Cameco Announces 1998 Financial Results and Subsequent Developments.SASKATOON Saskatoon (săskət  n`), city (1991 pop. 186,058), S central Sask., Canada, on the South Saskatchewan River. , Saskatchewan--(BUSINESS WIRE)--Feb. 4, 1999-- (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :CCO (Chief or Corporate Compliance Officer) The executive person in charge of compliance issues, regulatory requirements, internal controls and managing audits within an enterprise or organization. .) (ME:CCO.) (NYSE NYSE See: New York Stock Exchange :CCJ See citizen journalism. ) Cameco Cameco Corp. TSX: CCO NYSE: CCJ is the world's largest publicly traded uranium company, based in Saskatoon, Saskatchewan. It was formed in 1988 by the merger and privatization of two crown corporations: the federal owned Eldorado Mining and Refining Limited (known better Corporation today reports the following: - 1998 financial results - increased reserves at McArthur McArthur may refer to: Places:
- 1998 uranium market The uranium market, like all commodity markets, has a history of volatility, moving not only with the standard forces of supply and demand, but also to whims of geopolitics. It has also evolved particularities of its own in response to the unique nature and use of this material. summary - restated reserves for the Kumtor gold mine Kumtor Gold Mine is an open-pit gold mining site in Issyk Kul Province of Kyrgyzstan located about 350 km (220 mi) southeast of the capital Bishkek and 80 km (50 mi) south of Lake Issyk-Kul near the border with China. - dividend for first quarter 1999 Financial Results Cameco generated record cash from operations in 1998. After working capital changes, cash from operations was $235 million ($4.11 per share) up 45 percent from 1997. The improvement reflects primarily the inclusion of financial results from the recent acquisition of Uranerz Exploration and Mining Limited and Uranerz U.S.A., Inc. (Uranerz), a decrease in uranium uranium (y rā`nēəm), radioactive metallic chemical element; symbol U; at. no. 92; at. wt. 238.0289; m.p. 1,132°C;; b.p. 3,818°C;; sp. gr. 19. purchases by the company and the collection of
interest payments from Cameco's subordinated loans In the field of finance, a subordinated loan is a type of loan which ranks after other debts should a company fall into receivership or be closed. It is also known as subordinated debt, or as junior debt. to the Kumtor
Gold Company.With record revenue of $719 million and a $24 million writedown writedown A reduction in the value of an asset carried on a firm's financial statements. For example, the firm's accountants, believing the inventory is overvalued, may decide to take a writedown by reducing inventory valuation. after tax, the company posted net earnings attributable to common shares of $44 million ($0.76 per share) compared to $82 million ($1.51 per share) in 1997. Earnings from operations were $104 million in 1998 compared to $151 million the previous year. "We are pleased with our significant cash flow and given the depressed markets Depressed market Market in which supply overwhelms demand, leading to weak and lower prices. which we faced in 1998, we believe our results speak well of Cameco's strength under adverse conditions," said Bernard Ber·nard , Claude 1813-1878. French physiologist noted for his study of the digestive and nervous systems. Michel Michel named after Gaston Michel, a French surgeon (1875-1937). Michel clip metal skin sutures in various sizes from 8 to 16 mm long. Each clip is a 2 mm wide band of metal with a downturned sharp prong at each end. , Cameco's chair, president and chief executive officer. The 1998 earnings were impacted by smaller margins due to lower uranium prices and increased sales of higher cost purchased uranium. Administration expenses were up 45 percent reflecting a provision made for severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs at the Rabbit Lake Rabbit Lake can refer to:
see fixed costs. no longer reimbursed by Uranerz which was Cameco's joint venture partner in the past. Low uranium and gold prices led the company to writedown $16 million in non-producing US uranium properties, and in addition, $12 million reflecting a decline in the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of investments in companies related to non-Kumtor gold activities. These writedowns, which total $24 million ($0.42 per share) after deferred tax provisions, have no cash implications. "Despite challenging market conditions, Cameco achieved record levels of uranium and gold production and sales in 1998," said Michel. Total revenue grew by 12 percent to $719 million in 1998 from $643 million in 1997. In 1998, nuclear products and services accounted for 80 percent of total revenue with the remainder coming from gold-related activities. The company's uranium sales volume in 1998 was up about 10 percent from 1997, but the average selling price The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. decreased compared with 1997, the uranium spot price having declined 27 percent in 1998. In conversion services, sales volumes were up 6 percent, while average selling prices increased marginally. Gold sales increased by 35 percent to 234,000 ounces in 1998 compared to the previous year. The company invested $694 million in 1998, mostly for the acquisition of Uranerz, a 6.45 percent interest in Energy Resources of Australia Energy Resources of Australia Ltd (ASX: ERA) is a public company based in Australia. It is a subsidiary of the Rio Tinto Group which owns 68.4% of the company. The chairman is David Klingner and chief executive officer is Harry Kenyon-Slaney. and capital expenditures including $120 million for the development of McArthur River and Cigar Lake. This compares with $325 million invested in 1997 for the purchase of Power Resources, Inc. (PRI PRI: see Institutional Revolutionary party. (Primary Rate Interface) An ISDN service that provides 23 64 Kbps B (Bearer) channels and one 64 Kbps D (Data) channel (23B+D), which is equivalent to the 24 channels of a T1 line. ), capital expenditures and completion of funding of Kumtor. Acquisition and capital expenditures were financed primarily from $235 million of cash from operations, a net increase in debt of $252 million and net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of $177 million from the issue of preferred securities in the US market. Each preferred security represents $25 (US) principal amount of junior subordinated debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before with a term of 49 years. Long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. has increased by $426 million to $569 million at December December: see month. 31, 1998 reflecting the refinancing Refinancing An extension and/or increase in amount of existing debt. of a previous short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. and the partial funding of the Uranerz acquisition. The company's ratio of total debt to capital was 24 percent at year end. "This acquisition was an important milestone which consolidated Cameco's leadership in the uranium industry and left intact our conservative financial structure," said Michel. "It gives us increased flexibility to manage the transition to our new mines, McArthur River and Cigar Lake." These two deposits are the world's largest, highest-grade, known uranium deposits, forming the cornerstones of Cameco's future. At the McArthur River project, surface and underground development remains on schedule. "We are also pleased to announce the reserves at McArthur River have increased by 35 percent to 255 million pounds U3O8," said Michel. Reserves and resources now total 483 million pounds (Cameco's share is 84 percent). Uranium Market Summary Only about 10 million pounds U3O8 were traded on the uranium spot market in 1998, less than half the volume traded in the previous year. Spot market volume was less than 10 percent of the western world's uranium consumption in 1998. The weak spot market was primarily due to lower utility and producer demand. Utilities in particular withdrew from the spot market for a variety of reasons including reductions in their inventories and deferred requirements. Long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. contract price indicators published in the industry fell by 11 percent during 1998 to $11.10 (US) per pound U3O8, demonstrating more resilience resilience (r  ·zilˑ·yens),n than the spot price. "The spot market is already showing signs of improvement in 1999 as utilities and producers purchase for actual and discretionary needs. Since the end of 1998, the uranium spot price has increased by 20 percent to $10.50 (US) per pound U3O8," said Michel. "We remain convinced that the long-term fundamentals for the uranium industry are strong and we have demonstrated our confidence in the future of the industry by both our acquisition of Uranerz and our investments in McArthur River and Cigar Lake." Kumtor Gold Reserves and Resources Restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. "The Kumtor gold operation continues to outperform Outperform An analyst recommendation meaning a stock is expected to do slightly better than the market return. Notes: Exact definitions vary by brokerage, but in general this rating is better than neutral and worse than buy or strong buy. expectations, achieving, in 1998, production of 645,000 ounces at an average cash cost of $179 (US) per ounce ounce, in zoology ounce, in zoology: see leopard. ounce, unit of measurement ounce: see English units of measurement. ," said Michel. "However, with the persistent low gold price, we believe it is prudent to restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state the Kumtor reserves." Cameco is one-third owner and operator of the Kumtor project. As of December 31, 1998, the total remaining open pit reserves have been restated down to 4.4 million ounces and the resources have been revised up to 6.6 million ounces. The average grade for the remaining reserves has increased to 4.88 grams per ton. -0-
Kumtor Reserves
and Resources Dec 31/98 Dec 31/97 Change
------------------------------------------------------------
Reserves (million ounces) 4.4 8.6 - 3.4(x)
Grade of reserves
(grams/ton) 4.88 3.54 +1.34
Resources (million ounces) 6.6 3.9 +2.7
Grade of resources
(grams/ton) 3.67 3.75 -0.08
(x) adjusted for 1998 production
The reserves published since year-end 1994 were established using a gold price of $375 (US) per ounce while the current reserves are based on $325 (US) per ounce. The LME See London Metal Exchange. LME See London Metal Exchange (LME). (London Metal Exchange London Metal Exchange (LME) A market for trading base metals, where traded options contracts are available against the underlying futures contract. ) gold price averaged $294 (US) per ounce in 1998. As of December 31, 1998, Kumtor had about 750,000 ounces hedged at an average price of $307 (US) per ounce. Dividend Announcement Cameco also announced today that the company's board of directors declared its regular quarterly dividend of $0.125 per share payable April 15, 1999 to shareholders of record on March 31, 1999. Profile Cameco is the world's largest uranium producer. The company operates underground uranium mines Uranium mining is presently carried out in more than 25 countries around the world. An estimated 100 or more uranium mines in different stages of development are reported. Major uranium mines are located in Canada, Australia and Kazakhstan that contribute more than half of world's uranium in Saskatchewan, Canada, in situ In place. When something is "in situ," it is in its original location. leach leach v. leached, leach·ing, leach·es v.tr. 1. To remove soluble or other constituents from by the action of a percolating liquid. 2. uranium facilities in Wyoming and Nebraska in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , uranium processing facilities in Ontario, Canada and a gold mine in Kyrgyzstan, Central Asia. The company's uranium products are used to generate electricity in nuclear energy plants around the world, providing one of the cleanest sources of energy available today. Forward Looking Statements Statements contained in this news release which are not historical facts are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Such factors include among others: volatility and sensitivity to market prices for uranium and gold, competition, the impact of changes in foreign currency exchange rates, environmental risks, political risk arising from operating in certain developing countries, changes in government regulations, and policies including trade laws and policies, demand for nuclear power, replacement of production, receipt of permits and approvals from government authorities as well as other operating and development risks. If you would like to receive a 32-page fax containing the notes to the consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge , please call Cameco's fax service at 877/556-1566 or contact the investor and corporate relations department at 306/956-6400. It is also available at www.cameco.com, the company's Web site. -0-
1998 HIGHLIGHTS
Percent
FINANCIAL 1998 1997 Change
($ millions except per share amounts)
Revenue $719 $643 12
Earnings from operations $104 $151 -31
Net earnings attributable to
common shares $44 $82 -46
Cash from operations $235 $162 45
Earnings per share $0.76 $1.51 -50
Cash flow per share $4.11 $2.98 38
Weighted average number of
paid common shares (millions) 57 54 6
Total debt to capital ratio 0.24 0.14 71
PRODUCTION (Cameco Share)
Uranium concentrates
(million lbs. U3O8) 27 19 42
Uranium conversion (tU) 11,169 12,594 -11
Gold (oz) 244,387 202,454 21
CAMECO CORPORATION
CONSOLIDATED BALANCE SHEETS
As at December 31 1998 1997
(Thousands)
-------------------------------------- ----------- -----------
Assets
Current assets
Cash $36,466 $109,722
Accounts receivable (note 3) 124,247 111,584
Inventories (note 4) 344,451 298,708
Supplies and prepaid expenses 51,467 37,785
----------- -----------
556,631 557,799
Property, plant and equipment (note 5) 1,989,011 1,342,728
Long-term receivables, investments
and other (note 6) 210,160 188,696
Inventories (note 4) 182,805 181,479
----------- -----------
Total assets $2,938,607 $2,270,702
-------------------------------------- ----------- -----------
-------------------------------------- ----------- -----------
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt (note 7) $32,651 $143,650
Accounts payable and accrued
liabilities 116,335 93,831
Dividends payable 7,207 7,181
Current portion of long-term debt
(note 8) 28,631 14,016
Current portion of other liabilities
(note 10) 14,406 26,553
----------- -----------
199,230 285,231
Long-term debt (note 8) 540,116 129,065
Provision for reclamation (note 9) 105,995 87,976
Other liabilities (note 10) 19,052 19,147
Deferred income taxes 170,940 57,050
----------- -----------
1,035,333 578,469
Shareholders' equity
Preferred securities (note 11) 186,985 --
Share capital (note 12) 687,658 684,792
Contributed surplus 496,745 496,745
Retained earnings 509,326 494,608
Cumulative translation account
(note 13) 22,560 16,088
----------- ----------
1,903,274 1,692,233
-------------------------------------- ----------- ----------
Total liabilities and
shareholders' equity $2,938,607 $2,270,702
-------------------------------------- ----------- ----------
-------------------------------------- ----------- ----------
Commitments and contingencies (notes 9, 19, 24, 28)
See accompanying notes to consolidated financial statements.
Approved by the board of directors
CAMECO CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
For the year ended December 31 1998 1997 1996
(Thousands)
-------------------------------- --------- --------- ---------
Revenue from
Products and services $718,949 $642,945 $590,861
--------- --------- ---------
Expenses
Products and services sold 400,632 316,108 298,205
Depreciation, depletion and
reclamation 126,669 122,676 94,974
Administration 39,516 27,213 23,255
Exploration 30,609 32,023 29,223
Research and development 2,671 1,893 3,334
Interest, net (note 14) (1,609) (7,962) (3,396)
Writedown of mineral
properties (note 5) 15,964 -- --
-------- -------- ---------
614,452 491,951 445,595
--------- --------- ---------
Earnings from operations
(note 26) 104,497 150,994 145,266
Other expenses (note 15) 11,579 3,958 2,422
--------- --------- ---------
Earnings before income taxes 92,918 147,036 142,844
Income tax expense (note 16) 47,274 65,057 5,311
-------------------------------- --------- --------- ---------
Net earnings 45,644 81,979 137,533
Preferred securities charges
(note 11) 1,980 -- --
-------------------------------- --------- --------- ---------
Net earnings attributable to
common shares (note 26) $43,664 $81,979 $137,533
-------------------------------- --------- --------- ----------
-------------------------------- --------- --------- ----------
Net earnings per common share
(note 26) $0.76 $1.51 $2.60
-------------------------------- --------- --------- ----------
-------------------------------- --------- --------- ----------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the year ended December 31 1998 1997 1996
(Thousands)
-------------------------------- --------- --------- ----------
Retained earnings at beginning
of year $494,608 $440,206 $329,131
Net earnings 45,644 81,979 137,533
Dividends on common shares (28,946) (27,577) (26,458)
Preferred securities charges
(note 11) (1,980) -- --
-------------------------------- --------- --------- ----------
Retained earnings at end of year $509,326 $494,608 $440,206
-------------------------------- --------- --------- ----------
-------------------------------- --------- --------- ----------
See accompanying notes to consolidated financial statements.
CAMECO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
For the year ended December 31 1998 1997 1996
(Thousands)
--------------------------------- --------- --------- ---------
Operating activities
Net earnings $45,644 $81,979 $137,533
Items not requiring
(providing) cash:
Depreciation, depletion,
and reclamation 126,669 122,676 94,974
Provision for deferred taxes
(note 16) 38,148 58,847 --
Writedown of mineral
properties (note 5) 15,964 -- --
Other non-cash items (note 15) 11,579 3,958 2,422
Deferred revenue recognized (15,610) (8,384) (1,964)
Other operating items (note 17) 12,772 (96,970) (55,062)
--------------------------------- --------- --------- ---------
Cash provided by operations
(note 26) 235,166 162,106 177,903
--------------------------------- --------- --------- ---------
Investing activities
Additions to property, plant
and equipment (158,623) (126,143) (168,141)
Change in long-term receivables,
investments and other 10,524 (49,042) (27,730)
Repayment of additional
subordinated loan -- -- 31,591
Acquisition of net business
assets (note 23) (548,128) (155,975) --
Proceeds on sale of property,
plant and equipment 2,427 6,315 2,227
--------------------------------- --------- --------- ---------
Cash used in investing (693,800) (324,845) (162,053)
--------------------------------- --------- --------- ---------
Financing activities
Increase in debt 407,906 150,412 88,415
Repayment of debt (155,461) (63,699) (84,859)
Restricted cash (15,769) -- --
Issue of shares, net of
issue costs 2,866 198,188 6,948
Issue of preferred securities,
net of issue costs 176,736 -- --
Preferred securities charges (1,980) -- --
Dividends (28,920) (27,043) (26,393)
--------------------------------- --------- --------- ---------
Cash provided by (used in)
financing 385,378 257,858 (15,889)
--------------------------------- --------- --------- ---------
Increase (decrease) in cash
during the year (73,256) 95,119 (39)
Cash at beginning of year 109,722 14,603 14,642
--------------------------------- --------- --------- ---------
Cash at end of year $36,466 $109,722 $14,603
--------------------------------- --------- --------- ---------
--------------------------------- --------- --------- ---------
See accompanying notes to consolidated financial statements.
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