Quarterly Report - 2018 - Q1

On April 27, 2018, Cameco reported its consolidated financial and operating results for the first quarter ended March 31, 2018 in accordance with International Financial Reporting Standards (IFRS).

“We continue to focus on what we can control,” said president and CEO, Tim Gitzel. “In the first quarter we generated significant cash flow, which is due to our portfolio optimization activities, the benefits of our cost saving measures, and by pulling back on our production lever and drawing down inventory. While our average unit cost of sales was higher than a year ago, this was expected due to the care and maintenance costs incurred while production is suspended at the McArthur River and Key Lake operation.

“Today the market remains quiet. There are a lot of moving pieces, and utilities continue to evaluate the implications of what is perhaps best described as unprecedented noise in the political economy. Things like the possible trade action under section 232 of the Trade Expansion Act, the suspension of US Department of Energy’s excess uranium sales for the remainder of 2018, review of the Russian Suspension Agreement, and a potential Russian ban on all trade with US nuclear power companies. On the demand front, news remains mixed with additional Japanese reactor restarts, new construction announcements in China, India and the Middle East, further potential retirements in the US, and an announced phase out of nuclear power in Belgium.

“As 2018 unfolds we will continue to evaluate the market signals, however we remain resolved in our efforts to focus on what we can control and deliver long-term value to our shareholders.”

Summary of first quarter results and developments:

• Net earnings of $55 million; adjusted net earnings of $23 million: Earnings were higher this quarter as compared to 2017, largely due to the gain realized on the restructuring of JV Inkai and higher realized prices and deliveries in our uranium segment. As part of our ongoing efforts to optimize our contract portfolio and realize uncertain future value today, we restructured a contract with one of our utility customers that advanced future deliveries into the quarter, resulting in higher sales volume in both the uranium and fuel services segments. As expected, our unit cost of production was higher this quarter due to the suspension of production at McArthur River and Key Lake and the change in reporting for JV Inkai.
• Annual guidance largely unchanged: The 2018 financial outlook table in our annual MD&A remains largely unchanged. Based on the outlook provided in the table, we expect cash flow in 2018 to be similar to 2017.
• Uranium market remains quiet: The market was at a stand-still in the first quarter of 2018 as utilities digest changing market dynamics. Market prices and contracted volumes remained low in the quarter.
• Canada Revenue Agency (CRA) dispute, awaiting trial decision: The trial for 2003, 2005 and 2006 was concluded in September 2017. We remain confident in our position and await a decision from the judge. We expect to have a Tax Court decision within the next 12 months. In the first quarter we received a notice of reassessment from CRA for the 2012 tax year.
• TEPCO dispute, arbitration schedule set: We expect arbitration to begin in the first quarter of 2019. The timing for a final decision will be dependent on how long the arbitrators deliberate following the conclusion of the hearing. We have filed our statement of claim for $682 million (US) plus interest and legal costs.