Cameco Announces Preliminary 2016 Earnings Expectations and Operational Changes Planned for 2017
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Cameco Announces Preliminary 2016 Earnings Expectations
and Operational Changes Planned for 2017
Saskatoon, Saskatchewan, Canada, January 17, 2017 . . . . . . . . . . . . .
Cameco (TSX: CCO; NYSE: CCJ) is today announcing earnings expectations for its year ended
December 31, 2016 and operational changes planned for 2017.
While it is not our usual practice to disclose earnings expectations, we are announcing our
earnings expectations for 2016 in advance of our participation in upcoming investor conferences
due to the significant discrepancy between analyst earnings estimates and our current
expectations.
“Our current earnings expectations are not reflective of the strength of our core uranium
business, which saw us achieve our outlook for delivery volumes at a realized price 83% higher
than the current spot price,” said president and CEO, Tim Gitzel. “The current earnings
expectations do however reflect the consequences of a continued weak uranium market and our
resolve to make the necessary decisions to defend and preserve our core uranium business for the
long-term benefit of our stakeholders.”
As expected, Cameco delivered 31.5 million pounds of uranium at an average realized price of
$54.46 per pound in 2016. Also, we do not currently expect that any changes to the financial
outlook for 2016 presented in the table on page 13 of our third quarter Management’s Discussion
and Analysis (our 2016 Financial Outlook Information) will have a material impact on our actual
2016 earnings. However, subject to completion of our quarterly financial close process, annual
audit and approval of the 2016 consolidated financial statements by Cameco’s board of directors,
we expect to report an IFRS net loss for 2016 due in part to asset impairments resulting from fair
market value assessments at year end. We expect our adjusted net earnings for 2016 will be
significantly lower than analysts’ earnings estimates. In presenting our adjusted net earnings, we
expect to make total adjustments to net earnings between approximately $180 million and $220
million after-tax ($0.45 to $0.56 per share).
Cameco’s full annual results will be released after markets close on February 9, 2017.
As previously reported, Cameco implemented a number of strategic initiatives in 2016 intended
to strengthen our core business and enhance financial performance over time. These initiatives
include the suspension of production at the Rabbit Lake operation and curtailment of our U.S.
mining operations; signing of a collaboration agreement with the aboriginal communities located
near our Saskatchewan operations; restructuring of our NUKEM segment and corporate office
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departments and consolidation of office space. Our legal costs related to our tax dispute with the
Canada Revenue Agency (CRA) also increased as we prepared our case to be heard in the Tax
Court of Canada, which started in October. The total estimated cost for all these items is
approximately $120 million in 2016. These costs were partially offset by the $59 million of
additional income generated by the termination of two long-term supply contracts in the third
quarter of 2016. We also recorded an impairment charge for the Rabbit Lake mine and mill in
conjunction with the suspension of production.
2017 Operational Changes
Cameco is planning a number of actions in 2017 intended to further reduce costs and improve
efficiency at its uranium mining operations. The workforce at the McArthur River, Key Lake and
Cigar Lake operations is expected to be reduced by approximately 10% or 120 employees in
total. The reduction is planned to be conducted in stages and expected to be completed by the
end of May 2017. Affected employees will be offered exit packages that include transition
assistance.
Cameco also plans to implement changes to the air commuter service by which employees and
contract workers get to and from the mine and mill sites in northern Saskatchewan, as well as
work schedule changes to achieve additional cost savings. These changes will begin in April
2017 and are expected to be completed during 2018.
The workforce reduction and changes to air commuter service and work schedules planned at the
Saskatchewan operations are not expected to impact production in 2017. However, due to cost
cutting measures planned at Inkai, Cameco expects Inkai to produce almost 10% less in 2017
with Cameco’s share being 3.1 million pounds. In 2016, Cameco’s share of Inkai production was
3.3 million pounds.
Information regarding Cameco’s uranium production plans for 2017 will be provided together
with Cameco’s full annual results for 2016 after markets close on February 9, 2017.
“We regret the impact of these decisions on affected employees and other stakeholders,” said
president and CEO, Tim Gitzel. “These are necessary actions to take in a uranium market that
has remained weak and oversupplied for more than five years. While it is positive that we are
starting to see other producers announce their intent to reduce supply, we have not yet seen an
actual reduction in supply. Ultimately, it will be the return of both term demand and term
contracting in a significant way that will signal that market fundamentals have turned more
positive. While we expect that this demand and term contracting will come to the market at some
point, it has not yet happened. These operational changes are part of our strategy to help us
effectively manage the company through these low times and remain competitive, while
positioning the company to benefit as the market improves.”
Profile
Cameco is one of the world’s largest uranium producers, a significant supplier of conversion
services and one of two Candu fuel manufacturers in Canada. Our competitive position is based
on our controlling ownership of the world’s largest high-grade reserves and low-cost operations.
Our uranium products are used to generate clean electricity in nuclear power plants around the
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world. We also explore for uranium in the Americas, Australia and Asia. Our shares trade on the
Toronto and New York stock exchanges. Our head office is in Saskatoon, Saskatchewan.
Caution about forward-looking information
This news release includes statements considered to be forward-looking information or forward-
looking statements under Canadian and U.S. securities laws (which we refer to as forward-
looking information), including our current expectations regarding our 2016 earnings and
adjustments thereto, our expectation that any changes to our 2016 Financial Outlook Information
will not have a material impact on our actual 2016 earnings, our costs related to our strategic
initiatives and our dispute with CRA for 2016, the expected cost savings to be achieved by our
planned operational changes, our expected production levels, our expectations regarding future
market demand for uranium and term contracting, and the ability of other strategic initiatives to
strengthen our business and enhance financial performance.
This forward-looking information is based on a number of assumptions, including that: the
information already available to us regarding our financial results for 2016, including asset
impairment testing, is sufficiently complete and accurate to allow us to make a reasonable
assessment of actual earnings results (and adjustments thereto), the extent of any changes to our
2016 Financial Outlook Information and costs related to our strategic initiatives and our dispute
with CRA for 2016; that our planned workforce reductions and commuter service changes will
achieve the expected cost savings and not impact 2017 uranium production at our Saskatchewan
operations; that our other planned operational changes and strategic initiatives will successfully
achieve their intended result; that market demand for uranium and term contracting will increase
in the future; and that Inkai’s 2017 mining and production plans succeed. This information is
subject to a number of risks, including that: the completion of our quarterly financial close
process may give rise to earnings results, adjustments to earnings, costs or asset impairments that
are different from our current expectations; unforeseen factors may affect the significance of
changes to the 2016 Financial Outlook Information and that we may not be successful in
realizing the expected cost reductions and efficiency improvements from our planned workforce
reduction, commuter service changes and other strategic initiatives; that our planned workforce
reductions and commuter service changes impact 2017 uranium production at our Saskatchewan
operations; market demand for uranium and term contracting levels remain stable or decrease;
and Inkai’s 2017 mining or production plans are delayed or do not succeed for any reason.
Please also refer to our annual information form, first quarter, second quarter and third quarter
MD&A, and annual MD&A, which include a discussion of other material risks that could cause
actual results to differ significantly from our current expectations, and other assumptions that we
make in presenting forward-looking information.
The forward-looking information in this news release represents our current views, and can
change significantly. It is subject to material risks and based upon assumptions. Actual results
may be significantly different from what we currently expect. Forward-looking information is
designed to help you understand management's current views, and may not be appropriate for
other purposes. We will not necessarily update this information unless we are required to by
securities laws.
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Qualified Person
The above scientific and technical information related to Inkai was approved by Alain Mainville,
director, mineral resources management for Cameco, who is a qualified person for the purpose of
National Instrument 43-101.
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Investor inquiries: Rachelle Girard (306) 956-6403
Media inquiries: Gord Struthers (306) 956-6593