Cameco (TSX: CCO; NYSE: CCJ) today reported its consolidated
financial and operating results for the first quarter ended March
31, 2022 in accordance with International Financial Reporting
Standards (IFRS).
“With the recent uranium price increase, we are beginning to
enjoy the benefits of the strategic and deliberate decisions we
have made. And, with leverage to rising prices, we are
well-positioned to continue to capture value from the market
transition we believe is underway, and that is supported by the
fundamentals; fundamentals characterized by durable, full-cycle
demand against a backdrop of growing concerns about security of
supply,” said Tim Gitzel, Cameco’s president and CEO.
“Durable demand is being driven by the accountability for
achieving net-zero carbon targets, while balancing the need for
affordable, reliable and secure baseload electricity, all while
diversifying away from reliance on Russian energy supplies.
Governments and policy makers are increasingly recognizing the role
that nuclear plays in achieving those objectives. It is why, since
the start of 2022, we have seen announcements from countries like
the United States, the United Kingdom, France, South Korea and
Belgium focused on preserving and expanding the life of their
existing reactor fleets as well as on building new reactors. There
is also momentum building for non-traditional commercial uses of
nuclear power around the world such as development of small modular
reactors and advanced reactors, with numerous companies and
countries pursuing projects. We’re seeing countries and companies
turn to nuclear with an appetite that I’m not sure I’ve ever seen
in my four decades in this business.
“The supply side is quite a different picture. For some time now
we have said that we believed the uranium market was as vulnerable
to a supply shock as it has ever been due to persistently low
prices. The low prices and resulting lack of investment have put
productive capacity at risk and not just for uranium, but for
conversion and enrichment as well. We have seen the deepening of
geopolitical and origin risk as supply has become increasingly
concentrated. With Russia’s invasion of Ukraine, whether because of
sanctions or because of conflict with company values, the industry
now faces the challenge of disentangling its supply chain from
dependence on Russian nuclear fuel supplies. It is still early
days, but we are seeing what we believe is an unprecedented
geopolitical realignment occurring in the nuclear fuel cycle.
“With geopolitics complicating and potentially bottlenecking
nuclear fuel supplies, we are seeing not just utilities but some of
the intermediaries and service providers beginning to shift their
attention to securing material for their uncovered requirements,
and to derisk some of their origin dependencies. And we are seeing
the continued thinning of the spot market by physical uranium
investors. As a result, uranium prices have increased significantly
with the spot price up 38% and the long-term price up 15% since the
start of the year. The conversion spot price is up 65% and the
long-term price is up 25%.
“As the market continues to transition, we expect to continue to
place our uranium and conversion services under long-term contracts
and to meet rising demand with production from our best margin
operations. While we have not concluded any new contracts in 2022
beyond the 40 million pounds disclosed in our fourth quarter
MD&A, we have a significant pipeline of contract discussions
underway. However, we will continue to exercise strategic patience
in our contracting activity.
“We will also take a balanced and disciplined approach to our
supply decisions. Even though we have seen considerable pricing
pressure resulting from the geopolitical uncertainty, we will not
change our production plans. We will not front-run demand with
supply. As we announced in February, we are continuing with
indefinite supply discipline. Starting in 2024, with McArthur
River/Key Lake and Cigar Lake operating at less than licensed
capacity, we plan to be operating at about 40% below our productive
capacity (100% basis). This will remain our production plan until
we see further improvements in the uranium market and have made
further progress in securing the appropriate homes for our
unencumbered, in-ground inventory under long-term contracts, once
again demonstrating that we are a responsible supplier of uranium
fuel.
“Thanks to our deliberate actions and conservative financial
management we have been and continue to be resilient. Our strong
balance sheet, with $1.5 billion in cash and cash equivalents and
short-term investments, positions us well to self-manage risk,
including any global macro-economic or geopolitical uncertainty and
volatility that may arise.
“We are optimistic about Cameco’s role in capturing long-term
value across the fuel chain and supporting the transition to a
net-zero carbon economy. We have tier-one assets that are licensed,
permitted, long-lived, are proven reliable, and that have expansion
capacity. These tier-one assets are backed up by idle tier-two
assets and what we think is the best exploration portfolio that
leverages existing infrastructure. We are vertically integrated
across the nuclear fuel cycle. We have locked in significant value
for the fuel services segment of our business and we are exploring
opportunities to further our reach in the nuclear fuel cycle and in
innovative, non-traditional commercial uses of nuclear power in
Canada and around the world.
“We 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.”
- Net earnings of $40 million; adjusted net earnings of $17
million: first quarter results are driven by normal quarterly
variations in contract deliveries and the continued execution of
our strategy in a market that we believe is in the early stages of
transition. Adjusted net earnings is a non-IFRS measure, see
below.
- Strong performance in the uranium and fuel services
segments: First quarter results reflect the impact of increased
average realized prices in both the uranium and fuel services
segments. In our uranium segment we produced 1.9 million pounds
(our share) during the quarter and sold 5.9 million pounds at an
average realized price 34% higher than the same period last year.
In our fuel services segment average realized prices were 8% higher
than in the first quarter of 2021.
- Significant pipeline of contract discussions in strengthened
price environment: As we announced in February, in our uranium
segment, since the beginning of 2022, we had been successful in
adding 40 million pounds to our portfolio of long-term uranium
contracts. While we have not concluded any additional contracts in
2022, we continue to have a significant pipeline of contract
discussions underway. Origin risk is driving interest in securing
uranium supply as well as conversion services. We are being
strategically patient in our discussions to capture as much value
as possible in our contract portfolio. In addition to the
off-market contracting interest, there has been a re-emergence of
on-market requests for proposals from utilities looking to secure
their future requirements and reduce origin risk.
- Operational readiness for McArthur River/Key Lake is
on-track: During the first quarter, at the McArthur River mine
and Key Lake mill we focused on recruitment and training
activities. There are now approximately 600 employees and long-term
contractors employed at the mine and mill. When we resume
operations later this year, we expect to have approximately 850
employees and long-term contractors. In addition, we advanced the
work necessary to complete critical projects and the maintenance
readiness checks at both the mine and mill. We expensed the
operational readiness costs directly to cost of sales, which
totaled approximately $40 million during the quarter. We continue
to expect we could produce up to 5 million pounds (100% basis) this
year depending on our success in completing operational readiness
activities and managing the potential risks of the COVID-19
pandemic and related supply chain challenges.
- JV Inkai shipments: The geopolitical situation arising
as a result of the Russian invasion of Ukraine is creating
transportation risk in the region. Sanctions on Russia and
restrictions on and cancellations of some cargo insurance coverage
create uncertainty about the ability to ship uranium products from
Central Asia, potentially complicating the logistics for deliveries
from those areas, including JV Inkai’s final product. We are
working with Inkai and our joint venture partner, Kazatomprom, to
secure an alternate shipping route that doesn’t rely on Russian
rail lines or ports. In the meantime, we have decided to delay a
near-term delivery for our share of production from JV Inkai. In
the event that it takes longer than anticipated to secure an
alternate shipping route, we could experience further delays in our
expected Inkai deliveries this year. To mitigate the risk, we have
inventory, long-term purchase agreements and loan arrangements in
place that we can draw on. See Uranium 2022 Q1 updates in our first
quarter MD&A for more information.
- 2022 guidance updated: Our outlook has been amended to
reflect the increases in uranium prices. See Outlook for 2022 in
our first quarter MD&A for more information.
- Strong balance sheet: As of March 31, 2022, we had $1.5
billion in cash and cash equivalents and short-term investments and
$996 million in long-term debt. In addition, we have a $1 billion
undrawn credit facility.
- Received dividends from JV Inkai in April: On April 28,
we received dividend payments from JV Inkai totaling $83 million
(US). JV Inkai distributes excess cash, net of working capital
requirements, to the partners as dividends.
Consolidated financial results
THREE MONTHS
HIGHLIGHTS
ENDED MARCH 31
($ MILLIONS EXCEPT WHERE INDICATED)
2022
2021
CHANGE
Revenue
398
290
37%
Gross profit (loss)
50
(40)
>100%
Net earnings (losses) attributable to
equity holders
40
(5)
>100%
$ per common share (basic)
0.10
(0.01)
>100%
$ per common share (diluted)
0.10
(0.01)
>100%
Adjusted net earnings (losses) (non-IFRS,
see below)
17
(29)
>100%
$ per common share (adjusted and
diluted)
0.04
(0.07)
>100%
Cash provided by operations (after working
capital changes)
172
45
>100%
The financial information presented for the three months ended
March 31, 2021 and March 31, 2022 is unaudited.
NET EARNINGS
The following table shows what contributed to the change in net
earnings and adjusted net earnings (non-IFRS measure, see below) in
the first quarter of 2022, compared to the same period in 2021.
THREE MONTHS
ENDED MARCH 31
($ MILLIONS)
IFRS
ADJUSTED
Net losses – 2021
(5)
(29)
Change in gross profit by segment
(We calculate gross profit by deducting
from revenue the cost of products and services sold, and
depreciation and amortization (D&A))
Uranium
Higher sales volume
(11)
(11)
Higher realized prices ($US)
82
82
Lower costs
17
17
Change – uranium
88
88
Fuel services
Lower sales volume
(4)
(4)
Higher realized prices ($Cdn)
5
5
Higher costs
(2)
(2)
Change – fuel services
(1)
(1)
Other changes
Higher administration expenditures
(47)
(47)
Higher exploration expenditures
(2)
(2)
Change in reclamation provisions
(2)
1
Higher earnings from equity-accounted
investee
22
22
Change in gains or losses on
derivatives
1
(1)
Change in foreign exchange gains or
losses
(4)
(4)
Canadian Emergency Wage Subsidy in
2021
(12)
(12)
Change in income tax recovery or
expense
(1)
(1)
Other
3
3
Net earnings – 2022
40
17
Non-IFRS measures
ADJUSTED NET EARNINGS
Adjusted net earnings (ANE) is a measure that does not have a
standardized meaning or a consistent basis of calculation under
IFRS (non-IFRS financial measure). We use this measure as a more
meaningful way to compare our financial performance from period to
period. Adjusted net earnings is our net earnings attributable to
equity holders, adjusted to better reflect the underlying financial
performance for the reporting period. We believe that, in addition
to conventional measures prepared in accordance with IFRS, certain
investors use this information to evaluate our performance.
Adjusted net earnings is one of the targets that we measure to form
the basis for a portion of annual employee and executive
compensation (see Measuring our results in our 2021 annual
MD&A).
In calculating ANE we adjust for derivatives. We do not use
hedge accounting under IFRS and, therefore, we are required to
report gains and losses on all hedging activity, both for contracts
that close in the period and those that remain outstanding at the
end of the period. For the contracts that remain outstanding, we
must treat them as though they were settled at the end of the
reporting period (mark-to-market). However, we do not believe the
gains and losses that we are required to report under IFRS
appropriately reflect the intent of our hedging activities, so we
make adjustments in calculating our ANE to better reflect the
impact of our hedging program in the applicable reporting period.
See Foreign exchange in our 2021 annual MD&A for more
information.
We also adjust for changes to our reclamation provisions that
flow directly through earnings. Every quarter we are required to
update the reclamation provisions for all operations based on new
cash flow estimates, discount and inflation rates. This normally
results in an adjustment to an asset retirement obligation asset in
addition to the provision balance. When the assets of an operation
have been written off due to an impairment, as is the case with our
Rabbit Lake and US ISR operations, the adjustment is recorded
directly to the statement of earnings as “other operating expense
(income)”. See note 8 of our interim financial statements for more
information. This amount has been excluded from our ANE
measure.
Adjusted net earnings is a non-IFRS financial measure and should
not be considered in isolation or as a substitute for financial
information prepared according to accounting standards. Other
companies may calculate this measure differently, so you may not be
able to make a direct comparison to similar measures presented by
other companies.
The following table reconciles adjusted net earnings with net
earnings for the first quarter and compares it to the same period
in 2021.
THREE MONTHS
ENDED MARCH 31
($ MILLIONS)
2022
2021
Net earnings (losses) attributable to
equity holders
40
(5)
Adjustments
Adjustments on derivatives
(11)
(9)
Adjustments to other operating income
(19)
(22)
Income taxes on adjustments
7
7
Adjusted net earnings (losses)
17
(29)
Selected segmented highlights
THREE MONTHS
ENDED MARCH 31
HIGHLIGHTS
2022
2021
CHANGE
Uranium
Production volume (million lbs)
1.9
-
>100%
Sales volume (million lbs)
5.9
5.0
18%
Average realized price1
($US/lb)
43.24
32.25
34%
($Cdn/lb)
55.05
41.05
34%
Revenue ($ millions)
322
205
57%
Gross profit (loss) ($ millions)
24
(64)
>100%
Fuel services
Production volume (million kgU)
4.1
4.0
2%
Sales volume (million kgU)
2.2
2.6
(15)%
Average realized price 2
($Cdn/kgU)
34.49
31.91
8%
Revenue ($ millions)
76
84
(10)%
Gross profit ($ millions)
26
27
(4)%
1
Uranium average realized price is
calculated as the revenue from sales of uranium concentrate,
transportation and storage fees divided by the volume of uranium
concentrates sold.
2
Fuel services average realized
price is calculated as revenue from the sale of conversion and
fabrication services, including fuel bundles and reactor
components, transportation and storage fees divided by the volumes
sold.
Management's discussion and analysis (MD&A) and financial
statements
The first quarter MD&A and unaudited condensed consolidated
interim financial statements provide a detailed explanation of our
operating results for the three months ended March 31, 2022, as
compared to the same period last year. This news release should be
read in conjunction with these documents, as well as our audited
consolidated financial statements and notes for the year ended
December 31, 2021, and annual MD&A, and our most recent annual
information form, all of which are available on our website at
cameco.com, on SEDAR at sedar.com, and on EDGAR at
sec.gov/edgar.shtml.
Qualified persons
The technical and scientific information discussed in this
document for our material properties McArthur River/Key Lake, Cigar
Lake and Inkai was approved by the following individuals who are
qualified persons for the purposes of NI 43-101:
MCARTHUR RIVER/KEY LAKE
- Greg Murdock, general manager, McArthur River/Key Lake,
Cameco
CIGAR LAKE
- Lloyd Rowson, general manager, Cigar Lake, Cameco
INKAI
- Sergey Ivanov, deputy director general, technical services,
Cameco Kazakhstan LLP
Caution about forward-looking information
This news release includes statements and information about our
expectations for the future, which we refer to as forward-looking
information. Forward-looking information is based on our current
views, which can change significantly, and actual results and
events may be significantly different from what we currently
expect.
Examples of forward-looking information in this news release
include: our views that we have leverage to rising prices and are
well-positioned to continue to capture value from the market
transition we believe is underway; our view that uranium
fundamentals are characterized by durable, full-cycle demand
against a backdrop of growing concerns about security of supply;
our view that governments and policy makers are increasingly
recognizing the role that nuclear plays in achieving net-zero
carbon targets and other objectives; our view that there is
momentum building for non-traditional commercial uses of nuclear
power around the world; our belief that the uranium market is
vulnerable to a supply shock; our belief that we are seeing an
unprecedented geopolitical realignment occurring in the nuclear
fuel cycle; our belief that we are seeing utilities and some
intermediaries and service providers beginning to shift their
attention to securing material for their uncovered requirements;
our expectation to continue to place our uranium under long-term
contracts and to meet rising demand with production from our best
margin operations; our continuing commitment to our supply
discipline strategy; our plan, starting in 2024, to be operating at
about 40% below our productive capacity (100% basis); our intention
to maintain our announced production plan pending further
improvements in the uranium market and progress in our long-term
contracting; our anticipation that we will continue to be
resilient; our views regarding our balance sheet and ability to
self-manage risk; our optimism about Cameco’s ability to capture
long-term value across the fuel chain and support the transition to
a net-zero carbon economy; the reliability and expansion capacity
of our tier-one assets and quality of our exploration portfolio;
our efforts to further our reach into the nuclear fuel cycle and
innovative uses of nuclear power; our commitment to addressing
environmental, social and governance risks and opportunities that
we believe will make our business sustainable; our belief that we
are in early stages of a market transition; our view that we have a
significant pipeline of contract discussions in a strengthened
price environment; our view that operational readiness for McArthur
River/Key Lake is on track; our expectation that in 2022 we could
produce up to 5 million pounds (100% basis) of uranium at McArthur
River/Key Lake; we have inventory, long-term purchase agreements
and loan arrangements in place that mitigate the risk of delay of
Inkai deliveries in 2022; and the expected date for announcement of
our 2022 second quarter results.
Material risks that could lead to different results include:
unexpected changes in uranium supply, demand, long-term
contracting, and prices; changes in consumer demand for nuclear
power and uranium as a result of changing societal views and
objectives regarding nuclear power, electrification and
decarbonization; our expectations regarding the market fundamentals
and demand for nuclear power, geopolitical realignment in the
nuclear fuel cycle, and the shifting attention of utilities and
some intermediaries and service providers may be incorrect; our
contract portfolio may not realize the expected benefits of rising
uranium prices or we may not be successful in our contracting
strategy; we may not have the expected degree of financial strength
and ability to self-manage risk; our tier-one assets may not have
the expected levels of reliability or expansion capacity; our
exploration portfolio may not have the expected quality; we may be
unsuccessful in furthering our reach in the nuclear fuel cycle, or
pursuing innovative uses of nuclear power, or capturing value from
a transition to a net-zero carbon economy; the risk that we may not
continue with our supply discipline strategy; the risk that we may
not be able to implement changes to future operating and production
levels for Cigar Lake and McArthur River/Key Lake to the planned
levels within the expected timeframes; the risk that we may not be
able to meet sales commitments for any reason; the risk that we may
not be able to continue to be resilient; the risks to our business
associated with the ongoing COVID-19 pandemic, related global
supply chain disruptions, global economic and political uncertainty
and volatility; the risk that we may not be able to implement our
business objectives in a manner consistent with our environmental,
social, governance and other values; the risk that the strategy we
are pursuing may prove unsuccessful, or that we may not be able to
execute it successfully; disruption or delay in the transportation
of our products, including our share of Inkai production; we fail
to mitigate the consequences of delay in delivery of our share of
Inkai production; and the risk that we may be delayed in announcing
our future financial results.
In presenting the forward-looking information, we have made
material assumptions which may prove incorrect about: uranium
demand, supply, consumption, long-term contracting, and prices;
growth in the demand for and global public acceptance of nuclear
energy; our production, purchases, sales, deliveries and costs; our
ability to expand into additional areas of the nuclear fuel cycle
and pursue innovative uses of nuclear power; our ability to address
ESG risks and opportunities successfully; plans to transport our
products succeed, including our share of Inkai production; our
ability to mitigate adverse consequences of delay in delivery of
our share of Inkai production; the market conditions and other
factors upon which we have based our future plans and forecasts;
the success of our plans and strategies, including planned
operating and production changes; the absence of new and adverse
government regulations, policies or decisions; that there will not
be any significant unanticipated adverse consequences to our
business of the ongoing COVID-19 pandemic, supply disruptions, and
economic or political uncertainty and volatility; and our ability
to announce future financial results when expected.
Please also review the discussion in our 2021 annual MD&A
and most recent annual information form for other material risks
that could cause actual results to differ significantly from our
current expectations, and other material assumptions we have made.
Forward-looking information is designed to help you understand
management’s current views of our near-term and longer-term
prospects, and it may not be appropriate for other purposes. We
will not necessarily update this information unless we are required
to by securities laws.
Conference call
We invite you to join our first quarter conference call on
Thursday, May 5, 2022 at 8:00 a.m. Eastern.
The call will be open to all investors and the media. To join
the call, please dial (800) 319-4610 (Canada and US) or (604)
638-5340. An operator will put your call through. The slides and a
live webcast of the conference call will be available from a link
at cameco.com. See the link on our home page on the day of the
call.
A recorded version of the proceedings will be available:
- on our website, cameco.com, shortly after the call
- on post view until midnight, Eastern, June 5, 2022, by calling
(800) 319-6413 (Canada and US) or (604) 638-9010 (Passcode
8606)
2022 second quarter report release date
We plan to announce our 2022 second quarter results before
markets open on July 27, 2022.
Profile
Cameco is one of the largest global providers of the uranium
fuel needed to energize a clean-air world. Our competitive position
is based on our controlling ownership of the world’s largest
high-grade reserves and low-cost operations. Utilities around the
world rely on our nuclear fuel products to generate power in safe,
reliable, carbon-free nuclear reactors. Our shares trade on the
Toronto and New York stock exchanges. Our head office is in
Saskatoon, Saskatchewan.
As used in this news release, the terms we, us, our, the Company
and Cameco mean Cameco Corporation and its subsidiaries unless
otherwise indicated.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220504006226/en/
Investor inquiries: Rachelle Girard 306-956-6403
rachelle_girard@cameco.com
Media inquiries: Jeff Hryhoriw 306-385-5221
jeff_hryhoriw@cameco.com
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