Cameco Corp (CCJ) 2006 Q3 法說會逐字稿

Good morning ladies and gentlemen.

Thank you for standing by.

Welcome to the Cameco Corporation Third Quarter Results Conference Call.

At this time all participants are in listen-only mode.

Following the presentation, we will conduct a question-and-answer session.

[Operator Instructions]

I would like to remind everyone that this conference call is being recorded on Wednesday, November 1, 2006 at 8:00 AM Mountain Time.

I will not turn the conference over to Mr. Bob Lillie, Manager of Investor Relations.

Mr. Lillie, please go ahead.

Thank you Melissa and good morning everyone.

Thanks for joining us for Cameco's Third Quarter Conference Call to discuss the financial results.

Four of Cameco's senior management team are with us today.

They are Gerry Grandey, President and CEO, Kim Goheen, Senior Vice President and CFO, Terry Rogers, Senior Vice President and Chief Operating Officer, and George Assie, Senior Vice President, Marketing and Business Development.

In addition, we are joined by our colleague Alice Wong, Vice President of Investor, Corporate and Government Relations.

We're conscious of everyone's time today so we will review the highlights of the quarter, and then get right to your questions.

Today's conference call is opened to all members of the investment community and the media.

During the Q&A sessions, we will take questions from the investment community first, followed by questions from the media.

Please note that statements made during this conference call by the company regarding its objectives, projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations.

The company cautions that such statements involve risk and uncertainty, and that actual results may differ from those expressed or implied.

Important risk factors are outlined in the company's annual information form dated March 17, 2006.

With that, I will turn it over to Gerry.

Thank you Bob, and good morning to everyone.

Yesterday, we issued our third quarter results, and while these results are somewhat lower than the exceptional third quarter of one year ago, year-to-date, our revenue, net earnings and cash flow are significantly higher than 2005.

As is our custom, Kim will provide more details on these results.

Turning to the events of last week, suffice it to say we were challenged in a number of ways.

As many of you know, there was a rock fall on Sunday, October 22, which allowed water to flow into the underground development at Cigar Lake, eventually filling the relatively small underground workings.

This event was particularly surprising, given that the area had been dry and that we had taken appropriate precautions for this type of development.

As you would expect, we are in the process of doing a thorough review of the incident to determine what happened, why and what we can learn.

Of course, this will take some time as we will likely need to access the area before we get all of the answers we are looking for.

While events did not unfold in the way we had hoped, the response was in many ways gratifying.

Our employees together with contract workers responded quickly and appropriately.

Their actions ensured that all employees were safe, the environment was projected and all reasonable efforts were made to stop the water inflow.

While our employees and contractors are naturally disappointed with the setback, their creative minds have refocused on remediation and they are hard at work with the help of international experts.

Such challenges tend to bring out the best in people, and Cameco is no exception.

I'm also pleased with the expressions of support we received from many sources, including our partners, customers, suppliers, government officials and other mine sites.

I'm grateful for the efforts of many of you on this call today, from the investment community and media, who assisted and communicated the rapidly evolving events and joined us in two conference calls as the news unfolded.

We have already spent considerable time planning for the future.

We intend to take our time in developing a well researched and a thorough plan to restore underground construction at Cigar Lake.

Once we have that plan in place, we will be able to provide an indication of when we expect production to begin, and provide an update on capital costs.

We expect to provide the timetable and capital costs within three months by way of a news release, or as part of our fourth quarter MD&A issued in January.

While we'll take the time we need to ensure we have an appropriate plan, we are already moving quickly to mobilize whatever we need in the meantime.

We're fully prepared to restore the underground construction efficiently and to bring Cigar Lake into production as expeditiously as we can.

Terry will provide more specific information about Cigar Lake in a few moments.

I would only note that Cigar Lake remains an extraordinarily valuable ore mine, one that will supply uranium to our customers for many years to come.

Accordingly we will continue to sign long-term contracts, further strengthening our future.

And George will be commenting more on that shortly.

On the world stage, we continue to see evidence of the nuclear renaissance.

In July, the G8 leaders singled out the development of nuclear energy as an important component of global energy security, while simultaneously reducing harmful air pollutions and addressing climate change.

In Canada and in the US, utilities are planning for new reactor builds.

There are now as many as 30 new units being considered for potential new build in the United States.

I encourage you to review the information we have provided in our MD&A.

These international developments confirm Cameco's vision to be a dominant nuclear energy company, producing uranium fuel and generating clean electricity.

We continue to divest non-core assets.

This quarter we sold our small interest in the Fort à la Corne diamond project while actively pursuing opportunities on a number of fronts that fit within our vision.

The financial results released today, confirm Cameco continues to be in an enviably strong financial position, poised to take advantage of any opportunities in our industry.

And with that I will ask Kim to comment on the financial results.

Kim?

Thank you Gerry, and good morning.

Results from our third quarter were in line with the expectations and the guidance we provided in our Q2 report.

I will briefly summarize the quarter before turning to our financial condition and the outlook for the fourth quarter and the year as a whole.

On a consolidated basis our adjusted net earnings and cash flow were lower than in the third quarter 2005 due to lower earnings in the electricity and the gold businesses.

For comparison purposes we adjusted earnings for the quarter to exclude a $29 million gain on the sale of our interest in the Fort à la Corne diamond joint venture.

Uranium sales revenue in the third quarter declined compared to the same period in 2005, largely as a result of the deferred revenue on sales of 2.8 million pounds of uranium associated with the stand-by product loans that were put in place in the second quarter.

You will recall, as a precaution we put the product loan agreements in place to address any occurrence of supply disruption.

To date we have not drawn on these loans.

However, in accordance with generally accepted accounting principles we will defer revenue and cost on deliveries to the counterparties up to the limits of the loans.

These deferrals will continue till the loan agreements expire.

Or if drawn upon, until the loans are repaid and the net portion of the facility is terminated.

Deliveries and cash receipts still occur as scheduled as only the reporting of revenues and costs that are deferred.

In Fuel Services, the cost of UF6 purchased at correct market prices continue to constrain margins.

In addition, results reflect the deferral of 700,000 kilogram HEU of conversion services during the quarter, again associated with the stand-by product loan agreements.

In Nuclear Generation, operational results at Bruce [B] were encouraging.

An average capacity factor of about 92% was achieved in the quarter.

Operating costs during the quarter were $33 per megawatt hour, slightly lower than in 2005.

However, due to more moderate summer temperatures this year, the Q3 results at Bruce reflected spot power prices that were essentially half those of Q3 in 2005.

At Kumtor, the pit wall movement experienced in July and the lower mill head grade combined to reduce production in revenues for Centerra during the quarter.

The increase in revenues was partially offset by a higher average realized price of $617 US per ounce in the quarter, up almost 45% over the same period last year.

Cameco's financial condition remains exceptionally strong, with long-term debt of about 700 million at September 30 and cash of almost 500 million.

Centerra holds about half of that cash.

In the wake of the Cigar Lake situation last week, our credit rating has been reaffirmed.

Now, let's look at our expectations for the fourth quarter.

We expect consolidated revenue for the fourth quarter to be about 50% higher than that of the third quarter, due to anticipated higher sales volumes for uranium and conversion.

Deferral of revenue on sales of about another-about another 1 million pounds of uranium, we expect it to be in the fourth quarter.

The sales contracts involved are predominantly older agreements signed in lower-price environments.

As a result, we expect the deferrals to have a fairly modest impact in 2006 profitability.

Fuel Services revenue is projected to double that of the third quarter and gross profit is expected to be significantly higher as well.

At Bruce Power, fourth quarter earnings are projected to be 10% lower than Q3.

We are optimistic about future performance and contributions from Bruce.

The capacity factor year-to-date is firmly in the low 90% range and during the third quarter we undertook the final, planned outage related to major refurbishment activities at Bruce B. Following the completion of the work on Unit 8 early in November, we anticipate a significant reduction in time and expenditures on refurbishment activities.

This should boost generation and improve overall performance going forward.

In aggregate for 2006, Cameco expects consolidated gross profits to be significantly higher than 2005, despite somewhat weaker performance from the Electricity segment.

With that, I'll turn things over to Terry.

Okay, thank you Kim.

I'll begin by discussing what we're doing to get back on track at Cigar Lake and then give a brief update on the other mining operations and Fuel Services.

Well, currently, the water level at Cigar Lake is about 30 meters below the shaft collar, in the main shaft and we don't expect it to rise much further.

After the inflow, we quickly moved to begin the remediation process and our effort is running on-basically on three tracks.

Firstly, we're doing detailed planning to restore access and to remediate the mine and that planning is well under way.

We have international experts from several firms that are on site and we expect to have a preferred option, and several fallback plans fully developed within the next three months.

We are also consulting with our regulators to charge a certain regulatory path forward.

I should point out that the original environmental assessment for the project included language about remediation from the surface, in consideration of the possibility of such a flood.

This language in the original EA should speed the approvals process.

On the ground we have ordered and are mobilizing the equipment we will need to begin restoring access to the mine.

We have also adjusted our work force to ensure we have the people needed for the work to come.

Our first and primary option to restore access to the mine is quite conventional and has been proven at other operations around the world.

It involves drilling from the surface, fairly large-diameter holes into the area where the failure was and isolating the source of the inflow from the other under ground workings by grouting or freezing techniques.

Once the inflow is isolated, we'll pump the water out of the mine.

When we're back underground, it will take some time to rehabilitate the drifts and mechanical systems.

Do not expect the underground workings to degrade appreciably as a result of the flooding.

We will have to thoroughly inspect all mechanical and electrical gear though to evaluate the extent of the damage and make necessary repairs.

As indicated in the MD&A, we do not anticipate, at the present time, any downgrading of reserves in the category of resources.

We do want all stakeholders to understand that it may be possible, but due to technical rules about reporting reserves and resources, as outlined in the National Instrument 43101, we may reclassify reserves from "proven" to "probable".

Whether there is a need to reclassify will become clearer once the full remediation plan is developed and gains regulatory approval.

As Gerry indicated, we will provide scheduling and cost estimates once plans are finalized.

Turning to our Uranium mining operations, overall production is on track and we will meet our target of 21.4 million pound spend for the year.

We have concluded the contract negotiations with our unionized work force at McArthur River and Key Lake, with the tentative agreement signed on October 12th.

The union members are now voting on the agreement and that will take over the next couple of weekends.

The deal was endorsed by the union's Bargaining Committee and we are hopeful that that will be approved by the membership.

We'll have the results of the vote in mid November at which point we will update the market with a news release.

We also have good news from our Inkai excel project in Kazakhstan where we are making steady progress on construction.

Our Smith Ranch operation in Wyoming is also having a stellar year, producing well over last year's pace.

In the Fuel Services division, our Blind River refinery is expected to produce 18 million kilograms HEU for 2006, which is the plant's licensed, capacity limit, nearly 3 million kilograms HEU higher than Blind River's production in 2005.

The additional refined product is primarily going to Springfield's Fuels Limited in the UK, in support of our toll processing agreement.

At the Port Hope conversion facility we have overcome some technical difficulties that dogged us earlier in the year.

Production for the first nine months of 2006 is equivalent to last year but we are expecting to fall short of our year-end target.

We're also anticipating a slight shortfall in the Fuel Manufacturing operations for the year at Zircatec, though we expect to make this shortfall up early in 2007 when demand for deliveries is slower.

Applications for five-year license renewals for each of our fuel processing operations are now being reviewed by the Canadian Nuclear Safety Commission.

Day-one hearings were held in early October and day-two hearings are scheduled for late November, two of those in Port Hope and then Blind River will be December, actually in Ottawa.

Fuel Services division has taken some solid steps recently to build support and trust in local communities.

We're starting to see some fruit in that effort in the rising community support for the Port Hope operations.

That's all I have for now, George.

Thank you Terry and good morning everyone.

Spot market activity in the third quarter amounted to about 10.5 million pounds, bringing the total for the first nine months of the year to almost 26 million pounds.

That isn't far off the 29 million pounds recorded at this time last year.

The majority of spot activity this quarter was again the result of discretionary purchases by utilities, traders and investors which together amounted to almost 75% of third quarter volumes.

Utility purchases were for inventory building while investment groups continue to take positions in our rising market.

Industry average spot price at quarter end was $54.88, which was 20% higher than at the end of the second quarter and almost 75% higher than at the end of third quarter of 2005.

The spot price continued to strengthen following the end of the quarter even before the events at Cigar Lake unfolded.

That event has resulted in a great deal of uncertainty in the market and much speculation about prices with the obvious consensus among industry analysts that prices will increase significantly.

Today, the spot prices published by UX and TradeTech, average $60.13.

We now expect total 2006 spot volume to be close to 30 million pounds, similar to the 2005 level and given recent events it could be higher than that.

Moving to the long-term market, the average long-term price indicator at quarter end was $54.50, up 17% from the end of the second quarter 2006 and by over 65% from a year ago.

Today, the average long-term price is reported at $59.

As we forecast earlier, the long-term market remained active in the third quarter, and we continue to expect that total long-term contracting for 2006 will be in excess of 200 million pounds.

Now, I want to take a few minutes to provide further clarification on a number of items that were discussed in the quarterly report.

First, you will see that we have significantly expanded our Price Sensitivity Table to show our average realized price over the next ten years under a number of different spot price scenarios.

As we have been saying for some time, we have been building a portfolio that will provide significant downside protection against falling prices over the longer term.

In the rapidly rising market we are in today, we will continue to lag market prices.

Looking now at delivery volumes.

You will see that quantities for 2006 have increased.

This increase is not the result of unanticipated upward flexibilities in our legacy contracts.

The fact is that we have generally assumed that utilities will exercise maximum upward flexibility in all legacy contracts.

Most contracts are based on six annual volume commitments.

However we do have a number of what are called, requirements contracts.

Under those requirements contracts, the delivery volume is based on the customer's requirements for that calendar year.

And, the customer requirements could go up or down, based on how well their units operate, but usually those adjustments are relatively minor, and we communicate frequently with those customers to understand those changes and to avoid surprises.

However, on occasion, a customer's requirements will move over a year end due to the timing of the refueling outages, and that is a situation we are currently in.

The increase in 2006 delivery volumes is largely attributable to the timing of customer delivery requirements.

That is, early 2007 delivery volumes moving into late 2006.

And so, while 2006 volumes have increased, there has been a corresponding decrease in the volume expected to be delivered in 2007, it does not result in an overall decrease to our delivery commitments in total.

Another matter I want to address the question of whether Cameco is short of material, and is buying in the spot market to meet its delivery commitments under legacy contracts.

The answer is quite simply no.

We are not short of material and we are not making spot purchases to meet deliver commitments under legacy contracts.

We have, and will continue to make, opportunistic purchases in the spot market, an activity that has been part of our marketing strategy for more than a decade.

In addition to generating profits, these spot purchases provide us with greater insight into market activity.

They also serve to ensure transparency in the spot market.

One of Cameco's major strengths is our reputation as a long-term, reliable supplier, and we take that reputation very seriously.

We manage our contract portfolio very carefully.

As we move out in time, the volume of our commitments decreases significantly.

In determining the volume, we are comfortable contracting in any particular year, we consider the reliability and risks associated with the very sources of our supply.

In addition to the inventories that we hold, which are equivalent to about six months of our forward sales, we have primary production from a number of sources, utilizing a number of different mining methods.

They were also entered into contracts for long-term purchases including high enriched uranium and the UF6 generated from the re-enriching of European [tales].

As noted in last quarter's call, we have further supplemented our supply sources with stand by loan agreements, which we can use to deal with any short-term supply disruption caused by a problem with one of our sources of supply.

Cameco has standard force majeure language in all of its contacts.

In addition, several years ago, we introduced into new contracts what we call unplanned supply interruption language that provides Cameco with the right to reduce, defer or cancel volumes pro rata in the event of a meaningful, unplanned, supply interruption.

This language parallels the concept of unplanned reactor outage provisions that our utility customers have required for many years to protect them from being forced to buy material in the event that their units are off line for prolonged period.

This unplanned supply interruption language does provide us with the right and the flexibility to reduce or defer delivery commitments in the event we experience a significant unplanned disruption to one or more of our supply sources.

At the same time, it insures our utility customers that they will get delivery of a portion of their delivery requirements in a fair and equitable way, which is pro rata to the extent of the disruption in our supply.

About three-quarters of our contracts contain this unplanned supply interruption language.

This will increase going forward as all new contracts will include the language.

Now, in addition to that supply interruption language that I've just talked about, we also have the right under the Cigar Lake base load contract that we entered into to underpin Cigar Lake to cancel or defer the deliveries to the extent of any delay or shortfall in Cigar Lake production.

Moving on, another topic I wanted to touch on is to expand on some of our recent contracting terms.

Generalizing, we can say that recent offers contain a 20% fixed price component, which is escalated for inflation over the term of the contract, with the remaining 80% of the price based on the market price at the time of delivery.

Fixed price component offered is most often higher than the long term published indicator at the time of offer.

The market portion of the offer will contain a firm floor equal to about 80% of the prevailing spot price and this floor will escalate over time.

There is no ceiling price.

As an offset for the firm floor price and lack of a ceiling price, a discount of 5 to 10% might be offered, that's par price level of at least 25 to 30% above the current level.

I reiterate that what I have just described is indicative of terms that were being offered prior to the Cigar Lake event.

Finally, I want to note the reference in the quarter report that in light of the changing market conditions, we are revisiting our policy in respect to spot sales.

To retain greater flexibility going forward, we may, in the future, take advantage of short-term opportunities and place material into the spot market.

I'll turn very briefly to the US spot conversion market.

At quarter end the North American spot conversion price remained unchanged at $11.63 and the European also remained unchanged throughout the quarter at $12.

There has been some strengthening of conversion spot prices since quarter end, and a few days ago US moved their spot price up by $0.25 in North America and $0.50 in Europe.

The long-term market also remained unchanged at quarter end, with industry average price for North American conversion holding at 12.25 and the European conversion price at 13.50.

Now again, in recent days US did move their European longer-term indicator up by $0.50.

That concludes my remarks and with that I'll turn things back to Gerry.

Okay.

Thank you, George.

Operator, we will turn it over to you for questions.

We will now take questions from the phone lines.

Please be advised that we will take questions from the investment community first, followed by questions from the media.

[Operator Instructions]

Your first question comes from David Snow from Energy Equity Inc.

Please go ahead.

Yes.

Hi, I'm wondering how long it takes you typically in past operations to freeze off the water table if you use that route?

Bert?

Well, it takes - in an isolated area it takes several months for freezing to take effect.

So as we progress to the mine, once we get a freeze hole online in it will be just a matter of months.

And do you have an idea of where the water came in from?

I keep being asked that, and I'm wondering if you can help me in that regard?

The Athabasca Basin, David, is a large sandstone mass and it is-through its cracks and fissures, contains a lot of water.

It's just a very large basin of water with sandstone in it.

Okay, so you can't trace where the-which structure or fissure brought in the water?

No.

If you've been in Northern Saskatchewan it's just-it's all lakes with some land sticking up, so there's water everywhere.

It's just in the-it's totally saturated in the sandstone.

So how much do you have to freeze off typically to put your mine in?

Just in the place where you're doing the mining, isn't it?

That is correct.

Plan right now and what we've done is we've frozen in the drifts for the production levels-in the production level where the production will take place and we freeze that just ahead of the mining.

We do not freeze the entire ore body initially.

Is there a likelihood you'll have to freeze a greater area to provide a margin for safety against this reoccurring?

It is possible, surely.

You'd have to remember, though, where this development was in basement rock, very dry, and the risk assessment having been made was not that it would cause this issue.

But that's one of the things we'll have to consider as we move forward is do we want to mitigate the risk even greater than we have.

Okay, thank you very much.

Welcome.

Your next question comes from Fadi Shadid from Friedman, Billings, Ramsey.

Please go ahead.

Yes, good morning.

Question on the Price Sensitivity Table, on page 20 of the release.

Could you talk about why, like in '09 or '10, or especially '09, realization seems to drop at like 60 and $80 levels?

George, you want to grab that one?

Yes.

The reason for that, Fahdi, is that we're much-it just turns out that we're more heavily committed in 2009 than we are in the years prior to that or subsequent to that.

It's just the way it happened to work out in terms of contracting, and as a consequence we're left sensitive to swap price in that one year in 2009.

Okay.

Okay, good.

And another question just in general.

Could you update us in your interest in the like growth opportunities in an enrichment business such as you've talked about in the past?

Thanks.

We continue to look at all opportunities, and certainly in the fuel sector vertical integration remains a priority for us.

Obviously as we've said earlier we're not going to do anything that we, we're going to be convinced at what we do and how we do will add value.

So we continue to work on it.

Opportunities are somewhat limited but I also would say that the ability to produce Uranium is going to remain the foundation of the company and we spend a lot of time to looking just at production alternatives and opportunities.

Okay.

Thank you.

Yes.

Your next question comes from Brian MacArthur from UBS.

Please go ahead.

Good morning.

Just following up on the table, can you tell me out in the later years 2014 and 2016 on your Sensitivity Table, obviously you're getting a portion of the price?

Is that reflecting the 5 to 10% discount in your assumptions or is that reflecting base price escalated contracts written today at whatever it is, 56 escalated, and that's why you're getting a discount to the 80 to $100 scenario or is it combination of both?

You hit the nail on the head at the end there Brian.

It's a combination of both.

As I described it, lot of the contracts we've entered into recently, 20% is a fixed price, the other 80% is market related.

Some of these do have discounts with the combination of that 20% with the fixed price and those contracts where there is some discount offered at higher spot prices.

Right so if there's a-in your $100 scenario, there are contracts in there now that you've assumed 10 years.

Let's say for argument if you did it today, escalated at 2.5% from $56, there's some volume already embedded in that and then you've sold the rest of the uncommitted pound at $100 less, somewhere between 5 and 10%.

That's correct.

Okay.

Thank you.

Your next question comes from Lawrence Smith from Blackmont Capital.

Please go ahead.

Good morning.

Just a comment first.

Thank you for the more complete disclosure on realized prices.

That's very useful.

Two questions for George.

The first one, you talk about the base load contracts for Cigar.

Could you quantify what type of volume are covered by those contracts and then second question is, when you discuss the typical contract terms, I assume you were referring, that discussion referred to the portion of your contract mix that is fixed price?

And secondly, has the mix, has your targeted mix of fixed price versus market related changed recently?

Thank you.

Okay to answer your first question, we don't release information on the volumes under the Cigar Lake base load contracts.

Well it was worth a shot George.

Yes I know.

And then in terms of the pricing, what I was describing was just to try and give a sense of recent contract terms that might be offered and so, that 20% firm price, 80% market.

That's what's been in the market as of late.

And there was something else that you -?

So, so sorry.

You went through the contract terms fairly quickly and maybe it's easier to do this offline but were you describing, did that relate to your contracting in general or?

Yes what I was describing was the type of contracting that we've been doing recently to give the listeners, investors a sense of where we're at.

That's all I was trying to do.

Okay.

And then I wanted to make the point that, that was recent.

That could change significantly in light of more recent events.

The other question you asked, and sorry Alice reminded me is, has our target changed?

If you look at our portfolio today, it is still 60% market, 40% base escalated.

If we were to continue with what I've just described, you would see it move more towards market obviously.

Absolutely, okay, I understand now.

Thanks George.

your next question comes from Greg Barnes from TD Newcrest, please go ahead.

Yeah George, at the end of your comments you said you could make the move to place some material into the spot market.

I was wondering why you would do that and where the material would come from if you typically are fully contracted?

As I mentioned as well Greg is, the way we contract is generally going into a year we may be contracted for that year but we're not contracted beyond that.

It's not also uncommon for us to go into the delivery year where we've reserved a little bit for the first deliveries under a long-term contract, near term deliveries under a long-term contract.

Finally, as you know, we, on occasion, see material in the market that we think is attractively priced or given where our view of the market is going and so all we're trying to do here is give ourselves greater flexibility.

We just wanted to highlight to everyone that, while we've had a long standing practice on not selling into the spot market, that we may elect to do something different going forward.

We're not saying that we will, but we may.

I think earlier this year you purchased some material from DOE under the auction and you did turn around and sell that.

Was that reflective of entering and selling into the spot market then?

Yes, although, in that case, really looking to sell into the near term deliveries of the new contracts.

So that one, you wouldn't exactly say its spot but we could do spot.

So effectively your sales process is evolving where you're becoming a whole lot more flexible and want to take advantage of spot prices then?

Yes.

Okay.

Terry just quickly a second question, Rabbit Lake, I think there is a potential there to offset, particularly in 2008, some of the loss production from Cigar.

Do you think you'll be able to provide some update on that by the end of the year or sooner?

Yes Greg, we will be providing information about-and the encouraging results about Rabbit Lake.

The end of the year?

Yes, probably yes.

Yes, most likely.

We're just going through all the engineering and the planning to make sure that we have everything squared away.

So you're pretty optimistic there that you can push the mine out another couple of years of so?

We are optimistic Rabbit Lake is a good resource.

Okay, very good thanks.

Remember Greg, we are constrained by the same rules that everybody is.

Okay, thanks a lot.

You bet.

Your next question comes from Ian Howat from National Bank Financial, please go ahead.

Yes, good morning.

Referring back to the table again, in the later years, the first question is, you're pretty unhedged or pretty uncontracted for beyond 2010.

Is that correct?

You have a lot of contracting yet to do?

Yes.

Okay, so as opposed to what's in the -.

So if you sort of start contracting in the later years and then prices slow off then your prices-this only reflects if you keep selling at spot that you would actually then sort of have a, if the price continued to fall then you would have contracts higher than that depending on how you contracted them for.

Correct?

Yes, you're absolutely right.

The problem with this table is, that it assumes, for example in the $80 case, if the price goes to $80 tomorrow and stays there flat for 10 years.

Right.

There was no there way for us to show it.

No, no, I just want to understand how it's constructed.

On the conversion where you-it's similar, you signed long-term contracts a number of years ago and prices have continued to escalate.

Is the sort of the contracting period for this similar to the uranium, where in the next two to three years, most of those will roll over and you'll get the benefit of the higher contracts, or is it a longer contract period?

No, it's similar, and you're right.

Over the next several years, they should be rolling off.

That's one factor.

The other factor is that we just did our deal with Springfield Fuels Limited last year, and those volumes are just starting to kick in.

So it should see more of an uptick sooner rather than later in conversion.

The question the other day was whether you could increase capacity anywhere else.

I understand maybe not quickly but in light of, potentially, if you're going to see higher prices and the potential issues at Cigar and you have large reserves in the US and at Inkai.

The reality is if you wanted to focus some effort on that, you should be able to bring in more capacity within the next five to ten years elsewhere if you pushed for it?

We're certainly looking at all of that in response to the Cigar Lake.

Now, we've described in past calls some of the constraints that we've faced just in terms of regulatory approvals and these kinds of things.

It isn't, since we've been operating these facilities at full capacity, it's not something you can do quickly.

ISL by its very nature takes quite a long time to develop the well fields that are added new.

Frankly, in the US, we've been going about as fast as we can.

The results, as Terry indicated, at Smith Ranch this year have been spectacular.

Right.

Related more to the grade of the ore body and not so much to the rate of development, but rest assured we're doing everything we can to do precisely what you're talking about.

Okay.

Thank you.

The next question comes from Ivan Obolensky from Shields & Company.

Please go ahead.

Good morning.

I have two questions.

First, there are some pretty interesting companies that are abutting many of your important properties and I'm wondering if you are taking steps to accelerate the potential acquisitions in these areas.

Number-one and number-two what steps are being taken to get a furtherance of your reprocessing area after enrichment?

Ivan, the Athabasca Basin, the area you're talking about I think, you're in Saskatchewan.

During the years when prices were weak, Cameco maintained a very, very large property position and to do that you've got to continue to spend money every year.

Now obviously we didn't control the entire Athabasca Basin because a lot of it has got deep potential.

We do think the basin is prospective, and as the prices increase, what we've seen is a lot of other mining companies come in, acquire properties, and some of those would be adjacent to properties that we own.

We are in partnership with a number of companies as well in the Athabasca Basin and a lot of those partnerships date back a number of years.

The short answer is we've got a large position already.

We think the ground we have is highly perspective.

We continue to watch what the juniors are doing and their success and ultimately if we think it makes sense, then we'll begin to think about acquisitions as we've indicated in the past.

Right now a lot of effort goes into making a discovery in the Athabasca Basin and we know that even once you have at discovery, it takes a long time to delineate it, and get it permitted and ultimately developed, and it's not without challenges, by the way.

I think I answered the second part of it a little earlier in that we continually look for opportunities vertically.

We do not today participate in enrichment and nor do we participate really in the manufacturing of fuel assembly, other than in the Candu Fuel Cycle through Zircatec, but we continue to look for opportunities that we think would add value to the Cameco and to its shareholders.

That is something we do constantly.

Thank you very much.

You're welcome.

Your next question comes from Borden Putnam from Eastbourne Capital.

Please go ahead.

Hi, good morning.

Terry, thanks first for the added detail in Cigar.

I appreciate you laying out the picture for us there.

On the collapse and the area of the rock fall, I was curious, did the sand break through that area into the mine workings?

Borden, there were some photographs taken after the back collapsed into the intersection, and there is evidence of some sandstone rubble in the debris pile, so yes it did.

Interesting.

I have been trying to understand the time constants that you might be facing with this.

I went back and I have reviewed the ventilation shaft flooding event, and looking at the CNSC transcripts and such, and I was curious.

That hearing in April mentioned that you would be taking back to CNSC a proposal for remediation, and I wondered, before we get all tangled up in the current problem at Cigar, where were you at with the ventilation remediation process?

Borden, we had begun drilling from underground.

From under the shaft to drilling freeze holes around the perimeter from the levels below, and so the freeze drills were in place, actually, I think we were about 70% or I do not know exact number or so completed, with the drilling of the freeze holes when the other incident happened.

So that, the CNSC had reviewed that plan, and you were going ahead with that, under their guide?

Yes Borden.

The CNSC worked with us hand in hand basically, on that plan, and we had, like I said, we were about 70% of the holes were completed and freezing had, had been hooked or not, but I do not think it had been initiated yet.

Great.

I have been impressed with their thoroughness.

They are quite involved and diligent, but the-as I understood from the last calls we had last week, the heat exchange portion of the freeze plant was in the underground, so is that going to have to be re-established at surface?

And, if so, what are the thermal losses trying to freeze from surface?

Have you done this before with success?

Borden, we have froze them from the surface only the collars or the shafts, and about the first 40 meters or so, as we start sinking the shaft and get a ways down, until you can establish grouting in that case.

We haven't frozen from surface to depth, at least not in my time here, and I do not believe that happened.

The heat exchanges underground, our experience really at McArthur River was that, you can't predict what might be the case here exactly, but is was not, it wasn't so extensive damage.

It was fairly straightforward in how to clean up and get things running again, so I don't know, I can't predict what is going to happen to the heat exchangers, but I don't expect it is going to be a huge problem.

No, I am sorry, my point was that they are probably not available to you since they're in the flooded underground so you're going to have to re-establish that at surface to effect your remediation of the collapse area was my point.

Although the freeze plant on the surface can still be used to make the brine.

The heat exchanger underground is to take the cold brine from the surface and then the brine that's circulating in the frozen ground.

That's where the heat exchange takes place.

Right.

But we re-establish that from the surface.

Okay.

Let me change direction for a second.

On the resource classification and I read with interest this paragraph that is repeated in the release and it starts out in line with my understanding of measured resources and how they relate to proven reserves.

But as you work through that paragraph, I was a little surprised when you talk about that you would downgrade proven to probable.

And looking at that diagram which I keep, this is one that I'm referring to Figure 1 in the CIMM, Canadian Institute of Mining and Metallurgy, which I keep on my desk because this is the most important area for me to understand risk when we're investing in mining shares.

The issue of mining method or mine plan really is a modifying factor and that would move material from proven reserves to measured resource and back and forth.

In other words, you have a great deal of confidence and knowledge about these resource tons; you're not drilling delineation holes.

You're really seeking a mining method so I'm curious why you would go to probable versus to measured if, when you reclassify?

I think we're really not quite sure where we're going to end up in that spectrum.

I think we're just telescoping to people that under our view of that instrument and given some of the things that we don't know today, uncertainties that are out there that there may be a reclassification somewhere along that line.

We don't think we're going to have to resources because those pounds exist right and it's an incredibly valuable ore body.

We don't want anybody to be surprised in the future.

That is something that as we go through the investigation here and re-establish plans to go back into Cigar Lake.

It's something we've got to do along the way.

It's required by the National Instrument and certainly the qualified people that we have give us a lot of guidance and lot of comfort.

Okay Gerry, I appreciate that and continuing on that and stepping over the issue of what reclassification might occur.

The, with, even if you were to move it to probable at Cigar, you guys are very diligent about only depleting from proven.

You only mine what you call through put, which only comes out of your proven category material.

And so, this would take that material out of what I would call mineable reserve I guess at Cigar and in conjunction with the 139 million pounds that you've reclassified at McArthur River over the past few years from proven again to probably.

But again, not arguing about the terminology, you've taken that out of your mineable reserve base.

It just, it gives me discomfort and I wonder are you considering soliciting a third party outside preparation of your reserves and auto'd of your mine to give investors greater confidence that in fact, these notwithstanding that there in the ground.

We know the resources are in the ground but that you can get them and they will come out in this fashion.

To help us understand what the risks are?

I think what we've tried to do more is be very conservative on how we report these under the National Instrument.

I think you ought to take great comfort in the fact that we have taken steps on our own to do that under I think a very conservative reading of what's required without as you point out, that the pounds are certainly there.

The grades are certainly there and we're quite confident that over time we'll put them back into the appropriate category when they're mined.

Appreciate that.

Last question for me and I thank you for the time.

In the reclassifications that went on at McArthur there was some specific wording talking about-there was mining method questions, and looking at the only available mine plan that I've been able to find, which was an inclusion in your proposal for expansion at McArthur submitted to the CNSC.

That may be dated, but it's all that I've been able to find.

And in there you speak, or it shows about a transition from Zone 2, Panels 1, 2, 3 to Zone 4 lower and to Zone 2 remnant starting at about 2006.

Now this may be dated, but my point is that it's hard for a average person on the street to see physically where the additional tons are going to come from as Zone 2 is depleted.

Zone 2 is unique, Panels 1, 2 and 3 anyway, it's unique, its a little easier to mine.

Zones 4 and other are more Cigar Lake-like and so it's difficult for me to put into context what the future mine plan will look like.

And I wonder, Agnico-Eagle provides a very good, vertical longitudinal profile that shows stope by year, and I wonder, in their annual filings, if you could consider doing a similar thing to provide us with a better spatial understanding of where the tons will be coming from both at McArthur and Cigar.

Certainly we'll take that under advisement and maybe we can provide a little bit better guidance in the future as to where the production is going to come from.

Okay, thank you.

Your next question comes from Brian MacArthur from UBS.

Please go ahead.

Just in general terms because I know you're not going to give me the exact numbers, but with the Cigar base load contracts is it far to assume that they would be written in a previous regime?

And therefore would have lower leverage than the new contracts and therefore if they came out of this table you'd be taking out the lower - relatively lower value contract versus the higher one?

Is that a fair statement as I look out over the next few years?

Yes, that's a fair statement, Brian.

Thank you.

Your next question comes from Raymond Goldie from Solomon Partners.

Please go ahead.

Good morning and thank you.

I'm hearing from clients that they're concerned that Cigar Lake is a total write-off and I think this is an overreaction, but I also think it's why your share price has been so weak.

In this regard, can I give comfort to clients by-is it accurate to say that you currently have no workings other than the freeze holds below the ore body in or near the Cigar Lake ore body?

And I guess a related question, you said water was 30 meters below the collar of the Number 1 shaft.

What's the status of the Number 2 shaft?

Ray, there should be no doubt we intend to go back and mine Cigar Lake.

Now remember, it was a mining development, there wasn't a lot of equipment underground, so there isn't going to be a lot of underground equipment that will have been damaged by water inflow.

And our experience has been that what limited damage there will be is likely to be to electronics which we'll plan on replacing as we go back and access the underground workings.

So you know, all of the statements we've made to firm belief within Cameco is it's a setback but we're going to go back and recover and redevelop and mine the ore body.

So I think you can reassure your clients that that's the path we're heading on.

Mr. Grandey, though, I think the concerns are not about damage to the mining equipment, I think they are to the ore body itself and I just wanted-can I reassure people that there are actually no workings in or near the ore body currently?

All workings were in the dry basement rock so the ore body, remember, will be above the contact with the sandstone formation, the Athatbasca sandstone.

It sits up in the sandstone and all the mine workings were in the dry basement rock.

And there again, our experience has been, given the way we develop the mine with shock creating and ground support, that they'll be very limited damage if any to the underground development outside that one collapsed area that caused the water inflow.

Good.

That was my understanding too.

And how about the Number 2 shaft?

Number 2 shaft, Terry indicated was in the process of being re-mediated.

It too is filled with water to about the same level and its remediation will occur under the plans we had established earlier if we can't figure out a different way to do it.

Now how did it get flooded?

It's not directly connected with Number 1?

Okay this is Terry.

Shaft 2 was, we're in the process-we're down about 390 meters I guess and grouting off as we were probing to go to the next levels down.

And we did encounter water and had for some time and we're in the process of displacing the debris coming out of the holes with grouting.

And that's very typical and the method that had been used all the way down.

And what happened there was the standpipe that was protecting water from coming in and through which we grout, that just broke off the pipe.

So the inflow came through an artifact, through a drill hole.

The incident and the mine is really not related other than they're in the same water table regime and the water flowed to the mine from the general area and included Shaft 2.

So you're saying that Shaft 2 is effectively a separate, a third flood at Cigar Lake unrelated to the second one in Shaft Number 1?

No.

No, Shaft 2 was the incident was earlier this year where we had the standpipe fail and the shaft was flooded.

We were ...

Oh, I missed that story.

Thank you.

We were re-mediating that from underground with the freezing and then all I said just recently, just now is that when we have inflow at, in the mine itself, we could see evidence of the water table dropping in Shaft 2.

So there's a water connection but it's just because the whole basin is saturated.

Thank you.

Your next question comes from Lawrence Smith from Blackmont Capital.

Please go ahead.

Another question for George and sorry to both you again George.

Following-up on Brian MacArthur's question about the Cigar Lake contracts.

I notice in your press releases, you've talked about the ability to either defer or cancel and Brian's observation was that they would be the contracts with less sort of upward flexibility in price.

I mean depending on what the mix is between being able to defer or cancel, then maybe you could advise us what that is?

In effect what you'd be doing is pushing out the lower fixed price contracts further years out sort of 2010 beyond, assuming that's when the mine's first up.

Is that a fair comment?

Under those contracts, we have the right to defer or terminate completely those deliveries and a final decision hasn't been made yet.

But if we were to terminate them well then they're gone.

If we were to defer them it would take them out probably-this is off the top of my head-but much further than 2010 it would probably take it out to 2015 or beyond.

Those, all of those base-load contracts your option is either defer or cancel.

And I guess the third option would be you could go to the customer and say we're going to cancel.

Do you want to re-negotiate?

Fair observation?

Yes, I guess it is.

Yes.

Okay.

Thank you very much.

You're welcome.

Your next question comes from [Tom Carly] from Portal.

Please go ahead.

Hi.

I was wondering if you might be able to address the specific nature of the delays in expanding your McArthur River mine?

Thank you.

Terry?

Tom, the McArthur River, Key Lake mining and milling complex is-the application to increase the production to 22 million pounds was underway.

During the evaluation, concerns about the impact of the effluent stream, historically as well as what might be involved in the new expanded production, came in with elements of selenium and [milithinum] being primary concern.

So just a lot of work is going on and it slowed the regulatory process down as far as getting those approvals.

So we're working through that now and we have plans underway and submitted to the regulator.

A phased approach to reducing those metals in the effluent and I can just say we're making progress on that front.

The timing of actually getting approvals is still up in the air.

Your next question comes from Onno Rutten from Scotia Capital.

Please go ahead.

Yes good morning everyone and just related to that, the permitting for Rabbit Lake.

If you were to have to find new resources there and done all the engineering work, what is the permitting status of the mine and what allowance do you have to actually extend operations there?

The Rabbit Lake situation is the expansion of the Rabbit Lake will not require any additional permitting.

Just an extension of the reserve and we have a license to operate it at Rabbit.

But as far as I understand you're disclosure, that extension was still October 2008?

Is that correct?

I think you're, you're thinking of the modification for Cigar Lake ore I believe, Onno.

This is just extension of Rabbit Lake material, so we can operate and produce whatever extra pounds we find at Rabbit Lake.

The disclosure in the report is referring to modifications to the mill to accept the Cigar Lake ore.

Okay I will take it offline then.

Okay.

Thanks.

Your next question comes from David Snow from Energy Equities Inc.

Please go ahead.

Well I just wanted to clarify in my mind what you meant when I believe you said the workings were in dry basin rock and should have limited damage.

Is that the basement rock another words that you're talking about below the sandstone?

David that's correct yes.

Okay.

I see.

And then you also said you saw the water table dropping in the second shaft.

I'm trying to understand, does that mean the second shaft area was, is therefore flooded also?

David the second shaft was flooded in an event earlier this year.

So it is, remains -?

The water was still sitting in the shaft.

We never did de-water it because we have to, the purpose of freezing from underground was to block off that flow path.

And so the shaft 2 had been flooded since the incident this spring.

Oh okay.

All right.

Is not a new thing.

Okay.

All right.

Thank you very much.

Your next question comes from Brian MacArthur from UBS.

Please go ahead.

Hi just a follow-up one more time on this table.

There's a footnote saying all of this is before the Cigar Lake water flow incident.

I assume then, all this table was based-assuming you did the three-point whatever it was, 6 million pounds in 2008, the 5 in the 2009 and the full 9 million pounds in 2010 or was it pushed back to the one-year delay that was originally talked about?

Really I think the way to look at this table was that it was generally done on the assumption that sales volumes would be in the order of 35 million pounds for the entire period.

That's in a-so it was done prior to the Cigar Lake event.

Right so if you do have to as Larry brings up defer to terminate, you know your 35 becomes 32 in 2008, all else being equal.

You just take out those pounds is that correct?

That's right.

That's what could happen.

Now it depends what happens in other operations but

Sure.

Everything else being constant that would be the analysis.

I even hate to ask this second question but someone made a comment that McArthur now is having flooding issues.

Can you comment on that one way or the other?

Absolutely not true.

Thank you.

Your next question comes from Victor Lazarovici of BMO Capital Markets.

Please go ahead.

Thank you.

It's surprising that there's still questions on Cigar Lake that haven't been answered this in the late in the call.

But I do have one and that relates to the assumption that you can plug the leak and then pump out the water.

Under the CNSC rules, does that water become waste material or radioactive or nuclear material to need special treatment?

Or are you going to have to develop an EIA for that water?

On that Vic, any water coming out of the mine, including this, will end up being treated.

Treated as nuclear waste or?

Just like any other water that we treat normally that it would be pumped out of the brine and even in the normal operations, like at McArthur River, goes to the water treatment plant.

Okay and do you have sufficient capacity to do handle that?

Or how do you think it is going to work?

The accommodation of the water treatment plant, which is 500 cubic meters an hour plus a contingency pond that we have where we can with regulatory permission, alter it for discharge once water's treated on a temporary basis.

Remember the volumes of water we're talking about once sealed are not all that large.

Okay.

On an entirely different matter.

The Russian's have generally indicated they don't intend to extend the HEU agreement past 2013 and in the industry, it's generally believed they will continue to produce the material.

What's your expectation for how they're going to market it and bring it to the West?

Have they given you formal notice of termination of your arrangement and could you negotiate a marketing agreement with them sometime in the future and still control the material?

Our arrangement Vic goes through 2013 and then it terminates.

So they're, they have commented that they don't intend to extend it beyond 2013.

I think the industry is not necessarily speculating that they'll continue to blend it down.

In fact, Russia has indicated perhaps otherwise.

It is a big unknown out there as to what they would intend to do but they're certainly capable if they were to do it, to 1 utilize it internally which is highly probably for their own expanding nuclear power plant or even begin to sell it themselves to their clients or customers.

Now George would you have anything else you would want to add to that?

I would just add that a few-look at their primary supply today and their reactor program, they're export program, reactor export program.

They have a significant need for uranium and so there is a view in the industry that if they continue as Gerry mentioned, it might be at a reduced rate but they would be consuming pretty much all of that Uranium for their own reactor program and those client states that they serve.

You may know that they're planning I think its two reactor a year going forward and couple of the large reactor export programs.

The view is that HEU beyond 2013 will not make its way to the West to the extent that blend down continues, it will be utilized within Russia or its client states.

I guess I'm having trouble with the numbers.

If I recall, the last year of the HEU agreement had them shipping 32 million pounds for the West?

Its steady state at about 24 million pounds that would be created by blending down of which around 8 or so remains or is returned to Russia.

So the net effect in the West is about 16, between 15 and 17 million pounds or there.

And that's what you think will come out of the market in 2014?

That's what would, yes, that's what would disappear if they didn't continue blending beyond 2013.

Okay.

Thanks.

Your next question comes from Raymond Goldie from Solomon Partners.

Please go ahead.

Thank you.

Your guidance for '06 is 36 million pounds of Uranium deliveries with revenues recognized on 32 million pound and your guidance of '07 is 35 million pounds of deliveries and I wondered what level of deliveries would you recognize revenues in '07?

George do we have that or Kim?

Yes, I don't know.

I think that'll come out in the next-at year end Ray, when we give you the projections for, or look at '07?

Thanks very much.

Your next question comes from David Snow from Energy Equities Inc.

Please go ahead.

Yes, just as a-on that deferred amount.

I think that in one breath you say you've got loans for up to 5.6 and then in the next breath that you have none deferred.

I'm trying to understand what's-why that is?

What we had, the facilities have a capacity for borrowing of 5.6 million pounds of which and again, we actually haven't borrowed any.

The 5.6 just refers to the availability to borrow.

Well why do you have 2.6 in deferred revenue?

Pounds of uranium?

Yes, the 2.8 that is part of complying with accounting standards where when you are borrowing material from someone who you sell to, you defer the amount that you are selling to that party for revenue recognition until it matches the limit of what you can borrow.

Your maximum limit you can borrow is currently 2.8 rising to 5.6?

No, the maximum we can borrow is 5.6 but we have only delivered to that, to those same counter-parties 2.8 of that.

So you do it on a progression basis till you reach the limit.

This 2.8 delivered to the counter-parties, you mean the counter-parties are -?

One's that we can borrow material from.

The counter-parties are customers.

Okay, well then you have borrowed some of the 5.6?

No.

No.

The accounting rules say that if you have this loan facility in place that you have to defer any revenue from sales to those customers up to the limit of the loan.

Even if you have not borrowed any material from them.

Oh, you've contracted but haven't actually borrowed, physically, the material?

Correct.

Okay.

All right.

We find it incredibly confusing as well.

Yes, I see, okay, well good.

And I'm also wondering the Russians in midsummer had indicated they might want to go to market pricing of the highly enriched uranium contracted material by 2009 and eliminate monopoly buyers and go directly to customers.

Is there any further feedback on that that you can -?

That's really an effort on the part of Russia to gain access to the US market for their SWU production.

Not so much on the HEU but for their SWU production in Russia.

They are a large provider of enrichment services, and up until now they've been excluded pretty much from the US markets so-all of that discussion is trying to gain access over time for their production to the US market.

There hasn't been any recent developments.

I know that there are discussions ongoing between the US and Russia are going to go through at least December or some kind of an arrangement is probably going to come out it that would be acceptable to all the parties.

And how would that impact or affect the 15 to 17 million pounds of uranium now coming to the west?

Well again, the 15 to 17 million is HEU-related, that's weapons dismantling.

And what the Russians and the US are talking about is not that but it's access for their enriched uranium, which is different, coming into the US market and having access to the US market.

Okay.

That would be potentially another source of Russian fuel coming to the US market or am I hearing that wrong?

It could be a source of enriched uranium.

The uranium is likely to - well, will come from the market generally.

You shouldn't look at it as additional uranium available to the market.

It will be additional enrichment services that will then be using uranium supplied by the market generally.

Okay.

All right, thank you very much.

Your next question comes from Terence Ortslan from TSO.

Please go ahead.

Actually, all my colleagues have diligently asked the questions.

Thank you.

Hey Terry.

Thanks, Gerry, nice to hear you.

[Operator Instructions] Your next question comes from Chris Donville from Bloomberg News.

Please go ahead.

Hi.

Gerry and George, I wonder if you could talk a little bit about the ongoing influence of the non-uranium or non-nuclear industry related investors in the uranium market.

What impact do you see them having in terms of demand for uranium?

What do you see going forward in terms of the influence they're going to have on the market?

According to our estimates they hold something in the order of just under 20 million pounds, about 18 million pounds or so, so it's - you know, it's not an insignificant quantity.

If one looks at the spot market last couple of years it's going to average around 30 million pounds.

So put it into that sort of a frame if you will.

You know, with recent events and the outlook for price they continue to be interested in accumulating more so at this point they're a buyer not a seller, at least not until we see.

Your next question comes from John Hughes from CBC Radio.

Yes, hi there.

Question I guess I will start with Terry.

Sorry I missed your last name.

If I could just get you to state that for me as we are recording here.

You talked with a technique for-I think you mentioned freezing to get the water out.

I don't quite understand that.

If you could sort of explain that for me and also I don't know if this is for Terry or perhaps Gerry, there was a mention of an adjusted work force.

What does that mean?

Have there been people laid off?

And if so, who is currently up there working and what are they doing?

Okay John, its Terry Rogers, and your question related to the technique.

Are you referring to the technique of stanching the flow for now or?

Sorry, no.

I guess I should have been clear.

I was under the assumption that the flow of it stopped.

Is that the case?

No, the mine has been flooded from the flow and the next step is to-what we intend to do is to drill from the surface, down into the cavity where the failure occurred, fill that with concrete, seal off that area from the rest of the mine.

Then pump the mine out.

The ultimate remediation of the area which would be to stop the water-I mean to remediate where the failure actually is.

Right now, our thinking is to involve freezing, drilling holes and freezing it.

The same technique we use in the ore body itself.

And you should have a time table with that in about three months you figure?

Yes.

And secondly to the people who are working out there right now?

The adjusted force question was obviously the people who are working underground in construction, at the time we had this development going on.

That's a fairly small force but we had the underground construction as well and that would be installing the equipment and preparing to install the equipment.

I guess fortunately we hadn't really gotten too far along in that yet but the excavation for the underground for these facilities would set and some of these foundations had been done but there is no access now.

So that part of the workforce has been either laid off or redeployed to the extent that we can redeploy and keep critical skills and we have done that and worked with the contractors very closely to insure that we-to the extent possible that we have these skilled people when we need them back.

So how many have been laid off and who exactly or how many are currently working up there?

I believe the current workforce numbers John are about 200 and we had 450 or so at the time of the incident.

That includes contractors.

Now about 90 are chemical employees and the rest are contractors.

Okay, thank you.

Your next question comes from [Robert Hard] from [Newcam Market Reports].

Please go ahead.

Hello, Gerry.

How are you?

We are good, thank you.

I just have to say that your calmness in this crisis has been an inspiration to all of us.

Now my question concerns this proposed joint venture with Matsui and Tenex to mined in the Eastern Arctic part of Russia.

Can you tell us any detail about that?

How soon, how big, your share?

I will try to remain calm.

In reality, we don't generally comment on any of these.

We've been talking about Russia or talking with Russia doing some joint exploration over the years.

We've been in those conversations for quite a long time, but I think it's a long way from being any kind of a material event.

Identifying any particular property, we know that Russia's a big country and it's bound to have lots of potential, a lot of which has not been looked at using modern-day technology.

So this is kind of the first step in getting something started that over time will hopefully open up that country to more exploration.

So there's nothing for new reserves to be added at this point?

Oh no, we're a long way from that.

Thank you, Gerry.

Your next question comes from James Finch from StockInterview.

Please go ahead.

Hi.

Have you sent out force majeur letters yet?

No, we have not.

Okay.

Do you plan any further layoffs?

James, what we're doing is, we're going through this remediation plan, we have to reassess how many people we need of what skill set.

So right now we have the people we need to continue the work that we have.

We are continuing some of the contracts on surface so the surface facilities that are nearing completion, we will finish those, and that kind of thing.

At that point those people may be laid off, but they would be laid off in any event.

We have to just reassess the work force needs as we finalize the remediation plan.

Okay.

You're investigating what happened at Cigar Lake right now?

Is that correct?

That's correct, yes.

You're still investigating?

It will go on for quite a while, believe me, because we'll ultimately want to look at it from underground as well.

Okay.

Have you ruled out sabotage or negligence?

Absolutely ruled out both.

Both.

So you're looking at this as a total natural disaster and not man-made in any way whatsoever?

Completely unanticipated, a surprise to all of us given the thoroughness that we employed as we develop underground in that dry basin.

Okay, the reason I ask that is because several months ago, there were all kinds of rumors being floated about that Cameco would be taken over by this company, or that company.

Then a month before the episode, James Dines had come out with some observation or commentary about flooding.

I was in Toronto before that occurred and I'd gotten the same stuff on my plate, and then a month later, boom, Cigar Lake.

You've absolutely 100% ruled out sabotage, negligence, anything man-made, 100% without a doubt, there' no doubt whatsoever?

Without a doubt, yes.

Absolutely.

Okay.

Thanks.

Your next question comes from Chris Donville from Bloomberg News.

Please go ahead.

Hi.

I just wondered, in layman's terms, what is the status of the, I guess, of the uranium that the buyers had intended to take delivery of in the initial years from Cigar Lake?

Are those buyers, are you still in some way to make delivery on those commitments or what exactly is going on there?

I'm sorry for sounding a big confused.

Well, Chris, very simply, we're right now evaluating all of that.

We haven't made final decisions as George indicated.

We have the options to either defer of cancel the deliveries that are affected.

[Operator Instructions] Your next question comes from James Finch from StockInterview.

Please go ahead.

Again to follow-up on Chris Donville's question.

We talked quite a bit yesterday about the force majeure letters.

So when would you be sending out force majeure letters, if you intend to send them out to the utilities?

We haven't even decided that we would send them out yet, James.

Okay.

Thanks.

Yes.

Operator, I think we've been on now for about an hour and 20 minutes or so, so I think we'll conclude the call and say thanks to everybody that's been out there.

And again, I'll reiterate my thanks for last week in getting the communication out, and I wish you a very good day.

So thank you very much.

Ladies and gentlemen, this concludes the Cameco Corporation Third Quarter Results Conference Call.

Please disconnect your lines at this time.

We thank you for participating, and have a great day.