2014 Performance Highlights

Market conditions remained challenging in 2014, with little change from the previous year. However, Cameco performed well, navigating the near term challenges, while continuing to prepare for the positive long-term growth we see coming in the industry. We exceeded our production guidance, delivered on our financial guidance, and achieved record annual revenue from our uranium segment with a record annual realized price.

Strong financial performance

Our financial results remained strong in 2014:

• annual revenue of $2.4 billion
• annual gross profit of $638 million
• record annual revenue of $1.8 billion from our uranium segment based on sales of 32.5 million pounds
• record annual average realized price of $52.37 (Cdn) per pound in our uranium segment

Net earnings attributable to our equity holders (net earnings) in 2014 were $185 million compared to $318 million in 2013. This $133 million decrease in net earnings was the result of:

• write-downs totalling $327 million of our investments in Eagle Point mine assets at Rabbit Lake – $126 million, GE-Hitachi Global Laser Enrichment (GLE) – $184 million, and GoviEx Uranium Inc. (Goviex) – $17 million
• no earnings from Bruce Power Limited Partnership (BPLP), which we divested in the first quarter of 2014
• the write-off of $41 million of assets under construction as a result of changes made to the scope of a number of projects
• an early termination fee of $18 million incurred as a result of the cancellation of our toll conversion agreement with Springfields Fuels Ltd. (SFL), which was to expire in 2016
• settlement costs of $12 million with respect to the early redemption of our Series C debentures
• lower earnings in our fuel services segment as a result of a decrease in sales volumes and higher unit cost of sales
• higher losses on foreign exchange derivatives due to the weakening of the Canadian dollar

partially offset by:

• a $127 million gain on the sale of our interest in BPLP
• higher earnings in our uranium segment due to higher average realized prices
• a favourable settlement of $66 million in a dispute regarding a long-term supply contract with a utility customer
• lower exploration costs due to a more focused effort on our core projects in Saskatchewan, with decreases in activity elsewhere, particularly in Australia and at Inkai
• higher tax recoveries resulting from pre-tax losses in Canada, see Income taxes for details

Solid progress in our uranium segment this year

In our uranium segment, we exceeded our annual production expectations, and realized a number of successes at our mining operations. Key highlights:

• annual production of 23.3 million pounds—2% higher than the guidance we provided in our 2014 third quarter MD&A
• record quarterly production of 8.2 million pounds in the fourth quarter—9% higher than in 2013, largely due to record quarterly production from the Key Lake mill
• produced the first packaged uranium concentrate from the Cigar Lake mine and AREVA’s McClean Lake mill
• the Canadian Nuclear Safety Commission (CNSC) approved the Environmental Assessment (EA) for the Key Lake extension project, which includes permission to produce up to 25 million pounds (100%) per year at Key Lake mill. The CNSC also granted an annual production limit increase at McArthur River, allowing the mine to produce up to 21 million pounds (100%) per year.
• in October, unionized employees at McArthur River and Key Lake accepted a new four-year contract, ending a labour dispute that resulted in an 18-day shutdown of the operations

We also continued to advance our exploration activities, spending $4 million on six brownfield exploration projects, $6 million on our projects under evaluation in Australia, and $5 million for resource definition at Inkai and at our US operations. We spent about $32 million on regional exploration programs, mostly in Saskatchewan and Australia.

Updates on our other segments and investments

In response to weak market conditions for UF₆, we decided to reduce our planned 2014 production at Port Hope and terminate our toll conversion agreement with SFL. As a result, production in our fuel services segment was lower than our plan at the beginning of the year, and 22% lower than in 2013.

We sold our 31.6% limited partnership interest in BPLP and related entities to BPC Generation Infrastructure Trust, one of the limited partners in BPLP, for $450 million. The sale closed on March 27, 2014, and we began accounting for the sale as of January 1, 2014.

In 2014, the majority partner of GLE decided to significantly reduce funding to GLE, which required us to review the value of our 24% interest in the asset. As a result, we wrote down the full value of our investment and recorded a charge of $184 million in the third quarter. GLE is continuing its testing activities and engineering design work for a commercial facility, though at a slower pace. Negotiations are ongoing with the US Department of Energy (DOE) for the sale of its depleted uranium hexafluoride inventory. If negotiations are successful, we expect that definitive agreements with GLE would follow.