Cameco (TSX: CCO; NYSE: CCJ) today reported its consolidated
financial and operating results for the third quarter ended
September 30, 2023, in accordance with International Financial
Reporting Standards (IFRS).
“Our third quarter financial performance continues to
demonstrate the benefits of our strategic decisions and the
significant, positive momentum we are experiencing in the nuclear
energy industry. We have again increased our consolidated revenue
outlook for 2023, which is driven by higher average realized prices
as a result of substantial uranium spot price improvements. Gross
profits have also improved as our uranium average unit cost of
sales decreased from last year as we continue the transition back
to our tier-one production cost structure,” said Tim Gitzel,
Cameco’s president and CEO.
“I am pleased to announce that effective November 1, Dominic
Kieran is joining Cameco’s executive group as Global Managing
Director of our subsidiary in the United Kingdom. Dominic brings
extensive international executive experience in the nuclear fuel,
chemical and broader technology industries, which will enhance the
skillset of our strong and experienced leadership group. His
wide-ranging expertise will help facilitate Cameco’s growth across
the nuclear value chain.
“The world’s desire for clean, secure and low-cost energy is
creating a foundation of support for nuclear energy from across the
public and political spectrum. This increase in support, coupled
with the geopolitical uncertainty brought on by Russia’s invasion
of Ukraine and a coup in Niger, has intensified supply concerns as
future uranium supply and downstream processing is needed to
balance the market. In the short term, supply chain issues and
inflation risks are causing production challenges for current
operators. Compared to previous price cycles, the market does not
have the inventory or secondary supplies to absorb market
shocks.
“We are seeing durable, full-cycle demand growth across the
nuclear energy industry. These factors lead us to believe that we
are experiencing the industry’s best ever market fundamentals.
These dynamics have also led the World Nuclear Association (WNA) to
increase its demand forecast in their latest Nuclear Fuel Report to
an average annual growth rate of 3.6%, compared to 2.6% in the 2021
report. Furthermore, the WNA has issued a call to action to triple
nuclear capacity by 2050 to help the global drive to net-zero
greenhouse gas emissions.
“Our customers understand that we are a proven, reliable
supplier operating across the nuclear fuel cycle and recognize our
deep understanding of how nuclear fuel markets work. The important
role we play in our industry is also being recognized on the
international stage. In September, I had the honour of meeting
Ukrainian President Zelenskyy and Prime Minister Trudeau in Toronto
where the President thanked us for helping Ukraine in its efforts
to regain energy independence and we renewed Cameco’s commitment to
working with them. In October, reinforcing our commitment to
Energoatom, I joined a Cameco delegation to visit our partners at
their head offices in Ukraine.
“Also in September, Cameco was invited to participate in the
OECD’s inaugural Roadmaps to New Nuclear conference. This
conference of government and industry leaders met with the
intention of building leadership and cooperation in nuclear energy.
In November, we are participating in the International Atomic
Energy Agency's Standing Advisory Group on Nuclear Energy to advise
the agency's long-term nuclear power and nuclear fuel cycle
activities. These are proud moments for us at Cameco that highlight
the impact that our work is having around the world.
“We are a responsible, commercial supplier with a strong balance
sheet, long-lived, tier-one assets, and a proven operating track
record, and are returning to our tier-one cost structure. We are
invested across the nuclear fuel cycle and continue to work toward
closing the Westinghouse acquisition with our partner Brookfield
and its publicly listed affiliate Brookfield Renewable Partners and
its institutional partners by the end of this year, at which time
we look forward to being able to discuss the exciting prospects we
see for that business. We will continue to do what we said we would
do, executing on our strategy, and, consistent with our values, we
will do so in a manner we believe will make our business
sustainable over the long-term.”
- Q3 net earnings of $148 million; adjusted net earnings of
$137 million: Results reflect normal quarterly variations in
contract deliveries. Gross profit improved due to lower unit costs
in our uranium segment and a higher average realized price as our
market-related contracts benefitted from increases in the uranium
spot price relative to a year ago. We had unrealized foreign
exchange gains of $54 million on our US dollar cash balances in the
quarter. We must treat our foreign currency cash balances as though
they are converted to Canadian dollars at the exchange rate at the
end of the quarter. The unrealized gains in the quarter were
primarily due to higher-than-normal US dollar cash balances, being
held for the pending acquisition of Westinghouse, and a weakened
Canadian dollar relative to at the end of the second quarter. We do
not adjust net earnings for these gains. Adjusted net earnings is a
non-IFRS measure, see below.
- Strong performance in the uranium and fuel services segments
and improving 2023 consolidated revenue outlook: Results for
the first nine months of the year reflect the impact of higher
sales volumes and average realized prices in both the uranium and
fuel services segments under our long-term contract portfolio. In
our uranium segment we have delivered 22.2 million pounds, in line
with the delivery pattern disclosed in our annual MD&A, at an
average realized price 13% higher than in the same period last
year. In our fuel services segment, sales were 7% higher than in
the first nine months of 2022 and at an average realized price 9%
higher. With improving market fundamentals, for 2023 we have
increased our consolidated revenue outlook to between $2.43 billion
and $2.58 billion (previously $2.38 billion and $2.53 billion),
which is primarily driven by higher expected average realized
prices under our contract portfolio. In addition, we have updated
our average unit cost of sales. See Outlook for 2023 in our third
quarter MD&A for more information.
- Long-term contracting success continues while maintaining
exposure to higher prices: As of September 30, 2023, we had
commitments requiring delivery of an average of about 29 million
pounds per year from 2023 through 2027, an increase from an average
of about 28 million pounds per year at the end of June. We also
have contracts in our uranium and fuel services segments that span
more than decade, and in our uranium segment, many of those
contracts benefit from market-related pricing mechanisms. In
addition, we have a large and growing pipeline of business under
discussion, which we expect will help further build our long-term
contract portfolio. Total industry long-term contracting volumes to
date in 2023 have already exceeded the volume of each of the last
10 years, a strong indication that a new long-term contracting
cycle is underway.
- JV Inkai shipments: The first shipment containing
approximately two thirds of our share of Inkai's 2023 production is
currently in transit. We expect the shipment to arrive before the
end of 2023. The second shipment with the remaining volume of our
share of 2023 production is expected to depart before the end of
the year and arrive in early 2024. We continue to work closely with
JV Inkai and our joint venture partner, Kazatomprom, to receive our
share of production via the Trans-Caspian International Transport
Route, which does not rely on Russian rail lines or ports. We could
experience further delays to our expected Inkai deliveries this
year if transportation using this shipping route takes longer than
anticipated. To mitigate the risk of delays, we have inventory,
long-term purchase agreements and loan arrangements in place we can
draw on. Depending on when we receive shipments of our share of
Inkai’s production, our share of earnings from this
equity-accounted investee and the timing of the receipt of our
share of dividends from the joint venture may be impacted.
- Canada Revenue Agency (CRA) tax dispute: In October, we
received $12 million from CRA for disbursements related to the
September 2018 Tax Court decision and cost award, which is in
addition to the $10 million we received from CRA in April 2021 as
reimbursement for legal fees. See Transfer pricing dispute in our
third quarter MD&A for more information.
- Licence renewals in Northern Saskatchewan: In October,
the Canadian Nuclear Safety Commission renewed the licences for
McArthur River, Key Lake and Rabbit Lake. We are pleased to receive
20-year licences for McArthur River and Key Lake and a 15-year
licence for Rabbit Lake. We believe that our commitment to
protecting the health and safety of our employees, the public and
the environment is reflected in the extended duration of the
licences.
- Strong balance sheet: As of September 30, 2023, we had
$2.7 billion in cash and cash equivalents and $1.0 billion in total
debt. In addition, we have a $1.0 billion undrawn credit facility
which matures October 1, 2027.
- Dividend: Our board of directors declared a 2023 annual
dividend of $0.12 per common share, payable on December 15, 2023,
to shareholders of record on November 30, 2023. The decision to
declare an annual dividend is reviewed regularly by our board in
the context of our cash flow, financial position, strategy and
other relevant factors, including appropriate alignment with the
cyclical nature of our earnings. In 2022, the board increased the
dividend by 50% to reflect the expected improvement in our
financial performance as we began the transition to our tier-one
run rate. Until such time as we return to our tier-one cost
structure, the objective of our capital allocation will be to
ensure we have the financial capacity to execute on our strategy,
including achieving production at McArthur River/Key Lake in
accordance with our plan and closing the pending acquisition of
Westinghouse. We will continue to navigate by our investment-grade
rating through close management of our balance sheet metrics,
maintaining sufficient liquidity to meet our risk-mitigated working
cash target and that allows us to pursue other value-adding
opportunities.
- Addition to executive group: Effective November 1, 2023,
Dominic Kieran has been appointed Global Managing Director for
Cameco UK Ltd., a wholly owned subsidiary of Cameco. Dominic brings
over 20 years of leadership experience to Cameco. Most recently he
served as Chief Executive Officer with Babcock Nuclear, a wholly
owned subsidiary of Babcock International. Previously, he was with
Urenco for 15 years in increasingly senior leadership roles,
including Chief Commercial Officer, and gained a wealth of
experience from his diverse responsibilities. He holds an MBA from
the Henley Business School and master’s in engineering from the
University of London. He is a Chartered Engineer and a Fellow of
the UK Institute of Chemical Engineers and the UK Nuclear
Institute. “I am looking forward to working with an excellent team
to advance Cameco’s vision of energizing a clean-air world. The
transition to a clean and secure energy world is our imperative and
I look forward to helping this transition with Cameco,” said
Dominic Kieran.
Consolidated financial results
THREE MONTHS
NINE MONTHS
HIGHLIGHTS
ENDED SEPTEMBER 30
ENDED SEPTEMBER 30
($ MILLIONS EXCEPT WHERE INDICATED)
2023
2022
CHANGE
2023
2022
CHANGE
Revenue
575
389
48%
1,744
1,344
30%
Gross profit
152
25
>100%
429
168
>100%
Net earnings (losses) attributable to
equity holders
148
(20)
>100%
281
105
>100%
$ per common share (basic)
0.34
(0.05)
>100%
0.65
0.26
>100%
$ per common share (diluted)
0.34
(0.05)
>100%
0.65
0.26
>100%
Adjusted net earnings (non-IFRS, see
below)
137
10
>100%
249
100
>100%
$ per common share (adjusted and
diluted)
0.32
0.03
>100%
0.57
0.25
>100%
Cash provided by (used in) operations
(after working capital changes)
185
(47)
>100%
487
227
>100%
The financial information presented for the three months and
nine months ended September 30, 2022, and September 30, 2023, is
unaudited.
NET EARNINGS
The following table shows what contributed to the change in net
earnings (losses) and adjusted net earnings (non-IFRS measure, see
below) in the third quarter and first nine months of 2023, compared
to the same periods in 2022.
THREE MONTHS
NINE MONTHS
ENDED SEPTEMBER 30
ENDED SEPTEMBER 30
($ MILLIONS)
IFRS
ADJUSTED
IFRS
ADJUSTED
Net earnings (losses) - 2022
(20)
10
105
100
Change in gross profit by segment
(We calculate gross profit by deducting
from revenue the cost of products and services sold, and
depreciation and amortization (D&A), net of hedging
benefits)
Uranium
Impact from sales volume changes
6
6
18
18
Higher realized prices ($US)
56
56
93
93
Foreign exchange impact on realized
prices
18
18
75
75
Lower costs
40
40
66
66
Change – uranium
120
120
252
252
Fuel services
Impact from sales volume changes
-
-
5
5
Higher realized prices ($Cdn)
14
14
24
24
Higher costs
(8)
(8)
(20)
(20)
Change – fuel services
6
6
9
9
Other changes
Higher administration expenditures
(5)
(5)
(44)
(44)
Higher exploration expenditures
(1)
(1)
(6)
(6)
Change in reclamation provisions
36
12
(10)
10
Higher earnings from equity-accounted
investee
26
26
22
22
Change in gains or losses on
derivatives
26
(8)
75
(20)
Change in foreign exchange gains or
losses
3
3
(60)
(60)
Higher finance income
25
25
77
77
Bargain purchase gain on CLJV ownership
interest increase
-
-
(23)
-
Change in income tax recovery or
expense
(66)
(49)
(100)
(75)
Other
(2)
(2)
(16)
(16)
Net earnings - 2023
148
137
281
249
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 measure). We use this measure as a meaningful way to
compare our financial performance from period to period. Adjusted
net earnings is our net earnings attributable to equity holders,
adjusted to 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 2022 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 2022 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 9 of our interim financial statements for more
information. This amount has been excluded from our ANE
measure.
The bargain purchase gain that was recognized when we acquired
our pro-rata share of Idemitsu Canada Resources Ltd.’s 7.875%
participating interest in the Cigar Lake Joint Venture has also
been removed in calculating ANE since it is non-cash, non-operating
and outside of the normal course of our business. The gain was
recorded in the statement of earnings as part of “other income
(expense)”.
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 third quarter and first nine months of 2023 and
compares it to the same periods in 2022.
THREE MONTHS
NINE MONTHS
ENDED SEPTEMBER 30
ENDED SEPTEMBER 30
($ MILLIONS)
2023
2022
2023
2022
Net earnings (losses) attributable to
equity holders
148
(20)
281
105
Adjustments
Adjustments on derivatives
41
75
-
95
Adjustment to other operating income
(48)
(24)
(42)
(62)
Adjustment to other income
-
-
-
(23)
Income taxes on adjustments
(4)
(21)
10
(15)
Adjusted net earnings
137
10
249
100
Selected segmented highlights
THREE MONTHS
NINE MONTHS
ENDED SEPTEMBER 30
ENDED SEPTEMBER 30
HIGHLIGHTS
2023
2022
CHANGE
2023
2022
CHANGE
Uranium
Production volume (million lbs)
3.0
2.0
50%
11.9
6.6
80%
Sales volume (million lbs)
7.0
5.3
32%
22.2
18.7
19%
Average realized price1
($US/lb)
52.57
46.30
14%
48.62
45.34
7%
($Cdn/lb)
70.30
59.65
18%
65.40
57.84
13%
Revenue ($ millions)
489
313
56%
1,452
1,083
34%
Gross profit ($ millions)
139
19
>100%
349
97
>100%
Fuel services
Production volume (million kgU)
2.0
1.5
33%
9.6
9.3
3%
Sales volume (million kgU)
2.1
2.3
(9)%
7.8
7.3
7%
Average realized price 2
($Cdn/kgU)
39.87
33.43
19%
37.44
34.39
9%
Revenue ($ millions)
86
75
15%
291
250
16%
Gross profit ($ millions)
15
9
67%
84
76
11%
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 third quarter MD&A and unaudited condensed consolidated
interim financial statements provide a detailed explanation of our
operating results for the three and nine months ended September 30,
2023, as compared to the same periods last year. This news release
should be read in conjunction with these documents, as well as our
audited consolidated financial statements and notes for the year
ended December 31, 2022, first quarter, second quarter and annual
MD&A, and our most recent annual information form, all of which
are available on our website at cameco.com, on SEDAR+ at
sedarplus.ca, 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, Cameco
- Daley McIntyre, general manager, 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 expectation that amplified security of supply concerns
will benefit our full-year revenue; our belief that we are
experiencing significant positive momentum in the nuclear energy
industry; our consolidated revenue outlook for 2023; our continuing
transition to a tier-one production cost structure and the
longevity of our tier-one assets; the creation of a foundation of
support for nuclear energy; the intensification of supply concerns;
our view that there is durable, full-cycle demand growth across the
nuclear energy industry, and related third party demand and growth
rate forecasts; our commitment to the Ukraine and Energoatom; our
participation in building leadership and cooperation in nuclear
energy; the expected timing of the closing of the Westinghouse
acquisition and the prospects for that business; our intention to
continue to execute our strategy in a manner we believe will make
our business sustainable over the long term; our expectations
regarding our long-term contract portfolio and pipeline of
business, and our view that a new long-term contracting cycle is
underway; the effective date of the appointment of the new Global
Managing Director for Cameco UK Ltd.; the expected timing for the
arrival of the first and second shipments of our 2023 share of
Inkai’s production, the risk of further delays and our ability to
draw on inventory, long-term purchase agreements and loan
arrangements to mitigate that risk; our 2023 annual dividend
payment date and the considerations relevant to future dividends;
and the expected date for announcement of our 2023 fourth quarter
and annual 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; the risk that our views regarding nuclear power,
its growth profile, and benefits, may prove to be incorrect; the
risk that we may not be able to achieve planned production levels
within the expected timeframes, or that the costs involved in doing
so exceed our expectations; the risk that the production levels at
Inkai may not be at expected levels or that it may not be able to
deliver its production; the risk that we may not be able to meet
sales commitments for any reason; the risk that the Westinghouse
acquisition may be delayed or may not be completed on the terms in
the acquisition agreement or at all; the risks to our business
associated with potential production disruptions, including those
related to global supply chain disruptions, global economic
uncertainty, political volatility, labour relations issues, and
operating risks; 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; the risk that we may be unsuccessful in
our commitment to Ukraine and Energoatom, or our participation in
building leadership and cooperation in nuclear energy; the risk
that our newly-appointed executives may not begin to serve when
expected; 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, growth in the
demand for and global public acceptance of nuclear energy, and
prices; our production, purchases, sales, deliveries and costs; the
market conditions and other factors upon which we have based our
future plans and forecasts; our contract pipeline discussions; our
ability to mitigate adverse consequences of delays in the shipment
of our share of Inkai production; the success of our plans and
strategies, including planned production; the expected timing of
the closing of the Westinghouse acquisition; the absence of new and
adverse government regulations, policies or decisions; that there
will not be any significant adverse consequences to our business
resulting from production disruptions, including those relating to
supply disruptions, economic or political uncertainty and
volatility, labour relation issues, and operating risks; our
ability to support Ukraine, Energoatom and the building of
leadership and cooperation in nuclear energy; the ability of our
newly-appointed executives to begin to serve when expected; and our
ability to announce future financial results when expected.
Please also review the discussion in our 2022 annual MD&A,
our 2023 third quarter MD&A and our 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 third quarter conference call on
Tuesday, October 31, 2023, 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, November 30, 2023, by
calling (800) 319-6413 (Canada and US) or (604) 638-9010 (Passcode
0376)
2023 fourth quarter and annual report release date
We plan to announce our 2023 fourth quarter and annual
consolidated financial and operating results before markets open on
February 8, 2024. Announcement dates are subject to change.
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 safe, reliable,
carbon-free nuclear power. Our shares trade on the Toronto and New
York stock exchanges. Our head office is in Saskatoon,
Saskatchewan, Canada.
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/20231030568086/en/
Investor inquiries: Rachelle Girard 306-956-6403
rachelle_girard@cameco.com
Media inquiries: Veronica Baker 306-385-5541
veronica_baker@cameco.com
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