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Cameco reports first quarter results, Cigar Lake restart and the continued execution of strategy to support global clean-air transition

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Cameco reports first quarter results, Cigar Lake restart and the continued execution of strategy to support global clean-air transition

 

 

 

 

 

Cameco (TSX: CCO) (NYSE: CCJ) reported its consolidated financial and operating results for the first quarter ended March 31, 2021 in accordance with International Financial Reporting Standards.

 

“Our first quarter results were as expected,” said Tim Gitzel, Cameco’s president and CEO. “With the continued execution of our strategy and the unplanned disruptions due to the COVID-19 pandemic, we are not at the regular tier-one run rate of our business. However, despite the near-term costs of our strategy and associated with the precautionary production suspension at Cigar Lake, we ended the quarter with over a billion dollars in cash. And, we were successful in adding 9 million pounds U3O8 to our long-term contract portfolio.

 

“Additionally, we were pleased to announce in February that the Supreme Court of Canada dismissed Canada Revenue Agency’s request for leave to appeal in our tax dispute. This fully and finally resolves the tax years 2003, 2005 and 2006. We have followed the law and believe the CRA should return our $785 million in cash and letters of credit held as security.

 

“In April, we announced the restart of Cigar Lake as we have greater certainty that the mine will be able to operate safely and sustainably. Health and safety is always our top priority and we will continue to monitor the COVID-19 pandemic and the situation in the province.

 

“Globally, we see demand for both traditional and non-traditional uses of nuclear power growing as the increasing focus on electrification while phasing out carbon intensive sources of energy continues to take hold. In Europe, we have seen nuclear move another step closer to being included in the EU sustainable finance taxonomy following a rigorous scientific assessment that concluded there are no scientific arguments supporting its exclusion. In addition, at the recent global leaders’ summit on climate, aggressive plans to reduce carbon emissions and achieve net-zero carbon goals were discussed, with the US announcing a goal to cut up to 52% of its greenhouse gas emissions by 2030 leveraging existing and advanced nuclear reactor technology in its clean energy initiatives.

 

“We are excited about the future of nuclear power generation, about the fundamentals of uranium supply and demand and about the prospects for our company. We remain committed to our tier-one strategy and to our vision. Our vision to energize a clean-air world recognizes that we have an important role to play in enabling the vast reductions in greenhouse gas emissions required to accomplish the targets being set by countries and companies around the world to achieve a resilient, net-zero carbon economy.

 

“And, as we seek to achieve our vision, we are committed to doing so in a manner that reflects our values. Sustainability is at the heart of what we do. Embedded in all our decisions is a commitment to addressing the environmental, social and governance risks and opportunities that we believe will make our business sustainable over the long term. In these uncertain times, perhaps more than ever, it will be critical that we continue to work together to build on the strong foundation we have already established.”

 

  • Net loss of $5 million; adjusted net loss of $29 million: Results are driven by normal quarterly variations in contract deliveries and our continued execution on all strategic fronts. This quarter was also impacted by additional care and maintenance costs of $33 million resulting from the proactive suspension of production at the Cigar Lake mine for about four months starting in December 2020 in response to the COVID-19 pandemic. While production was suspended we kept and continued to pay all our employees. These costs were partially offset by the receipt of $12 million from the Canadian Employment Wage Subsidy. Adjusted net earnings is a non-IFRS measure, see below.
  • Cigar Lake restart: We safely restarted Cigar Lake in April, with the first shipment of ore sent to the McClean Lake mill at the end of April. The further COVID-related precautions we implemented, the licensed COVID-19 testing facility at the mine site and the ongoing provincial vaccine rollout program provided us with greater certainty around our ability to operate safely and sustainably. We will closely monitor the COVID-19 case counts and the ongoing success of the vaccine rollout and will continue to have regular dialogue with public health authorities and northern Saskatchewan leaders. We will not be in a position to provide additional outlook for 2021 until we know the rate at which we will be able to sustainably operate the Cigar Lake mine.
  • Contracting continues: In April, we finalized and executed an additional 9 million pounds U3Oin long-term sales contracts which had been under negotiation. And our pipeline remains large. Contracting is not tied to a year-end or quarter-end and we expect to update our contracting success as contracts are executed.
  • Strong balance sheet: As of March 31, 2021, we had $1 billion in cash and short-term investments and $1 billion in long-term debt. In addition, we have a $1 billion undrawn credit facility. We expect our cash balances and operating cash flows to meet our capital requirements during 2021, therefore, we do not anticipate drawing on our credit facility this year.
  • Supreme Court of Canada dismisses Canada Revenue Agency leave request: 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 our favour. Additionally, we received $10.3 million from CRA on April 20, 2021 which includes payment of the legal fees awarded by the Tax Court of Canada as well as the cost awards related to the Court of Appeal and Supreme Court decisions. Timing of any further payments remains uncertain.

 

 

Consolidated financial results

 

THREE MONTHS
HIGHLIGHTS ENDED MARCH 31
($ MILLIONS EXCEPT WHERE INDICATED) 2021 2020
Revenue 290 346
Gross profit (loss) (40 ) 35
Net losses attributable to equity holders (5 ) (19 )
$ per common share (basic) (0.01 ) (0.05 )
$ per common share (diluted) (0.01 ) (0.05 )
Adjusted net earnings (losses) (non-IFRS, see below) (29 ) 29
$ per common share (adjusted and diluted) (0.07 ) 0.07
Cash provided by operations (after working capital changes) 45 182

 

The financial information presented for the three months ended March 31, 2020 and March 31, 2021 is unaudited.

 

NET EARNINGS

 

The following table shows what contributed to the change in net earnings and adjusted net earnings (non-IFRS measure, see below) in the first quarter of 2021, compared to the same period in 2020.

 

 

CHANGES IN EARNINGS THREE MONTHS
($ MILLIONS) ENDED MARCH 31
IFRS ADJUSTED
Net earnings (losses) – 2020 (19 ) 29
Change in gross profit by segment
(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)
Uranium Lower sales volume (1 ) (1 )
Higher realized prices ($US) 6 6
Foreign exchange impact on realized prices (8 ) (8 )
Higher costs (67 ) (67 )
Change – uranium (70 ) (70 )
Fuel services Lower sales volume (4 ) (4 )
Higher realized prices ($Cdn) 4 4
Higher costs (2 ) (2 )
Change – fuel services (2 ) (2 )
Other changes
Lower administration expenditures 23 23
Lower exploration expenditures 3 3
Change in reclamation provisions 16
Higher earnings from equity-accounted investee 7 7
Change in gains or losses on derivatives 74 (5 )
Change in foreign exchange gains or losses (50 ) (50 )
Canadian Emergency Wage Subsidy in 2021 12 12
Change in income tax recovery or expense 9 32
Other (8 ) (8 )
Net losses – 2021 (5 ) (29 )

Adjusted net earnings (non-IFRS measure)

 

 

Adjusted net earnings 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. 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 our net earnings attributable to equity holders, adjusted to reflect the underlying financial performance for the reporting period. The adjusted earnings measure reflects the matching of the net benefits of our hedging program with the inflows of foreign currencies in the applicable reporting period and has also been adjusted for reclamation provisions for our Rabbit Lake and US operations, which had been impaired, and income taxes on adjustments.

 

Adjusted net earnings is non-standard supplemental information 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 first quarter and compares it to the same period in 2020.

 

 

THREE MONTHS
ENDED MARCH 31
($ MILLIONS) 2021 2020
Net losses attributable to equity holders (5 ) (19 )
Adjustments
Adjustments on derivatives (9 ) 70
Reclamation provision adjustments (22 ) (6 )
Income taxes on adjustments 7 (16 )
Adjusted net earnings (losses) (29 ) 29
     

 

 

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 7 of our interim financial statements for more information. This amount has been excluded from our adjusted net earnings measure.

 

 

Selected segmented highlights

 

THREE MONTHS
ENDED MARCH 31
HIGHLIGHTS 2021 2020 CHANGE
Uranium Production volume (million lbs) 2.1 (100 )%
Sales volume (million lbs) 5.0 6.0 (17 )%
Average realized price ($US/lb) 32.25 31.39 3 %
($Cdn/lb) 41.05 41.44 (1 )%
Revenue ($ millions) 205 248 (17 )%
Gross profit ($ millions) (65 ) 5 >(100%)
Fuel services Production volume (million kgU) 4.0 3.7 8 %
Sales volume (million kgU) 2.6 3.1 (16 )%
Average realized price ($Cdn/kgU) 31.91 29.91 7 %
Revenue ($ millions) 84 94 (11 )%
Gross profit ($ millions) 27 30 (10 )%

 

 

Management’s discussion and analysis and financial statements

 

The first quarter MD&A and unaudited condensed consolidated interim financial statements provide a detailed explanation of our operating results for the three months ended March 31, 2021, as compared to the same period 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, 2020, annual MD&A, and our most recent annual information form, all of which are available on our website at cameco.com, on SEDAR at sedar.com, and on EDGAR at sec.gov/edgar.shtml.

 

Qualified persons

 

The technical and scientific information discussed in this document for our material property Cigar Lake was approved by the following individual who is a qualified person for the purposes of NI 43-101:

  • Lloyd Rowson, general manager, Cigar Lake, Cameco

 

About Cameco

 

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 power in safe, reliable, carbon-free nuclear reactors. Our shares trade on the Toronto and New York stock exchanges. Our head office is in Saskatoon, Saskatchewan.

 

Posted May 7, 2021

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