Cameco reports fourth quarter and 2010 financial results
TSX: CCO website: cameco.com NYSE: CCJ currency: Cdn (unless noted)
2121 – 11th Street West, Saskatoon, Saskatchewan, S7M 1J3 Canada Tel: (306) 956-6200 Fax: (306) 956-6201
Cameco reports fourth quarter and 2010 financial results
- best safety performance in our history
- uranium production 10% higher than 2009
- continued to ramp up production at Inkai and exceeded 2009 production
- completed dewatering the underground at Cigar Lake
- extended Rabbit Lake’s expected mine life by two years to 2017
Saskatoon, Saskatchewan, Canada, February 11, 2011 . . . . . . . . . . . . .
Cameco (TSX: CCO; NYSE: CCJ) today reported its consolidated financial and operating results for the fourth quarter ended December 31, 2010 and for the year.
“Cameco had an excellent year in 2010,” said CEO Jerry Grandey. “We increased production, lowered uranium unit costs, and substantially raised our dividend. We also achieved the best safety record in our history.
“The market ended the year very strongly, as China signed significant long-term uranium purchasing agreements and several countries indicated their intentions to build more nuclear reactors. Our company is well-positioned to prosper from the growing need for clean energy now and in the future. We remain committed to our strategy of doubling production to 40 million pounds by 2018.”
| Highlights ($ millions except per share amounts) | Three months ended December 31 | change | Year ended December 31 | change | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Three months ended | Year ended | |||||||||
| December 31 | December 31 | |||||||||
| 2010 | 2009 | change | 2010 | 2009 | change | |||||
| Revenue 673 659 | 2% | 2,124 2,315 | (8%) | |||||||
| Gross profit 245 206 | 19% | 744 750 | (1%) | |||||||
| Net earnings 207 598 | (65%) | 515 1,099 | (53%) | |||||||
| $ per common share (basic) 0.52 1.52 | (66%) | 1.31 2.83 | (54%) | |||||||
| $ per common share (diluted) 0.52 1.52 | (66%) | 1.30 2.82 | (54%) | |||||||
| Adjusted net earnings (non-GAAP, see page 8) 191 170 | 12% | 496 528 | (6%) | |||||||
| $ per common share (adjusted and diluted) 0.48 0.43 | 12% | 1.25 1.35 | (7%) | |||||||
| Cash provided by operations 120 188 (after working capital changes) | (36%) | (36%) | 507 690 | (27%) | (27%) |
Net earnings for the year were $515 million ($1.30 per share diluted) compared to $1,099 million ($2.82 per share diluted) in 2009. In addition to the items noted below, our net earnings were impacted by the one time gain on the sale of our interest in Centerra Gold Inc. (Centerra) at the end of 2009 and lower unrealized gains on financial instruments this year.
On an adjusted basis, our earnings for the year were $496 million ($1.25 per share adjusted and diluted) compared to $528 million ($1.35 per share adjusted and diluted) (non-GAAP, see page 8). The 6% decrease resulted from:
- lower profits in our electricity business relating to lower realized selling prices
- higher exploration expenses
- higher income taxes
- partially offset by improved profits from our uranium business relating to lower cost of sales
See 2010 financial results by segment for more detailed discussion.
Fourth quarter
Our net earnings this quarter were $207 million ($0.52 per share diluted), a decrease of $391 million compared to $598 million ($1.52 per share diluted) in 2009. We had a $374 million net gain in the fourth quarter of 2009 related to the sale of our interest in Centerra.
On an adjusted basis, our earnings this quarter were $191 million ($0.48 per share diluted) compared to $170 million ($0.43 per share diluted) (non-GAAP, see page 8) in the fourth quarter of 2009. The 12% increase in adjusted net earnings was from higher profits in our uranium segment relating to a higher average realized selling price and a lower unit cost of sales, partially offset by lower profits in the electricity business due to a lower realized price.
See 2010 financial results by segment for more detailed discussion.
The 2010 annual financial statements have been audited, however 2009 and 2010 fourth quarter financial information presented is unaudited. You can find a copy of our 2010 audited financial statements on our website at cameco.com. Our 2010 annual management’s discussion and analysis will be posted on our website on Monday, February 14, 2011.
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Outlook for 2011
Over the next several years, we expect to invest significantly in expanding production at existing mines and advancing projects as we pursue our growth strategy. The projects are at various stages of development, from exploration and evaluation to construction.
We expect our existing cash balances and operating cash flows will meet our anticipated capital requirements without the need for significant additional funding. Cash balances will decline gradually as we use the funds in our business and pursue our growth plans.
Our outlook for 2011 reflects the growth expenditures necessary to help us achieve our strategy. We do not provide an outlook for the items in the table that are marked with a dash.
2011 Financial outlook1
| Consolidated | Uranium | Fuel services | Electricity | |||
|---|---|---|---|---|---|---|
| Production | Production | - 21.9 15 to 16 - million lbs million kgU | ||||
| Sales volume | - 31 to 33 Increase - million lbs 10% to 15% | |||||
| Capacity factor | - - - 89% | |||||
| Revenue compared to 2010 | Revenue compared to 2010 | Increase Increase Increase Decrease 10% to 15% 15% to 20%2 5% to 10% 10% to 15% | ||||
| Unit cost of product sold | - Increase 0% Increase Increase to 5%3 2% to 5% 10% to 15% | |||||
| (including DDR) | ||||||
| Direct administration costs | Increase - - - 15% to 20% | |||||
| compared to 20104 | ||||||
| Exploration costs compared to | - Decrease - - 5% to 10% | |||||
| 2010 | ||||||
| Tax rate | Tax rate | Recovery of - - - 0% to 5% | ||||
| Capital expenditures | $575 million5 - - $80 million |
1 Commencing January 1, 2011, we will be reporting our financial results in accordance with International Financial Reporting Standards (IFRS). The information in our 2011 financial outlook has been prepared in accordance with IFRS and our policy choices thereunder to date. Further information on our transition to IFRS is contained in our 2010 annual management’s discussion and analysis.
2 Based on a uranium spot price of $73.00 (US) per pound (the Ux spot price as of February 7, 2011), a long-term price indicator of $73.00 (US) per pound (the Ux long-term indicator on January 31, 2011) and an exchange rate of $1.00 (US) for $1.00 (Cdn).
3 This increase is based on the unit cost of sale for produced material. If we decide to make discretionary purchases in 2011 then we expect the overall unit cost of product sold to increase further.
4 Direct administration costs do not include stock-based compensation expenses.
5 Does not include our share of capital expenditures at Bruce Power Limited Partnership (BPLP).
Consolidated outlook
We expect consolidated revenue to be 10% to 15% higher in 2011 due to:
- higher sales volumes in the uranium and fuel services businesses
- increases in realized prices in the uranium and fuel services businesses
- partially offset by lower realized prices for electricity
We expect administration costs (not including stock-based compensation) to be about 15% to 20% higher than they were in 2010 due to planned higher spending in support of our growth strategy.
We expect exploration expenses to be about 5% to 10% lower than they were in 2010 due to a reduction in evaluation activities at the Kintyre project as we near the completion of the pre-feasibility stage.
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Uranium outlook
We expect to produce 21.9 million pounds of U3O8 in 2011.
Based on the contracts we have in place, we expect to sell between 31 million and 33 million pounds of U3O8 in 2011. We expect the unit cost of sales to be 0% to 5% higher than in 2010. This increase is based on the unit cost of sale for produced material. If we decide to make discretionary purchases in 2011 then we expect the overall unit cost of product sold to increase further.
Based on current spot prices, revenue should be about 15% to 20% higher than it was in 2010 as a result of increases in expected realized prices and sales volumes in 2011.
Our customers choose when in the year to receive deliveries of uranium and fuel services products, so our quarterly delivery patterns, and therefore our sales volumes and revenue, can vary significantly. We expect the trend in delivery patterns in 2011 to be somewhat different than in 2010, with deliveries heavily weighted to the second half of the year. We expect the fourth quarter to account for about one third of our 2011 sales volumes.
Price sensitivity analysis: uranium
The table below 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, 2010 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, 2010, and none of the assumptions we list below change.
Expected realized uranium price sensitivity under various spot price assumptions
(rounded to the nearest $1.00)
| ($US/lb UO 3 8 | ) | |||||||
|---|---|---|---|---|---|---|---|---|
| Spot prices | $20 | $40 | $60 | $80 | $100 | $120 | $140 |
| 2011 | 38 | 41 | 47 | 52 | 57 | 63 | 68 |
| 2012 | 36 | 40 | 50 | 58 | 68 | 77 | 86 |
| 2013 | 43 | 45 | 54 | 63 | 73 | 82 | 90 |
| 2014 | 44 | 47 | 55 | 64 | 74 | 83 | 91 |
| 2015 | 40 | 45 | 55 | 65 | 75 | 85 | 94 |
The table illustrates the mix of long-term contracts in our December 31, 2010 portfolio, and is consistent with our contracting strategy. It has been updated to reflect deliveries made and contracts entered into up to December 31, 2010.
Our portfolio includes a mix of fixed-price and market-price contracts, which we target at a 40:60 ratio. We signed many of our current contracts in 2003 to 2005, when market prices were low ($11 to $31 (US)). Those that are fixed at lower prices or have low ceiling prices will yield prices that are lower than current market prices. These older contracts are beginning to expire, and we are starting to deliver into more favourably priced contracts.
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 volume on average of 32 million pounds per year
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Deliveries
- customers take the maximum quantity allowed under each contract (unless they have already provided a delivery notice indicating they will take less)
- we defer a portion of deliveries under existing contracts for 2011 and 2012
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 13% 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.
- we deliver all volumes that we don’t have contracts for at the spot price for each scenario
Inflation
- is 2.0% per year
Cameco’s share of production — annual forecast to 2015
We have geographically diversified sources of production. We expect to produce about 125 million pounds of U3O8 over the next five years from the properties listed below. Our strategy is to double our annual production to 40 million pounds by 2018, which we expect will come from our operating properties, development projects and projects under evaluation.
| Current forecast | 2011 | 2012 | 2013 | 2014 | 2015 |
| (million lbs UO) 3 8 |
| McArthur River/Key Lake | 13.1 | 13.1 | 13.1 | 13.1 | 13.1 |
| Rabbit Lake | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 |
| US ISR | 2.5 | 3.1 | 3.1 | 3.7 | 3.8 |
| Inkai | 2.7 | 3.1 | 3.1 | 3.1 | 3.1 |
| Cigar Lake | - | - | 1.0 | 2.0 | 5.6 |
| Total | 21.9 | 22.9 | 23.9 | 25.5 | 29.2 |
In 2013, production at McArthur River may be lower as we transition to mining upper zone 4.
In 2010, Inkai received approval in principle to produce 3.9 million pounds per year (100% basis) and is seeking final approval with an amendment to the resource use contract.
Our 2011 and future annual production targets assume Inkai receives the government approvals and support of our partner, Kazatomprom. More specifically, it must:
- obtain final approval to produce at an annual rate of 3.9 million pounds (our share 2.3 million pounds)
- obtain the necessary permits and approvals to produce at an annual rate of 5.2 million pounds (our share 3.1 million pounds)
- ramp up production to an annual rate of 5.2 million pounds this year
We expect Inkai to receive all of the necessary permits and approvals to meet its 2011 and future annual production targets and we anticipate it will be able to ramp up production this year as noted above.
There is no certainty, however, that Inkai will receive these permits or approvals or that it will be able to ramp up production this year. If Inkai does not, or if the permits and approvals are delayed, Inkai may be unable to achieve its 2011 and future annual production targets.
________________________
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This forecast is forward-looking information. It is based on the assumptions and subject to the material risks discussed on page 15, and specifically on the assumptions and risks listed here. Actual production may be significantly different from this forecast.
Assumptions Material risks that could cause actual results to
- we achieve our forecast production for each differ materially
- we do not achieve forecast production levels
operation, which requires, among other things, for each operation because of a change in our that our mining plans succeed, processing mining plans, processing plants are not plants are available and function as designed, available or do not function as designed, lack we have sufficient tailings capacity and our of tailings capacity or for other reasons mineral reserve estimates are accurate
- we cannot obtain or maintain necessary
- we obtain or maintain the necessary permits permits or government approvals and approvals from government authorities
- natural phenomena, labour disputes, political
- our production is not disrupted or reduced as a risks, shortage or lack of supplies critical to result of natural phenomena, labour disputes, production, blockages or other acts of social political risks, blockades or other acts of social activism, equipment failures or other activism, shortage or lack of supplies critical to development and operation risks disrupt or production, equipment failures or other reduce our production development and operation risks
Fuel services outlook
We expect total production to be between 15 million and 16 million kgU in 2011.
We expect the average realized price for our fuel services products to decline by 2% to 5%, sales volumes to increase by 10% to 15% and revenue to be 5% to 10% higher.
Electricity outlook
We expect the average capacity factor for the four Bruce B reactors to be 89% in 2011, and actual output to be about 2% lower than it was in 2010. The 2011 realized price for electricity is projected to be about 5% to 10% lower than 2010 as BPLP has fewer financial contracts in place for 2011. At December 31, 2010, BPLP had about 7.5 TWh under financial contracts, which is equivalent to about 30% of Bruce B generation at its planned capacity factor. We expect that revenue will decline by 10% to 15% as a result.
We expect the average unit cost (net of cost recoveries) to be 10% to 15% higher in 2011, and total operating costs to rise by about 5% to 10%, mainly due to higher costs for planned outages and maintaining the workforce.
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Capital spending
| (Cameco’s share in $ millions) | 2010 plan | 2010 actual | 2011 plan | ||
| Growth capital | |||||
| Cigar Lake 111 | 90 | 176 | |||
| Inkai 4 | 5 | 9 | |||
| McArthur River - | - | 14 | |||
| Millennium - | - | 6 | |||
| US ISR - | - | 13 | |||
| Total growth capital 115 | 95 | 218 | |||
| Sustaining capital | |||||
| McArthur River/Key Lake 220 | 165 | 169 | |||
| US ISR 53 | 45 | 38 | |||
| Rabbit Lake 56 | 49 | 85 | |||
| Inkai 18 | 5 | 19 | |||
| Fuel services 29 | 20 | 32 | |||
| Other 9 | 8 | 14 | |||
| Total sustaining capital 385 | 292 | 357 | |||
| Capitalized interest 52 | 48 | - | |||
| Total uranium & fuel services 5521 | 435 | 575 | |||
| Electricity (our 31.6% share of BPLP) 41 | 35 | 80 |
1 We updated our 2010 capital cost estimate in the Q2 MD&A to $510 million and in the Q3 MD&A to $475 million.
Capital expenditures were 21% below our 2010 plan mainly as a result of reduced activity at our Saskatchewan uranium operations. We do not expect this reduction in capital expenditures in 2010 will impact our plans to double annual uranium production by 2018. The variance at Cigar Lake was due mainly to the clean-up and remediation of the underground workings taking longer than originally expected and the revision to project schedules as a result of the decision to proceed with surface freezing. The variance at McArthur River was due mainly to a change in the mine development plans and postponement of some capital projects that were not critical to production. The variance at Key Lake was mainly a result of delays in the construction of the acid and oxygen plants and deferring some of the other Key Lake revitalization projects.
We expect total capital expenditures for uranium and fuel services to be 32% higher in 2011, as a result of higher spending for:
- growth capital at Cigar Lake
- sustaining capital at Rabbit Lake
For the next several years, we expect our capital expenditures will be similar to 2011.
Sensitivity analysis
At December 31, 2010, every one-cent change in the value of the Canadian dollar versus the US dollar would change our 2010 net earnings by about $9 million (Cdn). This sensitivity is based on an exchange rate of $1.00 (US) for $0.99 (Cdn).
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For 2011:
- a change of $5 (US) per pound in each of the Ux spot price ($73.00 (US) per pound on February 7, 2011) and the Ux long-term price indicator ($73.00 (US) per pound on January 31, 2011) would change revenue by $34 million and net earnings by $26 million.
- a change of $5 in the electricity spot price would change our 2011 net earnings by $2 million, based on the assumption that the spot price will remain below the floor price provided for under BPLP’s agreement with the Ontario Power Authority (OPA).
Non-GAAP measures
We use adjusted net earnings, a non-GAAP measure, as a more meaningful way to compare our financial performance from period to period. Adjusted net earnings is our GAAP-based net earnings, adjusted for earnings from discontinued operations and unrealized mark-to-market gains and losses on our financial instruments, which we believe do not reflect underlying performance.
Adjusted net earnings is non-standard supplemental information, and not a substitute for financial information prepared according to GAAP. Other companies may calculate this measure differently. The table below reconciles adjusted net earnings with our net earnings.
| ($ millions) | Three months ended | Year ended | ||||
|---|---|---|---|---|---|---|
| December 31 | December 31 | |||||
| 2010 | 2009 | 2010 | 2009 | |||
| Net earnings (GAAP measure) | 207 | 598 | 515 | 1,099 |
Adjustments (after tax)
| Earnings from discontinued operations | - | (424) 1 | - | (382) 1 |
| Unrealized gains on financial instruments | (16) | (4) | (19) | (189) |
| Adjusted net earnings (non-GAAP measure) | 191 | 170 | 496 | 528 |
1 We have changed our method for determining adjusted earnings to exclude all amounts related to our investment in Centerra. Previously, we had included our share of operating income from Centerra in our adjusted earnings measure.
2010 financial results by segment
Uranium
| Highlights | Three months ended December 31 | Year ended December 31 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| December 31 | ||||||||||
| 2010 | 2009 | change | 2010 | 2009 | change | |||||
| Production volume (million lbs) | 6.4 | 6.7 (4)% | 22.8 | 20.8 10% | ||||||
| Sales volume (million lbs) | 9.1 | 10.0 (9)% | 29.6 | 33.9 (13)% | ||||||
| Average spot price ($US/lb) | 58.29 | 45.96 27% | 46.83 | 46.06 2% | ||||||
| Average realized price ($US/lb) ($Cdn/lb) | 40.64 19% 43.51 15% | 38.25 14% 45.12 2% | ||||||||
| 48.50 | 43.63 | |||||||||
| 50.10 | 45.81 | |||||||||
| Average unit cost of sales ($Cdn/lb UO) (including DDR) 3 8 | 29.89 | 29.89 | 30.29 (1)% | 28.40 | 28.40 | 30.59 (7)% | ||||
| Revenue ($ millions) | 461 | 443 4% | 1,374 | 1,551 (11)% | ||||||
| Gross profit ($ millions) | 181 | 132 37% | 503 | 488 3% | ||||||
| Gross profit (%) | 39 | 30 30% | 37 | 31 19% |
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Fourth quarter
Production volumes this quarter were 4% lower than in the fourth quarter of 2009 due to lower output at Rabbit Lake.
Uranium revenues were up 4% due to a 15% increase in the realized selling price, partially offset by a 9% decline in sales volumes.
Realized prices were higher due to higher prices under market-related and fixed-price sales contracts.
Total cash cost of sales (excluding DDR) decreased by 12% to $233 million ($25.30 per pound U3O8). This was mainly the result of the following:
- the 9% decline in sales volume
- average unit costs for produced uranium were 26% higher
- average unit costs for purchased uranium were 14% lower due to fewer purchases at spot prices
The net effect was a $49 million increase in gross profit for the quarter.
Full year
Production volumes in 2010 were 10% higher than in 2009 due to higher production at McArthur River/Key Lake and the continued rampup of production at Inkai.
Uranium revenues this year were down 11% compared to 2009, due to a 13% decline in sales volumes.
Sales volumes in 2010 were 13% lower than 2009 due to some customers deferring deliveries under contracts until 2011. In addition, given the discretionary nature of spot market demand and the low level of spot market prices during the first three quarters of 2010, we intentionally reduced our spot market sales for the year.
Our realized prices this year in US dollars were 14% higher than 2009 mainly due to higher prices under fixed-price sales contracts. Our Canadian dollar selling price, however, was only slightly higher than 2009 as it was impacted by a less favourable exchange rate. Our exchange rate averaged $1.05 compared to $1.18 in 2009.
Total cash cost of sales (excluding DDR) decreased by 23% this year, to $699 million ($23.32 per pound U3O8). This was mainly the result of the following:
- the 13% decline in sales volume
- average unit costs for produced uranium were 6% lower
- average unit costs for purchased uranium were 17% lower due to fewer purchases at spot prices
- a lower proportion of sales of purchased uranium, which carries a higher cash cost
The net effect was a $15 million increase in gross profit for the year.
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The following table shows our cash cost of sales per unit (excluding DDR) for produced and purchased material, including royalty charges on produced material, and the quantity of produced and purchased uranium sold.
| Three months ended December 31 | Unit cash cost of sale | Quantity sol | d s) | ||||||
|---|---|---|---|---|---|---|---|---|---|
| ($Cdn/lb UO) 3 8 | (million lb | ||||||||
| 2010 | 2009 | change | 2010 | 2009 | change | ||||
| Produced 22.30 17.73 | 4.57 | 5.5 5.1 | 0.4 | ||||||
| Purchased 29.93 34.72 | (4.79) | 3.6 4.9 | (1.3) | ||||||
| Total 25.30 26.19 | (0.89) | 9.1 10.0 | (0.9) | ||||||
| Full year ended December 31 | |||||||||
| Full year ended | |||||||||
| December 31 | 2010 | 2009 | change | 2010 | 2009 | change | |||
| Produced | 22.45 | 23.86 | (1.41) | 20.0 | 20.9 | (0.9) | |||
| Purchased | 25.11 | 30.22 | (5.11) | 9.6 | 13.0 | (3.4) | |||
| Total | 23.32 | 26.33 | (3.01) | 29.6 | 33.9 | (4.3) |
Fuel services results
(includes results for UF6, UO2 and fuel fabrication)
| Highlights | Three months ended December 31 | Year ended December 31 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| December 31 | ||||||||||
| 2010 | 2009 | change | 2010 | 2009 | change | |||||
| Production volume (million lbs) | 3.9 | 3.9 - | 15.4 | 12.3 25% | ||||||
| Sales volume (million lbs) | 6.3 | 6.0 5% | 17.0 | 14.9 14% | ||||||
| Realized price ($Cdn/kgU) | 14.59 | 14.89 (2)% | 16.86 | 17.84 (5)% | ||||||
| Average unit cost of sales ($Cdn/lb UO) (including DDR) 3 8 | 12.87 | 12.87 | 12.43 4% | 13.39 | 13.39 | 14.47 (7)% | ||||
| Revenue ($ millions) | 93 | 91 2% | 301 | 276 9% | ||||||
| Gross profit ($ millions) | 11 | 13 (15)% | 60 | 50 20% | ||||||
| Gross profit (%) | 12 | 14 (14)% | 20 | 18 11% |
Fourth quarter
Total revenue increased by 2% due to a 5% increase in sales volumes.
Our Canadian dollar realized price for UF6 was similar to the prior year but was affected by a less favourable exchange rate. Our exchange rate averaged $1.03 in the fourth quarter compared to $1.06 in 2009.
The total cost of products and services sold (including DDR) increased by 5% ($82 million compared to $78 million in the fourth quarter of 2009) due to the increase in sales volume. The average unit cost of sales was 4% higher due to increased sales of fuel fabrication, which carries a higher unit cost than other fuel services products.
The net effect was a $2 million decrease in gross profit.
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The Port Hope UF6 conversion plant operated for a full year in 2010, increasing production volumes by 25% over 2009. In 2009, the facility was shutdown for the first five months of the year.
Total revenue increased by 9% due to a 14% increase in sales volumes.
Our Canadian dollar realized price for UF6 was affected by a less favourable exchange rate. Our exchange rate averaged $1.05 in 2010 compared to $1.18 in 2009.
The total cost of products and services sold (including DDR) increased by 6% ($241 million compared to $226 million in 2009) due to the increase in sales volume. The average unit cost of sales was 7% lower due to lower costs for purchased material and the return to operational status of the UF6 facility.
The net effect was a $10 million increase in gross profit.
Electricity results Fourth quarter
Total electricity revenue decreased 7% as higher actual output was offset by a lower realized price. Realized prices reflect spot sales, revenue recognized under BPLP’s agreement with the OPA, and financial contract revenue. BPLP recognized revenue of $114 million this quarter under its agreement with the OPA, compared to $137 million in the fourth quarter of 2009. The equivalent of about 45% of BPLP’s output was sold under financial contracts this quarter, compared to 54% in the fourth quarter of 2009.
The capacity factor was 91% this quarter, up from 89% in the fourth quarter of 2009. Operating costs were $221 million compared to $218 million in 2009.
The result was an 18% decrease in our share of earnings before taxes.
BPLP distributed $120 million to the partners in the fourth quarter. Our share was $38 million. The partners have agreed that BPLP will distribute excess cash monthly, and will make separate cash calls for major capital projects.
Full year
BPLP’s results in 2010 are largely the result of lower revenues, which were 8% lower than 2009 due to a 9% decrease in realized electricity prices. BPLP recognized revenue of $339 million under the agreement with the OPA during the year, compared to $514 million in 2009. The equivalent of about 42% of BPLP’s output was sold under financial contracts in 2010, compared to 57% in 2009.
The capacity factor was 91% in 2010. Operating costs were $930 million this year compared to $905 million in 2009.
The net effect was a decrease in our share of earnings before taxes of 26%.
BPLP distributed $525 million to the partners in 2010. Our share was $166 million.
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Operations and development project updates
Uranium – production overview
| Cameco’s share (million lbs UO) 3 8 | Three months ended | Year ended | |||||
|---|---|---|---|---|---|---|---|
| December 31 | December 31 | ||||||
| 2010 | 2009 | 2010 | 2009 | 2010 plan | |||
| McArthur River/Key Lake | 4.0 | 4.0 | 13.9 | 13.3 13.1 | |||
| Rabbit Lake | 1.3 | 1.4 | 3.8 | 3.8 3.6 | |||
| Smith Ranch-Highland | 0.4 | 0.5 | 1.8 | 1.8 1.8 | |||
| Crow Butte | 0.2 | 0.2 | 0.7 | 0.8 0.7 | |||
| Inkai | 0.5 | 0.6 | 2.6 | 1.1 2.3 | |||
| Total | 6.4 | 6.7 | 22.8 | 20.8 21.51 |
1 We updated our 2010 plan in our Q3 MD&A to 22 million pounds.
McArthur River/Key Lake
Our share of production for the year was 6% higher than our target of 13.1 million pounds U3O8, and a 5% increase over 2009. In 2009, we also exceeded our production target.
Our strong performance at both McArthur River and Key Lake allowed us to realize benefits under the production flexibility amendments to the McArthur River and Key Lake operating licences.
We developed a second raisebore chamber in zone 2, panel 5. This is expected to improve production efficiency in the future.
In lower zone 4, we completed the transition to this zone and began production during the fourth quarter.
Rabbit Lake
Production this year was the same as in 2009.
We added mineral reserves, extending the estimated mine life by two years to 2017. We have completed surface exploration drilling near the mine and have found new mineralization. In 2012, we are planning to start an underground drilling program to further evaluate this mineralization.
Inkai
Our share of production this year was significantly higher due to successful wellfield performance and the processing of uranium in inventory at the end of 2009. Production was 13% higher than our plan at the beginning of the year due to the completion of the processing facilities and a stable acid supply.
Inkai received state commissioning approval for the main processing plant, allowing full processing of uranium concentrate on site. The plant operated at production rates very close to design capacity for several months due to strong wellfield performance.
Inkai received approval in principle to:
- increase annual production from blocks 1 and 2 to 3.9 million pounds of U3O8 (100% basis)
- amend the block 3 licence to provide for a five-year appraisal period to carry out delineation drilling, construction and operation of a test leach facility, and to complete a feasibility study
Inkai is in the process of finalizing the approval process with an amendment to its resource use contract.
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