Quarterly Report - 2019 - Q2

On July 25, 2019, Cameco reported its consolidated financial and operating results for the second quarter ended June 30, 2019 in accordance with International Financial Reporting Standards (IFRS).

“Our results reflect the outlook we provided for 2019 and the normal quarterly variations in contract deliveries, which are weighted to the second half of the year,” said Tim Gitzel, Cameco’s president and CEO.

“On a broader note, as we announced on July 13, 2019, we are pleased that the arbitration tribunal ruled in our favour in the contract dispute we had with Tokyo Electric Power Company Holdings, Inc. (TEPCO), agreeing that TEPCO did not have the right to terminate its uranium supply contract. While we are disappointed with the damages of $40.3 million (US) awarded, remember, we had removed this contract from our financial outlook. So overall the outcome is positive.

“The other item I’d like to highlight, was the decision by the President of the United States not to impose new trade restrictions on imports of foreign uranium into the US under Section 232 of the Trade Expansion Act. In addition, he announced the establishment of a United States Nuclear Fuel Working Group to further analyze the state of US nuclear fuel production and report back within 90 days. We are pleased with the decision and will support the efforts of this working group in any way we can. As a commercial supplier of uranium for zero-carbon energy generation, with idle production capacity in the US, we want to see this industry succeed.

“So there is some progress being made on the issues creating uncertainty for market participants. However, make no mistake, there is still a long way to go before we decide to restart McArthur River/Key Lake. We can’t lose sight of the fact that while we have a true value strategy, there are still others in our industry who lack conviction, experience, or are still over-producing their committed sales volumes and using the spot market for surplus disposal.

“Despite this, we will continue to execute on our strategy to add long-term value, doing what we said we would do.

“Long-term fundamentals reflect a growing demand story and a market where the uranium price needs to transition. Currently, the uranium price reflects surplus disposal in the spot market, and is dragging down the long-term price. Today, there are about 50 reactors under construction, and there is growing recognition of the role nuclear power must play in ensuring safe, reliable, and affordable zero-carbon electricity generation. The long-term price will eventually need to transition to one that will incent existing tier-one production to restart and ramp up to full capacity to satisfy that growing demand, with the spot price then reflecting a discount to the long-term price.”

• Net loss of $23 million; adjusted net loss of $18 million: Results are as expected, driven by normal quarterly variations in contract deliveries and in accordance with our 2019 outlook. Adjusted net earnings is a non-IFRS measure, see page 3.
• Updated outlook for 2019: We have updated the outlook provided for 2019 consolidated revenue and tax expense, uranium sales volume and revenue, uranium purchase volume, fuel services sales volume and revenue, and the average unit cost of sales (including depreciation and amortization) for fuel services. See Outlook for 2019 in our second quarter MD&A.
• Series D debenture: The $500 million debenture will be retired at maturity in September 2019.
• Tepco contract dispute: The arbitration tribunal agreed that TEPCO did not have the right to terminate the contract and awarded Cameco Inc. $40.3 million (US) for damages. In addition, Cameco Inc. is entitled to costs, expenses and pre-award interest that we calculate to be about $5 million (US). We expect to record these amounts in our 2019 third quarter financial results.
• Port Hope conversion facility collective agreement: A new collective agreement with unionized employees at our Port Hope conversion facility has been reached. The new agreement expires on July 1, 2022.
• McArthur River/Key Lake collective agreement: A new collective agreement with unionized employees at our McArthur River/Key Lake operation has been reached. The new agreement expires on December 31, 2022.