 13.1 13.1 13.1 13.1
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Rabbit Lake 3.6 3.6 3.6 3.6 3.6
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US ISR 2.5 3.1 3.1 3.7 3.8
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Inkai 2.7 3.1 3.1 3.1 3.1
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Cigar Lake - - 1.0 2.0 5.6
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Total 21.9 22.9 23.9 25.5 29.2
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In 2013, production at McArthur River may be lower as we transition to mining
upper zone 4.
In 2010, Inkai received approval in principle to produce 3.9 million pounds
per year (100% basis) and is seeking final approval with an amendment to the
resource use contract.
Our 2011 and future annual production targets assume Inkai receives the
government approvals and support of our partner, Kazatomprom. More
specifically, it must:
- obtain final approval to produce at an annual rate of 3.9 million pounds
(our share 2.3 million pounds)
- obtain the necessary permits and approvals to produce at an annual rate of
5.2 million pounds (our share 3.1 million pounds)
- ramp up production to an annual rate of 5.2 million pounds this year
We expect Inkai to receive all of the necessary permits and approvals to meet
its 2011 and future annual production targets and we anticipate it will be
able to ramp up production this year as noted above.
There is no certainty, however, that Inkai will receive these permits or
approvals or that it will be able to ramp up production this year. If Inkai
does not, or if the permits and approvals are delayed, Inkai may be unable to
achieve its 2011 and future annual production targets.
This forecast is forward-looking information. It is based on the assumptions
and subject to the material risks discussed on page 15, and specifically on
the assumptions and risks listed here. Actual production may be significantly
different from this forecast.
Assumptions
- we achieve our forecast production for each operation, which requires,
among other things, that our mining plans succeed, processing plants are
available and function as designed, we have sufficient tailings capacity and
our mineral reserve estimates are accurate
- we obtain or maintain the necessary permits and approvals from government
authorities
- our production is not disrupted or reduced as a result of natural
phenomena, labour disputes, political risks, blockades or other acts of
social activism, shortage or lack of supplies critical to production,
equipment failures or other development and operation risks
Material risks that could cause actual results to differ materially
- we do not achieve forecast production levels for each operation because of
a change in our mining plans, processing plants are not available or do not
function as designed, lack of tailings capacity or for other reasons
- we cannot obtain or maintain necessary permits or government approvals
- natural phenomena, labour disputes, political risks, shortage or lack of
supplies critical to production, blockages or other acts of social activism,
equipment failures or other development and operation risks disrupt or reduce
our production
Fuel services outlook
We expect total production to be between 15 million and 16 million kgU in
2011.
We expect the average realized price for our fuel services products to
decline by 2% to 5%, sales volumes to increase by 10% to 15% and revenue to
be 5% to 10% higher.
Electricity outlook
We expect the average capacity factor for the four Bruce B reactors to be 89%
in 2011, and actual output to be about 2% lower than it was in 2010. The 2011
realized price for electricity is projected to be about 5% to 10% lower than
2010 as BPLP has fewer financial contracts in place for 2011. At December 31,
2010, BPLP had about 7.5 TWh under financial contracts, which is equivalent
to about 30% of Bruce B generation at its planned capacity factor. We expect
that revenue will decline by 10% to 15% as a result.
We expect the average unit cost (net of cost recoveries) to be 10% to 15%
higher in 2011, and total operating costs to rise by about 5% to 10%, mainly
due to higher costs for planned outages and maintaining the workforce.
Capital spending
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(Cameco's share in $ millions) 2010 2010 2011
plan actual plan
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Growth capital
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Cigar Lake 111 90 176
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Inkai 4 5 9
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McArthur River - - 14
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Millennium - - 6
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US ISR - - 13
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Total growth capital 115 95 218
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Sustaining capital
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McArthur River/Key Lake 220 165 169
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US ISR 53 45 38
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Rabbit Lake 56 49 85
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Inkai 18 5 19
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Fuel services 29 20 32
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Other 9 8 14
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Total sustaining capital 385 292 357
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Capitalized interest 52 48 -
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Total uranium & fuel services 552(1) 435 575
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Electricity (our 31.6% share of BPLP) 41 35 80
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(1) We updated our 2010 capital cost estimate in the Q2 MD&A to $510
million and in the Q3 MD&A to $475 million.
Capital expenditures were 21% below our 2010 plan mainly as a result of
reduced activity at our Saskatchewan uranium operations. We do not expect
this reduction in capital expenditures in 2010 will impact our plans to
double annual uranium production by 2018. The variance at Cigar Lake was due
mainly to the clean-up and remediation of the underground workings taking
longer than originally expected and the revision to project schedules as a
result of the decision to proceed with surface freezing. The variance at
McArthur River was due mainly to a change in the mine development plans and
postponement of some capital projects that were not critical to production.
The variance at Key Lake was mainly a result of delays in the construction of
the acid and oxygen plants and deferring some of the other Key Lake
revitalization projects.
We expect total capital expenditures for uranium and fuel services to be 32%
higher in 2011, as a result of higher spending for:
- growth capital at Cigar Lake
- sustaining capital at Rabbit Lake
For the next several years, we expect our capital expenditures will be
similar to 2011.
Sensitivity analysis
At December 31, 2010, every one-cent change in the value of the Canadian
dollar versus the US dollar would change our 2010 net earnings by about $9
million (Cdn). This sensitivity is based on an exchange rate of $1.00 (US)
for $0.99 (Cdn).
For 2011:
- a change of $5 (US) per pound in each of the Ux spot price ($73.00 (US) per
pound on February 7, 2011) and the Ux long-term price indicator ($73.00 (US)
per pound on January 31, 2011) would change revenue by $34 million and net
earnings by $26 million.
- a change of $5 in the electricity spot price would change our 2011 net
earnings by $2 million, based on the assumption that the spot price will
remain below the floor price provided for under BPLP's agreement with the
Ontario Power Authority (OPA).
Non-GAAP measures
We use adjusted net earnings, a non-GAAP measure, as a more meaningful way to
compare our financial performance from period to period. Adjusted net
earnings is our GAAP-based net earnings, adjusted for earnings from
discontinued operations and unrealized mark-to-market gains and losses on our
financial instruments, which we believe do not reflect underlying
performance.
Adjusted net earnings is non-standard supplemental
information, and not a substitute for financial information prepared
according to GAAP. Other companies may calculate this measure differently.
The table below reconciles adjusted net earnings with our net earnings.
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Three months ended Year ended
December 31 December 31
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($ millions) 2010 2009 2010 2009
----------------------------------------------------------------------------
Net earnings (GAAP measure) 207 598 515 1,099
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Adjustments (after tax)
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Earnings from discontinued
operations - (424)(1) - (382)(1)
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Unrealized gains on financial
instruments (16) (4) (19) (189)
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Adjusted net earnings (non-GAAP
measure) 191 170 496 528
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(1) We have changed our method for determining adjusted earnings to exclude
all amounts related to our investment in Centerra. Previously, we had
included our share of operating income from Centerra in our adjusted
earnings measure.
2010 financial results by segment
Uranium
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Three months ended Year ended
December 31 December 31
-----------------------------------------------------
Highlights 2010 2009 change 2010 2009 change
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Production volume
(million lbs) 6.4 6.7 (4)% 22.8 20.8 10%
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Sales volume (million
lbs) 9.1 10.0 (9)% 29.6 33.9 (13)%
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Average spot price
($US/lb) 58.29 45.96 27% 46.83 46.06 2%
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Average realized price
($US/lb) 48.50 40.64 19% 43.63 38.25 14%
($Cdn/lb) 50.10 43.51 15% 45.81 45.12 2%
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Average unit cost of
sales ($Cdn/lb U3O8)
(including DDR) 29.89 30.29 (1)% 28.40 30.59 (7)%
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Revenue ($ millions) 461 443 4% 1,374 1,551 (11)%
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Gross profit ($
millions) 181 132 37% 503 488 3%
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Gross profit (%) 39 30 30% 37 31 19%
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Fourth quarter
Production volumes this quarter were 4% lower than in the fourth quarter of
2009 due to lower output at Rabbit Lake.
Uranium revenues were up 4% due to a 15% increase in the realized selling
price, partially offset by a 9% decline in sales volumes.
Realized prices were higher due to higher prices under market-related and
fixed-price sales contracts.
Total cash cost of sales (excluding DDR) decreased by 12% to $233 million
($25.30 per pound U3O8). This was mainly the result of the following:
- the 9% decline in sales volume
- average unit costs for produced uranium were 26% higher
- average unit costs for purchased uranium were 14% lower due to fewer
purchases at spot prices
The net effect was a $49 million increase in gross profit for the quarter.
Full year
Production volumes in 2010 were 10% higher than in 2009 due to higher
production at McArthur River/Key Lake and the continued rampup of production
at Inkai.
Uranium revenues this year were down 11% compared to 2009, due to a 13%
decline in sales volumes.
Sales volumes in 2010 were 13% lower than 2009 due to some customers
deferring deliveries under contracts until 2011. In addition, given the
discretionary nature of spot market demand and the low level of spot market
prices during the first three quarters of 2010, we intentionally reduced our
spot market sales for the year.
Our realized prices this year in US dollars were 14% higher than 2009 mainly
due to higher prices under fixed-price sales contracts. Our Canadian dollar
selling price, however, was only slightly higher than 2009 as it was impacted
by a less favourable exchange rate. Our exchange rate averaged $1.05 compared
to $1.18 in 2009.
Total cash cost of sales (excluding DDR) decreased by 23% this year, to $699
million ($23.32 per pound U3O8). This was mainly the result of the following:
- the 13% decline in sales volume
- average unit costs for produced uranium were 6% lower
- average unit costs for purchased uranium were 17% lower due to fewer
purchases at spot prices
- a lower proportion of sales of purchased uranium, which carries a higher
cash cost
The net effect was a $15 million increase in gross profit for the year.
The following table shows our cash cost of sales per unit (excluding DDR) for
produced and purchased material, including royalty charges on produced
material, and the quantity of produced and purchased uranium sold.
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Unit cash cost of sale Quantity sold
($Cdn/lb U3O8) (million lbs)
Three months ended ---------------------------------------------------------
December 31 2010 2009 change 2010 2009 change
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Produced 22.30 17.73 4.57 5.5 5.1 0.4
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Purchased 29.93 34.72 (4.79) 3.6 4.9 (1.3)
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Total 25.30 26.19 (0.89) 9.1 10.0 (0.9)
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Full year ended
December 31 2010 2009 change 2010 2009 change
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Produced 22.45 23.86 (1.41) 20.0 20.9 (0.9)
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Purchased 25.11 30.22 (5.11) 9.6 13.0 (3.4)
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Total 23.32 26.33 (3.01) 29.6 33.9 (4.3)
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Fuel services results
(includes results for
UF6, UO2 and fuel
fabrication)
----------------------------------------------------------------------------
Three months ended Year ended
December 31 December 31
Highlights 2010 2009 change 2010 2009 change
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Production volume
(million lbs) 3.9 3.9 - 15.4 12.3 25%
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Sales volume (million lbs) 6.3 6.0 5% 17.0 14.9 14%
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Realized price
($Cdn/kgU) 14.59 14.89 (2)% 16.86 17.84 (5)%
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Average unit cost of
sales ($Cdn/lb U3O8)
(including DDR) 12.87 12.43 4% 13.39 14.47 (7)%
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Revenue ($ millions) 93 91 2% 301 276 9%
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Gross profit ($ millions) 11 13 (15)% 60 50 20%
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Gross profit (%) 12 14 (14)% 20 18 11%
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Fourth quarter
Total revenue increased by 2% due to a 5% increase in sales volumes.
Our Canadian dollar realized price for UF6 was similar to the prior year but
was affected by a less favourable exchange rate. Our exchange rate averaged
$1.03 in the fourth quarter compared to $1.06 in 2009.
The total cost of products and services sold (including DDR) increased by 5%
($82 million compared to $78 million in the fourth quarter of 2009) due to
the increase in sales volume. The average unit cost of sales was 4% higher
due to increased sales of fuel fabrication, which carries a higher unit cost
than other fuel services products.
The net effect was a $2 million decrease in gross profit.
Full year
The Port Hope UF6 conversion plant operated for a full year in 2010,
increasing production volumes by 25% over 2009. In 2009, the facility was
shutdown for the first five months of the year.
Total revenue increased by 9% due to a 14% increase in sales volumes.
Our Canadian dollar realized price for UF6 was affected by a less favourable
exchange rate. Our exchange rate averaged $1.05 in 2010 compared to $1.18 in
2009.
The total cost of products and services sold (including DDR) increased by 6%
($241 million compared to $226 million in 2009) due to the increase in sales
volume. The average unit cost of sales was 7% lower due to lower costs for
purchased material and the return to operational status of the UF6 facility.
The net effect was a $10 million increase in gross profit.
Electricity results
Fourth quarter
Total electricity revenue decreased 7% as higher actual output was offset by
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 $114 million this quarter under its
agreement with the OPA, compared to $137 million in the fourth quarter of
2009. The equivalent of about 45% of BPLP's output was sold under financial
contracts this quarter, compared to 54% in the fourth quarter of 2009.
The capacity factor was 91% this quarter, up from 89% in the fourth quarter of
2009. Operating costs were $221 million compared to $218 million in 2009.
The result was an 18% decrease in our share of earnings before taxes.
BPLP distributed $120 million to the partners in the fourth quarter. Our
share was $38 million. The partners have agreed that BPLP will distribute
excess cash monthly, and will make separate cash calls for major capital
projects.
Full year
BPLP's results in 2010 are largely the result of lower revenues, which were
8% lower than 2009 due to a 9% decrease in realized electricity prices. BPLP
recognized revenue of $339 million under the agreement with the OPA during
the year, compared to $514 million in 2009. The equivalent of about 42% of
BPLP's output was sold under financial contracts in 2010, compared to 57% in
2009.
The capacity factor was 91% in 2010. Operating costs were $930 million this
year compared to $905 million in 2009.
The net effect was a decrease in our share of earnings before taxes of 26%.
BPLP distributed $525 million to the partners in 2010. Our share was $166
million.
Operations and development project updates
Uranium - production overview
----------------------------------------------------------------------------
Three months ended Year ended
December 31 December 31
---------------------------------------------------
Cameco's share
(million lbs U3O8) 2010 2009 2010 2009 2010 plan
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McArthur River/Key Lake 4.0 4.0 13.9 13.3 13.1
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Rabbit Lake 1.3 1.4 3.8 3.8 3.6
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Smith Ranch-Highland 0.4 0.5 1.8 1.8 1.8
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Crow Butte 0.2 0.2 0.7 0.8 0.7
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Inkai 0.5 0.6 2.6 1.1 2.3
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Total 6.4 6.7 22.8 20.8 21.5(1)
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(1) We updated our 2010 plan in our Q3 MD&A to 22 million pounds.
McArthur River/Key Lake
Our share of production for the year was 6% higher than our target of 13.1
million pounds U3O8, and a 5% increase over 2009. In 2009, we also exceeded
our production target.
Our strong performance at both McArthur River and Key Lake allowed us to
realize benefits under the production flexibility amendments to the McArthur
River and Key Lake operating licences.
We developed a second raisebore chamber in zone 2, panel 5. This is expected
to improve production efficiency in the future.
In lower zone 4, we completed the transition to this zone and began
production during the fourth quarter.
Rabbit Lake
Production this year was the same as in 2009.
We added mineral reserves, extending the estimated mine life by two years to
2017. We have completed surface exploration drilling near the mine and have
found new mineralization. In 2012, we are planning to start an underground
drilling program to further evaluate this mineralization.
Inkai
Our share of production this year was significantly higher due to successful
wellfield performance and the processing of uranium in inventory at the end
of 2009. Production was 13% higher than our plan at the beginning of the year
due to the completion of the processing facilities and a stable acid supply.
Inkai received state commissioning approval for the main processing plant,
allowing full processing of uranium concentrate on site. The plant operated
at production rates very close to design capacity for several months due to
strong wellfield performance.
Inkai received approval in principle to:
- increase annual production from blocks 1 and 2 to 3.9 million pounds of
U3O8 (100% basis)
- amend the block 3 licence to provide for a five-year appraisal period to
carry out delineation drilling, construction and operation of a test leach
facility, and to complete a feasibility study
Inkai is in the process of finalizing the approval process with an amendment
to its resource use contract.
Inkai continued delineation drilling throughout the year on block 3 and began
planning for engineering and construction of a test plant facility.
Cigar Lake
During 2010, we:
- completed dewatering the underground development
- substantially completed clean up, inspection, assessment and securing of
the underground development areas
- we prepared the ground around shaft 2 for freezing in preparation to resume
shaft sinking
- began implementing a surface freeze strategy we expect will shorten the
rampup period for the project by bringing forward uranium production into the
early years and improve mining costs and project economics
- increased installed pumping capacity to design standards
- completed backfilling of the 420 and 465 metre levels
- resumed underground development in the south end of the mine
- completed the 2010 surface drilling program
In 2011, we expect to:
- finish restoring all remaining underground mine systems, infrastructure and
underground development areas
- complete the work to secure the mine
- resume underground construction
- complete the sinking of shaft 2
- complete the surface ore loadout facilities
- procure additional equipment for the jet boring system
- work to obtain regulatory approval of the environmental assessment that
will allow the release of treated water directly to Seru Bay of Waterbury
Lake
- work to obtain regulatory approval for the Cigar Lake mine plan
Later in 2011, we plan to issue a new technical report for Cigar Lake to
reflect developments during 2010, including our decision to proceed with the
surface freeze strategy. In the report, we will update our estimates
including our capital cost estimate and production rampup schedule.
We continue to target initial production to begin in mid-2013.
Fuel services
Fuel services production totalled 15.4 million kgU in 2010, in line with our
target of 15 million to 16 million kgU. Production was 25% higher than in
2009 due to the routine operation of the Port Hope UF6 plant, which did not
operate for most of the first half of 2009.
Qualified persons
The technical and scientific information discussed in this document for our
material properties (McArthur River/Key Lake, Inkai and Cigar Lake) was
prepared under the supervision of the following individuals who are qualified
persons for the purposes of NI 43-101:
McArthur River/Key Lake
- Alain G. Mainville, director, mineral resources management, Cameco
- David Bronkhorst, vice-president, Saskatchewan mining south, Cameco
- Greg Murdock, technical superintendent, McArthur River, Cameco
- Lorne D. Schwartz, chief metallurgist, major projects - technical services,
Cameco
- Les Yesnik, general manager, Key Lake, Cameco
Cigar Lake
- Alain G. Mainville, director, mineral resources management, Cameco
- C. Scott Bishop, principal mine engineer, major projects - technical
services, Cameco
- Grant J.H. Goddard, vice-president, Saskatchewan mining north, Cameco
- Lorne D. Schwartz, chief metallurgist, major projects - technical services,
Cameco
Inkai
- Alain G. Mainville, director, mineral resources management, Cameco
About forward-looking information
This document includes statements and information about our expectations for
the future.
When we discuss our strategy, plans and future financial and operating
performance, or other things that have not yet taken place, we are making
statements considered to be forward-looking information or forward-looking
statements under Canadian and United States securities laws. We refer to them
in this document as forward-looking information.
Key things to understand about the forward-looking information in this
document:
- It typically includes words and phrases about the future, such as:
anticipate, expect, plan, intend, predict, goal, target, project, potential,
strategy and outlook (see examples below).
- It represents our current views, and can change significantly.
- It is based on a number of material assumptions, including those we've
listed below, which may prove to be incorrect.
- Actual results and events may be significantly different from what we
currently expect due to the risks associated with our business. We list a
number of these material risks below. We recommend you also review our
current annual information form and annual MD&A, which include a
discussion of other material risks that could cause actual results to differ
significantly from our current expectations.
Forward-looking information is designed to help you understand management's
current views of our near and longer term prospects, and it may not be
appropriate for other purposes. We will not necessarily update this
information unless we are required to by securities laws.
Examples of forward-looking information in this document
- outlook for each of our operating segments for 2011 and our consolidated
outlook for the year
- our expectation that existing cash balances and operating cash flows will
meet our anticipated capital requirements without the need for significant
additional funding
- our uranium price sensitivity analysis
- production at our uranium operations from 2011 to 2015 and our target of
doubling annual production to 40 million pounds by 2018
- our 2011 capital spending plan and our expectation that for the next
several years capital expenditures will be similar to 2011
- our expectation that our reduction in capital expenditures in 2010 will not
impact our plans to double annual uranium production by 2018
- our mid-2013 target for initial production from Cigar Lake, the expected
benefits of our surface freeze strategy and our 2011 Cigar Lake plans
- Material risks
- actual sales volumes or market prices for any of our products or services
are lower than we expect for any reason, including changes in market prices
or loss of market share to a competitor
- we are adversely affected by changes in foreign currency exchange rates,
interest rates or tax rates
- production costs are higher than planned, or necessary supplies are not
available, or not available on commercially reasonable terms
- our estimates of production, purchases, costs, decommissioning or
reclamation expenses, or our tax expense estimates, prove to be inaccurate
- we are unable to enforce our legal rights under our existing agreements,
permits or licences, or are subject to litigation or arbitration that has an
adverse outcome
- there are defects in, or challenges to, title to our properties
- our mineral reserve and resource estimates are inaccurate, or we face
unexpected or challenging geological, hydrological or mining conditions
- we are affected by environmental, safety and regulatory risks, including
increased regulatory burdens or delays
- we cannot obtain or maintain necessary permits or approvals from government
authorities
- we are affected by political risks in a developing country where we operate
- we are affected by terrorism, sabotage, blockades, accident or a
deterioration in political support for, or demand for, nuclear energy
- there are changes to government regulations or policies, including tax and
trade laws and policies
- our uranium and conversion suppliers fail to fulfil delivery commitments
- delay or lack of success in remediating and developing Cigar Lake
- we are affected by natural phenomena, including inclement weather, fire,
flood and earthquakes
- our operations are disrupted due to problems with our own or our customers'
facilities, the unavailability of reagents, equipment, operating parts and
supplies critical to production, lack of tailings capacity, labour shortages,
labour relations issues, strikes or lockouts, underground floods, cave-ins,
tailings dam failures, and other developments and operating risks
Material assumptions
- sales and purchase volumes and prices for uranium, fuel services and
electricity
- expected production costs
- expected spot prices and realized prices for uranium, and other factors
discussed on page 4, Price sensitivity analysis: uranium
- tax rates, foreign currency exchange rates and interest rates
- decommissioning and reclamation expenses
- mineral reserve and resource estimates
- the geological, hydrological and other conditions at our mines
- our Cigar Lake remediation and development plans succeed
- our ability to continue to supply our products and services in the expected
quantities and at the expected times
- our ability to comply with current and future environmental, safety and
other regulatory requirements, and to obtain and maintain required regulatory
approvals
- our operations are not significantly disrupted as a result of political
instability, nationalization, terrorism, sabotage, blockades, breakdown,
natural disasters, governmental or political actions, litigation or arbitration
proceedings, the unavailability of reagents, equipment, operating parts and
supplies critical to production, labour shortages, labour relations issues,
strikes or lockouts, underground floods, cave in, tailings dam failure, lack
of tailings capacity, or other development or operating risks
Quarterly dividend notice
We announced today that our board of directors approved a quarterly dividend
of $0.10 per share on the outstanding common shares of the corporation that
is payable on April 15, 2011, to shareholders of record at the close of
business on March 31, 2011.
Conference call
We invite you to join our fourth quarter conference call on Monday, February
14, 2011 at 11:00 a.m. Eastern.
The call will be open to all investors and the media. To join the call,
please dial (800) 769-8320 or (416) 695-6616 (Canada and US). An operator
will put your call through. A live audio feed of the conference call will be
available from a link at cameco.com. See the link on our home page on the day
of the call.
A recorded version of the proceedings will be available:
- on our website, cameco.com, shortly after the call
- on post view until midnight, Eastern, Monday, March 14, 2011 by calling
(800) 408-3053 or (905) 694-9451 (Passcode 4257148 #)
Additional information
Our 2010 annual management's discussion and analysis, annual audited
financial statements, reconciliation to United States GAAP and annual
information form will be available shortly on SEDAR at sedar.com, on EDGAR at
sec.gov/edgar.shtml and on our website at cameco.com.
Profile
We are one of the world's largest uranium producers, a significant supplier
of conversion services and one of two Candu fuel manufacturers in Canada. Our
competitive position is based on our controlling ownership of the world's
largest high-grade reserves and low-cost operations. Our uranium products are
used to generate clean electricity in nuclear power plants around the world,
including Ontario where we are a limited partner in North America's largest
nuclear electricity generating facility. We also explore for uranium in the
Americas, Australia and Asia. Our shares trade on the Toronto and New York
stock exchanges. Our head office is in Saskatoon, Saskatchewan.
As used in this news release, the terms we, us, our and Cameco mean Cameco Corporation and its subsidiaries and affiliates unless stated
otherwise.
For
more information, please contact
Cameco
Investor inquiries
Bob Lillie
(306) 956-6639
or
Media inquiries
Lyle Krahn
(306) 956-6316
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