Cameco Corporation 2015 Fourth Quarter & Year End Results - PDF document

Cameco Corporation 2015 Fourth Quarter & Year End Results Conference Call Monday, February 8, 2016 – 11:00 AM ET C O R P O R A T E P A R T I C I P A N T S P R E S E N T A T I O N Rachelle Girard Operator Director, Investor Relations Good day, ladies and gentlemen, and welcome to the Tim Gitzel Cameco Corporation Fourth Quarter Results Conference President & Chief Executive Officer Call. I would now like to turn the meeting over to Ms. Rachelle Girard, Director, Investor Relations. Please go Grant Isaac ahead, Ms. Girard. Senior Vice-President & Chief Financial Officer Sean Quinn Rachelle Girard, Director, Investor Relations Senior Vice-President, Chief Legal Officer & Corporate Secretary Thank you, Mary, and good morning, everyone. Thanks for joining us. Welcome to Cameco’s 2015 fourth quarter Alice Wong and year-end conference call to discuss the results. Senior Vice-President & Chief Corporate Officer With us on the call today are Tim Gitzel, President and CEO; Grant Isaac, Senior Vice-President and Chief Financial Officer; Bob Steane, Senior Vice-President and Chief Operating Officer; Alice Wong, Senior Vice- C O N F E R E N C E C A L L P A R T I C I P A N T S President and Chief Corporate Officer; and Sean Quinn, Senior Vice-President, Chief Legal Officer, and Corporate Orest Wowkodaw Secretary. Tim will begin with comments on our financial Scotiabank results and the industry, followed by Grant, who will comment on a few items, including our tax cases. Then Greg Barnes we’ll open it up for your questions. TD Securities If you joined the conference call through our website David Wang event page you will notice there will be slides displayed Morningstar during the remarks portion of this call. These slides are also available for download in a PDF file called “Webcast Oscar Cabrera Slides” through the conference call link at cameco.com. Bank of America Merrill Lynch Today’s conference call is open to all members of the Jim Ostroff investment community, including the media. During the Platts Q&A session please limit yourself to two questions and then return to the queue. Chelsea Laskowski MBC Radio Please note that this conference call will include forward- looking information, which is based on a number of Graham Tanaka assumptions, and that actual results could differ Tanaka Capital Management materially. Please refer to our annual information form and MD&A for more information about the factors that Fai Lee could cause these different results and the assumptions Odlum Brown we have made. With that, I will turn it over to Tim. Tim Gitzel, President & Chief Executive Officer Well, thank you, Rachelle, and welcome to everyone who has joined us on the call today to discuss Cameco’s Bell Conferencing Page 1

Cameco Corporation 2015 Fourth Quarter & Year End Results Conference Call Monday, February 8, 2016 – 11:00 AM ET annual and fourth quarter results. We appreciate you will do so at a lower cost than other sources of supply. taking the time to join us. And with this exceptional performance we now expect to achieve our target of 18 million pounds of annual Before we get started I just wanted to take a moment to production in 2017. The rest of our operations also express our sympathy to the people of La Loche, performed well, either meeting or beating their production Saskatchewan. While this kind of tragedy is, sadly, not targets. The only exception was McArthur / Key, where uncommon in our world, it’s particularly shocking unplanned maintenance outages to repair the calciner because it happened in our own backyard. And what caused production to be slightly below target. The makes it hit home even more is that we have people from shortfall, however, was more than made up by the other that community working at all of our Northern operations. In fact, in 2015 Cameco achieved record Saskatchewan sites. Our hearts certainly go out to the production of 28.4 million pounds. people of La Loche, the neighbouring communities, and to all of Northern Saskatchewan. In the months ahead we Looking ahead, our plan is to continue to pursue our will continue to engage with community leaders to strategy of focusing our capital on tier-one assets. This discuss how we can best help. And I would ask you as means continuing our production plans at Inkai, ramping well to keep the people of La Loche in your thoughts. up at Cigar Lake, and preparing for expansion at McArthur River in response to market conditions. We Now let’s turn our attention to the business of today’s believe this is the right strategy to ensure we’re quarterly conference call, our fourth quarter update. I’ll positioned to respond when the market calls for more start with some brief remarks then turn it over to Grant to production. It’s also a great risk mitigation strategy in the give additional detail on some of our results and an event that the uncertainty persists, and it could. Now, update on the CRA case. After that we’ll spend the almost five years post Fukushima, I don’t think anyone majority of the call on your questions. expected these conditions to last this long. And there are a number of reasons for that. In our view this is the most important reporting period for Cameco. A lot may happen during the year but the First, the pace of reactor restarts in Japan has been important piece is what we achieved after everything is much slower than anyone anticipated. Having to establish taken into consideration. In 2015 we continued to perform a new regulatory authority and process has meant that well, despite being in what is a very difficult industry to be the path to restarts in Japan is first of its kind and, in right now. In particular, we achieved record annual understandably, slow. However, the first restarts have revenue and record revenue from our uranium business. now occurred, Sendai units 1 and 2 as well as Takahama That was largely driven by a higher average realized unit 3. And we’re expecting more to follow. We hope that price in all of our business segments as a result of the the lessons learned on these initial restarts will help pave weak Canadian dollar. The performance of our NUKEM the way for others to follow more quickly. Another factor segment was also a significant contributor. There we saw contributing to the slow recovery of the market has been higher realized prices and higher sales volumes, which the extent to which some countries have moved away led to an almost 60 percent increase in its revenues. from or reduced their reactor fleets. And in some places However, while the weakening of the Canadian dollar there have been unexpected reactor closures. These helped our average realized prices, it negatively affected have generally been in electricity markets where reactors our earnings as we incurred losses on our foreign have become less competitive as a result of deregulation exchange derivatives. Combined with higher unit costs and low natural gas prices. Added to that are global and a number of one-time unusual items in both 2014 events that have combined to further challenge our and 2015, it meant earnings were down from last year. industry, things like a sluggish global economy, a variety of geopolitical issues, and flat electricity demand. The better news for 2015 was on the production side, with the biggest headline at Cigar Lake where we All of these factors mean that today we’re still waiting on produced 11.3 million packaged pounds. This far a recovery that had been expected to come sooner. exceeded our initial expectation of between 6 and 8 We’ve learned to put those expectations aside and million pounds. And the team at Cigar Lake achieved this instead focus on preparing for whatever comes our way safely and responsibly, ensuring we continue to get it and watching the market closely so that we’re ready to right at each step in the process. So we’re very proud of respond, because over the long term we know good the work being done at what is one of the world’s most things are in store for the industry. We know there’s a technically challenging mines. Having those pounds is huge amount of growth in reactor construction being led very important for our company. It provides the material by China, India, and South Korea, all of which have we expect will be needed to meet rising demand and it reactors under construction and brought new reactors on Bell Conferencing Page 2