Cameco Corp 6-K, filed Oct 31, 2023
Cameco Corp (CCJ)
About this 6-K
Cameco Corp filed this 6-K on October 31, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
Under the Securities Exchange Act of 1934
For the month of October, 2023
Cameco Corporation
(Commission file No. 1-14228)
2121-11th Street West
Saskatoon, Saskatchewan, Canada S7M 1J3
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☐ Form 40-F ☒
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ☐ No ☒
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
| Exhibit Index
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| Exhibit |
Description |
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| 99.1
99.2
99.3
99.4
99.5 |
Press Release dated October 31, 2023
Management’s discussion and analysis for the quarter ended September 30, 2023
Condensed consolidated interim unaudited financial statements for the quarter ended September 30, 2023
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated October 31, 2023
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated October 31, 2023 |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: October 31, 2023 | Cameco Corporation | |||||
| By: | /s/ Sean A. Quinn | |||||
| Sean A. Quinn | ||||||
| Senior Vice-President, Chief Legal Officer and Corporate Secretary | ||||||
Exhibit 99.1
| TSX: CCO |
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website: cameco.com | ||
| NYSE: CCJ | currency: Cdn (unless noted) |
2121 – 11th Street West, Saskatoon, Saskatchewan, S7M 1J3 Canada
Tel: 306-956-6200 Fax: 306-956-6201
Cameco announces third quarter results; tier-one transition continues to drive gross profit improvement; amplified security of supply concerns benefit full-year revenue outlook; decade-high industry contracting volume achieved; dividend declared
Saskatoon, Saskatchewan, Canada, October 31, 2023 .. . . . . . . . . . . . . . . .
Cameco (TSX: CCO; NYSE: CCJ) today reported its consolidated financial and operating results for the third quarter ended September 30, 2023, in accordance with International Financial Reporting Standards (IFRS).
“Our third quarter financial performance continues to demonstrate the benefits of our strategic decisions and the significant, positive momentum we are experiencing in the nuclear energy industry. We have again increased our consolidated revenue outlook for 2023, which is driven by higher average realized prices as a result of substantial uranium spot price improvements. Gross profits have also improved as our uranium average unit cost of sales decreased from last year as we continue the transition back to our tier-one production cost structure,” said Tim Gitzel, Cameco’s president and CEO.
“I am pleased to announce that effective November 1, Dominic Kieran is joining Cameco’s executive group as Global Managing Director of our subsidiary in the United Kingdom. Dominic brings extensive international executive experience in the nuclear fuel, chemical and broader technology industries, which will enhance the skillset of our strong and experienced leadership group. His wide-ranging expertise will help facilitate Cameco’s growth across the nuclear value chain.
“The world’s desire for clean, secure and low-cost energy is creating a foundation of support for nuclear energy from across the public and political spectrum. This increase in support, coupled with the geopolitical uncertainty brought on by Russia’s invasion of Ukraine and a coup in Niger, has intensified supply concerns as future uranium supply and downstream processing is needed to balance the market. In the short term, supply chain issues and inflation risks are causing production challenges for current operators. Compared to previous price cycles, the market does not have the inventory or secondary supplies to absorb market shocks.
“We are seeing durable, full-cycle demand growth across the nuclear energy industry. These factors lead us to believe that we are experiencing the industry’s best ever market fundamentals. These dynamics have also led the World Nuclear Association (WNA) to increase its demand forecast in their latest Nuclear Fuel Report to an average annual growth rate of 3.6%, compared to 2.6% in the 2021 report. Furthermore, the WNA has issued a call to action to triple nuclear capacity by 2050 to help the global drive to net-zero greenhouse gas emissions.
“Our customers understand that we are a proven, reliable supplier operating across the nuclear fuel cycle and recognize our deep understanding of how nuclear fuel markets work. The important role we play in our industry is also being recognized on the international stage. In September, I had the honour of meeting Ukrainian President Zelenskyy and Prime Minister Trudeau in Toronto where the President thanked us for helping Ukraine in its efforts to regain energy independence and we renewed Cameco’s commitment to working with them. In October, reinforcing our commitment to Energoatom, I joined a Cameco delegation to visit our partners at their head offices in Ukraine.
“Also in September, Cameco was invited to participate in the OECD’s inaugural Roadmaps to New Nuclear conference. This conference of government and industry leaders met with the intention of building leadership and cooperation in nuclear energy. In November, we are participating in the International Atomic Energy Agency’s Standing Advisory Group on Nuclear Energy to advise the agency’s long-term nuclear power and nuclear fuel cycle activities. These are proud moments for us at Cameco that highlight the impact that our work is having around the world.
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“We are a responsible, commercial supplier with a strong balance sheet, long-lived, tier-one assets, and a proven operating track record, and are returning to our tier-one cost structure. We are invested across the nuclear fuel cycle and continue to work toward closing the Westinghouse acquisition with our partner Brookfield and its publicly listed affiliate Brookfield Renewable Partners and its institutional partners by the end of this year, at which time we look forward to being able to discuss the exciting prospects we see for that business. We will continue to do what we said we would do, executing on our strategy, and, consistent with our values, we will do so in a manner we believe will make our business sustainable over the long-term.”
| • | Q3 net earnings of $148 million; adjusted net earnings of $137 million: Results reflect normal quarterly variations in contract deliveries. Gross profit improved due to lower unit costs in our uranium segment and a higher average realized price as our market-related contracts benefitted from increases in the uranium spot price relative to a year ago. We had unrealized foreign exchange gains of $54 million on our US dollar cash balances in the quarter. We must treat our foreign currency cash balances as though they are converted to Canadian dollars at the exchange rate at the end of the quarter. The unrealized gains in the quarter were primarily due to higher-than-normal US dollar cash balances, being held for the pending acquisition of Westinghouse, and a weakened Canadian dollar relative to at the end of the second quarter. We do not adjust net earnings for these gains. Adjusted net earnings is a non-IFRS measure, see page 4. |
| • | Strong performance in the uranium and fuel services segments and improving 2023 consolidated revenue outlook: Results for the first nine months of the year reflect the impact of higher sales volumes and average realized prices in both the uranium and fuel services segments under our long-term contract portfolio. In our uranium segment we have delivered 22.2 million pounds, in line with the delivery pattern disclosed in our annual MD&A, at an average realized price 13% higher than in the same period last year. In our fuel services segment, sales were 7% higher than in the first nine months of 2022 and at an average realized price 9% higher. With improving market fundamentals, for 2023 we have increased our consolidated revenue outlook to between $2.43 billion and $2.58 billion (previously $2.38 billion and $2.53 billion), which is primarily driven by higher expected average realized prices under our contract portfolio. In addition, we have updated our average unit cost of sales. See Outlook for 2023 in our third quarter MD&A for more information. |
| • | Long-term contracting success continues while maintaining exposure to higher prices: As of September 30, 2023, we had commitments requiring delivery of an average of about 29 million pounds per year from 2023 through 2027, an increase from an average of about 28 million pounds per year at the end of June. We also have contracts in our uranium and fuel services segments that span more than decade, and in our uranium segment, many of those contracts benefit from market-related pricing mechanisms. In addition, we have a large and growing pipeline of business under discussion, which we expect will help further build our long-term contract portfolio. Total industry long-term contracting volumes to date in 2023 have already exceeded the volume of each of the last 10 years, a strong indication that a new long-term contracting cycle is underway. |
| • | JV Inkai shipments: The first shipment containing approximately two thirds of our share of Inkai’s 2023 production is currently in transit. We expect the shipment to arrive before the end of 2023. The second shipment with the remaining volume of our share of 2023 production is expected to depart before the end of the year and arrive in early 2024. We continue to work closely with JV Inkai and our joint venture partner, Kazatomprom, to receive our share of production via the Trans-Caspian International Transport Route, which does not rely on Russian rail lines or ports. We could experience further delays to our expected Inkai deliveries this year if transportation using this shipping route takes longer than anticipated. To mitigate the risk of delays, we have inventory, long-term purchase agreements and loan arrangements in place we can draw on. Depending on when we receive shipments of our share of Inkai’s production, our share of earnings from this equity-accounted investee and the timing of the receipt of our share of dividends from the joint venture may be impacted. |
| • | Canada Revenue Agency (CRA) tax dispute: In October, we received $12 million from CRA for disbursements related to the September 2018 Tax Court decision and cost award, which is in addition to the $10 million we received from CRA in April 2021 as reimbursement for legal fees. See Transfer pricing dispute in our third quarter MD&A for more information. |
| • | Licence renewals in Northern Saskatchewan: In October, the Canadian Nuclear Safety Commission renewed the licences for McArthur River, Key Lake and Rabbit Lake. We are pleased to receive 20-year licences for McArthur River and Key Lake and a 15-year licence for Rabbit Lake. We believe that our commitment to protecting the health and safety of our employees, the public and the environment is reflected in the extended duration of the licences. |
| • | Strong balance sheet: As of September 30, 2023, we had $2.7 billion in cash and cash equivalents and $1.0 billion in total debt. In addition, we have a $1.0 billion undrawn credit facility which matures October 1, 2027. |
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| • | Dividend: Our board of directors declared a 2023 annual dividend of $0.12 per common share, payable on December 15, 2023, to shareholders of record on November 30, 2023. The decision to declare an annual dividend is reviewed regularly by our board in the context of our cash flow, financial position, strategy and other relevant factors, including appropriate alignment with the cyclical nature of our earnings. In 2022, the board increased the dividend by 50% to reflect the expected improvement in our financial performance as we began the transition to our tier-one run rate. Until such time as we return to our tier-one cost structure, the objective of our capital allocation will be to ensure we have the financial capacity to execute on our strategy, including achieving production at McArthur River/Key Lake in accordance with our plan and closing the pending acquisition of Westinghouse. We will continue to navigate by our investment-grade rating through close management of our balance sheet metrics, maintaining sufficient liquidity to meet our risk-mitigated working cash target and that allows us to pursue other value-adding opportunities. |
| • | Addition to executive group: Effective November 1, 2023, Dominic Kieran has been appointed Global Managing Director for Cameco UK Ltd., a wholly owned subsidiary of Cameco. Dominic brings over 20 years of leadership experience to Cameco. Most recently he served as Chief Executive Officer with Babcock Nuclear, a wholly owned subsidiary of Babcock International. Previously, he was with Urenco for 15 years in increasingly senior leadership roles, including Chief Commercial Officer, and gained a wealth of experience from his diverse responsibilities. He holds an MBA from the Henley Business School and master’s in engineering from the University of London. He is a Chartered Engineer and a Fellow of the UK Institute of Chemical Engineers and the UK Nuclear Institute. “I am looking forward to working with an excellent team to advance Cameco’s vision of energizing a clean-air world. The transition to a clean and secure energy world is our imperative and I look forward to helping this transition with Cameco,” said Dominic Kieran. |
Consolidated financial results
| HIGHLIGHTS | THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| ($ MILLIONS EXCEPT WHERE INDICATED) |
2023 | 2022 | CHANGE | 2023 | 2022 | CHANGE | ||||||||||||||||||
| Revenue |
575 | 389 | 48 | % | 1,744 | 1,344 | 30 | % | ||||||||||||||||
| Gross profit |
152 | 25 | >100 | % | 429 | 168 | >100 | % | ||||||||||||||||
| Net earnings (losses) attributable to equity holders |
148 | (20 | ) | >100 | % | 281 | 105 | >100 | % | |||||||||||||||
| $ per common share (basic) |
0.34 | (0.05 | ) | >100 | % | 0.65 | 0.26 | >100 | % | |||||||||||||||
| $ per common share (diluted) |
0.34 | (0.05 | ) | >100 | % | 0.65 | 0.26 | >100 | % | |||||||||||||||
| Adjusted net earnings (non-IFRS, see page 4) |
137 | 10 | >100 | % | 249 | 100 | >100 | % | ||||||||||||||||
| $ per common share (adjusted and diluted) |
0.32 | 0.03 | >100 | % | 0.57 | 0.25 | >100 | % | ||||||||||||||||
| Cash provided by (used in) operations (after working capital changes) |
185 | (47 | ) | >100 | % | 487 | 227 | >100 | % | |||||||||||||||
The financial information presented for the three months and nine months ended September 30, 2022, and September 30, 2023, is unaudited.
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NET EARNINGS
The following table shows what contributed to the change in net earnings (losses) and adjusted net earnings (non-IFRS measure, see page 4) in the third quarter and first nine months of 2023, compared to the same periods in 2022.
| THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| ($ MILLIONS) |
IFRS | ADJUSTED | IFRS | ADJUSTED | ||||||||||||||
| Net earnings (losses) - 2022 |
(20 | ) | 10 | 105 | 100 | |||||||||||||
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| Change in gross profit by segment |
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| (We calculate gross profit by deducting from revenue the cost of products and services sold, and depreciation and amortization (D&A), net of hedging benefits) |
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| Uranium |
Impact from sales volume changes | 6 | 6 | 18 | 18 | |||||||||||||
| Higher realized prices ($ US) | 56 | 56 | 93 | 93 | ||||||||||||||
| Foreign exchange impact on realized prices | 18 | 18 | 75 | 75 | ||||||||||||||
| Lower costs | 40 | 40 | 66 | 66 | ||||||||||||||
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| Change – uranium | 120 | 120 | 252 | 252 | ||||||||||||||
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| Fuel services |
Impact from sales volume changes | — | — | 5 | 5 | |||||||||||||
| Higher realized prices ($ Cdn) | 14 | 14 | 24 | 24 | ||||||||||||||
| Higher costs | (8 | ) | (8 | ) | (20 | ) | (20 | ) | ||||||||||
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| Change – fuel services | 6 | 6 | 9 | 9 | ||||||||||||||
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| Other changes |
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| Higher administration expenditures |
(5 | ) | (5 | ) | (44 | ) | (44 | ) | ||||||||||
| Higher exploration expenditures |
(1 | ) | (1 | ) | (6 | ) | (6 | ) | ||||||||||
| Change in reclamation provisions |
36 | 12 | (10 | ) | 10 | |||||||||||||
| Higher earnings from equity-accounted investee |
26 | 26 | 22 | 22 | ||||||||||||||
| Change in gains or losses on derivatives |
26 | (8 | ) | 75 | (20 | ) | ||||||||||||
| Change in foreign exchange gains or losses |
3 | 3 | (60 | ) | (60 | ) | ||||||||||||
| Higher finance income |
25 | 25 | 77 | 77 | ||||||||||||||
| Bargain purchase gain on CLJV ownership interest increase |
— | — | (23 | ) | — | |||||||||||||
| Change in income tax recovery or expense |
(66 | ) | (49 | ) | (100 | ) | (75 | ) | ||||||||||
| Other |
(2 | ) | (2 | ) | (16 | ) | (16 | ) | ||||||||||
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| Net earnings - 2023 |
148 | 137 | 281 | 249 | ||||||||||||||
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Non-IFRS measures
ADJUSTED NET EARNINGS
Adjusted net earnings (ANE) is a measure that does not have a standardized meaning or a consistent basis of calculation under IFRS (non-IFRS measure). We use this measure as a meaningful way to compare our financial performance from period to period. Adjusted net earnings is our net earnings attributable to equity holders, adjusted to reflect the underlying financial performance for the reporting period. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance. Adjusted net earnings is one of the targets that we measure to form the basis for a portion of annual employee and executive compensation (see Measuring our results in our 2022 annual MD&A).
In calculating ANE we adjust for derivatives. We do not use hedge accounting under IFRS and, therefore, we are required to report gains and losses on all hedging activity, both for contracts that close in the period and those that remain outstanding at the end of the period. For the contracts that remain outstanding, we must treat them as though they were settled at the end of the reporting period (mark-to-market). However, we do not believe the gains and losses that we are required to report under IFRS appropriately reflect the intent of our hedging activities, so we make adjustments in calculating our ANE to better reflect the impact of our hedging program in the applicable reporting period. See Foreign exchange in our 2022 annual MD&A for more information.
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We also adjust for changes to our reclamation provisions that flow directly through earnings. Every quarter we are required to update the reclamation provisions for all operations based on new cash flow estimates, discount and inflation rates. This normally results in an adjustment to an asset retirement obligation asset in addition to the provision balance. When the assets of an operation have been written off due to an impairment, as is the case with our Rabbit Lake and US ISR operations, the adjustment is recorded directly to the statement of earnings as “other operating expense (income)”. See note 9 of our interim financial statements for more information. This amount has been excluded from our ANE measure.
The bargain purchase gain that was recognized when we acquired our pro-rata share of Idemitsu Canada Resources Ltd.’s 7.875% participating interest in the Cigar Lake Joint Venture has also been removed in calculating ANE since it is non-cash, non-operating and outside of the normal course of our business. The gain was recorded in the statement of earnings as part of “other income (expense)”.
Adjusted net earnings is a non-IFRS financial measure and should not be considered in isolation or as a substitute for financial information prepared according to accounting standards. Other companies may calculate this measure differently, so you may not be able to make a direct comparison to similar measures presented by other companies.
The following table reconciles adjusted net earnings with net earnings for the third quarter and first nine months of 2023 and compares it to the same periods in 2022.
| THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| ($ MILLIONS) |
2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net earnings (losses) attributable to equity holders |
148 | (20 | ) | 281 | 105 | |||||||||||
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| Adjustments |
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| Adjustments on derivatives |
41 | 75 | — | 95 | ||||||||||||
| Adjustment to other operating income |
(48 | ) | (24 | ) | (42 | ) | (62 | ) | ||||||||
| Adjustment to other income |
— | — | — | (23 | ) | |||||||||||
| Income taxes on adjustments |
(4 | ) | (21 | ) | 10 | (15 | ) | |||||||||
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| Adjusted net earnings |
137 | 10 | 249 | 100 | ||||||||||||
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Selected segmented highlights
| THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| HIGHLIGHTS |
2023 | 2022 | CHANGE | 2023 | 2022 | CHANGE | ||||||||||||||||||||||||
| Uranium |
Production volume (million lbs) | 3.0 | 2.0 | 50 | % | 11.9 | 6.6 | 80 | % | |||||||||||||||||||||
| Sales volume (million lbs) | 7.0 | 5.3 | 32 | % | 22.2 | 18.7 | 19 | % | ||||||||||||||||||||||
| Average realized price1 | ($ | US/lb | ) | 52.57 | 46.30 | 14 | % | 48.62 | 45.34 | 7 | % | |||||||||||||||||||
| ($ | Cdn/lb | ) | 70.30 | 59.65 | 18 | % | 65.40 | 57.84 | 13 | % | ||||||||||||||||||||
| Revenue ($ millions) | 489 | 313 | 56 | % | 1,452 | 1,083 | 34 | % | ||||||||||||||||||||||
| Gross profit ($ millions) | 139 | 19 | >100 | % | 349 | 97 | >100 | % | ||||||||||||||||||||||
| Fuel services |
Production volume (million kgU) | 2.0 | 1.5 | 33 | % | 9.6 | 9.3 | 3 | % | |||||||||||||||||||||
| Sales volume (million kgU) | 2.1 | 2.3 | (9 | )% | 7.8 | 7.3 | 7 | % | ||||||||||||||||||||||
| Average realized price 2 | ($ | Cdn/kgU | ) | 39.87 | 33.43 | 19 | % | 37.44 | 34.39 | 9 | % | |||||||||||||||||||
| Revenue ($ millions) | 86 | 75 | 15 | % | 291 | 250 | 16 | % | ||||||||||||||||||||||
| Gross profit ($ millions) | 15 | 9 | 67 | % | 84 | 76 | 11 | % | ||||||||||||||||||||||
| 1 | Uranium average realized price is calculated as the revenue from sales of uranium concentrate, transportation and storage fees divided by the volume of uranium concentrates sold. |
| 2 | Fuel services average realized price is calculated as revenue from the sale of conversion and fabrication services, including fuel bundles and reactor components, transportation and storage fees divided by the volumes sold. |
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Management’s discussion and analysis (MD&A) and financial statements
The third quarter MD&A and unaudited condensed consolidated interim financial statements provide a detailed explanation of our operating results for the three and nine months ended September 30, 2023, as compared to the same periods last year. This news release should be read in conjunction with these documents, as well as our audited consolidated financial statements and notes for the year ended December 31, 2022, first quarter, second quarter and annual MD&A, and our most recent annual information form, all of which are available on our website at cameco.com, on SEDAR+ at sedarplus.ca, and on EDGAR at sec.gov/edgar.shtml.
Qualified persons
The technical and scientific information discussed in this document for our material properties McArthur River/Key Lake, Cigar Lake and Inkai was approved by the following individuals who are qualified persons for the purposes of NI 43-101:
MCARTHUR RIVER/KEY LAKE
| • | Greg Murdock, general manager, McArthur River, Cameco |
| • | Daley McIntyre, general manager, Key Lake, Cameco |
CIGAR LAKE
| • | Lloyd Rowson, general manager, Cigar Lake, Cameco |
INKAI
| • | Sergey Ivanov, deputy director general, technical services, Cameco Kazakhstan LLP |
Caution about forward-looking information
This news release includes statements and information about our expectations for the future, which we refer to as forward-looking information. Forward-looking information is based on our current views, which can change significantly, and actual results and events may be significantly different from what we currently expect.
Examples of forward-looking information in this news release include: our expectation that amplified security of supply concerns will benefit our full-year revenue; our belief that we are experiencing significant positive momentum in the nuclear energy industry; our consolidated revenue outlook for 2023; our continuing transition to a tier-one production cost structure and the longevity of our tier-one assets; the creation of a foundation of support for nuclear energy; the intensification of supply concerns; our view that there is durable, full-cycle demand growth across the nuclear energy industry, and related third party demand and growth rate forecasts; our commitment to the Ukraine and Energoatom; our participation in building leadership and cooperation in nuclear energy; the expected timing of the closing of the Westinghouse acquisition and the prospects for that business; our intention to continue to execute our strategy in a manner we believe will make our business sustainable over the long term; our expectations regarding our long-term contract portfolio and pipeline of business, and our view that a new long-term contracting cycle is underway; the effective date of the appointment of the new Global Managing Director for Cameco UK Ltd.; the expected timing for the arrival of the first and second shipments of our 2023 share of Inkai’s production, the risk of further delays and our ability to draw on inventory, long-term purchase agreements and loan arrangements to mitigate that risk; our 2023 annual dividend payment date and the considerations relevant to future dividends; and the expected date for announcement of our 2023 fourth quarter and annual results.
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Material risks that could lead to different results include: unexpected changes in uranium supply, demand, long-term contracting, and prices; changes in consumer demand for nuclear power and uranium as a result of changing societal views and objectives regarding nuclear power, electrification and decarbonization; the risk that our views regarding nuclear power, its growth profile, and benefits, may prove to be incorrect; the risk that we may not be able to achieve planned production levels within the expected timeframes, or that the costs involved in doing so exceed our expectations; the risk that the production levels at Inkai may not be at expected levels or that it may not be able to deliver its production; the risk that we may not be able to meet sales commitments for any reason; the risk that the Westinghouse acquisition may be delayed or may not be completed on the terms in the acquisition agreement or at all; the risks to our business associated with potential production disruptions, including those related to global supply chain disruptions, global economic uncertainty, political volatility, labour relations issues, and operating risks; the risk that we may not be able to implement our business objectives in a manner consistent with our environmental, social, governance and other values; the risk that the strategy we are pursuing may prove unsuccessful, or that we may not be able to execute it successfully; the risk that we may be unsuccessful in our commitment to Ukraine and Energoatom, or our participation in building leadership and cooperation in nuclear energy; the risk that our newly-appointed executives may not begin to serve when expected; and the risk that we may be delayed in announcing our future financial results.
In presenting the forward-looking information, we have made material assumptions which may prove incorrect about: uranium demand, supply, consumption, long-term contracting, growth in the demand for and global public acceptance of nuclear energy, and prices; our production, purchases, sales, deliveries and costs; the market conditions and other factors upon which we have based our future plans and forecasts; our contract pipeline discussions; our ability to mitigate adverse consequences of delays in the shipment of our share of Inkai production; the success of our plans and strategies, including planned production; the expected timing of the closing of the Westinghouse acquisition; the absence of new and adverse government regulations, policies or decisions; that there will not be any significant adverse consequences to our business resulting from production disruptions, including those relating to supply disruptions, economic or political uncertainty and volatility, labour relation issues, and operating risks; our ability to support Ukraine, Energoatom and the building of leadership and cooperation in nuclear energy; the ability of our newly-appointed executives to begin to serve when expected; and our ability to announce future financial results when expected.
Please also review the discussion in our 2022 annual MD&A, our 2023 third quarter MD&A and our most recent annual information form for other material risks that could cause actual results to differ significantly from our current expectations, and other material assumptions we have made. Forward-looking information is designed to help you understand management’s current views of our near-term 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.
Conference call
We invite you to join our third quarter conference call on Tuesday, October 31, 2023, at 8:00 a.m. Eastern.
The call will be open to all investors and the media. To join the call, please dial (800) 319-4610 (Canada and US) or (604) 638-5340. An operator will put your call through. The slides and a live webcast 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, November 30, 2023, by calling (800) 319-6413 (Canada and US) or (604) 638-9010 (Passcode 0376) |
2023 fourth quarter and annual report release date
We plan to announce our 2023 fourth quarter and annual consolidated financial and operating results before markets open on February 8, 2024. Announcement dates are subject to change.
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Profile
Cameco is one of the largest global providers of the uranium fuel needed to energize a clean-air world. Our competitive position is based on our controlling ownership of the world’s largest high-grade reserves and low-cost operations. Utilities around the world rely on our nuclear fuel products to generate safe, reliable, carbon-free nuclear power. Our shares trade on the Toronto and New York stock exchanges. Our head office is in Saskatoon, Saskatchewan, Canada.
As used in this news release, the terms we, us, our, the Company and Cameco mean Cameco Corporation and its subsidiaries unless otherwise indicated.
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Investor inquiries:
Rachelle Girard
306-956-6403
rachelle_girard@cameco.com
Media inquiries:
Veronica Baker
306-385-5541
veronica_baker@cameco.com
-8-
Exhibit 99.2
Management’s discussion and analysis
for the quarter ended September 30, 2023
| 5 | THIRD QUARTER MARKET UPDATE | |
| 9 | OUR STRATEGY | |
| 12 | CONSOLIDATED FINANCIAL RESULTS | |
| 18 | OUTLOOK FOR 2023 | |
| 20 | LIQUIDITY AND CAPITAL RESOURCES | |
| 23 | FINANCIAL RESULTS BY SEGMENT | |
| 27 | OUR OPERATIONS - THIRD QUARTER UPDATES | |
| 30 | QUALIFIED PERSONS | |
| 31 | ADDITIONAL INFORMATION | |
This management’s discussion and analysis (MD&A) includes information that will help you understand management’s perspective of our unaudited condensed consolidated interim financial statements and notes for the quarter ended September 30, 2023 (interim financial statements). The information is based on what we knew as of October 30, 2023, and updates our first quarter, second quarter and annual MD&A included in our 2022 annual report.
As you review this MD&A, we encourage you to read our interim financial statements as well as our audited consolidated financial statements and notes for the year ended December 31, 2022, and annual MD&A. You can find more information about Cameco, including our audited consolidated financial statements and our most recent annual information form, on our website at cameco.com, on SEDAR+ at sedarplus.ca or on EDGAR at sec.gov. You should also read our annual information form before making an investment decision about our securities.
The financial information in this MD&A and in our financial statements and notes are prepared according to International Financial Reporting Standards (IFRS), unless otherwise indicated.
Unless we have specified otherwise, all dollar amounts are in Canadian dollars.
Throughout this document, the terms we, us, our and Cameco mean Cameco Corporation and its subsidiaries unless otherwise indicated.
Caution about forward-looking information
Our MD&A includes statements and information about our expectations for the future. When we discuss our strategy, plans, 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 (US) securities laws. We refer to them in this MD&A as forward-looking information.
Key things to understand about the forward-looking information in this MD&A:
| • | It typically includes words and phrases about the future, such as: anticipate, believe, estimate, expect, plan, will, intend, goal, target, forecast, project, 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 have listed starting on page 4, 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 most recent annual information form and annual MD&A, which includes 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-term 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 MD&A
| • | our expectations regarding 2023 and future uranium supply, demand, contracting, geopolitical issues, and the market including the discussion under the heading Third quarter market update |
| • | the discussion under the heading Our strategy, including the role of nuclear energy in the world’s shift to a low-carbon, climate-resilient economy, our expectation that our strategy will allow us to increase long-term value, our intention to execute our strategy with an emphasis on safety, people and the environment, our belief that we have the right strategy to achieve our vision and will do so in a manner that reflects our values, our ability to address environmental, social and governance risks and opportunities, and our ambition to reach net-zero greenhouse gas emissions |
| • | the discussion under the heading Strategy in action including, the demand for nuclear fuel supplies, our expectations regarding uranium contracting and our contract portfolio, our plans for production at McArthur River/Key Lake, Cigar Lake, and the Port Hope UF6 conversion facility, our expectations regarding production levels at JV Inkai, and our expected financial capacity to execute our strategy and self-manage risk |
| • | the discussion of our expectations relating to our acquisition of a 49% interest in Westinghouse Electric Company (Westinghouse), including the sources and uses of financing for the acquisition, the timeline of the acquisition, including the anticipated closing thereof, and creating a powerful platform for strategic growth |
| • | the discussion of our expectations relating to our Canada Revenue Agency (CRA) transfer pricing dispute, our confidence that the courts would reject any attempt by CRA to utilize the same position and arguments for tax years 2007 through 2014 or the alternate position advanced for tax years 2014 through 2016, and our belief that CRA should return the full amount of cash and security that has been paid or otherwise secured by us |
| • | the discussion under the heading Outlook for 2023, including our production plan, expected improvement in financial performance, expected care and maintenance costs for our tier-two assets, our cash balances and the generation of cash flow, our outlook for our uranium average realized price, and other information in the table under the heading 2023 Financial Outlook, our revenue, adjusted net earnings, and cash flow sensitivity analysis, and our price sensitivity analysis for our uranium segment |
| • | the discussion under the heading Liquidity and capital resources, including expected liquidity to meet 2023 obligations and our expectations for our uranium contract portfolio to provide a solid revenue stream |
| • | our expectation that our operating and investment activities for the remainder of 2023 will not be constrained by the financial-related covenants in our unsecured revolving credit facility |
| • | our intention to update the table under the heading Purchase commitments to reflect material changes to purchase commitments and prices |
| • | our future plans and expectations for each of our uranium operating properties and fuel services operating sites, including production levels and our expected cash cost of production at McArthur River/Key Lake and Cigar Lake, and our expectation that the renewed licences will allow McArthur River/Key Lake to operate until October 2043 |
| • | expected timing for the transit of the first and second shipments of our 2023 share of Inkai’s production and the possibility of further delays in expected Inkai deliveries this year |
| • | we have inventory, long-term purchase agreements and loan arrangements in place that we can draw upon to mitigate the risk of delay in Inkai deliveries |
| • | the expected care and maintenance costs for our US ISR Operations and Rabbit Lake for 2023, and our expectation that the renewed licence will allow Rabbit Lake to operate until October 2038, once it has resumed operations |
| • | our 2023 annual dividend payment date and the considerations relevant to future dividends |
| 2 | CAMECO CORPORATION |
Material Risks
| • | actual sales volumes or market prices for any of our products or services are lower than we expect, or cost of sales is higher than we expect, for any reason, including changes in market prices, loss of market share to a competitor, trade restrictions, or geopolitical issues |
| • | we are adversely affected by changes in currency exchange rates, interest rates, royalty rates, tax rates or inflation |
| • | our production costs are higher than planned, or necessary supplies are not available, or not available on commercially reasonable terms |
| • | our strategies may change, be unsuccessful or have unanticipated consequences, or we may not be able to achieve anticipated operational flexibility and efficiency |
| • | changing views of governments regarding the pursuit of carbon reduction strategies or that our view on the role of nuclear power in pursuit of those strategies may prove to be inaccurate |
| • | risks relating to the development and use of new technology or lack of appropriate technology needed to achieve our 30% greenhouse gas (GHG) emissions reduction target or advance our ambition to reach net-zero GHG emissions |
| • | our estimates and forecasts prove to be inaccurate, including production, purchases, deliveries, cash flow, revenue, costs, decommissioning, reclamation expenses, or the receipt of future dividends from JV Inkai |
| • | the Westinghouse acquisition may be delayed or may not be completed on the terms in the acquisition agreement or at all |
| • | consummation of the Westinghouse acquisition is subject to the satisfaction of closing conditions and receipt of required approvals that may not be satisfied on a timely basis or at all |
| • | that we may not realize expected benefits from the Westinghouse acquisition |
| • | we are unable to enforce our legal rights under our agreements, permits or licences |
| • | disruption or delay in the transportation of our products |
| • | we are subject to litigation or arbitration that has an adverse outcome |
| • | that the courts may accept the same, similar or different positions and arguments advanced by CRA to reach decisions that are adverse to us for other tax years |
| • | the possibility of a materially different outcome in disputes with CRA for other tax years |
| • | that CRA does not agree that the court rulings for the years that have been resolved in Cameco’s favour should apply to subsequent tax years |
| • | that CRA will not return all or substantially all of the cash and security that has been paid or otherwise secured in a timely manner, or at all |
| • | there are defects in, or challenges to title, to our properties |
| • | our mineral reserve and resource estimates are not reliable, or there are unexpected or challenging geological, hydrological or mining conditions |
| • | we are affected by environmental, safety and regulatory risks, including workforce health and safety or increased regulatory burdens or delays |
| • | necessary permits or approvals from government authorities cannot be obtained or maintained |
| • | we are affected by political risks, including unrest in Kazakhstan, and geopolitical events, including the Russian invasion of Ukraine |
| • | operations are disrupted due to problems with our own or our joint venture partners’, suppliers’ or customers’ facilities, the unavailability of reagents, equipment, operating parts and supplies critical to production, equipment failure, lack of tailings capacity, labour shortages, labour relations issues, strikes or lockouts, fires, underground floods, cave-ins, ground movements, tailings dam failures, transportation disruptions or accidents, aging infrastructure, or other development and operating risks |
| • | we are affected by war, terrorism, cyber-attacks, sabotage, blockades, civil unrest, social or political activism, outbreak of illness (such as a pandemic like COVID-19), accident or a deterioration in political support for, or demand for, nuclear energy |
| • | a major accident at a nuclear power plant |
| • | we are impacted by changes in the regulation or public perception of the safety of nuclear power plants, which adversely affect the construction of new plants, the relicensing of existing plants and the demand for uranium |
| • | government laws, regulations, policies or decisions that adversely affect us, including tax and trade laws and sanctions on nuclear fuel exports and imports |
| • | our uranium suppliers or purchasers fail to fulfil their commitments |
| • | our McArthur River development, mining or production plans are delayed or do not succeed for any reason, including due to labour disruption |
| • | our Key Lake mill production plan is delayed or does not succeed for any reason, including due to labour disruption |
| • | our Cigar Lake development, mining or production plans are delayed or do not succeed for any reason |
| • | we may be unable to operate McArthur River/Key Lake, or Rabbit Lake once it has resumed operations, for the full period of our current licences |
| • | JV Inkai’s development, mining or production plans are delayed or do not succeed for any reason or JV Inkai is unable to transport and deliver its production |
| • | our production plan for our Port Hope UF6 conversion facility is delayed or does not succeed for any reason, including due to the availability of production supplies |
| • | our expectations relating to care and maintenance costs prove to be inaccurate |
| • | we are affected by natural phenomena, such as forest fires, floods and earthquakes as well as shifts in temperature, precipitation, and the impact of more frequent severe weather conditions on our operations as a result of climate change |
| 2023 THIRD QUARTER REPORT | 3 |
Material Assumptions
| • | our expectations regarding sales and purchase volumes and prices for uranium and fuel services, cost of sales, trade restrictions, inflation, and that counterparties to our sales and purchase agreements will honour their commitments |
| • | our expectations for the nuclear industry, including its growth profile, market conditions, geopolitical issues, and the demand for and supply of uranium |
| • | the continuing pursuit of carbon reduction strategies by governments and the role of nuclear in the pursuit of those strategies |
| • | the availability or development of technologies needed to achieve our 30% GHG emissions reduction target or advance our net-zero GHG emission ambition |
| • | the assumptions discussed under the heading 2023 Financial Outlook |
| • | our expectations regarding spot prices and realized prices for uranium, and other factors discussed under the heading Price sensitivity analysis: uranium segment |
| • | the Westinghouse acquisition is closed on the anticipated timeline and on the terms in the acquisition agreement |
| • | market conditions and other factors upon which we based the Westinghouse acquisition and our related forecasts will be as expected |
| • | the success of our plans and strategies relating to the Westinghouse acquisition |
| • | that the construction of new nuclear power plants and the relicensing of existing nuclear power plants will not be adversely affected by changes in regulation or in the public perception of the safety of nuclear power plants |
| • | our ability to continue to supply our products and services in the expected quantities and at the expected times |
| • | our expected production levels for Cigar Lake, McArthur River/Key Lake, JV Inkai and our fuel services operating sites |
| • | plans to transport our products succeed, including the shipment of our share of JV Inkai production to our Blind River refinery |
| • | our ability to mitigate adverse consequences of delays in the shipment of our share of JV Inkai production to our Blind River refinery |
| • | our cost expectations, including production costs, operating costs, and capital costs |
| • | our expectations regarding tax payments, tax rates, royalty rates, currency exchange rates, interest rates and inflation |
| • | in our dispute with CRA that courts will reach consistent decisions for other tax years that are based upon similar positions and arguments |
| • | that CRA will not successfully advance different positions and arguments that may lead to different outcomes for other tax years |
| • | our expectation that we will recover all or substantially all of the amounts paid or secured in respect of the CRA dispute to date |
| • | our decommissioning and reclamation estimates, including the assumptions upon which they are based, are reliable |
| • | our mineral reserve and resource estimates, and the assumptions upon which they are based, are reliable |
| • | our understanding of the geological, hydrological and other conditions at our uranium properties |
| • | our McArthur River and Cigar Lake development, mining and production plans succeed |
| • | our Key Lake mill production plans succeed |
| • | no circumstances arise that will prevent us from operating McArthur River/Key Lake, or Rabbit Lake once it has resumed operations, for the full period of our current licences |
| • | JV Inkai’s development, mining and production plans succeed, and that JV Inkai will be able to deliver its production |
| • | the ability of JV Inkai to pay dividends |
| • | our production plan for our Port Hope UF6 conversion facility succeeds |
| • | that care and maintenance costs will be as expected |
| • | our and our contractors’ ability to comply with current and future environmental, safety and other regulatory requirements and to obtain and maintain required regulatory approvals |
| • | neither our operations, nor those of our joint venture partners, suppliers or customers, are significantly disrupted as a result of political instability, nationalization, terrorism, sabotage, blockades, civil unrest, breakdown, climate change, natural disasters, forest or other fires, outbreak of illness (such as a pandemic like COVID-19), governmental, political or regulatory actions, litigation or arbitration proceedings, cyber-attacks, the unavailability of reagents, equipment, operating parts and supplies critical to production, labour shortages, labour relations issues, strikes or lockouts, health and safety issues, underground floods, increased loadings into the environment, cave-ins, ground movements, tailings dam failure, lack of tailings capacity, improper air emission or treated water releases, transportation disruptions or accidents, aging infrastructure, or other development or operating risk |
| 4 | CAMECO CORPORATION |
Third quarter market update
Ongoing geopolitical events, the global focus on the climate crisis, and energy security concerns have created what we believe are transformative tailwinds for the nuclear power industry, from both a demand and supply perspective.
In the third quarter of 2023, uranium prices reached levels not seen since 2011, driven primarily by growing security of supply concerns. Fuel buyers continued contracting to secure their long-term requirements for conversion and enrichment services and have returned their focus to the uranium required to feed into those services, as evidenced by higher prices across the fuel cycle and long-term contracting that continues to be on track to achieve the rate required to replace what is being consumed annually (replacement-rate contracting).
Some of the more significant developments affecting supply in the quarter and to date include:
| • | On September 3, Cameco provided an update to its 2023 production forecast at McArthur River/Key Lake and Cigar Lake. Total production for 2023 is anticipated to be up to 16.3 million pounds U3O8 (100% basis) at Cigar Lake (previously 18 million pounds U3O8) and 14 million pounds U3O8 (100% basis) at McArthur River/Key Lake (previously 15 million pounds U3O8). See Uranium 2023 Q3 updates starting on page 27 for more information. |
| • | Sprott Physical Uranium Trust (SPUT) has purchased nearly 3 million pounds U3O8 thus far in 2023, bringing total purchases since inception to nearly 44 million pounds U3O8. Volatility in equity markets has impacted whether SPUT is trading at a discount or premium to its net asset value which impacts its ability to raise funds to purchase uranium. |
| • | On September 26, an updated version of the Nuclear Fuel Security Act was reintroduced to the US House of Representatives. This House bill requires the Department of Energy (DOE) to conduct a study on the commercial availability of low-enriched uranium (LEU). If it concludes government spending is needed, DOE would be authorized to offer cost-shares and milestone payments to incentivize LEU production. |
| • | On July 26, a coup d’état occurred in Niger which resulted in a group of military officers removing President Mohamed Bazoum and seizing power. All exports of uranium and gold to France were suspended soon after. On September 8, Orano stated they had halted uranium processing operations at their majority-owned SOMAIR (Arlit) project in Niger due to logistical complications caused by international sanctions. |
| • | In September, Kazatomprom (KAP) stated plans to increase production in 2025 to 100% of subsoil agreements, producing a total of 79.3 million to 81.9 million pounds U3O8, an additional 28 million pounds U3O8 compared to 2023 planned production of 55.3 million to 55.9 million pounds U3O8. KAP indicated this production is already committed under long-term contracts and the decision is a result of better market conditions and increased contracting activities. However, KAP warned that geopolitical uncertainty, global supply chain issues and inflationary pressure could create challenges in achieving the planned production increase. |
| • | On August 31, Peninsula Energy Ltd. announced plans to restart production at their Lance in situ recovery (ISR) project in Wyoming in late 2024. They plan to produce roughly 1.1 million pounds U3O8 in 2025 with a gradual ramp up to 1.6 million to 1.8 million pounds U3O8 annually. |
| • | On September 5, Encore Energy Corp. announced plans to restart production at its South Texas Alta Mesa ISR facility in early 2024, and that production at its Rosita ISR facility remains on schedule to resume in 2023, with production capacity of 1.5 million pounds U3O8 and 800,000 pounds U3O8 at each site, respectively. |
| • | On October 11, Centrus Energy Corp. announced that it had begun enrichment operations to produce high-assay low-enriched uranium at its American Centrifuge Plant in Piketon, Ohio. |
| • | On October 18, Ur-Energy Inc. announced that the restart and ramp up of its Lost Creek ISR Facility is underway, although challenges with the recruitment and retention of employees and contractors have hampered efficient operations and initial work has therefore been slower than anticipated. |
| • | On October 19, Orano’s board of directors announced their approval of a production capacity extension project at Georges Besse 2. The project seeks to increase the production capacities by over 30% at the uranium enrichment plant in southeastern France. |
| 2023 THIRD QUARTER REPORT | 5 |
According to the International Atomic Energy Agency, globally, there are currently 437 operable reactors and 58 reactors under construction. Demand-related developments continue to indicate growing support for the nuclear industry, including nations reaffirming their commitment to existing nuclear and/or reversing policies to phase out nuclear, non-nuclear countries emerging as candidates for new nuclear capacity, improvements in global sustainable financing policies to include nuclear energy, and opinion polls showing growing public support. With a number of reactor construction projects approved and many more planned, demand for uranium fuel continues to improve.
The more significant developments in the quarter affecting current and future demand include:
| • | In September, the World Nuclear Association released its Global Nuclear Fuel Report which provides scenarios for demand and supply availability across the fuel supply chain through 2040. This included a robust demand outlook showing global nuclear generating capacity increasing to 686 GWe in the Reference Scenario by 2040, an average annual growth rate of 3.6%, compared to 2.6% in the 2021 report. This improvement was driven by improved government support, life extensions, new builds and importantly, the expectation that starting in the 2030s, the deployment of small modular reactors (SMR) will contribute to capacity growth. Additional key themes include assumed reductions to secondary feed supply and availability of mobile inventories, along with a growing volume of future uranium supply at higher incentive pricing than today needed to balance the market after 2030. |
| • | On September 26, Westinghouse signed a contract with Liaoning Nuclear Power Co. Limited and China Nuclear Power Engineering Co. Limited to supply instrument and control systems for two future AP1000 units at Xudapu. |
| • | On September 20, Korea Hydro & Nuclear Power announced it successfully completed fuel loading at Shin Hanul unit 2, a new APR-1400 pressurized water reactor. |
| • | On August 28, Kansai Electric Power Co. announced that unit 1 of the Takahama nuclear power plant successfully cleared its final pre-operational safety inspection to restart and formally entered commercial operation. |
| • | Tokyo Electric Power Company (TEPCO) announced on August 22 that Japan’s government approved plans and issued its final decision allowing TEPCO to begin discharging treated water into the Pacific Ocean from storage at the Fukushima-Daiichi nuclear power plant in Fukushima Prefecture, Japan. |
| • | At the end of August, India’s first indigenously developed nuclear power plant, Kakrapar Unit 3, began operating at full capacity. |
| • | On August 30, Egypt’s regulatory authority approved final plans for a fourth 1,200 MWe reactor at El Dabaa Nuclear Power Plant. |
| • | Sweden’s plan to expand nuclear power was highlighted during International Atomic Energy Agency Director General Grossi’s visit in August. The new government aims to expand the role of nuclear power in Sweden over the coming two decades, implementing legal changes aimed at paving the way for such an energy transformation. |
| • | In Poland, Polskie Elektrownie Jądrowe, announced in August its intention to go carbon neutral by 2040, ten years earlier than previously planned. Additionally in September, Westinghouse and Bechtel announced they signed a formal partnership agreement for the design and construction of a nuclear power plant at the Lubiatowo-Kopalino site, with the first of three units expected to begin commercial operation in 2033. |
| • | In Slovakia, Électricité de France (EDF) and JAVYS, the state-owned nuclear company, signed a framework cooperation agreement that involves nuclear projects in Slovakia, including both large-scale reactors and SMRs. Additionally, in September, Slovakian utility Slovenské Elektrárne announced it increased the power output of the new unit at the Mochovce nuclear power plant to 100% capacity. |
| • | In Romania, it was announced on September 19 that the Canadian federal government would support Romania’s energy security through a $3 billion export financing commitment to the country’s nuclear utility Nuclearelectrica SA. Since the 1970’s, Romania has used Canadian heavy-water reactor technology (CANDU) for its nuclear program. This funding will help complete the partially built CANDU-6 units 3 and 4. |
| • | In the United Kingdom (UK), EDF, who is building Hinkley Point C, announced potential delays due to construction setbacks at the plant in July. At this time, they warned the units may start up to 15 months late. Additionally, on September 21, EDF announced the creation of a new subsidiary known as EDF EPR Engineering UK. The new entity incorporates nuclear energy focused teams already present in the UK whose core task is to contribute to the engineering studies for Hinkley Point C. |
| • | On August 23, the UK Department for Energy Security and Net Zero along with UK Export Finance issued a press release announcing a loan guarantee of $245 million (US) for Ukraine to purchase nuclear fuel and help end its reliance on Russian imports. |
| 6 | CAMECO CORPORATION |
| • | In Ghana, Nuclear Power Ghana announced in September it selected the nation’s first two nuclear power plant locations. |
| • | On September 25, Kenya’s Nuclear Power and Energy Agency said they plan to begin construction on its first commercial nuclear power plant in 2027. They have advanced plans to launch a tender for this reactor in 2026 or 2027, with a construction start date in 2027. |
| • | In Canada, New Brunswick Power signed a three-year contract with Ontario Power Generation to help enhance the operational performance of the Point Lepreau nuclear power plant. Additionally, in August, Crown Investments Corporation provided around $479,000 to help Saskatchewan firms build small, advanced, and micro reactors (SAMR) supply chain capacity, while the Alberta government announced it plans to invest around $7 million to study SAMRs. |
| • | On September 13, Brazilian nuclear utility Eletronuclear announced that civil construction works on unit 3 at the Angra nuclear power plant in Rio de Janeiro have been halted due to a funding dispute. |
| • | In the United States, Southern announced Vogtle Unit 3 entered commercial service on July 31. |
| • | On August 24, Tennessee Valley Authority’s board of directors approved $15 billion (US) in new investments over the next three years to boost generating capacity and upgrade the existing energy system. |
| • | The DOE announced 106 awards to small businesses, totaling $126 million (US) in research and development grants to be used to pursue clean energy via multiple mission areas, including nuclear and fusion energy projects. |
| • | On September 19, US utility Vistra Energy announced it plans to sell the Richmond and Stryker fossil-fueled power plants in Ohio to help clear the path to complete a $6.3 billion (US) merger process launched in March to acquire Ohio-based nuclear operator Energy Harbor. |
| • | On August 24, Xcel Energy announced it received the necessary state approvals to extend operations of the Monticello nuclear power plant through 2040 by allowing the company to increase its onsite storage of spent nuclear fuel. |
Caution about forward-looking information relating to the nuclear industry
This discussion of our expectations for the nuclear industry, including its growth profile, uranium supply and demand, and reactor growth is forward-looking information that is based upon the assumptions and subject to the material risks discussed under the heading Caution about forward-looking information beginning on page 2.
Industry prices at quarter end
| SEP 30 2023 |
JUN 30 2023 |
MAR 31 2023 |
DEC 31 2022 |
SEP 30 2022 |
JUN 30 2022 |
|||||||||||||||||||
| Uranium ($US/lb U3O8)1 |
||||||||||||||||||||||||
| Average spot market price |
71.58 | 56.10 | 50.48 | 47.68 | 48.38 | 49.75 | ||||||||||||||||||
| Average long-term price |
61.50 | 56.00 | 53.00 | 52.00 | 51.00 | 51.50 | ||||||||||||||||||
| Fuel services ($US/kgU as UF6)1 |
||||||||||||||||||||||||
| Average spot market price |
||||||||||||||||||||||||
| North America |
40.88 | 40.75 | 39.75 | 40.00 | 38.00 | 32.75 | ||||||||||||||||||
| Europe |
40.88 | 40.75 | 39.75 | 40.00 | 38.00 | 32.75 | ||||||||||||||||||
| Average long-term price |
||||||||||||||||||||||||
| North America |
31.50 | 30.75 | 27.88 | 27.25 | 26.75 | 26.25 | ||||||||||||||||||
| Europe |
31.50 | 30.50 | 27.88 | 27.50 | 27.00 | 26.50 | ||||||||||||||||||
| Note: the industry does not publish UO2 prices. | ||||||||||||||||||||||||
| 1 | Average of prices reported by TradeTech and UxC LLC (UxC) |
On the spot market, where purchases call for delivery within one year, the volume reported by UxC for the third quarter of 2023 was almost 13 million pounds U3O8 equivalent, compared to 9 million pounds U3O8 equivalent contracted in the third quarter of 2022. As of September 30, 2023, the average reported spot price was $71.58 (US) per pound, an increase of $15.48 (US) per pound from the previous quarter.
| 2023 THIRD QUARTER REPORT | 7 |
Long-term contracts generally call for deliveries to begin more than two years after the contract is finalized, and use a number of pricing formulas, including base-escalated prices set at time of contracting and escalated over the term of the contract, and market-related prices, which reference spot and/or long-term indicators determined near the time of delivery. Long-term contracting reported by UxC for the first nine months of 2023 totaled about 144 million pounds U3O8 equivalent, up from about 80 million pounds U3O8 equivalent reported over the same period in 2022. Total long-term contracting volumes to date in 2023 has already exceeded the volume of each of the last 10 years, a strong indication that a new long-term contracting cycle is underway. The average reported long-term price at the end of the quarter was $61.50 (US) per pound U3O8 equivalent, an increase of $5.50 (US) per pound from the previous quarter.
With the increased demand for conversion services, pricing in both North America and Europe continues to be strong. As of the end of the third quarter, the average reported spot price reached a record high of $40.88 (US) per kilogram uranium (kgU) as UF6, up $0.13 (US) from the previous quarter. Long-term UF6 conversion prices for North America finished the quarter at $31.50 (US) per kgU, up $0.75 (US) from the previous quarter.
| 8 | CAMECO CORPORATION |
Our strategy
We are a pure-play investment in the growing demand for nuclear energy. We are focused on providing nuclear fuel products and services across the fuel cycle to support the generation of clean, reliable, secure and affordable energy, and we are focused on taking advantage of the long-term growth we see coming in our industry. Our strategy is set within the context of what we believe is a transitioning market environment, where increasing populations, a growing focus on electrification and decarbonization, and concerns about energy security and affordability are expected to durably strengthen the long-term fundamentals for nuclear power and the uranium and fuel services needed to run the reactors. We believe nuclear energy must be a significant component of the world’s shift to a low-carbon, climate resilient economy. It is an option that can provide the necessary power in a reliable, safe and affordable manner, and in a way that will help avoid some of the worst consequences of climate change.
Our strategy is to capture full-cycle value by:
| • | remaining disciplined in our contracting activity, building a balanced portfolio in accordance with our contracting framework; |
| • | profitably producing from our tier-one assets and aligning our production decisions in all segments of our business with our contract portfolio and customer needs; |
| • | being financially disciplined to allow us to execute on our strategy, take advantage of strategic opportunities and to self-manage risk, and |
| • | exploring other emerging and non-traditional opportunities within the fuel cycle that align with our commitment to responsibly and sustainably manage our business, contribute to the mitigation of global climate change, and help to provide energy security and affordability |
We expect our strategy will allow us to increase long-term value, and we will execute it with an emphasis on safety, people and the environment.
Our vision – “Energizing a clean-air world” – recognizes that we have an important role to play in enabling the vast reductions in global greenhouse gas (GHG) emissions required to achieve a resilient net-zero carbon economy. We support climate action that is consistent with the ambitions of the Paris Agreement and the Canadian government’s commitment to the agreement, which seeks to limit global temperature rise to less than 2° Celsius, a target that climate scientists believe will require the world to reach net-zero emissions by 2050 or sooner. Our uranium and fuel services are used around the world in the generation of safe, carbon-free, affordable, base-load nuclear power.
We believe we have the right strategy to achieve our vision and we will do so in a manner that reflects our values. For over 30 years, we have been operating and delivering our products responsibly. Building on that strong foundation, we have set a new target to reduce our combined Scope 1 and Scope 2 GHG emissions by 30% by 2030, from our 2015 baseline as our first major milestone on the journey to achieve our ambition of being net-zero. We remain committed to our efforts to transform our own, already low, greenhouse gas footprint in our ambition to reach net-zero emissions, and identifying and addressing the environmental, social, and governance (ESG) risks and opportunities that we believe may have a significant impact on our ability to add long-term value for our stakeholders.
You can read more about our strategy in our 2022 annual MD&A and our approach to ESG in our 2022 ESG report.
| 2023 THIRD QUARTER REPORT | 9 |
Strategy in action
In September, we provided a production update reducing our 2023 uranium production outlook from 33 million pounds (20.3 million pounds our share) to up to 30.3 million pounds (up to 18.7 million pounds our share). See Uranium 2023 Q3 updates starting on page 27 for more information. This expected production shortfall further highlights the growing security of supply risk at a time when we believe the demand outlook is stronger and more durable than ever and where we believe the risk to uranium supply is greater than the risk to uranium demand. We expect the uncertainty about where nuclear fuel supplies will come from to satisfy growing demand will continue to drive a renewed focus on long-term contracting to ensure availability of supply to fuel nuclear reactors. With the improvements in the market, the new long-term contracts we have put in place, and a pipeline of contracting discussions, we maintain our plans to increase uranium production to 36 million pounds (22.4 million pounds our share) starting in 2024. At Inkai, production will continue to follow the 20% reduction planned by Kazatomprom until the end of 2023. In addition to our uranium production plans, our Port Hope UF6 conversion facility is working to increase annual production to 12,000 tonnes of UF6 by 2024, in order to satisfy our book of long-term business and demand for conversion services, at a time when conversion prices are at historic highs.
We continue to have the ability to expand production from our existing assets, however some additional investment would be required. If we took advantage of all tier-one expansion opportunities, our annual share of tier-one uranium supply could be about 32 million pounds (including our share of production from McArthur River/Key Lake and Cigar Lake, and Inkai purchases). However, we will continue to responsibly manage our supply in accordance with our contract portfolio and our customers’ needs.
With increasing supply risk caused by production challenges and heightened geopolitical uncertainty, utilities are evaluating their nuclear fuel supply chains. Our utility customers’ nuclear power plants continue to be part of the critical infrastructure needed to guarantee the availability of 24-hour electricity to run essential services. Our customers are going to need nuclear fuel to allow them to continue to provide carbon-free baseload electricity. As a reliable, commercial supplier, with nuclear fuel assets in geopolitically stable jurisdictions, we are focused on working with our customers to secure long-term commitments that will underpin the long-term operation of our productive capacity, while helping de-risk their nuclear fuel supply chains.
We are also focused on adding new markets to our global commercial portfolio. We are successfully competing for business in countries seeking to enhance their energy security, while affirming their commitment to carbon-free nuclear power in achieving their climate goals.
In recent years, the volumes we have placed under long-term agreements have exceeded our annual delivery volumes. With our contracting success, we are heavily committed under long-term contracts. As of September 30, 2023, we had commitments requiring delivery of an average of about 29 million pounds per year from 2023 through 2027, an increase from an average of about 28 million pounds per year at the end of June. Commitment levels in 2023 through 2025 are higher than the average and in 2026 and 2027 lower than the average. We also have contracts in our uranium and fuel services segments that have deliveries spanning more than a decade, and in our uranium segment, many of our contracts benefit from market-related pricing mechanisms. In addition, we have a large and growing pipeline of business under discussion, which we expect will help further build our long-term portfolio. With about 144 million pounds of long-term contracting industry-wide so far this year, we believe there is clear evidence that the broader uranium market is moving toward replacement-rate contracting reflecting security of supply concerns. This is the type of contracting necessary to promote the price discovery already seen in the enrichment and conversion markets and that will incentivize investments in the supply necessary to satisfy the growing long-term requirements. Therefore, we remain selective in committing our unencumbered, in-ground uranium inventory and UF6 conversion capacity under long-term contracts to help maintain additional exposure to future improvements in the market.
We continue to meet our sales commitments through a combination of production, inventory, purchases and product loans. In the first nine months of 2023, we produced 11.9 million pounds of uranium (our share) and purchased 5 million pounds. The average unit cost of our purchases was $69.88 per pound ($51.58 per pound (US)). See Financial results by segment – Uranium starting on page 23 for more information.
Thanks to the disciplined execution of our strategy, our balance sheet is strong. As of September 30, 2023, we had $2.7 billion in cash and cash equivalents, and $1.0 billion in total debt. We also have a $1.0 billion undrawn credit facility. Our current cash balance is in excess of our normal working capital requirements and is expected to be used to help finance the pending acquisition of Westinghouse. See Pending acquisition of Westinghouse on page 30.
| 10 | CAMECO CORPORATION |
In October, pursuant to a cost award from the courts, we received a payment of approximately $12 million for disbursements from Canada Revenue Agency (CRA), which is in addition to the $10 million we received as reimbursement for legal fees in 2021. See Transfer pricing dispute on page 15 for more information.
We expect to maintain the financial strength and flexibility necessary to execute our strategy by being disciplined and planning production in coordination with contracting success and market opportunities, and by taking advantage of value-added growth opportunities, while continuing to navigate by our investment grade rating to self-manage risk, including risks related to global macro-economic uncertainty and volatility.
| 2023 THIRD QUARTER REPORT | 11 |
Financial results
This section of our MD&A discusses our performance, financial condition and outlook for the future.
In the second quarter of 2022, we, along with Orano, acquired Idemitsu Canada Resources Ltd.’s 7.875% participating interest in the Cigar Lake Joint Venture. Our ownership stake in Cigar Lake is now 54.547%, which is 4.522% higher than it was prior to the transaction. Effective May 19, 2022, we have reflected our share of production and financial results based on this new ownership stake.
Consolidated financial results
| HIGHLIGHTS | THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| ($ MILLIONS EXCEPT WHERE INDICATED) |
2023 | 2022 | CHANGE | 2023 | 2022 | CHANGE | ||||||||||||||||||
| Revenue |
575 | 389 | 48 | % | 1,744 | 1,344 | 30 | % | ||||||||||||||||
| Gross profit |
152 | 25 | >100 | % | 429 | 168 | >100 | % | ||||||||||||||||
| Net earnings (losses) attributable to equity holders |
148 | (20 | ) | >100 | % | 281 | 105 | >100 | % | |||||||||||||||
| $ per common share (basic) |
0.34 | (0.05 | ) | >100 | % | 0.65 | 0.26 | >100 | % | |||||||||||||||
| $ per common share (diluted) |
0.34 | (0.05 | ) | >100 | % | 0.65 | 0.26 | >100 | % | |||||||||||||||
| Adjusted net earnings (non-IFRS, see page 13) |
137 | 10 | >100 | % | 249 | 100 | >100 | % | ||||||||||||||||
| $ per common share (adjusted and diluted) |
0.32 | 0.03 | >100 | % | 0.57 | 0.25 | >100 | % | ||||||||||||||||
| Cash provided by (used in) operations (after working capital changes) |
185 | (47 | ) | >100 | % | 487 | 227 | >100 | % | |||||||||||||||
NET EARNINGS
The following table shows what contributed to the change in net earnings and adjusted net earnings (non-IFRS measure, see page 13) in the third quarter and the first nine months of 2023, compared to the same periods in 2022.
| THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| ($ MILLIONS) |
IFRS | ADJUSTED | IFRS | ADJUSTED | ||||||||||||||
| Net earnings (losses) - 2022 |
(20 | ) | 10 | 105 | 100 | |||||||||||||
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| Change in gross profit by segment |
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| (We calculate gross profit by deducting from revenue the cost of products and services sold, and depreciation and amortization (D&A), net of hedging benefits) |
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| Uranium |
Impact from sales volume changes | 6 | 6 | 18 | 18 | |||||||||||||
| Higher realized prices ($US) | 56 | 56 | 93 | 93 | ||||||||||||||
| Foreign exchange impact on realized prices | 18 | 18 | 75 | 75 | ||||||||||||||
| Lower costs | 40 | 40 | 66 | 66 | ||||||||||||||
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| Change – uranium | 120 | 120 | 252 | 252 | ||||||||||||||
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| Fuel services |
Impact from sales volume changes | — | — | 5 | 5 | |||||||||||||
| Higher realized prices ($Cdn) | 14 | 14 | 24 | 24 | ||||||||||||||
| Higher costs | (8 | ) | (8 | ) | (20 | ) | (20 | ) | ||||||||||
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| Change – fuel services | 6 | 6 | 9 | 9 | ||||||||||||||
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| Other changes |
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| Higher administration expenditures |
(5 | ) | (5 | ) | (44 | ) | (44 | ) | ||||||||||
| Higher exploration expenditures |
(1 | ) | (1 | ) | (6 | ) | (6 | ) | ||||||||||
| Change in reclamation provisions |
36 | 12 | (10 | ) | 10 | |||||||||||||
| Higher earnings from equity-accounted investee |
26 | 26 | 22 | 22 | ||||||||||||||
| Change in gains or losses on derivatives |
26 | (8 | ) | 75 | (20 | ) | ||||||||||||
| Change in foreign exchange gains or losses |
3 | 3 | (60 | ) | (60 | ) | ||||||||||||
| Higher finance income |
25 | 25 | 77 | 77 | ||||||||||||||
| Bargain purchase gain on CLJV ownership interest increase |
— | — | (23 | ) | — | |||||||||||||
| Change in income tax recovery or expense |
(66 | ) | (49 | ) | (100 | ) | (75 | ) | ||||||||||
| Other |
(2 | ) | (2 | ) | (16 | ) | (16 | ) | ||||||||||
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| Net earnings - 2023 |
148 | 137 | 281 | 249 | ||||||||||||||
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See Financial results by segment on page 23 for more detailed discussion.
| 12 | CAMECO CORPORATION |
ADJUSTED NET EARNINGS (NON-IFRS MEASURE)
Adjusted net earnings (ANE) is a measure that does not have a standardized meaning or a consistent basis of calculation under IFRS (non-IFRS measure). We use this measure as a meaningful way to compare our financial performance from period to period. Adjusted net earnings is our net earnings attributable to equity holders, adjusted to reflect the underlying financial performance for the reporting period. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance. Adjusted net earnings is one of the targets that we measure to form the basis for a portion of annual employee and executive compensation (see Measuring our results starting on page 36 of our 2022 annual report).
In calculating ANE we adjust for derivatives. We do not use hedge accounting under IFRS and, therefore, we are required to report gains and losses on all hedging activity, both for contracts that close in the period and those that remain outstanding at the end of the period. For the contracts that remain outstanding, we must treat them as though they were settled at the end of the reporting period (mark-to-market). However, we do not believe the gains and losses that we are required to report under IFRS appropriately reflect the intent of our hedging activities, so we make adjustments in calculating our ANE to better reflect the impact of our hedging program in the applicable reporting period. See Foreign exchange starting on page 17 for more information.
We also adjust for changes to our reclamation provisions that flow directly through earnings. Every quarter we are required to update the reclamation provisions for all operations based on new cash flow estimates, discount and inflation rates. This normally results in an adjustment to an asset retirement obligation asset in addition to the provision balance. When the assets of an operation have been written off due to an impairment, as is the case with our Rabbit Lake and US ISR operations, the adjustment is recorded directly to the statement of earnings as “other operating expense (income)”. See note 9 of our interim financial statements for more information. This amount has been excluded from our ANE measure.
The bargain purchase gain that was recognized when we acquired our pro-rata share of Idemitsu Canada Resources Ltd.’s 7.875% participating interest in the Cigar Lake Joint Venture has also been removed in calculating ANE since it is non-cash, non-operating and outside of the normal course of our business. The gain was recorded in the statement of earnings as part of “other income (expense)”.
Adjusted net earnings is a non-IFRS financial measure and should not be considered in isolation or as a substitute for financial information prepared according to accounting standards. Other companies may calculate this measure differently, so you may not be able to make a direct comparison to similar measures presented by other companies.
The following table reconciles adjusted net earnings with net earnings for the third quarter and first nine months of 2023 and compares it to the same periods in 2022.
| THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| ($ MILLIONS) |
2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net earnings (losses) attributable to equity holders |
148 | (20 | ) | 281 | 105 | |||||||||||
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| Adjustments |
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| Adjustments on derivatives |
41 | 75 | — | 95 | ||||||||||||
| Adjustment to other operating income |
(48 | ) | (24 | ) | (42 | ) | (62 | ) | ||||||||
| Adjustment to other income |
— | — | — | (23 | ) | |||||||||||
| Income taxes on adjustments |
(4 | ) | (21 | ) | 10 | (15 | ) | |||||||||
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| Adjusted net earnings |
137 | 10 | 249 | 100 | ||||||||||||
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| 2023 THIRD QUARTER REPORT | 13 |
Quarterly trends
| HIGHLIGHTS | 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||
| ($ MILLIONS EXCEPT PER SHARE AMOUNTS) |
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | ||||||||||||||||||||||||
| Revenue |
575 | 482 | 687 | 524 | 389 | 558 | 398 | 465 | ||||||||||||||||||||||||
| Net earnings (losses) attributable to equity holders |
148 | 14 | 119 | (15 | ) | (20 | ) | 84 | 40 | 11 | ||||||||||||||||||||||
| $ per common share (basic) |
0.34 | 0.03 | 0.27 | (0.04 | ) | (0.05 | ) | 0.21 | 0.10 | 0.03 | ||||||||||||||||||||||
| $ per common share (diluted) |
0.34 | 0.03 | 0.27 | (0.04 | ) | (0.05 | ) | 0.21 | 0.10 | 0.03 | ||||||||||||||||||||||
| Adjusted net earnings (losses) (non-IFRS, see page 13) |
137 | (3 | ) | 115 | 36 | 10 | 72 | 17 | 23 | |||||||||||||||||||||||
| $ per common share (adjusted and diluted) |
0.32 | (0.01 | ) | 0.27 | 0.09 | 0.03 | 0.18 | 0.04 | 0.06 | |||||||||||||||||||||||
| Cash provided by (used in) operations (after working capital changes) |
185 | 87 | 215 | 77 | (47 | ) | 102 | 172 | 59 | |||||||||||||||||||||||
Key things to note:
| • | the timing of customer requirements, which tend to vary from quarter to quarter, drives revenue in the uranium and fuel services segments, meaning quarterly results are not necessarily a good indication of annual results due to seasonal variability |
| • | net earnings do not trend directly with revenue due to unusual items and transactions that occur from time to time. We use adjusted net earnings, a non-IFRS measure, as a more meaningful way to compare our results from period to period (see page 13 for more information). |
| • | cash from operations tends to fluctuate as a result of the timing of deliveries and product purchases in our uranium and fuel services segments |
The following table compares the net earnings and adjusted net earnings for the first quarter to the previous seven quarters.
| HIGHLIGHTS | 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||
| ($ MILLIONS EXCEPT PER SHARE AMOUNTS) |
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | ||||||||||||||||||||||||
| Net earnings (losses) attributable to equity holders |
148 | 14 | 119 | (15 | ) | (20 | ) | 84 | 40 | 11 | ||||||||||||||||||||||
| Adjustments |
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| Adjustments on derivatives |
41 | (35 | ) | (6 | ) | (19 | ) | 75 | 31 | (11 | ) | 5 | ||||||||||||||||||||
| Adjustment to other operating income |
(48 | ) | 8 | (2 | ) | 88 | (24 | ) | (19 | ) | (19 | ) | 10 | |||||||||||||||||||
| Adjustment to other income |
— | — | — | — | — | (23 | ) | — | — | |||||||||||||||||||||||
| Income taxes on adjustments |
(4 | ) | 10 | 4 | (18 | ) | (21 | ) | (1 | ) | 7 | (3 | ) | |||||||||||||||||||
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| Adjusted net earnings (losses) (non-IFRS, see page 13) |
137 | (3 | ) | 115 | 36 | 10 | 72 | 17 | 23 | |||||||||||||||||||||||
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Corporate expenses
ADMINISTRATION
| THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| ($ MILLIONS) |
2023 | 2022 | CHANGE | 2023 | 2022 | CHANGE | ||||||||||||||||||
| Direct administration |
45 | 38 | 18 | % | 137 | 105 | 30 | % | ||||||||||||||||
| Stock-based compensation |
21 | 23 | (9 | )% | 50 | 34 | 47 | % | ||||||||||||||||
| Reversal (recovery) of fees related to CRA dispute |
— | — | — | — | 4 | (100 | )% | |||||||||||||||||
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| Total administration |
66 | 61 | 8 | % | 187 | 143 | 31 | % | ||||||||||||||||
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Direct administration costs were $7 million higher for the third quarter of 2023 compared to the same period last year, and $32 million higher for the first nine months largely due to the impacts of inflation and higher costs as a result of digital initiatives. Stock-based compensation in the first nine months of 2023 was $16 million higher than 2022 due to the increase in our share price from the comparative period. See note 17 to the financial statements.
| 14 | CAMECO CORPORATION |
EXPLORATION AND RESEARCH & DEVELOPMENT
In the third quarter, uranium exploration expenses were $4 million, an increase of $1 million from the third quarter of 2022. Exploration expenses for the first nine months of the year increased by $6 million compared to 2022, to $14 million.
We also had research and development expenditures in the third quarter of $8 million, an increase of $5 million from the third quarter of 2022. Research and development expenses for the first nine months of the year increased by $8 million compared to 2022, to $17 million. These expenses are related to our investment in Global Laser Enrichment, LLC.
INCOME TAXES
We recorded an income tax expense of $41 million in the third quarter of 2023, compared to a recovery of $25 million in the third quarter of 2022.
In the first nine months of 2023, we recorded an expense of $100 million compared to no expense in 2022.
| THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| ($ MILLIONS) |
2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net earnings (loss) before income taxes |
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| Canada |
162 | (87 | ) | 373 | 79 | |||||||||||
| Foreign |
27 | 42 | 8 | 26 | ||||||||||||
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| Total net earnings before income taxes |
189 | (45 | ) | 381 | 105 | |||||||||||
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| Income tax expense (recovery) |
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39 | (27 | ) | 93 | (5 | ) | ||||||||||
| Foreign |
2 | 2 | 7 | 5 | ||||||||||||
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| Total income tax expense |
41 | (25 | ) | 100 | — | |||||||||||
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TRANSFER PRICING DISPUTE
Background
Since 2008, Canada Revenue Agency (CRA) has disputed our marketing and trading structure and the related transfer pricing methodology we used for certain intercompany uranium sale and purchase agreements.
For the years 2003 to 2014, CRA shifted Cameco Europe Limited’s income (as recalculated by CRA) back to Canada and applied statutory tax rates, interest and instalment penalties, and, from 2007 to 2011, transfer pricing penalties. In addition, for 2014 to 2016, CRA has advanced an alternate reassessing position, see Reassessments, remittances and next steps below for more information.
In September 2018, the Tax Court of Canada (Tax Court) ruled that our marketing and trading structure involving foreign subsidiaries, as well as the related transfer pricing methodology used for certain intercompany uranium sales and purchasing agreements, were in full compliance with Canadian law for the tax years in question (2003, 2005 and 2006). On June 26, 2020, the Federal Court of Appeal (Court of Appeal) upheld the Tax Court’s decision.
On February 18, 2021, the Supreme Court of Canada (Supreme Court) dismissed CRA’s application for leave to appeal the June 26, 2020, decision of the Court of Appeal. The dismissal means that the dispute for the 2003, 2005 and 2006 tax years is fully and finally resolved in our favour. Although not technically binding, there is nothing in the reasoning of the lower court decisions that should result in a different outcome for the 2007 through 2014 tax years, which were reassessed on the same basis.
Refund and cost award
The Minister of National Revenue issued new reassessments for the 2003 through 2006 tax years in accordance with the decision and in July 2021, refunded the tax paid for those years. In October, pursuant to a cost award from the courts, we received a payment of approximately $12 million for disbursements, which is in addition to the $10 million we received from CRA in April 2021 as reimbursement for legal fees.
| 2023 THIRD QUARTER REPORT | 15 |
Reassessments, remittances and next steps
The Canadian income tax rules include provisions that generally require larger companies like us to remit or otherwise secure 50% of the cash tax plus related interest and penalties at the time of reassessment. Following the Supreme Court’s dismissal of CRA’s application for leave to appeal, we wrote to CRA requesting reversal of CRA’s transfer pricing adjustments for 2007 through 2013 and the return of the $780 million in cash and letters of credit we have paid or provided for those years. Given the strength of the court decisions received, our request was made on the basis that the Tax Court would reject any attempt by CRA to defend its reassessments for the 2007 through 2013 tax years applying the same or similar positions already denied for previous years.
In March, CRA issued revised reassessments for the 2007 through 2013 tax years, which resulted in a refund of $297 million of the $780 million in cash and letters of credit held by CRA at the time. The refund consisted of cash in the amount of $86 million and letters of credit in the amount of $211 million, which were returned in the second quarter. CRA continues to hold $483 million ($209 million in cash and $274 million in letters of credit) that Cameco has remitted or secured to date.
The series of court decisions that were completely and unequivocally in our favour for the 2003, 2005 and 2006 tax years, determined that the income earned by our foreign subsidiary from the sale of non-Canadian produced uranium was not taxable in Canada. In accordance with these decisions, CRA issued reassessments reducing the proposed transfer pricing adjustment from $5.1 billion to $3.3 billion, resulting in a reduction of $1.8 billion in income taxable in Canada compared to the previous reassessments issued to us by CRA for the 2007 through 2013 tax years.
The remaining transfer pricing adjustment of $3.3 billion for the 2007 to 2013 tax years relates to the sale of Canadian-produced uranium by our foreign subsidiary. Cameco maintains that the clear and decisive court decisions described above apply, and that CRA should fully reverse the remaining transfer pricing adjustments for these years and return the cash and security being held.
In October 2021, due to a lack of significant progress on our points of contention, we filed a notice of appeal with the Tax Court for the years 2007 through 2013. We have asked the Tax Court to order the complete reversal of CRA’s transfer pricing adjustment for those years and the return of the remainder of our cash and letters of credit being held, with costs.
In 2020, CRA advanced an alternate reassessing position for the 2014 tax year in the event the basis for its original reassessment, noted above, is unsuccessful. Subsequent to this, in 2021, we received a reassessment for the 2015 tax year and in late 2022, we received a reassessment for the 2016 tax year, both using this alternative reassessing position. The new basis of reassessment is inconsistent with the methodology CRA has pursued for prior years and we are disputing it separately. Our view is that this alternate methodology will not result in a materially different outcome from our 2014 to 2016 filing positions. On October 12, 2022, we filed an appeal with the Tax Court for the years 2014 and 2015, and in March 2023, filed a notice of objection for 2016. CRA did not require additional security for the tax debts they considered owing for 2014, 2015 and 2016.
We will not be in a position to determine the definitive outcome of this dispute for any tax year other than 2003 through 2006 until such time as all reassessments have been issued advancing CRA’s arguments and final resolution is reached for that tax year. CRA may also advance alternative reassessment methodologies for years other than 2003 through 2006, such as the alternative reassessing position advanced for 2014 through 2016.
Caution about forward-looking information relating to our CRA tax dispute
This discussion of our expectations relating to our tax dispute with CRA and future tax reassessments by CRA is forward-looking information that is based upon the assumptions and subject to the material risks discussed under the heading Caution about forward-looking information beginning on page 2.
| 16 | CAMECO CORPORATION |
FOREIGN EXCHANGE
The exchange rate between the Canadian dollar and US dollar affects the financial results of our uranium and fuel services segments.
We sell the majority of our uranium and fuel services products under long-term sales contracts, which are routinely denominated in US dollars. While our product purchases are largely denominated in US dollars, our production costs are largely denominated in Canadian dollars. To provide cash flow predictability, we hedge a portion of our net US/Cdn exposure (e.g. total US dollar sales less US dollar expenditures and product purchases) to manage shorter term exchange rate volatility. Our results are therefore affected by the movements in the exchange rate on our hedge portfolio, and on the unhedged portion of our net exposure.
Impact of hedging on IFRS earnings
We do not use hedge accounting under IFRS and we are therefore required to report gains and losses on economic hedging activity, both for contracts that close in the period and those that remain outstanding at the end of the period. For the contracts that remain outstanding, we must treat them as though they were settled at the end of the reporting period (mark-to-market).
However, we do not believe the gains and losses that we are required to report under IFRS appropriately reflect the intent of our hedging activities, so we make adjustments in calculating our ANE to better reflect the benefits of our hedging program in the applicable reporting period.
Impact of hedging on ANE
We designate contracts for use in particular periods, based on our expected net exposure in that period. Hedge contracts are layered in over time based on this expected net exposure. The result is that our current hedge portfolio is made up of a number of contracts which are currently designated to net exposures we expect in 2023 and future years, and we will recognize the gains and losses in ANE in those periods.
For the purposes of ANE, gains and losses on derivatives are reported based on the difference between the effective hedge rate of the contracts designated for use in the particular period and the exchange rate at the time of settlement. This results in an adjustment to current period IFRS earnings to effectively remove reported gains and losses on derivatives that arise from contracts put in place for use in future periods. The effective hedge rate will lag the market in periods of rapid currency movement. See Non-IFRS measures on page 13.
For more information, see our 2022 annual MD&A.
At September 30, 2023:
| • | The value of the US dollar relative to the Canadian dollar was $1.00 (US) for $1.36 (Cdn), up from $1.00 (US) for $1.32 (Cdn) at June 30, 2023. The exchange rate averaged $1.00 (US) for $1.34 (Cdn) over the quarter. |
| • | The mark-to-market position on all foreign exchange contracts was a $48 million loss compared to a $7 million loss at June 30, 2023. |
For information on the impact of foreign exchange on our intercompany balances, see note 18 to the financial statements.
| 2023 THIRD QUARTER REPORT | 17 |
Outlook for 2023
Our outlook for 2023 is beginning to reflect the transition of our cost structure back to a tier-one run rate, as we plan our production to satisfy the growing long-term commitments under our contract portfolio. With our plan to produce 18 million pounds per year (100% basis) at both Cigar Lake and at McArthur River/Key Lake in 2024, and to increase production at our Port Hope UF6 conversion facility, we expect to see continued improvement in our financial performance.
From a cash perspective, we expect to generate strong cash flows. However, cash balances will be dependent on the timing and volume of production, the timing, magnitude and source of our purchasing activity, and the timing of the close of the Westinghouse acquisition.
As in prior years, we will incur care and maintenance costs for the ongoing curtailment of our tier-two assets, which are expected to be between $50 million and $60 million.
As a result of lower production expectations from Cigar Lake and from McArthur River/Key Lake, we now expect to produce up to 18.7 million pounds (our share) in 2023. Please see Uranium 2023 Q3 updates on page 27 for more information. Due to the continued upward movement in the uranium spot price, we have updated our outlook for the anticipated uranium average realized price to $65.50 per pound (previously $63.80 per pound). With the updates to sales price, we now expect uranium revenue to be between $2,040 million and $2,130 million (previously $1,990 million to $2,080 million) and expected consolidated revenue to between $2,430 million and $2,580 million (previously $2,380 million to $2,530 million).
The average unit cost of sales in our uranium segment is now expected to be between $52.00 and $53.00 per pound (previously $49.00 and $51.00 per pound) due to the lower production expectations and the impact of the uranium spot price on our purchasing activity.
2023 FINANCIAL OUTLOOK
| CONSOLIDATED | URANIUM | FUEL SERVICES | ||||||||||
| Production (owned and operated properties) |
— | up to 18.7 million lbs | 13 to 14 million kgU | |||||||||
| Purchases |
— | 11 to 13 million lbs | — | |||||||||
| Sales/delivery volume |
— | 31 to 33 million lbs | 11.5 to 12.5 million kgU | |||||||||
| Revenue |
$ | 2,430-2,580 million | $ | 2,040-2,130 million | $ | 390-420 million | ||||||
| Average realized price |
— | $ | 65.50/lb | — | ||||||||
| Average unit cost of sales (including D&A) |
— | $ | 52.00-53.00/lb | 1 | $ | 23.50-24.50/kgU | 2 | |||||
| Direct administration costs |
$ | 180-190 million | — | — | ||||||||
| Exploration costs |
— | $ | 18 million | — | ||||||||
| Capital expenditures |
$ | 150-175 million | — | — | ||||||||
| 1 | Uranium average unit cost of sales is calculated as the cash and non-cash costs of the product sold, care and maintenance and selling costs, divided by the volume of uranium concentrates sold. |
| 2 | Fuel services average unit cost of sales is calculated as the cash and non-cash costs of the product sold, transportation and weighing and sampling costs, divided by the volume of products sold. |
We do not provide an outlook for the items in the table that are marked with a dash.
The following assumptions were used to prepare the outlook in the table above:
| • | Production – we achieve 18.7 million pounds of production (our share) in our uranium segment. If we do not achieve 18.7 million pounds, the outlook for the uranium segment may change. |
| • | Purchases – are based on the volumes we currently have commitments to acquire under contract in 2023, including our JV Inkai purchases, and it includes additional volumes we are required to purchase in order to meet the sales/delivery commitments we have under contract in 2023 and maintain a working inventory. It does not include any purchases that we may make as a result of the impact of any delays or disruptions to production for any reason, including disruptions caused by supply chain or transportation, or other issues. |
| 18 | CAMECO CORPORATION |
| • | Our 2023 outlook for sales/delivery volume and revenue does not include sales between our uranium and fuel services segments. |
| • | Sales/delivery volume is based on the volumes already delivered this year and the remaining commitments we have to deliver under contract in 2023. |
| • | Uranium revenue and average realized price are based on a uranium spot price of $70.00 (US) per pound (the UxC spot price as of September 25, 2023), a long-term price indicator of $61.00 (US) per pound (the UxC long-term indicator on September 25, 2023) and an exchange rate of $1.00 (US) for $1.33 (Cdn). |
| • | Uranium average unit cost of sales (including D&A) is based on the expected unit cost of sales for produced material, the planned purchases noted in the outlook at an anticipated average purchase price of about $72.40 (Cdn) per pound (previously $68.90 (Cdn) per pound) and includes care and maintenance costs of between $50 million and $60 million. We expect overall unit cost of sales could vary if there are changes in production and purchase volumes or the mix between spot and long-term purchases, uranium spot prices, and/or care and maintenance costs in 2023. |
| • | Direct administration costs do not include stock-based compensation expenses. See page 14 for more information. |
Our 2023 financial outlook is presented on the basis of equity accounting for our minority ownership interest in JV Inkai. Under equity accounting, our share of the profits earned by JV Inkai on the sale of its production to the JV partners will be included in “income from equity-accounted investees” on our consolidated statement of earnings. Our share of production will be purchased at a discount to the spot price and included at this value in inventory. In addition, JV Inkai capital is not included in our outlook for capital expenditures.
For more information on how changes in the exchange rate or uranium prices can impact our outlook see Revenue, adjusted net earnings, and cash flow sensitivity analysis below, and Foreign exchange on page 17.
REVENUE, ADJUSTED NET EARNINGS, AND CASH FLOW SENSITIVITY ANALYSIS
| FOR 2023 ($ MILLIONS) |
IMPACT ON: | |||||||||||||
| CHANGE |
REVENUE | ANE | CASH FLOW | |||||||||||
| Uranium spot and term price1 |
$5(US)/lb increase | 8 | 2 | (18 | ) | |||||||||
| $5(US)/lb decrease | (11 | ) | (4 | ) | 15 | |||||||||
| Value of Canadian dollar vs US dollar |
One cent decrease in CAD | 5 | 8 | — | ||||||||||
| One cent increase in CAD | (5 | ) | (8 | ) | — | |||||||||
| 1 | Assuming change in both UxC spot price ($70.00 (US) per pound on September 25, 2023) and the UxC long-term price indicator ($61.00 (US) per pound on September 25, 2023) |
We have sensitivity to the uranium price through both our sales and purchase commitments. However, for the remainder of the year our sales commitments are less sensitive to an increase in the uranium price than a decrease, while our purchase commitments are equally sensitive to an increase or decrease.
PRICE SENSITIVITY ANALYSIS: URANIUM SEGMENT
As discussed under Long-term contracting on page 26 of our 2022 annual MD&A, our average realized price is based on pricing terms established in our portfolio of long-term contracts, which includes a mix of base-escalated and market-related contracts that are layered in over time. Each confidential contract is bilaterally negotiated with the customer and delivery generally does not begin until two years or more after signing.
| • | Base-escalated contracts will reflect market conditions and pricing at the time each contract was finalized, with escalation factors applied based on when the material is delivered. |
| • | Market-related contracts reference a market price that can be set several months prior to delivery, subject to specific terms unique to each contract, such as floors and ceilings set relative to market pricing at time of negotiation and typically escalated to time of delivery. |
As a result of these contracting dynamics, changes to our average realized price will generally lag changes in market prices in both rising and falling price conditions. The magnitude and direction of the deviation can vary based on the degree of market price volatility between the time the contract price is set, and the time the product is delivered.
To help understand how the pricing under our current portfolio of commitments is expected to react at various spot prices at September 30, 2023, we have constructed the table that follows.
| 2023 THIRD QUARTER REPORT | 19 |
The table is based on the volumes and pricing terms under the long-term commitments in our contract portfolio that have been finalized as at September 30, 2023. The table does not include volumes and pricing terms in contracts under negotiation or those that have been accepted but are still subject to contract finalization. Based on the terms and volumes under contracts that have been finalized, the table is designed to indicate how our average realized price would react under various spot price assumptions at a point in time. In other words, the prices shown in the table would only be realized if the contract portfolio remained exactly as it was on September 30, 2023, using the following assumptions:
| • | The uranium price remains fixed at a given spot level for each annual period shown |
| • | Deliveries based on commitments under finalized contracts include best estimates of the expected deliveries and flexibility under contract terms |
| • | To reflect escalation mechanisms contained in existing contracts, the long-term US inflation rate target of 2% is used, for modeling purposes only |
It is important to note that the table 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. We intend to update this table each quarter in our MD&A to reflect deliveries made and changes to our contract portfolio. As a result, we expect the table to change from quarter to quarter.
Expected realized uranium price sensitivity under various spot price assumptions at September 30, 2023
(rounded to the nearest $1.00)
| SPOT PRICES ($US/lb U3O8) |
$20 | $40 | $60 | $80 | $100 | $120 | $140 | |||||||||||||||||||||
| 2023 |
46 | 47 | 48 | 49 | 49 | 49 | 50 | |||||||||||||||||||||
| 2024 |
35 | 41 | 51 | 56 | 58 | 59 | 60 | |||||||||||||||||||||
| 2025 |
37 | 43 | 54 | 61 | 64 | 65 | 66 | |||||||||||||||||||||
| 2026 |
40 | 43 | 56 | 65 | 68 | 69 | 70 | |||||||||||||||||||||
| 2027 |
41 | 44 | 56 | 67 | 71 | 72 | 73 | |||||||||||||||||||||
As of September 30, 2023, we had commitments requiring delivery of an average of about 29 million pounds per year from 2023 through 2027, with commitment levels in 2023 through 2025 higher than the average and in 2026 and 2027 lower than the average. As the market improves, we expect to continue to layer in volumes capturing greater upside using market-related pricing mechanisms.
Liquidity and capital resources
Our financial objective is to ensure we have the cash and debt capacity to fund our operating activities, investments and other financial obligations in order to execute our strategy and to allow us to self-manage risk. We have a number of alternatives to fund future capital requirements, including using our operating cash flow, drawing on our existing credit facilities, entering new credit facilities, and raising additional capital through debt or equity financings. We are always considering our financing options so we can take advantage of favourable market conditions when they arise. In addition, due to the deliberate cost reduction measures we have implemented, we have continued to have positive cash from operations, which has added to our cash balance. With the net proceeds from the October 2022 share issuance, which are expected to help finance the pending acquisition of Westinghouse, we had significant cash balances again at the end of the third quarter.
As of September 30, 2023, we had cash and cash equivalents of $2.7 billion, while our total debt amounted to $1.0 billion. Our cash balances and investments are held in government securities or with banks that are party to our lending facilities. We have a risk management policy that we follow to manage our exposure to banking counterparties, which limits amount and tenor of cash or investments based on counterparty credit rating. Our investment decisions prioritize security and liquidity and consider concentration amongst our banking partners. The majority of our cash balances are with Schedule I Canadian banks. On October 5, 2023, we received $12 million from CRA for disbursements related to the September 2018 Tax Court decision and cost award.
| 20 | CAMECO CORPORATION |
As announced on October 11, 2022, we have entered into a strategic partnership with Brookfield and its publicly listed affiliate Brookfield Renewable Partners (Brookfield) and its institutional partners to acquire Westinghouse. Permanent financing is expected to be a mix of capital sources (cash, debt and equity), designed to preserve the company’s balance sheet and ratings strength while maintaining our liquidity. Please see Liquidity and capital resources starting on page 50 of our annual MD&A for more information.
We expect our cash balances, operating cash flows, and the credit facilities put in place to support the close of the Westinghouse transaction, to meet our 2023 capital requirements. Depending on timing, we may have more or less cash than expected at closing and could temporarily draw on our revolving credit facility for short-term working capital purposes.
We have large, creditworthy customers that continue to need our nuclear fuel products and services even during weak economic conditions, and we expect the contract portfolio we have built will continue to provide a solid revenue stream. In our uranium segment, from 2023 through 2027, we have commitments to deliver an average of about 29 million pounds per year, with commitment levels in 2023 through 2025 higher than the average and in 2026 and 2027, lower than the average.
We expect increased production at McArthur River/Key Lake compared to last year will be positive for cash flow as we are able to source more of our committed sales from lower-cost produced pounds and are no longer required to expense operational readiness costs directly to cost of sales. However, cash flow from operations for 2023 will be dependent on the timing and volume of production from McArthur River/Key Lake and Cigar Lake and the timing, magnitude and source of our purchasing activity.
With the Supreme Court’s dismissal of CRA’s application for leave, the dispute for the 2003 through 2006 tax years is fully and finally resolved in our favour. Furthermore, we are confident the courts would reject any attempt by CRA to utilize the same position and arguments for tax years 2007 through 2014, or its alternate reassessing position for tax years 2014 through 2016 and believe CRA should return the remaining $483 million in cash and letters of credit we have been required to pay or otherwise secure. However, timing of any further payments is uncertain. See Transfer pricing dispute starting on page 15 for more information.
CASH FROM/USED IN OPERATIONS
Cash provided by operations was $232 million higher this quarter than in the third quarter of 2022 due to higher earnings and a decrease in working capital requirements, which required $109 million less in 2023 than in 2022. In addition to the higher earnings and decreased working capital requirements, interest received was $27 million more due to higher cash and investment balances and higher interest rates.
Cash provided by operations was $260 million higher in the first nine months of 2023 than for the same period in 2022 due to higher earnings, the $86 million cash refund from CRA, the higher dividend payment from JV Inkai and higher interest received due to higher cash and investment balances and higher interest rates. These factors were partially offset by an increase in working capital requirements, which required $44 million more in 2023 than in 2022. See note 16 of our interim financial statements for more information.
FINANCING ACTIVITIES
We use debt to provide additional liquidity. We have sufficient borrowing capacity with unsecured lines of credit totalling about $2.8 billion at September 30, 2023, up from $2.7 billion at June 30, 2023 due to a stronger US dollar. At September 30, 2023, we had approximately $1.5 billion outstanding in financial assurances, up from $1.4 billion at June 30, 2023 also due to a stronger US dollar.
We have extended the maturity date of our $1.0 billion unsecured revolving credit facility from October 1, 2026, to October 1, 2027. The credit facility allows us to request increases above $1.0 billion, in increments of no less than $50 million, up to a total of $1.25 billion. At September 30, 2023, we had no short-term debt outstanding on our $1.0 billion unsecured revolving credit facility, unchanged from December 31, 2022.
Long-term contractual obligations
Since December 31, 2022, we have reclassified our Series G debentures to current since they mature on June 24, 2024. There have been no other material changes to our long-term contractual obligations. Please see our 2022 annual MD&A for more information.
| 2023 THIRD QUARTER REPORT | 21 |
Debt covenants
We are bound by certain covenants in our unsecured revolving credit facility. The financially related covenants place restrictions on total debt, including guarantees. As at September 30, 2023, we met these financial covenants and do not expect our operating and investment activities for the remainder of 2023 to be constrained by them.
SHARES AND STOCK OPTIONS OUTSTANDING
At October 27, 2023, we had:
| • | 433,865,437 common shares and one Class B share outstanding |
| • | 1,706,604 stock options outstanding, with exercise prices ranging from $11.32 to $16.38 |
DIVIDEND
Our board of directors declared a 2023 annual dividend of $0.12 per common share, payable on December 15, 2023, to shareholders of record on November 30, 2023.
The decision to declare an annual dividend is reviewed regularly by our board in the context of our cash flow, financial position, strategy and other relevant factors, including appropriate alignment with the cyclical nature of our earnings. In 2022, the board increased the dividend by 50% to reflect the expected improvement in our financial performance as we began the transition to our tier-one run rate. Until such time as we return to our tier-one cost structure, the objective of our capital allocation will be to ensure we have the financial capacity to execute on our strategy, including achieving production at McArthur River/Key Lake in accordance with our plan and closing the pending acquisition of Westinghouse. We will continue to navigate by our investment-grade rating through close management of our balance sheet metrics, maintaining sufficient liquidity to meet our risk-mitigated working cash target and that allows us to pursue other value-adding opportunities.
OFF-BALANCE SHEET ARRANGEMENTS
We had three kinds of off-balance sheet arrangements at September 30, 2023:
| • | purchase commitments |
| • | financial assurances |
| • | other arrangements |
Purchase commitments
We make purchases under long-term contracts where it is beneficial for us to do so and in order to support our long-term contract portfolio. The following table is based on our purchase commitments in our uranium and fuel services segments at September 30, 2023,2 but does not include purchases of our share of Inkai production. These commitments include a mix of fixed-price and market-related contracts. Actual payments will be different as a result of changes to our purchase commitments and, in the case of contracts with market-related pricing, the market prices in effect at the time of delivery. We will update this table as required in our MD&A to reflect material changes to our purchase commitments and changes in the prices used to estimate our commitments under market-related contracts.
| SEPTEMBER 30 ($ MILLIONS) |
2023 | 2024 AND 2025 |
2026 AND 2027 |
2028 AND BEYOND |
TOTAL | |||||||||||||||
| Purchase commitments1,2 |
266 | 117 | 158 | 17 | 558 | |||||||||||||||
| 1 | Denominated in US dollars and Japanese yen, converted from US dollars to Canadian dollars at the rate of 1.33 and from Japanese yen to Canadian dollars at the rate of $0.01. |
| 2 | These amounts have been adjusted for any additional purchase commitments that we have entered into since September 30, 2023, but does not include deliveries taken under contract since September 30, 2023. |
We have commitments of $558 million (Cdn) for the following:
| • | approximately 9.2 million pounds of U3O8 equivalent from 2023 to 2028 |
| • | approximately 0.5 million kgU as UF6 in conversion services from 2023 to 2024 |
| • | about 0.5 million Separative Work Units (SWU) of enrichment services to meet existing forward sales commitments under agreements with a non-Western supplier |
The suppliers do not have the right to terminate agreements other than pursuant to customary events of default provisions.
| 22 | CAMECO CORPORATION |
Financial assurances
At September 30, 2023, our financial assurances totaled $1.5 billion, up from $1.4 billion at June 30, 2023, due a stronger US dollar.
Other arrangements
We have arranged for standby product loan facilities with various counterparties. The arrangements allow us to borrow up to 2.2 million kgU of UF6 conversion services and 4.0 million pounds of U3O8 over the period 2020 to 2026 with repayment in kind up to December 31, 2026. Under the loan facilities, standby fees of up to 1% are payable based on the market value of the facilities and interest is payable on the market value of any amounts drawn at rates ranging from 0.5% to 2.0%. At September 30, 2023, we have 1.8 million kgU of UF6 conversion services and 2.1 million pounds of U3O8 drawn on the loans.
BALANCE SHEET
| ($ MILLIONS) |
SEP 30, 2023 | DEC 31, 2022 | CHANGE | |||||||||
| Cash, cash equivalents and short-term investments |
2,668 | 2,282 | 17 | % | ||||||||
| Total debt |
998 | 997 | — | |||||||||
| Inventory |
509 | 665 | (23 | )% | ||||||||
Total cash, cash equivalents and short-term investments at September 30, 2023 were $2.7 billion, or 17% higher than at December 31, 2022, due to strong earnings, the receipt of the $86 million refund from CRA, the receipt of $79 million (US) of dividend payments from JV Inkai as well as $95 million of interest received during the first nine months of the year. Net debt at September 30, 2023, was negative $1.7 billion.
Total product inventories are $509 million compared to $665 million at the end of 2022. Inventories decreased due to sales being higher than production and purchases in the first nine months of the year. The average cost for uranium has increased to $45.48 per pound compared to $43.45 per pound at December 31, 2022. As of September 30, 2023, we held an inventory of 7.5 million pounds of U3O8 equivalent (excluding broken ore) (December 31, 2022 - 12.4 million pounds). Inventory varies from quarter to quarter depending on the timing of production, purchases and sales deliveries in the year.
Financial results by segment
Uranium
| THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| HIGHLIGHTS |
2023 | 2022 | CHANGE | 2023 | 2022 | CHANGE | ||||||||||||||||||||||
| Production volume (million lbs) |
3.0 | 2.0 | 50 | % | 11.9 | 6.6 | 80 | % | ||||||||||||||||||||
| Sales volume (million lbs) |
7.0 | 5.3 | 32 | % | 22.2 | 18.7 | 19 | % | ||||||||||||||||||||
| Average spot price |
($ | US/lb | ) | 62.63 | 49.13 | 27 | % | 55.95 | 49.77 | 12 | % | |||||||||||||||||
| Average long-term price |
($ | US/lb | ) | 59.13 | 51.33 | 15 | % | 55.60 | 49.11 | 13 | % | |||||||||||||||||
| Average realized price |
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| ($ | US/lb | ) | 52.57 | 46.30 | 14 | % | 48.62 | 45.34 | 7 | % | ||||||||||||||||||
| ($ | Cdn/lb | ) | 70.30 | 59.65 | 18 | % | 65.40 | 57.84 | 13 | % | ||||||||||||||||||
| Average unit cost of sales (including D&A) |
($ | Cdn/lb | ) | 50.36 | 56.08 | (10 | )% | 49.68 | 52.67 | (6 | )% | |||||||||||||||||
| Revenue ($ millions) |
489 | 313 | 56 | % | 1,452 | 1,083 | 34 | % | ||||||||||||||||||||
| Gross profit ($ millions) |
139 | 19 | >100 | % | 349 | 97 | >100 | % | ||||||||||||||||||||
| Gross profit (%) |
28 | 6 | >100 | % | 24 | 9 | >100 | % | ||||||||||||||||||||
THIRD QUARTER
Production during the quarter was 3.0 million pounds, 50% higher than the third quarter of 2022. See Uranium 2023 Q3 updates starting on page 27 for more information.
| 2023 THIRD QUARTER REPORT | 23 |
Uranium revenues this quarter were up 56% compared to 2022 due to a 32% increase in sales volume due to the timing of sales, which were in line with the delivery pattern disclosed in our annual MD&A, and an increase of 18% in the Canadian dollar average realized price. While the US dollar average realized price increased by 14%, the Canadian dollar average realized price increased by 18% as a result of a weakening of the Canadian dollar. For more information on the impact of spot price changes on average realized price, see Price sensitivity analysis: uranium segment on page 19.
Total cost of sales (including D&A) increased by 19% ($351 million compared to $295 million in 2022) due to a 32% increase in sales volume which was partially offset by a unit cost of sales that was 10% lower than the same period last year. Unit cost of sales was lower in 2023 due primarily to a decrease in operational readiness costs at McArthur River and Key Lake operations.
The net effect was a $120 million increase in gross profit for the quarter.
Equity earnings from investee, JV Inkai, were $35 million in the third quarter compared to $9 million in same period last year.
FIRST NINE MONTHS
Production volumes for the first nine months of the year were 80% higher than in the previous year. See Uranium 2023 Q3 updates starting on page 27 for more information.
Uranium revenues increased 34% compared to the first nine months of 2022 due to a 19% increase in sales volumes and an increase of 13% in the Canadian dollar average realized price as a result of the impact of the increase in the average US dollar spot price on market-related contracts as well as the weakening of the Canadian dollar. For more information on the impact of spot price changes on average realized price, see Price sensitivity analysis: uranium segment on page 19.
Total cost of sales (including D&A) increased by 12% ($1.1 billion compared to $986 million in 2022) primarily as a result of a 19% increase in sales volume partially offset by a unit cost of sales that was 6% lower than the same period last year. Unit cost of sales was lower in 2023 due to higher operational readiness costs at McArthur River and Key Lake operations in 2022 slightly offset by the higher cost of purchased material in 2023 compared to the same period in 2022.
The net effect was a $252 million increase in gross profit for the first nine months.
Equity earnings from investee, JV Inkai, were $100 million for the first nine months compared to $78 million for the same period last year.
The table below shows the costs of produced and purchased uranium incurred in the reporting periods (which are non-IFRS measures, see the paragraphs below the table). These costs do not include care and maintenance costs, selling costs such as royalties, transportation and commissions, nor do they reflect the impact of opening inventories on our reported cost of sales.
| THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| ($CDN/LB) |
2023 | 2022 | CHANGE | 2023 | 2022 | CHANGE | ||||||||||||||||||
| Produced |
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| Cash cost |
32.37 | 22.08 | 47 | % | 25.60 | 19.10 | 34 | % | ||||||||||||||||
| Non-cash cost |
12.24 | 17.68 | (31 | )% | 11.92 | 16.82 | (29 | )% | ||||||||||||||||
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| Total production cost 1 |
44.61 | 39.76 | 12 | % | 37.52 | 35.92 | 4 | % | ||||||||||||||||
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| Quantity produced (million lbs)1 |
3.0 | 2.0 | 50 | % | 11.9 | 6.6 | 80 | % | ||||||||||||||||
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| Purchased |
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| Cash cost |
79.14 | 46.25 | 71 | % | 69.88 | 48.71 | 43 | % | ||||||||||||||||
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| Quantity purchased (million lbs)1 |
0.8 | 4.6 | (83 | )% | 5.0 | 12.5 | (60 | )% | ||||||||||||||||
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| Totals |
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| Produced and purchased costs |
51.88 | 44.28 | 17 | % | 47.09 | 44.29 | 6 | % | ||||||||||||||||
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| Quantities produced and purchased (million lbs) |
3.8 | 6.6 | (42 | )% | 16.9 | 19.1 | (12 | )% | ||||||||||||||||
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| 1 | Due to equity accounting, our share of production from JV Inkai is shown as a purchase at the time of delivery. These purchases will fluctuate during the quarters and timing of purchases will not match production. There were no purchases during the quarter. In the first nine months of 2023, we purchased 1.4 million pounds of material produced in 2022 at a purchase price per pound of $66.51 ($48.69 (US)). |
| 24 | CAMECO CORPORATION |
The average cash cost of production was 47% higher for the quarter compared to the same period in 2022. For the first nine months, the average cash cost of production was 34% higher than in the same period in 2022. In 2023, with McArthur River/Key Lake ramping up production, inflationary pressure, the availability of personnel with the necessary skills and experience, and supply chain challenges with the availability of materials and reagents, our annual cash cost of production is expected to be higher than the average life of mine operating costs noted in our most recent annual information form: approximately $16 per pound at McArthur River/Key Lake and approximately $18 per pound at Cigar Lake.
We equity account for our share of JV Inkai. As a result, we record our share of its production as a purchase, which under Kazakhstan’s pricing regulations, requires we purchase the material at a price equal to the uranium spot price, less a 5% discount. However, this does not reflect the economic benefit to Cameco. Our share of the economic benefit is based on the difference between our purchase price and JV Inkai’s lower production cost and is reflected in the line item on our statement of earnings called, “share of earnings from equity-accounted investee.” This benefit is realized through payment of a cash dividend by JV Inkai. Excess cash, net of working capital requirements is distributed to the partners as dividends. If there is a significant disruption to JV Inkai’s operations for any reason, it may not achieve its production plans, there may be a delay in production, and it may experience increased costs to produce uranium.
Although purchased pounds are transacted in US dollars, we account for the purchases in Canadian dollars. In the third quarter, the average cash cost of purchased material was $79.14 (Cdn) per pound, or $59.26 (US) per pound, compared to $46.25 (Cdn) per pound, or $35.99 (US) per pound in the third quarter of 2022. For the first nine months, the average cash cost of purchased material was $69.88 (Cdn), or $51.58 (US) per pound, compared to $48.71 (Cdn), or $38.18 (US) per pound in the same period in 2022. As a result, the average cash cost of purchased material in Canadian dollar terms increased by 71% this quarter and increased by 43% for the nine months compared to the same periods last year.
Cash cost per pound, non-cash cost per pound and total cost per pound for produced and purchased uranium presented in the above table are non-IFRS measures. These measures do not have a standardized meaning or a consistent basis of calculation under IFRS. We use these measures in our assessment of the performance of our uranium business. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance and ability to generate cash flow.
These measures are non-standard supplemental information and should not be considered in isolation or as a substitute for measures of performance prepared according to accounting standards. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently, so you may not be able to make a direct comparison to similar measures presented by other companies.
To facilitate a better understanding of these measures, the following table presents a reconciliation of these measures to our unit cost of sales for the third quarter and the first nine months of 2023 and 2022.
| 2023 THIRD QUARTER REPORT | 25 |
Cash and total cost per pound reconciliation
| THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| ($ MILLIONS) |
2023 | 2022 | 2023 | 2022 | ||||||||||||
| Cost of product sold |
304.6 | 257.7 | 959.1 | 868.5 | ||||||||||||
| Add / (subtract) |
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| Royalties |
(22.3 | ) | (6.5 | ) | (61.0 | ) | (21.4 | ) | ||||||||
| Care and maintenance and operational readiness costs |
(12.1 | ) | (53.7 | ) | (35.2 | ) | (143.0 | ) | ||||||||
| Other selling costs |
(3.0 | ) | (0.5 | ) | (7.1 | ) | (3.9 | ) | ||||||||
| Change in inventories |
(106.8 | ) | 59.9 | (201.8 | ) | 34.7 | ||||||||||
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| Cash operating costs (a) |
160.4 | 256.9 | 654.0 | 734.9 | ||||||||||||
| Add / (subtract) |
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| Depreciation and amortization |
46.0 | 36.9 | 143.9 | 117.6 | ||||||||||||
| Care and maintenance and operational readiness costs |
(0.8 | ) | (10.0 | ) | (3.4 | ) | (32.4 | ) | ||||||||
| Change in inventories |
(8.5 | ) | 8.5 | 1.3 | 25.8 | |||||||||||
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| Total operating costs (b) |
197.1 | 292.3 | 795.8 | 845.9 | ||||||||||||
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| Uranium produced & purchased (million lbs) (c) |
3.8 | 6.6 | 16.9 | 19.1 | ||||||||||||
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| Cash costs per pound (a ÷ c) |
42.21 | 38.92 | 38.70 | 38.48 | ||||||||||||
| Total costs per pound (b ÷ c) |
51.88 | 44.28 | 47.09 | 44.29 | ||||||||||||
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Fuel services
(includes results for UF6, UO2, UO3 and fuel fabrication)
| THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| HIGHLIGHTS |
2023 | 2022 | CHANGE | 2023 | 2022 | CHANGE | ||||||||||||||||||||||
| Production volume (million kgU) |
2.0 | 1.5 | 33 | % | 9.6 | 9.3 | 3 | % | ||||||||||||||||||||
| Sales volume (million kgU) |
2.1 | 2.3 | (9 | )% | 7.8 | 7.3 | 7 | % | ||||||||||||||||||||
| Average realized price |
($ | Cdn/kgU | ) | 39.87 | 33.43 | 19 | % | 37.44 | 34.39 | 9 | % | |||||||||||||||||
| Average unit cost of sales (including D&A) |
($ | Cdn/kgU | ) | 33.00 | 29.43 | 12 | % | 26.59 | 23.99 | 11 | % | |||||||||||||||||
| Revenue ($ millions) |
86 | 75 | 15 | % | 291 | 250 | 16 | % | ||||||||||||||||||||
| Gross profit ($ millions) |
15 | 9 | 67 | % | 84 | 76 | 11 | % | ||||||||||||||||||||
| Gross profit (%) |
17 | 12 | 42 | % | 29 | 30 | (3 | )% | ||||||||||||||||||||
THIRD QUARTER
Total revenue for the third quarter of 2023 increased by 15% from $75 million in the same period last year to $86 million. This was due primarily to a 19% increase in average realized price compared to 2022 partially offset by a 9% decrease in sales volumes. Average realized price increased mainly due to increased prices for UF6 due to market conditions.
The total cost of products and services sold (including D&A) increased 8% ($71 million compared to $66 million in 2022) due to an increase of 12% in the average unit cost of sales which was partially offset by the 9% decrease in sales volume. Unit cost of sales increased mainly as a result of higher input costs.
The net effect was a $6 million increase in gross profit.
| 26 | CAMECO CORPORATION |
FIRST NINE MONTHS
In the first nine months of the year, total revenue increased 16% to $291 million from $250 million for the same period last year due to a 7% increase in sales volumes and a 9% increase in realized price. The increase in average realized price was mainly the result of increased prices due to market conditions.
The total cost of products and services sold (including D&A) increased 19% ($207 million compared to $174 million in 2022) due to the 7% increase in sales volume and an 11% increase in the average unit cost of sales due to higher input costs.
The net effect was an $8 million increase in gross profit.
Our operations
Uranium – production overview
Production volumes reflect our increased ownership interest in Cigar Lake of 54.547% as of May 19, 2022 (previously 50.025%).
We had 3.0 million pounds of production (our share) in the third quarter and 11.9 million pounds production (our share) in the first nine months of 2023, compared to 2.0 million pounds and 6.6 million pounds in the same periods of 2022. In 2022, there was no production from McArthur River and Key Lake until the fourth quarter.
We continue to evaluate the optimal mix of production, inventory and purchases in order to retain the flexibility to deliver long-term value.
URANIUM PRODUCTION
| THREE MONTHS ENDED SEPTEMBER 30 |
NINE MONTHS ENDED SEPTEMBER 30 |
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| OUR SHARE (MILLION LBS) |
2023 | 2022 | CHANGE | 2023 | 2022 | CHANGE | 2023 PLAN | |||||||||||||||||||||
| Cigar Lake |
1.4 | 2.0 | (30 | )% | 5.6 | 6.6 | (15 | )% | 8.9 | 1 | ||||||||||||||||||
| McArthur River/Key Lake |
1.6 | — | — | 6.3 | — | — | 9.8 | 2 | ||||||||||||||||||||
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| Total |
3.0 | 2.0 | 50 | % | 11.9 | 6.6 | 80 | % | 18.7 | |||||||||||||||||||
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| 1 | During the third quarter, we updated our Cigar Lake production forecast to up to 16.3 million pounds (100% basis) in 2023 (previously 18 million pounds). |
| 2 | During the third quarter, we updated our McArthur River/Key Lake production forecast to 14 million pounds (100% basis) in 2023 (previously 15 million pounds). |
Inflation, the availability of personnel with the necessary skills and experience, aging infrastructure, and the impact of supply chain challenges on the availability of materials and reagents carry with them the risk that we do not achieve our production plans and/or, experience production delays and increased costs. Additionally, with the extended period of time the McArthur River/Key Lake assets were on care and maintenance, the operational changes that have been made, and commissioning issues that we worked through at the mill in 2022, there is continued uncertainty regarding the timing of a successful ramp up to planned production and the associated costs.
Uranium 2023 Q3 updates
PRODUCTION UPDATE
McArthur River/Key Lake
The McArthur River and Key Lake operation was in a state of safe care and maintenance from 2018 through 2021 due to weak market conditions. The operation began transitioning back to production through the first three quarters of 2022, with no packaged pounds until the fourth quarter. Production ramp-up activities continue in 2023.
In the third quarter of 2023, total packaged production from McArthur River and Key Lake was 2.3 million pounds (1.6 million pounds our share). Our share of production in the first nine months of 2023 was 6.3 million pounds.
| 2023 THIRD QUARTER REPORT | 27 |
As announced on September 3, 2023, we now expect packaged production of 14 million pounds (9.8 million pounds our share) in 2023 (previously 15 million pounds or 10.5 million pounds our share). Challenges at the Key Lake mill related to length of time the facility was in care and maintenance, the operational changes that were implemented throughout the mill, availability of personnel with the necessary skills and experience, and the impact of supply chain challenges on the availability of materials and reagents have resulted in lower expected production for 2023. The McArthur River mine continues to operate well and is expected to achieve its planned mine production for the year. Any ore from McArthur River that is not immediately processed at Key Lake will be stored in inventory for future milling.
We continue to expect production of 18 million pounds (12.6 million pounds our share) in 2024.
The collective agreement with the United Steelworkers Local 8914 expired in December 2022, and we are in negotiations to reach a new agreement. As in the past, work continues under the terms of the expired collective agreement while negotiations proceed. There is a risk to the production plan if we are unable to reach an agreement and there is a labour disruption.
In October 2023, the Canadian Nuclear Safety Commission (CNSC) granted 20-year renewals to the licences for both McArthur River and Key Lake. The renewed licences are expected to allow McArthur River and Key Lake to operate until October 2043.
Cigar Lake
Total packaged production from Cigar Lake was 2.6 million pounds (1.4 million pounds our share) in the third quarter of 2023 compared to 3.6 million pounds (2.0 million pounds our share) in the third quarter of 2022. Our share of production in the first nine months of 2023 was 5.6 million pounds compared to 6.6 million pounds in the first nine months of 2022.
As announced on September 3, 2023, we now expect production of up to 16.3 million pounds (up to 8.9 million pounds our share) at Cigar Lake in 2023 (previously 18.0 million pounds or 9.8 million pounds our share). In our second quarter MD&A we noted that productivity had been impacted as we completed development and commissioning activities and achieved first production from a new mining area. We had expected to recover from these delays in the second half of the year. However, in the third quarter, we determined maintenance work was required on one of the underground circuits, which had not been planned. The additional time required to complete this work does not allow for the delayed production volumes to be recovered prior to year-end.
The 2023 annual planned maintenance shutdown, including the unplanned work, was completed by the end of September. All objectives of the maintenance shutdown were achieved, and normal production activities have resumed.
We continue to expect 18.0 million pounds (9.8 million pounds our share) in 2024.
Inkai
Production on a 100% basis was 2.0 million pounds for the quarter and 6.3 million pounds for the first nine months of the year, compared to 2.3 million pounds and 5.8 million pounds in the same periods last year.
Based on an adjustment to the production purchase entitlement under the 2016 JV Inkai restructuring agreement, we are entitled to purchase 4.2 million pounds, or 50% of JV Inkai’s planned 2023 production of 8.3 million pounds.
Due to equity accounting, our share of production is shown as a purchase at a discount to the spot price and included in inventory at this value at the time of delivery. Our share of the profits earned by JV Inkai on the sale of its production to the JV partners is included in “share of earnings from equity-accounted investee” on our consolidated statement of earnings. Excess cash, net of working capital requirements is distributed to the partners as dividends.
Achievement of JV Inkai’s 2023 production forecast requires it to continue to successfully manage several ongoing risks, including the potential impact of procurement and supply chain issues, and inflationary pressures on its production materials and reagents. If there is a significant disruption to JV Inkai’s operations for any reason, it may not achieve its production plans, there may be a delay in production, and it may experience increased costs to produce uranium.
| 28 | CAMECO CORPORATION |
The geopolitical situation continues to cause transportation risks in the region. The first shipment containing approximately two thirds of our share of Inkai’s 2023 production is currently in transit. We expect the shipment to arrive before the end of 2023. The second shipment with remaining volume of our share of 2023 production is expected to depart before the end of the year and arrive in early 2024. We continue to work closely with JV Inkai and our joint venture partner, Kazatomprom, to receive our share of production via the Trans-Caspian International Transport Route, which does not rely on Russian rail lines or ports. We could experience further delays to our expected Inkai deliveries this year if transportation using this shipping route takes longer than anticipated. To mitigate the risk of delays, we have inventory, long-term purchase agreements and loan arrangements in place we can draw on. Depending on when we receive shipments of our share of Inkai’s production, our share of earnings from this equity-accounted investee and the timing of the receipt of our share of dividends from the joint venture may be impacted.
TIER-TWO CURTAILED OPERATIONS
US ISR Operations
As a result of our 2016 curtailment decision, commercial production has ceased. As production is suspended, we expect ongoing cash and non-cash care and maintenance costs to range between $14 million (US) and $16 million (US) for 2023.
Rabbit Lake
Rabbit Lake remains in a safe state of care and maintenance following the suspension of production in 2016. We continue to evaluate opportunities to minimize care and maintenance costs and expect these costs to range between $27 million and $32 million for 2023.
In October 2023, the CNSC granted a 15-year renewal to the licence for Rabbit Lake. The renewed licence is expected to allow Rabbit Lake to operate until October 2038 once it has resumed operations.
Fuel services 2023 Q3 updates
PORT HOPE CONVERSION SERVICES
CAMECO FUEL MANUFACTURING INC. (CFM)
Production update
Fuel services produced 2.0 million kgU in the third quarter of 2023, 33% higher than the third quarter last year, and 9.6 million kgU in the first nine months, which was 3% higher than the same period last year.
In our fuel services segment, which includes the production of UO2, UF6 and heavy water reactor fuel bundles, we expect to produce between 13 million and 14 million kgU of combined fuel services products in 2023 (outlook and production results are not disclosed by individual product line).
In addition, at our Port Hope UF6 conversion facility we are working on increasing annual production to 12,000 tonnes in 2024 to satisfy our book of long-term commitments and demand for conversion services.
| 2023 THIRD QUARTER REPORT | 29 |
Pending acquisition of Westinghouse
As announced on October 11, 2022, we entered into a strategic partnership with Brookfield and its publicly listed affiliate Brookfield Renewable Partners (Brookfield) and its institutional partners to acquire Westinghouse, a global provider of mission-critical and specialized technologies, products and services across most phases of the nuclear power sector. Brookfield, with its institutional partners, will beneficially own a 51% interest in Westinghouse and Cameco will beneficially own 49%. Bringing together Cameco’s expertise in the nuclear industry with Brookfield’s expertise in clean energy positions nuclear power at the heart of the energy transition and creates a powerful platform for strategic growth across the nuclear sector.
We continue to work on closing the acquisition by the end of 2023. Closing is subject to the receipt of the remaining required approvals and other closing conditions. The final financing, our share of which will be approximately $2.2 billion (US), will be determined based on our cash balance, cash flow generation, and market conditions at the time of close. We expect a permanent financing mix of capital sources, including cash, debt and equity, designed to preserve our balance sheet and ratings strength, while maintaining healthy liquidity. See our 2022 annual MD&A for more information.
Caution about forward-looking information relating to the Westinghouse acquisition
This discussion of our expectations for the Westinghouse acquisition, including sources and uses of financing for the acquisition, timeline for the acquisition, including anticipated closing date, is forward-looking information that is based upon the assumptions and subject to the material risks discussed under the headings Caution about forward-looking information beginning on page 2, and in our October 18, 2022, material change report. The material change report is available at www.sedarplus.ca and www.sec.gov. Actual results and events may be significantly different from what we currently expect.
Qualified persons
The technical and scientific information discussed in this document for our material properties (McArthur River/Key Lake, Inkai and Cigar Lake) was approved by the following individuals who are qualified persons for the purposes of NI 43-101:
MCARTHUR RIVER/KEY LAKE
| • | Greg Murdock, general manager, McArthur River, Cameco |
| • | Daley McIntyre, general manager, Key Lake, Cameco |
CIGAR LAKE
| • | Lloyd Rowson, general manager, Cigar Lake, Cameco |
INKAI
| • | Sergey Ivanov, deputy general director, technical services, Cameco Kazakhstan LLP |
| 30 | CAMECO CORPORATION |
Additional information
Critical accounting estimates
Due to the nature of our business, we are required to make estimates that affect the amount of assets and liabilities, revenues and expenses, commitments and contingencies we report. We base our estimates on our experience, our best judgment, guidelines established by the Canadian Institute of Mining, Metallurgy and Petroleum and on assumptions we believe are reasonable.
Purchase prices related to business combinations and asset acquisitions are allocated to the underlying acquired assets and liabilities based on their estimated fair value at the time of acquisition. The determination of fair value requires us to make assumptions, estimates and judgments regarding future events. The allocation process is inherently subjective and impacts the amounts assigned to individually identifiable assets and liabilities. As a result, the purchase price allocation impacts our reported assets and liabilities, future net earnings due to the impact on future depreciation and amortization expense and impairment tests.
Controls and procedures
As of September 30, 2023, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer (CEO) and chief financial officer (CFO), of the effectiveness of our disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Based upon that evaluation and as of September 30, 2023, the CEO and CFO concluded that:
| • | the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under applicable securities laws is recorded, processed, summarized and reported as and when required |
| • | such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure |
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 2023 THIRD QUARTER REPORT | 31 |
Exhibit 99.3
Cameco Corporation
2023 condensed consolidated interim financial statements
(unaudited)
October 30, 2023
Cameco Corporation
Consolidated statements of earnings
| (Unaudited) | Note | Three months ended | Nine months ended | |||||||||||||||||
| ($Cdn thousands, except per share amounts) |
Sep 30/23 | Sep 30/22 | Sep 30/23 | Sep 30/22 | ||||||||||||||||
| Revenue from products and services |
11 | $ | 575,079 | $ | 388,659 | $ | 1,744,041 | $ | 1,344,274 | |||||||||||
| Cost of products and services sold |
367,302 | 315,937 | 1,140,886 | 1,026,997 | ||||||||||||||||
| Depreciation and amortization |
55,987 | 47,574 | 174,212 | 149,372 | ||||||||||||||||
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| Cost of sales |
19 | 423,289 | 363,511 | 1,315,098 | 1,176,369 | |||||||||||||||
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| Gross profit |
151,790 | 25,148 | 428,943 | 167,905 | ||||||||||||||||
| Administration |
65,510 | 61,141 | 186,569 | 142,768 | ||||||||||||||||
| Exploration |
4,106 | 3,246 | 14,262 | 8,168 | ||||||||||||||||
| Research and development |
7,850 | 3,130 | 17,189 | 9,296 | ||||||||||||||||
| Other operating income |
9 | (61,304 | ) | (24,643 | ) | (54,962 | ) | (65,283 | ) | |||||||||||
| Loss (gain) on disposal of assets |
92 | (448 | ) | 368 | (660 | ) | ||||||||||||||
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| Earnings (loss) from operations |
135,536 | (17,278 | ) | 265,517 | 73,616 | |||||||||||||||
| Finance costs |
12 | (22,960 | ) | (23,277 | ) | (69,302 | ) | (62,376 | ) | |||||||||||
| Loss on derivatives |
18 | (47,092 | ) | (73,114 | ) | (16,093 | ) | (91,402 | ) | |||||||||||
| Finance income |
33,986 | 9,457 | 92,625 | 15,886 | ||||||||||||||||
| Share of earnings from equity-accounted investee |
7 | 35,466 | 8,685 | 99,728 | 78,213 | |||||||||||||||
| Other income |
13 | 53,694 | 50,876 | 8,073 | 90,791 | |||||||||||||||
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| Earnings (loss) before income taxes |
188,630 | (44,651 | ) | 380,548 | 104,728 | |||||||||||||||
| Income tax expense (recovery) |
14 | 40,563 | (25,117 | ) | 99,825 | 41 | ||||||||||||||
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| Net earnings (loss) |
148,067 | (19,534 | ) | 280,723 | 104,687 | |||||||||||||||
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| Net earnings (loss) attributable to: |
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| Equity holders |
$ | 148,080 | $ | (19,530 | ) | $ | 280,741 | $ | 104,799 | |||||||||||
| Non-controlling interest |
(13 | ) | (4 | ) | (18 | ) | (112 | ) | ||||||||||||
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| Net earnings (loss) |
$ | 148,067 | $ | (19,534 | ) | $ | 280,723 | $ | 104,687 | |||||||||||
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| Earnings (loss) per common share attributable to equity holders: |
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| Basic |
15 | $ | 0.34 | $ | (0.05 | ) | $ | 0.65 | $ | 0.26 | ||||||||||
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| Diluted |
15 | $ | 0.34 | $ | (0.05 | ) | $ | 0.65 | $ | 0.26 | ||||||||||
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See accompanying notes to condensed consolidated interim financial statements.
2
Cameco Corporation
Consolidated statements of comprehensive earnings
| (Unaudited) | Three months ended | Nine months ended | ||||||||||||||
| ($Cdn thousands) |
Sep 30/23 | Sep 30/22 | Sep 30/23 | Sep 30/22 | ||||||||||||
| Net earnings (loss) |
$ | 148,067 | $ | (19,534 | ) | $ | 280,723 | $ | 104,687 | |||||||
| Other comprehensive loss, net of taxes |
||||||||||||||||
| Items that are or may be reclassified to net earnings: |
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| Exchange differences on translation of foreign operations |
(21,279 | ) | (32,473 | ) | (25,180 | ) | (66,697 | ) | ||||||||
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| Other comprehensive loss, net of taxes |
(21,279 | ) | (32,473 | ) | (25,180 | ) | (66,697 | ) | ||||||||
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| Total comprehensive income (loss) |
$ | 126,788 | $ | (52,007 | ) | 255,543 | 37,990 | |||||||||
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| Other comprehensive income (loss) attributable to: |
||||||||||||||||
| Equity holders |
$ | (21,279 | ) | $ | (32,474 | ) | $ | (25,180 | ) | $ | (66,700 | ) | ||||
| Non-controlling interest |
— | 1 | — | 3 | ||||||||||||
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| Other comprehensive loss |
$ | (21,279 | ) | $ | (32,473 | ) | $ | (25,180 | ) | $ | (66,697 | ) | ||||
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| Total comprehensive income (loss) attributable to: |
||||||||||||||||
| Equity holders |
$ | 126,801 | $ | (52,004 | ) | $ | 255,561 | $ | 38,099 | |||||||
| Non-controlling interest |
(13 | ) | (3 | ) | (18 | ) | (109 | ) | ||||||||
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|
|||||||||
| Total comprehensive income (loss) |
$ | 126,788 | $ | (52,007 | ) | $ | 255,543 | $ | 37,990 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
See accompanying notes to condensed consolidated interim financial statements.
3
Cameco Corporation
Consolidated statements of financial position
| (Unaudited) | Note | As at | ||||||||||
| ($Cdn thousands) |
Sep 30/23 | Dec 31/22 | ||||||||||
| Assets |
||||||||||||
| Current assets |
||||||||||||
| Cash and cash equivalents |
$ | 2,667,715 | $ | 1,143,674 | ||||||||
| Short-term investments |
— | 1,138,174 | ||||||||||
| Accounts receivable |
297,683 | 183,944 | ||||||||||
| Current tax assets |
2,760 | 1,056 | ||||||||||
| Inventories |
5 | 508,678 | 664,698 | |||||||||
| Supplies and prepaid expenses |
200,457 | 157,910 | ||||||||||
| Current portion of long-term receivables, investments and other |
6 | 1,685 | 32,180 | |||||||||
|
|
|
|
|
|||||||||
| Total current assets |
3,678,978 | 3,321,636 | ||||||||||
|
|
|
|
|
|||||||||
| Property, plant and equipment |
3,322,377 | 3,473,490 | ||||||||||
| Intangible assets |
44,397 | 47,117 | ||||||||||
| Long-term receivables, investments and other |
6 | 570,244 | 595,507 | |||||||||
| Investment in equity-accounted investee |
7 | 194,785 | 210,972 | |||||||||
| Deferred tax assets |
909,429 | 984,071 | ||||||||||
|
|
|
|
|
|||||||||
| Total non-current assets |
5,041,232 | 5,311,157 | ||||||||||
|
|
|
|
|
|||||||||
| Total assets |
$ | 8,720,210 | $ | 8,632,793 | ||||||||
|
|
|
|
|
|||||||||
| Liabilities and shareholders’ equity |
||||||||||||
| Current liabilities |
||||||||||||
| Accounts payable and accrued liabilities |
261,805 | 374,714 | ||||||||||
| Current tax liabilities |
17,727 | 6,498 | ||||||||||
| Current portion of long-term debt |
499,717 | — | ||||||||||
| Current portion of other liabilities |
8 | 130,745 | 131,324 | |||||||||
| Current portion of provisions |
9 | 46,376 | 48,305 | |||||||||
|
|
|
|
|
|||||||||
| Total current liabilities |
956,370 | 560,841 | ||||||||||
|
|
|
|
|
|||||||||
| Long-term debt |
497,865 | 997,000 | ||||||||||
| Other liabilities |
8 | 249,015 | 216,162 | |||||||||
| Provisions |
9 | 906,063 | 1,022,725 | |||||||||
|
|
|
|
|
|||||||||
| Total non-current liabilities |
1,652,943 | 2,235,887 | ||||||||||
|
|
|
|
|
|||||||||
| Shareholders’ equity |
||||||||||||
| Share capital |
10 | 2,908,411 | 2,880,336 | |||||||||
| Contributed surplus |
215,874 | 224,687 | ||||||||||
| Retained earnings |
2,977,123 | 2,696,379 | ||||||||||
| Other components of equity |
9,472 | 34,652 | ||||||||||
|
|
|
|
|
|||||||||
| Total shareholders’ equity attributable to equity holders |
6,110,880 | 5,836,054 | ||||||||||
| Non-controlling interest |
17 | 11 | ||||||||||
|
|
|
|
|
|||||||||
| Total shareholders’ equity |
6,110,897 | 5,836,065 | ||||||||||
|
|
|
|
|
|||||||||
| Total liabilities and shareholders’ equity |
$ | 8,720,210 | $ | 8,632,793 | ||||||||
|
|
|
|
|
|||||||||
Commitments and contingencies [notes 9, 14, 21]
See accompanying notes to condensed consolidated interim financial statements.
4
Cameco Corporation
Consolidated statements of changes in equity
| Attributable to equity holders | ||||||||||||||||||||||||||||||||
| (Unaudited) ($Cdn thousands) |
Share capital |
Contributed surplus |
Retained earnings |
Foreign currency translation |
Equity investments at FVOCI |
Total | Non- controlling interest |
Total equity |
||||||||||||||||||||||||
| Balance at January 1, 2023 |
$ | 2,880,336 | $ | 224,687 | $ | 2,696,379 | $ | 35,400 | $ | (748 | ) | $ | 5,836,054 | $ | 11 | $ | 5,836,065 | |||||||||||||||
| Net earnings (loss) |
— | — | 280,741 | — | — | 280,741 | (18 | ) | 280,723 | |||||||||||||||||||||||
| Other comprehensive loss |
— | — | — | (25,180 | ) | — | (25,180 | ) | — | (25,180 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total comprehensive income (loss) for the period |
— | — | 280,741 | (25,180 | ) | — | 255,561 | (18 | ) | 255,543 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Share-based compensation |
— | 2,710 | — | — | — | 2,710 | — | 2,710 | ||||||||||||||||||||||||
| Stock options exercised |
28,075 | (5,114 | ) | — | — | — | 22,961 | — | 22,961 | |||||||||||||||||||||||
| Restricted share units released |
— | (6,409 | ) | — | — | — | (6,409 | ) | — | (6,409 | ) | |||||||||||||||||||||
| Dividends |
— | — | 3 | — | — | 3 | — | 3 | ||||||||||||||||||||||||
| Transactions with owners - contributed equity |
— | — | — | — | — | — | 24 | 24 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at September 30, 2023 |
$ | 2,908,411 | $ | 215,874 | $ | 2,977,123 | $ | 10,220 | $ | (748 | ) | $ | 6,110,880 | $ | 17 | $ | 6,110,897 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at January 1, 2022 |
$ | 1,903,357 | $ | 230,039 | $ | 2,639,650 | $ | 73,543 | $ | (748 | ) | $ | 4,845,841 | $ | 127 | $ | 4,845,968 | |||||||||||||||
| Net earnings (loss) |
— | — | 104,799 | — | — | 104,799 | (112 | ) | 104,687 | |||||||||||||||||||||||
| Other comprehensive income (loss) |
— | — | — | (66,700 | ) | — | (66,700 | ) | 3 | (66,697 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total comprehensive income (loss) for the period |
— | — | 104,799 | (66,700 | ) | — | 38,099 | (109 | ) | 37,990 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Share-based compensation |
— | 2,425 | — | — | — | 2,425 | — | 2,425 | ||||||||||||||||||||||||
| Stock options exercised |
11,664 | (2,389 | ) | — | — | — | 9,275 | — | 9,275 | |||||||||||||||||||||||
| Restricted share units released |
— | (6,201 | ) | — | — | — | (6,201 | ) | — | (6,201 | ) | |||||||||||||||||||||
| Dividends |
— | — | 3 | — | — | 3 | — | 3 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at September 30, 2022 |
$ | 1,915,021 | $ | 223,874 | $ | 2,744,452 | $ | 6,843 | $ | (748 | ) | $ | 4,889,442 | $ | 18 | $ | 4,889,460 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
See accompanying notes to condensed consolidated interim financial statements.
5
Cameco Corporation
Consolidated statements of cash flows
| (Unaudited) | Note | Three months ended | Nine months ended | |||||||||||||||||
| ($Cdn thousands) |
Sep 30/23 | Sep 30/22 | Sep 30/23 | Sep 30/22 | ||||||||||||||||
| Operating activities |
||||||||||||||||||||
| Net earnings (loss) |
$ | 148,067 | $ | (19,534 | ) | $ | 280,723 | $ | 104,687 | |||||||||||
| Adjustments for: |
||||||||||||||||||||
| Depreciation and amortization |
55,987 | 47,574 | 174,212 | 149,372 | ||||||||||||||||
| Deferred charges |
9,220 | 30,038 | (11,992 | ) | 49,261 | |||||||||||||||
| Unrealized loss on derivatives |
43,007 | 76,177 | 2,124 | 101,599 | ||||||||||||||||
| Share-based compensation |
17 | 949 | 846 | 2,710 | 2,425 | |||||||||||||||
| Loss (gain) on disposal of assets |
92 | (448 | ) | 368 | (660 | ) | ||||||||||||||
| Finance costs |
12 | 22,960 | 23,277 | 69,302 | 62,376 | |||||||||||||||
| Finance income |
(33,986 | ) | (9,457 | ) | (92,625 | ) | (15,886 | ) | ||||||||||||
| Share of earnings in equity-accounted investee |
(35,466 | ) | (8,685 | ) | (99,728 | ) | (78,213 | ) | ||||||||||||
| Other operating income |
9 | (61,304 | ) | (24,643 | ) | (54,962 | ) | (65,283 | ) | |||||||||||
| Other expense (income) |
13 | (53,694 | ) | (50,876 | ) | (8,073 | ) | (90,791 | ) | |||||||||||
| Income tax expense (recovery) |
14 | 40,563 | (25,117 | ) | 99,825 | 41 | ||||||||||||||
| Interest received |
33,986 | 7,366 | 94,752 | 13,386 | ||||||||||||||||
| Income taxes received (paid) |
(1,155 | ) | 123 | 70,450 | (235 | ) | ||||||||||||||
| Dividends from equity-accounted investee |
— | — | 113,642 | 104,943 | ||||||||||||||||
| Other operating items |
16 | 15,561 | (93,235 | ) | (153,871 | ) | (109,872 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net cash provided by (used in) operations |
184,787 | (46,594 | ) | 486,857 | 227,150 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Investing activities |
||||||||||||||||||||
| Additions to property, plant and equipment |
(43,142 | ) | (43,233 | ) | (110,037 | ) | (109,304 | ) | ||||||||||||
| Acquisitions [note 4] |
— | — | — | (101,669 | ) | |||||||||||||||
| Decrease (increase) in short-term investments |
19,507 | (40,097 | ) | 1,136,687 | (317,096 | ) | ||||||||||||||
| Decrease (increase) in long-term receivables, investments and other |
— | — | 1,000 | (2,000 | ) | |||||||||||||||
| Proceeds from sale of property, plant and equipment |
— | 448 | 36 | 726 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net cash provided by (used in) investing |
(23,635 | ) | (82,882 | ) | 1,027,686 | (529,343 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Financing activities |
||||||||||||||||||||
| Interest paid |
(1,465 | ) | (430 | ) | (21,263 | ) | (19,802 | ) | ||||||||||||
| Lease principal payments |
(721 | ) | (931 | ) | (1,625 | ) | (2,096 | ) | ||||||||||||
| Proceeds from issuance of shares, stock option plan |
8,912 | 79 | 22,961 | 9,275 | ||||||||||||||||
| Dividends returned |
— | — | 4 | 5 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net cash provided by (used in) financing |
6,726 | (1,282 | ) | 77 | (12,618 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Increase (decrease) in cash and cash equivalents, during the period |
167,878 | (130,758 | ) | 1,514,620 | (314,811 | ) | ||||||||||||||
| Exchange rate changes on foreign currency cash balances |
45,877 | 8,458 | 9,421 | 9,472 | ||||||||||||||||
| Cash and cash equivalents, beginning of period |
2,453,960 | 1,064,408 | 1,143,674 | 1,247,447 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Cash and cash equivalents, end of period |
|
$ | 2,667,715 | $ | 942,108 | $ | 2,667,715 | $ | 942,108 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Cash and cash equivalents is comprised of: |
||||||||||||||||||||
| Cash |
969,052 | 697,410 | ||||||||||||||||||
| Cash equivalents |
1,698,663 | 244,698 | ||||||||||||||||||
|
|
|
|
|
|||||||||||||||||
| Cash and cash equivalents |
$ | 2,667,715 | $ | 942,108 | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||
See accompanying notes to condensed consolidated interim financial statements.
6
Cameco Corporation
Notes to condensed consolidated interim financial statements
(Unaudited)
(Cdn$ thousands, except per share amounts and as noted)
| 1. | Cameco Corporation |
Cameco Corporation is incorporated under the Canada Business Corporations Act. The address of its registered office is 2121 11th Street West, Saskatoon, Saskatchewan, S7M 1J3. The condensed consolidated interim financial statements as at and for the period ended September 30, 2023 comprise Cameco Corporation and its subsidiaries (collectively, the Company or Cameco) and the Company’s interests in associates and joint arrangements.
Cameco is one of the world’s largest providers of the uranium needed to generate clean, reliable baseload electricity around the globe. The Company has mines in northern Saskatchewan and the United States, as well as a 40% interest in Joint Venture Inkai LLP (JV Inkai), a joint arrangement with Joint Stock Company National Atomic Company Kazatomprom (Kazatomprom), located in Kazakhstan. JV Inkai is accounted for on an equity basis (see note 7).
Cameco has two operating mines, Cigar Lake and McArthur River. Operations at McArthur River/Key Lake, which had been suspended in 2018, resumed in November of 2022. The Rabbit Lake operation was placed in care and maintenance in 2016. Cameco’s operations in the United States, Crow Butte and Smith Ranch-Highland, are also not currently producing as the decision was made in 2016 to curtail production and defer all wellfield development. See note 19 for the financial statement impact.
The Company is also a leading provider of nuclear fuel processing services, supplying much of the world’s reactor fleet with the fuel to generate one of the cleanest sources of electricity available today. It operates the world’s largest commercial refinery in Blind River, Ontario, controls a significant portion of the world UF6 primary conversion capacity in Port Hope, Ontario and is a leading manufacturer of fuel assemblies and reactor components for CANDU reactors at facilities in Port Hope and Cobourg, Ontario.
| 2. | Significant accounting policies |
| A. | Statement of compliance |
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The condensed consolidated interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with Cameco’s annual consolidated financial statements as at and for the year ended December 31, 2022.
These condensed consolidated interim financial statements were authorized for issuance by the Company’s board of directors on October 30, 2023.
| B. | Basis of presentation |
These condensed consolidated interim financial statements are presented in Canadian dollars, which is the Company’s functional currency. All financial information is presented in Canadian dollars, unless otherwise noted. Amounts presented in tabular format have been rounded to the nearest thousand except per share amounts and where otherwise noted.
The condensed consolidated interim financial statements have been prepared on the historical cost basis except for the following material items which are measured on an alternative basis at each reporting date:
7
| Derivative financial instruments | Fair value through profit or loss (FVTPL) | |
| Equity securities | Fair value through other comprehensive income (FVOCI) | |
| Liabilities for cash-settled share-based payment arrangements | Fair value through profit or loss (FVTPL) | |
| Net defined benefit liability | Fair value of plan assets less the present value of the defined benefit obligation |
The preparation of the condensed consolidated interim financial statements in conformity with International Financial Reporting Standards (IFRS) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may vary from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2022.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 5 of the December 31, 2022, consolidated financial statements.
| 3. | Accounting standards |
| A. | Changes in accounting policy |
A number of amendments to existing standards became effective January 1, 2023, but they did not have an effect on the Company’s financial statements.
| i. | Income taxes |
In May 2023, the International Accounting Standards Board issued International Tax Reform – Pillar Two Model Rules, which amended IAS 12, Income Taxes (IAS 12). The amendments are effective for annual periods beginning on or after January 1, 2023. The amendments apply to income taxes arising from changes to tax law enacted to implement the Pillar Two model rules published by the Organisation for Economic Co-operation and Development. Cameco applied the temporary mandatory exception from deferred tax accounting for the top-up tax related to Pillar Two income taxes. The extent of the impact of the amendments have not yet been determined, however we do expect to include additional disclosures arising from this amendment in our consolidated annual financial statements for the year ended December 31, 2023.
| B. | New standards and interpretations not yet adopted |
A number of amendments to existing standards are not yet effective for the period ended September 30, 2023, and have not been applied in preparing these condensed consolidated interim financial statements. Cameco does not intend to early adopt any of the amendments and does not expect them to have a material impact on its financial statements.
8
| 4. | Acquisition of additional interest in Cigar Lake Joint Venture (CLJV) |
On May 19, 2022, Cameco and Orano Canada Inc. (Orano) completed the acquisition of Idemitsu Canada Resources Ltd.’s (Idemitsu) 7.875% participating interest in the CLJV by acquiring their pro rata shares through an asset purchase. Cameco’s ownership stake in the Cigar Lake uranium mine in northern Saskatchewan is now 54.547% (previously 50.025%). The primary reason for the business combination was to increase our ownership interest.
Cash consideration of $101,681,000 was paid for the additional 4.522% interest. While Cameco received the economic benefit of owning the additional interest as of January 1, 2022, the additional interest was proportionately consolidated with the results of Cameco commencing on May 19, 2022.
CLJV allocates uranium production to each joint operation participant and the joint operation participant derives revenue directly from the sale of such product. Mining and milling expenses incurred by joint operations are included in the cost of inventory. As such, there is no revenue or profit or loss of the acquiree included in the consolidated statements of earnings. If the acquisition had occurred at the beginning of 2022, Cameco’s share of production would have included an additional 296,000 pounds. The impact to the financial statements would not have been material.
Acquisition costs of $1,508,000 were included in administration expense in the consolidated statements of earnings for the nine-month period ended September 30, 2022.
Included in the identifiable assets and liabilities acquired at the date of acquisition are inputs, production processes and outputs. Therefore, Cameco has determined that together the acquired set is a business. In accordance with the acquisition method of accounting, the purchase price was allocated to the underlying assets and liabilities assumed based on their fair values at the date of acquisition. Fair values were determined based on discounted cash flows and quoted market prices. The values assigned to the net assets acquired were as follows:
| Property, plant and equipment |
$ | 97,930 | ||
| Deferred tax asset |
28,196 | |||
| Inventory |
9,909 | |||
| Working capital |
(24 | ) | ||
| Reclamation provision |
(2,528 | ) | ||
| Sales contracts |
(9,000 | ) | ||
|
|
|
|||
| Net assets acquired |
$ | 124,483 | ||
|
|
|
|||
| Cash paid |
101,681 | |||
|
|
|
|||
| Bargain purchase gain [note 13](a) |
$ | 22,802 | ||
|
|
|
| (a) | The bargain purchase gain resulted from applying the measurement requirements under IFRS 3, Business Combinations. This standard requires the measurement of tax attributes that were acquired as part of the transaction be in accordance with IAS 12, Income Taxes, rather than at fair value. The measured amount of these attributes exceeded the amount paid for them and the resulting gain is included in other income (expense) in the consolidated statement of earnings. |
9
| 5. | Inventories |
| Sep 30/23 | Dec 31/22 | |||||||
| Uranium |
||||||||
| Concentrate |
$ | 342,699 | $ | 537,426 | ||||
| Broken ore |
50,135 | 46,703 | ||||||
|
|
|
|
|
|||||
| 392,834 | 584,129 | |||||||
| Fuel services |
115,419 | 80,144 | ||||||
| Other |
425 | 425 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 508,678 | $ | 664,698 | ||||
|
|
|
|
|
|||||
Cameco expensed $374,819,000 of inventory as cost of sales during the third quarter of 2023 (2022 - $282,667,000). For the nine months ended September 30, 2023, Cameco expensed $1,170,997,000 of inventory as cost of sales (2022 - $953,438,000).
| 6. | Long-term receivables, investments and other |
| Sep 30/23 | Dec 31/22 | |||||||
| Deferred charges |
$ | — | $ | 29,585 | ||||
| Derivatives [note 18] |
1,087 | 2,807 | ||||||
| Investment tax credits |
95,940 | 95,812 | ||||||
| Amounts receivable related to tax dispute [note 14](a) |
209,125 | 295,221 | ||||||
| Product loan(b) |
263,637 | 200,998 | ||||||
| Other |
2,140 | 3,264 | ||||||
|
|
|
|
|
|||||
| 571,929 | 627,687 | |||||||
| Less current portion |
(1,685 | ) | (32,180 | ) | ||||
|
|
|
|
|
|||||
| Net |
$ | 570,244 | $ | 595,507 | ||||
|
|
|
|
|
|||||
| (a) | Cameco was required to remit or otherwise secure 50% of the cash taxes and transfer pricing penalties, plus related interest and instalment penalties assessed, in relation to its dispute with Canada Revenue Agency (CRA). In light of our view of the likely outcome of the case, Cameco expects to recover the amounts remitted to CRA, including cash taxes, interest and penalties totalling $209,125,000 already paid as at September 30, 2023 (December 31, 2022 - $295,221,000). $86,097,000 was received during the year (see note 14). |
| (b) | Cameco loaned 5,400,000 pounds of uranium concentrate to its joint venture partner, Orano Canada Inc., (Orano). Orano was obligated to repay the Company in kind with uranium concentrate no later than December 31, 2023. During the first quarter of 2022, the repayment terms were extended to December 31, 2028. As at September 30, 2023, 3,000,000 pounds have been repaid on this loan. |
Cameco also agreed to lend to Orano up to 1,148,200 kgU of conversion supply and up to an additional 1,200,000 pounds of uranium concentrate over the period 2022 to 2024. Repayment to Cameco is to be made in kind with U3O8 quantities drawn being repaid by December 31, 2027 and quantities of UF6 drawn by December 31, 2035.
As at September 30, 2023, 3,300,000 pounds of U3O8 (December 31, 2022 - 3,571,001 pounds) and 1,148,200 kgU of UF6 conversion supply (December 31, 2022 - 700,000 kgU) were drawn on the loans and are recorded at Cameco’s weighted average cost of inventory.
10
| 7. | Equity-accounted investee |
JV Inkai is the operator of the Inkai uranium deposit located in Kazakhstan. JV Inkai is a uranium mining and milling operation that utilizes in-situ recovery (ISR) technology to extract uranium. The participants in JV Inkai purchase uranium from Inkai and, in turn, derive revenue directly from the sale of such product to third-party customers (see note 20). Cameco holds a 40% interest in JV Inkai and Kazatomprom holds a 60% interest. Cameco does not have control over the joint venture so it accounts for the investment on an equity basis.
The following tables summarize the financial information of JV Inkai (100%):
| Sep 30/23 | Dec 31/22 | |||||||
| Cash and cash equivalents |
$ | 13,946 | $ | 14,950 | ||||
| Other current assets |
274,615 | 373,868 | ||||||
| Non-current assets |
335,192 | 334,954 | ||||||
| Current liabilities |
(27,553 | ) | (34,606 | ) | ||||
| Non-current liabilities |
(35,805 | ) | (37,644 | ) | ||||
|
|
|
|
|
|||||
| Net assets |
$ | 560,395 | $ | 651,522 | ||||
|
|
|
|
|
|||||
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/23 | Sep 30/22 | Sep 30/23 | Sep 30/22 | |||||||||||||
| Revenue from products and services |
$ | 79,319 | $ | 29,102 | $ | 280,819 | $ | 178,264 | ||||||||
| Cost of products and services sold |
(12,531 | ) | (5,242 | ) | (48,725 | ) | (28,266 | ) | ||||||||
| Depreciation and amortization |
(4,448 | ) | (1,382 | ) | (16,219 | ) | (7,736 | ) | ||||||||
| Finance income |
423 | 413 | 991 | 1,003 | ||||||||||||
| Finance costs |
(233 | ) | (234 | ) | (804 | ) | (2,378 | ) | ||||||||
| Other expense |
(1,853 | ) | (2,383 | ) | (16,496 | ) | (7,339 | ) | ||||||||
| Income tax expense |
(11,565 | ) | (4,126 | ) | (39,566 | ) | (29,172 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net earnings from continuing operations |
$ | 49,112 | $ | 16,148 | $ | 160,000 | $ | 104,376 | ||||||||
| Other comprehensive income |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total comprehensive income |
$ | 49,112 | $ | 16,148 | $ | 160,000 | $ | 104,376 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The following table reconciles the summarized financial information to the carrying amount of Cameco’s interest in JV Inkai:
| Sep 30/23 | Dec 31/22 | |||||||
| Opening net assets |
$ | 651,522 | $ | 571,542 | ||||
| Total comprehensive income(a) |
160,000 | 278,659 | ||||||
| Dividends declared |
(238,086 | ) | (195,865 | ) | ||||
| Impact of foreign exchange |
(13,041 | ) | (2,814 | ) | ||||
|
|
|
|
|
|||||
| Closing net assets |
560,395 | 651,522 | ||||||
| Cameco’s share of net assets |
224,158 | 260,609 | ||||||
| Consolidating adjustments(b) |
(45,244 | ) | (82,275 | ) | ||||
| Fair value increment(c) |
82,371 | 83,675 | ||||||
| Dividends declared but not received |
5,952 | — | ||||||
| Dividends in excess of ownership percentage(d) |
(74,843 | ) | (48,641 | ) | ||||
| Impact of foreign exchange |
2,391 | (2,396 | ) | |||||
|
|
|
|
|
|||||
| Carrying amount in the statement of financial position at September 30, 2023 |
$ | 194,785 | $ | 210,972 | ||||
|
|
|
|
|
|||||
| (a) | Cameco’s share of earnings from equity-accounted investee as reported on the statement of earnings does not equal its share of JV Inkai’s total comprehensive income. Cameco’s share of earnings also includes consolidating adjustments and amortization of the fair value increment. |
11
| (b) | Cameco records certain consolidating adjustments to eliminate unrealized profit, recognize deferred profit and amortize historical differences in accounting policies. The historical differences are amortized to earnings over units of production. |
| (c) | Upon restructuring, Cameco assigned fair values to the assets and liabilities of JV Inkai. This increment is amortized to earnings over units of production. |
| (d) | Cameco’s share of dividends follows its production purchase entitlements which is currently higher than its ownership interest. |
| 8. | Other liabilities |
| Sep 30/23 | Dec 31/22 | |||||||
| Deferred sales |
$ | 54,853 | $ | 66,845 | ||||
| Derivatives [note 18] |
58,746 | 58,342 | ||||||
| Accrued pension and post-retirement benefit liability |
68,785 | 66,180 | ||||||
| Lease obligation [note 18] |
8,488 | 9,287 | ||||||
| Product loans(a) |
122,098 | 78,094 | ||||||
| Sales contracts [note 4] |
6,314 | 9,000 | ||||||
| Other |
60,476 | 59,738 | ||||||
|
|
|
|
|
|||||
| 379,760 | 347,486 | |||||||
| Less current portion |
(130,745 | ) | (131,324 | ) | ||||
|
|
|
|
|
|||||
| Net |
$ | 249,015 | $ | 216,162 | ||||
|
|
|
|
|
|||||
| (a) | Cameco has standby product loan facilities with various counterparties. The arrangements allow us to borrow up to 2,200,000 kgU of UF6 conversion services and 4,026,000 pounds of U3O8 by September 30, 2026 with repayment in kind up to December 31, 2026. Under the facilities, standby fees of up to 1% are payable based on the market value of the facilities and interest is payable on the market value of any amounts drawn at rates ranging from 0.5% to 2.0%. At September 30, 2023, we have 1,787,000 kgU of UF6 conversion services (December 31, 2022 - 1,529,000 kgU) drawn on the loans with repayment due by December 31 of the following years: |
| 2023 | 2024 | 2025 | 2026 | Total | ||||||||||||||||
| kgU of UF6 |
348,000 | — | 528,000 | 911,000 | 1,787,000 | |||||||||||||||
We also have 2,067,000 pounds of U3O8 (December 31, 2022 - 1,393,000 pounds) drawn with repayment due no later than December 31 of the following years:
| 2023 | 2024 | 2025 | 2026 | Total | ||||||||||||||||
| lbs of U3O8 |
1,194,000 | — | 630,000 | 243,000 | 2,067,000 | |||||||||||||||
The loans are recorded at Cameco’s weighted average cost of inventory.
12
| 9. | Provisions |
| Reclamation | Waste disposal | Total | ||||||||||
| Beginning of year |
$ | 1,061,096 | $ | 9,934 | $ | 1,071,030 | ||||||
| Changes in estimates and discount rates |
||||||||||||
| Capitalized in property, plant, and equipment |
(64,722 | ) | — | (64,722 | ) | |||||||
| Recognized in earnings |
(54,962 | ) | 3,378 | (51,584 | ) | |||||||
| Provisions used during the period |
(28,275 | ) | (1,487 | ) | (29,762 | ) | ||||||
| Unwinding of discount |
26,225 | 244 | 26,469 | |||||||||
| Impact of foreign exchange |
1,008 | — | 1,008 | |||||||||
|
|
|
|
|
|
|
|||||||
| End of period |
$ | 940,370 | $ | 12,069 | $ | 952,439 | ||||||
|
|
|
|
|
|
|
|||||||
| Current |
43,149 | 3,227 | 46,376 | |||||||||
| Non-current |
897,221 | 8,842 | 906,063 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 940,370 | $ | 12,069 | $ | 952,439 | |||||||
|
|
|
|
|
|
|
|||||||
| 10. | Share capital |
At September 30, 2023, there were 433,865,437 common shares outstanding. Options in respect of 1,706,604 shares are outstanding under the stock option plan and are exercisable up to 2027. For the quarter ended September 30, 2023, there were 557,200 options that were exercised resulting in the issuance of shares (2022 - 5,500). For the nine months ended September 30, 2023, there were 1,346,967 options exercised that resulted in the issuance of shares (2022 - 383,072).
11. Revenue
Cameco’s uranium and fuel services sales contracts with customers contain both fixed and market-related pricing. Fixed-price contracts are typically based on a term-price indicator at the time the contract is accepted and escalated over the term of the contract. Market-related contracts are based on either the spot price or long-term price, and the price is quoted at the time of delivery rather than at the time the contract is accepted. These contracts often include a floor and/or ceiling prices, which are usually escalated over the term of the contract. Escalation is generally based on a consumer price index. The Company’s contracts contain either one of these pricing mechanisms or a combination of the two. There is no variable consideration in the contracts and therefore no revenue is considered constrained at the time of delivery. Cameco expenses the incremental costs of obtaining a contract as incurred as the amortization period is less than a year.
The following tables summarize Cameco’s sales disaggregated by geographical region and contract type and includes a reconciliation to Cameco’s reportable segments (note 19):
For the three months ended September 30, 2023
| Uranium | Fuel services | Other | Total | |||||||||||||
| Customer geographical region |
||||||||||||||||
| Americas |
$ | 155,819 | $ | 51,527 | $ | 180 | $ | 207,526 | ||||||||
| Europe |
198,214 | 26,576 | — | 224,790 | ||||||||||||
| Asia |
135,348 | 7,415 | — | 142,763 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 489,381 | $ | 85,518 | $ | 180 | $ | 575,079 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Contract type |
||||||||||||||||
| Fixed-price |
$ | 179,936 | $ | 76,195 | $ | 180 | $ | 256,311 | ||||||||
| Market-related |
309,445 | 9,323 | — | 318,768 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 489,381 | $ | 85,518 | $ | 180 | $ | 575,079 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
13
For the three months ended September 30, 2022
| Uranium | Fuel services | Other | Total | |||||||||||||
| Customer geographical region |
||||||||||||||||
| Americas |
$ | 162,569 | $ | 63,348 | $ | — | $ | 225,917 | ||||||||
| Europe |
80,813 | 9,566 | — | 90,379 | ||||||||||||
| Asia |
69,881 | 2,482 | — | 72,363 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 313,263 | $ | 75,396 | $ | — | $ | 388,659 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Contract type |
||||||||||||||||
| Fixed-price |
$ | 86,811 | $ | 73,659 | $ | — | $ | 160,470 | ||||||||
| Market-related |
226,452 | 1,737 | — | 228,189 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 313,263 | $ | 75,396 | $ | — | $ | 388,659 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
For the nine months ended September 30, 2023
| Uranium | Fuel services | Other | Total | |||||||||||||
| Customer geographical region |
||||||||||||||||
| Americas |
$ | 589,220 | $ | 204,567 | $ | 629 | $ | 794,416 | ||||||||
| Europe |
453,250 | 72,141 | — | 525,391 | ||||||||||||
| Asia |
409,567 | 14,667 | — | 424,234 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 1,452,037 | $ | 291,375 | $ | 629 | $ | 1,744,041 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Contract type |
||||||||||||||||
| Fixed-price |
$ | 487,801 | $ | 280,107 | $ | 629 | $ | 768,537 | ||||||||
| Market-related |
964,236 | 11,268 | — | 975,504 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 1,452,037 | $ | 291,375 | $ | 629 | $ | 1,744,041 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
For the nine months ended September 30, 2022
| Uranium | Fuel services | Other | Total | |||||||||||||
| Customer geographical region |
||||||||||||||||
| Americas |
$ | 578,005 | $ | 202,123 | $ | 8,654 | $ | 788,782 | ||||||||
| Europe |
215,171 | 32,636 | 2,769 | 250,576 | ||||||||||||
| Asia |
289,685 | 15,231 | — | 304,916 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 1,082,861 | $ | 249,990 | $ | 11,423 | $ | 1,344,274 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Contract type |
||||||||||||||||
| Fixed-price |
$ | 374,869 | $ | 246,531 | $ | 11,423 | $ | 632,823 | ||||||||
| Market-related |
707,992 | 3,459 | — | 711,451 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 1,082,861 | $ | 249,990 | $ | 11,423 | $ | 1,344,274 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
14
| 12. | Finance costs |
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/23 | Sep 30/22 | Sep 30/23 | Sep 30/22 | |||||||||||||
| Interest on long-term debt |
$ | 10,397 | $ | 10,045 | $ | 31,254 | $ | 29,787 | ||||||||
| Unwinding of discount on provisions |
8,862 | 8,617 | 26,469 | 20,289 | ||||||||||||
| Other charges |
3,701 | 4,615 | 11,579 | 12,300 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 22,960 | $ | 23,277 | $ | 69,302 | $ | 62,376 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 13. | Other income (expense) |
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/23 | Sep 30/22 | Sep 30/23 | Sep 30/22 | |||||||||||||
| Bargain purchase gain [note 4] |
— | — | — | 22,802 | ||||||||||||
| Foreign exchange gains |
53,694 | 50,874 | 7,528 | 67,987 | ||||||||||||
| Other |
— | 2 | 545 | 2 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 53,694 | $ | 50,876 | $ | 8,073 | $ | 90,791 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 14. | Income taxes |
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/23 | Sep 30/22 | Sep 30/23 | Sep 30/22 | |||||||||||||
| Earnings (loss) before income taxes |
||||||||||||||||
| Canada |
$ | 161,802 | $ | (86,676 | ) | $ | 373,253 | $ | 79,062 | |||||||
| Foreign |
26,828 | 42,025 | 7,295 | 25,666 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 188,630 | $ | (44,651 | ) | $ | 380,548 | $ | 104,728 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Current income taxes |
||||||||||||||||
| Canada |
$ | 2,899 | $ | 506 | $ | 18,236 | $ | 3,830 | ||||||||
| Foreign |
2,719 | 1,331 | 6,947 | 6,276 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 5,618 | $ | 1,837 | $ | 25,183 | $ | 10,106 | |||||||||
| Deferred income taxes (recovery) |
||||||||||||||||
| Canada |
$ | 35,201 | $ | (27,531 | ) | $ | 74,358 | $ | (9,211 | ) | ||||||
| Foreign |
(256 | ) | 577 | 284 | (854 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 34,945 | $ | (26,954 | ) | $ | 74,642 | $ | (10,065 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income tax expense (recovery) |
$ | 40,563 | $ | (25,117 | ) | $ | 99,825 | $ | 41 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
Cameco has recorded $909,429,000 of deferred tax assets (December 31, 2022 - $984,071,000). The realization of these deferred tax assets is dependent upon the generation of future taxable income in certain jurisdictions during the periods in which the Company’s temporary tax differences are available. The Company considers whether it is probable that all or a portion of the deferred tax assets will not be realized. In making this assessment, management considers all available evidence, including recent financial operations, projected future taxable income and tax planning strategies. Based on projections of future taxable income over the periods in which the deferred tax assets are available, realization of these deferred tax assets is probable and consequently the deferred tax assets have been recorded.
15
Canada
On February 18, 2021, the Supreme Court of Canada (Supreme Court) dismissed Canada Revenue Agency’s (CRA) application for leave to appeal the June 26, 2020 decision of the Federal Court of Appeal (Court of Appeal). The dismissal means that the dispute for the 2003, 2005 and 2006 tax years is fully and finally resolved in the Company’s favour.
In September 2018, the Tax Court of Canada (Tax Court) ruled that the marketing and trading structure involving foreign subsidiaries, as well as the related transfer pricing methodology used for certain intercompany uranium sales and purchasing agreements, were in full compliance with Canadian law for the tax years in question. Management believes the principles in the decision apply to all subsequent tax years, and that the ultimate resolution of those years will not be material to Cameco’s financial position, results of operations or liquidity in the year(s) of resolution. Due to a revised CRA reassessment position for certain years, CRA has released approximately $86,000,000 of cash held on account (see note 6).
As CRA continues to pursue reassessments for tax years subsequent to 2006, Cameco is utilizing its appeal rights under Canadian federal and provincial tax rules.
| 15. | Per share amounts |
Per share amounts have been calculated based on the weighted average number of common shares outstanding during the period. The weighted average number of paid shares outstanding in 2023 was 433,180,572 (2022 - 398,389,298).
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/23 | Sep 30/22 | Sep 30/23 | Sep 30/22 | |||||||||||||
| Basic earnings (loss) per share computation |
||||||||||||||||
| Net earnings (loss) attributable to equity holders |
$ | 148,080 | $ | (19,530 | ) | $ | 280,741 | $ | 104,799 | |||||||
| Weighted average common shares outstanding |
433,587 | 398,439 | 433,181 | 398,389 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Basic earnings (loss) per common share |
$ | 0.34 | $ | (0.05 | ) | $ | 0.65 | $ | 0.26 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted earnings (loss) per share computation |
||||||||||||||||
| Net earnings (loss) attributable to equity holders |
$ | 148,080 | $ | (19,530 | ) | $ | 280,741 | $ | 104,799 | |||||||
| Weighted average common shares outstanding |
433,587 | 398,439 | 433,181 | 398,389 | ||||||||||||
| Dilutive effect of stock options |
1,547 | — | 1,860 | 1,639 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted average common shares outstanding, assuming dilution |
435,134 | 398,439 | 435,041 | 400,028 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted earnings (loss) per common share |
$ | 0.34 | $ | (0.05 | ) | $ | 0.65 | $ | 0.26 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | For the quarter ended September 30, 2022, 1,628 options were excluded from the diluted weighted average number of common shares because their inclusion would have been anti-dilutive. |
16
| 16. | Statements of cash flows |
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/23 | Sep 30/22 | Sep 30/23 | Sep 30/22 | |||||||||||||
| Changes in non-cash working capital: |
||||||||||||||||
| Accounts receivable |
$ | (45,386 | ) | $ | (48,040 | ) | $ | (116,794 | ) | $ | 74,900 | |||||
| Inventories |
100,628 | (58,951 | ) | 171,798 | (67,827 | ) | ||||||||||
| Supplies and prepaid expenses |
(15,928 | ) | (10,538 | ) | (42,529 | ) | (23,494 | ) | ||||||||
| Accounts payable and accrued liabilities |
(15,864 | ) | 12,678 | (133,434 | ) | (86,526 | ) | |||||||||
| Reclamation payments |
(10,235 | ) | (6,998 | ) | (29,762 | ) | (20,437 | ) | ||||||||
| Other |
2,346 | 18,614 | (3,150 | ) | 13,512 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other operating items |
$ | 15,561 | $ | (93,235 | ) | $ | (153,871 | ) | $ | (109,872 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| 17. | Share-based compensation plans |
| A. | Stock option plan |
The aggregate number of common shares that may be issued pursuant to the Cameco stock option plan shall not exceed 43,017,198 of which 31,885,744 shares have been issued. As of September 30, 2023, the total number of stock options held by the participants was 1,706,604 (December 31, 2022 - 3,053,571).
| B. | Executive performance share unit (PSU) |
During the quarter, the Company granted 232,160 PSUs. The weighted average fair value per unit at the date of issue was $37.30. As of September 30, 2023, the total number of PSUs held by the participants was 828,674 (December 31, 2022 - 1,255,255).
| C. | Restricted share unit (RSU) |
During the quarter, the Company granted 292,553 RSUs. The weighted average fair value per unit at the date of issue was $37.30. As of September 30, 2023, the total number of RSUs held by the participants was 816,505 (December 31, 2022 - 1,131,493).
| D. | Deferred share unit (DSU) |
As of September 30, 2023, the total number of DSUs held by participating directors was 559,776 (December 31, 2022 - 547,304).
Equity-settled plans
Cameco records compensation expense under its equity-settled plans with an offsetting credit to contributed surplus, to reflect the estimated fair value of units granted to employees. During the period, the Company recognized the following expenses under these plans:
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/23 | Sep 30/22 | Sep 30/23 | Sep 30/22 | |||||||||||||
| Restricted share unit plan |
$ | 949 | $ | 846 | $ | 2,710 | $ | 2,380 | ||||||||
| Stock option plan |
— | — | — | 45 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 949 | 846 | 2,710 | 2,425 | |||||||||||||
| Employee share ownership plan(a) |
1,005 | 827 | 3,052 | 2,538 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 1,954 | $ | 1,673 | $ | 5,762 | $ | 4,963 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | The total number of shares purchased in 2023 with Company contributions was 77,233 (2022 - 56,196). |
17
Cash-settled plans
During the period, the Company recognized the following expenses (income) under these plans:
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/23 | Sep 30/22 | Sep 30/23 | Sep 30/22 | |||||||||||||
| Performance share unit plan |
$ | 6,577 | $ | 9,845 | $ | 17,821 | $ | 15,685 | ||||||||
| Deferred share unit plan |
6,900 | 5,119 | 12,846 | 5,194 | ||||||||||||
| Restricted share unit plan |
5,840 | 6,791 | 15,243 | 10,113 | ||||||||||||
| Phantom stock option plan |
787 | 852 | 1,776 | 1,190 | ||||||||||||
| Phantom restricted share unit plan |
298 | 137 | 606 | 229 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 20,402 | $ | 22,744 | $ | 48,292 | $ | 32,411 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Expenses related to share-based compensation plans are primarily included as part of administration expense in the statement of earnings.
| 18. | Financial instruments and related risk management |
| A. | Accounting classifications |
The following tables summarize the carrying amounts and accounting classifications of Cameco’s financial instruments at the reporting date:
At September 30, 2023
| FVTPL | Amortized cost |
Total | ||||||||||
| Financial assets |
||||||||||||
| Cash and cash equivalents(a) |
$ | — | $ | 2,667,715 | $ | 2,667,715 | ||||||
| Accounts receivable |
— | 297,683 | 297,683 | |||||||||
| Derivative assets [note 6] |
||||||||||||
| Foreign currency contracts |
1,087 | — | 1,087 | |||||||||
|
|
|
|
|
|
|
|||||||
| 1,087 | 2,965,398 | 2,966,485 | ||||||||||
|
|
|
|
|
|
|
|||||||
| Financial liabilities |
||||||||||||
| Accounts payable and accrued liabilities |
— | 261,805 | 261,805 | |||||||||
| Lease obligation [note 8] |
— | 8,488 | 8,488 | |||||||||
| Current portion of long-term debt |
— | 499,717 | 499,717 | |||||||||
| Derivative liabilities [note 8] |
||||||||||||
| Foreign currency contracts |
48,949 | — | 48,949 | |||||||||
| Interest rate contracts |
9,797 | — | 9,797 | |||||||||
| Long-term debt |
— | 497,865 | 497,865 | |||||||||
|
|
|
|
|
|
|
|||||||
| 58,746 | 1,267,875 | 1,326,621 | ||||||||||
|
|
|
|
|
|
|
|||||||
| Net |
(57,659 | ) | 1,697,523 | 1,639,864 | ||||||||
|
|
|
|
|
|
|
|||||||
18
At December 31, 2022
| FVTPL | Amortized cost |
Total | ||||||||||
| Financial assets |
||||||||||||
| Cash and cash equivalents |
$ | — | $ | 1,143,674 | $ | 1,143,674 | ||||||
| Short-term investments |
— | 1,138,174 | 1,138,174 | |||||||||
| Accounts receivable |
— | 183,944 | 183,944 | |||||||||
| Derivative assets [note 6] |
||||||||||||
| Foreign currency contracts |
2,807 | — | 2,807 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 2,807 | $ | 2,465,792 | $ | 2,468,599 | |||||||
|
|
|
|
|
|
|
|||||||
| Financial liabilities |
||||||||||||
| Accounts payable and accrued liabilities |
$ | — | $ | 374,714 | $ | 374,714 | ||||||
| Lease obligation [note 8] |
— | 9,287 | 9,287 | |||||||||
| Derivative liabilities [note 8] |
||||||||||||
| Foreign currency contracts |
51,058 | — | 51,058 | |||||||||
| Interest rate contracts |
7,284 | — | 7,284 | |||||||||
| Long-term debt |
— | 997,000 | 997,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| 58,342 | 1,381,001 | 1,439,343 | ||||||||||
|
|
|
|
|
|
|
|||||||
| Net |
$ | (55,535 | ) | $ | 1,084,791 | $ | 1,029,256 | |||||
|
|
|
|
|
|
|
|||||||
(a) Cameco has pledged $248,372,000 of cash as security against certain of its letter of credit facilities. This cash is being used as collateral for an interest rate reduction on the letter of credit facilities. The collateral account had a term of five years effective July 1, 2018 and is in the process of being extended. Cameco retains full access to this cash.
| B. | Fair value hierarchy |
The fair value of an asset or liability is generally estimated as the amount that would be received on sale of an asset, or paid to transfer a liability in an orderly transaction between market participants at the reporting date. Fair values of assets and liabilities traded in an active market are determined by reference to last quoted prices, in the principal market for the asset or liability. In the absence of an active market for an asset or liability, fair values are determined based on market quotes for assets or liabilities with similar characteristics and risk profiles, or through other valuation techniques. Fair values determined using valuation techniques require the use of inputs, which are obtained from external, readily observable market data when available. In some circumstances, inputs that are not based on observable data must be used. In these cases, the estimated fair values may be adjusted in order to account for valuation uncertainty, or to reflect the assumptions that market participants would use in pricing the asset or liability.
All fair value measurements are categorized into one of three hierarchy levels, described below, for disclosure purposes. Each level is based on the transparency of the inputs used to measure the fair values of assets and liabilities:
Level 1 – Values based on unadjusted quoted prices in active markets that are accessible at the reporting date for identical assets or liabilities.
Level 2 – Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.
Level 3 – Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.
19
When the inputs used to measure fair value fall within more than one level of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety.
The following tables summarize the carrying amounts and level 2 fair values of Cameco’s financial instruments that are measured at fair value:
As at September 30, 2023
| Carrying value | Fair Value | |||||||
| Derivative assets [note 6] |
||||||||
| Foreign currency contracts |
$ | 1,087 | $ | 1,087 | ||||
| Current portion of long-term debt |
(499,717 | ) | (500,000 | ) | ||||
| Derivative liabilities [note 8] |
||||||||
| Foreign currency contracts |
(48,949 | ) | (48,949 | ) | ||||
| Interest rate contracts |
(9,797 | ) | (9,797 | ) | ||||
| Long-term debt |
(497,865 | ) | (505,426 | ) | ||||
|
|
|
|
|
|||||
| Net |
$ | (1,055,241 | ) | $ | (1,063,085 | ) | ||
|
|
|
|
|
|||||
As at December 31, 2022
| Carrying value | Fair Value | |||||||
| Derivative assets [note 6] |
||||||||
| Foreign currency contracts |
$ | 2,807 | $ | 2,807 | ||||
| Derivative liabilities [note 8] |
||||||||
| Foreign currency contracts |
(51,058 | ) | (51,058 | ) | ||||
| Interest rate contracts |
(7,284 | ) | (7,284 | ) | ||||
| Long-term debt |
(997,000 | ) | (1,014,010 | ) | ||||
|
|
|
|
|
|||||
| Net |
$ | (1,052,535 | ) | $ | (1,069,545 | ) | ||
|
|
|
|
|
|||||
The preceding tables exclude fair value information for financial instruments whose carrying amounts are a reasonable approximation of fair value. The carrying value of Cameco’s cash and cash equivalents, short-term investments, accounts receivable, and accounts payable and accrued liabilities approximates its fair value as a result of the short-term nature of the instruments.
There were no transfers between level 1 and level 2 during the period. Cameco does not have any financial instruments that are classified as level 3 as of the reporting date.
| C. | Financial instruments measured at fair value |
Cameco measures its derivative financial instruments and long-term debt at fair value. Derivative financial instruments and current and long-term debt are classified as recurring level 2 fair value measurements.
The fair value of Cameco’s long-term debt is determined using quoted market yields as of the reporting date, which ranged from 4.0% to 5.1% (2022 - 3.3% to 4.2%).
Foreign currency derivatives consist of foreign currency forward contracts, options and swaps. The fair value of foreign currency options is measured based on the Black Scholes option-pricing model. The fair value of foreign currency forward contracts and swaps is measured using a market approach, based on the difference between contracted foreign exchange rates and quoted forward exchange rates as of the reporting date.
20
Interest rate derivatives consist of interest rate swap contracts. The fair value of interest rate swaps is determined by discounting expected future cash flows from the contracts. The future cash flows are determined by measuring the difference between fixed interest payments to be received and floating interest payments to be made to the counterparty based on Canada Dealer Offer Rate forward interest rate curves.
Where applicable, the fair value of the derivatives reflects the credit risk of the instrument and includes adjustments to take into account the credit risk of the Company and counterparty. These adjustments are based on credit ratings and yield curves observed in active markets at the reporting date.
| D. | Derivatives |
The following table summarizes the fair value of derivatives and classification on the consolidated statements of financial position:
| Sep 30/23 | Dec 31/22 | |||||||
| Non-hedge derivatives: |
||||||||
| Foreign currency contracts |
$ | (47,862 | ) | $ | (48,251 | ) | ||
| Interest rate contracts |
(9,797 | ) | (7,284 | ) | ||||
|
|
|
|
|
|||||
| Net |
$ | (57,659 | ) | $ | (55,535 | ) | ||
|
|
|
|
|
|||||
| Classification: |
||||||||
| Current portion of long-term receivables, investments and other [note 6] |
$ | 643 | $ | 1,331 | ||||
| Long-term receivables, investments and other [note 6] |
444 | 1,476 | ||||||
| Current portion of other liabilities [note 8] |
(29,211 | ) | (25,913 | ) | ||||
| Other liabilities [note 8] |
(29,535 | ) | (32,429 | ) | ||||
|
|
|
|
|
|||||
| Net |
$ | (57,659 | ) | $ | (55,535 | ) | ||
|
|
|
|
|
|||||
The following table summarizes the different components of the gain (loss) on derivatives included in net earnings (loss):
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/23 | Sep 30/22 | Sep 30/23 | Sep 30/22 | |||||||||||||
| Non-hedge derivatives: |
||||||||||||||||
| Foreign currency contracts |
$ | (45,329 | ) | $ | (72,369 | ) | $ | (12,355 | ) | $ | (85,224 | ) | ||||
| Interest rate contracts |
(1,763 | ) | (745 | ) | (3,738 | ) | (6,178 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net |
$ | (47,092 | ) | $ | (73,114 | ) | $ | (16,093 | ) | $ | (91,402 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
19. Segmented information
Cameco has two reportable segments: uranium and fuel services. Cameco’s reportable segments are strategic business units with different products, processes and marketing strategies. The uranium segment involves the exploration for, mining, milling, purchase and sale of uranium concentrate. The fuel services segment involves the refining, conversion and fabrication of uranium concentrate and the purchase and sale of conversion services.
Cost of sales in the uranium segment includes care and maintenance costs for our operations that have had production suspensions as well as operational readiness costs for our operations that are resuming operations. Operational readiness costs include costs to complete critical projects, perform maintenance readiness checks, and recruit and train sufficient mine and mill personnel before beginning operations. Cameco expensed $12,887,000 of care and maintenance costs during the third quarter of 2023 (2022 - $63,676,000 of care and maintenance and operational readiness costs). For the nine months ended September 30, 2023, Cameco expensed $38,580,000 (2022 - $175,408,000 of care and maintenance costs).
21
Accounting policies used in each segment are consistent with the policies outlined in the summary of significant accounting policies. Segment revenues, expenses and results include transactions between segments incurred in the ordinary course of business. These transactions are priced on an arm’s length basis, are eliminated on consolidation and are reflected in the “other” column.
Business segments
For the three months ended September 30, 2023
| Uranium | Fuel services | Other | Total | |||||||||||||
| Revenue |
$ | 489,381 | $ | 85,518 | $ | 180 | $ | 575,079 | ||||||||
| Expenses |
||||||||||||||||
| Cost of products and services sold |
304,551 | 62,751 | — | 367,302 | ||||||||||||
| Depreciation and amortization |
46,012 | 8,040 | 1,935 | 55,987 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cost of sales |
350,563 | 70,791 | 1,935 | 423,289 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Gross profit (loss) |
138,818 | 14,727 | (1,755 | ) | 151,790 | |||||||||||
| Administration |
— | — | 65,510 | 65,510 | ||||||||||||
| Exploration |
4,106 | — | — | 4,106 | ||||||||||||
| Research and development |
— | — | 7,850 | 7,850 | ||||||||||||
| Other operating income |
(48,381 | ) | (12,923 | ) | — | (61,304 | ) | |||||||||
| Loss on disposal of assets |
41 | 51 | — | 92 | ||||||||||||
| Finance costs |
— | — | 22,960 | 22,960 | ||||||||||||
| Loss on derivatives |
— | — | 47,092 | 47,092 | ||||||||||||
| Finance income |
— | — | (33,986 | ) | (33,986 | ) | ||||||||||
| Share of earnings from equity-accounted investee |
(35,466 | ) | — | — | (35,466 | ) | ||||||||||
| Other income |
— | — | (53,694 | ) | (53,694 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings (loss) before income taxes |
218,518 | 27,599 | (57,487 | ) | 188,630 | |||||||||||
| Income tax expense |
40,563 | |||||||||||||||
|
|
|
|||||||||||||||
| Net earnings |
$ | 148,067 | ||||||||||||||
|
|
|
|||||||||||||||
|
|
|
|||||||||||||||
22
For the three months ended September 30, 2022
| Uranium | Fuel services | Other | Total | |||||||||||||
| Revenue |
$ | 313,263 | $ | 75,396 | $ | — | $ | 388,659 | ||||||||
| Expenses |
||||||||||||||||
| Cost of products and services sold |
257,674 | 58,284 | (21 | ) | 315,937 | |||||||||||
| Depreciation and amortization |
36,859 | 8,089 | 2,626 | 47,574 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cost of sales |
294,533 | 66,373 | 2,605 | 363,511 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Gross profit (loss) |
18,730 | 9,023 | (2,605 | ) | 25,148 | |||||||||||
| Administration |
— | — | 61,141 | 61,141 | ||||||||||||
| Exploration |
3,246 | — | — | 3,246 | ||||||||||||
| Research and development |
— | — | 3,130 | 3,130 | ||||||||||||
| Other operating expense (income) |
(24,848 | ) | 205 | — | (24,643 | ) | ||||||||||
| Gain on disposal of assets |
(448 | ) | — | — | (448 | ) | ||||||||||
| Finance costs |
— | — | 23,277 | 23,277 | ||||||||||||
| Loss on derivatives |
— | — | 73,114 | 73,114 | ||||||||||||
| Finance income |
— | — | (9,457 | ) | (9,457 | ) | ||||||||||
| Share of earnings from equity-accounted investee |
(8,685 | ) | — | — | (8,685 | ) | ||||||||||
| Other income |
— | — | (50,876 | ) | (50,876 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings (loss) before income taxes |
49,465 | 8,818 | (102,934 | ) | (44,651 | ) | ||||||||||
| Income tax recovery |
(25,117 | ) | ||||||||||||||
|
|
|
|||||||||||||||
| Net loss |
$ | (19,534 | ) | |||||||||||||
|
|
|
|||||||||||||||
For the nine months ended September 30, 2023
| Uranium | Fuel services | Other | Total | |||||||||||||
| Revenue |
$ | 1,452,037 | $ | 291,375 | $ | 629 | $ | 1,744,041 | ||||||||
| Expenses |
||||||||||||||||
| Cost of products and services sold |
959,060 | 182,551 | (725 | ) | 1,140,886 | |||||||||||
| Depreciation and amortization |
143,857 | 24,357 | 5,998 | 174,212 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cost of sales |
1,102,917 | 206,908 | 5,273 | 1,315,098 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Gross profit (loss) |
349,120 | 84,467 | (4,644 | ) | 428,943 | |||||||||||
| Administration |
— | — | 186,569 | 186,569 | ||||||||||||
| Exploration |
14,262 | — | — | 14,262 | ||||||||||||
| Research and development |
— | — | 17,189 | 17,189 | ||||||||||||
| Other operating income |
(41,602 | ) | (13,360 | ) | — | (54,962 | ) | |||||||||
| Loss on disposal of assets |
5 | 363 | — | 368 | ||||||||||||
| Finance costs |
— | — | 69,302 | 69,302 | ||||||||||||
| Loss on derivatives |
— | — | 16,093 | 16,093 | ||||||||||||
| Finance income |
— | — | (92,625 | ) | (92,625 | ) | ||||||||||
| Share of earnings from equity-accounted investee |
(99,728 | ) | — | — | (99,728 | ) | ||||||||||
| Other income |
(545 | ) | — | (7,528 | ) | (8,073 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings (loss) before income taxes |
476,728 | 97,464 | (193,644 | ) | 380,548 | |||||||||||
| Income tax expense |
99,825 | |||||||||||||||
|
|
|
|||||||||||||||
| Net earnings |
$ | 280,723 | ||||||||||||||
|
|
|
|||||||||||||||
23
For the nine months ended September 30, 2022
| Uranium | Fuel services | Other | Total | |||||||||||||
| Revenue |
$ | 1,082,861 | $ | 249,990 | $ | 11,423 | $ | 1,344,274 | ||||||||
| Expenses |
||||||||||||||||
| Cost of products and services sold |
868,469 | 150,374 | 8,154 | 1,026,997 | ||||||||||||
| Depreciation and amortization |
117,641 | 24,028 | 7,703 | 149,372 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cost of sales |
986,110 | 174,402 | 15,857 | 1,176,369 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Gross profit (loss) |
96,751 | 75,588 | (4,434 | ) | 167,905 | |||||||||||
| Administration |
— | — | 142,768 | 142,768 | ||||||||||||
| Exploration |
8,168 | — | — | 8,168 | ||||||||||||
| Research and development |
— | — | 9,296 | 9,296 | ||||||||||||
| Other operating income |
(62,262 | ) | (3,021 | ) | — | (65,283 | ) | |||||||||
| Gain on disposal of assets |
(453 | ) | (207 | ) | — | (660 | ) | |||||||||
| Finance costs |
— | — | 62,376 | 62,376 | ||||||||||||
| Loss on derivatives |
— | — | 91,402 | 91,402 | ||||||||||||
| Finance income |
— | — | (15,886 | ) | (15,886 | ) | ||||||||||
| Share of earnings from equity-accounted investee |
(78,213 | ) | — | — | (78,213 | ) | ||||||||||
| Other income |
(22,802 | ) | — | (67,989 | ) | (90,791 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings (loss) before income taxes |
252,313 | 78,816 | (226,401 | ) | 104,728 | |||||||||||
| Income tax expense |
41 | |||||||||||||||
|
|
|
|||||||||||||||
| Net earnings |
$ | 104,687 | ||||||||||||||
|
|
|
|||||||||||||||
20. Related parties
Cameco purchases uranium concentrate from JV Inkai. For the quarter ended September 30, 2023, Cameco did not have any purchases (2022 - Cameco recorded physical weight adjustments of $4,827,000 ($3,736,000 (US)) related to the finalization of prior period deliveries). For the nine-month period ended September 30, 2023, purchases were $93,430,000 ($68,394,000 (US)) (2022 - $49,287,000 ($38,701,000 (US))).
For the quarters ended September 30, 2023 and 2022, Cameco did not receive any cash dividends from JV Inkai. For the nine months ended September 30, 2023, cash dividends received were $113,642,000 ($83,059,000 (US)) (2022 - $104,943,000 ($82,933,000 (US))).
21. Commitment
On October 11, 2022, Cameco announced that it had entered into a strategic partnership with Brookfield and it’s publicly listed affiliate Brookfield Renewable Partners (Brookfield) and its institutional partners to acquire Westinghouse Electric Company (Westinghouse), one of the world’s largest nuclear services businesses. Brookfield, with its institutional partners, will own a 51% interest in Westinghouse and Cameco will own 49%.
Cameco’s share of the purchase price will be funded with a combination of cash, debt and equity. In 2022, the Company secured a bridge loan facility of $280,000,000 (US) as well as $600,000,000 (US) in term loans. The bridge facility, if funded, will mature 364 days after the acquisition closing date and the term loans, which consist of two $300,000,000 (US) tranches, are expected to mature two and three years after the closing of the acquisition. In addition, Cameco issued 34,057,250 common shares pursuant to a public offering.
Transaction costs of $59,600,000 have been included in supplies and prepaid expenses in the consolidated statement of financial position as at September 30, 2023 (December 31, 2022 - $41,227,000). The closing of the acquisition is anticipated by the end of the year, subject to the remaining approvals and other closing conditions. Under the terms of the agreement, if the transaction does not close, Cameco is entitled to recover a portion of these costs.
24
Exhibit 99.4
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Tim Gitzel, president and chief executive officer of Cameco Corporation, certify that:
| 1. | I have reviewed this quarterly report on Form 6-K of Cameco Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
Page 2
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: October 31, 2023 |
| /s/ Tim Gitzel |
| Tim Gitzel |
| President and Chief Executive Officer |
Exhibit 99.5
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Grant Isaac, executive vice-president and chief financial officer, of Cameco Corporation, certify that:
| 1. | I have reviewed this quarterly report on Form 6-K of Cameco Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: October 31, 2023 |
| /s/ Grant Isaac |
| Grant Isaac |
| Executive Vice-President and Chief Financial Officer |