Cameco Corp (CCJ) 2008 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen.

Welcome to the Cameco Corporation first quarter results conference call.

I would now like to turning 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 first 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, Kim Goheen, Senior Vice President and CFO, George Assie, Senior Vice President, Marketing and Business Development, and Tim Gitzel, Senior Vice President and Chief Operating Officer.

Gerry will start things off with comments on Cameco's financial results, and the uranium markets in the first quarter.

and then will open it up for questions.

Please note that during the first quarter there were no material changes to Cameco's 2008 consolidated outlook, or our 2008 outlook for each business segment contained in the annual managements discussion and analysis.

For your convenience, we have summarized Cameco's 2008 consolidated outlook, and the outlook for each business segment, in a table called 2008 financial outlook, on our website at Cameco.com.

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

During the Q&A session, please ask one question only, and if needed, 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 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 conclusions, or making the forecasts, or projections, reflected in them.

Additional information about the material factors that could cause actual results to differ materially, and the material factors or assumptions that were applied, are contained in the company's annual information form dated March 28, 2008, and the company's most recent management discussion and analysis dated May 12, 2008, both of which are available on SEDAR and EDGAR.

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

Thank you, Bob.

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

I intend to cover two general topics today.

I'll begin with Cameco's performance so far in 2008, and end with an overview of the uranium market.

2008 has started well for Cameco as indicated by our strong first quarter results, that we issued this morning.

You may recall that we had some operational challenges in 2007.

Despite posting impressive financial results, that included record revenue, adjusted net earnings, and cash flow.

Those challenges have sharpened our focus on the operations in the short term, and have assisted us in building a foundation that will make more-- make us more resilient, and stronger in the long term.

I can tell these events have brought out the best in our employees, and provided the evidence that we really are driven to succeed.

2008 will be Cameco's year of renewal.

Indeed, it's coming along quite nicely.

Just to give you a few examples, at Port Hope we continue to make good progress in preparing the plant for production.

After excavating contaminated soil, we have put in new floors, and started to reinstall equipment.

We are also constructing a system to contain, recover and treat affected ground water that has already begun water collection.

Our estimate for production start-up remains unchanged.

At the third quarter of 2008, at the earliest.

At Inkai we continue to deal with the country wide shortage of sulfuric acid, that is required for mining operations.

While this may affect Inkai's output this year, and our ability to declare commercial production, we have identified an alternative acid supplier, that has been making up some of the shortfall.

Our partner, KazAtomProm has indicated they are making progress in their efforts, to bring supply sources online.

Earlier this year, we were pleased that Rabbit Lake was able to restore mining operations more quickly than anticipated.

After sealing up an historic exploration drill hole, that was allowing additional water to enter the mine.

After building up sufficient inventory of ore, and completing some repairs to the mill, we restarted milling operations at the beginning of April.

We expect Rabbit Lake to produce the planned 3.6 million pounds of uranium this year.

At Cigar Lake, we continue to progress toward dewatering the mine.

Since our last update, there are three significant items of note.

First, we recently finalized a technical assessment, that indicates we do not have to take any additional precautionary measures to safeguard two large underground openings, prior to dewatering.

Second, we have completed the corrective actions related to dewatering the underground mine, that arose from the root cause investigation.

The improvements we have made and continue to make, are fundamentally changing the way we work at Cigar Lake.

Third, in April we submitted an application to the CNSC to allow dewatering of the underground development, completing the second shaft, and other activities that will take us up to the point of resuming development underground.

The CNSC is developing a schedule to review this application.

Our production start-update remains unchanged at 2011 at the earliest.

As we have stated before, we want to complete a full assessment after dewatering, before providing a firm production time line and cost estimate.

In addition to making substantial recovery at our operations, we are making progress with restoring our relationship and reputation with the CNSC.

Improving performance, addressing key issues, and ongoing dialogue, are re-establishing trust and confidence, following the events of 2007.

We are committed to build a productive relationship, befitting our leadership position in this industry.

Now a few comments about the uranium market.

The uranium spot price has declined to $60 per pound, U.S.

This is not surprising, given the moderate amounts of supply, chasing very limited demand.

I should note that this is all within the context of relatively tiny spot market, where even minor quantities can have a significant impact.

For the next few years, utilities are generally well-covered under contracts, and they hold modest amount of inventory.

This leaves little demand from utilities in the spot market today.

Adding to this, utilities are avoiding any discretionary purchases, in the hope that the price will decline even further.

On the supply side, we have moderate amounts of uranium in the hands of traditional trading companies, that have come to the market to raise cash.

There are also small amounts of production available from a few producers, that do not have all of their production committed under long-term supply contracts.

Meanwhile, in the long-term market, the prices remain stable for a long time, and only recently declined by $5 to $90 per pound.

The reason for this underlying strength is over the longer term, that is looking beyond the next few years, utilities uncovered requirements are growing, at the same time suppliers are heavily committed.

Typically, this scenario would be the market's signal, that would result in increased production.

However, this has not been as easy as some market players assume, as demonstrated by the announcements of delayed or reduced production estimates.

The result is that the long-term market price reflects the uncertainty associated with tight supply and uncovered requirements, several years out in time.

The difference between the spot and long-term market prices leads to the obvious question.

Why are utilities willing to pay a premium for long-term price?

Well, three reasons come to mind.

First, there is concern that uranium prices will rise over the longer term.

Second, some customers prefer price predictability for a portion of their long-term needs.

And third, some customers are willing to pay a premium for long-term security of supply.

Cameco is well-positioned to meet this demand, and continues to sign long-term contracts in this market, and we are preparing to sell even more production in the future.

By 2016, we are targeting an 80% increase over 2007 production volumes.

Drawing from our powerful asset base of more than 500 million pounds of proven and probable reserves, and considerable resources.

While others cast a worried eye on the movements of the uranium spot price, we expect to generate strong returns under any future spot price scenario.

Our contracting strategy has capitalized on the long-term market strength, and while our realized price has lagged the market, it is no accident that we saw our average realized price on our deliveries in the first quarter, increase by 55% from one year ago.

Those prices contributed to another strong quarter.

Delivered planning and financial discipline today, and over the past two decades, will ensure that our financial results continue to benefit from our strong uranium contract portfolio, a growing production profile, and solid market fundamentals.

In summary, while mutual fund ads sometimes indicate that past performance is not necessarily indicative of the future, we believe our strong results are a good indication of Cameco's financial performance for many years to come.

With that, I will turn the call over to the operator to open up the call to questions.

Operator.

Thank you.

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

In order to respect everyone's time on 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'll get to them after others have had their chance.

(OPERATOR INSTRUCTIONS).

There will be a brief pause while participants register for questions.

Thank you for your patience.

The first question is from David Snow of Energy Equities, Inc.

Please go ahead.

Hi, good afternoon or good morning.

I'm wondering if you could give me an update from the past-- I think last conference call of your expectation of world production?

I believe it was last given at 117 in '07, 109 million pounds was the actual in '07, and 129 is expected '08.

I wonder if you could bring me up-to-date on what you expect that outlook, and maybe longer term, 2015?

2007, David was I think 107 million pounds that we managed to tabulate.

In 2008, subject to all kinds of uncertainties that are out there, about 120 million to 125 million pounds.

2016, I'm not at all sure.

We know our production's going to be up considerably.

You know, there are a lot of supply uncertainties that are out there in that period of time, and I think that's one of the reasons the long-term market is reacting the way it is, in maintaining the higher price and, they just deal with mines that are out there, that are intending to expand or come into production, and we have seen over the last few years how difficult it is to bring on, either expanding production or new production out of mines.

Okay.

And I wondered if you could give us a little more -- I'm sure somebody else will ask up-to-date color, on remediation activities underground at Cigar.

I'll turn it to Tim.

But I tell you, from my own personal perspective, I am quite encouraged by what I see going on there.

A real change in culture, if you will, safety culture, speaking broadly.

People absolutely committed to succeed, and doing things correctly.

We're on track in terms of being ready now to pump all of the documentation that needed to be filed, it's been filed with the CNSC, and they're as I indicated in my comments, developing a schedule.

So we're marching down the road to get that mine de-watered.

It will then become quite a conventional recovery operation, going in, looking underground, deciding what needs to be done to rehabilitate, and ultimately getting back into development.

Tim do you have anything you want to add to that?

I would just agree.

We put out a plan a year ago now.

We're following that plan.

Our mantra is assurance of success.

We won't do things unless we're sure that they're the right things to do, and we said if that takes us a little bit more time, or costs us a little bit more, so be it.

And so I think we've got a very strong team in place now, overseeing the rehabilitation, and surface work continues.

Our licensing is in, and up-to-date.

Our licensing applications.

We're awaiting to get in front of the regulators to get approval to move forward.

So it's moving ahead as planned, and we're pleased with the progress.

What do you do next, once the approval comes?

Well, we've asked for-- we're following our five phase plan that we put out, David.

We're done with phase one now which is drilling down into the -- in the area of the fall, and pouring the plug, done that.

We've tested the plug by drawing the water down, in the number one shaft.

And the plug has been holding very well.

We think it's holding back 95% of the water coming in, which is even as good or better than we'd hoped.

Now we've got our licensing application in, to move to the next phases, phase two would be then to take the water out of the mine, and get our people back in there, and cautiously start moving out into the mine and restoring the area, and then we want to pour another engineered bulkhead behind the plug, that we poured from surface.

So that's kind of the next steps over the next months and as I say, we're in the queue for regulatory approval for those steps.

I think we're on track.

We're working very closely with our regulators, both federal and provincial on these, and hope to be reporting good progress going forward.

The second bulkhead, you're going to pour from the surface--

David, could you go back in the queue, please.

Yes.

Sorry about that.

Have to take other questions.

Thank you.

The next question is from Orest Wowkodaw, on Cannacord Adams.

Please go ahead.

Hello, good afternoon.

I wonder if you could give us a little more color here on what's happening at McArthur River.

You mentioned that the transition of the second new mining area is behind schedule.

I'm curious in terms of what risk that poses to your 2009 production targets?

I believe the last number published was your share of a little over 13 million pounds.

Still targeting 18.7 million in total.

Our share, as would you recite it at 13 million pounds.

But a little bit of flexibility to go into areas that we're currently mining, in order to maintain that production schedule.

It's true, we're a little bit behind.

That's simply the freeze drilling, little bit behind, although that's coming up to schedule.

And some of the underground development, a little bit behind, but plans to try to bring that back on schedule as well.

But again, flexibility to make sure that we meet the production schedule.

You're still confident of that previous target for next year?

We are.

Thank you very much.

Thank you.

The next question is from from [Midash Dakar] from FBR.

Please go ahead.

Hello.

A quick question on Inkai.

You just mentioned that you are facing some sulfuric acid issues at Inkai.

Isn't it sufficient to meet your ramp-up requirements, one.

Second, are you planning to revise your Inkai production going forward for '08.

Well, we are still struggling with our asset supply in Kazakhstan with Inkai.

We have secondary source, I think as we noted in the past, on these calls, that we looked at getting our own source, at least in the interim.

Long-term we're looking at still, and we're working on building our own asset plant Inkai, and near our facilities.

But in the near term, the short term, the supply from the Kazaks, I would say is a bit unreliable.

We are getting our portion of the supply that's coming, but it's not enough to really acidify our block one to the levels we'd like it to, to get the grade up to where we would like it to, so that we can start running it through ion exchange.

So for the next couple months, we're doing our best with our own supply end.

What we get from the Kazaks solidify block one, block two is being acidified.

It's kind of a month to month piece for us.

We're meeting the Kazaks again in two weeks, to talk to them, to get an update as to where we're at, and we continue to push our own solution to bring as much of our own asset in, as we can.

Is it impacting your 2008 production guideline for Inkai?

I think we'll know that over the next few months as we see what the Kazaks can bring for us.

There is some question at block one, as to whether we'll get the full production we predicted out of block one.

All right.

Thank you very much.

Thank you.

The next question is from Dan Bushman, of CGWW Radio.

Please go ahead.

Good morning, Mr.

Grandey.

Do you think the trend will continue as far as high net earnings, for the next quarter?

We don't forecast particularly with respect to net earnings.

We try to do a little bit of annual guidance, which we did in the MD&A that we put out a few months back.

That's about as much as we'll do, Dan.

Okay, were you pleased with this first quarter, then?

We're absolutely pleased with the first quarter, you bet.

All right.

Thank you.

Thank you.

The next question is from Fraser Phillips, of RBC Capital Markets.

Please go ahead.

Thanks.

Gerry, I just wanted to ask to make sure I was clear on the comments you made about 2016, an 80% increase in volumes, is that over and above your anticipated or guided sales volumes this year, or was it productions, or-- I wasn't clear?

Over and above our 2007 production.

Production.

Okay.

That's correct.

And then one other question.

I noticed in the MD&A, I think I'm correct in saying that the original two loan agreements with customers were-- you basically closed out.

I noticed, though, I think I noticed that there was another one initiated as of April 1 of this year.

What is the thinking behind that?

The two that dated back a couple of years were closed out.

We did another one with a completely different party, because we got terms that were different, extending it longer, different variety, if you will, or flavor.

So yes, that's exactly as reported.

Okay.

Thank you.

Thank you.

The next question is from Greg Barnes of TD Newcrest.

Please go ahead.

Yes, thank you.

Product loan agreement, you said in Q1 that you recognized $85 million into revenue, due to the closure of the previous agreement?

Correct.

How did that impact the bottom line, Kim.

I'm not sure I understand that.

The gross profit on those sales, Greg, was about $41 million, so revenue would have been increased by 85, and the gross profit or gross margin by 41 in Q1.

So the 41 million flowed right down to the bottom line?

No, gross profit, before tax.

Before tax.

Right.

Okay.

So it's a bit of an unusual item this quarter, then?

There were a number of kind of-- items that you couldn't predict ahead of time but that would have been in that package, yes.

Okay.

Greg, not reported in any earlier quarters either so, we just observing accounting rules in terms of how this has to be treated.

Just look at how consensus was at $0.40, I think.

But if you knock this 41 million gross profit off, it's going to be coming in somewhere below that.

Greg, I think we would have-- I'm pretty sure that we did project or notify people ahead of time, that that would be coming back in in quarter one.

So I don't know how people modeled, but it wasn't a secret in any way.

Okay.

Fair enough.

Thanks a lot.

You bet.

Thank you.

The next question is from Borden Putnam of Eastbourne Capital.

Please go ahead.

Hello, good morning.

Gerry, on the-- maybe this is for Tim.

At McArthur, Tim, as they've mentioned already on the call here, there's some transitioning that's going slow to the new areas, and coinciding with the new loan agreements, I'm wondering if you could give us a little more color on which zones are giving you trouble?

I'm looking at an old production schedule, it talks about zone two panel five, and zone four lower, both needing to come in about 2009 and in your MD&A you mention-- and also in the AIF you mention that additional regulatory approval is required for these zones.

So which zones are giving you trouble, and what sorts of trouble, and what approvals would be required when are you ready to go ahead?

Thanks.

Yes, Tim, go right ahead.

Borden, we -- you're absolutely correct in the two areas we need to go into is zone two panel five and lower zone four, to move forward in 2009 and beyond.

The good news is that zone two panel five, the development work, and the freeze curtain and protection we're putting in, is going well, and that's moving -- that's the one that's moving ahead nicely.

Where we're a bit delayed is on the lower zone four piece, and that has to do with the-- I think the same philosophy we're applying there, the assurance of success philosophy, where we're not going to take any chances.

We're going to do it right.

We're going to make sure that we don't have more incidents.

So that's taking us a little bit longer.

So that said, we have-- I'll call it a contingency plan, internally at least.

We can go into some areas that are already behind freezing, and really scrape out, if you like, take a few million more pounds in 2009, that would cover us off while we're still developing the lower zone four.

So we think we have a good plan in place that will allow us to maintain our production in nine, and going forward.

On the licensing piece, in fact, we have to go back for both McArthur River and Key Lake for relicensing, our five-year licenses come to an end in October 2008.

And so we've submitted, in fact this week, yesterday, our documents for renewed five-year license, and we'll be back in front of the commission in June and September for both McArthur River and Key Lake, which will include the moving into the new areas.

Okay.

Thanks.

And then back-- you prompted my second question then.

It sounds like in the areas of zone two, which you're going to continue to mine to make up for this production change, it might involve more of the remnants, and those are the areas where you've back filled around the existing-- sorry, around some of the remaining ore, and that's going to drive some troubles I would guess, with additional backfill going to the (inaudible) Lake and some of the issues with affluent troubles you've had there.

Am I right about that, and if not, how are things going with the phase one construction and commissioning, which now looks it's about six months late, I take it, by your MD&A?

Your analysis is right.

Remnants we call it, remnants might make a company three or four million pounds.

I know, it's rich stuff.

We do have to pluck it out.

There will be some additional cement.

We set up some new concentrating equipment at Key Lake to help us solve that problem, which is working well.

So we don't think that will be a big problem going forward.

And you're about six months behind at Key Lake, is that right, by my reading of the MD&A, versus the (inaudible) chart in your proposal to CNSC of December 2006?

Well, you know, we're breaking it up.

If you're talking about the Key Lake revitalization, we're breaking that up into bite sized chunks now, and we're submitting environmental assessments for some of the first work as part of it.

So we're moving along.

I don't think we're behind in that regard, and we're-- we'll need approval from environmental point of view, and then we'll get busy with the construction.

Okay.

Thanks.

Thank you.

The next question is from Terrence Ortslan, of TSO & Associates.

Please go ahead.

Thanks.

Good afternoon.

Just a question on this asset in Kazakhstan.

Can you talk about the asset balance in the area, and how much it costs today, to get the asset if you can kind it, and two, how much will it cost you to make your own asset?

As I recall, the asset reduction is at about half of what would normally be expected for all uranium producers, and the cost figures, I'm not sure that I have.

Tim, do you have any?

No.

You know, we've seen the cost go up.

And I don't have the exact numbers in front of me, I apologize, but they've gone up a bit, to get our own supply.

But we're looking at that going forward.

First, we need to have-- we need to ensure we have a sustained supply of acid, and we've had, as I said again on the last call, a company out of Germany do a full study on the situation in Kazakhstan and Russia and Uzbekistan, to see what the supply is going forward, versus if we were to buy versus a stand-alone plant.

So we're doing that work now.

And how much acid do you-- will you consume, block one, block two, and all?

Right now, we're requiring about 5,000 ton a month.

Okay.

And you will eventually get up to?

Well, that will move up, depending on how we're-- that varies, it's not a constant.

It's how you're acidifying your fields.

But the height over the next couple years, it might go up a couple thousand tons, 7,000 tons a month.

That's not much.

You're budgeting how much per ton of acid?

What are you budgeting for?

I don't have those numbers.

Spot market of acid has gone through the roof, depending where you are on this planet, anywhere between $200 to $600 a ton.

What is it in Kazakhstan?

I'm sorry, I don't have that number in front of me.

Okay.

Come back to the exploration.

Beyond the annual report, could you talk about any change in emphasis this year, and where should we be looking at some news coming out from you guys, during the course of the summer and the fall?

Exploration expenditures for this year are going to be between $50 million and $55 million, Terry.

About half of that is going to be devoted to the Athabasca Basin region, I guess.

So you're right, results sometime at the end of the summer, into the fall, when summer drilling season is over.

Okay.

Any highlight in terms of which ones we're going to have some news from?

We would have gone back to Virgin River that we talked about historically, a little bit around Cree Lake.

We're targeting those areas, where we've had had success in the past two or three years.

Okay.

Who can I talk to about the acid later?

You can talk to Tim.

Okay.

Thanks.

Thank you.

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

Please go ahead.

Hello, good afternoon, everyone.

Just wanted to follow up on Rabbit Lake.

Obviously the mine is now back up and running, but no production was booked in the quarter.

Just wanted to know, going forward, how we should look at that coming into the income stream.

Are you going to be able to catch up relatively quickly, or should we kind of spread it out over the course of the year?

And then just a second question, a little bit different, on your interest in Centerra, just get the views from Cameco's point of view, how things are progressing with the government there, and your expectations now for when you will be looking at obviously moving down to 41% ownership and de-consolidating the results.

We'll deal with Rabbit Lake first.

It was intended that the mill be down during the first quarter, so it came up on the first of April.

Still predict 3.6 million pounds produced out of Rabbit Lake this year, and so there's a little bit of a stockpile, working inventory, if you will, that can now feed the mill.

And then on the second question, as to Centerra, I'll let Kim make a comment on that.

Sure.

Cliff, as to the (inaudible) government, we have been in discussions with them.

We continue to have our discussions, both the President and the Prime Minister and Parliament for that matter, have all come up recently, clearly putting their own comments on it, their own desire to have our transactions concluded by the end of May, June 1 deadline is out there.

That is ambitious, there's no question about it.

All parties are trying to make that date, and we will see what happens.

So assuming that deadline was magically met, you would look to start de-consolidating post Q2?

Well, if that-- when that deadline is met or when the transactions close, we will deconsolidate as of that day.

Okay.

I'll pass it on to someone else.

Thank you.

The next question is from George Topping, of Blackmont.

Please go ahead.

Good day everyone.

I was just interested in following up on the closing out of the contract, uranium loans with customers, and the impact that it had, not so much on the earnings but on the cash flow.

Can you tell me how much of the cash flow is related to that?

Kim?

Actually, none.

How does that sound, George?

That sounds good.

None.

Okay.

What would have happened, and the way these entries are recorded in the financial statements, when the time of the actual physical sale takes place, we receive the cash flow, and it is reported in working capital at that point in time, as a cash from operations.

When you then turn around and take it into income, the cash has already been recognized, and is on the balance sheet, so it's just an earnings impact.

Okay.

Thank you.

Thank you.

The next question is from Chris Donville, of Bloomberg News.

Please go ahead.

Hi, Gerry.

I'm wondering if you can talk a little bit more about the relationship between the spot price and the long-term price, and I'm wondering to what extent are you expecting a widening of the spread between those two prices?

Chris, let me ask George to make a comment on that.

Go ahead, George.

Well, Chris, of course the spot market reflects what's happening in the very near term here, and as I'm sure you've heard Gerry mention in his remarks as well, the demand that we have in the market for our discretionary is not for real needs in the near term, and on the supply side you have short-term players, I'll say traders, some of the traditional traders, a few small producers with some uncommitted volumes, et cetera, adding supply to that market, and that's moving the price down.

The long-term market, on the other hand, reflects the uncertainty associated with future production.

The number of players in that market are significantly fewer, and so it's held fairly firm.

It did drop $5 this month, down to $90.

So while the two markets in many respects are I guess-- well, I'll say in many respects are quite distinct, they're obviously also related.

The discrepancy we have at present between the spot and the long-term market, which is $30, in my view, can't be maintained over the longer term, and so to the extent that you see further downward pressure on the spot price, you would expect to see further softening in the long-term price.

And you know, I guess vice versa.

If there's significant strengthening in the spot price, that could ultimately allow the long-term price to rise further.

Today, my view is that, that large discrepancy cannot be maintained over a long period of time.

Okay.

Thank you.

Thank you.

The next question is from David Snow, of Energy Equities, Inc.

Please go ahead.

I was asking about the second cement that you're going to pour in the cigar, if you could review that again?

Yes, we'll go back in the area, what we call the 944 drift, east to where the rock fall occurred, and where we've already poured the plug in behind.

We'll go in then and pour another engineered-- the plan is to go and pour another engineered bulkhead to just make sure we've absolutely sealed that off.

You know, we were operating from 500 meters away, through a lot of rock when we poured the first one, and fortunately I think it's a job well-done, but we want to make sure that that is completely sealed off.

So that will be one of the first orders of business.

That will be done with the benefit of underground access?

Absolutely.

Yeah, they'll be at the face.

Okay.

And could you give me some idea as to what total Kazakhstan output was last year, and what the increase was last year, and what it may be this year?

Industry-wide?

Total Kazak?

Yes.

I don't have the exact numbers.

Industry-wide, I don't have them here either.

We'll get it for you.

Okay.

Great.

Thank you.

Thank you.

The next question is from Borden Putnam, of Eastbourne Capital.

Please go ahead.

Yeah, Tim, if I could go back to a Cigar Lake for a second.

In the AIF there's a mention that the plug, although it's considered effective, if it's found to not be completely effective, that freezing will be used in the in flow area.

And remind me, I don't believe there was freezing there before, and that was part of the trouble, you didn't think you needed it at that level, at that elevation in the mine.

But if you were to go back and do this, what sort of time constants would be required to effectively do this, to help you with remediation?

Well, you know, we're quite happy, Borden, with the way that initial plug is holding, and we were concerned that we might not get as good a take, on that plug as we did.

So we haven't been talking too much about freezing in the that specific area right now.

You know, that's a development area, not underneath the ore body, freezing in the ore body of course, and underneath there.

Once we get back in there and are able to look at it and test it, and as I say, I think we'll right away pour that engineered bulkhead.

Not sure that we'll need the freezing in that area but we'll look at that.

And you know, that will be part of-- we've said publicly that we're reviewing the mine plan, given the circumstances, again, and so that will be part of the new mine plan going forward, as to whether we would need to freeze in that area.

Yes, I appreciated that.

But on page 34 of the AIF it talks specifically, that it will be utilized to secure the inflow area.

So I was just wondering what might have changed your thinking about that?

Anyway, we'll get to that as you discover more down there.

And I want to help you a little bit with my question on the Key Lake mill going back to that.

I don't think I was quite fair.

You talk in the MD&A that the construction is done for phase one.

Now you're in the commissioning, that looks like according to the [Ghant] chart, that that's sort of a three-month time constant on your work before you're completed with that, so it looks like that would be pushing it into-- out into the second quarter perhaps.

My question is if that, whenever that occurs, how long do you think the CNSC would take reviewing your achievements to-- before they'll grant you approval to move ahead with phase two construction?

I'm sorry, I think there might be some confusion.

We talked phase one, two and three in the context of cigar.

That's why I wanted-- I realize what happened.

You're talking about our [arolium selenium] removal?

Correct.

Oh, okay.

Yeah, sure.

We just got that up and running.

In fact, Gerry was up and cut the ribbon a few weeks ago on that piece.

So we're just working the kinks out of that and we should have some results coming.

We need to have and will have results by the time we go in front of the commission in June, June 11 on that.

So we'll know how that's working, and it's dependent on those results, Borden, as to how we move, or if we move into phases two and three.

Okay.

Last, if I could have one more.

We're on the end of the call, maybe it won't offend anybody.

Borden, go ahead.

Thanks, Gerry.

Bob, I wanted to thank you for your help walking me through the issues in Inkai, talking about the revisions to the reserves there.

Can you add a little bit of color to that?

When would you perhaps get better clarity on moving those probable back into proven, or vice versa based on the line plan and permits there?

I wasn't privy, Borden, to your conversation with Bob Lillie so I'm not sure what you're talking about.

There was a large revision to proven at Inkai, so Bob through a couple of e-mails walked me through what was going on there.

I thought maybe either you or Tim could give us some more color on that?

It's just recognizing that there is a huge Soviet resource there that we can't really bring into our own calculation of reserves.

As we prove up block two, block one, we're able to bring-- and confirm some of the Soviet drilling and demonstrate that you can recover, we're able to bring more into our own tabulation of reserves.

Right, but this revision went the other way.

And moved from proven to probable, and it related, Bob suggested, to uncertainty of permit extensions and things like that, so I'd--

We can get you that information offline, Borden.

[Alan Manville] has got that down to a science so we'd be happy to give that to you.

Great.

I'd appreciate that.

Thanks.

Thank you.

The next question is from Greg Barnes, of TD Newcrest.

Please go ahead.

Yes, thank you.

George, the [Tara] market has seen pretty low volumes year-to-date as well as the spot market.

I was wondering if you are expecting any improvement on that front for the balance of the year, and what you're thinking for 2009?

No, Greg, our expectation of 2009 would be something in the order of about 125 million pounds in the term market.

That would be about half what has been the pace over the last several years.

But as we've discussed in the past, the pace over the last several years was-- never seen before.

So there's been such a huge amount of contracting over the last three years, that we expected things to start slowing down and 125 million pounds for the year would fit with our expectation.

And how do you see that developing over the next couple years, George, with potential new core demand and what have you coming into the market or not?

I'm still not clear on how that's going to develop.

Yeah, you know, my own-- I would think that what we're going to see here, is I think as we already talked about '08, and I wouldn't be surprised if '09 was also relatively light, but you're right, as-- as the nuclear Renaissance takes firmer hold, and as you start to see plants firmly committed, et cetera, you should start to see those numbers start to ramp up again.

Right now, Gerry made note of it in his remarks, utilities are well-covered for the next several years, with contracts and modest amounts of inventory, they've gone through a period of very heavy contracting, the way it works in our industry you would expect to see a bit of the respite here.

They'll concentrate on enrichment, and they'll be coming back to uranium in a bigger way in a couple years.

Do you sense at all, George, that utilities feel they have the pricing power at the moment, and more than happy to exercise that?

I think it's fair to say that utilities are feeling a little better about things, in light of the way the spot market has reacted, and that will indeed affect some of the terms that they might be willing to accept under longer term contracts.

By the same token, if they're coming up today for supply in the longer term, you're dealing with- and they want secure, reliable supply, you're dealing with just a few players, that are able to address it.

But I'd say-- it's certainly fair to say that utilities are more comfortable with the situation today.

And just quickly on the term price, slipped a little bit to 90.

Do you see further slippage there down to the mid-80s?

Well, I would expect, you know, if the spot price stays at 60 or weakens a bit further, I think that there's going to be increased pressure on the term price.

But again, I think it's more the case today than it's ever been the case in the past, there seems to be a much more clear distinction between the two markets, and it goes back to, as I've already noted, that you've got a very few number of players in that long-term market that can reliably supply, and many of them are very, very heavily committed.

I think what you see developing, and wrote about it recently, you've got traditional spot market, you've got a long-term market where-- where supply would begin two or three years out, maybe run for eight or ten years, and you're getting a bit more of a clearly defined midterm market, for the next one to three years, and prices in that period are somewhere between that spot and that long-term price.

Great.

Thanks, George.

Thank you.

The next question is from Greg Glinski, of Klingenstein Fields.

Please go ahead.

Looking at the chart you guys provide on the detailed uranium prices versus market price, if uranium price is $100 in five years, you realize prices are still at a significant discount, is that because of legacy contracts, or the way the new ones are written, or in other words why isn't it catching up more quickly?

Thanks.

Greg, it's because we're always writing contracts, so as the market has gone from seven up to $90 in terms-- in the long-term pricing, we would have been writing contracts throughout that period of time.

So in a rising-- rapidly rising market, we will always lag, and 40% of our portfolio is fixed, and 60% related to the spot price, the time of delivery.

So it's just a function of the way that portfolio is constructed when you're selling somewhere between 30 million and 32 million pounds a year, you're always writing contracts.

Okay.

Great.

Thanks a lot.

Thank you.

(OPERATOR INSTRUCTIONS).

The next question is from Lawrence Smith, of Scotia Capital.

Please go ahead.

Good afternoon.

Another question on the table on page seven of the MD&A.

I'm struggling with what the implications are for realized prices in market where there's a large discrepancy between the spot price and the long-term price, because the table's predicated on the assumption that they're the same.

Maybe George could run us through what it means over the next couple of years if we have $20 to $30 difference between spot and long-term.

What it means is-- that's a good point.

Today, as you've noted, that table is predicated solely upon spot price, and it assumes that at any point in time, the level of the long-term market price, published long-term market price is identical to the level of the spot price.

We do have a significant portion of our market related contracts in the future, which reference actually the long-term market price, and not the spot price.

So to the extent that there is a large discrepancy in the future, and under those contracts that reference long-term market price, we would be realizing-- that discrepancy is as it is today with the long-term price being higher, then we would actually be realizing a significantly better price than what is being shown here.

Thank you very much.

Thank you.

The next question is from David Snow of Energy Equities, Inc.

Please go ahead.

Could you bring us up-to-date on your take on the U.S.

DOE rumbles upon selling some of their stockpile?

How do you think that will play out?

George, do you want to respond to that?

Certainly been a lot of that in the press.

There's been a lot of work that's taken place in the industry to-- utilities and producers to arrive at what's called an industry consensus, as to recommendations to DOE, as to how they should place that material into the market.

I think you've-- DOE is certainly taking it seriously.

They've got a lot of different programs in place, and a lot of different pulls on them, for that material.

I think for the near term here, it appears that the DOE is not likely to make much, if any, of that material available to the market in the very near term.

As you go out in time, the industry consensus would have them feeding it into the markets.

I don't remember the exact numbers, but I think it starts at one and a half million or two million pounds a year, and eventually over time rises to a maximum of five million pounds a year.

So we see it as a fairly orderly stream of supply to the market for the future.

On the same note, is there any-- can you give us an update on how the Soviet change in enrichment plans will affect the availability of enrichment capacity, and therefore the substituted ability for enrichment for uranium, that might impact the uranium market?

Really, what's gone on-- I think what you're referring to is the recently signed amendment to the suspension agreement, which gives Russia increased access to the U.S.

market.

If you look at the agreement closely, you'd see that prior to 2013, it's actually very limited quantities, and after 2013 it amounts to about 20% of the U.S.

market.

Today, another way of looking at it, is that today Russia actually supplies something closer to 40%, 45% of the U.S.

enrichment market.

So it actually represents a, if you will, a tightening of enrichment supply from the Russians to the U.S.

market in the future.

Less so than had previously been expected?

Well, previously under the suspension agreement, it would have been zero for enrichment supplies, so this gives them access to 20%.

Okay.

Now, does that have an impact, do you think, in terms of doing more enrichment, or do you think they'll still go to 0.3 tales?

I think that the Russians have demonstrated that in contracting for enrichment, they're going to contract on-- to be competitive with the other enrichment suppliers.

So I think the tales actually will go to the natural level, that the enrichment industry in total would have it go to, and so I think it's the relative price between enrichment and uranium that will dictate what the tale capacity is.

I don't see that Russia having access to the U.S.

market, somehow impacts the price of uranium, by virtue of the tale (inaudible) they're willing to contract out.

You're still assuming about a 0.3 tales?

We're not that high.

I believe we have it rising over time, to something more in the order of 0.26, 0.27.

Right now it's at about 0.23.

I would say today the optimal, I would say if you had complete flexibility, would be close to 0.2, 0.21, something like that.

In fact, enrichers have limited the tales flexibility under new contracts, so practically speaking, the tales assay which most enrichers are operating, are probably more like 0.26, or 0.265 or something like that.

Thank you very much.

You're welcome.

Thank you.

The next question is from [Cushuc] Ray of Adit Capital.

Please go ahead.

My question is of the balance that you supplied in the first quarter to your customers, how many of them were either borrowed or purchased in the spot market?

None borrowed.

None were borrowed.

And as we've indicated in past years, we always have a few purchases in the spot market, mostly to gauge market intelligence.

They're just simply fed into inventory, so I don't think we have any idea.

They're just part of the average cost of sales, Kim, I don't know whether you want to make an observation.

Be but it would be simply blended in with our inventories out of which deliveries were made to utilities, so it's all punch bowl.

I think that's probably the best answer for you.

Thank you.

Thank you.

This will conclude the questions from the telephone lines.

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

Gerry Grandey for his closing remarks.

Thank you very much, operator.

As I mentioned at the beginning of this call, we expect 2008 to be a time of renewal for our company.

We're looking forward to providing further updates on our progress throughout the year.

And I'll note that this is the year that we're celebrating Cameco's 20th anniversary.

We appreciate your interest, and wish you all a good day.

Thank you.

Thank you.

The Cameco corporation first 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.