Cameco Corp (CCJ) 2007 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen.

Welcome to the Cameco corporation fourth quarter results conference call.

I would now like to turn the meeting over to Mr.

Bob Lillie, Director Investor Relations.

Please go ahead Mr.

Lillie.

Thank you, operator.

Good afternoon, everyone.

Welcome to Cameco's fourth quarter conference call to discuss the financial results.

Thank you for joining us.

With us today are four of Cameco's senior executives.

They are Gerry Grandey, President and CEO; George Assie, Senior Vice President Marketing and Business Development; Kim Goheen, as Senior Vice President and CFO; and Tim Gitzel, Senior Vice President and Chief Operating Officer.

Also with us today is our colleague Alice Wong, Vice President of Investor, Corporate and Government Relations.

Gerry will start things off with comments on the quarter's results and Cameco's position at the end of 2007.

George will comment briefly on the recently signed amendment to the Russian suspension agreement and then we'll open it up for questions.

Today's conference call is open to all members of the investment community, including the media.

During the question and answer session, please ask one question, followed by one further question.

If you have additional questions, please return to the queue until others have had an opportunity to participate.

Please note that statements made by the company during this conference call, including statements regarding its objectives, projections, estimates, expectations, or predictions, contain forward-looking information and statements within the meaning of applicable Canadian and U.S.

securities laws.

The company cautions that such information and statements involve risk and uncertainty and that actual results could differ materially from those contained in them.

In addition, certain material factors or assumptions were applied in drawing the or making the forecasts or projections reflected in them.

Additional information about the material factors could cause actual results to differ materially and the material factor or assumptions that were applied are contained in the companies annual information form dated March 30, 2007 and the companies February 6, 2008 news release, both of which are available on SEDAR and EDGAR.

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

Okay, Bob.

Thank you very much.

Let me add my welcome to everyone on the conference call, as well as to those that are listening on the web.

We've seen a fair bit of turbulence in the world stock markets lately and often that prompts investors to question the resilience of their holdings.

Reputable companies that appear attractive in a rising market often lose their luster in the harsh light of a general market slide.

Some companies have the assets, the drive and the strategy to sail through the turbulence.

Their vision remains viable, their resolve is undeterred and their value is secure.

After reflecting on the last year and the results that we announced today, I would put Cameco in that group of resilient companies.

While Cameco's share price has drifted with the recent stock market declines, our strengths have become even more apparent.

We have shown a growth strategy prudent for long-term market cycles, a contracting strategy that will reward investors in all price cycles and growing financial returns in sensitive to economic downturns.

My remarks today will expand on these themes.

Our growth strategy is built on acquiring and building quality nuclear assets that add value to the company at reasonable cost.

During the past few years, rapidly raising uranium prices and increasing interest in most things nuclear, drove the cost of potential acquisitions to levels that seemed unthinkable only a short time ago.

While we clearly had the financial resources to acquire assets available in the market, we exercised the discipline and the foresight to wait for better value.

With the rapid and sometimes dramatic decline in valuations in the past few weeks, the wisdom of our strategy has been reinforced.

While prices were high, we continue to develop and rejuvenate our production assets.

Concurrently, we expanded our exploration portfolio around the world.

And we secured strategic opportunities to build on the world's most promising collection of green field and brown field exploration interests on five continents.

We continue to monitor valuations in the uranium sphere, as they become more attractive.

We expect consolidation in the industry will continue, and we are watching and evaluating opportunities carefully.

We are ready to seize the opportunities that will add value for our shareholders, not just for now, but over many years into the future.

The quality assets we have today have contributed to our strong financial results.

While we've had operational challenges this past year, we emerged focused and determined to improve our safety culture, our management systems, to make it stronger and more resilient.

And we're beginning to see results.

Late last year we found and sealed an old exploration drill hole at Rabbit Lake that had allowed additional water to enter the mine.

Thanks to the ingenuity of the site team, we were able to restart mining sooner than anticipated.

Last month, we received regulatory approval to begin the process of repairing and adding significant upgrades to the Port Hope U.S.

6 conversion facility.

Production restart is targeted for the third quarter at the earliest.

Earlier this year, our Smith Ranch Highland uranium plant in the state of Wyoming received regulatory approval to begin building a new satellite processing facility.

This will extend the life of the operation and allow us to mine additional reserves within the permit area.

The new facility should be operating in the third quarter of this year, and will operate for at least nine years.

At Cigar Lake, all activities are progressing as planned.

We are on track to dewater the mine in the second half of the year and look forward to getting underground again.

Finally, we are securing the assets needed to bring our well fields into production at our Inkai project in Kazakhstan.

That facility is slated for commercial production this year.

As we continue to build on existing operations and look forward for external opportunities, the prospects for our industry remain strong.

The nuclear renaissance is gathering momentum around the world.

Last month, the UK government was the latest to conclude that nuclear must be a large part of a sustainable energy mix for the future.

A few weeks ago, a prominent industry consultant reported that 55 countries are considering building their first nuclear generation capacity, and that 86 countries may rely on nuclear power by 2015.

Rapid expansion continues in Russia, China and India.

Cameco's portfolio of long-term uranium contracts is another source of strength.

Our realized uranium prices increased dramatically last year and made a significant contribution to our financial results.

Our contracting strategy is designed to deliver strong results through cycles of volatility.

While others may cast a worried eye to movements in the spot price, we expect to have strong returns through many price scenarios.

This is why we're not particularly concerned when we see significant movement in the uranium spot price, like we did last year when the price moved rapidly up and then down.

We said before that we expected volatility and that will likely continue.

Keep in mind that the spot price is essentially ill liquid.

And the spot market is essentially ill liquid.

Even tiny sales move the price dramatically and yet through many spot price changes, the long-term price has remained unchanged at $95 a pound since last May.

The overall market fundamentals remain sound and we are absolutely confident in our marketing strategy, a strategy designed to weather the storms and to deliver strong results over the long-term.

The last strength I will mention today is our financial results.

In 2007, we again set records for revenue, adjusted net earnings and cash flow.

Not only did we set these financial records, but we have continued to show increases in all these areas for the past three years.

Our financial results are driven by realized prices that have more than doubled since 2005.

Given our existing contract portfolio and current market fundamentals, we expect strong results in 2008 and beyond.

This has given us the financial flexibility.

We have continued our unbroken record of paying dividends and also increased our dividend by 20% this year, making the fifth increase in six years.

We are also planning to continue our share buyback program.

I should point out that at current share prices, they represent exceptional value.

Successive years of strong financial results have given us the flexibility to be ready to fund acquisitions when the value is right.

Finally, the most important consideration is that we expect to continue generating strong earnings and cash flow, even if economies slow down.

Nuclear plants provide base load electricity and will require fuel.

Turning out the lights is simply not an option.

The talented and driven team at Cameco has built a powerful company that is positioned to meet the opportunities we see in the future.

I am confident that the strengths I have outlined today will stand the test of time and will ultimately be reflected in long-term share value for our investors.

Now, before we go to the Q&A session, we have received a number of inquiries in the past few days about the recent amendment to the Russian suspension agreement and its potential impact on the industry and on Cameco.

Anticipating that we might get further questions today, I'm asking George if he wouldn't comment briefly on the Russian suspension agreement and the amendments.

George?

Thank you, Gerry, and good afternoon, everyone.

As Gerry's already said, we've been asked about last Friday's signing of the amendment to the Russian suspension agreement and what impact that amendment might have on Cameco.

It's important to realize that Russia's long-term focus continues to be -- to get access to the US enrichment market, which this amendment will provide.

It allows them to sell directly to US utilities.

The amendment continues to limit Russia's access to US commercial markets between now and 2020.

The level of additional imports into the US prior to 2014 is minimal and thereafter represents about 20% of the estimated US demand for separate of work units or enrichment services.

By comparison, Russia currently supplies about 50% of the US market through the HEU agreement, which ends in 2013.

First core fuel for new reactors is exempted from the quota limits, so I think the important takeaway here is that for uranium, there is no effect globally, as it doesn't change the amount of uranium available in the world.

So, the impact of this amendment on Cameco is not expected to be significant.

So, with that, I'll turn it back to you, Gerry.

Okay.

So operator, I think we're now prepared to take questions.

Certainly, thank you.

We will now take questions from investors, analysts, and media.

In order to respect everyone's time one the call today, we will take your question and allow one follow up question.

Then, if you have further questions, please return to the queue and we will get to them after the others have had their chance.

(OPERATOR INSTRUCTIONS) The first question is from Ian Howat of National Bank Financial, please go ahead.

Yes, good afternoon.

I was interested in some highlights or a little bit more detail in your sustaining capital, particularly the US operations where you're spending roughly, I don't know, $15 a pound or more, seems fairly high for sustaining capital.

I was just wondering if you could give details on that and the other sustaining capital, the same as MacArthur river?

Okay, Ian, I'll ask Kim to do that.

I think the figure -- and I'll -- we'll have to confirm it, but it would also reflect expansion, because we plan to expand those operations.

We tend to go ahead and count those in the current year, not in future years, even though we're expanding the operation.

But I'll--

Yes, you said separated it out by growth capital above, so that's what the question's really about.

Yes, go ahead, Kim.

Alright, well, Ian, what we use for a sustaining capital definition, is that if it's not related to increasing production, and by default it must be sustaining capital.

Right.

So expanding that operation -- the life of that operation and so on would not get counted as growth.

It will count it as sustaining.

Right.

So, as we move forward, and just extending the license we're talking about for the operations in the US, all that capital that we're investing now does extend the life of those operations and that's getting caught in there.

Okay.

And certainly as you talked about MacArthur river, it fits in that same category.

Okay.

So those aren't going to be $53 million for the US going forward for the next 10 years or $164 million at MacArthur river?

No.

Okay.

Not through sustaining capital, no.

Okay.

Thank you.

Thank you.

The following question is from Dan Bushman of CJWW radio.

Please go ahead.

Good afternoon.

Mr.

Grandey, do you have any plans at all to move your headquarters to downtown in Saskatoon?

Well, we've indicated from time to time that where we are currently, we're busting at the seams and we're trying to accommodate people and the growth that we're facing here, so we're building a little bit out to the sides and it is intended to be an interim measure and if we can figure out a way together with developers in the city, in the future, then it is certainly possible.

All right, thank you.

Thank you.

The following question is from Greg Barnes of TD Newcrest.

Please go ahead.

Okay, Kim, the operating costs at Port Hope at $100 million for the quarter, are very high compared to what they have been typically.

And I know there's some remediation costs, about $14 million included in there.

Can you give us some guidance on what else is included in that and why it's so high?

Greg, there really isn't anything else in there.

The $40 million is the big item that you mentioned.

Two pieces, one, the ongoing costs of about $26 million since July, as we move forward with that, and then the provision, if I can call it that, for people on the line, of about $14 to $15 million, taking into account the costs we expect for cleaning up the contaminated soil.

Those two big items going through Port Hope on the conversion side is what you're looking at.

Compared to other periods, that would throw it off a bit.

And what is it going to look like going forward for the next couple of quarters while the operation is still shut down?

I think I'll wait for a couple of weeks to get into that in much depth with you, Greg, when we come out with the full MD&A, but yet not to duck your question, these activities, as we're now back into filling the concrete in and such to bring that operation back into service, we've already made the provision of 14 that will not be duplicated then when we do that work in '08.

And then we'll go -- as the additional numbers, we talked about a 20 to 25 million for improvements to the facility will go through and see whether those are capital or to be expensed at the time.

Really, you know, again, it will be -- it won't be the same as we just went through, but until the plant's back in production, it is kind of a unique period for us.

Okay.

If I could just ask a quick follow-on, then.

Gerry, you mentioned the long-term price at $95 has been standing at that level for six, seven months now.

Do you, Cameco, actually sell long-term material at that level, or are you discounting it?

How is that working now on the market?

George, do you want to go ahead and respond to that?

Yes, the -- the short answer is yes, we have entered into contracts with prices at that level and in fact above that level.

Long-term contracts.

So, what does that $95 represent, if you're entering into contracts above that level?

Well, I'm just sharing with you, you asked if we had entered into them at that level and I wanted to assure you that we had and indeed above it.

So, what I'm telling you, is that, that -- I guess the way to put it is, that long term price is the best estimate of long term prices as determined by UX and TradeTech, they are the ones that publish that price.

So what I'm sharing is we've done even better than that.

Okay, thank you.

Thank you.

The following question is from Richard Quit, a private investor.

Please go ahead.

Richard Quit, your line is now open.

Please go ahead.

If you're using a speaker phone --

We're not getting anything, operator.

Certainly.

I'll proceed with the next question.

The following question is from Cliff Hale-Sanders of CIBC World Markets.

Please go ahead.

Hi, good afternoon, gentlemen.

Before I ask my question, I just want to clear up Greg's previous question on Port Hope, just to make sure I understood it right.

I understood the 14 million provision and you talked about 26 million since July.

Was that all accounted for in Q3 -- sorry, Q4?

Through the two quarters, Cliff.

It was not -- it was spread through the two quarters.

And expensed as it was incurred.

Okay, to the increase in cost is not because you're buying material elsewhere to fulfill contracts then?

No.

Okay.

Just want to clear that up.

My question is really on uranium price realizations.

Obviously they came down dramatically over the Q3 levels.

Some of that's FX rates as well.

My understanding was you still had some material that would be sold closer to spot and therefore, you know, realizations and my anticipation would have been slightly higher.

It seems like there is a significant degree in volatility despite the long-term contracts.

So, just wondering if you can address why there's such a huge swing between Q3 to Q4.

Well, I think it has everything to do with just the timing, when the utilities decide to take their uranium, so we had swings between quarters and third quarter happened to be one where we were able to take advantage of some of the contracts that we had negotiated into very high priced contracts, and that didn't span into the fourth quarter at all, so just timing of deliveries, I believe.

George, do you want to --

Yes, yes that's it exactly.

And just one other additional component, there was a higher priced contract where the delivery slipped over year end from 2007 into 2008.

So that also had an impact from earlier estimates.

Okay.

And can I ask one more question before we go on?

Go right ahead.

On Centerra gold, and I saw the comments today that the deal is officially, from the Kyrgyz government is being suspended in the sense that they are not going to -- not likely to ratify it in the near term.

From a simple accounting perspective, what is your plan for the treatment of your investment in Centerra going forward, just from a modeling purpose?

Are you going to continue to fully consolidate it until this deal is ratified by the local governments, or should we expect the equity accounting going forward just because your expectation is the deal will close, sometime in the near future?

Well, Cliff, let me come back to your first opening comments.

You are at least one step ahead of us here because we have not seen anything about the government suspending this.

We continue to have discussions with them at this point.

If we had thought otherwise, we would have notified the market.

We continue to work in every signal that I am personally receiving from Kyrgyzstan is quite positive.

Just so you're aware then, there is a report on Reuters that the government has postponed the ratification of the agreement and that's come out sometime over the last couple hours.

Well, we will follow up on that one.

At this point, again, with all due respect to those notices and (inaudible) coming out of there, I always treat them with a fair degree of suspicion until more substance is behind it, but we will see what will happen.

Back to your point, we will not begin equity accounting for investment in Centerra until the transactions closed.

Okay.

I'll let someone else ask a question, then.

Thanks.

Thank you.

The following question is from Maury Lions of Saskatoon Star Phoenix.

Please go ahead.

Yes, Mr.

Grandey, today in Ottawa the federal government awarded a contract to National Bank Financial actually to help it set a long-term strategic direction for ACL.

And should the federal government decide that they want to get out of the business of manufacturing reactors, would that be the kind of nuclear investment that you would be interested in?

Well, Maury, we're always interested in what the government of Canada does and what the ACL might be up to, but we don't make comments on things of that nature.

Your competitor from France is occasionally expressed interest in ACL.

There's been lots of commentary and interest on the part of others, I think.

Very good.

The following question is from Lawrence Smith of Scotia Capital.

Please go ahead.

Good afternoon.

Question on the market, I guess probably shoot for George to handle.

Obviously a very wide divergence between so-called spot price and contract price these days.

Maybe George could just give us his view on, you know, what's going on in the market to cause that and, you know, directionally what's likely to happen.

I mean is -- I know you guys don't forecast prices, but is it likely that the contract price will come down or the spot price will move up, or is it sustainable that we'll have that divergence continue for a while?

And just as an aside, obviously if the divergence between the spot and contract stays there for a while, I guess your guidance on realized prices would be kind of out the window.

Thank you.

Okay.

Well, of course what you're referring to is the $20 discrepancy between the spot and the long-term prices.

If you look at the market today and look first at the longer-term market, the situation you have is you have utilities that are well covered under existing contract for the next few years, and then they have significant uncovered requirements that need to be addressed.

At the same time when you look to suppliers, suppliers are very heavily committed.

So, in large part, I think when you look at the nature of the long-term price, the $95 reflects that concern about the tightening of the market in that period.

If you then move back to where the spot market is, the spot market today reflects the actions of, you know, a few relatively aggressive sellers in December of last year and January of this year, and with really no demand in the market, and no demand coming from financial players and certainly no demand from utilities.

And so there you see the weakening of the spot price and then again, this large discrepancy.

It's not -- you know, that's too much discrepancy to be maintained over a significant period of time, and as to whether the level of the spot price comes up or the level of the long-term price comes down I guess remains to be seen.

If you look at some of the most recent reports, though, coming out of the industry press, it would seem to suggest that the spot market may be at or very near bottom and people are starting to look for some recovery in the level of that spot price.

But, you know, that remains to be seen.

What we expect is that the spot price will remain volatile and secondly, that large discrepancy cannot be maintained for a long period of time.

Great, thank you very much.

You're welcome.

Thank you.

The following question is from David Shields of CBC Radio.

Please go ahead.

Hello, Mr.

Grandey.

I was just wondering if you could comment on the, the likelihood of some more I guess value-added uranium activity happening in Saskatchewan, be that processing, or even perhaps a reactor.

David, I think with the change here in the government, quite receptive to nuclear issues, you know, really across the spectrum.

So number one, there's lots of exploration activity going on.

Two, new mine development is under way, being talked about.

Three, expansion.

That's really where most of the value in the near-term is going to be added.

We talk about, others talk about, well, what else could be done that's going to be driven by longer-term fundamentals in the industry.

So, you know, I think it will be the subject for a lot of discussion by government, by the industry, as we try to figure out what value-added including possibly addressing greenhouse gas issues and others, by building reactors, small ones, big ones.

Those have been talked about by the government as well.

All of that, I think is very useful conversation to have, not targeting on any one thing, but trying to figure out where we maximize the advantages we have.

Okay, sir.

And maybe if I could just ask one more question, as far as Cigar Lake goes, and the cleanup that's going on there, I guess number one, where is it at specifically right now?

And number two, how much of a dent has it put in Cameco's bottom line?

Well, remember when the mine flooded, it was a mine in development, not in production.

So, it's meant that with the remediation, it will be delayed in terms of its commercial production, but in terms of remediation, as we indicated, we seem to be pretty well on schedule.

I hope to have the mine dewatered by the latter half of the year.

Once we get it dewatered, we'll be able to go underground and see what the condition of the mine is, better develop or refine the mine plan, and then begin getting the mine back into development.

Sure, but even though it wasn't a producing mine, I mean obviously you would put that into your expectations that, you know, that this mine would be generating uranium originally, I guess as early as this year, originally?

And all that's been factored in and financially we obviously expensed a number of the expenditures that we've had and built the delayed production into our schedules.

Okay, thank you.

You bet.

Thank you.

The following question is from Orest Wowkodaw of Canaccord.

Please go ahead.

Hi, good afternoon.

Two questions.

First one at Inkai, in your production guidance for this year, what have you assumed in terms of when the acid will resume to expected levels?

Kim?

Well, we've got, Orest, as we've stated, we've got several sources supply of asset.

We've got the normal Kazak supply, which comes out of some of their mining operations, which they have been bringing on and it's been reduced at the end, it was reduced at the end of 2007.

But they seem to be supplying a bit more now, although we don't have exact numbers.

Secondly, we took it into our own hands to find a source of supply, which we did in Russia and that necessitated us getting some rail cars built to transport that to 16 cars and we've got half of them built now and they are transporting.

So, we're able to acidify our -- both block one and block two now and so we've been pouring that in and so going forward, I don't know the exact status of Kazakhstan's supply (inaudible) supply.

But --

But you don't anticipate any disruptions in terms your start up your ramp up?

Well we -- we look good for the next few months and they seem to be getting their supply together, so it seems to be okay.

Okay, thank you.

And second question, just for Kim, at the end of the year, your cash was down to about $130 million.

Just a question of -- do you think you can sustain your share buyback here, given where your cash is at?

Well, Orest, we will be looking at that as we go throughout this year.

We do plan to continue that program.

Certainly first and foremost, the cash from operations and committed debt facilities will be used to fund capital expenditures and maintain the dividend and then we'll see how the year goes beyond that.

Thank you.

Thank you.

The following question is from David Wargo of Cormark Securities.

Please go ahead.

Hi, gentlemen.

My question was actually regarding the sulfuric acid situation in Kazakhstan.

Do you know if it's being rationed to Cameco first, Ariva second or in that order, and its not falling down to the other developing companies in the area?

Well I think that everyone is on a bit a diet there, I don't think they are playing favorites.

Do you think that the -- I mean the Kazak's have basically said that they'd have the supply and balance by the end of -- first half of 2008, do you think that might be a little bit aggressive and it could pour over into 2009?

I can't answer that.

We believe them when they tell us that, but in the meantime we're taking other own measures as well.

Okay, perfect.

Thank you.

Thank you.

The following question is from Greg Barnes of TD Newcrest.

Please go ahead.

Yes, thank you.

Kim, I guess it is more on your decision to provide less guidance going forward.

Yes, right.

You've made it a lot more difficult to forecast quarterly earnings by not providing us with an estimate of sales volume changes quarter over quarter and pricing changes quarter over quarter.

Just wondering why you decided to do that?

Well, Greg, when we were looking at our results and how the quarter to quarter roller coaster turns out over time, I would like to sit down and talk to you about how it's done at some point, but when we looked at it, really from our business and the real variability quarter by quarter for earnings and for deliveries, I mean, and contracts that are delivered into by quarter, we weren't sure that we were given a whole lot of substance to (inaudible) out, so we thought much better just to present a full year estimate.

I guess it just leaves us with the fact that I know you're very volatile in deliveries quarter over quarter and I guess historically it's been weighted towards the back end of the year.

Greg, even on that, it really depends on the years.

I can show you years where it was the exact opposite.

You would have a very heavy quarter four and then a very heavy quarter one.

They just really are all over the place, driven by when the customers want the material.

So, the best thing for us to do, then, is just flat line it and say you're going to deliver 33 million pounds for the year and we'll just divide it equally quarter over quarter and leave it at that?

Yes, I -- if -- I would -- again, I would love to talk to you about this sometime.

Maybe I can convince you to go to the full year estimate as well.

Maybe you can.

Greg, again, there's just too many things at play to make it meaningful I think.

It was something to work with and it's going to lead to a whole lot more volatility and earnings misses or you'll beat us, its just very, very difficult to model, even more difficult to model now than it has been in the past.

Properly explained I think we'll all be better off.

Okay.

Thank you.

The following question is from Fadi Shadid of FBR Capital Markets.

Please go ahead.

Yes, hi.

Going back to your comments on potential acquisitions, and given your low debt levels, you know, what is the potential in terms of -- maybe like what is your target capital structure and, you know, just to kind of frame some, you know, what the acquisition possibilities could be in terms of maybe target capital structure.

Yes, I can answer that.

Kim here.

I'm not sure -- I could give you the answer first, but I need to then comment on it right after that.

Our long run capital structure is 75% equity, 25% debt.

And we, we run with that second equity component because we are in a growth mode -- an acquisitive mode for the right, that the right opportunity comes along.

What I also want to comment on, though, is that in no way does that target constrain what we may undertake or what we would consider to be value-adding for shareholders.

That is a long run target.

In between if there were an opportunity, conceptually not irrespective of how many see zeros were after it.

If we thought it was a value adding proposition, then we would under take it and we would finance it accordingly.

So, I'm not sure that it's the best way to look at what we may or may not have an appetite for.

It's just based off of a static ratio like that.

Okay, fair enough.

And maybe more of a market question.

What is -- if you could share with us your outlook on world production relative to what it will amount to in '07 -- or what it has amounted to in '07, just world production forecast.

It was in 2007 -- we think it came in, you know, we're waiting for the final numbers, but looks like it will be about 109 million pounds.

At the beginning of '07, the estimate was 117 million pounds, so it's fallen significantly short.

Currently for 2008, we believe it will be -- or the estimate, I should say, is just under 129 million pounds.

But that, you know, that requires the startup of a significant number of new operations.

So, you know, if you look at what production has done over the last several years, it's typically disappointed on those numbers.

But at any rate, that's the current forecast today.

Okay, thank you.

Thank you.

The following question is from Ross Garden of MKM Longboat.

Please go ahead.

Good afternoon.

Just coming back to the point regarding the contracts that you have as 95 and above, that sounds sort of very interesting.

I just wondered, can you provide any guidance as to when you will actually be delivering into those contracts?

The guidance that we provided would be in the table.

It's blended because we are selling the assumed annual delivery, and all of the contracts and the pricing that would be contained in those contracts, including the ones that are 95 and above would be included in those price tables.

Fine, okay.

So, you can't give any guidance as to when sort of the bulk of those will be --

No, we're not going give specific guidance as to individual contracts.

Okay.

That's fine.

Thank you.

I just had one other question.

I was trying to understand Port Hope just a little bit more.

I think you said earlier when you were talking to Cliff and Greg, that you have 26 million plus 14, then looking at the numbers that you have provided, getting to the loss that you made for the quarter, of 36, can you explain what was happening on the cost side, because that doesn't really explain why you made a loss this year versus the, the 11 earnings before --

Thank you, and just to put a point out there, of course through that whole period in time, we have a fabrication operation that continued and we also have our UO2 plant that was in full production through that period.

So, there is ongoing activities there.

As to why -- these two items I had mentioned, yes, our sales levels are roughly the same as we had had in the prior year, but when you have costs that are, during a period when there's no production, those are immediately expensed.

There's nothing that goes into an inventory calculation.

Okay.

So that -- those items are different year-over-year and it's what's causing the change.

Okay.

Fine.

So, going forward, we shouldn't -- from a modeling perspective, we shouldn't really be changing the cost structure or anything like that; this is more to do with the fixed cost base.

You had a ramp down in the production, so we should think of it like that?

Two parts to your question.

Yes, there was most definitely a ramp down period while the UF6 plant was not in operation.

As going forward as to what we expect the costs to do, well, again, through the first part of this year, we won't -- that plant won't be back in operation, so we will have probably not the same magnitude, but we will have similar, conceptually similar impact will take place and it really won't be back -- when that plant is back in operation, that you can get back into a real comparison year-over-year.

Okay.

Could I ask one more question at this time?

Just regarding the CapEx, again, it's a follow-on from an earlier question.

Looking at the way you split, and the definition that you provided on the call as to how you define sustaining CapEx.

Correct.

In order to kind of get a feel for the numbers going forward, in essence like a true sustaining CapEx, what would be the numbers, or is any headline numbers you can give us, because it's typical to strip out, like if I look at MacArthur River and Key lake (inaudible) 16, so sustaining it--

Right--

What part of that is actually more growth and what's--

Sure.

What's--

I can't give you the split, but I do appreciate you giving me an opportunity to expand my earlier comment.

Included in that MacArthur river Key Lake, because they are aggregated together, is the rejuvenation of the Key Lake Mill, which is a major program that we're undertaking to extend the life of that mill for many decades to come.

As we move forward into our MD&A, we will provide some more information generally as to what's going on there.

As to a real good number for total sustaining capital across all of the units, I don't have that number at my fingertips and I'll work and see if I can provide some more as we move forward here.

Okay.

Thank you.

Thank you.

The following question is from Jay Turner of BMO Capital Markets.

Please go ahead.

Great, thank you.

Good afternoon, gentlemen.

Actually most of my questions were answered earlier, especially regarding Kazakhstan and the acid issue, but I was wondering possibly if you could just provide some color on the spot market, as you've seen it over the last month or so, given the meltdown on the equity markets and whether you got a sense that some of the financial players that were maybe holding physical metal decided to liquidate positions for reasons that, you know, were due to the selloff as opposed to the fundamentals in the uranium market.

Okay, Jay.

I'll ask George to respond to that.

Yes, the sellers that we saw in December and in January, we did not see a lot of the financial players that hold uranium in the market.

We are aware that some of them may have sold, but for the most part, I think they have bought and sold among themselves.

So not -- they have not been significant players on either the selling or the buying side, and today they continue to hold something in the order of about 20 million pounds.

All right, thanks very much.

You're welcome.

Thank you.

The following question is from David Wargo of Cormark Securities.

Please go ahead.

I guess this is a question for Gerry.

Gerry, you know, evaluations come in line where you would actually start thinking about actually making an acquisition.

Are they at the level where you would feel comfortable with that?

We're certainly getting closer, David.

We've seen, as I tried to convey in my opening remarks, a pretty dramatic decline and, you know, I said in earlier calls that we've got a dedicated team of people that do nothing but review how successful other companies have been with their exploration programs, how successful they have been with development, bringing new mines into production, and all in light of the valuation the market has ascribed to them.

So, as it adjusts due to the general market conditions, we become increasingly interested.

I guess this leads to a follow-up, I mean do you have any apprehension of operating in Africa?

There's no part of the world that we wouldn't look at.

I'll put it that way.

Good to hear, okay.

That's it.

Thank you.

We're used to some exotic places.

Well, if you can operate in Kazakhstan, you can operate anywhere.

All right.

All right.

Thank you very much.

You're welcome.

The following question is from John Coats, a private investor.

Please go ahead.

Good afternoon, gentlemen.

I live fairly close to your Crow Butte site in Nebraska and I was just wondering if you have a sense of any results from the recent NRC meeting here?

Also, if the ruling is in favor, will you continue with the planned expansion down here, and if the NRC ruling goes against you, what will happen then?

I appreciate the interest.

You live in a lovely part of the country.

Our, our intent for Crow Butte is for it to continue as it has for a number of years, being a low cost producer in a very, very environmentally friendly way.

The hearing that was held really had to do with proposed expansion of the facility, which we intend to pursue, and the subject of that hearing was -- could some interested parties, probably don't live quite as close as you do, but within a 200 mile radius, I would say, do they have the right and a sufficient interest under US law to intervene into the proceeding?

That was the narrow issue that was at play before the Nuclear Regulatory Commission panel.

So, after they make their decision and as to whether they are entitled to participate or not as parties, then it, you know, I guess we would expect that, that decision would be out within a few months anyway.

We will then take the expansion program forward.

Okay, thank you.

One other question also, please.

What do you see as the future for Cameco in precious metals, particularly the gold?

Our ownership in gold comes about through Centerra.

Correct, yes.

We consolidated that all in 2004, really to allow them to focus on their own business of gold mining to take advantage of the opportunities that they have before them.

They have done a very good job of returning shareholder value.

There's been ups and downs obviously, but we also set it up as an eventual vehicle that would allow Cameco to exit the gold business.

And so when the time is right, we still intend to pursue that objective.

That, you mean, by exiting the gold business?

That's correct.

Okay.

Thank you very much, gentlemen.

Thank you.

Thank you.

The following question is from Stephen (Kibsy) of Keist.

Please go ahead.

Yes, Gerry, I'm just wondering with regards to Centerra, if you were to divest at some point of your holdings, which way would you lean, towards a secondary issue, or would it be more towards dividing out the Centerra shares to the current Cameco shareholders?

I would say that all options are certainly investigated.

Our preference would be to basically realize the value and reapply the nuclear business.

Okay, thank you very much.

You bet.

Thank you.

The following question is from Ross Garden of MKM Longboat.

Please go ahead.

Hi, guys.

Just one follow-up question on the Port Hope facility.

I was looking back at the MD&A from the third quarter.

And one of the comments that you made is that you have sufficient inventory on hand to make delivery commitments through the end of the first quarter of 2008, assuming customer do not accelerate deliveries.

Now, I just wanted to get a better feel for the situation as it currently stands, and if this wasn't to sort of remain the case, what is the likely impact on costs?

Do you have to go to the spot market?

Or is it likely to be an impact on the bottom line?

We do not foresee a need to go to the spot market.

George, do you want to add anything to that?

Yes, that's right.

Given the inventories that we have and then as we were aware that the facility was going to be shut down a little bit longer, we approached utilities that we knew had significant inventories of if you have UF6 to arrange, and with which we had contracts to arrange for deferrals of deliveries under existing contracts.

So, we think we're well placed really, through most of '08.

Okay.

Well it sounds like you got that one well covered.

Just another question on -- I was looking at your net income.

One thing that interested me was that when you have your adjusted net income, the 603 that you report for the year, you don't seem to add back the one-off items at Cigar Lake and Port Hope, and I just wondered, is it sort of hidden in the numbers, or is that another exceptional item and that I can potentially add back, therefore increasing the sort of the normalized net income for the year?

Well, yes, they are not included in those numbers.

They are not netted out.

The 603 does include $29 million of remediation expenses -- or ongoing expenses at Cigar Lake.

So, we have not taken -- we have not pushed that number higher by excluding those items, which is what I think your question was.

Yes.

Well, why is that, though?

It's kind of a definitional thing, if you will.

Looking at items like the agreement with the Kyrgyz, which I'll come back and comment on at the end, the -- that one is clearly different.

When we looked at items like Cigar Lake's ongoing expenses, our situation at Port Hope, we thought it better not to try and take those out, but just leave them as expenses and go on from there.

Okay.

The reason I say this is that having looked at all what the analyst community is doing, they always add back such items.

So, what happens is your net income looks artificially too low, so really it was closer to consensus than people realize and that's the reason that I'm asking this question, but that's fine.

If that's the way you've classified it, I think we all understand what the number is and how to adjust.

Okay, thank you.

Good question.

Thank you.

While we're at it, Kim do you want to talk?

Since you raised the Kyrgyzstan, and we've now seeing the Reuters report--

Sure.

Which we didn't have before, so Kim go ahead.

To Cliff's earlier comment, on the Kyrgyz, Centerra made the announcement yesterday, which, again, we are fully aware of, there is no basis for an investigation.

They are current with their taxes in the years being audited, 2003 and '04, no significant differences.

Working with the Kyrgyz, this has been an ongoing conversation that we've had for sometime.

It is in our best interest to continue this process.

It is in the Kyrgyz's government's best interest to continue this.

We have absolutely no expectation, no reason to think otherwise it will just continuously we move on.

At this point, I certainly would not even take February the 15 off the table, but we will investigate this in more depth as we move forward here.

Okay.

Next, next question?

Thank you.

The following question is from Fadi Shadid of FBR capital market.

Please go ahead.

Yes, hi.

I might have missed this, but what is an update on some of your own actions that you may be taking to cushion the sulfuric acid supply in Kazakhstan?

Kim, talked about it a little bit earlier, but I will just have him make a couple of comments.

A couple of things, the nearest term, and the action we are talking is we found a source of supply in Russia.

That has sulfuric acid available, the question was getting it to the site.

To do that, we had to fabricate some rail cars to do that.

And we've got some of them done, so they are transporting that acid now to the site.

So, that's supplementing the supply.

We're still getting a supply, reduced supply, albeit, but a supply from [KazAtomProm] so with that, we're able to acidify our fields now.

Longer term we're looking, option three, longer term, and that's not for tomorrow -- at building our own acid plant in (Tykenor), but that's got a bunch of regulatory hurdles to get over yet.

Is the Russia supply sustainable?

Is there plenty of it?

The supply we have is sustainable for the near term.

I see it for 2008 and we'll see going forward if we need it.

Thank you.

Thank you.

(OPERATOR INSTRUCTIONS) The following question is from Andrew McKay, private investor.

Please go ahead.

Yes, hello, gents.

Mr.

Grandey, you're a significant shareholder in UEX and I was reading their last news release on West Bear and it mentioned that discussions were ongoing with respect to West Bear, possibly to arrange a total milling arrangement or perhaps the sale of the deposit.

I was wondering if you could enlighten us on the status of those negotiations and will you have to wait for the final resource report before there is a decision made there?

And secondly, on UEX, when they raised financing, do you intend on maintaining your share holding?

Thanks.

Andrew, yes, we are a significant shareholder.

We're absolutely delighted with what they have done.

I think they have got some very interesting deposits, but I certainly don't -- am not aware of any of their plans, development plans, sale plans.

I'm not -- just not aware of it, so I can't really comment.

Historically, we've at times chosen to participate and times chosen not to and I think each time it comes up in light of the opportunity and market conditions, we'll make a decision at the time.

Yes, I was just quoting the UEX news release of December 13.

I apologize, but I haven't seen it.

And even if I had, I probably wouldn't be too knowledgeable about what they are doing.

Okay.

I guess secondly, on the Cigar Lake issue, you mentioned in the release today that come the end of February timeframe, you're planning on drawing down the level in one of the shafts to test the plug.

Do you intend on holding a news conference when that evolution is approved and complete, or what's your intention there?

I don't, I don't think we're going to hold a news conference, but we will communicate eventually through either MD&A or otherwise the results of what we're doing.

Okay.

Well, thank you very much, and I'll hang up.

Thank you.

(OPERATOR INSTRUCTIONS) The following question is from Sarah Zoo of Desjardins Securities.

Please go ahead.

Good afternoon.

You mentioned about in the long-term you're building your own acid plant to solve the acid shortage problem in Kazakhstan.

Do you have a target date of startup, like when it will start production of your own acid?

We are not committed to building one, but we're studying the option.

It might very well be that in six months there will be plenty of acid with a number of alternatives, in which event we probably would not incur the capital expense, but if we think that it's prudent, we'll make that decision in a few months.

Okay, thank you.

You bet.

Thank you.

The following question is from Meryl McHenry of M Partners.

Please go ahead.

Yes it, could have been answered in the call at the first part or something.

I hadn't got your calls recently, but it seems like years back you used to provide some kind of price sensitivity to price changes, as far as your operating margins.

Do you still provide any of that?

And there are also -- I was wondering if you might have any duration of your contracts.

I suppose not.

That might be something competitors would want to know, but I was just curious about that.

We do provide price sensitivity on revenue through the price table that we have now published, so you can find it there.

And the length of the contracts, I'll ask George to make a comment about.

Yes, over the last couple of years, our focuses have been on signing contracts of longer duration, so generally they would have terms that would run, you know, 10 years or so.

So, that's where our focus has been and most of our commitments going forward are generally, I would say, under very longer-term contracts.

Do you--

I would point out as well in the release on Page seven, we talked a little bit about sensitivity exchanges in price.

Do you ladder your contracts?

Is it just a weighted average of approximately 10 years plus, or is it -- I suppose have you some roll-off, but is there any information on roll-off on that?

No, we don't give any detailed information on that and the table that we present there is based upon the, you know, you see the assumptions and that's based upon the volumes that we have committed and et cetera, over the entire period.

So it's all baked into that table.

Okay, thanks so much.

In effect, it is the laddering because we're in the market contracting at all times, so new contracts come in each period.

Okay.

Thank you much.

Thank you.

(OPERATOR INSTRUCTIONS)

Operator, if there are no more questions, then we'll end the call.

I just want to mention that 2008 this year is the 20th Anniversary of Cameco.

We'll be celebrating in October.

Through the year, obviously we'll have plenty of opportunity to get together.

We appreciate your interest in Cameco and we wish you all a very good day.

Thank you.

Thank you.

The Cameco corporation fourth quarter results conference call has now ended.

Please disconnect your lines at this time.

We thank you for your participation, and have a great day.