Cameco (TSX: CCO) (NYSE: CCJ) reported its consolidated financial and operating results for the third quarter ended September 30, 2021 in accordance with International Financial Reporting Standards.
“Our third quarter results were as expected and reflect the continued execution of our strategy and the proactive decisions to suspend production to protect the health and safety of our workers, their families and their communities,” said Tim Gitzel, Cameco’s president and CEO. “With McArthur River and Key Lake in care and maintenance, we are not at the regular tier-one run rate of our business. However, we are positioning to capture long-term value: to respond to the growing need for uranium to generate safe, clean, reliable, and affordable electricity.
“The recent increase in the uranium spot price – about 46% since the end of June, demonstrates the thinning of uncommitted primary supply as unexpected demand from junior uranium companies and financials has led to increased liquidity and better price discovery, a welcome development. As a result, we are beginning to see utility interest in on-market contract activity as their focus shifts to securing material for their uncovered requirements, which has resulted in an increase of almost 28% in the long-term price since the end of June as well. Increasing uranium prices are positive for us. Over time, the market exposure in our contract portfolio will pick up the benefit of rising prices and we will be layering in new contracts with pricing mechanisms that will underpin the long-term operation of our productive capacity. This is why we remain committed to our strategy. We have taken our production well below our sales commitments and will continue to align our production decisions with the market fundamentals, we will continue to be strategically patient with contracting, and we will continue to conservatively manage our balance sheet.
“Thanks to the deliberate actions we have taken, we have the financial strength to support our strategy and allow us to self-manage risk. Again, we ended the quarter with negative net debt, we had about $1.4 billion in cash compared to our long-term debt of $1 billion.
“Our strategy has positioned us well to take advantage of the positive long-term fundamentals for nuclear power. 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.
“Our vision of ‘energizing 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. We have operating and idle tier-one assets that are licensed, permitted, long-lived, and are proven reliable that have expansion capacity. These tier-one assets are backed up by idle tier-two assets and what we think is the best exploration portfolio that leverages existing infrastructure. We are vertically integrated across the nuclear fuel cycle. We have locked in significant value for our fuel services segment of our business in the recent price transition in the conversion market and we are exploring opportunities to further our reach in the nuclear fuel cycle and in innovative, non-traditional commercial uses of nuclear power in Canada and around the world.
“We are optimistic about Cameco’s role in capturing long-term value across the fuel chain and supporting the transition to a net-zero carbon economy. 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 delivering our products responsibly. 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.”
Consolidated financial results
|THREE MONTHS||NINE MONTHS|
|CONSOLIDATED HIGHLIGHTS||ENDED SEPTEMBER 30||ENDED SEPTEMBER 30|
|($ MILLIONS EXCEPT WHERE INDICATED)||2021||2020||CHANGE||2021||2020||CHANGE|
|Net losses attributable to equity holders||(72||)||(61||)||(18||)%||(114||)||(133||)||14||%|
|$ per common share (basic)||(0.18||)||(0.15||)||(21||)%||(0.29||)||(0.34||)||15||%|
|$ per common share (diluted)||(0.18||)||(0.15||)||(21||)%||(0.29||)||(0.34||)||15||%|
|Adjusted net losses (non-IFRS, see below)||(54||)||(78||)||31||%||(121||)||(114||)||(6||)%|
|$ per common share (adjusted and diluted)||(0.14||)||(0.20||)||30||%||(0.30||)||(0.29||)||(3||)%|
|Cash provided by (used in) operations (after working capital changes)||203||(66||)||>100||%||399||(200||)||>100||%|
The financial information presented for the three months and nine months ended September 30, 2020 and September 30, 2021 is unaudited.
The following table shows what contributed to the change in net earnings and adjusted net earnings (non-IFRS measure, see below) in the third quarter and first nine months of 2021, compared to the same period in 2020.
|CHANGES IN EARNINGS||THREE MONTHS ENDED||NINE MONTHS ENDED|
|($ MILLIONS)||SEPTEMBER 30||SEPTEMBER 30|
|Net losses – 2020||(61||)||(78||)||(133||)||(114||)|
|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))|
|Uranium||Higher sales volume||–||–||12||12|
|Lower realized prices ($US)||(14||)||(14||)||(3||)||(3||)|
|Foreign exchange impact on realized prices||(17||)||(17||)||(60||)||(60||)|
|Lower (higher) costs||35||35||(5||)||(5||)|
|Change – uranium||4||4||(56||)||(56||)|
|Fuel services||Higher (lower) sales volume||1||1||(2||)||(2||)|
|Higher (lower) realized prices ($Cdn)||(2||)||(2||)||12||12|
|Change – fuel services||(2||)||(2||)||8||8|
|Lower (higher) administration expenditures||(10||)||(10||)||10||10|
|Lower (higher) exploration expenditures||(1||)||(1||)||2||2|
|Change in reclamation provisions||9||–||42||–|
|Higher earnings from equity-accounted investee||8||8||15||15|
|Change in gains or losses on derivatives||(37||)||20||12||22|
|Change in foreign exchange gains or losses||23||23||(20||)||(20||)|
|Canadian Emergency Wage Subsidy in 2021||–||–||21||21|
|Change in income tax recovery or expense||(3||)||(16||)||(4||)||2|
|Net losses – 2021||(72||)||(54||)||(114||)||(121||)|
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 third quarter and first nine months of 2021 and compares it to the same periods in 2020.
|THREE MONTHS||NINE MONTHS|
|ENDED SEPTEMBER 30||ENDED SEPTEMBER 30|
|Net losses attributable to equity holders||(72||)||(61||)||(114||)||(133||)|
|Adjustments on derivatives||26||(31||)||8||(2||)|
|Reclamation provision adjustments||(2||)||7||(18||)||24|
|Income taxes on adjustments||(6||)||7||3||(3||)|
|Adjusted net losses||(54||)||(78||)||(121||)||(114||)|
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 8 of our interim financial statements for more information. This amount has been excluded from our adjusted net earnings measure.
Selected segmented highlights
|THREE MONTHS||NINE MONTHS|
|ENDED SEPTEMBER 30||ENDED SEPTEMBER 30|
|Uranium||Production volume (million lbs)||2.0||0.2||>100||%||3.3||2.3||43||%|
|Sales volume (million lbs)||6.7||6.7||–||17.9||22.1||(19||)%|
|Average realized price||($US/lb)||32.20||33.77||(5||)%||32.68||32.79||–|
|Revenue ($ millions)||270||302||(11||)%||732||980||(25||)%|
|Gross loss ($ millions)||(30||)||(34||)||12||%||(119||)||(62||)||(92||)%|
|Fuel services||Production volume (million kgU)||1.4||2.0||(30||)%||9.0||8.4||7||%|
|Sales volume (million kgU)||3.0||2.8||7||%||8.7||9.2||(5||)%|
|Average realized price||($Cdn/kgU)||26.42||26.95||(2||)%||30.24||28.66||6||%|
|Revenue ($ millions)||80||77||4||%||264||263||–|
|Gross profit ($ millions)||10||12||(17||)%||73||65||12||%|
Management’s discussion and analysis 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, 2021, 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, 2020, 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 sedar.com, and on EDGAR at sec.gov/edgar.shtml.
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We acknowledge the [financial] support of the Government of Canada.