2019 Annual Report
Management’s discussion and analysis
February 7, 2020
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2019 PERFORMANCE HIGHLIGHTS
MARKET OVERVIEW AND DEVELOPMENTS
OUR STRATEGY
MEASURING OUR RESULTS
FINANCIAL RESULTS
OPERATIONS AND PROJECTS
MINERAL RESERVES AND RESOURCES
ADDITIONAL INFORMATION
2019 CONSOLIDATED FINANCIAL STATEMENTS
This management’s discussion and analysis (MD&A) includes information that will help you understand management’s
perspective of our audited consolidated financial statements (financial statements) and notes for the year ended December 31,
2019. The information is based on what we knew as of February 6, 2020.
We encourage you to read our audited consolidated financial statements and notes as you review this MD&A. You can find
more information about Cameco, including our financial statements and our most recent annual information form, on our
website at cameco.com, on SEDAR at sedar.com 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, the Company 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 on page 3, 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 on pages 2 and 3. We recommend you also review our most recent annual information form, 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 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
on the financial front, we are well-positioned to execute on
our strategy and self-manage risk
we will continue to take the necessary actions to maintain
the strength of our balance sheet so we can self-manage
risk, and that we expect will reward shareholders for their
continued patience and support of our strategy to build long-
term value
our expectations about 2020 and future global uranium
supply, consumption, contracting volumes and demand,
including the discussion under the heading Market overview
and developments
the discussion under the heading Our strategy
our expectations for uranium purchases
our expectations for uranium sales and deliveries
the discussion of our expectations relating to our Canada
Revenue Agency (CRA) transfer pricing dispute, including
that the Tax Court of Canada’s (Tax Court) ruling will be
upheld on appeal, the timing of an appeal decision, the Tax
Court ruling diminishes our tax risk relating to our CRA
dispute, and our estimate of the amount and timing of
expected cash taxes and transfer pricing penalties and the
amount of the disbursements award
Material risks
actual sales volumes or market prices for any of our products
or services are lower than we expect for any reason,
including changes in market prices, loss of market share to a
competitor or trade restrictions
we are adversely affected by changes in currency exchange
rates, interest rates, royalty rates, or tax rates
our production costs are higher than planned, or our cost
reduction strategies are unsuccessful, or necessary supplies
are not available, or not available on commercially
reasonable terms
our strategies may change, be unsuccessful or have
unanticipated consequences
2 CAMECO CORPORATION
the discussion under the heading Outlook for 2020, including
our 2020 financial outlook, expectations for 2020 gross profit
and cash balances, and our price sensitivity analysis for our
uranium segment
the outlook for our uranium and fuel services segments for
2020
our expectations for future tax payments and rates, including
effective tax rates
our expectation that our cash balances and operating cash
flows will meet our anticipated 2020 capital requirements
our expectations for 2020, 2021 and 2022 capital
expenditures
our expectation that in 2020 we will be able to comply with all
the covenants in our unsecured revolving credit facility
production and life of mine operating cost estimates for the
Cigar Lake and Inkai operations
future plans and expectations for uranium properties,
advanced uranium projects, and fuel services operating sites
our expectations related to care and maintenance costs,
including incurring between $150 million and $170 million in
2020
our mineral reserve and resource estimates
our decommissioning estimates
our estimates and forecasts prove to be inaccurate, including
production, purchases, deliveries, cash flow, revenue, costs,
decommissioning, reclamation expenses, our tax expense,
or receipt of future dividends from JV Inkai
we are unable to enforce our legal rights under our existing
agreements, permits or licences
we are subject to litigation or arbitration that has an adverse
outcome, including lack of success in our dispute with CRA
we are unsuccessful in our dispute with CRA and this results
in significantly higher cash taxes, interest charges and
penalties that could have a material adverse effect on us
we are unable to utilize letters of credit to the extent
anticipated in our dispute with CRA
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 increased regulatory burdens or delays
necessary permits or approvals from government authorities
cannot be obtained or maintained
we are affected by political risks
we are affected by terrorism, sabotage, blockades, civil
unrest, social or political activism, 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
our uranium suppliers fail to fulfil delivery commitments or
our uranium purchasers fail to fulfil purchase commitments
our Cigar Lake development, mining or production plans are
delayed or do not succeed for any reason
Material assumptions
our expectations regarding sales and purchase volumes and
prices for uranium and fuel services, trade restrictions, and
that counterparties to our sales and purchase agreements
will honour their commitments
our expectations regarding the demand for and supply of
uranium
our expectations regarding spot prices and realized prices
for uranium, and other factors discussed under the heading
Price sensitivity analysis: uranium segment
that the construction of new nuclear power plants and the
relicensing of existing nuclear power plants not being more
adversely affected than expected 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 uranium and conversion
services
our cost expectations, including production costs, purchase
costs, operating costs, capital costs, and the success of our
cost reduction strategies
our expectations regarding tax rates and payments, royalty
rates, currency exchange rates and interest rates
our expectations about the outcome of our dispute with CRA,
including that the Tax Court ruling will be upheld on appeal
we are able to utilize letters of credit to the extent anticipated
in our dispute with CRA
our decommissioning and reclamation estimates, including
the assumptions upon which they are based, are reliable
any difficulties in milling of Cigar Lake ore at the McClean
Lake mill
water quality and environmental concerns could result in a
potential deferral of production and additional capital and
operating expenses for the Cigar Lake operation
JV Inkai’s development, mining or production plans are
delayed or do not succeed for any reason
our expectations relating to care and maintenance costs
prove to be inaccurate
we are affected by natural phenomena, including inclement
weather, fire, flood and earthquakes
our operations are disrupted due to problems with our own or
our 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,
underground floods, cave-ins, ground movements, tailings
dam failures, transportation disruptions or accidents,
unanticipated consequences of our cost reduction strategies,
or other development and operating risks
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 Cigar Lake development, mining and production plans
succeed
the McClean Lake mill is able to process Cigar Lake ore as
expected
JV Inkai’s development, mining and production plans
succeed
the ability of JV Inkai to pay dividends
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
our operations are not significantly disrupted as a result of
political instability, nationalization, terrorism, sabotage,
blockades, civil unrest, breakdown, natural disasters,
governmental or political actions, litigation or arbitration
proceedings, the unavailability of reagents, equipment,
operating parts and supplies critical to production, labour
shortages, labour relations issues, strikes or lockouts,
underground floods, cave-ins, ground movements, tailings
dam failure, lack of tailings capacity, transportation
disruptions or accidents, unanticipated consequences of our
cost reduction strategies, or other development or operating
risks
MANAGEMENT’S DISCUSSION AND ANALYSIS 3
4 CAMECO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS 5
2019 performance highlights
Throughout 2019 we continued to do what we said we would do, executing on all strategic fronts; operational, marketing and
financial. On the operational front, Cigar Lake and our Fuel Services segment are performing very well. With the McArthur
River/Key Lake operation still on care and maintenance, production in our uranium segment remained well below our
committed sales. As a result, we were actively purchasing material on the spot market. On the financial front, we are well-
positioned to execute on our strategy and self-manage risk. Our balance sheet is strong, we are starting 2020 with $1.1 billion
in cash and $1 billion in long-term debt with maturities in 2022, 2024 and 2042. In addition, the Federal Court of Appeal
hearing of our September 2018 unequivocal Tax Court of Canada (Tax Court) win has been scheduled to be held on March 4,
2020 and we anticipate we could receive a decision in 2020. We believe the Tax Court ruling diminishes the risk related to our
tax case with Canada Revenue Agency (CRA) and believe the decision of the Tax Court will be upheld on appeal.
In 2019, the spot market underperformed our expectations, due to the delay of end-user demand caused by uncertainty largely
related to market acess and trade policy issues. However, we were pleased by our performance in the term market. The
interest in long-term contracting and our off-market conversations with some of our best and largest customers continues. We
have not seen the current level of prospective business in our pipeline since before 2011. Since the beginning of 2019, we
added just over 36 million pounds of deliveries to our contract portfolio, more than replacing the volumes delivered in 2019,
while maintaining leverage to higher future uranium prices. Our customers recognize that, from a security of supply
perspective, diversification is important, and in some cases their risk management departments require it. They want access to
long-lived, tier-one productive capacity from commercial suppliers who have a proven operating track record. Increasingly,
many customers are also required to ensure their suppliers adhere to more stringent environmental, social, and governance
performance standards. In addition, in light of the market access and trade policy issues affecting our market, they recognize
the potential for trade policy distortions to regionalize supply, and ultimately, along with low prices, make the availability of
future supply less certain and less predictable.
In September, the World Nuclear Association released its nuclear fuel report, which highlighted the fact that the demand cycle
is on an upswing while the production cycle has swung down. The report outlined three scenarios for uranium demand and
supply for the years 2019 through 2040. Demand was up in all three scenarios considered: the low case, the base case, and
the high case. Under all three scenarios the report shows that the industry needs to at least double projected primary uranium
production by 2040 to satisfy forecasted demand. To achieve this, the WNA report recognized that the market will require the
appropriate signals to ensure current levels of production continue, the return of idled capacity, the completion of projects
under development, the pursuit of brownfield expansion projects, and the development of currently planned and prospective
greenfield projects. Finally, the report recognized that even when inventories are high, mobility can be low. For us, the report
reinforced our belief that the uranium market needs to transition, similar to what has happened in the conversion market and is
beginning to occur in the enrichment market.
However, until we see that transition occur, we will continue to take the necessary actions to maintain the strength of our
balance sheet so we can self-manage risk, and that we expect will reward shareholders for their continued patience and
support of our strategy to build long-term value.
6 CAMECO CORPORATION
Financial performance
HIGHLIGHTS
DECEMBER 31 ($ MILLIONS EXCEPT WHERE INDICATED)
Revenue
Gross profit
Net earnings attributable to equity holders
$ per common share (diluted)
Adjusted net earnings (non-IFRS, see page 28)
$ per common share (adjusted and diluted)
Cash provided by operations (after working capital changes)
2019
1,863
242
74
0.19
41
0.10
527
2018
2,092
296
166
0.42
211
0.53
668
CHANGE
(11)%
(18)%
(55)%
(56)%
(81)%
(81)%
(21)%
Net earnings attributable to equity holders (net earnings) and adjusted net earnings were lower in 2019 compared to 2018, in-
line with the outlook we provided. See 2019 consolidated financial results beginning on page 27 for more information. Key
highlights:
generated $527 million in cash from operations
retired one-third, $500 million, of our outstanding debt
extended the maturity date of our revolving credit facility to November 2023, and reduced it by $250 million to $1 billion
Tax Court awarded $10.25 million in legal fees incurred, plus an amount for disbursements of up to $17.9 million in our
dispute with CRA. Timing of any payments under the cost award is uncertain.
tribunal of international arbitrators ruled in favour of Cameco Inc. in its dispute with Tokyo Electric Power Company
Holdings, Inc. (TEPCO), awarding damages of $40.3 million (US), which we received in the third quarter
received $92.6 million (US) from JV Inkai, representing repayment, in full, of its outstanding loan. In addition, received
dividends of $10.6 million (US) in December 2019.
Our segment updates
In our uranium segment, annual production was in-line with expectations. Key highlights:
continued the production suspension at McArthur River/Key Lake, removing 18 million pounds per year (100% basis) from
the market
annual production of 9.0 million pounds—in-line with the 2019 outlook provided
purchased 19.0 million pounds of uranium, including our spot purchases, committed purchase volumes, JV Inkai purchases
and the purchase of NUKEM’s excess inventory
reached a new collective agreement with unionized employees at our McArthur River/Key Lake operation, which expires
December 31, 2022
Production in 2019 from our fuel services segment was 27% higher than in 2018, as a result of an increase in UF6 production
given the increase in demand in the market. We reached a new collective agreement with unionized employees at our Port
Hope conversion facility, which expires July 1, 2022.
See Our operations and projects beginning on page 55 for more information.
MANAGEMENT’S DISCUSSION AND ANALYSIS 7
HIGHLIGHTS
Uranium
Production volume (million lbs)
Sales volume (million lbs)
Average realized price
Revenue ($ millions)
Gross profit ($ millions)
($US/lb)
($Cdn/lb)
Fuel services
Production volume (million kgU)
Sales volume (million kgU)
Average realized price
Revenue ($ millions)
Gross profit ($ millions)
Industry prices
Uranium ($US/lb U3O8)1
Average annual spot market price
Average annual long-term price
Fuel services ($US/kgU as UF6)1
Average annual spot market price
North America
Europe
Average annual long-term price
North America
Europe
($Cdn/kgU)
26.21
26.78
370
90
313
59
2019
9.0
31.5
33.77
44.85
1,414
153
13.3
14.1
2018
9.2
35.1
37.01
47.96
1,684
268
10.5
11.6
CHANGE
(2)%
(10)%
(9)%
(6)%
(16)%
(43)%
27%
22%
(2)%
18%
53%
2019
2018
CHANGE
25.64
31.75
18.27
18.12
16.73
16.63
24.59
30.38
9.98
10.32
14.33
14.44
4%
5%
83%
76%
17%
15%
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 2019 was
approximately 63.3 million pounds, compared to 88.7 million pounds in 2018. The majority of the activity in the spot market has
been churn, the same material changing hands many times. There has been a lack of end-user demand primarily caused by
the delay of purchasing decisions. Uncertainty due to changing market dynamics, including ongoing market access and trade
policy issues continued to keep some utilities on the sidelines. At the end of 2019, the average reported spot price was $24.93
(US) per pound, down $2.82 (US) per pound from the end of 2018. During the year, the uranium spot price ranged from a high
of $28.90 (US) per pound to a low of $24.05 (US) per pound, averaging $25.64 (US) for the year.
Long-term contracts usually call for deliveries to begin more than two years after the contract is finalized, and use a number of
pricing formulas, including fixed prices escalated over the term of the contract, and market referenced prices (spot and long-
term indicators) quoted near the time of delivery. The volume of long-term contracting reported by UxC for 2019 was about
95.8 million pounds compared to about 91.5 million pounds in 2018. While higher than the same period last year, newly
contracted volumes continued to be less than the quantities consumed. Uncertainty regarding the future of some reactor fleets
and complacency due to low uranium prices continued to impact contracting volumes. The average reported long-term price at
the end of the year was $32.50 (US) per pound, up $0.50 (US) from 2018.
With the uncertainty created by market access and trade policy issues facing the nuclear industry, we expect contracting in
2020 could remain largely discretionary.
Spot UF6 conversion prices increased to record levels in both the North American and European markets. For North American
delivery, the average reported spot price at the end of 2019 was $22.13 (US) per kilogram uranium as UF6 (US/kgU as UF6),
up $8.63 (US) from the end of 2018. Long-term UF6 conversion prices finished 2019 at $18.13 (US/kgU as UF6), up $2.13
(US) from the end of 2018.
8 CAMECO CORPORATION
SHARES AND STOCK OPTIONS OUTSTANDING
DIVIDEND
At February 5, 2020, we had:
395,797,732 common shares and one Class B share
outstanding
8,594,527 stock options outstanding, with exercise
prices ranging from $11.32 to $26.81
In 2019, our board of directors declared a dividend of
$0.08 per common share, which was paid December 13,
2019. The decision to declare an annual dividend by our
board will be based on our cash flow, financial position,
strategy and other relevant factors including appropriate
alignment with the cyclical nature of our earnings.
MANAGEMENT’S DISCUSSION AND ANALYSIS 9
Market overview and developments
Growing confidence
Market access and trade policy issues were at the top of the list of factors affecting the market in 2019. These issues created
uncertainty and consumed a significant amount of time and focus from our customers and contributed to the delay of end-user
demand in the spot market. Despite the significant demand created by the reduction in primary supply this year, at least half of
the activity in the spot market has been churn, the same material changing hands many times. In contrast, interest in long-term
contracting increased compared to 2018. While the volume of uranium executed under long-term contracts is still below annual
consumption levels, it reached its highest level since 2012 and there continues to be significant interest. We believe that
underlying this interest is the recognition that the demand cycle is on an upswing while the production cycle has swung down
and the market needs to transition to one where price reflects an economic return on primary production. This gives us
confidence that the uranium market will undergo the same transition we have seen in the conversion market and that is
beginning to occur in the enrichment market.
Supply is not guaranteed
Economic realities and government-driven trade policies continue to have an impact on the security of supply in our industry.
Not only does it not make sense to invest in future primary supply, even the lowest-cost producers are deciding to preserve
long-term value by leaving uranium in the ground. Adding to security of supply concerns today is the role of commercial and
state-owned entities in the uranium market, and the disconnect between where uranium is produced and where it is
consumed. Nearly 80% of primary production is in the hands of state-owned enterprises, after taking into account the cuts to
primary production that have occurred over the last several years. Furthermore, almost 90% of primary production comes from
countries that consume little-to-no uranium, and 90% of uranium consumption occurs in countries that have little-to-no primary
production. As a result, government-driven trade policies can be particularly disruptive for the uranium market. Some of the
more significant supply developments are:
In the US, which has the largest fleet of nuclear reactors in the world, the US Nuclear Fuel Working Group (NFWG) was
established to further analyze the state of nuclear fuel production in the US. This action followed the determination by the
President of the United States under Section 232 of the Trade Expansion Act that imports of foreign uranium do not
constitute a national security threat, and that new restrictions on imports were not required. The NFWG has submitted its
report to the President, however, the details of the report have not been made public and the President has not made any
determinations.
The concern regarding expanded sanctions on Iran that could extend to countries providing nuclear fuel products and
services to Iran (i.e. Russia, China, and some European nations), and therefore disrupt Russian nuclear fuel imports into
the US. Compounding this concern is the continued uncertainty regarding Russian sanctions and whether existing quotas
on imports of Russian uranium into the US, under the Russian Suspension Agreement, will be extended or amended prior
to its expiry in 2020.
Trade tensions with China continue. On August 14, 2019, the US issued sanctions that involved China General Nuclear
Power Group and three of its subsidiaries, effectively banning US companies from supplying these groups with specific
nuclear-related commercial or dual-use goods. This has not impacted uranium sales.
Kazatomprom (KAP) announced that, given current market conditions, it intends to extend its current production limits (20%
reduction from planned production volumes) across all its production assets through 2021. Combined with reductions from
prior years, KAP indicated its cutbacks are equivalent to stopping all production in Kazakhstan for about one year. They
have also indicated that a return to full production will not occur until there is a sustained market recovery. In addition,
during the third quarter KAP offered a secondary placement of its shares, increasing its publicly-traded share capital from
15% to 18.8%.
Energy Resources of Australia Ltd. reconfirmed that it is required to discontinue mining and processing activities at the
Ranger uranium mine in the Northern Territory of Australia by January 2021.
The board of directors of Orano’s Cominak mine announced that the mine will shut down in March 2021 due to depletion of
reserves.
10 CAMECO CORPORATION
Demand has recovered and is growing
The demand gap left by forced and premature nuclear reactor shut-downs since March of 2011 has been filled. According to
the International Atomic Energy Agency (IAEA) five new reactors began commercial operation in 2019, and 53 reactors are
under construction. With a number of reactor construction projects recently approved, and many more planned, the demand
for uranium is growing. This growth is largely occurring in Asia and the Middle East. Some of this growth is tempered by early
reactor retirements, plans for reduced reliance on nuclear, or phase-out policies in other regions. However, there is growing
recognition of the role nuclear power must play in providing safe, reliable, affordable carbon-free baseload electricity and
achieving a low-carbon future. Some of the more significant demand developments are:
The World Nuclear Association’s 2019 Nuclear Fuel Report shows demand is forecast to be higher in all scenarios
examined over the period 2019 through 2040. In addition, the report shows that under all demand scenarios, the industry
needs to at least double projected primary uranium production by 2040, which will require the appropriate market signals to
ensure current levels of production continue, the return of idled production capacity, completion of projects under
development, and development of currently planned and prospective projects.
In its latest uranium market outlook report, UxC increased its annual demand outlook by 8 million pounds per year and
moved its assumed structural deficit from 2026 to 2022.
In May 2019, the International Energy Agency released its first nuclear report in 20 years, “Nuclear Power in a Clean
Energy System”. The report highlights that a steep decline in nuclear power would threaten energy security and climate
change goals and result in billions of tonnes of additional carbon emissions by 2040.
In October 2019, the IAEA held its first ever conference recognizing the critical role for nuclear power in combating climate
change, “International Conference on Climate Change and the Role of Nuclear Power”. The IAEA advocates that it will be
difficult to achieve the goal of reducing greenhouse gas emissions without a significant increase in nuclear power.
In November 2019, the European Parliament adopted a resolution recognizing the role of nuclear energy in achieving its
2050 climate plan calling for net zero emissions.
This year, China National Nuclear Company received the first new construction approval in China in about three years for
units 1 and 2 at Zhangzhou, and construction began at unit 1 in October 2019.
NextEra Energy’s Turkey Point 3 and 4 in Florida received the first ever subsequent license renewal, allowing them to
operate for 80 years.
Duke Energy announced it is seeking to renew the operating licences to 80 years for the 11 reactors it operates in North
and South Carolina to support carbon reduction plans. Tennessee Valley Authority also announced plans to extend the
licences for its six reactors in Tennessee and Alabama to 80 years.
Three Mile Island nuclear power plant was retired from service by Exelon after 45 years of operation in Pennsylvania.
In Ohio, a bill was passed providing funding to support the ongoing operation of the Perry and Davis-Besse nuclear power
plants, similar to incentives enacted by other states including Illinois, New Jersey, New York, Connecticut, and pending
legislation in Pennsylvania.
There were reports that Kyushu Electric Power Co. and other utilities in Japan expect to temporarily close their currently
operating units over the coming years to complete the implementation of the antiterrorism measures required by the nuclear
regulators. Some of these units are expected to shut down starting in 2020 before returning to service within a year.
Brazil announced the possible construction of six more nuclear reactors by 2050, in addition to completion of Angra unit 3,
which is currently under construction. Brazil also plans to restart domestic uranium mining in 2019 for the first time in five
years, and is open to private sector investment.
MANAGEMENT’S DISCUSSION AND ANALYSIS 11
OPPORTUNITIES FOR THOSE WHO CAN WAIT
UxC reports that over the last five years only 396 million pounds have been locked-up in the long-term market, while over 831
million pounds have been consumed in reactors. We remain confident that utilities have a growing gap to fill.
Like other commodities, the uranium industry is cyclical. History demonstrates that in general, when prices are rising and high,
uranium is perceived as scarce, and a lot of contracting activity takes place. The heavy contracting that takes place during
price runs, drives investment in higher-cost sources of production. Once that production is in the market, it tends to stay in the
market longer than is economically rational, creating the perception that uranium is abundant and always will be, and prices
decline. When prices are declining and low, like we have seen over the past eight years, there is no perceived urgency to
contract, and contracting activity and investment in new supply drops off. After years of low investment in supply, as has been
the case since 2011, security of supply tends to overtake price concerns at some point, and utilities re-enter the long-term
market to ensure they have the reliable supply of uranium they need to run their reactors.
12 CAMECO CORPORATION
We believe the current backlog of long-term contracting presents a substantial opportunity for commercially motivated
suppliers like us that can weather the low-price part of the cycle. As a low-cost producer, we manage our operations with these
price cycles in mind.
In our industry, customers do not come to the market right before they need to load uranium into their reactors. To operate a
reactor that could run for more than 60 years, natural uranium and the downstream services have to be purchased years in
advance, allowing time for a number of processing steps before it arrives at the power plant as a finished fuel bundle. At
present, we believe there is a significant amount of uranium that needs to be contracted to keep reactors running into the next
decade.
UxC estimates that cumulative uncovered requirements are about 1.5 billion pounds to the end of 2035. The longer the
recovery of the long-term market is delayed, the less certainty there will be about the availability of future supply to fill growing
demand. In fact, recent data from the US Energy Information Administration shows that utility inventories are starting to decline
and are approaching levels that could put security of supply at risk. Ultimately, we expect the current market uncertainty to
give way to increasing concerns about the security of future supply.
As utilities’ uncovered requirements grow, annual supply declines, demand for uranium from producers and financial players
increases, and with trade policy potentially restricting access to some markets, we believe the pounds available in the spot
market will not be adequate to satisfy the growing backlog of long-term demand. As a result, we expect there will be increased
competition to secure uranium under long-term contracts on terms that will ensure the availability of reliable primary supply to
meet growing demand.
MANAGEMENT’S DISCUSSION AND ANALYSIS 13
Global population is on the rise, and with the world's need for safe, clean, reliable baseload energy, nuclear remains an
important part of the energy mix. We remain confident in the future of the nuclear industry. With demand coming on in the form
of restarts and new reactors, and supply becoming less certain as a result of low prices, production curtailments, lack of
investment, and market access and trade policy issues, we’re continuing to expect a market transition. While the timing of a
market transition remains uncertain, we will continue to take the actions we believe are necessary to position the company for
long-term success. Therefore, we will undertake contracting activity which aligns with the uncertain timing of a market recovery
and is intended to ensure we have adequate protection and will benefit from higher prices under our contract portfolio, while
maintaining exposure to the rewards that come from having uncommitted, low-cost supply to deliver into a strengthening
market.
14 CAMECO CORPORATION
Our strategy
Our strategy is set within the context of a challenging market environment, which we expect to give way to strong long-term
fundamentals driven by increasing populations, and the impact of growing electricity demand on the world’s climate. Nuclear
energy must be a central part of the solution to the world’s shift to a low-carbon, climate resilient economy. It is an option that
can provide the power needed, not only reliably, but also safely and affordably, and in a way that will help avoid some of the
worst consequences of climate change.
Tier-one focus
We are a pure-play nuclear fuel investment, focused on providing a clean source of energy, and taking advantage of the
long-term growth we see coming in our industry. Our strategy is to focus on our tier-one assets and profitably produce at
a pace aligned with market signals in order to preserve the value of those assets and increase long-term shareholder
value, and to do that with an emphasis on safety, people and the environment.
URANIUM
Uranium production is central to our strategy, as it is the biggest value driver of the nuclear fuel cycle and our business. In
accordance with market conditions, and to mitigate risk, we will evaluate the optimal mix of our production, inventory and
purchases in order to satisfy our contractual commitments and in order to return the best value possible. We will not produce
from our tier-one assets to sell into an oversupplied spot market. During a prolonged period of uncertainty, this could mean
leaving our uranium in the ground. As conditions improve, we expect to meet rising demand with production from our best
margin operations.
In light of today’s lingering uncertainty as to how long the weak market conditions will persist, we are focused on preserving
the value of our lowest cost assets, on maintaining a strong balance sheet, on protecting and extending the value of our
contract portfolio and on efficiently managing the company in a low price environment. We have undertaken a number of
deliberate and disciplined actions. In 2019, these actions resulted in:
generation of $527 million in cash from operations
retirement of one-third, $500 million, of our outstanding debt
a year-end balance of $1.1 billion in cash on our balance sheet
Consistent with our actions, our McArthur River/Key Lake operation remains on care and maintenance for an indeterminate
duration, removing 18 million pounds of uranium annually from the market. Some of our actions have a cost in the short term,
and we must weigh these costs against the value we expect they will generate over the long term. Accordingly, we will adjust
our actions based on market signals with the intent of being able to self-manage risk, and to ensure our tier-one assets are
available to us in a market that values them appropriately.
FUEL SERVICES
Our fuel services division is a source of profit and supports our uranium segment while allowing us to vertically integrate
across the fuel cycle.
The UF6 conversion market has gone through a transition that has seen the industry average North American spot price
increase by more than 280% and the industry average North American term price increase by almost 40% since the end of
2017. In this environment, with our Port Hope facility the only UF6 plant currently operating in North America, we are focused
on securing new long-term contracts that reflect today’s prices and that will allow us to continue to consistently support the
long-term needs of our customers.
In addition, we are pursuing non-traditional markets for our UO2 and fuel fabrication business and have been actively securing
new contracts for reactor components to support refurbishment of Canadian reactors.
Our focus will continue to be on maintaining and optimizing the profitability of this segment of our business.
OTHER FUEL CYCLE INVESTMENTS
We continue to explore other opportunities within the nuclear fuel cycle. In particular, we are interested in the second largest
value driver of the fuel cycle, enrichment. Having operational control of uranium production, conversion, and enrichment
facilities would offer operational synergies that could enhance profit margins.
MANAGEMENT’S DISCUSSION AND ANALYSIS 15
In 2019, we signed a binding agreement to increase our interest in Global Laser Enrichment (GLE) from 24% to 49%. GLE is
testing a third-generation enrichment technology that, if successful, will use lasers to commercially enrich uranium. Closing of
the agreement is conditional upon receipt of US regulatory approval and GLE’s contract with the US Department of Energy
(DOE) regarding DOE’s inventory of depleted tails remaining in full force and effect.
Capital allocation – focus on value
Delivering returns to our long-term shareholders is a top priority. We continually evaluate our investment options to ensure we
allocate our capital in a way that we believe will:
create the greatest long-term value for our shareholders
allow us to navigate by our investment-grade rating and mitigate risk
allow us to execute on our dividend while ensuring it is appropriately aligned with the cyclical nature of our earnings
To deliver value, free cash flow must be productively reinvested in the business or returned to shareholders, which requires
good execution and disciplined allocation. Our decisions are based on the run rate of our business, not one-time events. Cash
on our balance sheet that exceeds value-adding growth opportunities and/or is not needed to self-manage risk should be
returned to shareholders.
We have a multidisciplinary capital allocation team that evaluates all possible uses of investable capital.
We start by determining how much cash we have to invest (investable capital), which is based on our expected cash flow from
operations minus expenses we consider to be a higher priority, such as dividends and financing costs, and could include
others. This investable capital can be reinvested in the company or returned to shareholders.
Our capital allocation decisions will continue to pivot on what the market is providing. With the continued market uncertainty
we are facing, and our ongoing dispute with CRA, the objective of our capital allocation is to maximize cash flow, while
navigating by our investment-grade rating through close management of our balance sheet metrics.
With the metrics that inform an investment-grade rating in mind, and in this period of low uranium prices, we have taken steps
to improve margin and cash flow by:
responsibly managing our sources of supply thereby preserving the value of our tier-one assets
restructuring our activities to reduce our operating, capital, and general and administrative spending
reducing our annual dividend from $0.40 per share to $0.08 per share in 2018
implementing an initiative intended to provide a greater focus on technology and its applications to improve efficiency and
reduce costs across the organization, with a particular focus on innovation and accelerating the adoption of advanced
digital and automation technologies
As a result, we are well positioned to self-manage risk.
REINVESTMENT
If a decision is made to reinvest capital in sustaining, capacity replacement, or growth, all opportunities are ranked and only
those that meet the required risk-adjusted return criteria are considered for investment. We also must identify, at the corporate
level, the expected impact on cash flow, earnings, and the balance sheet. All project risks must be identified, including the
risks of not investing. Allocation of capital only occurs once an investment has cleared these hurdles.
This may result in some opportunities being held back in favour of higher return investments, and should allow us to generate
the best return on investment decisions when faced with multiple prospects, while also controlling our costs. If there are not
enough good investment prospects internally or externally, this may result in residual investable capital, which we would then
consider returning directly to shareholders.
16 CAMECO CORPORATION
We have not yet seen the market transition needed to restart our idled production capacity. Therefore, until we see that
transition, our capital expenditures for 2020 through 2022 will be focused primarily on sustaining and capacity replacement
capital, and demonstrating our continued commitment to a clean environment through ongoing investment in the Vision in
Motion project in Port Hope. In addition, we will focus on improving operational effectiveness across our operations, including
the use of digital and automation technologies with a particular goal of substantially reducing operating costs and increasing
operational flexibility when it comes time to restart the McArthur River/Key Lake operation. Any opportunities will be rigorously
assessed before an investment decision is made. If we get clarity on our CRA dispute prior to a market transition, which
generates a one-time cash infusion, we will focus on the debt portion of our ratings metrics. This may mean an even greater
emphasis on reducing the debt on our balance sheet. However, if the market does begin to transition and higher uranium
prices are beginning to flow through our contract portfolio, and we are able to increase our portfolio of acceptable long-term
contracts, the earnings portion of our rating metrics are expected to improve. In that scenario, reducing debt would not be the
priority. Our priority would be to invest in restarting our idled tier-one assets, and if warranted, turn to value-adding growth
opportunities.
RETURN
We believe in returning cash to shareholders, but are also focused on protecting the company and rewarding those
shareholders who understand and support our strategy to build long-term value. If we have excess cash and determine the
best use is to return it to shareholders, we can do that through a share repurchase or dividend—an annual dividend, one-time
supplemental dividend or a progressive dividend. When deciding between these options, we consider a number of factors,
including the nature of the excess cash (one time or cash generated by our business operations), growth prospects for the
company, and growth prospects for the industry.
Share buyback: If we were generating excess cash while there were few or no growth prospects for the company or the
industry, then a share buyback might make sense. However, our current view is that the long-term fundamentals for Cameco
and the industry remain strong.
Dividend: The amount and type of dividend paid, annual, progressive or one-time supplemental is evaluated by our board of
directors with careful consideration of our cash flow, financial position, strategy, and other relevant factors including
appropriate alignment with the cyclical nature of our earnings.
Marketing framework – balanced contract portfolio
As with our corporate strategy and approach to capital allocation, the purpose of our marketing framework is to deliver value.
Our approach is to secure a solid base of earnings and cash flow by maintaining a balanced contract portfolio that optimizes
our realized price.
We evaluate our strategy in the context of our market environment and continue to adjust our actions in accordance with our
marketing framework:
First, we will not produce from our tier-one assets to sell into an oversupplied spot market. We will not produce from these
assets unless we can deliver our tier-one pounds under long-term contracts that provide an acceptable rate of return on
these assets for our owners.
Second, we do not intend to build up an inventory of excess uranium. Excess inventory serves to contribute to the sense
that uranium is abundant and creates an overhang on the market, and it ties up working capital on our balance sheet.
Third, in addition to our committed sales, we will capture demand in the market where we think we can obtain value. We will
take advantage of opportunities the market provides, where it makes sense from an economic, logistical and strategic point
of view. Those opportunities may come in the form of spot, mid-term or long-term demand, and will be additive to our
current committed sales.
Fourth, once we capture demand, we will decide how to best source material to satisfy that demand. Depending on the
timing and volume of our production, purchase commitments, and our inventory volumes, this means we will be active
buyers in the market in order to meet our demand obligations.
And finally, in general, if we choose to source material to meet demand by purchasing it, we expect the price of that
material will be more than offset by the leverage to market prices in our sales portfolio over a rolling 12-month period.
In addition to this framework, our contracting decisions always factor in who the customer is, our desire for regional
diversification, the product form, and logistical factors.
MANAGEMENT’S DISCUSSION AND ANALYSIS 17
Ultimately, our goal is to protect and extend the value of our contract portfolio on terms that recognize the value of our assets
and provide adequate protection when prices go down and allow us to benefit when prices rise. We believe using this
framework will allow us to create long-term value for our shareholders. Our focus will continue to be on maximizing cash flow,
so we can execute on our strategy and self-manage risk.
LONG-TERM CONTRACTING
Uranium is not traded in meaningful quantities on a commodity exchange. Utilities have historically bought the majority of their
uranium and fuel services products under long-term contracts with suppliers, and have met the rest of their needs on the spot
market. We sell uranium and fuel services directly to nuclear utilities around the world as uranium concentrates, UO2 and UF6,
conversion services, or fuel fabrication. We have a solid portfolio of long-term sales contracts that reflect the long-term,
trusting relationships we have with our customers.
In general, we are always active in the market, buying and selling uranium when it is beneficial for us and in support of our
long-term contract portfolio. We undertake activity in the spot and term markets prudently, looking at the prices and other
business factors to decide whether it is appropriate to purchase or sell into the spot or term market. Not only is this activity a
source of profit, it gives us insight into underlying market fundamentals.
We deliver large volumes of uranium every year, therefore our net earnings and operating cash flows are affected by changes
in the uranium price. Market prices are influenced by the fundamentals of supply and demand, market access and trade policy
issues, geopolitical events, disruptions in planned supply and demand, and other market factors.
The objectives of our contracting strategy are to:
maximize realized price while reducing volatility of our future earnings and cash flow
focus on meeting the nuclear industry’s growing annual uncovered requirements with our future uncommitted supply while
ensuring adequate regional diversity
establish and grow market share with strategic customers
We target a ratio of 40% fixed-pricing and 60% market-related pricing in our portfolio of long-term contracts, including
mechanisms to protect us when the market price is declining and allow us to benefit when market prices go up. This is a
balanced and flexible approach that allows us to adapt to market conditions and put a floor on our average realized price, and
deliver the best value to shareholders over the long term.
This approach has allowed us to realize prices higher than the market prices during periods of weak uranium demand, and we
expect it will enable us to realize increases linked to higher market prices in the future.
Fixed-price contracts for uranium: 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 for uranium: are different from fixed-price contracts in that they may be based on either the spot
price or the long-term price, and that price is as quoted at the time of delivery rather than at the time the contract is accepted.
These contracts sometimes provide for discounts, and often include floor prices and/or ceiling prices, which are usually
escalated over the term of the contract.
Fuel services contracts: the majority of our fuel services contracts are at a fixed price per kgU, escalated over the term of the
contract, and reflect the market at the time the contract is accepted.
OPTIMIZING THE CONTRACT PORTFOLIO
We work with our customers to optimize the value of our existing contract portfolio. In cases where a customer is seeking relief
due to a challenging policy, operating, or economic environment, we evaluate their specific circumstances and assess their
long-term sustainability. Where we deem the customer’s long-term demand to be at risk, we may consider options that allow
us to benefit from converting that uncertain future value into certain present value. In contrast, where the customer is
considered to have a more certain and predictable future, we may offer relief. For example, in a low price environment, we
may blend in more market-related volumes in the near term, but only where the customer is willing to extend the terms and
conditions of that contract out into the future, and only where it is beneficial to us.
18 CAMECO CORPORATION
CONTRACT PORTFOLIO STATUS
We have commitments to sell over 130 million pounds of U3O8 with 31 customers worldwide in our uranium segment, and over
36 million kilograms as UF6 conversion with 28 customers worldwide in our fuel services segment. The annual average sales
commitments over the next five years in our uranium segment is around 19 million pounds, with commitment levels in 2020
and 2021 higher than in 2022 through 2024.
Customers – U3O8:
Five largest customers account for 60% of commitments
Customers – UF6 conversion:
Five largest customers account for 60% of commitments
Note - Chart labels updated February 27, 2020
MANAGING OUR CONTRACT COMMITMENTS
To meet our delivery commitments, we use our uranium supply, which includes uranium obtained from:
our existing production
purchases under our JV Inkai agreement, from NUKEM, under long-term agreements and in the spot market
our existing inventory
We allow sales volumes to vary year-to-year depending on:
the level of sales commitments in our long-term contract portfolio
our production volumes
purchases under existing and/or new arrangements
discretionary use of inventories
market opportunities
MANAGEMENT’S DISCUSSION AND ANALYSIS 19
Managing our costs
PRODUCTION COSTS
In order to operate efficiently and cost-effectively, we manage operating costs and improve plant reliability by prudently
investing in production infrastructure, new technology, and business process improvements. Like all mining companies, our
uranium segment is affected by the cost of inputs such as labour and fuel.
Given the current market dynamics, in 2020, our only operating property will be Cigar Lake. Our McArthur River/Key Lake,
Rabbit Lake, and US operations are currently on care and maintenance. While we have these operations on standby, our
annual cash production costs will reflect the operating cost of mining and milling our share of Cigar Lake mineral reserves,
which is estimated to be between $15 and $16 per pound over the entire life-of-mine.
Operating costs in our fuel services segment are mainly fixed. In 2019, labour accounted for about 44% of the total. The
largest variable operating cost is for zirconium, followed by anhydrous hydrogen fluoride, and energy (natural gas and
electricity).
CARE AND MAINTENANCE COSTS
In 2020, we expect to incur between $150 million and $170 million in care and maintenance costs related to the suspension of
production at our McArthur River/Key Lake mine and mill, Rabbit Lake mine and mill, and US operations. The largest
proportion of these costs will be incurred at McArthur River/Key Lake.
Our expected care and maintenance costs have increased compared to 2019 due to planned expenditures that will allow us to
fully assess our operating processes at McArthur River/Key Lake. Consistent with our tier-one strategy, we expect that
production at McArthur River/Key Lake will be the first of our operations to restart once we see the appropriate market signals.
Therefore, we are focused on improving operational effectiveness, including the use of digital and automation technologies
with a particular goal of substantially reducing operating costs and increasing operational flexibility when it comes time to
restart these operations. As a result, care and maintenance costs are expected to be higher compared to Rabbit Lake and in
the US. Our Rabbit Lake and US operations are higher-cost, and with plenty of idle tier-one capacity and tier-one expansion
capacity globally that can come back on line relatively quickly, the restart horizon is less certain.
While Rabbit Lake and our US operations are in standby, we will continue to evaluate our options in order to minimize costs.
20 CAMECO CORPORATION
PURCHASES AND INVENTORY COSTS
Our costs are also affected by the purchases of uranium and conversion services we make under long-term contracts and on
the spot market.
To meet our delivery commitments, we make use of our mined production, inventories, purchases under long-term contracts,
and purchases we make on the spot market. In 2020, the price for the majority of our purchases will be quoted at the time of
delivery.
The cost of purchased material may be higher or lower than our other sources of supply, depending on market conditions. The
cost of purchased material affects our cost of sales, which is determined by calculating the average of all of our sources of
supply, including opening inventory, production, and purchases, and adding royalties, selling costs, and care and maintenance
costs. If market prices exceed our cost of produced material including royalties, we expect the cost of sales to increase
accordingly.
FINANCIAL IMPACT
As greater certainty returns to the uranium market, our view is that the market needs to transition to one where uranium prices
reflect the cost of bringing on new primary production to meet growing demand.
We have taken a number of deliberate and disciplined actions to reduce supply and streamline operations. Some of these
actions come with a cost in the near term, like care and maintenance costs, but we expect the benefit over the long term will
far outweigh those costs.
We believe our actions will help shield the company from the nearer term risks we face and will reward shareholders for their
continued patience and support of our strategy to build long-term value.
Committed to our values
Our values are at the core of everything we do and define who we are as a company.
SAFETY AND ENVIRONMENT
The safety of people and protection of the environment are the foundations of everything we do, locally and globally.
PEOPLE
We value the contribution of every employee and demonstrate respect for individual dignity, creativity and cultural diversity.
INTEGRITY
We lead by example, earn trust, honour our commitments and conduct our business ethically.
EXCELLENCE
Through leadership, collaboration and innovation, we strive to achieve our full potential and inspire others to reach theirs.
MANAGEMENT’S DISCUSSION AND ANALYSIS 21
Our approach to ESG matters
Our uranium is used around the world in the generation of safe, carbon-free, affordable, base-load nuclear energy. As we seek
to bring the benefits of carbon-free nuclear energy to the world, we will do so in a manner that reflects our values. We are
committed to 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.
SUSTAINABILITY: A KEY PART OF OUR STRATEGY, REFLECTING OUR VALUES
We view sustainability as an integrated approach to conducting business. We integrate sustainability principles and practices
into all stages of our activities, from exploration to decommissioning, including factoring them into our objectives and approach
to compensation, our overall corporate strategy, and our day-to-day operations. We adopt established and recognized
management system frameworks to guide our integrated approach, which is embedded within ethical business practices and
our robust and transparent governance framework. We seek to be transparent with our stakeholders, keeping them updated
on the risks and opportunities that we believe may have a significant impact on our ability to add long-term value.
We have a sustainability policy that describes our commitments in this regard. We encourage you to review our sustainability
policy at cameco.com/about/governance/policies-programs.
Safety and the Environment
We employ an integrated Safety, Health, Environment and Quality (SHEQ) management system that applies to all phases and
aspects of our business. The system is governed by one integrated SHEQ policy that recognizes that the safety and health of
our workers and the public, protection of the environment, and quality of our processes are the highest priority during all
stages of our activities. The policy is supported by multiple corporate SHEQ management programs. We maintain ISO 14001
certification at a corporate level. We encourage you to review our SHEQ policy at cameco.com/about/governance/policies-
programs.
Climate change: Nuclear power is part of the solution
There is growing recognition that uranium is the cleanest energy fuel in the world and of the role nuclear power must play in
ensuring safe, reliable and affordable carbon-free electricity generation from key global agencies, such as the United Nations
Economic Commission for Europe, the United Nations Intergovernmental Panel on Climate Change, and the Union of
Concerned Scientists. Indeed, for the first time in nearly two decades, the International Energy Agency released a report on
nuclear energy in the hopes of bringing it back into the global energy debate. The report highlighted that a steep decline in
nuclear power would threaten energy security and climate change goals and result in four billion tonnes of additional carbon
emissions by 2040.
The nuclear industry recognizes the scale and immediacy of the challenge outlined in the Paris Agreement, and the important
role that all low-carbon and carbon-free energy sources have to play. Led by the World Nuclear Association, the nuclear
industry has a program and vision for the future of electricity supply called “Harmony”. The Harmony program sets a target for
nuclear power to provide 25% of electricity by 2050 to help avoid the worst consequences of climate change. As members of
the World Nuclear Association, and through participation in other industry organizations we fully support and are advocates of
this initiative.
We believe that the reduction of carbon and greenhouse gas (GHG) emissions is important and necessary in Canada and
around the world, and that nuclear power must be a central part of the solution to the world’s shift to a low-carbon, climate
resilient economy. As one of the world’s largest producers of the uranium fuel needed to fuel nuclear reactors, we believe
there is a significant opportunity for us to be part of the solution to combating climate change and that we are well positioned to
deliver significant long-term business value, while actively working to reduce our emission profile.
We are proud that our the high-grade uranium ores in Saskatchewan’s Athabasca Basin result in our Canadian uranium
having among the lowest life cycle greenhouse gas emission intensity internationally, despite the constraints related to our
geographic location. In fact, the production of Saskatchewan uranium requires at least one hundred times less greenhouse
gas (GHG) emissions than production of the cleanest Canadian natural gas to produce the same amount of electricity and, all
of the nuclear power produced is GHG emission free. We have tracked and reported GHG emissions for more than two
decades, despite any regulatory requirement to do so. We continue to be focused on improving energy management and the
visibility of energy consumption within our organization, with the overall goal of improving the energy intensity of our operations
to create business value.
22 CAMECO CORPORATION
Stakeholder relations
Gaining the support of all our stakeholders is necessary to sustain our business.
We have a people policy that describes our commitment to developing and supporting a flexible, skilled, stable and diverse
workforce. The policy is supported by multiple corporate human resource programs, standards and practices. We encourage
you to review this policy at cameco.com/about/governance/policies-programs.
In addition, we strive to earn the support of the communities in which we operate, which is one of our key measures of
success. We identify opportunities and initiatives that support and respect these communities and their cultures.
We recognize the substantial value in developing and maintaining long-term mutually beneficial relationships with Indigenous
communities located within or near our operations and other activities.
Over more than 30 years of operation and partnership in northern Saskatchewan, we have developed a comprehensive
strategy that applies to all our operations globally, and is aimed at ensuring the support of the communities with whom we
work. The global strategy is flexible and is implemented locally to reflect the needs of the communities. The bulk of the
strategy has evolved as a result of the commercial benefits we see from ensuring strong support among local communities
wherever we operate and focuses on five key areas:
Workforce development: designed to deliver programming that aims to build educational and skills capacity in local
communities.
Business development: designed to promote involvement of locally-owned businesses in contracting opportunities at our
operations, to provide additional jobs, revenue streams and capacity building at the local community level.
Community engagement: designed with the objective to ensure that we secure support for our operations from local
communities and satisfy the obligations placed on us by regulators and laws.
Community investment: designed to help local communities with much-needed funding for community programming and
infrastructure for initiatives focused on youth, education and literacy, health and wellness, and community development.
Environmental stewardship: designed to support our overall environmental programming and give communities a voice in
both the formal environmental assessment regulatory process, as well as ongoing monitoring activities.
We set standards for the measures that we will conform to in maintaining ongoing and meaningful engagement within the
communities where we operate.
HOW WE ARE DOING
We produce a sustainability report for our stakeholders to tell them how we are performing against globally recognized key
indicators that measure our environmental, social, governance and financial impacts in the areas that we believe may have a
significant impact on our ability to add long-term value for our stakeholders. We use the Global Reporting Initiative’s
Sustainability Framework (GRI), in addition to some corporate indicators that are unique to the company to measure and
report our performance. This is our report card to our stakeholders. For our most recent performance results, we encourage
you to review our sustainability report at cameco.com/about/sustainability.
Given the evolving nature of the ESG landscape, we have established a multi-disciplinary working group to review of our
current approach in this area, including how we report. The working group is chaired by our Senior Vice-President and Chief
Corporate Officer and will report to the relevant committees of the board.
GOVERNANCE: SOUND GOVERNANCE IS THE FOUNDATION FOR STRONG PERFORMANCE
We believe that sound governance is the foundation for strong corporate performance. Our board of directors is responsible
for overseeing management, and our strategy and business affairs and the integration of ESG principles throughout the
company. The board’s goal is to ensure we operate as a successful business, optimizing financial returns while effectively
managing risk.
The board has formal governance guidelines that set out our approach to governance and the board’s governance role and
practices. The guidelines ensure we comply with all of the governance rules and legislation in Canada and the United States
that are applicable, conduct ourselves in the best interests of our stakeholders, and meet industry best practices. The
guidelines are reviewed and updated regularly.
MANAGEMENT’S DISCUSSION AND ANALYSIS 23
Risk and Risk Management
We have a mature enterprise risk management (ERM) framework that consists of processes and controls to ensure risks are
being appropriately managed and mitigated.
Decisions to accept, mitigate, or transfer identified risks guide management’s plans in our strategic planning and budgeting
process. Employees throughout the company take ownership of the risks specific to their area, and are responsible for
developing and implementing the controls to manage and re-assess risk, including ESG risks.
Our risk policy sets out a broad, systematic approach to identifying, assessing, reporting and managing the significant risks,
including ESG risks, we face in our business and operations. The policy is reviewed annually to ensure that it continues to
meet our needs.
See Managing the risks, starting on page 56, for a discussion of the risks, including ESG risks, that generally apply to all of our
operations and advanced uranium projects, and that could have a material impact on business in the near term. We also
recommend you review our most recent annual information form, which includes a discussion of other material risks that could
have an impact on our business.
The board is responsible for overseeing management’s implementation of appropriate risk management processes and
controls. Time is dedicated at board and committee meetings to risk identification, management, and reporting. In consultation
with the board, management works on enhancing its enterprise risk oversight practices, processes and controls. While the
board oversees the company’s strategic risks, including ESG/climate-related risks, it also allocates oversight of other top-tier
risks to specific board committees. Set out below is an overview of the responsibilities allocated to specific board committees.
Audit and finance – supports the board in fulfilling its oversight responsibilities regarding the integrity of our accounting and
financial reporting, the adequacy and effectiveness of our internal controls and disclosure controls, legal, regulatory (excluding
safety, health and the environment) and ethical compliance, the independence and performance of our external and internal
auditors, oversight of specific material risks, and prevention and detection of fraudulent activities and financial oversight.
Human resources – supports the board in fulfilling its oversight responsibilities regarding human resource policies, employee
and labour relations matters, executive compensation, executive succession and development, pension plan governance, and
oversight of material risks assigned to the committee.
Nominating, corporate governance and risk – supports the board in fulfilling its oversight responsibilities by developing and
recommending a set of corporate governance principles, identifying and recommending qualified individuals as members of
the board and its committees, assessing the effectiveness of the board and committees, and overseeing the risk program.
Reserves oversight - supports the board in fulfilling its oversight responsibilities regarding estimating and disclosing mineral
reserves and resources.
Safety, health and environment – supports the board in fulfilling its oversight responsibilities regarding safety, health,
environmental and climate-related matters, and supportive communities.
In addition, the safety, health and environment committee and the nominating, corporate governance and risk committees
assist the board in fulfilling its oversight responsibility with respect to ESG matters.
More information about our shareholder commitment, our governance principles, how our board operates, its responsibilities,
and the profiles of each of our directors can be found in our most recent management proxy circular and on our website at
cameco.com/about/board-of-directors.
TARGETS AND METRICS: THE LINK BETWEEN ESG FACTORS AND EXECUTIVE PAY
We recognize the importance of integrating certain ESG factors, such as safety performance, a clean environment and
supportive communities, into our executive compensation strategy as we see success in these areas as critical to the long
term success of the company. For more information on our compensable targets and our reported performance against those
targets see the Measuring our results section that follows and our most recent management proxy circular.
24 CAMECO CORPORATION
Measuring our results
Each year, we set corporate objectives that are aligned with our strategic plan. These objectives fall under our four measures
of success, and performance against specific targets under these objectives forms the foundation for a portion of annual
employee and executive compensation. See our most recent management proxy circular for more information on how
executive compensation is determined.
2019 OBJECTIVES1
TARGET
RESULTS
OUTSTANDING FINANCIAL PERFORMANCE
Earnings measure
Achieve targeted adjusted net earnings.
adjusted net earnings was above the maximum target
Cash flow measure
Achieve cash flow from operations (after
working capital changes).
cash flow from operations was above the maximum
target
SAFE, HEALTHY AND REWARDING WORKPLACE
Workplace safety
measure
Strive for no injuries at all Cameco-
operated sites. Maintain a long-term
downward trend in combined employee
and contractor injury frequency and
severity, and radiation doses.
best safety performance in the history of the company,
however TRIR did not meet the 2019 improvement target
completion of corrective actions and job task
observations exceeded the target
average radiation doses remained low and stable
CLEAN ENVIRONMENT
Environmental
performance measures
Achieve divisional environmental aspect
improvement targets.
performance was within the targeted range
there were no significant environmental incidents in 2019
SUPPORTIVE COMMUNITIES
Stakeholder support
measure
Implement Collaboration Agreements by
supporting northern business
development opportunities and build
corporate reputation.
of our two targets involving sourcing of services from
preferred northern Saskatchewan suppliers, one did not
meet the minimum target and the other was above the
maximum target
1 Detailed results for our 2019 corporate objectives and the related targets will be provided in our 2020 management proxy circular prior to our Annual Meeting of
Shareholders on April 30, 2020.
2020 objectives
OUTSTANDING FINANCIAL PERFORMANCE
Achieve targeted financial measures focused on controlling costs and generating cash.
SAFE, HEALTHY AND REWARDING WORKPLACE
Improve workplace safety performance at all sites.
CLEAN ENVIRONMENT
Improve environmental performance at all sites.
SUPPORTIVE COMMUNITIES
Build and sustain strong stakeholder support for our activities.
MANAGEMENT’S DISCUSSION AND ANALYSIS 25
Financial results
This section of our MD&A discusses our performance, financial condition and outlook for the future.
27 2019 CONSOLIDATED FINANCIAL RESULTS
38 OUTLOOK FOR 2020
41 LIQUIDITY AND CAPITAL RESOURCES
46 2019 FINANCIAL RESULTS BY SEGMENT
46 ............... URANIUM
48 ............... FUEL SERVICES
49 FOURTH QUARTER FINANCIAL RESULTS
49 ............... CONSOLIDATED RESULTS
52 ............... URANIUM
54 ............... FUEL SERVICES
26 CAMECO CORPORATION
2019 consolidated financial results
This section of our MD&A discusses our performance, financial condition and outlook for the future.
As of January 1, 2018, due to restructuring and a change in our ownership interest, we began accounting for JV Inkai on an
equity basis, with no restatement of prior periods.
HIGHLIGHTS
DECEMBER 31 ($ MILLIONS EXCEPT WHERE INDICATED)
Revenue
Gross profit
Net earnings (loss) attributable to equity holders
$ per common share (basic)
$ per common share (diluted)
Adjusted net earnings (non-IFRS, see page 28)
$ per common share (adjusted and diluted)
Cash provided by operations (after working capital changes)
2019
1,863
242
74
0.19
0.19
41
0.10
527
2018
2,092
296
166
0.42
0.42
211
0.53
668
CHANGE FROM
2017
2018 TO 2019
2,157
436
(205)
(0.52)
(0.52)
59
0.15
596
(11)%
(18)%
(55)%
(56)%
(56)%
(81)%
(81)%
(21)%
Net earnings
Our net earnings normally trend with revenue, but, in 2017, were significantly influenced by impairment charges due to the
weakness in the uranium market.
The following table shows what contributed to the change in net earnings in 2019 compared to 2018 and 2017.
($ MILLIONS)
Net earnings (losses) - previous year
Change in gross profit by segment
2019
166
2018
(205)
2017
(62)
(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
Higher (lower) sales volume
Higher (lower) realized prices ($US)
Foreign exchange impact on realized prices
Lower (higher) costs
change – uranium
Fuel services
Higher (lower) sales volume
Higher (lower) realized prices ($Cdn)
Lower (higher) costs
change – fuel services
Other changes
Lower administration expenditures
Lower impairment charges
Lower exploration expenditures
Change in reclamation provisions
Lower loss on disposal of assets
Change in gains or losses on derivatives
Change in foreign exchange gains or losses
Change in earnings from equity-accounted investments
Arbitration award in 2019 related to TEPCO contract
Gain on sale of interest in Wheeler River Joint Venture in 2018
Gain on restructuring of JV Inkai in 2018
Gain on customer contract restructuring in 2018
Sale of exploration properties in 2018
Gain on customer contract settlements in 2016
Reversal of tax provision in 2018 related to CRA dispute
Change in income tax recovery or expense
Other
Net earnings (losses) - current year
(27)
(133)
35
10
(115)
13
(11)
29
31
17
-
6
57
-
113
(45)
13
52
(17)
(49)
(6)
(7)
-
(61)
(126)
45
74
18
40
1
(186)
(127)
1
(5)
(1)
(5)
21
358
10
(60)
5
(137)
49
32
-
17
49
6
7
-
61
62
23
166
29
(222)
(36)
180
(49)
(5)
21
(15)
1
44
4
13
(34)
16
22
(17)
-
-
-
-
-
-
(59)
-
(91)
7
(205)
MANAGEMENT’S DISCUSSION AND ANALYSIS 27
Impairment charges
In the third quarter of 2017, we made changes to the way our global marketing activities were organized. The changes
significantly impacted the marketing activities historically performed by NUKEM. As a result, we recognized an impairment
charge for the full carrying value of goodwill of $111 million.
During the fourth quarter of 2017, we announced our plan to temporarily suspend production at the McArthur River/Key Lake
operation in 2018. As a result, we re-evaluated the project to complete the new calciner at Key Lake, which was undertaken to
allow for increased production. Given the production suspension, market conditions, and that we determined the existing
calciner had sufficient capacity to reliably meet our ongoing production requirements, it was determined that no further
investment would be made to complete the project. As a result, we recognized an impairment charge related to the new
calciner of $55 million.
Also during the fourth quarter of 2017, we recorded a $184 million write down of our US assets. Due to the continued
weakening of the uranium market and the reduction in mineral reserves, we concluded that it was appropriate to recognize an
impairment charge for these assets.
Non-IFRS measures
ADJUSTED NET EARNINGS
Adjusted net earnings is a measure that does not have a standardized meaning or a consistent basis of calculation under
IFRS (non-IFRS measure). We use this measure as a more meaningful way to compare our financial performance from period
to period. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this
information to evaluate our performance. Adjusted net earnings is our net earnings attributable to equity holders, adjusted to
better reflect the underlying financial performance for the reporting period. The adjusted earnings measure reflects the
matching of the net benefits of our hedging program with the inflows of foreign currencies in the applicable reporting period,
and is adjusted for impairment charges, reclamation provisions for our Rabbit Lake and US operations, which have been
impaired, the gain on restructuring of JV Inkai, and income taxes on adjustments.
Adjusted net earnings is non-standard supplemental information and should not be considered in isolation or as a substitute
for financial information prepared according to accounting standards. Other companies may calculate this measure differently,
so you may not be able to make a direct comparison to similar measures presented by other companies.
To facilitate a better understanding of these measures, the table below reconciles adjusted net earnings with our net earnings
for the years ended 2019, 2018 and 2017.
($ MILLIONS)
Net earnings (loss) attributable to equity holders
Adjustments
Adjustments on derivatives
Impairment charges
Reclamation provision adjustments
Gain on restructuring of JV Inkai
Income taxes on adjustments
Adjusted net earnings
2019
74
(49)
-
3
-
13
41
2018
166
65
-
60
(49)
(31)
211
2017
(205)
(108)
358
-
-
14
59
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 15 of our annual financial statements for more information. This amount has been excluded from our
adjusted net earnings measure.
28 CAMECO CORPORATION
The following table shows what contributed to the change in adjusted net earnings (non-IFRS measure, see above) in
2019 compared to the same period in 2018 and 2017.
($ MILLIONS)
Adjusted net earnings - previous year
Change in gross profit by segment
2019
211
2018
59
2017
143
(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
Higher (lower) sales volume
Higher (lower) realized prices ($US)
Foreign exchange impact on realized prices
Lower (higher) costs
change – uranium
Fuel services
Higher (lower) sales volume
Higher (lower) realized prices ($Cdn)
Lower (higher) costs
change – fuel services
Other changes
Lower administration expenditures
Lower (higher) exploration expenditures
Lower loss on disposal of assets
Change in gains or losses on derivatives
Change in foreign exchange gains or losses
Change in earnings from equity-accounted investments
Arbitration award in 2019 related to TEPCO contract
Gain on sale of interest in Wheeler River Joint Venture in 2018
Gain on customer contract restructuring in 2018
Sale of exploration properties in 2018
Gain on customer contract settlements in 2016
Reversal of tax provision in 2018 related to CRA dispute
Change in income tax recovery or expense
Other
Adjusted net earnings - current year
Average realized prices
Uranium1
$US/lb
$Cdn/lb
2019
33.77
44.85
Fuel services
1 Average realized foreign exchange rate ($US/$Cdn): 2019 – 1.33, 2018 – 1.30 and 2017 – 1.30.
$Cdn/kgU
26.21
(27)
(133)
35
10
(115)
13
(11)
29
31
17
6
-
(1)
(45)
13
52
(17)
(6)
(7)
-
(61)
(82)
45
41
2018
37.01
47.96
26.78
18
40
1
(186)
(127)
1
(5)
(1)
(5)
21
10
5
36
49
32
-
17
6
7
-
61
17
23
211
29
(222)
(36)
180
(49)
(5)
21
(15)
1
44
13
16
44
(17)
-
-
-
-
-
(59)
-
(90)
13
59
CHANGE FROM
2017
2018 TO 2019
36.13
46.80
27.20
(9)%
(6)%
(2)%
MANAGEMENT’S DISCUSSION AND ANALYSIS 29
Revenue
The following table shows what contributed to the change in revenue for 2019.
($ MILLIONS)
Revenue – 2018
Uranium
Lower sales volume
Lower realized prices ($Cdn)
Fuel services
Higher sales volume
Lower realized prices ($Cdn)
Other
Revenue – 2019
2,092
(172)
(98)
64
(8)
(15)
1,863
See 2019 Financial results by segment on page 46 for more detailed discussion.
THREE-YEAR TREND
In 2018, revenue decreased by 3% compared to 2017 due to a decrease in sales volumes from NUKEM due to the
restructuring of our marketing activities in 2017. This was partially offset by an increase in sales volumes and average realized
price in our uranium segment.
In 2019, revenue decreased by 11% compared to 2018 due to a decrease in sales volume in the uranium segment and a
decrease in the Canadian dollar average realized price despite an increase in the uranium spot price. This decrease in the
uranium segment was partially offset by an increase in sales volumes in our fuel services segment.
REVENUE OUTLOOK FOR 2020
We expect consolidated revenue to be between $1,480 million and $1,630 million, lower than in 2019 due to a decrease in
average realized prices in our uranium segment as a result of lower expected prices under our contract portfolio and a
decrease in committed sales volumes. We will continue to be active buying and selling uranium in the spot market if it makes
sense for us. If we make additional sales with deliveries in 2020, we would expect our revenue outlook to increase.
In our uranium and fuel services segments, our customers choose when in the year to receive deliveries. As a result, our
quarterly delivery patterns and, therefore, our sales volumes and revenue can vary significantly. We expect the quarterly
distribution of uranium deliveries in 2020 to be weighted to the last three quarters of the year as shown below. However, not all
delivery notices have been received to date and the expected delivery pattern could change. Typically, we receive notices six
months in advance of the requested delivery date.
30 CAMECO CORPORATION
Corporate expenses
ADMINISTRATION
($ MILLIONS)
Direct administration
Severance costs
Stock-based compensation
Total administration
2019
113
1
11
125
2018
112
14
16
142
CHANGE
1%
(93)%
(31)%
(12)%
Direct administration costs in 2019 were $1 million higher than 2018.
We recorded $11 million in stock-based compensation expenses in 2019 under our stock option, restricted share unit, deferred
share unit, performance share unit and phantom stock option plans, $5 million lower than in 2018 due to the decrease in our
share price compared to the same period in 2018. See note 24 to the financial statements.
Administration outlook for 2020
We expect direct administration costs to be between $110 million to $120 million, similar to 2019.
EXPLORATION
Our 2019 exploration activities were focused primarily on Canada. Our spending decreased from $20 million in 2018 to $14
million in 2019 due to a planned reduction in expenditures.
Exploration outlook for 2020
We expect exploration expenses to be about $13 million in 2020. The focus for 2020 will be on our core projects in
Saskatchewan.
FINANCE COSTS
Finance costs were $99 million, a decrease from $112 million in 2018 due to a reduction in our outstanding debt as we retired
our $500 million debenture that matured in September. See note 19 to the financial statements.
FINANCE INCOME
Finance income was $30 million compared to $22 million in 2018 due to higher cash balances throughout the year.
GAINS AND LOSSES ON DERIVATIVES
In 2019, we recorded $32 million in gains on our derivatives compared to $81 million in losses in 2018. The increase reflects
the strength in the Canadian dollar compared to the US dollar at the end of 2019 compared to 2018. See Foreign exchange on
page 36 and note 26 to the financial statements.
INCOME TAXES
We recorded an income tax expense of $61 million in 2019 compared to a recovery of $126 million in 2018. The increase in
expense was primarily due to a change in the distribution of earnings among jurisdictions as well as the reversal in 2018 of the
provision related to our CRA dispute in the amount of $61 million (see Tax Court of Canada decision below for more details).
See note 21 to the financial statements.
In 2019, we recorded earnings of $229 million in Canada compared to losses of $257 million in 2018, while in foreign
jurisdictions, we recorded a loss of $94 million compared to earnings of $297 million in 2018. The tax rate in Canada is higher
than the average of the rates in the foreign jurisdictions in which our subsidiaries operate.
On an adjusted earnings basis, we recognized a tax expense of $48 million in 2019 compared to a recovery of $95 million in
2018. The table below presents our adjusted earnings and adjusted income tax expenses attributable to Canadian and foreign
jurisdictions.
MANAGEMENT’S DISCUSSION AND ANALYSIS 31
($ MILLIONS)
Pre-tax adjusted earnings1
Canada
Foreign
Total pre-tax adjusted earnings
Adjusted income taxes1
Canada
Foreign
2019
2018
183
(94)
89
55
(7)
(181)
297
116
(112)
17
Adjusted income tax expense (recovery)
1 Pre-tax adjusted earnings and adjusted income taxes are non-IFRS measures. Our IFRS-based measures have been adjusted by the amounts reflected in the
48
(95)
table in adjusted net earnings (non-IFRS measures on page 28).
TRANSFER PRICING DISPUTE
Tax Court of Canada decision
On September 26, 2018, the Tax Court of Canada (Tax Court) ruled unequivocally in our favour in our case with the Canada
Revenue Agency (CRA) for the 2003, 2005 and 2006 tax years.
The Tax Court ruled that our marketing and trading structure involving foreign subsidiaries and the related transfer pricing
methodology used for certain intercompany uranium purchase and sale agreements were in full compliance with Canadian
laws for the three tax years in question. While the decision applies only to the three tax years under dispute, we believe there
is nothing in the decision that would warrant a materially different outcome for subsequent tax years.
The Tax Court has referred the matter back to the Minister of National Revenue in order to issue new reassessments for the
2003, 2005 and 2006 tax years in accordance with the Tax Court’s decision. The total tax amount reassessed for those tax
years was $11 million, and we remitted 50%. Therefore, we expect to receive refunds totaling about $5.5 million plus interest.
The timing for the revised reassessments along with refunds plus interest may be delayed pending the outcome of the appeal.
For further information regarding the appeal, see below.
On April 30, 2019, we announced the decision of the Tax Court in our application to recover costs in the amount of about $38
million ($20.5 million for legal fees and $17.9 million in disbursements), which were incurred over the course of this case. The
Tax Court awarded $10.25 million in legal fees incurred, plus an amount for disbursements, which is yet to be determined. The
amount of the award for disbursements will be determined by an officer of the Tax Court. We are optimistic we will recover all,
or substantially all, of the $17.9 million in disbursements. Timing of any payments under the cost award is uncertain. The CRA
has asked for the cost award to be overturned should it be successful in the appeals process.
Appeal process
On October 25, 2018, CRA filed a notice of appeal with the Federal Court of Appeal. In its notice of appeal, CRA is not
appealing the Tax Court’s finding that sham was not present, but is appealing the Tax Court’s interpretation and application of
the transfer pricing provisions in section 247 of the Income Tax Act. CRA filed its written submissions with the Federal Court of
Appeal on May 31, 2019. In its written submission, CRA repeated its trial argument that the transactions should be
recharacterized because arm’s length persons would not have entered into the various agreements that underpin the
marketing and trading structure. CRA’s alternate argument is that the terms (focused on pricing) of these agreements would
have been significantly different if these agreements had been made between arm’s length persons. CRA argues that either
approach should result in the disputed reassessments being upheld in their totality.
The Federal Court of Appeal hearing is scheduled to be held on March 4, 2020, and we anticipate that we could receive a
decision in 2020. We believe there is nothing in the Tax Court’s decision that would warrant a materially different outcome on
appeal.
The decision of the Federal Court of Appeal can be appealed to the Supreme Court of Canada, but only if the Supreme Court
of Canada agrees to hear the appeal. The request to appeal a decision of the Federal Court of Appeal to the Supreme Court of
Canada must be made within 60 days of issuance of a Federal Court of Appeal decision.
32 CAMECO CORPORATION
In the event that either party appeals the Federal Court of Appeal decision, it would likely take about two years from the date
the Federal Court of Appeal decision is issued to receive a decision from the Supreme Court of Canada should that court hear
the appeal.
We expect to incur additional costs during the appeal process, and in connection with potential reassessments of subsequent
years. There could also be costs incurred if a negotiated resolution with CRA is sought or achieved.
Potential exposure based on CRA appeal
Since 2008, CRA has disputed our marketing and trading structure and the related transfer pricing methodology we used for
certain intercompany uranium sale and purchase agreements. To date, we have received notices of reassessment for our
2003 through 2013 tax years. While the Tax Court has ruled unequivocally in our favour for the 2003, 2005 and 2006 tax
years, and we believe there is nothing in the decision that would warrant a materially different outcome on appeal, or for
subsequent tax years we will continue to report on the potential exposure as we expect it will continue to tie up our financial
capacity until the dispute is finally resolved for all years.
For the years 2003 to 2013, CRA has 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. We
understand CRA is currently considering whether to impose a transfer pricing penalty for 2012 and 2013. Taxes of
approximately $326 million for the 2003 to 2019 years have already been paid to date in a jurisdiction outside Canada. If CRA
is successful on appeal, we will consider our options under bilateral international tax treaties to limit double taxation of this
income. There is a risk that we will not be successful in eliminating all potential double taxation. The income adjustments
claimed by CRA in its reassessments are represented by the amounts described below.
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. We received the 2013 reassessment late
in 2019. The CRA has advised that security remitted to date is sufficient to secure the tax debts they consider owing and as
such, no further security is required at this time. To date, under these provisions, after applying elective deductions, we have
paid or secured the amounts shown in the table below. Of these amounts, we expect to receive refunds totaling approximately
$5.5 million plus interest for the years at issue in the Tax Court. The timing of the refund may be delayed pending the outcome
of the appeal.
INTEREST
TRANSFER
AND INSTALMENT
PRICING
CASH
SECURED BY
YEAR PAID ($ MILLIONS)
CASH TAXES
PENALTIES
PENALTIES
TOTAL
REMITTANCE
Prior to 2014
2014
2015
2016
2017
2018
2019
Total
1
106
202
51
-
17
-
377
22
47
71
38
1
40
2
36
-
79
31
39
-
-
221
185
59
153
352
120
40
57
2
783
59
153
20
32
39
-
-
303
LC
-
-
332
88
1
57
2
480
MANAGEMENT’S DISCUSSION AND ANALYSIS 33
While we expect the Tax Court’s decision to be upheld on appeal and believe the decision should apply in principle to
subsequent years, until such time as all appeals are exhausted, and a resolution is reached for all tax years in question, we
will not be in a position to determine the definitive outcome of this dispute. We expect any further actions regarding the tax
years 2007 through 2013 will be suspended until the three years covered under the decision are finally resolved, with the
exception of the transfer pricing penalties noted above. The tax years 2014 and beyond have not yet been reassessed, and it
is uncertain what approach CRA will take on audit. Despite the fact that we believe there is no basis to do so, and it is not our
view of the likely outcome, CRA may continue to reassess us using the methodology it used to reassess the 2003 through
2013 tax years. In that scenario, and including the $5.7 billion already reassessed, we would expect to receive notices of
reassessment for a total of approximately $8.7 billion of additional income taxable in Canada for the years 2003 through 2019,
which would result in a related tax expense of approximately $2.6 billion. As well, CRA may continue to apply transfer pricing
penalties to taxation years subsequent to 2011. In that case, we estimate that cash taxes and transfer pricing penalties
claimed by CRA for these years would be between $1.95 billion and $2.15 billion. In addition, CRA may seek to apply interest
and instalment penalties that would be material to us. While in dispute, we may be required to remit or otherwise provide
security for 50% of the cash taxes and transfer pricing penalties (between $970 million and $1.07 billion), plus related interest
and instalment penalties assessed, which would be material to us. However, as noted previously, CRA has informed us that
no further security is required for the tax debts it considers owing at this time. We have already paid or secured $562 million in
cash taxes and transfer pricing penalties and $221 million in interest and instalment penalties.
Under the Canadian federal and provincial tax rules, any amount required to be paid or secured each year will depend on the
amount of income reassessed in that year and the availability of elective deductions and tax loss carryovers. CRA has to date
disallowed the use of any loss carry-backs for any transfer pricing adjustment, starting with the 2008 tax year. This does not
impact the anticipated income tax expense for a particular year, but does impact the timing of any required security or
payment. As noted above, for amounts reassessed after 2014, as an alternative to remitting cash, we used letters of credit to
satisfy our obligations related to the reassessed income tax and related interest amounts. If required, we believe we will be
able to continue to provide security in the form of letters of credit to satisfy these requirements. The amounts summarized in
the table below reflect actual amounts paid or secured from 2003 through 2019 along with estimated post-2019 amounts if
CRA were to continue to reassess based on the scenario outlined above, and include the expected timing adjustment for the
inability to use any loss carry-backs starting with the 2008 tax year. The amounts have not been adjusted to reflect the refund
of approximately $5.5 million plus interest we expect to receive based on the ruling of the Tax Court. The timing of such refund
may be delayed pending the outcome of the appeal. We plan to update this table annually to include the estimated impact of
reassessments expected for completed years subsequent to 2019.
$ MILLIONS
2003-2019
Post-2019
TOTAL
50% of cash taxes and transfer pricing penalties paid, secured or potentially owing in the period
Cash payments
Secured by letters of credit
Total paid or potentially owing1
226
336
562
185 - 235
225 - 275
410 - 460
560 - 610
410 - 510
970 - 1070
1 These amounts do not include interest and instalment penalties, which totaled approximately $221 million to December 31, 2019.
In light of our view of the likely outcome of the appeal, and the dispute for subsequent years, based on the Tax Court’s
decision as described above, we expect to recover the amounts remitted, including the $783 million already paid or otherwise
secured to date.
34 CAMECO CORPORATION
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 and also on the more specific assumptions and risks listed below. Actual outcomes may vary significantly.
Assumptions
CRA will reassess us for the years 2014 through 2019 using
a similar methodology as for the years 2003 through 2013,
and the reassessments will be issued on the basis we expect
we will be able to apply elective deductions and utilize letters
of credit to the extent anticipated
CRA will seek to impose transfer pricing penalties (in a
manner consistent with penalties charged in the years 2007
through 2011) in addition to interest charges and instalment
penalties
we will be substantially successful in our dispute with CRA,
including any appeals of the Tax Court’s decision or any
decisions regarding other tax years, and we will not incur any
significant tax liability resulting from the outcome of the
dispute or other costs, potentially including costs associated
with a negotiated resolution with CRA
a favourable determination by the officer of the Tax Court of
the amount of our disbursements award
Material risks that could cause actual results to differ
materially
CRA reassesses us for years 2014 through 2019 using a
different methodology than for years 2003 through 2013, or
we are unable to utilize elective deductions or letters of credit
to the extent anticipated, resulting in the required cash
payments or security provided to CRA pending the outcome
of the dispute being higher than expected
the time lag for the reassessments for each year is different
than we currently expect
we are unsuccessful in an appeal of the Tax Court’s decision
or any tax decisions of the Tax Court for subsequent years,
or appeals of those decisions, and the outcome of our
dispute with CRA, potentially including costs associated with
a negotiated resolution with CRA, results in significant costs,
cash taxes, interest charges and penalties which could have
a material adverse effect on our liquidity, financial position,
results of operations and cash flows
cash tax payable increases due to unanticipated adjustments
by CRA not related to transfer pricing
we are unable to effectively eliminate all double taxation
an unfavourable determination of the officer of the Tax Court
of the amount of our disbursements award
Tax outlook for 2020
On an adjusted net earnings basis, we expect a tax expense of between $20 million and $30 million in 2020.
Our consolidated tax rate is a blend of the statutory rates applicable to taxable income earned or tax losses incurred in
Canada and in our foreign subsidiaries. We have a global customer base and we have established a marketing and trading
structure involving foreign subsidiaries, which entered into various intercompany purchase and sale arrangements, as well as
uranium purchase and sale agreements with third parties. Cameco and its subsidiaries made reasonable efforts to put arm’s-
length transfer pricing arrangements in place, and these arrangements expose the parties to the risks and rewards accruing to
them under these contracts. The intercompany contract prices are generally comparable to those established in comparable
contracts between arm’s-length parties entered into at that time. In 2017, we changed our global marketing organization to
consolidate our international activities in Canada in order to achieve efficiencies. The existing purchase and sale
arrangements will continue to be in place until they expire. As the existing contracts expire, we anticipate that more income will
be earned in Canada.
We continue to expect our consolidated tax rate will trend toward the Canadian statutory rate in the longer term. The actual
effective tax rate will vary from year-to-year, primarily due to the actual distribution of earnings among jurisdictions and the
market conditions at the time transactions occur under both our intercompany and third-party purchase and sale
arrangements.
MANAGEMENT’S DISCUSSION AND ANALYSIS 35
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. Our product purchases are denominated in US dollars while 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 risk management policy is based on a 60-month period and permits us to hedge 35% to 100% of our expected net
exposure in the first 12 month period. Our normal practice is to layer in hedge contracts over a three- to four-year period with
the hedge percentage being highest in the first 12 months and decreasing hedge percentages in subsequent years. The
portion of our net exposure that remains unhedged is subject to prevailing market exchange rates for the period. Therefore,
our results are affected by the movements in the exchange rate on our hedge portfolio (explained below), and on the
unhedged portion of our net exposure. A weakening Canadian dollar would have a positive effect on the unhedged exposure,
and a strengthening Canadian dollar would have a negative effect. See Revenue, adjusted net earnings, and cash flow
sensitivity analysis on page 40 for more information on how a change in the exchange rate will impact our revenue, cash flow,
adjusted net earnings (ANE), and gains and losses on derivatives, presented on an ANE basis.
Impact of hedging on IFRS earnings
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.
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 2020 and future years and we will recognize
the gains or 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 or 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 28.
The table below provides a summary of our hedge portfolio at December 31, 2019. You can use this information to estimate
the expected gains or losses on derivatives for 2020 on an ANE basis. However, if we add contracts to the portfolio that are
designated for use in 2020 or if there are changes in the US/Cdn exchange rates in the year, those expected gains or losses
could change.
36 CAMECO CORPORATION
HEDGE PORTFOLIO SUMMARY
DECEMBER 31, 2019
($ MILLIONS)
US dollar forward contracts
Average contract rate 1
US dollar option contracts
Average contract rate range1
Total US dollar hedge contracts
Effective hedge rate range2
($ millions)
(US/Cdn dollar)
($ millions)
(US/Cdn dollar)
($ millions)
2020
190
1.27
170
AFTER
2020
140
1.30
175
TOTAL
330
1.28
345
1.29 to 1.33
1.29 to 1.33
1.29 to 1.33
360
315
675
(US/Cdn dollar)
1.28 to 1.30
1.29 to 1.32
1.29 to 1.31
Hedge ratio3
1 The average contract rate is the weighted average of the rates stipulated in the outstanding contracts.
2 The effective hedge rate is the exchange rate on the original hedge contract at the time it was established and designated for use. Therefore the effective hedge
rate range shown reflects an average of contract exchange rates at the time of designation.
3 Hedge ratio is calculated by dividing the amount (in foreign currency) of outstanding derivative contracts by estimated future net exposures.
44%
14%
8%
At December 31, 2019:
The value of the US dollar relative to the Canadian dollar was $1.00 (US) for $1.30 (Cdn), down from $1.00 (US) for $1.36
(Cdn) at December 31, 2018. The exchange rate averaged $1.00 (US) for $1.33 (Cdn) over the year.
The mark-to-market position on all foreign exchange contracts was a $4 million loss compared to a $53 million loss at
December 31, 2018.
We manage counterparty risk associated with hedging by dealing with highly rated counterparties and limiting our exposure. At
December 31, 2019, all of our hedging counterparties had a Standard & Poor’s (S&P) credit rating of A or better.
For information on the impact of foreign exchange on our intercompany balances, see note 26 to the financial statements.
MANAGEMENT’S DISCUSSION AND ANALYSIS 37
Outlook for 2020
Our strategy is to focus on our tier-one assets and profitably produce at a pace aligned with market signals, in order to
preserve the value of those assets and increase long-term shareholder value, and to do that with a focus on safety, people
and the environment.
Our outlook for 2020 reflects the expenditures necessary to help us achieve our strategy. We have made significant progress
in reducing our administration, exploration and operating costs, as well as our capital expenditures. We have also made a
number of strategic decisions that come with significant costs in the near term, costs we factored into our decisions. As a
result, and based on what we know today, including committed delivery volumes, from a gross profit point of view, 2020 is
expected to be a weaker year for us. The lower delivery commitments and changing pricing terms under our existing contract
portfolio are expected to adversely impact our revenue and average realized price in 2020 relative to 2019. In addition, our
outlook for the average unit cost of sales in 2020 continues to be impacted by the proportion of purchased material compared
to produced material making up our uranium supply and care and maintenance costs, which are expected to be between $150
million and $170 million. Despite the impact on our expected results, we continue to believe these are the right decisions to
create long-term shareholder value.
In contrast, from a cash perspective, we expect to continue to maintain a significant cash balance. We expect to continue to
generate cash from operations however, the amount of cash generated will be dependent on the timing and magnitude of our
purchasing activity and therefore, cash balances may fluctuate throughout the year.
We report our results and outlook based on a calendar-year view, at a point in time. However, under our marketing framework,
we plan on a rolling 12-month basis, which means our production, sales, inventory and purchases are all variables. Therefore,
in accordance with market opportunities and as the year unfolds, we expect our actual production, sales, purchases and
inventory may vary from what we are reporting in the 2020 Financial Outlook table.
In addition, there are a number of moving pieces both internally and externally, that could have a significant impact on the
market and on our results, and it is important to keep them in mind. Some of the more significant items are:
the decision by the President of the United States to implement any of the recommendations contained in the NFWG report,
and the impact, if any, on the uranium market and uranium prices
whether the Russian Suspension Agreement gets amended or extended prior to its expiry at the end of 2020
the impact if sanctions on Iran are expanded and extend to countries providing nuclear fuel products and services to Iran,
and therefore disrupt Russian nuclear fuel imports into the US
a potential decision from the Federal Court of Appeal in our tax dispute with CRA
See 2019 Financial results by segment on page 46 for details.
2019 outlook compared to actual results
Our actual results were largely in-line with the outlook provided in our third quarter MD&A. However, our total purchases for
the year were 19 million pounds compared to our outlook of 21 million to 23 million pounds. Based on what we were seeing in
the market, we decided to reduce our spot purchases in 2019 and to draw our inventory down. With the expected delivery
pattern in 2020 heavily weighted to the last three quarters of the year and the timing of our 2020 purchase commitments, we
are confident in our ability to meet our delivery commitments.
38 CAMECO CORPORATION
2020 FINANCIAL OUTLOOK
EXPECTED CONTRIBUTION TO GROSS PROFIT
Production (owned and operated properties)
Purchases
Sales/delivery volume
Revenue
Average realized price
Average unit cost of sales (including D&A)
CONSOLIDATED
100%
URANIUM
36%
FUEL SERVICES
64%
-
-
-
9.0 million lbs
13 to 14 million kgU
20 to 22 million lbs
-
28 to 30 million lbs
12 to 13 million kgU
$1,480-1,630 million
$1,120-1,210 million
$340-370 million
-
-
$40.90/lb
-
$38.50-40.50/lb
$19.70-20.70/kgU
Direct administration costs
$110-120 million
-
Exploration costs
-
$13 million
Expected loss on derivatives - ANE basis
Tax expense - ANE basis
Capital expenditures
$0-10 million
$20-30 million
$120 million
-
-
-
-
-
-
-
-
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:
Purchases – are based on the volumes we currently have commitments to acquire under contract in 2020, including our JV
Inkai purchases and the purchase of NUKEM’s excess inventory, and it includes the additional volumes we are required to
purchase in order to meet the sales/delivery commitments we have under contract in 2020 and maintain our desired
working inventory.
Our 2020 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 we currently have commitments to deliver under contract in 2020.
Uranium revenue and average realized price are based on a uranium spot price of $24.35 (US) per pound (the UxC spot
price as of January 27, 2020), a long-term price indicator of $32.00 (US) per pound (the UxC long-term indicator on January
27, 2020) and an exchange rate of $1.00 (US) for $1.30 (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 $31.40 per pound, and includes care
and maintenance costs of between $150 million and $170 million. If purchase volumes and/or uranium spot prices vary in
2020, then we expect the overall unit cost of sales may be affected.
Direct administration costs do not include stock-based compensation expenses. See page 31 for more information.
Our outlook for the tax expense is based on adjusted net earnings and the other assumptions listed in the table. The
outlook does not include our share of taxes on JV Inkai profits as the income from JV Inkai is net of taxes. If other
assumptions change then the expected expense may be affected.
Our 2020 financial outlook is presented on the basis of equity accounting for our minority ownership interest in JV Inkai. Under
equity accounting, our share of the profits earned by JV Inkai on the sale of its production will be included in “income from
equity-accounted investees” on our consolidated statement of earnings. Our share of production will be purchased at a
discount to the spot price and included at this value in inventory. In addition, JV Inkai capital is not included in our outlook for
capital expenditures. Please see Inkai Planning for the future on page 70 and Capital spending on page 42 for more details.
For more information on how changes in the exchange rate or uranium prices can impact our outlook see Revenue, adjusted
net earnings, and cash flow sensitivity analysis below, and Foreign exchange on page 36.
MANAGEMENT’S DISCUSSION AND ANALYSIS 39
REVENUE, ADJUSTED NET EARNINGS, AND CASH FLOW SENSITIVITY ANALYSIS
IMPACT ON:
FOR 2020 ($ MILLIONS)
CHANGE
REVENUE
Uranium spot and term price1
Value of Canadian dollar vs US dollar
$5(US)/lb increase
$5(US)/lb decrease
One cent decrease in CAD
One cent increase in CAD
78
(74)
10
(10)
ANE
12
(9)
3
(3)
CASH FLOW
(10)
14
2
(2)
1 Assuming change in both UxC spot price ($24.35 (US) per pound on January 27, 2020) and the UxC long-term price indicator ($32.00 (US) per pound on
January 27, 2020).
In 2020, our cash flow is expected to move in the opposite direction from price. Cash inflows from revenue are expected to be
relatively less sensitive to an increase in the spot price than cash outflows from purchases due the volume of planned
deliveries at prices that have been fixed compared to the volume of spot purchases remaining based on our outlook.
PRICE SENSITIVITY ANALYSIS: URANIUM SEGMENT
The following 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. It is designed to indicate how the portfolio of long-term contracts we had in place on December 31,
2019 would respond to different spot prices. In other words, we would realize these prices only if the contract portfolio
remained the same as it was on December 31, 2019, and none of the assumptions we list below change.
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
(rounded to the nearest $1.00)
SPOT PRICES
($US/lb U3O8)
2021
2022
2023
2024
$20
27
27
28
30
$40
40
40
40
41
$60
53
54
54
53
$80
60
62
62
60
$100
$120
$140
65
66
66
62
69
69
69
63
73
71
72
63
The table illustrates the mix of long-term contracts in our December 31, 2019 portfolio, and is consistent with our marketing
strategy. It has been updated to reflect contracts entered into up to December 31, 2019.
Our portfolio includes a mix of fixed-price and market-related contracts, which we target at a 40:60 ratio. Those that are fixed
at lower prices or have low ceiling prices will yield prices that are lower than current market prices.
________________________
Our portfolio is affected by more than just the spot price. We made the following assumptions (which are not forecasts) to create the table:
Sales
sales volumes on average of 19 million pounds per year,
with commitment levels in 2020 and 2021 higher than in
2022 through 2024
excludes sales between our segments
Deliveries
deliveries include best estimates of requirements contracts
and contracts with volume flex provisions
40 CAMECO CORPORATION
Annual inflation
is 2% in the US
Prices
the average long-term price indicator is the same as the
average spot price for the entire year (a simplified approach
for this purpose only). Since 1996, the long-term price
indicator has averaged 21% higher than the spot price. This
differential has varied significantly. Assuming the long-term
price is at a premium to spot, the prices in the table will be
higher.
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.
At the end of 2019, we had cash and short-term investments of $1.1 billion, while our total debt amounted to $1 billion.
We have large, creditworthy customers that continue to need uranium even during weak economic conditions, and we expect
the uranium contract portfolio we have built to continue to provide a solid revenue stream. From 2020 through 2024, we have
commitments to deliver an average of 19 million pounds per year, with commitment levels in 2020 and 2021 higher than in
2022 through 2024.
In the currently weak uranium price environment, our focus is on preserving the value of our tier-one assets and reducing our
operating, capital and general and administrative spending. 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
implemented over the past five years, the reduction in our dividend, and the drawdown of inventory in 2018 as a result of the
suspension of production at our McArthur River/Key Lake operation, we have significant cash balances. We expect to continue
to generate cash from operations however, the amount of cash generated will be dependent on the timing and magnitude of
our purchasing activity and therefore, cash balances may fluctuate throughout the year. We expect our cash balances and
operating cash flows to meet our capital requirements during 2020.
We received a favourable ruling in our case with CRA for the 2003, 2005 and 2006 tax years. We expect the ruling to be
upheld on appeal, and we believe the ruling should apply in principle to subsequent tax years. However, until such time as all
appeals are exhausted, and a resolution is reached for all tax years in question, in accordance with Canadian income tax rules
we may be required to remit or otherwise secure 50% of any cash taxes plus related interest and penalties CRA may continue
to reassess, even though we believe there is no basis for them to do so. See page 32 for more information. In the above
scenario, the table on page 34 provides the amount and timing of the cash taxes and transfer pricing penalties paid or secured
to date. In addition, it provides an estimate of the amounts we may potentially have to pay or secure upfront if CRA continues
to reassess us using the same methodology it reassessed the 2003 to 2013 tax years. The timing of these amounts is
uncertain.
FINANCIAL CONDITION
Cash position ($ millions)
(cash and cash equivalents and short-term investments)
Cash provided by operations ($ millions)
(net cash flow generated by our operating activities after changes in working capital)
Cash provided by operations/net debt1
(net debt is total consolidated debt, less cash position)
Net debt/total capitalization1
(total capitalization is net debt and equity)
1 As at December 31, 2019, Cameco’s net debt is negative due to its strong cash position.
CREDIT RATINGS
2019
2018
1,062
1,103
527
668
n/a
n/a
170%
7%
The credit ratings assigned to our securities by external ratings agencies are important to our ability to raise capital at
competitive pricing to support our business operations. We navigate by our investment-grade credit rating.
Third-party ratings for our commercial paper and senior debt as of February 6, 2020:
SECURITY
Commercial paper
Senior unsecured debentures
Rating trend / rating outlook
DBRS
R-2 (middle)1
BBB1
Negative
S&P
A-32
BBB-2
Stable2
1 On May 24, 2019, DBRS lowered its long term corporate credit rating from BBB (high) to BBB and commercial paper to R-2 (middle).
MANAGEMENT’S DISCUSSION AND ANALYSIS 41
2 On March 1, 2019 S&P lowered its long term corporate credit rating from BBB to BBB-, commercial paper to A-3 and changed Cameco’s rating outlook to stable
from negative.
The rating agencies may revise or withdraw these ratings if they believe circumstances warrant. The rating trend/outlook
represents the rating agency’s assessment of the likelihood and direction that the rating could change in the future.
A change in our credit ratings could affect our cost of funding and our access to capital through the capital markets.
Liquidity
($ MILLIONS)
Cash and cash equivalents at beginning of year
Cash from operations
Investment activities
Additions to property, plant and equipment and acquisitions
Other investing activities
Financing activities
Change in debt
Interest paid
Other financing activities
Dividends
Exchange rate on changes on foreign currency cash balances
Cash and cash equivalents and short-term investments at end of year
CASH FROM OPERATIONS
2019
1,103
527
(75)
121
(500)
(72)
(3)
(32)
(7)
2018
592
668
(55)
34
-
(73)
-
(71)
8
1,062
1,103
Cash from operations was 21% lower than in 2018 due largely to the drawdown of inventory in 2018 in accordance with our
strategy. Working capital provided $87 million less in 2019. Not including working capital requirements, our operating cash
flows in the year were down $54 million. See note 23 to the financial statements.
INVESTING ACTIVITIES
Cash used in investing includes acquisitions and capital spending.
Capital spending
We classify capital spending as sustaining, capacity replacement or growth. As a mining company, sustaining capital is the
money we spend to keep our facilities running in their present state, which would follow a gradually decreasing production
curve, while capacity replacement capital is spent to maintain current production levels at those operations. Growth capital is
money we invest to generate incremental production, and for business development.
CAMECO’S SHARE ($ MILLIONS)
Sustaining capital
McArthur River/Key Lake
Cigar Lake
Fuel services
Other
Total sustaining capital
Capacity replacement capital
Cigar Lake
Total capacity replacement capital
Total uranium & fuel services
2019 PLAN
2019 ACTUAL
2020 PLAN
5
15
30
-
50
45
45
95
2
9
28
1
40
35
35
75
10
15
45
-
70
50
50
120
Total capital expenditures for 2019 were lower than our outlook of $95 million as a result of the rescheduling of some
expenditures at Cigar Lake to 2020.
42 CAMECO CORPORATION
Outlook for investing activities
CAMECO’S SHARE ($ MILLIONS)
Total uranium & fuel services
Sustaining capital
Capacity replacement capital
Growth capital
2021 PLAN
2022 PLAN
75-125
60-85
15-40
-
50-100
35-60
15-40
-
We expect total 2020 capital expenditures for uranium and fuel services to be about 58% higher than in 2019 due to ongoing
investment in the Vision in Motion project at fuel services, increased mine development activity at Cigar Lake, and the
rescheduling of some expenditures planned at Cigar Lake in 2019 to 2020.
Capital expenditures for JV Inkai are expected to be covered by JV Inkai cash flows in 2020, and are included in our overall
equity investment.
Major sustaining and capacity replacement expenditures in 2020 include:
Fuel services – continuation of work on our Vision in Motion project
Cigar Lake – underground development and necessary ground freezing infrastructure to meet production targets
Our 2020, 2021 and 2022 capital spending estimates assume that market conditions remain such that McArthur River and Key
Lake remain in a state of ongoing care and maintenance. Capital spending could increase if we identify and approve
investment in projects we expect will reduce costs and improve operational effectiveness and efficiency.
This information regarding currently expected capital expenditures for future periods is forward-looking information, and is
based upon the assumptions and subject to the material risks discussed on pages 2 and 3. Our actual capital expenditures for
future periods may be significantly different.
FINANCING ACTIVITIES
Cash from financing includes borrowing and repaying debt, and other financial transactions including paying dividends and
providing financial assurance.
Long-term contractual obligations
2021 AND
2023 AND
DECEMBER 31 ($ MILLIONS)
Long-term debt
Interest on long-term debt
Provision for reclamation
Provision for waste disposal
Other liabilities
Capital commitments
Total
2020
-
41
55
1
5
38
140
2022
400
82
53
3
10
-
548
2024
500
52
98
3
4
-
2025 AND
BEYOND
100
92
921
1
75
-
TOTAL
1,000
267
1,127
8
94
38
657
1,189
2,534
We have contractual capital commitments of approximately $38 million at December 31, 2019. Certain of the contractual
commitments may contain cancellation clauses; however, we disclose the commitments based on management’s intent to fulfil
the contracts.
We have unsecured lines of credit of about $2.5 billion, which include the following:
A $1.0 billion unsecured revolving credit facility that matures November 1, 2023. Each year on the anniversary date, and
upon mutual agreement, the facility can be extended for an additional year. In addition to borrowing directly from this facility,
we can use up to $100 million of it to issue letters of credit. We may increase the revolving credit facility above $1.0 billion,
by increments of no less than $50 million, up to a total of $1.25 billion. The facility ranks equally with all of our other senior
debt. At December 31, 2019, there were no amounts outstanding under this facility.
At December 31, 2019, we had approximately $1.5 billion outstanding in financial assurances provided by various financial
institutions. We use these facilities mainly to provide financial assurance for future decommissioning and reclamation of our
operating sites, for our obligations relating to the CRA dispute, and as overdraft protection.
MANAGEMENT’S DISCUSSION AND ANALYSIS 43
In total we have $1.0 billion in senior unsecured debentures outstanding:
$400 million bearing interest at 3.75% per year, maturing on November 14, 2022
$500 million bearing interest at 4.19% per year, maturing on June 24, 2024
$100 million bearing interest at 5.09% per year, maturing on November 14, 2042
Debt covenants
Our revolving credit facility includes the following financial covenants:
our funded debt to tangible net worth ratio must be 1:1 or less
other customary covenants and events of default
Funded debt is total consolidated debt less non-recourse debt, $100 million in letters of credit, cash and short-term
investments.
Not complying with any of these covenants could result in accelerated payment and termination of our revolving credit facility.
At December 31, 2019, we complied with all covenants, and we expect to continue to comply in 2020.
OFF-BALANCE SHEET ARRANGEMENTS
We had three kinds of off-balance sheet arrangements at the end of 2019:
purchase commitments
financial assurances
other arrangements
Purchase commitments
We make purchases under long-term contracts where it is beneficial for us to do so and in order to support our long-term
contract portfolio. The following table is based on our purchase commitments in our uranium and fuel services segments, as
well as commitments previously contracted by NUKEM, at December 31, 20192 but does not include purchases of our share of
Inkai production. These commitments include a mix of fixed-price and market-related contracts. Actual payments will be
different as a result of changes to our purchase commitments and, in the case of contracts with market-related pricing, the
market prices in effect at the time of delivery. We will update this table as required in our MD&A to reflect material changes to
our purchase commitments and changes in the prices used to estimate our commitments under market-related contracts.
DECEMBER 31, 2019 ($ MILLIONS)
2020
2022
2024
2021 AND
2023 AND
2025 AND
BEYOND
TOTAL
Purchase commitments1,2
773
1 Denominated in US dollars and Japanese yen, converted from US dollars to Canadian dollars at the rate of 1.30 and from Japanese yen to Canadian dollars at
180
216
126
251
the rate of $0.01.
2 These amounts have been adjusted for any additional purchase commitments that we have entered into since December 31, 2019, but does not include
deliveries taken under contract since December 31, 2019.
We have commitments of $773 million (Cdn) for the following:
approximately 18 million pounds of U3O8 equivalent from 2020 to 2028
approximately 0.3 million kgU as UF6 in conversion services in 2020
about 0.1 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.
Financial assurances
Standby letters of credit and surety bonds provide financial assurance for the decommissioning and reclamation of our mining
and conversion facilities as well as for our obligations relating to the CRA dispute. We are required to provide financial
assurances to various regulatory agencies until decommissioning and reclamation activities are complete. We are also
providing letters of credit until the CRA dispute is resolved. Our financial assurances renew automatically on an annual basis,
unless otherwise advised by the issuing institution. At December 31, 2019 our financial assurances totaled $1.5 billion, down
from $1.6 billion at December 31, 2018. The decrease in 2019 was mainly due to small changes in reclamation requirements
as well as the change in foreign exchange rates.
44 CAMECO CORPORATION
Other arrangements
We have arranged for standby product loan facilities with three different counterparties. The arrangements allow us to borrow
up to 1.2 million kgU of UF6 conversion services over the period 2020 to 2022 with repayment in kind up to March 31, 2023.
Under the loan facilities, standby fees of up to 1% are payable based on the market value of the facilities and interest is
payable on the market value of any amounts drawn at rates ranging from 0.5% to 2.0%.
BALANCE SHEET
DECEMBER 31, 2019
($ MILLIONS EXCEPT PER SHARE AMOUNTS)
Inventory
Total assets
Long-term financial liabilities
Dividends per common share
2019
321
7,427
2,099
0.08
2018
468
8,019
2,102
0.08
CHANGE
2017
2018 TO 2019
950
7,779
2,448
0.40
(31)%
(7)%
-
-
Total product inventories decreased by 31% to $321 million this year due to higher sales volumes than the quantities produced
and purchased during the year. At December 31, 2019, our average cost for uranium was $33.41 per pound, up from $32.62
per pound at December 31, 2018. As of December 31, 2019, we held an inventory of 6.1 million pounds of U3O8 equivalent
(excluding broken ore).
At the end of 2019, our total assets amounted to $7.4 billion, a decrease of $0.6 billion compared to 2018, due to a decrease
in cash and investment balances resulting from the repayment of long term debt, offset by strong cash flow from operations. In
addition, lower inventories, the repayment of our loan to JV Inkai and ongoing depreciation on our property plant and
equipment impacted our total assets. In 2018, the total asset balance increased by $0.2 billion compared to 2017, primarily
due to an increase in cash and investment balances.
The major components of long-term financial liabilities are long-term debt, the provision for reclamation, deferred sales and
financial derivatives.
MANAGEMENT’S DISCUSSION AND ANALYSIS 45
2019 financial results by segment
Uranium
HIGHLIGHTS
Production volume (million lbs)
Sales volume (million lbs)
Average spot price
Average long-term price
Average realized price
Average unit cost of sales (including D&A)
Revenue ($ millions)
Gross profit ($ millions)
Gross profit (%)
($US/lb)
($US/lb)
($US/lb)
($Cdn/lb)
($Cdn/lb)
2019
9.0
31.5
25.64
31.75
33.77
44.85
39.99
1,414
153
11
2018
9.2
35.1
24.59
30.38
37.01
47.96
40.33
1,684
268
16
CHANGE
(2)%
(10)%
4%
5%
(9)%
(6)%
(1)%
(16)%
(43)%
(31)%
Production volumes in 2019 decreased by 2% compared to 2018. See Uranium – production overview on page 59 for more
information.
Uranium revenues this year were down 16% compared to 2018 due to a decrease in sales volumes of 10% and a decrease of
6% in the Canadian dollar average realized price. Although the spot price for uranium averaged $25.64 (US) per pound in
2019, an increase of 4% compared to the 2018 average price of $24.59 (US) per pound, the average realized price decreased
due to a lower proportion of sales from higher priced fixed-price contracts and lower prices on market-related contracts due to
a change in the protection from floor prices compared to 2018 partially offset by the weakening of the Canadian dollar
compared to the prior year.
Total cost of sales (including D&A) decreased by 11% ($1.26 billion compared to $1.42 billion in 2018) mainly due to a
decrease in sales volume of 10%.
The net effect was a $115 million decrease in gross profit for the year.
The following table shows the costs of produced and purchased uranium incurred in the reporting periods (non-IFRS
measures, see below). These costs do not include care and maintenance costs, selling costs such as royalties, transportation
and commissions, nor do they reflect the impact of opening inventories on our reported cost of sales.
($CDN/LB)
Produced
Cash cost
Non-cash cost
Total production cost 1
Quantity produced (million lbs)1
Purchased
Cash cost1
Quantity purchased (million lbs)1
Totals
Produced and purchased costs
Quantities produced and purchased (million lbs)
2019
2018
CHANGE
15.70
16.09
31.79
9.0
35.26
19.0
34.14
28.0
15.31
15.90
31.21
9.2
36.01
14.0
34.11
23.2
3%
1%
2%
(2)%
(2)%
36%
0%
21%
1 Our share of Inkai production was 3.7 million pounds (amended on Feb 13, 2020; previously 3.3 million pounds) for 2019 (2018 - 2.9 million pounds). Due to
equity accounting, our share of production is shown as a purchase at the time of delivery. JV Inkai purchases will fluctuate during the quarters and timing of
purchases will not match production. In 2019 we purchased 3.5 million pounds at a purchase price per pound of $32.43 ($24.37 (US)).
The average cash cost of production was 3% higher in the year than in 2018. While McArthur River and Key Lake are shut
down, our annual cash cost of production is expected to reflect the estimated life-of-mine operating cost, between $15 and $16
per pound, of mining and milling our share of Cigar Lake mineral reserves, but it may fluctuate from quarter-to-quarter.
The benefit of the estimated life-of-mine operating cost for Inkai’s production of between $8 and $9 per pound, is expected to
be reflected in the line item on our statement of earnings called “share of earnings from equity-accounted investee”.
46 CAMECO CORPORATION
Although purchased pounds are transacted in US dollars, we account for the purchases in Canadian dollars. In the year, the
average cash cost of purchased material was $35.26 (Cdn), or $26.49 (US) per pound, compared to $36.01 (Cdn), or $27.68
(US) per pound in the same period in 2018.
Cash cost per pound, non-cash cost per pound and total cost per pound for produced and purchased uranium presented in the
above table are non-IFRS measures. These measures do not have a standardized meaning or a consistent basis of
calculation under IFRS. We use these measures in our assessment of the performance of our uranium business. We believe
that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate
our performance and ability to generate cash flow.
These measures are non-standard supplemental information and should not be considered in isolation or as a substitute for
measures of performance prepared according to accounting standards. These measures are not necessarily indicative of
operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures
differently, so you may not be able to make a direct comparison to similar measures presented by other companies.
To facilitate a better understanding of these measures, the following table presents a reconciliation of these measures to our
unit cost of sales for the years ended 2019 and 2018 as reported in our financial statements.
CASH AND TOTAL COST PER POUND RECONCILIATION
($ MILLIONS)
Cost of product sold
Add / (subtract)
Royalties
Other selling costs
Care and maintenance and severance costs
Change in inventories
Cash operating costs (a)
Add / (subtract)
Depreciation and amortization
Care and maintenance costs
Change in inventories
Total operating costs (b)
Uranium produced & purchased (million lbs) (c)
Cash costs per pound (a ÷ c)
Total costs per pound (b ÷ c)
2019
1,041.9
2018
1,138.9
(32.5)
(10.5)
(109.5)
(78.2)
811.2
218.8
(44.4)
(29.6)
956.0
28.0
28.97
34.14
(39.1)
(12.6)
(168.3)
(273.9)
645.0
277.2
(44.2)
(86.7)
791.3
23.2
27.80
34.11
MANAGEMENT’S DISCUSSION AND ANALYSIS 47
ROYALTIES
We pay royalties on the sale of all uranium extracted at our mines in the province of Saskatchewan. Two types of royalties are
paid:
Basic royalty: calculated as 5% of gross sales of uranium, less the Saskatchewan resource credit of 0.75%.
Profit royalty: a 10% royalty is charged on profit up to and including $23.76/kg U3O8 ($10.78/lb) and a 15% royalty is
charged on profit in excess of $23.76/kg U3O8. Profit is determined as revenue less certain operating, exploration,
reclamation and capital costs. Both exploration and capital costs are deductible at the discretion of the producer.
As a resource corporation in Saskatchewan, we also pay a corporate resource surcharge of 3% of the value of resource sales.
URANIUM SEGMENT OUTLOOK
In July 2018 we announced the extension of the suspension of production at the McArthur River/Key Lake operation for an
indeterminate duration and therefore, we expect to produce 9 million pounds in 2020. In addition, we expect to purchase
between 20 million and 22 million pounds in 2020 to meet our sales commitments and achieve our desired inventory level.
This includes our spot market purchases and other purchase commitments, including from JV Inkai and the purchase of
NUKEM’s excess inventory. We anticipate an average purchase price of $31.40 per pound for our planned purchases, based
on the uranium price and foreign exchange rate assumptions used in our outlook table on page 38.
Based on the contracts we have in place, and not including sales between our segments, we expect to deliver between 28
million and 30 million pounds of U3O8 in 2020. We expect the unit cost of sales to be between $38.50 per pound and
$40.50per pound, about the same as in 2019. The required spot market purchases and any additional discretionary purchases
we may make in 2020 are subject to market prices throughout the year. If they are at a cost different than the assumptions
noted, then we expect the overall unit cost of sales to be affected, as well as our revenue.
We expect revenue to be between $1,120 million to $1,210 million, lower than in 2019 as a result of a lower expected average
realized price and lower sales volumes.
Fuel services
(includes results for UF6, UO2, UO3 and fuel fabrication)
HIGHLIGHTS
Production volume (million kgU)
Sales volume (million kgU)
Average realized price
Average unit cost of sales (including D&A)
Revenue ($ millions)
Gross profit ($ millions)
Gross profit (%)
($Cdn/kgU)
($Cdn/kgU)
2019
13.3
14.1
26.21
19.84
370
90
24
2018
10.5
11.6
26.78
21.86
313
59
19
CHANGE
27%
22%
(2)%
(9)%
18%
53%
26%
Total revenue increased by 18% from 2018 due to a 22% increase in sales volume that was partially offset by a 2% decrease
in the realized price.
Total cost of products and services sold (including D&A) increased by 10% ($280 compared to $255 in 2018), due to the 22%
increase in sales volume, partially offset by a 9% decrease in average unit cost of sales compared to 2018.
The net effect was a $31 million increase in gross profit.
FUEL SERVICES OUTLOOK
In 2020, we plan to produce 13 million to 14 million kgU, and we expect sales volumes, not including intersegment sales, to be
12 million to 13 million kgU. Overall revenue is expected to be between $340 million and $370 million, slightly lower than 2019
due to lower committed sales volumes. We expect the average unit cost of sales (including D&A) to be between $19.70/kgU
and $20.70/kgU.
48 CAMECO CORPORATION
Fourth quarter financial results
Consolidated results
HIGHLIGHTS
($ MILLIONS EXCEPT WHERE INDICATED)
Revenue
Gross profit
Net earnings attributable to equity holders
$ per common share (basic)
$ per common share (diluted)
Adjusted net earnings (non-IFRS, see page 28)
$ per common share (adjusted and diluted)
Cash provided by operations (after working capital changes)
NET EARNINGS
THREE MONTHS ENDED
DECEMBER 31
2019
874
184
128
0.32
0.32
94
0.24
274
2018
831
207
160
0.40
0.40
202
0.51
57
CHANGE
5%
(11)%
(20)%
(20)%
(20)%
(53)%
(53)%
>100%
The following table shows what contributed to the change in net earnings and adjusted net earnings (non-IFRS measure, see
page 28) in the fourth quarter of 2019 compared to the same period in 2018.
($ MILLIONS)
Net earnings - 2018
Change in gross profit by segment
IFRS
ADJUSTED
160
202
(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
Higher sales volume
Lower realized prices ($US)
Foreign exchange impact on realized prices
Lower costs
change – uranium
Fuel services
Higher sales volume
Higher realized prices ($Cdn)
Lower costs
change – fuel services
Other changes
Lower administration expenditures
Lower exploration expenditures
Change in reclamation provisions
Change in gains or losses on derivatives
Change in foreign exchange gains or losses
Change in earnings from equity-accounted investments
Gain on sale of interest in Wheeler River Joint Venture in 2018
Change in income tax recovery or expense
Other
Net earnings - 2019
20
(84)
6
15
(43)
5
5
11
21
2
1
36
64
(25)
7
(17)
(69)
(9)
128
20
(84)
6
15
(43)
5
5
11
21
2
1
-
(1)
(25)
7
(17)
(44)
(9)
94
MANAGEMENT’S DISCUSSION AND ANALYSIS 49
ADJUSTED NET EARNINGS
We use adjusted net earnings, a non-IFRS measure, as a more meaningful way to compare our financial performance from
period to period. See page 28 for more information. The following table reconciles adjusted net earnings with our net earnings.
($ MILLIONS)
Net earnings attributable to equity holders
Adjustments
Adjustments on derivatives
Reclamation provision adjustments
Income taxes on adjustments
Adjusted net earnings
THREE MONTHS ENDED
DECEMBER 31
2019
128
(18)
(26)
10
94
2018
160
47
10
(15)
202
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 15 of our annual financial statements for more information. This amount has been excluded from our
adjusted net earnings measure.
ADMINISTRATION
($ MILLIONS)
Direct administration
Stock-based compensation
Total administration
THREE MONTHS ENDED
DECEMBER 31
2019
32
2
34
2018
CHANGE
33
3
36
(3)%
(33)%
(6)%
Direct administration costs were $32 million in the quarter, $1 million lower than the same period last year. Stock-based
compensation expenses were $1 million lower from the fourth quarter of 2018. See note 24 to the financial statements.
Quarterly trends
HIGHLIGHTS
($ MILLIONS EXCEPT PER SHARE AMOUNTS)
Revenue
Net earnings (loss) attributable to equity holders
$ per common share (basic)
$ per common share (diluted)
Q4
874
128
Q3
303
(13)
Q2
388
(23)
2019
Q1
298
(18)
0.32
(0.03)
(0.06)
(0.05)
0.32
(0.03)
(0.06)
(0.05)
Adjusted net earnings (loss) (non-IFRS, see page 28)
94
(2)
(18)
(33)
Q4
831
160
0.40
0.40
202
Q3
488
28
Q2
333
(76)
0.07
(0.19)
0.07
(0.19)
15
(28)
2018
Q1
439
55
0.14
0.14
23
$ per common share (adjusted and diluted)
0.24
(0.01)
(0.04)
(0.08)
0.51
0.04
(0.07)
0.06
Cash provided by (used in) operations (after working
capital changes)
274
232
(59)
80
57
278
57
275
Key things to note:
Our financial results are strongly influenced by the performance of our uranium segment, which accounted for 76% of
consolidated revenues in the fourth quarter of 2019 and 81% of consolidated revenues in the fourth quarter of 2018.
The timing of customer requirements, which tends to vary from quarter to quarter, drives revenue in the uranium and fuel
services segments.
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 28 for more information).
50 CAMECO CORPORATION
Cash from operations tends to fluctuate as a result of the timing of deliveries and product purchases in our uranium and fuel
services segments.
Quarterly results are not necessarily a good indication of annual results due to the variability in customer requirements
noted above.
The table that follows presents the differences between net earnings and adjusted net earnings for the previous seven
quarters.
HIGHLIGHTS
($ MILLIONS EXCEPT PER SHARE AMOUNTS)
Net earnings (loss) attributable to equity holders
Adjustments
Adjustments on derivatives
Reclamation provision adjustments
Gain on restructuring of JV Inkai
Income taxes on adjustments
Adjusted net earnings (losses) (non-IFRS, see
page 28)
Q4
128
(18)
(26)
-
10
Q3
Q2
2019
Q1
(13)
(23)
(18)
9
3
-
(1)
(17)
(23)
24
-
(2)
2
-
6
Q4
160
47
10
-
(15)
Q3
28
(24)
5
-
6
Q2
(76)
20
44
-
(16)
2018
Q1
55
22
1
(49)
(6)
94
(2)
(18)
(33)
202
15
(28)
23
MANAGEMENT’S DISCUSSION AND ANALYSIS 51
Fourth quarter financial results by segment
Uranium
HIGHLIGHTS
Production volume (million lbs)
Sales volume (million lbs)
Average spot price
Average long-term price
Average realized price
Average unit cost of sales (including D&A)
Revenue ($ millions)
Gross profit ($ millions)
Gross profit (%)
($US/lb)
($US/lb)
($US/lb)
($Cdn/lb)
($Cdn/lb)
THREE MONTHS ENDED
DECEMBER 31
2019
2.7
14.0
25.08
32.17
35.92
47.50
37.80
666
136
20
2018
2.4
12.6
28.27
31.50
40.50
53.11
38.89
670
179
27
CHANGE
13%
11%
(11)%
2%
(11)%
(11)%
(3)%
(1)%
(24)%
(26)%
Production volumes this quarter were 13% higher compared to the fourth quarter of 2018. See Uranium – production overview
on page 59 for more information.
Uranium revenues were down 1% due to an 11% decrease in the Canadian dollar average realized price offset by an 11%
increase in sales volume. The US dollar average realized price decreased by 11% compared to 2018. Average realized price
decreased due to a lower proportion of sales from higher priced fixed-price contracts compared to the same period in 2018
and lower prices on both fixed and market-related contracts. The Canadian dollar was slightly weaker compared to the same
period last year, $1.00 (US) for $1.32 (Cdn) compared to $1.00 (US) for $1.31 (Cdn) in the fourth quarter of 2018.
Total cost of sales (including D&A) increased by 9% ($519 million compared to $477 million in 2018). This was primarily the
result of the 11% increase in sales volume as the average unit cost of sales decreased by 3%.
The net effect was a $43 million decrease in gross profit for the quarter.
The following table shows the costs of produced and purchased uranium incurred in the reporting periods (which are non-IFRS
measures, see the paragraphs below the table). These costs do not include care and maintenance costs, selling costs such as
royalties, transportation and commissions, nor do they reflect the impact of opening inventories on our reported cost of sales.
($CDN/LB)
Produced
Cash cost
Non-cash cost
Total production cost 1
Quantity produced (million lbs)1
Purchased
Cash cost1
Quantity purchased (million lbs)1
Totals
Produced and purchased costs
Quantities produced and purchased (million lbs)
THREE MONTHS ENDED
DECEMBER 31
2019
2018
CHANGE
17.21
15.54
32.75
2.7
34.17
4.3
33.62
7.0
14.91
15.07
29.98
2.4
38.13
7.3
36.11
9.7
15%
3%
9%
13%
(10)%
(41)%
(7)%
(28)%
1 Our share of Inkai production was 1.3 million pounds (amended on Feb 13, 2020; previously 0.9 million pounds) for Q4, 2019. Due to equity accounting, our
share of production will be shown as a purchase at the time of delivery. JV Inkai purchases will fluctuate during the quarters and timing of purchases will not match
production. During the quarter, we purchased 1.4 million pounds at a purchase price per pound of $32.18 ($24.40 (US)).
52 CAMECO CORPORATION
The average cash cost of production was 15% higher for the quarter than in the comparable period in 2018. While McArthur
River and Key Lake are shut down, our annual cash cost of production is expected to reflect the estimated life-of-mine
operating cost, between $15 and $16 per pound, of mining and milling our share of Cigar Lake mineral reserves, but it may
fluctuate from quarter-to-quarter.
The benefit of the estimated life-of-mine operating cost for Inkai’s production of between $8 and $9 per pound, is expected to
be reflected in the line item on our statement of earnings called “share of earnings from equity-accounted investee”.
Although purchased pounds are transacted in US dollars, we account for the purchases in Canadian dollars. In the fourth
quarter, the average cash cost of purchased material was $34.17 (Cdn) per pound, or $25.87 (US) per pound in US dollar
terms, compared to $38.13 (Cdn) per pound, or $29.08 (US) per pound in the fourth quarter of 2018.
Cash cost per pound, non-cash cost per pound and total cost per pound for produced and purchased uranium presented in the
above table are non-IFRS measures. These measures do not have a standardized meaning or a consistent basis of
calculation under IFRS. We use these measures in our assessment of the performance of our uranium business. We believe
that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate
our performance and ability to generate cash flow.
These measures are non-standard supplemental information and should not be considered in isolation or as a substitute for
measures of performance prepared according to accounting standards. These measures are not necessarily indicative of
operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures
differently, so you may not be able to make a direct comparison to similar measures presented by other companies.
To facilitate a better understanding of these measures, the following table presents a reconciliation of these measures to our
unit cost of sales for the fourth quarters of 2019 and 2018.
CASH AND TOTAL COST PER POUND RECONCILIATION
($ MILLIONS)
Cost of product sold
Add / (subtract)
Royalties
Other selling costs
Care and maintenance and severance costs
Change in inventories
Cash operating costs (a)
Add / (subtract)
Depreciation and amortization
Care and maintenance costs
Change in inventories
Total operating costs (b)
Uranium produced & purchased (million lbs) (c)
Cash costs per pound (a ÷ c)
Total costs per pound (b ÷ c)
THREE MONTHS ENDED
DECEMBER 31
2019
442.8
(14.3)
(4.4)
(29.7)
(201.0)
193.4
87.4
(11.5)
(33.9)
235.4
7.0
27.63
33.62
2018
409.2
(2.6)
(4.4)
(38.6)
(49.5)
314.1
81.1
(13.4)
(31.5)
350.3
9.7
32.38
36.11
MANAGEMENT’S DISCUSSION AND ANALYSIS 53
Fuel services
(includes results for UF6, UO2, UO3 and fuel fabrication)
HIGHLIGHTS
Production volume (million kgU)
Sales volume (million kgU)
Average realized price
Average unit cost of sales (including D&A)
Revenue ($ millions)
Gross profit ($ millions)
Gross profit (%)
($Cdn/kgU)
($Cdn/kgU)
THREE MONTHS ENDED
DECEMBER 31
2019
4.0
6.2
24.61
17.11
152
47
31
2018
3.5
5.1
23.56
18.76
120
24
20
CHANGE
14%
22%
4%
(9)%
27%
96%
55%
Total revenue increased by 27% due to a 22% increase in sales volumes and a 4% increase in average realized price. The
increase in average realized price was due to higher realized prices for all product lines.
Total cost of sales (including D&A) increased by 12% to $106 million compared to the fourth quarter of 2018 due to the 22%
increase in sales volumes partially offset by a decrease of 9% in the average unit cost of sales, primarily as a result lower
costs for UF6 due to higher production rates.
The net effect was a $23 million increase in gross profit.
54 CAMECO CORPORATION
Operations and projects
This section of our MD&A is an overview of the mining properties we operate or have an interest in, our curtailed
operations and our projects, what we accomplished this year, our plans for the future and how we manage risk.
56 MANAGING THE RISKS
59 URANIUM – PRODUCTION OVERVIEW
59 ............... PRODUCTION OUTLOOK
60 URANIUM – TIER-ONE OPERATIONS
60 ............... MCARTHUR RIVER MINE / KEY LAKE MILL
64 ............... CIGAR LAKE
68 ............... INKAI
71 URANIUM – TIER-TWO OPERATIONS
71 ............... RABBIT LAKE
72 ............... US ISR
73 URANIUM – ADVANCED PROJECTS
73 ............... MILLENNIUM
73 ............... YEELIRRIE
73 ............... KINTYRE
74 URANIUM – EXPLORATION AND CORPORATE DEVELOPMENT
75 FUEL SERVICES
75 ............... BLIND RIVER REFINERY
76 ............... PORT HOPE CONVERSION SERVICES
76 ............... CAMECO FUEL MANUFACTURING INC. (CFM)
MANAGEMENT’S DISCUSSION AND ANALYSIS 55
Managing the risks
The nature of our operations means we face many potential risks and hazards that could have a significant impact on our
business. Our risk policy and program involves a broad, systematic approach to identifying, assessing, reporting and
managing the significant risks we face in our business and operations, including ESG risks. The policy establishes clear
accountabilities for enterprise risk management. We use a common risk matrix throughout the company and consider any risk
that has the potential to significantly affect our ability to achieve our corporate objectives or strategic plan as an enterprise risk.
However, there is no assurance we will be successful in preventing the harm any of these risks and hazards could cause. We
recommend you read our most recent management proxy circular for more information about our risk oversight.
Below we list the risks that generally apply to all of our operations and advanced projects. We also talk about how we manage
specific risks in each operation or project update. These risks could have a material impact on our business in the near term.
We recommend you also review our annual information form, which includes a discussion of other material risks that could
have an impact on our business.
Regulatory risks
A significant part of our economic value depends on our ability to:
obtain and renew the licences and other approvals we need to operate, to increase production at our mines and to develop
new mines. If we do not receive the regulatory approvals we need, or do not receive them at the right time, then we may
have to delay, modify or cancel a project, which could increase our costs and delay or prevent us from generating revenue
from the project. Regulatory review, including the review of environmental matters, is a long and complex process.
comply with the conditions in these licences and approvals. Our right to continue operating facilities, increase production at
our mines and develop new mines depends on our compliance with these conditions.
comply with the extensive and complex laws and regulations that govern our activities. Environmental legislation imposes
strict standards and controls on almost every aspect of our operations and projects, and is not only introducing new
requirements, but also becoming more stringent. For example:
we must complete the environmental assessment process before we can begin developing a new mine or make any
significant change to our operations
we may need regulatory approval to make changes to our operational processes, which can take a significant amount
of time because it may require an extensive review of supporting technical information. The complexity of this process
can be further compounded when regulatory approvals are required from multiple agencies.
the federal government has recently introduced a new Impact Assessment Act as well as a Canadian Navigable Waters
Act along with significant revisions to the federal Fisheries Act. This new legislation will impact the scope and timeliness
of approvals for projects and the revisions could impact existing operations.
Environment and Climate Change Canada has brought forward an amended national recovery plan for woodland
caribou that has the potential to impact economic and social development in northern Saskatchewan. Research
completed in northern Saskatchewan has resulted in a report indicating the range in which our northern Saskatchewan
operations are located, hosts a secure and self-sustaining population of woodland caribou, perhaps one of the most
secure boreal caribou populations in Canada. The population status was incorporated by Environment and Climate
Change Canada into the amended national recovery plan; however, potential habitat protection measures could still
have an impact on our Saskatchewan operations and advanced projects.
We use significant management and financial resources to manage our regulatory risks.
Environmental risks
We have the safety, health and environmental risks associated with any mining and chemical processing company. Our
uranium and fuel services segments also face unique risks associated with radiation.
56 CAMECO CORPORATION
Laws to protect the environment are becoming more stringent for members of the nuclear energy industry, including mining,
milling and processing facilities, and have inter-jurisdictional aspects (both federal and provincial/state regimes are applicable).
Once we have permanently stopped mining and processing activities at an operating site, we are required to decommission
the site to the satisfaction of the regulators. We have developed preliminary decommissioning plans for our operating sites and
use them to estimate our decommissioning costs. Regulators review and accept our preliminary decommissioning plans on a
regular basis. As the site approaches or goes into decommissioning, regulators review the detailed decommissioning plans.
This can result in further regulatory process, as well as additional requirements, costs and financial assurances.
Currently, Cameco has submitted updates to all Saskatchewan operations’ Preliminary Decommissioning Plan (PDP) and
Preliminary Decommissioning Cost Estimate (PDCE) documents in accordance with the five year timeline specified in the
regulations. Upon acceptance of the final PDP and PDCE documents by the Saskatchewan Ministry of Environment and
Canadian Nuclear Safety Commission (CNSC) staff, a formal Commission proceeding will be required for final approval of the
PDP and PDCE by the Commission. We have received the required approvals for the revised PDP and the letters of credit
have been updated for McArthur River. For Cigar Lake and Key Lake, the revised PDP has been reviewed and accepted by
staff and we are awaiting Commission proceedings to formally approve them. The revised PDP for Rabbit Lake is still under
review by CNSC staff.
At the end of 2019, our estimate of total decommissioning and reclamation costs was $1.13 billion. This is the undiscounted
value of the obligation and is based on our current operations. We had accounting provisions of $1.05 billion at the end of
2019 (the present value of the $1.13 billion). Regulatory approval is required prior to beginning decommissioning. Since we
expect to incur most of these expenditures at the end of the useful lives of the operations they relate to, and none of our
assets have approval for decommissioning, our expected costs for decommissioning and reclamation for the next five years
are not material.
We provide financial assurances for decommissioning and reclamation such as letters of credit or surety bonds to regulatory
authorities, as required. We had a total of about $994 million in financial assurances supporting our reclamation liabilities at
the end of 2019. All of our North American operations have financial assurances in place in connection with our preliminary
plans for decommissioning of the sites.
Some of the sites we own or operate have been under ongoing investigation and/or remediation and planning as a result of
historic soil and groundwater conditions.
We use significant management and financial resources to manage our environmental risks.
We manage environmental risks through our safety, health, environment and quality (SHEQ) management system. Our chief
executive officer is responsible for ensuring that our SHEQ management system is implemented. Our board’s safety, health
and environment committee also oversees how we manage our environmental risks.
In 2019, we invested:
$73 million in environmental protection, monitoring and assessment programs, approximately 4% more than in 2018
$18 million in health and safety programs, or 10% less than 2018
The increase in environmental expenditures in 2019 was largely due to expenditures related to the Vision in Motion projects,
but also some spending on projects involving tailings and waste rock in northern Saskatchewan. The decrease in health and
safety related expenditures were due to overall cost reductions across Cameco operations.
Spending on environmental and health and safety programs is expected to level off in 2020 as a result of the continued
impacts of the decisions to transition Rabbit Lake into care and maintenance and to curtail production at the US operations, as
well as the continued shutdown of the McArthur River and Key Lake operations for an indeterminate duration.
MANAGEMENT’S DISCUSSION AND ANALYSIS 57
Operational risks
Other operational risks and hazards include:
environmental damage
industrial and transportation accidents
labour shortages, disputes or strikes
cost increases for labour, contracted or purchased
fires
blockades or other acts of social or political activism
natural phenomena, such as inclement weather
conditions, floods and earthquakes
materials, supplies and services
unusual, unexpected or adverse mining or geological
shortages of required materials, supplies and
conditions
equipment
transportation and delivery disruptions
interruptions in the supply of electricity, water, and other
utilities
equipment failures
non-compliance with laws and licences
catastrophic accidents
underground floods
ground movement or cave-ins
tailings pipeline or dam failures
technological failure of mining methods
unanticipated consequences of our cost reduction
strategies
We have insurance to cover some of these risks and hazards, but not all of them, and not to the full amount of losses or
liabilities that could potentially arise.
58 CAMECO CORPORATION
Uranium – production overview
Production in our uranium segment in the fourth quarter was 2.7 million pounds, 13% higher compared to the same period in
2018, while production for the year was 9.0 million pounds, 2% lower than in 2018. See Uranium – Tier-one operations starting
on page 60 for more information.
Uranium production
CAMECO SHARE
(MILLION LBS)
McArthur River/Key Lake
Cigar Lake
US ISR
Total
THREE MONTHS ENDED
DECEMBER 31
YEAR ENDED
DECEMBER 31
2019
-
2.7
-
2.7
2018
-
2.4
-
2.4
2019
-
9.0
-
9.0
2018
2019 PLAN
2020 PLAN
0.1
9.0
0.1
9.2
-
9.0
-
9.0
- 1
9.0
- 1
9.0
1 The McArthur River/Key Lake and Rabbit Lake operations are in a safe and sustainable state of care and maintenance, and we are no longer developing new
wellfields at Crow Butte and Smith Ranch-Highland. Please see Uranium – Tier-one operations beginning on page 60 and Uranium – Tier-two operations
beginning on page 71 for more information.
We expect total production from Inkai to be 8.3 million pounds in 2020 on a 100% basis. Due to equity accounting, our share
of production is shown as a purchase.
Production Outlook
We remain focused on taking advantage of the long-term growth we see coming in our industry, while maintaining the ability to
respond to market conditions as they evolve. Our strategy is to focus on our tier-one assets and profitably produce at a pace
aligned with market signals in order to preserve the value of those assets and increase long-term shareholder value, and to do
that with an emphasis on safety, people and the environment.
Given today’s weak market conditions and to mitigate risk, we plan to:
ensure we continue to operate safely
evaluate the optimal mix of production, inventory and purchases in order to retain the flexibility to deliver long-term value
focus on technology and its applications to improve efficiency, reduce costs and improve operational effectiveness across
our operations, including the use of digital and automation technologies
MANAGEMENT’S DISCUSSION AND ANALYSIS 59
Uranium – Tier-one operations
McArthur River mine / Key Lake mill
2019 Production (our share)
0.0M lbs
2020 Production Outlook (our share)
0.0M lbs
Estimated Reserves (our share)
273.6M lbs
Estimated Mine Life1
23 years
1Estimated mine life based on the production schedule presented in the National Instrument 43-101 Technical Report dated March 29, 2019.
McArthur River is the world’s largest, high-grade uranium mine, and Key Lake is the world’s largest uranium mill.
Ore grades at the McArthur River mine are 100 times the world average, which means it can produce more than 18 million
pounds per year by mining only 300 to 400 tonnes of ore per day. We are the operator of both the mine and mill.
In 2018, a decision was made to suspend production and place the mine and mill in care and maintenance, which will continue
for an indeterminate duration.
McArthur River is considered a material uranium property for us. There is a technical report dated March 29, 2019 (effective
December 31, 2018) that can be downloaded from SEDAR (sedar.com) or from EDGAR (sec.gov).
Location
Ownership
Mine type
Mining methods
End product
Certification
Estimated reserves
Estimated resources
Licensed capacity
Licence term
Saskatchewan, Canada
McArthur River – 69.805%
Key Lake – 83.33%
Underground
Primary: blasthole stoping
Secondary: raiseboring
Uranium concentrate
ISO 14001 certified
273.6 million pounds (proven and probable), average grade U3O8: 6.91%
6.7 million pounds (measured and indicated), average grade U3O8: 2.36%
1.8 million pounds (inferred), average grade U3O8: 2.85%
Mine and mill: 25.0 million pounds per year
Through October, 2023
Total packaged production:
2000 to 2019 325.4 million pounds (McArthur River/Key Lake) (100% basis)
1983 to 2002 209.8 million pounds (Key Lake) (100% basis)
2019 production
0 million pounds (0.0 million pounds on 100% basis)
2020 production outlook
0.0 million pounds (0.0 million pounds on 100% basis)
Estimated decommissioning cost1
$42 million – McArthur River (100% basis)
$223 million – Key Lake (100% basis)
All values shown, including reserves and resources, represent our share only, unless indicated.
1 The Key Lake estimate is currently under regulatory review.
60 CAMECO CORPORATION
BACKGROUND
Mine description
The McArthur River reported mineral reserves are contained within seven zones: Zones 1, 2, 3, 4, 4 South, A and B. Prior to
care and maintenance, there were two active mining zones and one where development was significantly advanced.
Zone 2 has been actively mined since production began in 1999. The ore zone was initially divided into three freeze panels. As
the freeze wall was expanded, the inner connecting freeze walls were decommissioned in order to recover the inaccessible
uranium around the active freeze pipes. Mining of zone 2 is almost complete. About 4.8 million pound of mineral reserves
remain and we expect to recover them using a combination of raisebore and blasthole stope mining.
Zone 4 has been actively mined since 2010. The zone was divided into four freeze panels, and like in zone 2, as the freeze
wall was expanded, the inner connecting freeze walls were decommissioned. Zone 4 has 117.5 million pounds of mineral
reserves secured behind freeze walls and it will be the main source of production when mine production restarts. Raisebore
mining and blasthole stoping will be used to recover the mineral reserves.
Zone 1 is the next planned mine area to be brought into production. Freezehole drilling was 90% complete and brine
distribution construction was approximately 10% complete when work was suspended in 2018 as part of the production
suspension. Work remaining before production can begin includes completion of the freezehole drilling, brine distribution
construction, ground freezing and drill and extraction chamber development. Once complete, an additional 46.6 million pounds
of mineral reserves will be secured behind freeze walls. Blasthole stope mining is currently planned as the main extraction
method.
We have successfully extracted over 325 million pounds (100% basis) since we began mining in 1999.
Mining methods and techniques
The McArthur River deposit presents unique challenges that are not typical of traditional hard or soft rock mines. These
challenges are the result of mining in or near high pressure ground water in challenging ground conditions with significant
radiation concerns due to the high-grade uranium ore. Therefore, mine designs and mining methods are selected based on
their ability to mitigate hydrological, radiological and geotechnical risks.
There are three approved mining methods at McArthur River: raisebore mining, blasthole stope mining and boxhole mining.
However, only raisebore and blasthole stope mining remain in use. In addition, we use ground freezing to mine the McArthur
River deposit.
Ground freezing
All the mineralized areas discovered to date at McArthur River are in, or partially in, water-bearing ground with significant
pressure at mining depths. This high pressure water source is isolated from active development and production areas in order
to reduce the inherent risk of an inflow. To date, McArthur River has relied on pressure grouting and ground freezing to
successfully mitigate the risks of the high pressure ground water.
Chilled brine is circulated through freeze holes to form an impermeable freeze barrier around the area being mined. This
prevents water from entering the mine, and helps stabilize weak rock formations.
Blasthole stoping
Our use of blasthole stoping began in 2011 and has expanded; the majority of ore extraction is now carried out using this
method. It is planned in areas where blastholes can be accurately drilled and small stable stopes excavated without
jeopardizing the freeze wall integrity. The use of this method has allowed the site to improve operating costs by increasing
overall extraction efficiency by reducing underground development, concrete consumption, mineralized waste generation and
improving extraction cycle time.
Raisebore mining
Raisebore mining is an innovative non-entry approach that we adapted to meet the unique challenges at McArthur River, and it
has been used since mining began in 1999. This method is favourable for mining the weaker rock mass areas of the deposit,
and is suitable for massive high-grade zones where there is access both above and below the ore zone.
MANAGEMENT’S DISCUSSION AND ANALYSIS 61
Initial processing
McArthur River produces two product streams which are both shipped to the Key Lake mill to produce uranium ore
concentrates. We carry out initial processing of two product streams at McArthur River: high-grade slurry and low-grade
mineralization. Both product streams are shipped to Key Lake mill to produce uranium ore concentrate.
High-grade slurry is pumped to surface and, after blending and further thickening it is transported to Key Lake in slurry trucks.
The low-grade mineralization is hoisted to surface and hauled to Key Lake, where it is mixed with water, ground, thickened
and blended with the high-grade slurry to a nominal 5% U3O8 mill feed grade. It is then processed into uranium ore
concentrates and packaged.
Tailings capacity
Based on the current licence conditions, tailings capacity at Key Lake is sufficient to mill all the known McArthur River mineral
reserves and resources, should they be converted to reserves, with additional capacity to toll mill ore from other regional
deposits.
Licensed annual production capacity
The McArthur River mine and Key Lake mill are both licensed to produce up to 25 million pounds (100% basis) per year. The
current production capacity of the Key Lake mill is sufficient to process McArthur River mineral reserves at a production rate of
18 million pounds U3O8 per year.
2019 UPDATE
Production suspension
The facilities remained in a state of safe and sustainable care and maintenance throughout 2019.
Approximately 175 employees remain at the McArthur River and Key Lake sites. Care and maintenance activities include mine
dewatering, water treatment, freeze wall maintenance, and environmental monitoring. In addition, preservation maintenance
and monitoring of the critical facilities continues. Our objective is that the McArthur River and Key Lake operations are
available to return to production in a timely manner once a decision is made to end the production suspension.
Exploration
As a result of the production suspension, there was no exploration activity in 2019.
Labour relations
We reached a new collective agreement with unionized employees at our McArthur River/Key Lake operations. The new
agreement expires on December 31, 2022.
PLANNING FOR THE FUTURE
Production
Due to continued uranium price weakness, we have suspended production for an indeterminate duration. As a result of the
suspension, and the time required to restart the mine and mill, we do not expect the operation to produce any uranium in 2020.
Our share of the cash and non-cash costs to maintain both operations during the suspension is expected to range between $8
million and $10 million per month. The increase in care and maintenance costs compared to 2019 is related to planned
expenditures to fully assess our operating processes. See Innovation below.
Expansion potential
Once the market signals that new supply is needed and a decision is made to restart production, we will undertake the work
necessary to optimize the capacity of both the McArthur River mine and Key Lake mill, up to a maximum of 25 million pounds
per year (100% basis), the annual production licence limit. We expect that this paced approach will allow us to extract
maximum value from the operation as the market transitions.
62 CAMECO CORPORATION
Innovation
While McArthur River/Key Lake is in a state of care and maintenance, we are taking the opportunity to fully assess our
operating processes with the objective of enhancing the efficiency of these operations. Our goal is to streamline our processes
and leverage digital and automation technologies to significantly reduce our future operating costs and increase operational
flexibility when the time comes to restart. Any opportunities will be rigorously assessed before an investment decision is made.
MANAGING OUR RISKS
Production at McArthur River/Key Lake poses many challenges. These challenges include control of groundwater, weak rock
formations, radiation protection, water inflow, mine area transitioning, regulatory approvals, surface and underground fires and
other mining related challenges. Operational experience gained since the start of production has resulted in a significant
reduction in risk.
Mine and mill restart
The operational changes we have made, including the suspension of production in 2018 for an indeterminate duration and the
accompanying workforce reduction, carry with them the risks of a delay in restarting operations and subsequent production
disruption.
There is increased uncertainty regarding the timing of a successful restart of the operations and the associated costs the
longer the mine and mill are on care and maintenance.
Water inflow risk
Water inflows pose a significant risk to mine production. In 2003, a water inflow resulted in a three-month suspension of
production. We also had a small water inflow in 2008 that did not impact production, but did cause significant development
delays.
The consequences of another water inflow at McArthur River would depend on its magnitude, location and timing, but could
include a significant interruption or reduction in production, a material increase in costs or a loss of mineral reserves.
We take significant steps and precautions to reduce the risk of inflows, but there is no guarantee that these will be successful.
In the event that an inflow does occur, we believe we have sufficient pumping, water treatment and surface storage capacity to
handle the estimated maximum sustained inflow.
We also manage the risks listed on pages 56 to 58.
MANAGEMENT’S DISCUSSION AND ANALYSIS 63
Uranium – Tier-one operations
Cigar Lake
2019 Production (our share)
9.0M lbs
2020 Production Outlook (our share)
9.0M lbs
Estimated Reserves (our share)
86.3M lbs
Estimated Mine Life
2029
Cigar Lake is the world’s highest grade uranium mine, with grades that are 100 times the world average. We are a 50% owner
and the mine operator. Cigar Lake uranium is milled at Orano’s (previously AREVA) McClean Lake mill.
Cigar Lake is considered a material uranium property for us. There is a technical report dated March 29, 2016 (effective
December 31, 2015) that can be downloaded from SEDAR (sedar.com) or from EDGAR (sec.gov).
Location
Ownership
Mine type
Mining method
End product
Certification
Estimated reserves
Estimated resources
Licensed capacity
Licence term
Saskatchewan, Canada
50.025%
Underground
Jet boring system
Uranium concentrate
ISO 14001 certified
86.3 million pounds (proven and probable), average grade U3O8: 14.69%
50.8 million pounds (measured and indicated), average grade U3O8: 14.44%
11.9 million pounds (inferred), average grade U3O8: 5.92%
18.0 million pounds per year (our share 9.0 million pounds per year)
Through June, 2021
Total packaged production: 2014 to 2019
82.9 million pounds (100% basis)
2019 production
9.0 million pounds (18.0 million pounds on 100% basis)
2020 production outlook
9.0 million pounds (18.0 million pounds on 100% basis)
Estimated decommissioning cost1
All values shown, including reserves and resources, represent our share only, unless otherwise indicated.
1 This updated estimate is currently under regulatory review.
$62 million (100% basis)
BACKGROUND
Development
We began developing the Cigar Lake underground mine in 2005, but development was delayed due to water inflows in 2006
and 2008. The underground workings were successfully remediated and secured in 2011 and, in October 2014 the McClean
Lake mill produced the first uranium concentrate from ore mined at the Cigar Lake operation. Commercial production was
declared in May 2015.
64 CAMECO CORPORATION
Mine description
Cigar Lake’s geological setting is similar to McArthur River’s: the permeable sandstone, which overlays the deposit and
basement rocks, contains large volumes of water at significant pressure. However, unlike McArthur River, the Cigar Lake
deposit has the shape of a flat- to cigar-shaped lens. As a result of these challenging geological conditions, we are unable to
utilize traditional mining methods that require access above the ore, necessitating the development of a non-entry mining
method specifically adapted for this deposit: the Jet Boring System (JBS).
Mine development is carried out uniquely in the basement rocks below the ore horizon. New mine development is required
throughout the mine life to gain access to the ore above.
Mining method
Bulk ground freezing
The sandstone that overlays the deposit and basement rocks is water-bearing, and to prevent water from entering the mine,
help stabilize weak rock formations, and meet our production schedule, we freeze the ground from surface. The ore zone and
surrounding ground in the area to be mined must meet specific ground freezing requirements before we begin jet boring.
Jet boring system (JBS) mining
After many years of test mining, we selected jet boring, a non-entry mining method, which we have developed and adapted
specifically for this deposit. This method involves:
drilling a pilot hole into the frozen orebody, inserting a high pressure water jet and cutting a cavity out of the frozen ore
collecting the ore and water mixture (slurry) from the cavity and pumping it to storage (sump storage), allowing it to settle
using a clamshell, transporting the ore from sump storage to an underground grinding and processing circuit
once mining is complete, filling each cavity in the orebody with concrete
starting the process again with the next cavity
We have divided the orebody into production panels and at least three production panels need to be frozen at one time to
achieve the full annual production rate of 18 million pounds. One JBS machine is located below each frozen panel. Three JBS
machines are currently in operation. Two machines actively mine at any given time while the third is moving, setting up, or
undergoing maintenance.
Initial processing
We carry out initial processing of the extracted ore at Cigar Lake:
the underground circuit grinds the ore and mixes it with water to form a slurry
the slurry is pumped 500 metres to the surface and stored in one of two ore slurry holding tanks
it is blended and thickened, removing excess water
the final slurry, at an average grade of approximately 14% U3O8, is pumped into transport truck containers and shipped to
McClean Lake mill on a 69 kilometre all-weather road
MANAGEMENT’S DISCUSSION AND ANALYSIS 65
Water from this process, including water from underground operations, is treated on the surface. Any excess treated water is
released into the environment.
Milling
All of Cigar Lake’s ore slurry is being processed at the McClean Lake mill, operated by Orano. Given the McClean Lake mill’s
capacity, it is able to:
operate at Cigar Lake’s targeted annual production level of 18.0 million pounds U3O8
process and package all of Cigar Lake’s current mineral reserves
Licensing annual production capacity
The Cigar Lake mine is licensed to produce up to 18 million pounds (100% basis) per year. Orano’s McClean Lake mill is
licensed to produce 24 million pounds annually.
2019 UPDATE
Production
Total packaged production from Cigar Lake was 18.0 million pounds U3O8; our share was 9.0 million pounds, achieving our
forecast.
During the year, we:
completed and commissioned the freeze plant expansion project
implemented an extended summer shutdown, during which maintenance activities were completed as well as a capital
upgrade to the mine exhaust fans
executed production activities from three production tunnels in the eastern part of the ore body
extended our surface brine distribution infrastructure and expanded our ground freezing program ensuring continued frozen
ore inventory growth in alignment with our long-term production plans
Underground development
In alignment with our production plans, underground mine development restarted in 2019. Development included focus on two
new production panels in the eastern portion of the ore body along with initial access development towards the western
portion. Development in these specific areas will continue in 2020 to ensure new production panels are available in alignment
with long-term production plans.
Labour relations
Orano reached a new three-year collective agreement with unionized employees at the McClean Lake mill. The previous
contract expired on May 31, 2019.
PLANNING FOR THE FUTURE
Production
In 2020, we expect to produce 18 million packaged pounds at Cigar Lake; our share is 9.0 million pounds.
Our 2020 production plan for the Cigar Lake mine includes an extended shutdown during the third quarter. The shut-down will
consist of a four-week production outage, preceded by a two-week maintenance period with mine start-up planned before the
end of the third quarter.
66 CAMECO CORPORATION
In 2020, we expect to:
continue surface freeze drilling and complete construction and commissioning of the freeze distribution infrastructure
expansion in support of future production
continue underground mine development and complete three new production tunnels as well as expand ventilation and
access drifts in alignment with the long-term mine plan
expand underground piping and infrastructure towards new production panels required to sustain production
MANAGING OUR RISKS
Cigar Lake is a challenging deposit to develop and mine. These challenges include control of groundwater, weak rock
formations, radiation protection, chemical ore characteristics, performance of the water treatment system, water inflow,
regulatory approvals, surface and underground fires and other mining-related challenges. To reduce this risk, we are applying
our operational experience and the lessons we have learned about water inflows at McArthur River and Cigar Lake.
Operational changes
The operational changes we have made, including the extended summer shutdown, the workforce reduction, changes to the
shift rotation schedule, and changes to the commuter flight services at the site, which are intended to achieve cost savings and
improve efficiency, carry with them increased risk of production disruption.
Transition to new mining areas
In order to successfully achieve the planned production schedule, we must continue to successfully transition into new mining
areas, which includes mine development and investment in critical support infrastructure.
Ground freezing
To manage our risks and meet our production schedule, the areas being mined must meet specific ground freezing
requirements before we begin jet boring. We have identified greater variation of the freeze rates of different geological
formations encountered in the mine, based on information obtained through surface freeze drilling. As a mitigation measure,
we have increased the site freeze capacity to facilitate the mining of ore cavities as planned.
Environmental performance
The Cigar Lake orebody contains elements of concern with respect to the water quality and the receiving environment. The
distribution of elements such as arsenic, molybdenum, selenium and others is non-uniform throughout the ore body, and this
can present challenges in attaining and maintaining the required effluent concentrations.
There have been ongoing efforts to optimize the current water treatment process and water handling systems to ensure
acceptable environmental performance, which is expected to avoid the need for additional capital upgrades and potential
deferral of production.
Water inflow risk
A significant risk to development and production is from water inflows. The 2006 and 2008 water inflows were significant
setbacks.
The consequences of another water inflow at Cigar Lake would depend on its magnitude, location and timing, but could
include a significant delay or disruption in Cigar Lake production, a material increase in costs or a loss of mineral reserves.
We take the following steps to reduce the risk of inflows, but there is no guarantee that these will be successful:
Bulk freezing: Two of the primary challenges in mining the deposit are control of groundwater and ground support. Bulk
freezing reduces but does not completely eliminate the risk of water inflows.
Mine development: We plan for our mine development to take place away from known groundwater sources whenever
possible. In addition, we assess all planned mine development for relative risk and apply extensive additional technical and
operating controls for all higher risk development.
Pumping capacity and treatment limits: We have pumping capacity to meet our standard for this operation of at least one
and a half times the estimated maximum inflow.
We believe we have sufficient pumping, water treatment and surface storage capacity to handle the estimated maximum
inflow.
We also manage the risks listed on pages 56 to 58.
MANAGEMENT’S DISCUSSION AND ANALYSIS 67
Uranium – Tier-one operations
Inkai
2019 Production (100% basis)
8.3 M lbs
2020 Production Outlook (100% basis)
8.3 M lbs
Estimated Reserves (our share)
100.7M lbs
Estimated Mine Life
2045 (based on licence term)
Inkai is a very significant uranium deposit, located in Kazakhstan. The operator is JV Inkai limited liability partnership, which
we jointly own (40%) with Kazatomprom (60%)1.
Inkai is considered a material uranium property for us. There is a technical report dated January 25, 2018 (effective January 1,
2018) that can be downloaded from SEDAR (sedar.com) or from EDGAR (sec.gov).
Location
Ownership
Mine type
End product
Certifications
Estimated reserves
Estimated resources
South Kazakhstan
40%1
In situ recovery (ISR)
Uranium concentrate
BSI OHSAS 18001
ISO 14001 certified
100.7 million pounds (proven and probable), average grade U3O8: 0.03%
12.8 million pounds (measured and indicated), average grade U3O8: 0.03%
30 million pounds (inferred), average grade U3O8: 0.03%
Licensed capacity (wellfields)
10.4 million pounds per year (our share 4.2 million pounds per year)1
Licence term
Through July 2045
Total packaged production: 2009 to 2019
57.5 million pounds (100% basis)
2019 production
2020 production outlook
8.3 million pounds (100% basis)
8.3 million pounds (100% basis)1
Estimated decommissioning cost (100% basis)
All values shown, including reserves and resources, represent our share only, unless indicated.
1 Effective January 1, 2018, our ownership interest in the joint venture dropped to 40% and we now equity account for our investment. Due to the transition to
equity accounting, our share of production is shown as a purchase.
$11 million (US) (100% basis) (this estimate is currently under review)
BACKGROUND
Mine description
The Inkai uranium deposit is a roll-front type orebody within permeable sandstones. The more porous and permeable units
host several stacked and relatively continuous, sinuous “roll-fronts” of low-grade uranium forming a regional system.
Superimposed over this regional system are several uranium projects and active mines.
Inkai’s mineralization ranges in depths from about 260 metres to 530 metres. The deposit has a surface projection of about 40
kilometres in length, and the width ranges from 40 to 1600 metres. The deposit has hydrogeological and mineralization
conditions favourable for use of in-situ recovery (ISR) technology.
68 CAMECO CORPORATION
Mining and milling method
JV Inkai uses conventional, well-established, and very efficient ISR technology, developed after extensive test work and
operational experience. The process involves five major steps:
leach the uranium in-situ by circulating an acid-based solution through the host formation
recover it from solution with ion exchange resin (takes place at both main and satellite processing plants)
precipitate the uranium with hydrogen peroxide
thicken, dewater, and dry it
package the uranium peroxide product in drums
Production
Total 2019 production from Inkai was 8.3 million pounds (100% basis), an increase from 2018. While the production volume
was in accordance with Kazatomprom’s planned 20% decrease to the licensed production profile under the terms of the
subsoil use contract, the subsoil use contract called for higher production in 2019 compared to 2018. The subsoil use law in
Kazakhstan allows producers to produce within 20% (above or below) of their licensed capacity in a year.
Project funding and cash distribution
We had an outstanding loan for Inkai’s work on block 3 prior to the restructuring. Under the restructuring agreement, the
partners agreed that JV Inkai would distribute excess cash, after working capital requirements, as priority repayment of this
loan. In 2019, principal and interest payments of $92.7 million (US) were received, which repaid the loan in full. As a result,
excess cash, after working capital requirements, will be distributed to the partners as dividends. Our share of dividends follows
our production purchase entitlements as described below.
JV Inkai Restructuring Agreement
In 2016, we signed an agreement with our partner Kazatomprom and JV Inkai to restructure and enhance JV Inkai. The
restructuring closed in December 2017 and took effect January 1, 2018. This restructuring was subject to obtaining all required
government approvals including an amendment to JV Inkai’s Resource Use Contract, which were obtained. The restructuring
consisted of the following:
JV Inkai has the right to produce 10.4 million pounds of U3O8 per year, an increase from the prior licensed annual
production of 5.2 million pounds
JV Inkai has the right to produce until 2045 (previously, the licence terms, based on the boundaries prior to the
restructuring, were to 2024 and 2030)
our ownership interest in JV Inkai is 40% and Kazatomprom’s share is 60%. However, during production rampup, we are
entitled to purchase 57.5% of the first 5.2 million pounds of annual production, and, as annual production increases over 5.2
million pounds, we are entitled to purchase 22.5% of such incremental production, to the maximum annual share of 4.2
million pounds. Once the rampup to 10.4 million pounds annually is complete, we will be entitled to purchase 40% of such
annual production, matching our ownership interest.
a governance framework that provides protection for us as a minority owner
the boundaries of the mining area match the agreed production profile for JV Inkai to 2045
priority payment of the loan that our subsidiary made to JV Inkai to fund exploration and evaluation of the historically
defined block 3 area
With Kazatomprom, we completed and reviewed a feasibility study for the purpose of evaluating the design, construction and
operation of a uranium refinery in Kazakhstan. In accordance with the agreement, a decision was made not to proceed with
construction of the uranium refinery as contemplated in the feasibility study. We subsequently signed an agreement to licence
our proprietary UF6 conversion technology to Kazatomprom, which will allow Kazatomprom to examine the feasibility of
constructing and operating its own UF6 conversion facility in Kazakhstan.
Our 2020 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 are included in “income from equity-
accounted investees” on our consolidated statement of earnings. Our share of production is 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. Please see Planning for the future below for more details.
MANAGEMENT’S DISCUSSION AND ANALYSIS 69
PLANNING FOR THE FUTURE
Production
We expect total production from Inkai to be 8.3 million pounds (100% basis) in 2020. Due to Kazatomprom’s announced plans
to maintain its aggregate production reduction of 20%, an adjustment to the restructuring agreement, as described above, has
been made. As a result of this adjustment, we are entitled to purchase 59.4% of JV Inkai’s planned production in 2020 which
equates to 4.9 million pounds. Our share of the profits earned by JV Inkai on the sale of its production will be included in
“income from equity-accounted investees” on our consolidated statement of earnings.
MANAGING OUR RISKS
Political risk
Kazakhstan declared itself independent in 1991 after the dissolution of the Soviet Union. Our investment in JV Inkai is subject
to the greater risks associated with doing business in developing countries, which have significant potential for social,
economic, political, legal and fiscal instability. Kazakh laws and regulations are complex and still developing and their
application can be difficult to predict. The other owner of JV Inkai is Kazatomprom, an entity majority owned by the
government of Kazakhstan. We have entered into agreements with JV Inkai and Kazatomprom intended to mitigate political
risk. This risk includes the imposition of governmental laws or policies that could restrict or hinder JV Inkai paying us
dividends, or selling us our share of JV Inkai production, or that impose discriminatory taxes or currency controls on these
transactions. The restructuring of JV Inkai, which took effect January 1, 2018, was undertaken with the objective to better align
the interests of Cameco and Kazatomprom and includes a governance framework that provides for protection for us as a
minority owner of JV Inkai. We believe the political risk related to our investment in JV Inkai is manageable.
For more details on this risk, please our most recent annual information form under the heading political risks.
JV Inkai manages risks listed on pages 56 to 58.
70 CAMECO CORPORATION
Uranium – Tier-two operations
Rabbit Lake
Located in Saskatchewan, Canada, our 100% owned Rabbit Lake operation opened in 1975, and has the second largest
uranium mill in the world. Due to market conditions, we suspended production at Rabbit Lake during the second quarter of
2016.
Location
Ownership
End product
ISO certification
Mine type
Estimated reserves
Estimated resources
Mining methods
Licensed capacity
Licence term
Total production: 1975 to 2019
2019 production
2020 production outlook
Estimated decommissioning cost1
1 This updated estimate is currently under regulatory review.
PRODUCTION SUSPENSION
Saskatchewan, Canada
100%
Uranium concentrates
ISO 14001 certified
Underground
-
38.6 million pounds (indicated), average grade U3O8: 0.95%
33.7 million pounds (inferred), average grade U3O8: 0.62%
Vertical blasthole stoping
Mill: maximum 16.9 million pounds per year; currently 11 million
Through October, 2023
202.2 million pounds
0 million pounds
0 million pounds
$213 million
The facilities remained in a state of safe and sustainable care and maintenance throughout 2019.
While in standby, we continue to evaluate our options in order to minimize care and maintenance costs. We expect care and
maintenance costs to range between $30 million and $35 million annually.
MANAGING OUR RISKS
We also manage the risks listed on pages 56 to 58.
MANAGEMENT’S DISCUSSION AND ANALYSIS 71
US ISR Operations
Located in Nebraska and Wyoming in the US, the Crow Butte and Smith Ranch-Highland (including the North Butte satellite)
operations began production in 1991 and 1975. Each operation has its own processing facility. Due to market conditions, we
curtailed production and deferred all wellfield development at these operations during the second quarter of 2016.
Ownership
End product
ISO certification
Estimated reserves
Smith Ranch-Highland:
North Butte-Brown Ranch:
Crow Butte:
Estimated resources
Smith Ranch-Highland:
100%
Uranium concentrates
ISO 14001 certified
-
-
-
24.9 million pounds (measured and indicated), average grade U3O8: 0.06%
7.7 million pounds (inferred), average grade U3O8: 0.05%
North Butte-Brown Ranch: 9.5 million pounds (measured and indicated), average grade U3O8: 0.07%
Crow Butte:
0.4 million pounds (inferred), average grade U3O8: 0.07%
13.9 million pounds (measured and indicated), average grade U3O8: 0.25%
1.8 million pounds (inferred), average grade U3O8: 0.16%
In situ recovery (ISR)
Smith Ranch-Highland:1
Crow Butte:
Wellfields: 3 million pounds per year; processing plants: 5.5 million pounds per year
Processing plants and wellfields: 2 million pounds per year
Mining methods
Licensed capacity
Licence term
Smith Ranch-Highland:
Through September, 2028
Crow Butte:
Through October, 2024
Total production: 2002 to 2019
2019 production
2020 production outlook
33.0 million pounds
0 million pounds
0 million pounds
Estimated decommissioning cost2
Smith Ranch-Highland: $219 million (US), including North Butte
Crow Butte: $52 million (US)
1 Including Highland mill
2This updated estimate is currently under regulatory review.
PRODUCTION CURTAILMENT
As a result of our 2016 decision, production at the US operations ceased in 2018. We expect ongoing cash and non-cash care
and maintenance costs to range between $14 million (US) and $16 million (US) for 2020.
FUTURE PRODUCTION
We do not expect any production in 2020.
IMPAIRMENT
In 2017, due to the continued weakening of the uranium market and a reduction in mineral reserves, we recorded a $184
million write down of our US assets.
MANAGING OUR RISKS
We manage the risks listed on pages 56 to 58.
72 CAMECO CORPORATION
Uranium – advanced projects
Work on our advanced projects has been scaled back and will continue at a pace aligned with market signals.
Millennium
Location
Ownership
End product
Potential mine type
Estimated resources (our share)
BACKGROUND
Saskatchewan, Canada
69.9%
Uranium concentrates
Underground
53.0 million pounds (indicated), average grade U3O8: 2.39%
20.2 million pounds (inferred), average grade U3O8: 3.19%
The Millennium deposit was discovered in 2000, and was delineated through geophysical survey and surface drilling work
between 2000 and 2013.
Yeelirrie
Location
Ownership
End product
Potential mine type
Estimated resources
BACKGROUND
Western Australia
100%
Uranium concentrates
Open pit
128.1 million pounds (measured and indicated), average grade U3O8: 0.15%
The deposit was discovered in 1972 and is a near-surface calcrete-style deposit that is amenable to open pit mining
techniques. It is one of Australia’s largest undeveloped uranium deposits.
Kintyre
Location
Ownership
End product
Potential mine type
Estimated resources
BACKGROUND
Western Australia
100%
Uranium concentrates
Open pit
53.5 million pounds (indicated), average grade U3O8: 0.62%
6.0 million pounds (inferred), average grade U3O8: 0.53%
The Kintyre deposit was discovered in 1985 and is amenable to open pit mining techniques.
2019 PROJECT UPDATES
We believe that we have some of the best undeveloped uranium projects in the world. However, in the current market
environment our primary focus is on preserving the value of our tier-one uranium assets. We continue to await a signal from
the market that additional production is needed prior to making any new development decisions.
PLANNING FOR THE FUTURE
2020 Planned activity
No work is planned at Millennium, Yeelirrie or Kintyre. Further progress towards a development decision is not expected until
market conditions improve.
MANAGING THE RISKS
For all of our advanced projects, we manage the risks listed on pages 56 to 58.
MANAGEMENT’S DISCUSSION AND ANALYSIS 73
Uranium – exploration and corporate development
Our exploration program is directed at replacing mineral reserves as they are depleted by our production, and is key to
sustaining our business. However, during this period of weak uranium prices, and as we have ample idled production capacity,
we have reduced our spending to focus only on exploration near our existing operations where we have established
infrastructure and capacity to expand. Globally, we have land with exploration and development prospects that are among the
best in the world, mainly in Canada, Australia and the US. Our land holdings total about 0.8 million hectares (1.9 million acres).
In northern Saskatchewan alone, we have direct interests in about 0.7 million hectares (1.7 million acres) of land covering
many of the most prospective exploration areas of the Athabasca Basin.
2019 UPDATE
Brownfield exploration
Brownfield exploration is uranium exploration near our existing operations, and includes expenses for advanced exploration on
the evaluation of projects where uranium mineralization is being defined.
In 2019, we spent about $4 million on brownfields and advanced uranium projects in Saskatchewan and Australia. At the US
operations we spent $1 million.
Regional exploration
We spent about $9 million on regional exploration programs (including support costs), primarily in Saskatchewan’s Athabasca
Basin.
PLANNING FOR THE FUTURE
We will continue to focus on our core projects in Saskatchewan under our long-term exploration strategy. Long-term, we look
for properties that meet our investment criteria. We may partner with other companies through strategic alliances, equity
holdings and traditional joint venture arrangements. Our leadership position and industry expertise in both exploration and
corporate social responsibility make us a partner of choice.
ACQUISITION PROGRAM
Currently, given the conditions in the uranium market, our extensive portfolio of reserves and resources and our belief that we
have ample idle production capacity, our focus is on navigating by our investment-grade rating and preserving the value of our
tier-one assets. We expect that these assets will allow us to meet rising uranium demand with increased production from our
best margin operations, and will help to mitigate risk in the event of prolonged uncertainty.
However, we continually evaluate acquisition opportunities within the nuclear fuel cycle that could add to our future supply
options, support our sales activities, and complement and enhance our business in the nuclear industry. We will invest when
an opportunity is available at the right time and the right price. We strive to pursue corporate development initiatives that will
leave us and our shareholders in a fundamentally stronger position. As such, an acquisition opportunity is never assessed in
isolation. Acquisitions must compete for investment capital with our own internal growth opportunities. They are subject to our
capital allocation process described in the strategy section, starting on page 15.
74 CAMECO CORPORATION
Fuel services
Refining, conversion and fuel manufacturing
We have about 25% of world UF6 primary conversion capacity and are a supplier of natural UO2. Our focus is on cost-
competitiveness and operational efficiency.
Our fuel services segment is strategically important because it helps support the growth of the uranium segment. Offering a
range of products and services to customers helps us broaden our business relationships and expand our uranium market
share.
Blind River Refinery
Licensed Capacity
24.0M kgU as UO3
Licence renewal in
Feb, 2022
Blind River is the world’s largest commercial uranium refinery, refining uranium concentrates from mines around the world into
UO3.
Location
Ownership
End product
ISO certification
Licensed capacity
Ontario, Canada
100%
UO3
ISO 14001 certified
18.0 million kgU as UO3 per year, approved to 24.0 million subject to the completion
of certain equipment upgrades (advancement depends on market conditions)
Licence term
Through February, 2022
Estimated decommissioning cost
$48 million
MANAGEMENT’S DISCUSSION AND ANALYSIS 75
Port Hope Conversion Services
Licensed Capacity
12.5M kgU as UF6
2.8M kgU as UO2
Licence renewal in
Feb, 2027
Port Hope is the only uranium conversion facility in Canada and a supplier of UO2 for Canadian-made CANDU reactors.
Location
Ownership
End product
ISO certification
Licensed capacity
Licence term
Ontario, Canada
100%
UF6, UO2
ISO 14001 certified
12.5 million kgU as UF6 per year
2.8 million kgU as UO2 per year
Through February, 2027
Estimated decommissioning cost
$129 million
Cameco Fuel Manufacturing Inc. (CFM)
Licensed Capacity
1.2M kgU as UO2 fuel pellets
Licence renewal in
Feb, 2022
CFM produces fuel bundles and reactor components for CANDU reactors.
Location
Ownership
End product
ISO certification
Licensed capacity
Licence term
Ontario, Canada
100%
CANDU fuel bundles and components
ISO 9001 certified, ISO 14001 certified
1.2 million kgU as UO2 fuel pellets
Through February, 2022
Estimated decommissioning cost
$21 million
76 CAMECO CORPORATION
2019 UPDATE
Production
Fuel services produced 13.3 million kgU, 27% higher than 2018. This was a result of increased demand.
Port Hope conversion facility cleanup and modernization (Vision in Motion)
Vision in Motion is a unique opportunity that demonstrates our continued commitment to a clean environment. It has been
made possible by the opening of a long-term waste management facility by the government of Canada’s Port Hope Area
Initiative project. There is a limited opportunity during the life of this project to engage in clean-up and renewal activities that
address legacy waste at the Port Hope Conversion facility inherited from historic operations. We made significant progress on
the Vision in Motion project in 2019 and will continue with the implementation work in 2020.
PLANNING FOR THE FUTURE
Production
We plan to produce between 13 million and 14 million kgU in 2020.
In addition, in conjunction with our initiative intended to provide a greater focus on technology and its applications to improve
efficiency and reduce costs across the organization, we will continue to look for opportunities to improve operational
effectiveness, including the use of digital and automation technologies.
MANAGING OUR RISKS
Labour relations
A new collective agreement with unionized employees at our conversion facility in Port Hope was reached. The new
agreement is for three years and expires on July 1, 2022.
We also manage the risks listed on pages 56 to 58.
MANAGEMENT’S DISCUSSION AND ANALYSIS 77
Mineral reserves and resources
Our mineral reserves and resources are the foundation of our company and fundamental to our success.
We have interests in a number of uranium properties. The tables in this section show the estimates of the proven and probable
mineral reserves, and measured, indicated, and inferred mineral resources at those properties. However, only three of the
properties listed in those tables are material uranium properties for us: McArthur River/Key Lake, Cigar Lake and Inkai. Mineral
reserves and resources are all reported as of December 31, 2019.
We estimate and disclose mineral reserves and resources in five categories, using the definition standards adopted by the
Canadian Institute of Mining, Metallurgy and Petroleum Council, and in accordance with National Instrument 43-101 –
Standards of Disclosure for Mineral Projects (NI 43-101), developed by the Canadian Securities Administrators. You can find
out more about these categories at www.cim.org.
About mineral resources
Mineral resources do not have to demonstrate economic viability, but have reasonable prospects for eventual economic
extraction. They fall into three categories: measured, indicated and inferred. Our reported mineral resources are exclusive of
mineral reserves.
Measured and indicated mineral resources can be estimated with sufficient confidence to allow the appropriate application
of technical, economic, marketing, legal, environmental, social and governmental factors to support evaluation of the
economic viability of the deposit.
measured resources: we can confirm both geological and grade continuity to support detailed mine planning
indicated resources: we can reasonably assume geological and grade continuity to support mine planning
Inferred mineral resources are estimated using limited geological evidence and sampling information. We do not have
enough confidence to evaluate their economic viability in a meaningful way. You should not assume that all or any part of
an inferred mineral resource will be upgraded to an indicated or measured mineral resource, but it is reasonably expected
that the majority of inferred mineral resources could be upgraded to indicated mineral resources with continued exploration.
Our share of uranium in the following mineral resource tables is based on our respective ownership interests. Mineral
resources that are not mineral reserves have no demonstrated economic viability.
About mineral reserves
Mineral reserves are the economically mineable part of measured and/or indicated mineral resources demonstrated by at least
a preliminary feasibility study. The reference point at which mineral reserves are defined is the point where the ore is delivered
to the processing plant, except for ISR operations where the reference point is where the mineralization occurs under the
existing or planned wellfield patterns. Mineral reserves fall into two categories:
proven reserves: the economically mineable part of a measured resource for which at least a preliminary feasibility study
demonstrates that, at the time of reporting, economic extraction could be reasonably justified with a high degree of
confidence
probable reserves: the economically mineable part of a measured and/or indicated resource for which at least a preliminary
feasibility study demonstrates that, at the time of reporting, economic extraction could be reasonably justified with a degree
of confidence lower than that applying to proven reserves
We use current geological models, an average uranium price of $44 (US) per pound U3O8, and current or projected operating
costs and mine plans to report our mineral reserves, allowing for dilution and mining losses. We apply our standard data
verification process for every estimate.
Our share of uranium in the mineral reserves table below is based on our respective ownership interests.
78 CAMECO CORPORATION
Changes this year
Our share of proven and probable mineral reserves decreased from 467 million pounds U3O8 at the end of 2018, to 461 million
pounds at the end of 2019. The change was primarily the result of:
production at Cigar Lake and Inkai, which removed 13 million pounds from our mineral inventory
partially offset by:
a mineral resource and reserve estimate update at Cigar Lake, which added approximately 7 million pounds of proven and
probable reserves
Our share of measured and indicated mineral resources slightly increased from 423 million pounds U3O8 at the end of 2018, to
424 million pounds at the end of 2019. Our share of inferred mineral resources is 175 million pounds U3O8, a slight decrease
of 1 million pounds from the end of 2018. The variance in mineral resources was primarily the result of the Cigar Lake mineral
resource estimate update and minor mineral resource estimation work at McArthur River.
MANAGEMENT’S DISCUSSION AND ANALYSIS 79
Qualified persons
The technical and scientific information discussed in this MD&A 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/Key
Scott Bishop, director, technical services, Cameco
Alain D. Renaud, lead geologist, technical services,
Lake, Cameco
Alain D. Renaud, lead geologist, technical services,
Cameco
Scott Bishop, director, technical services, Cameco
Cameco
INKAI
Alain D. Renaud, lead geologist, technical services,
Cameco
CIGAR LAKE
Scott Bishop, director, technical services, Cameco
Lloyd Rowson, general manager, Rabbit Lake/Cigar
Lake, Cameco
Important information about mineral reserve and resource estimates
Although we have carefully prepared and verified the mineral reserve and resource figures in this document, the figures are
estimates, based in part on forward-looking information.
Estimates are based on knowledge, mining experience, analysis of drilling results, the quality of available data and
management’s best judgment. They are, however, imprecise by nature, may change over time, and include many variables
and assumptions, including:
geological interpretation
extraction plans
commodity prices and currency exchange rates
recovery rates
operating and capital costs
There is no assurance that the indicated levels of uranium will be produced, and we may have to re-estimate our mineral
reserves based on actual production experience. Changes in the price of uranium, production costs or recovery rates could
make it unprofitable for us to operate or develop a particular site or sites for a period of time. See page 2 for information about
forward-looking information.
Please see our mineral reserves and resources section of our annual information form for the specific assumptions,
parameters and methods used for McArthur River, Inkai and Cigar Lake mineral reserve and resource estimates.
Important information for US investors
We present information about mineralization, mineral reserves and resources as required by National Instrument 43-101 –
Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators (NI 43-101), in accordance with
applicable Canadian securities laws. As a foreign private issuer filing reports with the US Securities and Exchange
Commission (SEC) under the Multijurisdictional Disclosure System, we are not required to comply with the SEC’s disclosure
requirements relating to mining properties. Investors in the United States should be aware that the disclosure requirements of
NI 43-101 are different from those under applicable SEC rules, and the information that we present concerning mineralization,
mineral reserves and resources may not be comparable to information made public by companies that comply with the SEC’s
reporting and disclosure requirements for mining companies.
80 CAMECO CORPORATION
Mineral reserves
As at December 31, 2019 (100% – only the shaded column shows our share)
PROVEN AND PROBABLE
(tonnes in thousands; pounds in millions)
PROVEN
PROBABLE
TOTAL MINERAL RESERVES
RESERVES
MINING
METHOD
TONNES % U3O8
GRADE CONTENT
(LBS U3O8)
TONNES
GRADE CONTENT
(LBS U3O8)
% U3O8
GRADE CONTENT CONTENT METALLURGICAL
TONNES % U3O8
(LBS U3O8)
(LBS U3O8)
RECOVERY (%)
OUR
SHARE
UG
OP
UG
261.9
15.50
61.1
2,034.0
0.52
7.14
89.5
0.7
320.2
538.5
ISR
204,440.9
0.04
160.0
152,994.7
270.8
13.90
83.0
532.7
14.69
172.5
-
-
6.04
0.03
-
61.1
71.7
2,572.5
91.8
357,435.6
0.52
6.91
0.03
0.7
391.9
251.8
86.3
0.6
273.6
100.7
206,797.9
-
570.4
153,804.0
-
246.5
360,601.9
-
816.9
461.2
98.5
99
99
85
-
PROPERTY
Cigar Lake
Key Lake
McArthur River
Inkai
Total
(UG – underground, OP – open pit, ISR – in situ recovery)
Note that the estimates in the above table:
Use a constant dollar average uranium price of approximately $44 (US) per pound U3O8
are based on exchange rates of $1.00 US=$1.25 Cdn and 405 Kazakhstan Tenge to $1.00 Cdn
Our estimate of mineral reserves and mineral resources may be positively or negatively affected by the occurrence of one or
more of the material risks discussed under the heading Caution about forward-looking information beginning on page 2, as
well as certain property-specific risks. See Uranium – Tier-one operations starting on page 60.
Metallurgical recovery
We report mineral reserves as the quantity of contained ore supporting our mining plans, and provide an estimate of the
metallurgical recovery for each uranium property. The estimate of the amount of valuable product that can be physically
recovered by the metallurgical extraction process is obtained by multiplying the quantity of contained metal (content) by the
planned metallurgical recovery percentage. The content and our share of uranium in the table above are before accounting for
estimated metallurgical recovery.
MANAGEMENT’S DISCUSSION AND ANALYSIS 81
Mineral resources
As at December 31, 2019 (100% – only the shaded columns show our share)
MEASURED, INDICATED AND INFERRED
(tonnes in thousands; pounds in millions)
MEASURED RESOURCES (M)
INDICATED RESOURCES (I)
OUR
SHARE
INFERRED RESOURCES
OUR
SHARE
TONNES % U3O8
GRADE CONTENT
(LBS U3O8)
TOTAL M+I TOTAL M+I
GRADE CONTENT CONTENT CONTENT
(LBS U3O8)
(LBS U3O8)
(LBS U3O8)
TONNES % U3O8
INFERRED
GRADE CONTENT CONTENT
(LBS U3O8)
% U3O8
(LBS U3O8)
TONNES
11.6
8.54
2.2
307.1
14.66
99.3
101.5
50.8
182.1
5.92
PROPERTY
Cigar Lake
Fox Lake
Kintyre
-
-
-
-
-
-
-
-
3,897.7
0.62
McArthur River
97.8
2.57
5.5
85.0
2.12
Millennium
Rabbit Lake
Tamarack
Yeelirrie
-
-
-
-
-
-
-
-
-
1,442.6
2.39
1,836.5
0.95
183.8
4.42
27,172.9
0.16
95.9
12,178.3
0.12
Crow Butte
1,601.0
0.19
Gas Hills - Peach
687.2
0.11
6.7
1.7
939.3
0.35
3,626.1
0.15
Inkai
36,680.9
0.03
21.3
21,132.2
0.02
-
53.5
9.5
75.9
38.6
17.9
-
386.7
7.99
53.5
6.7
53.0
517.1
0.53
41.0
2.85
412.4
3.19
38.6
2,460.9
0.62
10.3
45.6
1.02
128.1
128.1
-
-
14.0
531.4
0.16
13.3
3,307.5
0.08
-
53.5
4.0
75.9
38.6
17.9
32.2
7.3
11.6
10.7
8.4
4.1
4.1
14.0
13.3
32.0
9.5
4.1
4.4
23.8
68.1
6.0
2.6
29.0
33.7
1.0
-
1.8
6.0
11.9
53.3
6.0
1.8
20.2
33.7
0.6
-
1.8
6.0
0.4
0.2
1.1
7.7
0.4
0.2
1.1
7.7
12.8
116,394.6
0.03
75.0
30.0
North Butte - Brown
Ranch
Ruby Ranch
Shirley Basin
Smith Ranch -
Highland
621.3
0.08
1.1
5,530.3
0.07
-
-
-
2,215.3
0.08
89.2
0.16
0.3
1,638.2
0.11
9.5
294.5
0.07
4.1
4.4
56.2
0.14
508.0
0.10
3,711.3
0.10
7.9
14,372.3
0.05
17.0
24.9
24.9
6,861.0
0.05
70,673.2
-
142.6
69,384.7
-
384.6
527.2
424.0
131,999.0
-
256.4
174.7
Total
Note that mineral resources:
do not include amounts that have been identified as mineral reserves
do not have demonstrated economic viability
82 CAMECO CORPORATION
Additional information
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.
We believe the following critical accounting estimates reflect the more significant judgments used in the preparation of our
financial statements. These estimates affect all of our segments, unless otherwise noted.
Decommissioning and reclamation
In our uranium and fuel services segments, we are required to estimate the cost of decommissioning and reclamation for each
operation, but we normally do not incur these costs until an asset is nearing the end of its useful life. Regulatory requirements
and decommissioning methods could change during that time, making our actual costs different from our estimates. A
significant change in these costs or in our mineral reserves could have a material impact on our net earnings and financial
position. See note 15 to the financial statements.
Property, plant and equipment
We depreciate property, plant and equipment primarily using the unit-of-production method, where the carrying value is
reduced as resources are depleted. A change in our mineral reserves would change our depreciation expenses, and such a
change could have a material impact on amounts charged to earnings.
We assess the carrying values of property, plant and equipment and goodwill every year, or more often if necessary. If we
determine that we cannot recover the carrying value of an asset or goodwill, we write off the unrecoverable amount against
current earnings. We base our assessment of recoverability on assumptions and judgments we make about future prices,
production costs, our requirements for sustaining capital and our ability to economically recover mineral reserves. A material
change in any of these assumptions could have a significant impact on the potential impairment of these assets.
In performing impairment assessments of long-lived assets, assets that cannot be assessed individually are grouped together
into the smallest group of assets that generates cash inflows that are largely independent of the cash inflows from other assets
or groups of assets. Management is required to exercise judgment in identifying these cash generating units.
Taxes
When we are preparing our financial statements, we estimate taxes in each jurisdiction we operate in, taking into consideration
different tax rates, non-deductible expenses, valuation of deferred tax assets, changes in tax laws and our expectations for
future results.
We base our estimates of deferred income taxes on temporary differences between the assets and liabilities we report in our
financial statements, and the assets and liabilities determined by the tax laws in the various countries we operate in. We
record deferred income taxes in our financial statements based on our estimated future cash flows, which includes estimates
of non-deductible expenses, future market conditions, production levels and intercompany sales. If these estimates are not
accurate, there could be a material impact on our net earnings and financial position.
Controls and procedures
We have evaluated the effectiveness of our disclosure controls and procedures and internal control over financial reporting as
of December 31, 2019, as required by the rules of the US Securities and Exchange Commission and the Canadian Securities
Administrators.
MANAGEMENT’S DISCUSSION AND ANALYSIS 83
Management, including our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), supervised and participated
in the evaluation, and concluded that our disclosure controls and procedures are effective to provide a reasonable level of
assurance that the information we are required to disclose in reports we file or submit under securities laws is recorded,
processed, summarized and reported accurately, and within the time periods specified. It should be noted that, while the CEO
and CFO believe that our disclosure controls and procedures provide a reasonable level of assurance that they are effective,
they do not expect the disclosure controls and procedures or internal control over financial reporting to be capable of
preventing all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met.
Management, including our CEO and our CFO, is responsible for establishing and maintaining internal control over financial
reporting and conducted an evaluation of the effectiveness of our internal control over financial reporting based on the Internal
Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of
December 31, 2019.
During the first quarter of 2019, we implemented a new marketing system resulting in a material change in internal controls
over financial reporting. The new system provides for contract administration, including the processing and recording of
delivery obligations as well as revenue forecasting and reporting. The implementation process included extensive involvement
by key end users and management and incorporated user acceptance testing, change management procedures, data
migration strategies and a parallel run period where users validated the new system. Post-implementation reviews and testing
were conducted by management to ensure that internal controls surrounding the implementation process were properly
designed to prevent material financial statement errors.
There have been no other changes in our internal control over financial reporting during the year that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
New standards adopted
On January 1, 2019, we adopted the following new standards as issued by the International Accounting Standards Board
(IASB).
IFRS 16, Leases, eliminates the dual model for lessees, which distinguishes between on-balance sheet finance leases and off-
balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance
lease accounting. We adopted IFRS 16 using the modified retrospective approach which does not require comparative
information to be restated.
IFRIC 23, Uncertainty over Income Tax Treatments provides guidance on the accounting for current and deferred tax liabilities
and assets in circumstances in which there is uncertainty over income tax treatments. The adoption of the standard did not
have a material impact on the financial statements.
84 CAMECO CORPORATION
Cameco Corporation
2019 consolidated financial statements
February 6, 2020
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 85
Report of management’s accountability
The accompanying consolidated financial statements have been prepared by management in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board. Management is responsible for
ensuring that these statements, which include amounts based upon estimates and judgments, are consistent with other
information and operating data contained in the annual financial review and reflect the corporation's business transactions and
financial position.
Management is also responsible for the information disclosed in the management’s discussion and analysis including
responsibility for the existence of appropriate information systems, procedures and controls to ensure that the information
used internally by management and disclosed externally is complete and reliable in all material respects.
In addition, management is responsible for establishing and maintaining an adequate system of internal control over financial
reporting. The internal control system includes an internal audit function and a code of conduct and ethics, which is
communicated to all levels in the organization and requires all employees to maintain high standards in their conduct of the
Company's affairs. Such systems are designed to provide reasonable assurance that the financial information is relevant,
reliable and accurate and that the Company’s assets are appropriately accounted for and adequately safeguarded.
Management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on
the criteria established in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s system of
internal control over financial reporting was effective as at December 31, 2019.
KPMG LLP has audited the consolidated financial statements in accordance with Canadian generally accepted auditing
standards and the standards of the Public Company Accounting Oversight Board (United States).
The board of directors annually appoints an audit and finance committee comprised of directors who are not employees of the
corporation. This committee meets regularly with management, the internal auditor and the shareholders' auditors to review
significant accounting, reporting and internal control matters. Both the internal and shareholders' auditors have unrestricted
access to the audit and finance committee. The audit and finance committee reviews the consolidated financial statements,
the report of the shareholders' auditors, and management’s discussion and analysis and submits its report to the board of
directors for formal approval.
Original signed by Tim S. Gitzel
President and Chief Executive Officer
February 6, 2020
Original signed by Grant E. Isaac
Senior Vice-President and Chief Financial Officer
February 6, 2020
86 CAMECO CORPORATION
Report of independent registered public accounting firm
To the Shareholders and Board of Directors of Cameco Corporation:
Opinion on the consolidated financial statements
We have audited the accompanying consolidated statements of financial position of Cameco Corporation (the “Company”) as
of December 31, 2019 and 2018, the related consolidated statements of earnings, comprehensive income, changes in equity,
and cash flows for each of the years then ended, and the related notes (collectively, the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in
conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2019, based on the criteria established
in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated February 6, 2020 expressed an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that
our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit and finance committee and that: (1) relate to
accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.
Assessment of recoverability of deferred tax assets
As discussed in note 21 to the consolidated financial statements, as at December 31, 2019 the Company recorded deferred
tax assets of $956,376,000 relating to tax losses incurred in certain jurisdictions and temporary differences. The assessment
of the recoverability of these deferred tax assets is dependent on the generation of future taxable income. Significant
judgment and estimation is required to assess the sufficiency of future taxable income to utilize the recognized deferred tax
assets. The Company uses projections of future taxable income in order to assess the probability that the deferred tax assets
will be realized. Predicting future taxable income is dependent on assumptions and judgments regarding future market
conditions, production rates, and intercompany sales. The Company determined that the realization of these deferred tax
assets is probable.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 87
We identified the assessment of the recoverability of deferred tax assets as a critical audit matter due to the high degree of
judgment required in assessing the significant assumptions and judgments that are reflected in the projections of future
taxable income.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal
controls over the Company’s assessment of the recoverability of the deferred tax asset, including controls over the
assumptions and judgments used in the projections of future taxable income. To assess the Company’s ability to estimate
future taxable income, we compared the Company’s previous forecasts to actual results. To assess the Company’s estimate of
future taxable income, we evaluated key assumptions in the model by comparing (1) forecast uranium sales prices to
published views of independent market participants, (2) foreign exchange rates to external analyst estimates, (3) forecast
sales to historical trends, board approved budgets and committed sales volumes, including to a sample of committed sales
contracts, and (4) forecast production volumes to historical data, board approved budgets and life of mine plans. We
performed a sensitivity analysis over the key assumptions to assess their impact on the Company’s determination that the
deferred tax assets were realizable. We involved income tax professionals with specialized skills and knowledge in assessing
the Company’s application of the tax regulations in relevant jurisdictions.
Original signed by KPMG LLP
Chartered Professional Accountants
We have served as the Company’s auditor since 1988.
Saskatoon, Canada
February 6, 2020
88 CAMECO CORPORATION
Consolidated statements of earnings
For the years ended December 31
($Cdn thousands, except per share amounts)
Revenue from products and services
Cost of products and services sold
Depreciation and amortization
Cost of sales
Gross profit
Administration
Exploration
Research and development
Other operating expense
Loss on disposal of assets
Earnings from operations
Finance costs
Gain (loss) on derivatives
Finance income
Share of earnings from equity-accounted investee
Other income
Earnings before income taxes
Income tax expense (recovery)
Net earnings
Net earnings (loss) attributable to:
Equity holders
Non-controlling interest
Net earnings
Earnings per common share attributable to equity holders:
Basic
Diluted
See accompanying notes to consolidated financial statements.
Note
2019
2018
17
$ 1,862,925 $ 2,091,661
1,345,551
275,749
1,467,940
327,973
1,621,300
1,795,913
15
19
26
11
20
21
241,625
124,869
13,686
6,058
2,732
1,869
92,411
(98,622)
32,269
29,760
45,360
33,840
135,018
61,077
295,748
141,552
20,283
1,757
59,616
2,303
70,237
(111,779)
(81,081)
22,071
32,321
108,160
39,929
(126,306)
$
73,941 $
166,235
74,000
(59)
166,323
(88)
$
73,941 $
166,235
22
22
$
$
0.19 $
0.19 $
0.42
0.42
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 89
Consolidated statements of comprehensive income
For the years ended December 31
($Cdn thousands)
Net earnings
Other comprehensive income (loss), net of taxes:
Items that will not be reclassified to net earnings:
Remeasurements of defined benefit liability1
Equity investments at FVOCI - net change in fair value2
Equity investments at FVOCI - net change in fair value -
equity-accounted investee
Items that are or may be reclassified to net earnings:
Exchange differences on translation of foreign operations
Reclassification of foreign currency translation reserve to net
earnings
Other comprehensive loss, net of taxes
Total comprehensive income
Other comprehensive income (loss) attributable to:
Equity holders
Non-controlling interest
Other comprehensive loss for the year
Total comprehensive income (loss) attributable to:
Equity holders
Non-controlling interest
Total comprehensive income for the year
1 Net of tax (2019 - $2,301; 2018 - $(2,200))
2 Net of tax (2019 - $453; 2018 - $1,349)
See accompanying notes to consolidated financial statements.
Note
2019
2018
$
73,941 $
166,235
25
(8,112)
(4,044)
6,226
(9,728)
(709)
-
(27,888)
(1,875)
20
-
(5,450)
(40,753)
(10,827)
33,188 $
155,408
(40,740) $
(13)
(10,854)
27
(40,753) $
(10,827)
33,260 $
(72)
155,469
(61)
33,188 $
155,408
$
$
$
$
$
90 CAMECO CORPORATION
Consolidated statements of financial position
As at December 31
($Cdn thousands)
Assets
Current assets
Cash and cash equivalents
Short-term investments
Accounts receivable
Current tax assets
Inventories
Supplies and prepaid expenses
Current portion of long-term receivables, investments and other
Total current assets
Property, plant and equipment
Intangible assets
Long-term receivables, investments and other
Investment in equity-accounted investee
Deferred tax assets
Total non-current assets
Total assets
Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued liabilities
Current tax liabilities
Current portion of long-term debt
Current portion of other liabilities
Current portion of provisions
Total current liabilities
Long-term debt
Other liabilities
Provisions
Total non-current liabilities
Shareholders' equity
Share capital
Contributed surplus
Retained earnings
Other components of equity
Total shareholders' equity attributable to equity holders
Non-controlling interest
Total shareholders' equity
Note
2019
2018
6
7
10
8
9
10
11
21
$ 1,062,431 $
-
328,044
3,667
320,770
85,502
6,564
1,806,978
711,528
391,025
402,350
6,996
467,795
89,206
13,826
2,082,726
3,720,672
60,410
630,131
252,681
956,376
5,620,270
3,881,926
65,602
751,868
230,502
1,006,012
5,935,910
$ 7,427,248 $ 8,018,636
12
$
13
14
15
13
14
15
181,799 $
6,290
-
33,073
56,248
277,410
996,718
153,927
1,004,230
2,154,875
1,862,749
234,681
2,825,596
71,699
4,994,725
238
4,994,963
224,754
19,633
499,599
79,573
52,316
875,875
996,072
142,061
1,011,036
2,149,169
1,862,652
234,982
2,791,321
104,327
4,993,282
310
4,993,592
Total liabilities and shareholders' equity
$ 7,427,248 $ 8,018,636
Commitments and contingencies [notes 8, 15, 21]
See accompanying notes to consolidated financial statements.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 91
Consolidated statements of changes in equity
($Cdn thousands)
capital
surplus
earnings
translation
at FVOCI
Total
interest
Attributable to equity holders
Foreign
Equity
Share Contributed
Retained
currency investments
Non-
controlling
Total
equity
Balance at January 1, 2019
$ 1,862,652 $
234,982 $ 2,791,321 $ 104,989 $
(662) $ 4,993,282 $
310 $ 4,993,592
Net earnings (loss)
Other comprehensive loss
Total comprehensive
income (loss)
Share-based compensation
Stock options exercised
Restricted and performance
share units released
Modification of share-based
arrangement [note 24]
Dividends
-
-
-
-
97
-
-
-
-
-
-
14,342
(16)
(6,258)
(8,369)
-
74,000
(8,112)
-
(27,875)
-
(4,753)
74,000
(40,740)
65,888
(27,875)
(4,753)
-
-
-
-
(31,613)
-
-
-
-
-
-
-
-
-
-
33,260
14,342
81
(6,258)
(8,369)
(31,613)
(59)
(13)
(72)
-
-
-
-
-
73,941
(40,753)
33,188
14,342
81
(6,258)
(8,369)
(31,613)
Balance at December 31, 2019
$ 1,862,749 $
234,681 $ 2,825,596 $
77,114 $
(5,415) $ 4,994,725 $
238 $ 4,994,963
Balance at January 1, 2018
$ 1,862,652 $
224,812 $ 2,650,417 $ 112,341 $
9,066 $ 4,859,288 $
371 $ 4,859,659
Net earnings (loss)
Other comprehensive
income (loss)
Total comprehensive
income (loss)
Share-based compensation
Restricted and performance
share units released
Dividends
-
-
-
-
-
-
-
-
-
166,323
-
-
166,323
(88)
166,235
6,226
(7,352)
(9,728)
(10,854)
27
(10,827)
172,549
(7,352)
(9,728)
155,469
(61)
155,408
14,976
-
(4,806)
-
-
(31,645)
-
-
-
-
-
-
14,976
(4,806)
(31,645)
-
-
-
14,976
(4,806)
(31,645)
Balance at December 31, 2018
$ 1,862,652 $
234,982 $ 2,791,321 $ 104,989 $
(662) $ 4,993,282 $
310 $ 4,993,592
See accompanying notes to consolidated financial statements.
92 CAMECO CORPORATION
Consolidated statements of cash flows
For the years ended December 31
($Cdn thousands)
Operating activities
Net earnings
Adjustments for:
Depreciation and amortization
Deferred charges
Unrealized loss (gain) on derivatives
Share-based compensation
Loss on disposal of assets
Finance costs
Finance income
Share of earnings from equity-accounted investee
Other expense (income)
Other operating expense
Income tax expense (recovery)
Interest received
Income taxes paid
Dividends from equity-accounted investee
Other operating items
Net cash provided by operations
Investing activities
Additions to property, plant and equipment
Decrease (increase) in short-term investments
Decrease in long-term receivables, investments and other
Proceeds from sale of property, plant and equipment
Net cash provided by (used in) investing
Financing activities
Decrease in long-term debt
Interest paid
Proceeds from issuance of shares, stock option plan
Lease principal payments
Dividends paid
Net cash used in financing
Increase in cash and cash equivalents, during the year
Exchange rate changes on foreign currency cash balances
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Cash and cash equivalents is comprised of:
Cash
Cash equivalents
Cash and cash equivalents
See accompanying notes to consolidated financial statements.
Note
2019
2018
$
73,941 $
166,235
24
19
11
20
15
21
31
23
275,749
(13,013)
(55,048)
14,342
1,869
98,622
(29,760)
(45,360)
18,961
2,732
61,077
30,944
(18,589)
14,079
96,478
527,024
(75,211)
391,025
120,913
679
437,406
(500,000)
(72,484)
81
(2,904)
(31,613)
(606,920)
357,510
(6,607)
711,528
$ 1,062,431 $
327,973
10,683
74,295
14,976
2,303
111,779
(22,071)
(32,321)
(100,310)
59,616
(126,306)
18,311
(20,709)
-
183,062
667,516
(55,362)
(391,025)
33,508
1,249
(411,630)
-
(72,976)
-
-
(71,224)
(144,200)
111,686
8,222
591,620
711,528
$
427,986 $
634,445
$ 1,062,431 $
317,296
394,232
711,528
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 93
Notes to consolidated financial statements
For the years ended December 31, 2019 and 2018
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 consolidated financial statements as at and for the year ended
December 31, 2019 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 currently has one mine operating in northern Saskatchewan, Cigar Lake, 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 11).
It also has two operations in Northern Saskatchewan which are in care and maintenance. Rabbit Lake was placed in care and
maintenance in the second quarter of 2016 while operations at McArthur River/Key Lake were suspended indefinitely in the
third quarter of 2018 (see note 28 for financial statement impact). 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.
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 about 25% 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
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB).
These consolidated financial statements were authorized for issuance by the Company’s board of directors on February 6,
2020.
These consolidated 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 consolidated 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:
94 CAMECO CORPORATION
Derivative financial instruments
Equity investments
Liabilities for cash-settled share-based payment arrangements
Net defined benefit liability
Fair value through profit or loss (FVTPL)
Fair value through other comprehensive income
(FVOCI)
FVTPL
Fair value of plan assets less the present value of the
defined benefit obligation
The preparation of the consolidated financial statements in conformity with 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.
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.
This summary of significant accounting policies is a description of the accounting methods and practices that have been used
in the preparation of these consolidated financial statements and is presented to assist the reader in interpreting the
statements contained herein. These accounting policies have been applied consistently to all entities within the consolidated
group.
i. Business combinations
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Company. The Company
measures goodwill at the acquisition date as the fair value of the consideration transferred, including the recognized amount of
any non-controlling interests in the acquiree, less the net recognized amount (generally fair value) of the identifiable assets
acquired and liabilities assumed, all measured as of the acquisition date. When the excess is negative, a bargain purchase
gain is recognized immediately in earnings. In a business combination achieved in stages, the acquisition date fair value of the
Company’s previously held equity interest in the acquiree is also considered in computing goodwill.
Consideration transferred includes the fair values of the assets transferred, liabilities incurred and equity interests issued by
the Company. Consideration also includes the fair value of any contingent consideration and share-based compensation
awards that are replaced mandatorily in a business combination.
The Company elects on a transaction-by-transaction basis whether to measure any non-controlling interest at fair value, or at
their proportionate share of the recognized amount of the identifiable net assets of the acquiree, at the acquisition date.
Acquisition-related costs are expensed as incurred, except for those costs related to the issue of debt or equity instruments.
ii. Subsidiaries
The consolidated financial statements include the accounts of Cameco and its subsidiaries. Subsidiaries are entities over
which the Company has control. Subsidiaries are fully consolidated from the date on which control is acquired by the Company
and are deconsolidated from the date that control ceases.
iii. Investments in equity-accounted investees
Cameco’s investments in equity-accounted investees include investments in associates.
Associates are those entities over which the Company has significant influence, but not control or joint control, over the
financial and operating policies. Significant influence is presumed to exist when the Company holds between 20% and 50% of
the voting power of another entity, but can also arise where the Company holds less than 20% if it has the power to be actively
involved and influential in policy decisions affecting the entity.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 95
Investments in associates are accounted for using the equity method. The equity method involves the recording of the initial
investment at cost and the subsequent adjusting of the carrying value of the investment for Cameco’s proportionate share of
the earnings or loss and any other changes in the associates’ net assets, such as dividends. The cost of the investment
includes transaction costs.
Adjustments are made to align the accounting policies of the associate with those of the Company before applying the equity
method. When the Company’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of
that interest is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Company has
incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports
profits, Cameco resumes recognizing its share of those profits only after its share of the profits equals the share of losses not
recognized.
iv. Joint arrangements
A joint arrangement can take the form of a joint operation or joint venture. All joint arrangements involve a contractual
arrangement that establishes joint control.
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
assets, and obligations for the liabilities, relating to the arrangement. A joint operation may or may not be structured through a
separate vehicle. These arrangements involve joint control of one or more of the assets acquired or contributed for the
purpose of the joint operation. The consolidated financial statements of the Company include its share of the assets in such
joint operations, together with its share of the liabilities, revenues and expenses arising jointly or otherwise from those
operations. All such amounts are measured in accordance with the terms of each arrangement.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the arrangement. A joint venture is always structured through a separate vehicle. It operates in the same way as
other entities, controlling the assets of the joint venture, earning its own revenue and incurring its own liabilities and expenses.
Interests in joint ventures are accounted for using the equity method of accounting, whereby the Company’s proportionate
interest in the assets, liabilities, revenues and expenses of jointly controlled entities are recognized on a single line in the
consolidated statements of financial position and consolidated statements of earnings. The share of joint ventures results is
recognized in the Company’s consolidated financial statements from the date that joint control commences until the date at
which it ceases.
v. Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity-accounted
investees are eliminated against the investment to the extent of the Company’s interest in the investee. Unrealized losses are
eliminated in the same manner as unrealized gains, but only to the extent that there is no evidence of impairment.
Items included in the financial statements of each of Cameco’s subsidiaries, associates and joint arrangements are measured
using their functional currency, which is the currency of the primary economic environment in which the entity operates. The
consolidated financial statements are presented in Canadian dollars, which is Cameco’s functional and presentation currency.
96 CAMECO CORPORATION
i. Foreign currency transactions
Foreign currency transactions are translated into the respective functional currency of the Company and its entities using the
exchange rates prevailing at the dates of the transactions. At the reporting date, monetary assets and liabilities denominated in
foreign currencies are translated to the functional currency at the exchange rate at that date. Non-monetary items that are
measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
The applicable exchange gains and losses arising on these transactions are reflected in earnings with the exception of foreign
exchange gains or losses on provisions for decommissioning and reclamation activities that are in a foreign currency, which
are capitalized in property, plant and equipment.
ii. Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are
translated to Canadian dollars at exchange rates at the reporting dates. The revenues and expenses of foreign operations are
translated to Canadian dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognized in other comprehensive income. When a foreign operation is disposed of, in
whole, the relevant amount in the foreign currency translation account is transferred to earnings as part of the gain or loss on
disposal.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the
foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of the
net investment in a foreign operation, and are recognized in other comprehensive income and presented within equity in the
foreign currency translation account.
Cash and cash equivalents consists of balances with financial institutions and investments in money market instruments,
which have a term to maturity of three months or less at the time of purchase and are classified as at amortized cost.
F. Short-term investments
Short-term investments are comprised of money market instruments with terms to maturity between three and 12 months and
are classified as at amortized cost.
Inventories of broken ore, uranium concentrates, and refined and converted products are measured at the lower of cost and
net realizable value.
Cost includes direct materials, direct labour, operational overhead expenses and depreciation. Net realizable value is the
estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
Consumable supplies and spares are valued at the lower of cost or replacement value.
i. Buildings, plant and equipment and other
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment charges. The cost
of self-constructed assets includes the cost of materials and direct labour, borrowing costs and any other costs directly
attributable to bringing the assets to the location and condition necessary for them to be capable of operating in the manner
intended by management, including the initial estimate of the cost of dismantling and removing the items and restoring the site
on which they are located.
When components of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items of property, plant and equipment and depreciated separately.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 97
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from
disposal with the carrying amount of property, plant and equipment, and are recognized in earnings.
ii. Mineral properties and mine development costs
The decision to develop a mine property within a project area is based on an assessment of the commercial viability of the
property, the availability of financing and the existence of markets for the product. Once the decision to proceed to
development is made, development and other expenditures relating to the project area are deferred as part of assets under
construction and disclosed as a component of property, plant and equipment with the intention that these will be depreciated
by charges against earnings from future mining operations. No depreciation is charged against the property until the
production stage commences. After a mine property has been brought into the production stage, costs of any additional work
on that property are expensed as incurred, except for large development programs, which will be deferred and depreciated
over the remaining life of the related assets.
The production stage is reached when a mine property is in the condition necessary for it to be capable of operating in the
manner intended by management. The criteria used to assess the start date of the production stage are determined based on
the nature of each mine construction project, including the complexity of a mine site. A range of factors is considered when
determining whether the production stage has been reached, which includes, but is not limited to, the demonstration of
sustainable production at or near the level intended (such as the demonstration of continuous throughput levels at or above a
target percentage of the design capacity).
iii. Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of the asset less its residual value. Assets which are
unrelated to production are depreciated according to the straight-line method based on estimated useful lives as follows:
Land
Buildings
Plant and equipment
Furniture and fixtures
Other
Not depreciated
15 - 25 years
3 - 15 years
3 - 10 years
3 - 5 years
Mining properties and certain mining and conversion assets for which the economic benefits from the asset are consumed in a
pattern which is linked to the production level are depreciated according to the unit-of-production method. For conversion
assets, the amount of depreciation is measured by the portion of the facilities' total estimated lifetime production that is
produced in that period. For mining assets and properties, the amount of depreciation or depletion is measured by the portion
of the mines' proven and probable mineral reserves recovered during the period.
Depreciation methods, useful lives and residual values are reviewed at each reporting period and are adjusted if appropriate.
iv. Borrowing costs
Borrowing costs on funds directly attributable to finance the acquisition, production or construction of a qualifying asset are
capitalized until such time as substantially all the activities necessary to prepare the qualifying asset for its intended use are
complete. A qualifying asset is one that takes a substantial period of time to prepare for its intended use. Capitalization is
discontinued when the asset enters the production stage or development ceases. Where the funds used to finance a project
form part of general borrowings, interest is capitalized based on the weighted average interest rate applicable to the general
borrowings outstanding during the period of construction.
v. Repairs and maintenance
The cost of replacing a component of property, plant and equipment is capitalized if it is probable that future economic benefits
embodied within the component will flow to the Company. The carrying amount of the replaced component is derecognized.
Costs of routine maintenance and repair are charged to products and services sold.
98 CAMECO CORPORATION
Goodwill arising from the acquisition of subsidiaries is initially recognized at cost, measured as the excess of the fair value of
the consideration paid over the fair value of the identifiable net assets acquired. At the date of acquisition, goodwill is allocated
to the cash generating unit (CGU), or group of CGUs that is expected to receive the economic benefits of the business
combination. Goodwill is subsequently measured at cost, less accumulated impairment losses.
Intangible assets acquired individually or as part of a group of assets are initially recognized at cost and measured
subsequently at cost less accumulated amortization and impairment losses. Subsequent expenditure is capitalized only when
it increases the future economic benefits embodied in the specific asset to which it relates. The cost of a group of intangible
assets acquired in a transaction, including those acquired in a business combination that meet the specified criteria for
recognition apart from goodwill, is allocated to the individual assets acquired based on their relative fair values.
Intangible assets that have finite useful lives are amortized over their estimated remaining useful lives. Amortization methods
and useful lives are reviewed at each reporting period and are adjusted if appropriate.
Commencing in 2019 (see note 8), Cameco recognizes a right-of-use asset and a lease liability at the lease commencement
date. The right-of-use asset is initially measured at cost, which is the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred, less any lease incentives received,
and subsequently at cost less any accumulated depreciation and impairment losses. The right-of-use asset is subsequently
depreciated using the straight-line method from the commencement date to the end of the lease term, unless the cost of the
right-of-use asset reflects that the Company will exercise a purchase option, in which case the right-of-use asset will be
depreciated on the same basis as that of property, plant and equipment.
The lease liability is measured at amortized cost using the effective interest method. It is initially measured at the present value
of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or,
if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, Cameco uses its incremental
borrowing rate as the discount rate. Current borrowing rates available for classes of leased assets are compared with the rates
of Cameco’s existing debt facilities to ensure that use of the Company’s incremental borrowing rate is reasonable.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made.
It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the
estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the
assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is
reasonably certain not to be exercised.
Cameco uses judgement in determining the lease term for some lease contracts that include renewal options. The assessment
of whether the Company is reasonably certain to exercise such options impacts the lease term, which affects the amount of
lease liabilities and right-of-use assets recognized.
The Company has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-
term leases that have a lease term of 12 months or less. The lease payments associated with these leases are recognized as
an expense on a straight-line basis over the lease term.
Finance income comprises interest income on funds invested. Interest income and interest expense are recognized in
earnings as they accrue, using the effective interest method. Finance costs comprise interest and fees on borrowings,
unwinding of the discount on provisions and costs incurred on redemption of debentures.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are
expensed in the period incurred.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 99
Expenditures on research are charged against earnings when incurred. Development costs are recognized as assets when the
Company can demonstrate technical feasibility and that the asset will generate probable future economic benefits.
i. Non-derivative financial assets
Cameco recognizes loss allowances for expected credit losses (ECLs) on financial assets measured at amortized cost, debt
investments measured at FVOCI, and contract assets. It measures loss allowances at an amount equal to lifetime ECLs,
except for debt securities that are determined to have low credit risk at the reporting date and other debt securities, loans
advanced and bank balances for which credit risk has not increased significantly since initial recognition. For these, loss
allowances are measured equal to 12-month ECLs.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument while 12-
month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting
date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considered when
estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of the difference
between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to
receive. ECLs are discounted at the effective interest rate of the financial asset.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when
estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue
cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical
experience and informed credit assessment and including forward-looking information.
The Company considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations in full,
without recourse by Cameco to actions such as realizing security (if any is held).
The Company considers a debt security to have low credit risk when it is at least an A (low) DBRS or A- S&P rating.
Financial assets carried at amortized cost and debt securities at FVOCI are assessed at each reporting date to determine
whether they are ‘credit-impaired’. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental effect
on the estimated future cash flows of the financial asset have occurred. Evidence can include significant financial difficulty of
the borrower or issuer, a breach of contract, restructuring of an amount due to the Company on terms that the Company would
not consider otherwise, indications that a debtor or issuer will enter bankruptcy or other financial reorganization, or the
disappearance of an active market for a security.
Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.
For debt securities at FVOCI, the loss allowance is charged to earnings and is recognized in OCI. The gross carrying amount
of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its
entirety or a portion thereof.
ii. Non-financial assets
The carrying amounts of Cameco’s non-financial assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested
annually for impairment.
100 CAMECO CORPORATION
For impairment testing, assets are grouped together into CGUs which are the smallest group of assets that generate cash
inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a
business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the
combination.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is
based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset or CGU. Fair value is determined as the
amount that would be obtained from the sale of the asset or CGU in an arm’s-length transaction between knowledgeable and
willing parties. For exploration properties, fair value is based on the implied fair value of the resources in place using
comparable market transaction metrics.
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment
losses are recognized in earnings. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying
amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro
rata basis.
Impairment losses recognized in prior periods are assessed at each reporting date whenever events or changes in
circumstances indicate that the impairment may have reversed. If the impairment has reversed, the carrying amount of the
asset is increased to its recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no
impairment loss had been recognized. A reversal of an impairment loss is recognized immediately in earnings. An impairment
loss in respect of goodwill is not reversed.
Exploration and evaluation expenditures are those expenditures incurred by the Company in connection with the exploration
for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource
are demonstrable. These expenditures include researching and analyzing existing exploration data, conducting geological
studies, exploratory drilling and sampling, and compiling prefeasibility and feasibility studies. Exploration and evaluation
expenditures are charged against earnings as incurred, except when there is a high degree of confidence in the viability of the
project and it is probable that these costs will be recovered through future development and exploitation.
The technical feasibility and commercial viability of extracting a resource is considered to be determinable based on several
factors, including the existence of proven and probable reserves and the demonstration that future economic benefits are
probable. When an area is determined to be technically feasible and commercially viable, the exploration and evaluation
assets attributable to that area are first tested for impairment and then transferred to property, plant and equipment.
Exploration and evaluation costs that have been acquired in a business combination or asset acquisition are capitalized under
the scope of IFRS 6, Exploration for and Evaluation of Mineral Resources, and are reported as part of property, plant and
equipment.
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions
are determined by discounting the risk-adjusted expected future cash flows at a pre-tax risk-free rate that reflects current
market assessments of the time value of money. The unwinding of the discount is recognized as a finance cost.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 101
i. Environmental restoration
The mining, extraction and processing activities of the Company normally give rise to obligations for site closure and
environmental restoration. Closure and restoration can include facility decommissioning and dismantling, removal or treatment
of waste materials, as well as site and land restoration. The Company provides for the closure, reclamation and
decommissioning of its operating sites in the financial period when the related environmental disturbance occurs, based on the
estimated future costs using information available at the reporting date. Costs included in the provision comprise all closure
and restoration activity expected to occur gradually over the life of the operation and at the time of closure. Routine operating
costs that may impact the ultimate closure and restoration activities, such as waste material handling conducted as a normal
part of a mining or production process, are not included in the provision.
The timing of the actual closure and restoration expenditure is dependent upon a number of factors such as the life and nature
of the asset, the operating licence conditions and the environment in which the mine operates. Closure and restoration
provisions are measured at the expected value of future cash flows, discounted to their present value using a current pre-tax
risk-free rate. Significant judgments and estimates are involved in deriving the expectations of future activities and the amount
and timing of the associated cash flows.
At the time a provision is initially recognized, to the extent that it is probable that future economic benefits associated with the
reclamation, decommissioning and restoration expenditure will flow to the Company, the corresponding cost is capitalized as
an asset. The capitalized cost of closure and restoration activities is recognized in property, plant and equipment and
depreciated on a unit-of-production basis. The value of the provision is gradually increased over time as the effect of
discounting unwinds. The unwinding of the discount is an expense recognized in finance costs.
Closure and rehabilitation provisions are also adjusted for changes in estimates. The provision is reviewed at each reporting
date for changes to obligations, legislation or discount rates that effect change in cost estimates or life of operations. The cost
of the related asset is adjusted for changes in the provision resulting from changes in estimated cash flows or discount rates,
and the adjusted cost of the asset is depreciated prospectively.
ii. Waste disposal
The refining, conversion and manufacturing processes generate certain uranium-contaminated waste. The Company has
established strict procedures to ensure this waste is disposed of safely. A provision for waste disposal costs in respect of
these materials is recognized when they are generated. Costs associated with the disposal, the timing of cash flows and
discount rates are estimated both at initial recognition and subsequent measurement.
i. Pension obligations
The Company accrues its obligations under employee benefit plans. The Company has both defined benefit and defined
contribution plans. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a
separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold
sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined
benefit plan is a pension plan other than a defined contribution plan. Typically, defined benefit plans define an amount of
pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of
service and compensation.
102 CAMECO CORPORATION
The liability recognized in the consolidated statements of financial position in respect of defined benefit pension plans is the
present value of the defined benefit obligation at the reporting date less the fair value of plan assets. The defined benefit
obligation is calculated annually, by qualified independent actuaries using the projected unit credit method prorated on service
and management's best estimate of expected plan investment performance, salary escalation, retirement ages of employees
and expected health care costs. The present value of the defined benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the
benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.
The Company recognizes all actuarial gains and losses arising from defined benefit plans in other comprehensive income, and
reports them in retained earnings. When the benefits of a plan are improved, the portion of the increased benefit relating to
past service by employees is recognized immediately in earnings.
For defined contribution plans, the contributions are recognized as employee benefit expense in earnings in the periods during
which services are rendered by employees. Prepaid contributions are recognized as an asset to the extent that a cash refund
or a reduction in future payments is available.
ii. Other post-retirement benefit plans
The Company provides certain post-retirement health care benefits to its retirees. The entitlement to these benefits is usually
conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The
expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used
for defined benefit pension plans. Actuarial gains and losses are recognized in other comprehensive income in the period in
which they arise. These obligations are valued annually by independent qualified actuaries.
iii. Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is
provided. A liability is recognized for the amount expected to be paid under short-term cash bonus plans if the Company has a
present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the
obligation can be measured reliably.
iv. Termination benefits
Termination benefits are payable when employment is terminated by the Company before the normal retirement date, or
whenever an employee accepts an entity’s offer of benefits in exchange for termination of employment. Cameco recognizes
termination benefits as an expense at the earlier of when the Company can no longer withdraw the offer of those benefits and
when the Company recognizes costs for a restructuring. If benefits are payable more than 12 months after the reporting
period, they are discounted to their present value.
v. Share-based compensation
For equity-settled plans, the grant date fair value of share-based compensation awards granted to employees is recognized as
an employee benefit expense, with a corresponding increase in equity, over the period that the employees unconditionally
become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which
the related service and vesting conditions are expected to be met, such that the amount ultimately recognized as an expense
is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
For cash-settled plans, the fair value of the amount payable to employees is recognized as an expense, with a corresponding
increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is re-
measured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized as
employee benefit expense in earnings.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 103
When the terms and conditions of equity-settled plans at the time they were granted are subsequently modified, the fair value
of the share-based payment under the original terms and conditions and under the modified terms and conditions are both
determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over
the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based
payment expense is not adjusted if the modified fair value is less than the original fair value.
Cameco’s contributions under the employee share ownership plan are expensed during the year of contribution. Shares
purchased with Company contributions and with dividends paid on such shares become unrestricted on January 1 of the
second plan year following the date on which such shares were purchased.
Cameco supplies uranium concentrates, uranium conversion services, fabrication services and other services. Revenue is
measured based on the consideration specified in a contract with a customer. The Company recognizes revenue when it
transfers control, as described below, over a good or service to a customer. Customers do not have the right to return
products.
Cameco’s sales arrangements with its customers are pursuant to enforceable contracts that indicate the nature and timing of
satisfaction of performance obligations, including significant payment terms, where payment is usually due in 30 days. Each
delivery is considered a separate performance obligation under the contract.
Uranium supply
In a uranium supply arrangement, Cameco is contractually obligated to provide uranium concentrates to its customers.
Cameco-owned uranium may be physically delivered to either the customer or to conversion facilities (Converters).
For deliveries to customers, terms in the sales contract specify the location of delivery. Revenue is recognized when the
uranium has been delivered and accepted by the customer at that location.
When uranium is delivered to Converters, the Converter will credit Cameco’s account for the volume of accepted uranium.
Based on delivery terms in the sales contract with its customer, Cameco instructs the Converter to transfer title of a
contractually specified quantity of uranium to the customer’s account at the Converter’s facility. At this point, control has been
transferred and Cameco recognizes revenue for the uranium supply.
Toll conversion services
In a toll conversion arrangement, Cameco is contractually obligated to convert customer-owned uranium to a chemical state
suitable for enrichment. Based on delivery terms in a sales contract with its customer, Cameco either (i) physically delivers
converted uranium to enrichment facilities (Enrichers) where it instructs the Enricher to transfer title of a contractually specified
quantity of converted uranium to the customer’s account at the Enricher’s facility, or (ii) transfers title of a contractually
specified quantity of converted uranium to either an Enricher’s account or the customer’s account at Cameco’s Port Hope
conversion facility. At this point, the customer obtains control and Cameco recognizes revenue for the toll conversion services.
Conversion supply
A conversion supply arrangement is a combination of uranium supply and toll conversion services. Cameco is contractually
obligated to provide converted uranium to its customers. Based on delivery terms in the sales contract, Cameco either (i)
physically delivers converted uranium to the Enricher where it instructs the Enricher to transfer title of a contractually specified
quantity of converted uranium to the customer’s account at the Enricher’s facility, or (ii) transfers title of a contractually
specified quantity of converted uranium to either an Enricher’s account or a customer’s account at Cameco’s Port Hope
conversion facility. At this point, the customer obtains control and Cameco recognizes revenue for both the uranium supplied
and the conversion service provided.
104 CAMECO CORPORATION
Fabrication services
In a fabrication services arrangement, Cameco is contractually obligated to provide fuel bundles or reactor components to its
customers. In a contract for fuel bundles, the bundles are inspected and accepted by the customer at Cameco’s Port Hope
fabrication facility or another location based on delivery terms in the sales contract. At this point, the customer obtains control
and Cameco recognizes revenue for the fabrication services.
In some contracts for reactor components, the components are made to a customer’s specification and if a contract is
terminated by the customer, Cameco is entitled to reimbursement of the costs incurred to date, including a reasonable margin.
Since the customer controls all of the work in progress as the products are being manufactured, revenue and associated costs
are recognized over time, before the goods are delivered to the customer’s premises. Revenue is recognized on the basis of
units produced as the contracts reflect a per unit basis. Revenue from these contracts represents an insignificant portion of
Cameco’s total revenue. In other contracts where the reactor components are not made to a specific customer’s specification,
when the components are delivered to the location specified in the contract, the customer obtains control and Cameco
recognizes revenue for the services.
Other services
Uranium concentrates and converted uranium are regulated products and can only be stored at regulated facilities. In a
storage arrangement, Cameco is contractually obligated to store uranium products at its facilities on behalf of the customer.
Cameco invoices the customer in accordance with the contract terms and recognizes revenue on a monthly basis.
Cameco also provides customers with transportation of its uranium products. In the contractual arrangements where Cameco
is acting as the principal, revenue is recognized as the product is delivered.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another.
Trade receivables and debt securities are initially recognized when they are originated. All other financial assets and liabilities
are initially recognized when the company becomes a party to the contractual provisions of the instrument. A financial asset
(unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value
plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.
A trade receivable without a significant financing component is initially measured at the transaction price.
i. Financial assets
On initial recognition, financial assets are classified as measured at: amortized cost, fair value through other comprehensive
income, or fair value through profit or loss based on the Company’s business model for managing its financial assets and their
cash flow characteristics. Classifications are not changed subsequent to initial recognition unless the Company changes its
business model for managing its financial assets, in which case all affected financial assets are reclassified on the first day of
the first reporting period following the change in business model.
Amortized cost
A financial asset is measured at amortized cost if it is not designated as at fair value through profit or loss, is held within a
business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise to cash
flows on specified dates that are solely payments of principal and interest on the principal amount outstanding. Assets in this
category are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by
impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss, as is
any gain or loss on derecognition.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 105
Fair value through other comprehensive income (FVOCI)
A debt investment is measured at FVOCI if it is not designated as at fair value through profit or loss, is held within a business
model whose objective is achieved by both collecting contractual cash flows and selling financial assets and its contractual
terms give rise to cash flows on specified dates that are solely payments of principal and interest on the principal amount
outstanding. These assets are subsequently measured at fair value. Interest income calculated using the effective interest
method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are
recognized in other comprehensive income (OCI). On derecognition, gains and losses accumulated in OCI are reclassified to
profit or loss.
On initial recognition of an equity investment that is not held for trading, Cameco may irrevocably elect to present subsequent
changes in the investments fair value in OCI. This election is made on an investment by investment basis. These assets are
subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly
represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never
reclassified to profit or loss.
Fair value through profit or loss (FVTPL)
All financial assets not classified as measured at amortized cost or FVOCI are measured at FVTPL. This includes all derivative
financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the
requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an
accounting mismatch that would otherwise arise. These assets are subsequently measured at fair value. Net gains and losses,
including any interest or dividend income, are recognized in profit or loss.
Derecognition of financial assets
Cameco derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of
the financial asset are transferred or in which it neither transfers or retains substantially all of the risks and rewards of
ownership and it does not retain control of the financial asset.
If the Company enters into a transaction whereby it transfers assets recognized in its statement of financial position, but
retains either all or substantially all of the risks and rewards of the transferred assets, the transferred assets would not be
derecognized.
ii. Financial liabilities
On initial recognition, financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified
as FVTPL if it is classified as held-for-trading, is a derivative or is designated as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.
Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense
and foreign exchange gains and losses are recognized in profit or loss as is any gain or loss on derecognition.
A financial liability is derecognized when its contractual obligations are discharged or cancelled, or expire. The Company also
derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially
different, in which case a new financial liability based on the modified terms is recognized at fair value. On derecognition of a
financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash
assets transferred or liabilities assumed) is recognized in profit or loss.
iii. Derivative financial instruments
The Company holds derivative financial instruments to reduce exposure to fluctuations in foreign currency exchange rates and
interest rates. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is
not a financial asset and certain criteria are met.
106 CAMECO CORPORATION
Derivative financial instruments are initially measured at fair value in the consolidated statements of financial position, with any
directly attributable transaction costs recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are
measured at fair value, and changes in fair value are recognized in profit or loss.
The purpose of hedging transactions is to modify the Company’s exposure to one or more risks by creating an offset between
changes in the fair value of, or the cash flows attributable to, the hedged item and the hedging item. When hedge accounting
is appropriate, the hedging relationship is designated as a fair value hedge, a cash flow hedge, or a foreign currency risk
hedge related to a net investment in a foreign operation. The Company does not have any instruments that have been
designated as hedge transactions at December 31, 2019 and 2018.
Income tax expense is comprised of current and deferred taxes. Current tax and deferred tax are recognized in earnings
except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive
income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantially enacted at the reporting date, and any adjustments to tax payable in respect of previous years. Current tax
assets and liabilities are measured at the amount expected to be paid or recovered from the taxation authorities.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. In addition, deferred tax is not recognized for taxable
temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected
to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted
by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on
different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities
will be realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it
is probable that future taxable income will be available against which they can be utilized. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
The Company’s exposure to uncertain tax positions is evaluated and a provision is made where it is probable that this
exposure will materialize.
Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized
as a reduction of equity, net of any tax effects.
The Company presents basic and diluted earnings per share data for its common shares. Earnings per share is calculated by
dividing the net earnings attributable to equity holders of the Company by the weighted average number of common shares
outstanding.
Diluted earnings per share is determined by adjusting the net earnings attributable to equity holders of the Company and the
weighted average number of common shares outstanding, for the effects of all dilutive potential common shares. The
calculation of diluted earnings per share assumes that outstanding options which are dilutive to earnings per share are
exercised and the proceeds are used to repurchase shares of the Company at the average market price of the shares for the
period. The effect is to increase the number of shares used to calculate diluted earnings per share.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 107
An operating segment is a component of the Company that engages in business activities from which it may earn revenues
and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other segments.
To be classified as a segment, discrete financial information must be available and operating results must be regularly
reviewed by the Company’s executive team.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and
intangible assets other than goodwill.
3. Accounting standards
On January 1, 2019, Cameco adopted the new standard, IFRS 16, Leases (IFRS 16) and the interpretation, IFRIC 23,
Uncertainty over Income Tax Treatments (IFRIC 23) as issued by the IASB.
i. Leases
IFRS 16 eliminates the dual model for lessees, which distinguishes between on-balance sheet finance leases and off-balance
sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to finance lease
accounting under IAS 17. Cameco adopted IFRS 16 using the modified retrospective approach which does not require
comparative information to be restated. The following practical expedients were used during initial application:
No reassessment of whether a contract is, or contains, a lease at the date of initial application. Contracts that were
not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease under IFRS 16;
Reliance on an assessment under IAS 37 for onerous contracts as an alternative to performing an impairment review;
No recognition of right-of-use assets and liabilities for leases for which the lease term ends within 12 months of the
date of initial application or for leases of low value assets; and
Use of hindsight when determining the lease terms.
When measuring lease liabilities for leases that were classified as operating, lease payments were discounted using Cameco’s
incremental borrowing rate at January 1, 2019, which was 4.65%. Adoption of the standard did not have a material impact on
the consolidated financial statements. See notes 8, 14 and 26.
ii. Income tax
IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which
there is uncertainty over income tax treatments. The adoption of the standard did not have a material impact on the financial
statements:
4. Determination of fair values
A number of the Company’s accounting policies and disclosures require the measurement of fair value, for both financial and
non-financial assets and liabilities.
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.
108 CAMECO CORPORATION
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.
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.
Transfers between levels of the fair value hierarchy are recognized at the end of the reporting period during which the transfer
occurred. There were no transfers between level 1, level 2, or level 3 during the period. Cameco does not have any recurring
fair value measurements that are categorized as level 3 as of the reporting date.
Further information about the techniques and assumptions used to measure fair values is included in the following notes:
Note 24 - Share-based compensation plans
Note 26 - Financial instruments and risk management
5. Use of estimates and judgments
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
revenues and expenses. Actual results may differ from these estimates.
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 period affected.
Information about critical judgments in applying the accounting policies that have the most significant effect on the amounts
recognized in the consolidated financial statements is discussed below. Further details of the nature of these judgments,
estimates and assumptions may be found in the relevant notes to the consolidated financial statements.
Cameco assesses the carrying values of property, plant and equipment, and intangible assets when there is an indication of
possible impairment. Goodwill and intangible assets not yet available for use or with indefinite useful lives are tested for
impairment annually. If it is determined that carrying values of assets or goodwill cannot be recovered, the unrecoverable
amounts are charged against current earnings. Recoverability is dependent upon assumptions and judgments regarding
market conditions, costs of production, sustaining capital requirements and mineral reserves. Other assumptions used in the
calculation of recoverable amounts are discount rates, future cash flows and profit margins. A material change in assumptions
may significantly impact the potential impairment of these assets.
In performing impairment assessments of long-lived assets, assets that cannot be assessed individually are grouped together
into the smallest group of assets that generates cash inflows that are largely independent of the cash inflows from other assets
or groups of assets. Management is required to exercise judgment in identifying these CGUs.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 109
Significant decommissioning and reclamation activities are often not undertaken until near the end of the useful lives of the
productive assets. Regulatory requirements and alternatives with respect to these activities are subject to change over time. A
significant change to either the estimated costs, timing of the cash flows or mineral reserves may result in a material change in
the amount charged to earnings.
Cameco operates in a number of tax jurisdictions and is, therefore, required to estimate its income taxes in each of these tax
jurisdictions in preparing its consolidated financial statements. In calculating income taxes, consideration is given to factors
such as tax rates in the different jurisdictions, non-deductible expenses, changes in tax law and management’s expectations of
future operating results. Cameco estimates deferred income taxes based on temporary differences between the income and
losses reported in its consolidated financial statements and its taxable income and losses as determined under the applicable
tax laws. The tax effect of these temporary differences is recorded as deferred tax assets or liabilities in the consolidated
financial statements. The calculation of income taxes requires the use of judgment and estimates. The determination of the
recoverability of deferred tax assets is dependent on assumptions and judgments regarding future market conditions,
production rates and intercompany sales, which can materially impact estimated future taxable income. If these judgments and
estimates prove to be inaccurate, future earnings may be materially impacted.
Depreciation on property, plant and equipment is primarily calculated using the unit-of-production method. This method
allocates the cost of an asset to each period based on current period production as a portion of total lifetime production or a
portion of estimated mineral reserves. Estimates of life-of-mine and amounts of mineral reserves are updated annually and are
subject to judgment and significant change over time. If actual mineral reserves prove to be significantly different than the
estimates, there could be a material impact on the amounts of depreciation charged to earnings.
The gain recorded on the restructuring of JV Inkai was calculated based on the fair value of the asset being given up. The
determination of fair value requires Cameco to make assumptions, estimates and judgments, some of which are inherently
subjective.
6. Accounts receivable
Trade receivables
GST/VAT receivables
Other receivables
Total
2019
2018
$
321,638 $
4,614
1,792
392,865
3,711
5,774
$
328,044 $
402,350
The Company’s exposure to credit and currency risks as well as credit losses related to trade and other receivables, excluding
goods and services tax (GST)/value added tax (VAT) receivables, is disclosed in note 26.
110 CAMECO CORPORATION
7. Inventories
Uranium
Concentrate
Broken ore
Fuel services
Other
Total
2019
2018
$
204,123 $
51,094
255,217
335,276
51,545
386,821
62,701
75,541
2,852
5,433
$
320,770 $
467,795
Cameco expensed $1,398,000,000 of inventory as cost of sales during 2019 (2018 - $1,501,000,000). Included in cost of sales
for the year ended December 31, 2018 is a $29,296,000 net write-down to reflect net realizable value. No write-down was
recorded in the current year.
8. Property, plant and equipment
At December 31, 2019
Land
and
buildings
Plant
and
equipment
Furniture
and
fixtures
Under
construction
Exploration
and
evaluation
Total
Cost
Beginning of year
Additions
Transfers
Change in reclamation provision [note 15]
Disposals
Effect of movements in exchange rates
$ 5,089,908 $ 2,654,944 $
80,083 $
63,465 $ 1,121,061 $ 9,009,461
2,327
17,157
24,883
(923)
(32,642)
7,179
28,453
-
(3,486)
(8,925)
158
951
-
(142)
(181)
65,482
(46,561)
-
(507)
(17)
65
-
-
(693)
(48,593)
75,211
-
24,883
(5,751)
(90,358)
End of year
5,100,710
2,678,165
80,869
81,862
1,071,840
9,013,446
Accumulated depreciation and impairment
Beginning of year
Depreciation charge
Change in reclamation provision [note 15]
Disposals
Effect of movements in exchange rates
2,835,037
1,697,178
128,579
105,700
2,732
(225)
(30,035)
-
(2,194)
(7,635)
74,860
2,057
-
(139)
(177)
36,799
483,661
5,127,535
-
-
-
-
-
-
(639)
236,336
2,732
(3,197)
(24,636)
(62,483)
End of year
2,936,088
1,793,049
76,601
36,799
458,386
5,300,923
Right-of-use assets
Beginning of year
Additions
Disposals
Depreciation charge
End of year
-
3,517
-
(871)
2,646
-
5,768
(9)
(675)
5,084
-
851
-
(432)
419
-
-
-
-
-
-
-
-
-
-
-
10,136
(9)
(1,978)
8,149
Net book value at December 31, 2019
$ 2,167,268 $
890,200 $
4,687 $
45,063 $
613,454 $ 3,720,672
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 111
At December 31, 2018
Cost
Beginning of year
Additions
Transfers
Change in reclamation provision
Disposals
JV Inkai restructuring(a)
Effect of movements in exchange rates
Land
and
buildings
Plant
and
equipment
Furniture
and
fixtures
Under
construction
Exploration
and
evaluation
Total
$ 5,045,112 $ 2,729,635 $
90,817 $
154,731 $ 1,120,280 $ 9,140,575
1,944
104,760
132,317
7,274
20,044
-
(186)
(7,355)
(245,882)
(109,748)
51,843
15,094
-
45,516
288
(129,436)
-
(4,714)
(6,624)
316
-
(1,663)
(5,739)
628
4,344
55,362
-
-
132,317
(414)
(14,332)
-
(367,993)
56
(3,777)
63,532
End of year
5,089,908
2,654,944
80,083
63,465
1,121,061
9,009,461
Accumulated depreciation and impairment
Beginning of year
Depreciation charge
Transfers
Change in reclamation provision
Disposals
JV Inkai restructuring(a)
Effect of movements in exchange rates
2,717,249
1,611,460
80,752
55,832
483,390
4,948,683
120,754
111,465
13,036
59,616
(185)
(123,919)
48,486
6,333
-
(5,853)
(38,783)
12,556
3,217
(322)
-
(4,647)
(4,441)
301
-
(19,047)
-
-
-
14
-
-
-
-
-
235,436
-
59,616
(10,685)
(167,143)
271
61,628
End of year
2,835,037
1,697,178
74,860
36,799
483,661
5,127,535
Net book value at December 31, 2018
$ 2,254,871 $
957,766 $
5,223 $
26,666 $
637,400 $ 3,881,926
Cameco has contractual capital commitments of approximately $38,000,000 at December 31, 2019. Certain of the contractual
commitments may contain cancellation clauses, however the Company discloses the commitments based on management’s
intent to fulfill the contract. The majority of this amount is expected to be incurred in 2020.
(a) Effective January 1, 2018, Cameco’s ownership interest in JV Inkai was reduced to 40% resulting in JV Inkai being
accounted for on an equity basis instead of proportionate consolidation (see note 11).
112 CAMECO CORPORATION
9. Intangible assets
At December 31, 2019
Cost
Beginning of year
Effect of movements in exchange rates
End of year
Accumulated amortization and impairment
Beginning of year
Amortization charge
Effect of movements in exchange rates
End of year
Contracts
Intellectual
property
Total
$
119,371 $
(5,664)
118,819 $
-
238,190
(5,664)
113,707
118,819
232,526
115,434
1,181
(5,521)
57,154
3,868
-
172,588
5,049
(5,521)
111,094
61,022
172,116
Net book value at December 31, 2019
$
2,613 $
57,797 $
60,410
At December 31, 2018
Cost
Beginning of year
Effect of movements in exchange rates
End of year
Accumulated amortization and impairment
Beginning of year
Amortization charge
Effect of movements in exchange rates
End of year
Intellectual
Contracts
property
Total
$
109,812 $
9,559
118,819 $
-
228,631
9,559
119,371
118,819
238,190
104,939
1,325
9,170
53,680
3,474
-
158,619
4,799
9,170
115,434
57,154
172,588
Net book value at December 31, 2018
$
3,937 $
61,665 $
65,602
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 113
The intangible asset values relate to intellectual property acquired with Cameco Fuel Manufacturing Inc. (CFM) and purchase
and sales contracts acquired with NUKEM. The CFM intellectual property is being amortized on a unit-of-production basis over
its remaining life. Amortization is allocated to the cost of inventory and is recognized in cost of products and services sold as
inventory is sold. The NUKEM purchase and sales contracts will be amortized to earnings over the remaining terms of the
underlying contracts, which extend to 2022. Amortization of the purchase contracts is allocated to the cost of inventory and is
included in cost of products and services sold as inventory is sold. Sales contracts are amortized to revenue.
10. Long-term receivables, investments and other
Investments in equity securities [note 26](a)
Derivatives [note 26]
Advances receivable from JV Inkai [note 31]
Investment tax credits
Amounts receivable related to tax dispute [note 21]
Product loan(b)
Other
Less current portion
Net
2019
2018
$
24,408
10,504
-
95,474
303,222
176,904
26,183
636,695
(6,564)
$
28,916
3,881
124,533
95,246
303,222
176,904
32,992
765,694
(13,826)
$
630,131
$
751,868
(a) At January 1, 2018, Cameco designated the investments shown below as equity securities at FVOCI because these equity
securities represent investments that the Company intends to hold for the long term for strategic purposes. There were no
dividends recognized on any of these investments during the year.
Investment in Denison Mines Corp.
Investment in UEX Corporation
Investment in ISO Energy Ltd.
Investment in GoviEx
Other
$
2019
13,292
7,253
1,481
2,000
382
$
2018
15,507
8,754
1,777
2,313
565
$
24,408
$
28,916
(b) During 2018, as a result of the decision to temporarily suspend production at the McArthur River mine, Cameco loaned
5,400,000 pounds of uranium concentrate to its joint venture partner, Orano Canada Inc., (Orano). Orano is obligated to repay
us in kind with uranium concentrate no later than December 31, 2023. The loan was recorded at Cameco’s weighted average
cost of inventory.
11. Equity-accounted investee
JV Inkai is the operator of the Inkai uranium deposit located in Kazakhstan. Cameco holds a 40% interest and Kazatomprom
holds a 60% interest in JV Inkai. Cameco does not have joint control over the joint venture and as a result, Cameco accounts
for JV Inkai on an equity basis.
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.
114 CAMECO CORPORATION
The following tables summarize the financial information of JV Inkai (100%):
Cash and cash equivalents
Other current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Revenue from products and services
Cost of products and services sold
Depreciation and amortization
Finance income
Finance costs
Other expense
Income tax expense
Net earnings
Other comprehensive loss
Total comprehensive income
$
2019
16,699
139,324
398,721
(71,162)
(41,508)
$
2018
41,717
160,784
407,816
(151,728)
(41,746)
$
442,074
$
416,843
2019
2018
$
261,860
(64,199)
(27,740)
651
(2,939)
(23,767)
(30,999)
112,867
(1,773)
$
203,359
(52,172)
(27,504)
160
(6,251)
(30,419)
(20,860)
66,313
-
$
111,094
$
66,313
The following table reconciles the summarized financial information to the carrying amount of Cameco’s interest in JV Inkai:
Opening net assets
Total comprehensive income(a)
Dividends declared
Impact of foreign exchange
Closing net assets
Cameco's share of net assets
Consolidating adjustments(b)
Fair value increment(c)
Dividends declared but not received
Impact of foreign exchange
2019
2018
$
416,843
111,094
(66,369)
(19,494)
442,074
176,830
(30,633)
91,697
13,859
928
$
374,650
66,313
-
(24,120)
416,843
166,737
(33,978)
94,633
-
3,110
Carrying amount in the statement of financial position at December 31, 2019
$
252,681
$
230,502
(a) Cameco’s share of earnings from equity-accounted investee as reported on the statement of earnings will not equal its
share of JV Inkai’s other comprehensive income when Cameco receives dividends from JV Inkai that are not in proportion to
its 40% ownership interest.
(b) In addition to its proportionate share of earnings from JV Inkai, Cameco records certain consolidating adjustments to
eliminate unrealized profit and amortize historical differences in accounting policies. This amount is amortized to earnings over
units of production.
(c) Following the restructuring, in addition to the adjustments noted in (b), Cameco also amortizes the fair values assigned to
assets and liabilities at the time of the restructuring over units of production.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 115
12. Accounts payable and accrued liabilities
Trade payables
Non-trade payables
Payables due to related parties
Total
2019
2018
$
100,407
66,815
14,577
$
123,219
92,183
9,352
$
181,799
$
224,754
The Company’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 26.
13. Long-term debt
Unsecured debentures
Series D - 5.67% debentures due September 2, 2019
Series E - 3.75% debentures due November 14, 2022
Series F - 5.09% debentures due November 14, 2042
Series G - 4.19% debentures due June 24, 2024
Less current portion
Total
2019
2018
$
-
399,152
99,302
498,264
996,718
-
$
499,599
398,873
99,286
497,913
1,495,671
(499,599)
$
996,718
$
996,072
Cameco has a $1,000,000,000 unsecured revolving credit facility that is available until November 1, 2023. Upon mutual
agreement, the facility can be extended for an additional year on the anniversary date. In addition to direct borrowings under
the facility, up to $100,000,000 can be used for the issuance of letters of credit and, to the extent necessary, it may be used to
provide liquidity support for the Company’s commercial paper program. The agreement also provides the ability to increase the
revolving credit facility above $1,000,000,000 by increments no less than $50,000,000, to a total of $1,250,000,000. The
facility ranks equally with all of Cameco’s other senior debt. As of December 31, 2019 and 2018, there were no amounts
outstanding under this facility.
Cameco has $1,719,120,000 (2018 - $1,716,473,000) in letter of credit facilities. Outstanding and committed letters of credit at
December 31, 2019 amounted to $1,528,603,000 (2018 - $1,572,984,000), the majority of which relate to future
decommissioning and reclamation liabilities (note 15).
Cameco is bound by a covenant in its revolving credit facility. The covenant requires a funded debt to tangible net worth ratio
equal to or less than 1:1. Non-compliance with this covenant could result in accelerated payment and termination of the
revolving credit facility. At December 31, 2019, Cameco was in compliance with the covenant and does not expect its
operating and investing activities in 2020 to be constrained by it.
The Company has arranged for standby product loan facilities with three different counterparties. The arrangements allow it to
borrow up to 1.2 million kgU of UF6 conversion services over the period 2020 to 2022 with repayment in kind up to March 31,
2023. 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%.
116 CAMECO CORPORATION
The table below represents currently scheduled maturities of long-term debt:
2020
2021
2022
2023
2024
Thereafter
Total
$
-
-
399,152
-
498,264
99,302 $
996,718
14. Other liabilities
Deferred sales [note 17]
Derivatives [note 26]
Accrued pension and post-retirement benefit liability [note 25]
Lease obligation
Other
Less: current portion
Net
$
2019
17,418
12,524
80,737
12,869
63,452
187,000
(33,073)
$
2018
30,727
61,387
68,255
-
61,265
221,634
(79,573)
$
153,927
$
142,061
Expenses related to short-term leases and leases of low-value assets were insignificant during 2019.
15. Provisions
Beginning of year
Changes in estimates and discount rates [note 8]
Capitalized in property, plant and equipment
Recognized in earnings
Provisions used during the period
Unwinding of discount [note 19]
Effect of movements in exchange rates
End of period
Current
Non-current
Reclamation Waste disposal
Total
$ 1,053,892
$
9,460
$ 1,063,352
22,151
2,732
(31,933)
20,634
(16,801)
-
645
(457)
155
-
22,151
3,377
(32,390)
20,789
(16,801)
$ 1,050,675
$
54,806
995,869
$ 1,050,675
$
$
$
9,803
$ 1,060,478
1,442
8,361
$
56,248
1,004,230
9,803
$ 1,060,478
Cameco's estimates of future decommissioning obligations are based on reclamation standards that satisfy regulatory
requirements. Elements of uncertainty in estimating these amounts include potential changes in regulatory requirements,
decommissioning and reclamation alternatives and amounts to be recovered from other parties.
Cameco estimates total undiscounted future decommissioning and reclamation costs for its existing operating assets to be
$1,127,487,000 (2018 - $1,157,208,000). The expected timing of these outflows is based on life-of-mine plans with the
majority of expenditures expected to occur after 2024. These estimates are reviewed by Cameco technical personnel as
required by regulatory agencies or more frequently as circumstances warrant. In connection with future decommissioning and
reclamation costs, Cameco has provided financial assurances of $994,129,000 (2018 - $1,050,546,000) in the form of letters
of credit to satisfy current regulatory requirements.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 117
The reclamation provision relates to the following segments:
Uranium
Fuel services
Total
2019
2018
$
831,352
219,323
$
828,781
225,111
$ 1,050,675
$ 1,053,892
The fuel services segment consists of the Blind River refinery, Port Hope conversion facility and Cameco Fuel Manufacturing
Inc.. The refining, conversion and manufacturing processes generate certain uranium contaminated waste. These include
contaminated combustible material (paper, rags, gloves, etc.) and contaminated non-combustible material (metal parts, soil
from excavations, building and roofing materials, spent uranium concentrate drums, etc.). These materials can in some
instances be recycled or reprocessed. A provision for waste disposal costs in respect of these materials is recognized when
they are generated.
Cameco estimates total undiscounted future costs related to existing waste disposal to be $8,451,000 (2018 - $9,617,000).
The majority of these expenditures are expected to occur within the next five years.
16. Share capital
Authorized share capital:
Unlimited number of first preferred shares
Unlimited number of second preferred shares
Unlimited number of voting common shares, no stated par value, not convertible or redeemable, and
One Class B share
Number issued (number of shares)
Beginning of year
Issued:
Stock option plan [note 24]
End of year
2019
2018
395,792,732
395,792,732
5,000
-
395,797,732
395,792,732
All issued shares are fully paid. Holders of the common shares are entitled to exercise one vote per share at meetings of
shareholders, are entitled to receive dividends if, as and when declared by our Board of Directors and are entitled to
participate in any distribution of remaining assets following a liquidation.
The shares of Cameco are widely held and no shareholder, resident in Canada, is allowed to own more than 25% of the
Company’s outstanding common shares, either individually or together with associates. A non-resident of Canada is not
allowed to own more than 15%. In addition, no more than 25% of total shareholder votes cast may be cast by non-resident
shareholders.
One Class B share issued during 1988 and assigned $1 of share capital entitles the shareholder to vote separately as a class
in respect of any proposal to locate the head office of Cameco to a place not in the province of Saskatchewan.
Dividends on Cameco Corporation common shares are declared in Canadian dollars. For the year ended December 31, 2019,
the dividend declared per share was $0.08 (December 31, 2018 - $0.08).
118 CAMECO CORPORATION
17. Revenue
Cameco’s 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 table summarizes Cameco’s sales disaggregated by geographical region and contract type and includes a
reconciliation to the Company’s reportable segments (note 28):
For the year ended December 31, 2019
Customer geographical region
Americas
Europe
Asia
Contract type
Fixed-price
Market-related
For the year ended December 31, 2018
Customer geographical region
Americas
Europe
Asia
Contract type
Fixed-price
Market-related
Uranium
Fuel services
Other
Total
$
569,535
288,134
556,140
$
206,226
79,629
84,422
$
59,300
3,587
15,952
$
835,061
371,350
656,514
$ 1,413,809
$
370,277
$
78,839
$ 1,862,925
$
349,021
1,064,788
$
305,383
64,894
$ 1,413,809
$
370,277
$
$
69,703
9,136
$
724,107
1,138,818
78,839
$ 1,862,925
Uranium
Fuel services
Other
Total
$
695,678
275,096
713,282
$
191,791
50,000
72,198
$
69,012
10,693
13,911
$
956,481
335,789
799,391
$ 1,684,056
$
313,989
$
93,616
$ 2,091,661
$
577,143
1,106,913
$
293,400
20,589
$ 1,684,056
$
313,989
$
$
83,706
9,910
$
954,249
1,137,412
93,616
$ 2,091,661
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 119
Deferred sales
The following table provides information about contract liabilities (note 14) from contracts with customers:
Beginning of year
Additions
Recognized in revenue
Effect of movements in exchange rates
End of year
2019
2018
$
$
30,727
9,783
(23,067)
(25)
29,148
25,695
(24,025)
(91)
$
17,418
$
30,727
Deferred sales primarily relates to advance consideration received from customers for future conversion deliveries and fuel
fabrication services as well as revenue related to the storage of uranium and converted uranium held at Cameco facilities. The
revenue related to the fuel fabrication services and storage is recognized over time while the revenue related to future
conversion deliveries is expected to be recognized between 2020 and 2025.
Cameco recognized $78,000 of revenue (2018 - $5,468,000 reduction of revenue) during 2019 from performance obligations
satisfied (or partially satisfied) in previous periods. This is due to the difference between actual pricing indices and the
estimates at the time of invoicing.
Future sales commitments
Cameco’s sales portfolio consists of short and long-term sales commitments. The contracts can be executed well in advance
of a delivery and include both fixed and market-related pricing. The following table summarizes the expected future revenue,
by segment, related to only fixed-price contracts with remaining future deliveries as follows:
2020
2021
2022
2023
2024 Thereafter
Total
Uranium
Fuel services
Other
Total
$ 271,642 $ 183,422 $ 145,920 $ 169,234 $ 166,015 $ 532,429 $ 1,468,662
1,647,094
8,242
265,126
4,212
212,562
-
150,266
-
150,773
-
593,612
-
274,755
4,030
$ 550,427 $ 452,760 $ 358,482 $ 319,500 $ 316,788 $ 1,126,041 $ 3,123,998
The sales contracts are denominated largely in US dollars and converted from US to Canadian dollars at a rate of $1.30.
The amounts in the table represent the consideration the Company will be entitled to receive when it satisfies the remaining
performance obligations in the contracts. The amounts include assumptions about volumes for contracts that have volume
flexibility. Cameco’s total revenue that will be earned will also include revenue from contracts with market-related pricing. The
Company has elected to exclude these amounts from the table as the transaction price will not be known until the time of
delivery. Contracts with an original duration of one year or less have been included in the table.
120 CAMECO CORPORATION
18. Employee benefit expense
The following employee benefit expenses are included in cost of products and services sold, administration, exploration,
research and development and property, plant and equipment:
Wages and salaries
Statutory and company benefits
Expenses related to defined benefit plans [note 25]
Expenses related to defined contribution plans [note 25]
Equity-settled share-based compensation [note 24]
Cash-settled share-based compensation [note 24]
Total
19. Finance costs
Interest on long-term debt
Unwinding of discount on provisions [note 15]
Other charges
Total
No borrowing costs were determined to be eligible for capitalization during the year.
20. Other income (expense)
Arbitration award(a)
Foreign exchange gains
Gain on restructuring of JV Inkai(b)
Sale of exploration interests(c)
Contract restructuring
Other
Total
2019
2018
$
238,000
41,972
4,790
11,767
17,469
(1,437)
$
305,367
50,477
3,527
13,431
18,821
3,597
$
312,561
$
395,220
2019
2018
$
63,136
20,789
14,697
$
73,039
23,681
15,059
$
98,622
$
111,779
2019
2018
$
52,801
(18,961)
-
-
-
-
$
-
26,205
48,570
25,027
6,201
2,157
$
33,840
$
108,160
(a) In the third quarter of 2019, Cameco received an award from the tribunal of international arbitrators (Tribunal) with respect
to its contract dispute with Tokyo Electric Power Company Holdings, Inc. (TEPCO). The Tribunal rejected TEPCO’s assertion
that it had the right to terminate its uranium supply agreement and awarded damages of $40,300,000 (US). Damages were
based on the Tribunal’s interpretation of losses under this supply agreement.
(b) Effective January 1, 2018, Cameco’s ownership interest in JV Inkai was reduced from 60% to 40% based on an
implementation agreement with Kazatomprom. Cameco recognized a gain on the change in ownership interests of
$48,570,000. Included in this gain is $5,450,000 which has been reclassified from the foreign currency translation reserve to
net earnings.
(c) In 2018, Cameco sold its interest in the Wheeler River Joint Venture to Denison Mines Corp. in exchange for 24,615,000
common shares (note 10). Cameco recorded a gain of $17,231,000 on the transaction.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 121
21. Income taxes
Assets
Property, plant and equipment
Provision for reclamation
Inventories
Foreign exploration and development
Income tax losses (gains)
Defined benefit plan actuarial losses
Long-term investments and other
Deferred tax assets
Liabilities
Inventories
Deferred tax liabilities
Recognized in earnings
2019
2018
As at December 31
2019
2018
$
74,039
2,325
(2,163)
(14)
(108,839)
-
(17,377)
(52,029)
301
301
$
119,132
(36,622)
1,137
(14)
39,289
-
24,169
147,091
-
-
$
319,185
193,514
-
5,267
390,341
7,947
40,423
956,677
301
301
$
245,206
191,189
2,163
5,281
499,180
5,646
57,347
1,006,012
-
-
Net deferred tax asset (liability
$
(52,330)
$
147,091
$
956,376
$ 1,006,012
Deferred tax allocated as
Deferred tax assets
Deferred tax liabilities
Net deferred tax asset
2019
2018
$
956,376
-
$ 1,006,012
-
$
956,376
$ 1,006,012
Cameco has recorded a deferred tax asset of $956,376,000 (December 31, 2018 - $1,006,012,000). The realization of this
deferred tax asset is dependent upon the generation of future taxable income in certain jurisdictions during the periods in
which the Company’s deferred tax assets 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.
122 CAMECO CORPORATION
Deferred tax asset at beginning of year
Recovery (expense) for the year in net earnings
Recovery (expense) for the year in other comprehensive income
Change to equity accounting - JV Inkai
Effect of movements in exchange rates
End of year
Income tax losses
Property, plant and equipment
Provision for reclamation
Long-term investments and other
Total
2019
2018
$ 1,006,012
(52,330)
2,754
-
(60)
$
848,704
147,091
(851)
10,849
219
$
956,376
$ 1,006,012
2019
2018
$
280,330
2,321
75,082
70,380
$
270,154
2,344
88,036
72,500
$
428,113
$
433,034
The provision for income taxes differs from the amount computed by applying the combined expected federal and provincial
income tax rate to earnings before income taxes. The reasons for these differences are as follows:
Earnings before income taxes and non-controlling interest
Combined federal and provincial tax rate
$
Computed income tax expense
Increase (decrease) in taxes resulting from:
Difference between Canadian rates and rates
applicable to subsidiaries in other countries
Change in unrecognized deferred tax assets
Share-based compensation plans
Change in tax provision related to transfer pricing
Non-deductible (non-taxable) capital amounts
Income in equity-accounted investee
Change in uncertain tax positions
Other permanent differences
Income tax expense (recovery)
2019
135,018
26.9%
36,320
5,558
19,646
1,146
-
-
(12,074)
2,572
7,909
$
2018
39,929
26.9%
10,741
(78,138)
18,027
1,292
(61,000)
(13,249)
-
(3,517)
(462)
$
61,077
$
(126,306)
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 123
Earnings (loss) before income taxes
Canada
Foreign
Current income taxes
Canada
Foreign
Deferred income taxes (recovery)
Canada
Foreign
Income tax expense (recovery)
2019
2018
$
229,429
(94,411)
$
135,018
$
$
$
$
$
7,969
778
8,747
60,010
(7,680)
52,330
61,077
$
$
$
$
$
$
$
(257,291)
297,220
39,929
5,913
14,872
20,785
(149,284)
2,193
(147,091)
(126,306)
In 2008, as part of the ongoing annual audits of Cameco's Canadian tax returns, Canada Revenue Agency (CRA) disputed the
transfer pricing structure and methodology used by Cameco and its wholly owned Swiss subsidiary, Cameco Europe Ltd., in
respect of sale and purchase agreements for uranium products. From December 2008 to date, CRA issued notices of
reassessment for the taxation years 2003 through 2013, which in aggregate have increased Cameco's income for Canadian
tax purposes by approximately $5,700,000,000. CRA has also issued notices of reassessment for transfer pricing penalties for
the years 2007 through 2011 in the amount of $371,000,000. It is uncertain whether CRA will reassess Cameco's tax returns
for subsequent years on a similar basis and if these will require Cameco to make future remittances or provide security on
receipt of the reassessments.
On September 26, 2018, the Tax Court of Canada (Tax Court) ruled in our favour in our case with the Canada Revenue
Agency (CRA) for the 2003, 2005 and 2006 tax years.
The Tax Court ruled that our marketing and trading structure involving foreign subsidiaries and the related transfer pricing
methodology used for certain intercompany uranium purchase and sale agreements were in full compliance with Canadian
laws for the three tax years in question. While the decision applies only to the three tax years in question, we believe there is
nothing in the decision that would warrant a materially different outcome for subsequent tax years. We expect to recover any
amounts remitted or secured as a result of the reassessments.
On October 25, 2018, CRA filed a notice of appeal with the Federal Court of Appeal. We anticipate that it will take about two
years from the start of the appeal process to receive a decision from the Federal Court of Appeal.
124 CAMECO CORPORATION
We expect the Tax Court’s decision to be upheld on appeal. We expect any further actions regarding the tax years 2007
through 2013 will be suspended until the three years covered in the decision are finally resolved. Despite the fact that we
believe there is no basis to do so, and it is not our view of the likely outcome, CRA may continue to reassess us using the
methodology it used to reassess the 2003 through 2013 tax years. In that scenario, and including the $5,700,000,000 already
reassessed, we expect to receive notices of reassessment for a total of approximately $8,700,000,000 for the years 2003
through 2019, which would increase Cameco’s income for Canadian tax purposes and result in a related tax expense of
approximately $2,600,000,000. In addition to penalties already imposed, CRA may continue to apply penalties to taxation
years subsequent to 2011. As a result, we estimate that cash taxes and transfer pricing penalties would be between
$1,950,000,000 and $2,150,000,000. In addition, we estimate there would be interest and instalment penalties applied that
would be material to Cameco. While in dispute, we would be responsible for remitting or otherwise securing 50% of the cash
taxes and transfer pricing penalties (between $970,000,000 and $1,070,000,000), plus related interest and instalment
penalties assessed, which would be material to Cameco.
Under Canadian federal and provincial tax rules, the amount required to be remitted each year will depend on the amount of
income reassessed in that year and the availability of elective deductions. CRA disallowed the use of any loss carry-backs to
be applied to any transfer pricing adjustment, starting with the 2008 tax year. In light of our view of the likely outcome of the
case, we expect to recover the amounts remitted to CRA, including cash taxes, interest and penalties totalling $303,222,000
already paid as at December 31, 2019 (December 31, 2018 - $303,222,000) (note 10). In addition to the cash remitted, we
have provided $480,000,000 in letters of credit to secure 50% of the cash taxes and related interest.
Management believes that the ultimate resolution will not be material to Cameco's financial position, results of operations or
liquidity in the year(s) of resolution. Resolution of this matter as stipulated by CRA would be material to Cameco’s financial
position, results of operations or liquidity in the year(s) of resolution and other unfavourable outcomes for the years 2003 to
date could be material to Cameco's financial position, results of operations and cash flows in the year(s) of resolution.
At December 31, 2019, income tax losses carried forward of $2,509,669,000 (2018 - $2,809,926,000) are available to reduce
taxable income. These losses expire as follows:
Date of expiry
Canada
US
Other
Total
2026
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
No expiry
$
$
-
47
-
272
173,691
322,359
372,558
209,265
143
5,581
6,524
-
-
-
20,859
22,464
38,296
21,125
14,699
44,674
33,462
51,896
40,559
-
$
80,000
-
-
-
-
-
-
-
-
-
-
1,051,195
$
80,000
47
20,859
22,736
211,987
343,484
387,257
253,939
33,605
57,477
47,083
1,051,195
$ 1,090,440
$
288,034
$ 1,131,195
$ 2,509,669
Included in the table above is $1,048,264,000 (2018 - $987,639,000) of temporary differences related to loss carry forwards
where no future benefit has been recognized.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 125
22. 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 2019 was 395,796,677 (2018 - 395,792,732).
Basic earnings per share computation
Net earnings attributable to equity holders
Weighted average common shares outstanding
Basic earnings per common share
Diluted earnings per share computation
Net earnings attributable to equity holders
Weighted average common shares outstanding
Dilutive effect of stock options
Weighted average common shares outstanding, assuming dilution
2019
2018
$
74,000
$
166,323
395,797
395,793
$
0.19
$
0.42
$
74,000
$
166,323
395,797
258
396,055
395,793
257
396,050
Diluted earnings per common share
$
0.19
$
0.42
23. Supplemental cash flow information
Other operating items included in the statements of cash flows are as follows:
Changes in non-cash working capital:
Accounts receivable
Inventories
Supplies and prepaid expenses
Accounts payable and accrued liabilities
Reclamation payments
Other
Total
2019
2018
$
58,488
113,388
3,612
(62,250)
(32,390)
15,630
$
(44,353)
241,496
52,192
(39,616)
(31,311)
4,654
$
96,478
$
183,062
126 CAMECO CORPORATION
The changes arising from financing activities were as follows:
Balance at January 1, 2019
Changes from financing cash flows:
Dividends paid
Interest paid
Shares issued, stock option plan
Repayment of long-term debt
Long-term
debt(a)
Interest
payable
Dividends
payable
Share
capital
Total
$ 1,495,671
$
13,539
$
-
$ 1,862,652
$ 3,371,862
-
-
-
(500,000)
-
(72,484)
-
-
(31,613)
-
-
-
-
-
81
-
(31,613)
(72,484)
81
(500,000)
Total cash changes
(500,000)
(72,484)
(31,613)
81
(604,016)
Non-cash changes:
Amorization of issue costs
Dividends declared
Interest expense
Lease interest expense
Shares issued, stock option plan
Foreign exchange
Total non-cash changes
1,047
-
-
-
-
-
1,047
-
-
61,780
309
-
(114)
61,975
-
31,613
-
-
-
-
31,613
-
-
-
-
16
-
16
1,047
31,613
61,780
309
16
(114)
94,651
Balance at December 31, 2019
$
996,718
$
3,030
$
-
$ 1,862,749
$ 2,862,497
(a) Includes current portion of long-term debt
24. Share-based compensation plans
The Company has the following equity-settled plans:
The Company has established a stock option plan under which options to purchase common shares may be granted to
employees of Cameco. Options granted under the stock option plan have an exercise price of not less than the closing price
quoted on the Toronto Stock Exchange (TSX) for the common shares of Cameco on the trading day prior to the date on which
the option is granted. The options carry vesting periods of one to three years, and expire eight years from the date granted.
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 27,875,289 shares have been issued.
Stock option transactions for the respective years were as follows:
(Number of options)
Beginning of year
Options granted
Options forfeited
Options expired
Options exercised [note 16]
End of year
Exercisable
2019
2018
8,820,805
886,740
(270,025)
(815,423)
(5,000)
8,324,666
1,473,430
(315,340)
(661,951)
-
8,617,097
8,820,805
6,290,380
6,007,557
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 127
Weighted average exercise prices were as follows:
Beginning of year
Options granted
Options forfeited
Options expired
Options exercised
End of year
Exercisable
2019
2018
$19.75
15.27
22.59
38.43
16.38
$17.44
$18.90
$22.19
11.32
25.43
28.90
-
$19.75
$22.83
Total options outstanding and exercisable at December 31, 2019 were as follows:
Option price per share
Number
$11.32 - 15.83
$15.84 - 26.81
3,733,210
4,883,887
8,617,097
Options outstanding
Options exercisable
Weighted
average
remaining
life
Weighted
average
exercisable
price
5.7
1.9
$13.50
$20.45
Weighted
average
exercisable
price
$13.52
$20.45
Number
1,406,493
4,883,887
6,290,380
The foregoing options have expiry dates ranging from May 14, 2020 to February 28, 2027.
B
The Company has established an RSU plan whereby it provides each plan participant an annual grant of RSUs in an amount
determined by the board. Each RSU represents one phantom common share that entitles the participant to a payment of one
Cameco common share purchased on the open market, or cash with an equivalent market value, at the board’s discretion.
The RSUs carry vesting periods of one to three years, and the final value of the units will be based on the value of Cameco
common shares at the end of the vesting periods. During the vesting period, dividend equivalents accrue to the participants in
the form of additional share units as of each normal cash dividend payment date of Cameco’s common shares. As of
December 31, 2019, the total number of RSUs held by the participants was 443,274, (2018 - 456,704).
Cameco also has an employee share ownership plan, whereby both employee and Company contributions are used to
purchase shares on the open market for employees. The Company’s contributions are expensed during the year of
contribution. Under the plan, employees have the opportunity to participate in the program to a maximum of 6% of eligible
earnings each year with Cameco matching the first 3% of employee-paid shares by 50%. Cameco contributes $1,000 of
shares annually to each employee that is enrolled in the plan. Shares purchased with Company contributions and with
dividends paid on such shares become unrestricted 12 months from the date on which such shares were purchased. At
December 31, 2019, there were 2,253 participants in the plan (2018 - 2,317). The total number of shares purchased in 2019
with Company contributions was 235,915 (2018 - 304,147). In 2019, the Company’s contributions totaled $3,127,000 (2018 -
$3,845,000).
128 CAMECO CORPORATION
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 year, the Company recognized the following expenses
under these plans:
Stock option plan
Performance share unit plan(a)
Restricted share unit plan
Employee share ownership plan
Total
$
2019
4,418
7,245
2,679
3,127
$
2018
4,744
7,690
2,542
3,845
$
17,469
$
18,821
(a) In the fourth quarter, the performance share unit plan was amended to allow eligible participants to elect payout of their
grants in cash or shares, provided they have met their share ownership requirements. As a result, this plan is now considered
cash-settled. This amount represents the expense recorded prior to the plan modification.
Fair value measurement of equity-settled plans
The fair value of the units granted through the performance share unit plan was determined based on Monte Carlo simulation
and the fair value of options granted under the stock option plan was measured based on the Black-Scholes option-pricing
model. The fair value of RSUs granted was determined based on their intrinsic value on the date of grant. Expected volatility
was estimated by considering historic average share price volatility.
The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as
follows:
Number of options granted
Expected vesting
Average strike price
Expected dividend
Expected volatility
Risk-free interest rate
Expected life of option
Expected forfeitures
Weighted average grant date fair values
The Company has the following cash-settled plans:
Stock option plan
PSU
RSU
886,740
-
$15.27
$0.08
36%
1.8%
4.9 years
7%
$4.92
477,250
106%
-
-
38%
1.8%
3.0 years
12%
$15.33
212,496
-
$15.33
-
-
-
-
15%
$15.33
Cameco offers a DSU plan to non-employee directors. A DSU is a notional unit that reflects the market value of a single
common share of Cameco. 60% of each director’s annual retainer is paid in DSUs. In addition, on an annual basis, directors
can elect to receive 25%, 50%, 75% or 100% of the remaining 40% of their annual retainer and any additional fees in the form
of DSUs. If a director meets their ownership requirements, the director may elect to take 25%, 50%, 75% or 100% of their
annual retainer and any fees in cash, with the balance, if any, to be paid in DSUs. Each DSU fully vests upon award. Dividend
equivalents accrue to the participants in the form of additional share units as of each normal cash dividend payment date of
Cameco’s common shares. The DSUs will be redeemed for cash upon a director leaving the board. The redemption amount
will be based upon the weighted average of the closing prices of the common shares of Cameco on the TSX for the last 20
trading days prior to the redemption date multiplied by the number of DSUs held by the director. As of December 31, 2019, the
total number of DSUs held by participating directors was 474,266 (2018 - 528,483).
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 129
The Company has established a PSU plan whereby it provides each plan participant an annual grant of PSUs in an amount
determined by the board. Each PSU represents one phantom common share that entitles the participant to a payment of one
Cameco common share purchased on the open market, or cash with an equivalent market value, at the participant’s
discretion, at the end of each three-year period if certain performance and vesting criteria have been met. The final value of
the PSUs will be based on the value of Cameco common shares at the end of the three-year period and the number of PSUs
that ultimately vest. During the vesting period, dividend equivalents accrue to the participants in the form of additional share
units as of each normal cash dividend payment date of Cameco’s common shares. Vesting of PSUs at the end of the three-
year period will be based on total shareholder return over the three years, Cameco’s ability to meet its annual operating
targets and whether the participating executive remains employed by Cameco at the end of the three-year vesting period. If
the participant elects a cash payout, the redemption amount will be based on the volume-weighted average trading price of
Cameco’s common shares on March 1 or, if March 1 is not a trading day, on the first trading day following March 1. As of
December 31, 2019, the total number of PSUs held by the participants, after adjusting for forfeitures on retirement, was
1,465,618 (2018 - 1,343,971).
Cameco makes annual grants of bonuses to eligible non-North American employees in the form of phantom stock options.
Employees receive the equivalent value of shares in cash when exercised. Options granted under the phantom stock option
plan have an award value equal to the closing price quoted on the TSX for the common shares of Cameco on the trading day
prior to the date on which the option is granted. The options vest over three years and expire eight years from the date
granted. As of December 31, 2019, the number of options held by participating employees was 406,270 (2018 - 353,580) with
exercise prices ranging from $11.32 to $26.81 per share (2018 - $11.32 to $39.53) and a weighted average exercise price of
$16.48 (2018 - $17.74).
Cameco has recognized the following expenses (recoveries) under its cash-settled plans:
Deferred share unit plan
Performance share unit plan(a)
Phantom stock option plan
Total
2019
2018
$
$
(1,001)
-
(436)
$
(1,437)
$
2,922
-
675
3,597
(a) The modification to the PSU plan resulted in a reclassification, at the date of modification, of $8,369,000 from equity to
liabilities. The liability recognized on the date of the modification was less than the amount previously recognized as an
increase in equity. Since the plan modification did not change the performance and vesting criteria, no incremental fair value
was granted.
At December 31, 2019, a liability of $14,577,000 (2018 - $9,352,000) was included in the consolidated statements of financial
position to recognize accrued but unpaid expenses for cash-settled plans.
Fair value measurement of cash-settled plans
The fair value of the units granted through the PSU plan was determined based on Monte Carlo simulation and the fair value
of the phantom stock option plan was measured based on the Black-Scholes option-pricing model. Expected volatility is
estimated by considering historic average share price volatility.
The inputs used in the measurement of the fair values of the cash-settled share-based payment plans at the grant and
reporting dates were as follows:
130 CAMECO CORPORATION
PSUs
Phantom stock options
Grant date
Reporting
date
Grant date
Reporting
date
Mar 1, 2019
Dec 31, 2019 Mar 1, 2019
Dec 31, 2019
Number of units
Expected vesting
Average strike price
Expected dividend
Expected volatility
Risk-free interest rate
Expected life of option
Expected forfeitures
Weighted average measurement date fair values
477,250
106%
-
-
38%
1.8%
3.0 years
12%
$15.33
1,465,618
80%
-
-
31%
1.7%
1.4 years
10%
$10.07
68,890
-
$15.27
$0.08
37%
1.5%
4.5 years
8%
$5.07
406,720
-
$16.48
$0.08
35%
1.7%
4.0 years
8%
$2.14
In addition to these inputs, other features of the PSU grant were incorporated into the measurement of fair value. The market
condition based on total shareholder return was incorporated by utilizing a Monte Carlo simulation. The non-market criteria
relating to realized selling prices and operating targets have been incorporated into the valuation at both grant and reporting
date by reviewing prior history and corporate budgets.
25. Pension and other post-retirement benefits
Cameco maintains both defined benefit and defined contribution plans providing pension benefits to substantially all of its
employees. All regular and temporary employees participate in a registered defined contribution plan. This plan is registered
under the Pension Benefits Standard Act, 1985. In addition, all Canadian-based executives participate in a non-registered
supplemental executive pension plan which is a defined benefit plan.
Under the supplemental executive pension plan (SEPP), Cameco provides a lump sum benefit equal to the present value of a
lifetime pension benefit based on the executive’s length of service and final average earnings. The plan provides for
unreduced benefits to be paid at the normal retirement age of 65, however unreduced benefits could be paid if the executive
was at least 60 years of age and had 20 years of service at retirement. This program provides for a benefit determined by a
formula based on earnings and service, reduced by the benefits payable under the registered base plan. Security is provided
for the SEPP benefits through a letter of credit held by the plan’s trustee. The face amount of the letter of credit is determined
each year based on the wind-up liabilities of the supplemental plan, less any plan assets currently held with the trustee. A
valuation is required annually to determine the letter of credit amount. Benefits will continue to be paid from plan assets until
the fund is exhausted, at which time Cameco will begin paying benefits from corporate assets.
Cameco also maintains non-pension post-retirement plans (“other benefit plans”) which are defined benefit plans that cover
such benefits as group life insurance and supplemental health and dental coverage to eligible employees and their
dependents. The costs related to these plans are charged to earnings in the period during which the employment services are
rendered. These plans are funded by Cameco as benefit claims are made.
The board of directors of Cameco has final responsibility and accountability for the Cameco retirement programs. The board is
ultimately responsible for managing the programs to comply with applicable legislation, providing oversight over the general
functions and setting certain policies.
Cameco expects to pay $1,106,000 in contributions and letter of credit fees to its defined benefit plans in 2020.
The post-retirement plans expose Cameco to actuarial risks, such as longevity risk, market risk, interest rate risk, liquidity risk
and foreign currency risk. The other benefit plans expose Cameco to risks of higher supplemental health and dental utilization
than expected. However, the other benefit plans have limits on Cameco’s annual benefits payable.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 131
The effective date of the most recent valuation for funding purposes on the registered defined benefit pension plans is January
1, 2018. The next planned effective date for valuations is January 1, 2021.
Cameco has more than one defined benefit plan and has generally provided aggregated disclosures in respect of these plans,
on the basis that these plans are not exposed to materially different risks. Information relating to Cameco’s defined benefit
plans is shown in the following table:
Pension benefit plans
2019
2018
Other benefit plans
2019
2018
$
7,177
$
8,061
$
Fair value of plan assets, beginning of year
Interest income on plan assets
Return on assets excluding interest income
Employer contributions
Benefits paid
Administrative costs paid
Fair value of plan assets, end of year
Defined benefit obligation, beginning of year
Current service cost
Interest cost
Actuarial loss (gain) arising from:
- demographic assumptions
- financial assumptions
- experience adjustment
Past service cost
Benefits paid
Foreign exchange
Defined benefit obligation, end of year
Defined benefit liability [note 14]
262
280
-
(912)
(1)
6,806
54,271
1,586
1,807
-
6,925
777
-
(1,705)
(1,073)
62,588
(55,782)
$
$
$
$
259
(292)
61
(910)
(2)
7,177
55,972
1,670
1,668
-
(3,776)
56
-
(2,028)
709
54,271
(47,094)
$
$
$
$
$
$
$
$
$
-
-
-
-
-
-
-
21,161
817
841
-
2,877
114
-
(855)
-
$
$
24,955
(24,955)
$
$
-
-
-
-
-
-
-
26,893
1,429
946
(192)
(1,887)
(2,919)
(1,929)
(1,180)
-
21,161
(21,161)
The percentages of the total fair value of assets in the pension plans for each asset category at December 31 were as follows:
Asset category(a)
Canadian equity securities
U.S. equity securities
Global equity securities
Canadian fixed income
Other(b)
Total
Pension benefit plans
2019
2018
9%
12%
9%
30%
40%
100%
9%
0%
21%
29%
41%
100%
(a) The defined benefit plan assets contain no material amounts of related party assets at December 31, 2019 and 2018
respectively.
(b) Relates to the value of the refundable tax account held by the Canada Revenue Agency. The refundable total is
approximately equal to half of the sum of the realized investment income plus employer contributions less half of the benefits
paid by the plan.
132 CAMECO CORPORATION
The following represents the components of net pension and other benefit expense included primarily as part of
administration:
Pension benefit plans
Other benefit plans
2019
2018
2019
2018
Current service cost
Net interest cost
Past service cost
Administration cost
Defined benefit expense [note 18]
Defined contribution pension expense [note 18]
$
$
$
1,586
1,545
-
1
3,132
11,767
1,670
1,409
-
2
3,081
13,431
$
817
841
-
-
1,658
-
Net pension and other benefit expense
$
14,899
$
16,512
$
1,658
$
The total amount of actuarial losses (gains) recognized in other comprehensive income is:
1,429
946
(1,929)
-
446
-
446
Actuarial loss (gain)
Return on plan assets excluding
interest income
Pension benefit plans
Other benefit plans
2019
2018
2019
2018
$
7,702
$
(3,720)
$
2,991
$
(4,998)
(280)
292
-
-
$
7,422
$
(3,428)
$
2,991
$
(4,998)
The assumptions used to determine the Company’s defined benefit obligation and net pension and other benefit expense
were as follows at December 31 (expressed as weighted averages):
Discount rate - obligation
Discount rate - expense
Rate of compensation increase
Initial health care cost trend rate
Cost trend rate declines to
Year the rate reaches its final level
Dental care cost trend rate
Pension benefit plans
Other benefit plans
2019
3.0%
3.7%
3.0%
-
-
-
-
2018
3.7%
3.4%
3.0%
-
-
-
-
2019
3.1%
3.9%
-
6.0%
5.0%
2022
5.0%
2018
3.9%
3.4%
-
6.0%
5.0%
2022
5.0%
At December 31, 2019, the weighted average duration of the defined benefit obligation for the pension plans was 20.0 years
(2018 - 19.4 years) and for the other benefit plans was 15.2 years (2018 - 14.3 years).
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 133
A 1% change at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would
have affected the defined benefit obligation by the following:
Pension benefit plans
Increase
Decrease
Other benefit plans
Increase
Decrease
Discount rate
Rate of compensation increase
$
(8,141)
2,832
$
10,595
(2,608)
$
(3,284)
n/a
$
4,133
n/a
A 1% change in any of the other assumptions would not have a significant impact on the defined benefit obligation.
The methods and assumptions used in preparing the sensitivity analyses are the same as the methods and assumptions used
in determining the financial position of Cameco’s plans as at December 31, 2019. The sensitivity analyses are determined by
varying the sensitivity assumption and leaving all other assumptions unchanged. Therefore, the sensitivity analyses do not
recognize any interdependence in the assumptions. The methods and assumptions used in determining the above sensitivity
are consistent with the methods and assumptions used in the previous year.
In addition, an increase of one year in the expected lifetime of plan participants in the pension benefit plans would increase the
defined benefit obligation by $1,621,000.
To measure the longevity risk for these plans, the mortality rates were reduced such that the average life expectancy for all
members increased by one year. The reduced mortality rates were subsequently used to re-measure the defined benefit
obligation of the entire plan.
26. Financial instruments and related risk management
Cameco is exposed in varying degrees to a variety of risks from its use of financial instruments. Management and the board of
directors, both separately and together, discuss the principal risks of our businesses. The board sets policies for the
implementation of systems to manage, monitor and mitigate identifiable risks. Cameco’s risk management objective in relation
to these instruments is to protect and minimize volatility in cash flow. The types of risks Cameco is exposed to, the source of
risk exposure and how each is managed is outlined below.
Market risk
Market risk is the risk that changes in market prices, such as commodity prices, foreign currency exchange rates and interest
rates, will affect the Company’s earnings or the fair value of its financial instruments. Cameco engages in various business
activities which expose the Company to market risk. As part of its overall risk management strategy, Cameco uses derivatives
to manage some of its exposures to market risk that result from these activities.
Derivative instruments may include financial and physical forward contracts. Such contracts may be used to establish a fixed
price for a commodity, an interest-bearing obligation or a cash flow denominated in a foreign currency. Market risks are
monitored regularly against defined risk limits and tolerances.
Cameco’s actual exposure to these market risks is constantly changing as the Company’s portfolios of foreign currency,
interest rate and commodity contracts change.
The types of market risk exposure and the way in which such exposure is managed are as follows:
As a significant producer and supplier of uranium and nuclear fuel processing services, Cameco bears significant exposure to
changes in prices for these products. A substantial change in prices will affect the Company’s net earnings and operating cash
flows. Prices for Cameco’s products are volatile and are influenced by numerous factors beyond the Company’s control, such
as supply and demand fundamentals and geopolitical events.
134 CAMECO CORPORATION
Cameco’s sales contracting strategy focuses on reducing the volatility in future earnings and cash flow, while providing both
protection against decreases in market price and retention of exposure to future market price increases. To mitigate the risks
associated with the fluctuations in the market price for uranium products, Cameco seeks to maintain a portfolio of uranium
product sales contracts with a variety of delivery dates and pricing mechanisms that provide a degree of protection from
pricing volatility.
The relationship between the Canadian and US dollar affects financial results of the uranium business as well as the fuel
services business. Sales of uranium product, conversion and fuel manufacturing services are routinely denominated in US
dollars while production costs are largely denominated in Canadian dollars.
Cameco attempts to provide some protection against exchange rate fluctuations by planned hedging activity designed to
smooth volatility. To mitigate risks associated with foreign currency, Cameco enters into forward sales and option contracts to
establish a price for future delivery of the foreign currency. These foreign currency contracts are not designated as hedges and
are recorded at fair value with changes in fair value recognized in earnings. Cameco also has a natural hedge against US
currency fluctuations because a portion of its annual cash outlays, including purchases of uranium and conversion services, is
denominated in US dollars.
Cameco holds a number of financial instruments denominated in foreign currencies that expose the Company to foreign
exchange risk. Cameco measures its exposure to foreign exchange risk on financial instruments as the change in carrying
values that would occur as a result of reasonably possible changes in foreign exchange rates, holding all other variables
constant. As of the reporting date, the Company has determined its pre-tax exposure to foreign currency exchange risk on
financial instruments to be as follows based on a 5% weakening of the Canadian dollar:
Cash and cash equivalents
Accounts receivable
Net foreign currency derivatives
Currency
Carrying value
(Cdn)
Gain (loss)
$
USD
USD
USD
$
120,675
280,877
(4,333)
6,034
14,044
(30,851)
A 5% strengthening of the Canadian dollar against the currencies above at December 31, 2019 would have had an equal but
opposite effect on the amounts shown above, assuming all other variables remained constant.
The Company has a strategy of minimizing its exposure to interest rate risk by maintaining target levels of fixed and variable
rate borrowings. The proportions of outstanding debt carrying fixed and variable interest rates are reviewed by senior
management to ensure that these levels are within approved policy limits. At December 31, 2019, the proportion of Cameco’s
outstanding debt that carries fixed interest rates is 85% (2018 - 67%).
Cameco is exposed to interest rate risk through its interest rate swap contracts whereby fixed rate payments on a notional
amount of $150,000,000 of the Series E senior unsecured debentures were swapped for variable rate payments. The Series E
swaps terminate on November 14, 2022. Under the terms of the swaps, Cameco makes interest payments based on the three-
month Canada Dealer Offered Rate plus an average margin of 1.2% and receives fixed interest payments of 3.75%. The
Series D swaps terminated on September 2, 2019. At December 31, 2019, the fair value of Cameco’s interest rate swap net
asset was $2,313,000 (2018 - $856,000).
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 135
Cameco measures its exposure to interest rate risk as the change in cash flows that would occur as a result of reasonably
possible changes in interest rates, holding all other variables constant. As of the reporting date, the Company has determined
the impact on earnings of a 1% increase in interest rate on its interest rate contracts to be a loss of $1,524,000.
Counterparty credit risk
Counterparty credit risk is associated with the ability of counterparties to satisfy their contractual obligations to Cameco,
including both payment and performance. The maximum exposure to credit risk, as represented by the carrying amount of the
financial assets, at December 31 was:
Cash and cash equivalents
Short-term investments
Accounts receivable [note 6]
Advances receivable from JV Inkai [note 31]
Derivative assets [note 10]
Cash and cash equivalents
2019
2018
$
$ 1,062,431
-
323,430
-
10,504
711,528
391,025
398,639
124,533
3,881
Cameco held cash and cash equivalents of $1,062,000,000 at December 31, 2019 (2018 - $712,000,000). Cameco mitigates
its credit risk by ensuring that balances are held with counterparties with high credit ratings. The Company monitors the credit
rating of its counterparties on a monthly basis and has controls in place to ensure prescribed exposure limits with each
counterparty are adhered to.
Impairment on cash and cash equivalents has been measured on a 12-month ECL basis and reflects the short maturities of
the exposures. The Company considers that its cash and cash equivalents have low credit risk based on the external credit
ratings of the counterparties. Cameco has assessed its counterparty credit risk on cash and cash equivalents by applying
historic global default rates to outstanding cash balances based on S&P rating. The conclusion of this assessment is that the
loss allowance is insignificant.
Accounts receivable
Cameco’s sales of uranium product, conversion and fuel manufacturing services expose the Company to the risk of non-
payment. Cameco manages the risk of non-payment by monitoring the credit-worthiness of its customers and seeking pre-
payment or other forms of payment security from customers with an unacceptable level of credit risk.
A summary of the Company’s exposure to credit risk for trade receivables is as follows:
Investment grade credit rating
Non-investment grade credit rating
Total gross carrying amount
Loss allowance
Net
Carrying
value
$ 244,315
77,323
$ 321,638
-
$ 321,638
At December 31, 2019, there were no significant concentrations of credit risk and no amounts were held as collateral.
Historically, Cameco has experienced minimal customer defaults and, as a result, considers the credit quality of its accounts
receivable to be high.
136 CAMECO CORPORATION
Cameco uses customer credit rating data, historic default rates and aged receivable analysis to measure the ECLs of trade
receivables from corporate customers, which comprise a small number of large balances. Since the Company has not
experienced customer defaults in the past, applying historic default rates in calculating ECLs, as well as considering forward-
looking information, resulted in an insignificant allowance for losses.
The following table provides information about Cameco’s aged trade receivables as at December 31, 2019:
Current (not past due)
1-30 days past due
More than 30 days past due
Total
Liquidity risk
Corporate
customers
Other
customers
$
$
274,249
39,690
301
$
314,240
$
5,306
1,221
871
7,398
Total
279,555
40,911
1,172
321,638
Financial liquidity represents Cameco’s ability to fund future operating activities and investments. Cameco ensures that there
is sufficient capital in order to meet short-term business requirements, after taking into account cash flows from operations and
the Company’s holdings of cash and cash equivalents. The Company believes that these sources will be sufficient to cover the
likely short-term and long-term cash requirements.
The table below outlines the Company’s available debt facilities at December 31, 2019:
Outstanding and
Total amount
committed
Amount available
Unsecured revolving credit facility
Letter of credit facilities [note 13]
$
1,000,000
1,719,120
$
-
1,528,603
$
1,000,000
190,517
The tables below present a maturity analysis of Cameco’s financial liabilities, including principal and interest, based on the
expected cash flows from the reporting date to the contractual maturity date:
Carrying
amount
Contractual
cash flows
less than Due in 1-3 Due in 3-5 Due after 5
1 year
years
years
years
Due in
Accounts payable and accrued liabilities $ 181,799 $ 181,799 $ 181,799 $
Long-term debt
Foreign currency contracts
Lease obligation [note 14]
1,000,000
4,333
14,004
996,718
4,333
12,869
-
4,168
3,967
- $
- $
400,000
165
8,031
500,000
-
2,006
-
100,000
-
-
Total contractual repayments
$ 1,195,719 $ 1,200,136 $ 189,934 $ 408,196 $ 502,006 $ 100,000
Total interest payments on long-term debt
$ 266,820 $ 41,040 $ 82,080 $ 52,080 $
91,620
Due in
less than Due in 1-3 Due in 3-5 Due after 5
Total
1 year
years
years
years
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 137
Measurement of fair values
The following tables summarize the carrying amounts and accounting classifications of Cameco’s financial instruments at the
reporting date:
At December 31, 2019
Financial assets
Cash and cash equivalents
Accounts receivable [note 6]
Derivative assets [note 10]
Foreign currency contracts
Interest rate contracts
Investments in equity securities [note 10]
Financial liabilities
Accounts payable and accrued liabilities [note 12]
Lease obligation [note 14]
Derivative liabilities [note 14]
Foreign currency contracts
Long-term debt [note 13]
FVTPL
Amortized
cost
FVOCI -
designated
Total
$
$
$
- $ 1,062,431 $
-
328,044
- $ 1,062,431
328,044
-
8,191
2,313
-
-
-
-
-
-
24,408
8,191
2,313
24,408
10,504 $ 1,390,475 $
24,408 $ 1,425,387
- $
-
181,799 $
12,869
- $
-
181,799
12,869
12,524
-
-
996,718
12,524
1,191,386
-
-
-
12,524
996,718
1,203,910
Net
$
(2,020) $
199,089 $
24,408 $
221,477
At December 31, 2018
Financial assets
Cash and cash equivalents
Short-term investments
Accounts receivable [note 6]
Derivative assets [note 10]
Foreign currency contracts
Interest rate contracts
Investments in equity securities [note 10]
Advances receivable from Inkai [note 31]
Financial liabilities
Accounts payable and accrued liabilities [note 12]
Current portion of long-term debt [note 13]
Derivative liabilities [note 14]
Foreign currency contracts
Interest rate contracts
Uranium contracts
Long-term debt [note 13]
FVTPL
Amortized
cost
FVOCI -
designated
Total
$
$
$
- $
-
-
711,528 $
391,025
402,350
- $
-
-
711,528
391,025
402,350
2,201
1,680
-
-
-
-
-
124,533
-
-
28,916
-
2,201
1,680
28,916
124,533
3,881 $ 1,629,436 $
28,916 $ 1,662,233
- $
-
224,754 $
499,599
- $
-
224,754
499,599
54,866
823
5,698
-
-
-
-
996,072
61,387
1,720,425
-
-
-
-
-
54,866
823
5,698
996,072
1,781,812
Net
$
(57,506) $
(90,989) $
28,916 $
(119,579)
138 CAMECO CORPORATION
Cameco has pledged $195,729,000 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 has a term of five years
effective July 1, 2018. Cameco retains full access to this cash.
The investments in equity securities represent investments that Cameco intends to hold for the long-term for strategic
purposes. As permitted by IFRS 9, these investments have been designated at the date of initial application as measured at
FVOCI. The accumulated fair value reserve related to these investments will never be reclassified to profit or loss.
Cameco has not irrevocably designated a financial asset that would otherwise meet the requirements to be measured at
amortized cost at FVOCI or FVTPL to eliminate or significantly reduce an accounting mismatch that would otherwise arise.
The following tables summarize the carrying amounts and fair values of Cameco’s financial instruments, including their levels
in the fair value hierarchy:
As at December 31, 2019
Derivative assets [note 10]
Foreign currency contracts
Interest rate contracts
Investments in equity securities [note 10]
Derivative liabilities [note 14]
Foreign currency contracts
Long-term debt [note 13]
Carrying value
Level 1
Level 2
Total
Fair value
$
$
8,191
2,313
24,408
$
-
-
24,408
$
8,191
2,313
-
8,191
2,313
24,408
(12,524)
(996,718)
-
-
(12,524)
(1,111,923)
(12,524)
(1,111,923)
Net
$
(974,330)
$
24,408
$ (1,113,943)
$ (1,089,535)
As at December 31, 2018
Derivative assets [note 10]
Foreign currency contracts
Interest rate contracts
Investments in equity securities [note 10]
Current portion of long-term debt [note 13]
Derivative liabilities [note 14]
Foreign currency contracts
Interest rate contracts
Uranium contracts
Long-term debt [note 13]
Net
Carrying value
Level 1
Level 2
Total
Fair value
$
2,201
1,680
28,916
(499,599)
(54,866)
(823)
(5,698)
(996,072)
$
$
-
-
28,916
-
$
2,201
1,680
-
(511,210)
2,201
1,680
28,916
(511,210)
-
-
-
-
(54,866)
(823)
(5,698)
(1,111,782)
(54,866)
(823)
(5,698)
(1,111,782)
$ (1,524,261)
$
28,916
$ (1,680,498)
$ (1,651,582)
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.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 139
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.
Cameco measures its derivative financial instruments, material investments in equity securities, current portion of long-term
debt and long-term debt at fair value. Investments in publicly held equity securities are classified as a recurring level 1 fair
value measurement while derivative financial instruments and long-term debt are classified as a recurring level 2 fair value
measurement.
The fair value of investments in equity securities is determined using quoted share prices observed in the principal market for
the securities as of the reporting date. The fair value of Cameco’s long-term debt is determined using quoted market yields as
of the reporting date, which ranged from 1.7% to 1.8% (2018 - 1.9% to 2.2%).
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.
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.
Uranium contract derivatives consist of price swaps. The fair value of uranium price swaps is determined by discounting
expected future cash flows from the contracts. The future cash flows are determined by measuring the difference between
fixed purchases or sales under contracted prices, and floating purchases or sales based on Numerco forward uranium price
curves. The swaps were settled during the year so there were none outstanding at the reporting date.
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.
140 CAMECO CORPORATION
Derivatives
The following table summarizes the fair value of derivatives and classification on the consolidated statements of financial
position:
Non-hedge derivatives:
Foreign currency contracts
Interest rate contracts
Uranium contracts
Net
Classification:
Current portion of long-term receivables, investments and other [note 10]
Long-term receivables, investments and other [note 10]
Current portion of other liabilities [note 14]
Other liabilities [note 14]
Net
$
$
$
2019
2018
$
(4,333)
2,313
-
(52,665)
857
(5,698)
(2,020)
$
(57,506)
$
4,144
6,360
(7,505)
(5,019)
1,028
2,853
(35,534)
(25,853)
$
(2,020)
$
(57,506)
The following table summarizes the different components of the gains (losses) on derivatives included in net earnings:
Non-hedge derivatives:
Foreign currency contracts
Interest rate contracts
Uranium contracts
Net
27. Capital management
2019
2018
$
$
31,863
2,068
(1,662)
(85,967)
2,032
2,854
$
32,269
$
(81,081)
Cameco’s management considers its capital structure to consist of bank overdrafts, long-term debt, short-term debt (net of
cash and cash equivalents and short-term investments), non-controlling interest and shareholders’ equity.
Cameco’s capital structure reflects its strategy and the environment in which it operates. Delivering returns to long-term
shareholders is a top priority. The Company’s objective is to maximize cash flow while maintaining its investment grade rating
through close capital management of our balance sheet metrics. Capital resources are managed to allow it to support
achievement of its goals while managing financial risks such as the continued weakness in the market, litigation risk and
refinancing risk. The overall objectives for managing capital in 2019 reflect the environment that the Company is operating in,
similar to the prior comparative period.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 141
The capital structure at December 31 was as follows:
Current portion of long-term debt [note 13]
Long-term debt [note 13]
Cash and cash equivalents
Short-term investments
Net debt
Non-controlling interest
Shareholders' equity
Total equity
Total capital
2019
2018
$
$
-
996,718
(1,062,431)
-
499,599
996,072
(711,528)
(391,025)
(65,713)
393,118
238
4,994,725
310
4,993,282
4,994,963
4,993,592
$ 4,929,250
$ 5,386,710
Cameco is bound by certain covenants in its general credit facilities. These covenants place restrictions on total debt, including
guarantees and set minimum levels for net worth. As of December 31, 2019, Cameco met these requirements.
28. 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 currently have production
suspensions. Cameco expensed $153,924,000 (2018 - $212,511,000) of care and maintenance costs during the year,
including $260,000 (2018 - $32,111,000) of severance costs. This had a negative impact on gross profit in the uranium
segment.
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.
142 CAMECO CORPORATION
A. Business segments - 2019
For the year ended December 31, 2019
Revenue
$ 1,413,809
$
370,277
$
78,839
$ 1,862,925
Uranium
Fuel
services
Other
Total
Expenses
Cost of products and services sold
Depreciation and amortization
Cost of sales
Gross profit (loss)
Administration
Exploration
Research and development
Other operating expense
Loss on disposal of assets
Finance costs
Gain on derivatives
Finance income
Share of earnings from equity-accounted investee
Other expense (income)
1,041,922
218,832
1,260,754
234,423
45,856
280,279
69,206
11,061
1,345,551
275,749
80,267
1,621,300
153,055
89,998
(1,428)
241,625
-
13,686
-
2,732
1,869
-
-
-
(45,360)
(52,801)
-
-
-
-
-
-
-
-
-
-
124,869
-
6,058
-
-
98,622
(32,269)
(29,760)
-
18,961
124,869
13,686
6,058
2,732
1,869
98,622
(32,269)
(29,760)
(45,360)
(33,840)
135,018
61,077
73,941
Earnings (loss) before income taxes
232,929
89,998
(187,909)
Income tax expense
Net earnings
Capital expenditures for the year
$
48,092
$
27,117
$
2
$
75,211
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 143
For the year ended December 31, 2018
Revenue
$ 1,684,056
$
313,989
$
93,616
$ 2,091,661
Uranium
Fuel
services
Other
Total
Expenses
Cost of products and services sold
Depreciation and amortization
Cost of sales
Gross profit (loss)
Administration
Exploration
Research and development
Other operating expense
Loss on disposal of assets
Finance costs
Loss on derivatives
Finance income
Share of earnings from equity-accounted investee
Other income
1,138,940
277,171
1,416,111
219,240
35,977
255,217
109,760
14,825
1,467,940
327,973
124,585
1,795,913
267,945
58,772
(30,969)
295,748
-
20,283
-
59,616
1,008
-
-
-
(32,321)
(81,955)
-
-
-
-
1,264
-
-
-
-
-
141,552
-
1,757
-
31
111,779
81,081
(22,071)
-
(26,205)
141,552
20,283
1,757
59,616
2,303
111,779
81,081
(22,071)
(32,321)
(108,160)
39,929
(126,306)
166,235
Earnings (loss) before income taxes
301,314
57,508
(318,893)
Income tax recovery
Net earnings
Capital expenditures for the year
$
44,114
$
11,226
$
22
$
55,362
Revenue is attributed to the geographic location based on the location of the entity providing the services. The Company’s
revenue from external customers is as follows:
United States
Canada
Switzerland
Germany
2019
2018
$ 1,295,195
567,730
-
-
$ 1,660,727
424,079
4,038
2,817
$ 1,862,925
$ 2,091,661
The Company’s non-current assets, excluding deferred tax assets and financial instruments, by geographic location
are as follows:
Canada
Australia
United States
Kazakhstan
Germany
144 CAMECO CORPORATION
2019
2018
$ 3,267,376
392,500
121,102
80
24
$ 3,401,828
414,084
131,526
49
41
$ 3,781,082
$ 3,947,528
Cameco relies on a small number of customers to purchase a significant portion of its uranium concentrates and uranium
conversion services. During 2019, revenues from two customers of Cameco’s uranium and fuel services segments
represented approximately $422,740,000 (2018 - $204,594,000), approximately 24% (2018 - 10%) of Cameco’s total revenues
from these segments. As customers are relatively few in number, accounts receivable from any individual customer may
periodically exceed 10% of accounts receivable depending on delivery schedule.
29. Group entities
The following are the principal subsidiaries and associates of the Company:
Subsidiaries:
Cameco Fuel Manufacturing Inc.
Cameco Marketing Inc.
Cameco Inc.
Power Resources, Inc.
Crow Butte Resources, Inc.
NUKEM, Inc.
Cameco Australia Pty. Ltd.
Cameco Europe Ltd.
Associates:
JV Inkai
Principal place
of business
Ownership interest
2019
2018
Canada
Canada
US
US
US
US
Australia
Switzerland
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Kazakhstan
40%
40%
30. Joint operations
Cameco conducts a portion of its exploration, development, mining and milling activities through joint operations located
around the world. Operations are governed by agreements that provide for joint control of the strategic operating, investing
and financing activities among the partners. These agreements were considered in the determination of joint control.
Cameco’s significant Canadian uranium joint operation interests are McArthur River, Key Lake and Cigar Lake. The Canadian
uranium joint operations allocate 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.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 145
Cameco reflects its proportionate interest in these assets and liabilities as follows:
Total assets
McArthur River
Key Lake
Cigar Lake
Total liabilities
McArthur River
Key Lake
Cigar Lake
31. Related parties
Principal place
of business
Ownership
2019
2018
Canada
Canada
Canada
69.81%
83.33%
50.03%
$ 1,046,556
524,324
1,354,399
$ 1,065,562
537,233
1,503,863
$ 2,925,279
$ 3,106,658
$
69.81%
83.33%
50.03%
32,132
227,562
47,396
$
32,829
222,369
38,478
$
307,090
$
293,676
Key management personnel are those persons that have the authority and responsibility for planning, directing and controlling
the activities of the Company, directly or indirectly. Key management personnel of the Company include executive officers,
vice-presidents, other senior managers and members of the board of directors.
In addition to their salaries, Cameco also provides non-cash benefits to executive officers and vice-presidents and contributes
to pension plans on their behalf (note 25). Senior management and directors also participate in the Company’s share-based
compensation plans (note 24).
Executive officers are subject to terms of notice ranging from three to six months. Upon resignation at the Company’s request,
they are entitled to termination benefits of up to the lesser of 18 to 24 months or the period remaining until age 65. The
termination benefits include gross salary plus the target short-term incentive bonus for the year in which termination occurs.
Compensation for key management personnel was comprised of:
Short-term employee benefits
Share-based compensation(a)
Post-employment benefits
Termination benefits
Total
2019
2018
$
$
21,225
12,034
5,542
272
24,821
12,796
4,323
860
$
39,073
$
42,800
(a) Excludes deferred share units held by directors (see note 24).
B. Other related party transactions
Cameco funded JV Inkai’s project development costs through an unsecured shareholder loan. The limit of the loan facility is
$175,000,000 (US) and advances under the facility bear interest at a rate of LIBOR plus 2%. At December 31, 2019, there was
no balance outstanding as the loan was fully repaid in the third quarter (2018 - $124,533,000 ($91,320,000 (US)) (notes 10
and 30). For the year ended December 31, 2019, Cameco recorded interest income of $1,878,000 relating to this balance
(2018 - $5,603,000).
146 CAMECO CORPORATION
Cameco purchases uranium concentrates from JV Inkai. For the year ended December 31, 2019, Cameco had purchases of
$112,861,000 ($84,827,000 (US)) (2018 - $94,063,000 ($72,007,000 (US))). Cameco received a cash dividend from JV Inkai
of $14,079,000 ($10,635,000 (US)) (2018 - nil).
32. Comparative Figures
Certain prior year balances have been reclassified to conform to the current financial statement presentation.
2019 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 147
Investor Information
Common Shares
Toronto (CCO) | New York (CCJ)
Transfer Agents and Registrars
The registrar and transfer agent for Cameco’s common shares is AST Trust Company. For information on common shareholdings, dividend
cheques, lost share certificates and address changes, contact:
Canada
AST Trust Company (Canada)
P.O. Box 700, Station B
Montreal, Quebec H3B 3K3
Telephone
1-800-387-0825 or
1-416-682-3860 (outside of North America)
www.astfinancial.com/ca-en
USA
American Stock Transfer &
Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Inquiries
Cameco Corporation
2121 - 11th Street West
Saskatoon, Saskatchewan S7M 1J3
Phone:
306-956-6200
Fax:
306-956-6201
For comprehensive
financial information, visit:
cameco.com
Annual Meeting
Dividends
The annual meeting of shareholders of Cameco
In 2019, our board of directors declared a dividend of
Corporation is scheduled to be held on April 30, 2020 at
$0.08 per common share, which was paid December 13,
Cameco’s head office in Saskatoon, Saskatchewan.
2019. The decision to declare a dividend by our board is
based on our cash flow, financial position, strategy and
other relevant factors including appropriate alignment
with the cyclical nature of our earnings.