Ms. Rachelle Girard reports
CAMECO ANNOUNCES THIRD QUARTER RESULTS, BENEFITING FROM EXECUTION OF STRATEGY; CONTINUED CONTRACTING SUCCESS WITH 77 MILLION POUNDS URANIUM YEAR-TO-DATE: 50 MILLION PREVIOUSLY ANNOUNCED AND ADVANCING ANOTHER 27 MILLION
Cameco Corp. has released its consolidated financial and operating results for the third quarter ended Sept. 30, 2022, in accordance with International Financial Reporting Standards (IFRS).
"Our results reflect the execution of our strategy of full-cycle value capture and are in line with the preliminary third-quarter operating update provided on Oct. 11, 2022. We are benefiting from higher average realized prices in our uranium segment and our fuel services segment as the market continues to transition and geopolitics continue to highlight security of supply concerns," said Tim Gitzel, Cameco's president and chief executive officer. "With improving financials as we begin to restore our Tier 1 run rate and exposure to rising prices, we continue to believe Cameco is the best way to invest in the uranium market recovery.
"We have continued to have success in securing long-term contracts that will underpin the operation of our Tier 1 assets and that we expect to benefit from for many years thanks to our strategic patience. Year-to-date we have added 50 million pounds to our long-term uranium contract portfolio. And we have added seven million kg [kilograms] U as UF6 [uranium hexafluoride] to our portfolio. Additionally, we have advanced contracting discussions for about 27 million pounds of long-term uranium business and 7.5 million kg U of conversion services from initiation to accepted. Key commercial terms, such as pricing mechanism, volume and tenor have been agreed upon, but contracts are subject to finalization. Once all contracts are finalized, the total volume of uranium successfully contracted since the beginning of 2022 is expected to be about 77 million pounds, and the total volume of conversion services contracted is expected to be about 14.5 million kg U. Finalization of these contracts may or may not occur in this calendar year. And while it has already been a successful year of contracting, our pipeline of uranium and conversion negotiations remains large and we expect to see more long-term demand come to the market.
"We remain disciplined and balanced in managing our assets over the long term. Continued contracting success and further improvements in the uranium market will be the key to enable us to make production planning decisions that will get us back to operating at our Tier 1 run rate.
"We continue to transition from care and maintenance to operational readiness at McArthur River and Key Lake. Commissioning has been completed for all process circuits at the McArthur River mine and critical mining equipment and initial production areas have been prepared and are ready for new production. The Key Lake mill has undergone significant upgrades, including a new computer operating system, installation of several automated systems and the incorporation of digital technology. We have been working through normal commissioning issues as we integrate the existing and new assets with the upgraded operating system. Commissioning activities are winding down and first production is scheduled for later in the fourth quarter. We continue to expect up to two million pounds of production (100 per cent basis) this year.
"Thanks to our deliberate actions and conservative financial management we have been, and continue to be, resilient. With $1.3-billion in cash and cash equivalents and short-term investments on our balance sheet, improving fundamentals for our business and our decision to prepare McArthur River/Key Lake for production, our plans give us line of sight to a significant improvement in our future financial performance.
"We are optimistic about Cameco's role in supporting the transition to a net-zero carbon economy. We have Tier-1 assets that are licensed, permitted, long-lived and proven reliable, and that have expansion capacity. These Tier-1 assets are backed up by idle Tier-2 assets and what we think is the best exploration portfolio that leverages existing infrastructure. We have locked in significant value for the fuel services segment of our business in the recent price transition in the conversion market, and we are exploring opportunities in the nuclear fuel cycle and in innovative, non-traditional commercial uses of nuclear power in Canada and around the world.
"And of course, with the pending joint acquisition of Westinghouse, we are excited about being able to extend the base of our reach in the nuclear fuel cycle with assets that, like ours, are strategic, proven, licensed, permitted and located in geopolitically important jurisdictions. Assets that we expect will be able to participate in the growing demand profile for nuclear energy from their existing footprint.
"We believe we have the right strategy to achieve our vision of 'energizing a clean-air world' and we will do so in a manner that reflects our values. Embedded in all our decisions is a commitment to addressing the environmental, social and governance risks and opportunities that we believe will make our business sustainable over the long term."
Q3 net loss of $20-million, adjusted net earnings of $10-million: Results are driven by normal quarterly variations in contract deliveries and the continued execution of the company's strategy, including the operational readiness activities to reach planned Tier 1 production by 2024. Adjusted net earnings is a non-IFRS measure.
Strong performance in the uranium and fuel services segments: Third-quarter results reflect the impact of higher average realized prices in both the uranium and fuel services segments under the company's long-term contract portfolio. In the company's uranium segment it produced two million pounds (the company's share) during the quarter and delivered 5.3 million pounds at an average realized price 48 per cent higher than the same period last year. In the company's fuel services segment average realized prices were 27 per cent higher than in the third quarter of 2021. Uranium and fuel services production and deliveries were in-line with the preliminary third-quarter operating update provided on Oct. 11, 2022.
Contracting success continues while maintaining leverage to higher prices: Year-to-date, the company has added to its long-term contract portfolio more than 50 million pounds in its uranium segment and more than seven million kg U-UF6 conversion in its fuel services segment. In addition, it has advanced contracting discussions for about 27 million pounds of long-term uranium business and 7.5 million kg U of conversion services from initiation to accepted. Key commercial terms such as pricing mechanism, volume and tenor have been agreed to, but the contracts are subject to finalization. Once all contracts are finalized, the total volume of uranium successfully contracted since the beginning of 2022 is expected to be about 77 million pounds and the total volume of conversion services contracted is expected to be about 14.5 million kg U. Finalization of these contracts may or may not occur in this calendar year. While it has already been a successful year of contracting, the company's pipeline of uranium and conversion negotiations remains large and it expects to see more long-term demand come to the market.
McArthur River/Key Lake continue to expect first production in fourth quarter: During the quarter the company continued to advance the recruitment, training and operational readiness activities at the McArthur River mine and Key Lake mill. It expensed the operational readiness costs directly to cost of sales, which totalled approximately $51-million during the quarter. Commissioning has been completed for all process circuits at the McArthur River mine and critical mining equipment and initial production areas have been prepared and are ready for new production. The Key Lake mill has undergone significant upgrades, including a new computer operating system, installation of several automated systems and the incorporation of digital technology. The company has been working through normal commissioning issues as it integrates the existing and new assets with the upgraded operating system. Commissioning activities are winding down and first production is scheduled for later in the fourth quarter. The company continues to expect up to two million pounds of production (100 per cent basis) this year.
JV Inkai shipments still delayed: JV Inkai has continued to experience delays in shipping its finished product via the Trans-Caspian route. The first shipment of the company's share of JV Inkai's 2022 production has been dispatched at the end of September but is delayed in transit. The company continues to work closely with JV Inkai and its joint venture partner, Kazatomprom, to begin receiving the company's production share via this shipping route that doesn't rely on Russian rail lines or ports, however, there are no assurances regarding the timeline for resolution of this delay. In the event that it takes longer than anticipated to secure this shipping route, the company could experience further delays in its expected Inkai deliveries this year. To mitigate this risk, the company has inventory, long-term purchase agreements and loan arrangements in place it can draw on. Depending on when the company receives the shipment of its share of Inkai's 2022 production, its 2022 share of earnings from this equity-accounted investee and the timing of the receipt of its share of dividends from the joint venture may be impacted.
Strong balance sheet: As of Sept. 30, 2022, the company had $1.3-billion in cash, cash equivalents and short-term investments, and $997-million in long-term debt. In addition, the company as a $1-billion undrawn credit facility which matures Oct. 1, 2026.
2022 outlook updated: The company has updated its outlook for purchases and average realized price. See outlook for 2022 in the company's third-quarter MD&A (management s discussion and analysis) for more information.
Also of note, joint venture formed to acquire Westinghouse: Following the quarter, as announced on Oct. 11, 2022, the company has entered into a strategic partnership with Brookfield Renewable Partners and its institutional partners to acquire Westinghouse Electric Company, a global provider of mission-critical and specialized technologies, products and services across most phases of the nuclear power sector. Brookfield Renewable, with its institutional partners, will beneficially own a 51-per-cent interest in Westinghouse and Cameco will beneficially own 49-per-cent. Bringing together Cameco's expertise in the nuclear industry with Brookfield Renewable's expertise in clean energy positions nuclear power at the heart of the energy transition and creates a powerful platform for strategic growth across the nuclear sector. Concurrently with the execution of the acquisition agreement, the company secured commitments that provide for a $1-billion (U.S.) bridge loan facility and $600-million (U.S.) in term loans. Following the announcement, the company undertook a $650-million (U.S.) bought-deal offering of common shares, with an underwriter option to purchase additional shares. The offering closed on Oct. 17, 2022, providing the company with gross proceeds of approximately $747.6-million (U.S.) including the underwriter's exercise of the option to purchase additional shares in full. Closing is anticipated in the second half of 2023. The transaction is subject to closing conditions, including regulatory approvals. See subsequent event, proposed acquisition of Westinghouse in the company's third-quarter MD&A and the Oct. 18, 2022, material change report (available on SEDAR and SEC websites) for more information.
The financial information presented for the three months and nine months ended Sept. 30, 2021, and Sept. 30, 2022, is unaudited.
Management's discussion and analysis and financial statements
The third-quarter MD&A and unaudited condensed consolidated interim financial statements provide a detailed explanation of the company's operating results for the three and nine months ended Sept. 30, 2022, as compared with the same periods last year. This news release should be read in conjunction with these documents, as well as the company's audited consolidated financial statements and notes for the year ended Dec. 31, 2021, first quarter, second quarter and annual MD&A, and the company's most recent annual information form, all of which are available on the company's website, on SEDAR and on EDGAR.
The technical and scientific information discussed in this document for the company's material properties McArthur River/Key Lake, Cigar Lake and Inkai was approved by the following individuals who are qualified persons for the purposes of National Instrument 43-101:
- McArthur River/Key Lake:
Greg Murdock, general manager, McArthur River, Cameco;
- Cigar Lake:
Lloyd Rowson, general manager, Cigar Lake, Cameco;
Sergey Ivanov, deputy director general, technical services, Cameco Kazakhstan LLP.
Cameco invites you to join its third quarter conference call on Thursday, Oct. 27, 2022, at 8 a.m. ET.
The call will be open to all investors and the media. To join the call, please dial 800-319-4610 (Canada and U.S.) or 604-638-5340. An operator will put your call through. The slides and a live webcast of the conference call will be available from a link on the company's website home page on the day of the call.
A recorded version of the proceedings will be available:
- On the company's website shortly after the call;
On postview until midnight ET, Nov. 27, 2022, by calling 800-319-6413 (Canada and U.S.) or 604-638-9010 (passcode 9376).
2022 fourth quarter and annual report release date
Cameco plans to announce its 2022 fourth quarter and annual consolidated financial and operating results before markets open on Feb. 9, 2023. Announcement dates are subject to change.
About Cameco Corp.
Cameco is one of the largest global providers of the uranium fuel needed to energize a clean-air world. The company's competitive position is based on its controlling ownership of the world's largest high-grade reserves and low-cost operations. Utilities around the world rely on Cameco's nuclear fuel products to generate safe, reliable carbon-free nuclear power. Cameco's head office is in Saskatoon, Sask.
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