Cameco Corp (CCJ) 2008 Q2 法說會逐字稿

The Cameco Corporation conference call will begin momentarily.

Good morning, ladies and gentlemen, welcome to the Cameco Corporation second 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, and good morning, everyone.

Welcome to our second quarter conference call to discuss the financial results.

Thanks for joining us.

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

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

Gerry will start things off with comments on Cameco's financial results, uranium.

Consolidated outlook, and the 2008 outlook for each business segment in a table called, 2008 financial outlook, which can be found in the Cameco update section of our home page at cameco.com.

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

During the Q&A session, please ask just one question, followed by one follow-up if needed.

Please note that statements made by the company during this call, including statements regarding its objectives, projections, estimates, expectations or predictions, contain forward-looking information and statements within the meaning of applicable Canadian and US 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, where applied in drawing the conclusions or in 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 facts or assumptions that were applied, are contained in the company's annual information form dated March 28th, 2008, and the company's most recent Management Discussion and Analysis dated August 13th, 2008, both of which are available on SEDAR and EDGAR.

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

Thank you, Bob.

And let me add my welcome to everyone joining us on the call, as well those that are listening online.

Once again, Cameco has strong quarterly results to report.

Our consolidated gross margin was 37%, led by our uranium business at 56%.

While not as strong as the outstanding Q2 we had in 2007, these results are very solid.

The second quarter 2008 was the second best net earnings we had posted in the last eight quarters of record financial results.

Unfortunately, these results are somewhat overshadowed by the recent events at Cigar Lake.

Early on Tuesday we observed an increase of water inflow to the mine, during the day, the inflow exceeded the point which we considered acceptable to continue work in the shaft, as set out in our remediation plan.

This was particularly disappointing for us, as progress had been excellent since the dewatering began in early July.

Inflow was minimal.

We had successfully dewatered the workings at the 420-meter level and we were approaching the bottom of the shaft.

Because we knew there was always a risk of further water inflow, we built contingencies to the Cigar Lake remediation plan.

So when it happened we had both the systems and governance in place to respond to the problem.

As a result, the plan was well executed with no safety or environmental issues.

Now the team is available to focus on evaluating the path forward.

Since issuing our press release on Tuesday, we have been analyzing information gathered during the event and completed the initial data collection.

We will now allow the water to rise to natural equilibrium over the next couple of weeks.

We will continue to conduct analysis and conduct further data as needed.

In parallel, we plan to cover off a number of activities.

Specifically, we plan to assess all of the information and learnings from our work of the past 18 to 20 months to ensure we build on our experience and successes.

We intend to prepare for and execute shaft 2 remediation.

We'll define the specific cause and location of the inflow, look at the necessary amendments to our remediation plan, and identify resource gaps to execute the plan.

We have already begun reviewing plans and lining up equipment that may be necessary to avoid delay once our course is settled.

This work will be conducted in the coming weeks.

While the event at Cigar Lake set us back, we have made significant progress toward our visions, to be a leading nuclear energy company in several other areas since the first quarter.

Earlier this week, we closed the acquisition of the Kintyre deposits in Western Australia, adding potential for low-cost production and further diversifying our portfolio of quality uranium assets by deposit type and region.

Kintyre became available as a result of Rio Tinto's effort to raise cash for its Alcan acquisition.

Through a competitive bidding process, we were able to secure a 70% interest in the project.

The remainder is held by an Australian subsidiary of Mitsubishi, who will be our joint venture partner.

With the uranium price half of what it was a year ago, Kintyre was attractively valued.

The fact that Cameco controls significant exploration land around the deposit makes it even more attractive.

Kintyre builds on our strong position in Australia, which is an increasingly important production center for the future.

In June, we further extended our participation in the nuclear fuel cycle by entering an enrichment venture with GE Hitachi Nuclear Energy.

Cameco acquired a 24% interest in an enrichment plant being developed in North Carolina that will apply new laser technology.

The technology is proven at bench scale and global laser enrichment is advancing toward commercial production, expected in 2013.

Laser enrichment is is the third generation of enrichment technology.

We believe it will be competitive with the dominant centrifuge technology, our investment extends Cameco's position in the front end of the wide water fuel cycle, beyond uranium production and conversion.

We also advanced toward development of a new conversion facility in Kazakhstan in partnership with Kazatomprom.

The companies are evaluating the feasibility of a 12,000 ton conversion plant at the Ulba Metallurgical Plant.

Tied to this project, under the MOU signed between Cameco and Kazatomprom last year is a plan to double future production from the Inkai uranium deposit to a total of 10.4 million pounds annually.

Currently, we have delayed the declaration of commercial production from Inkai until 2009 due to the limited supply of acid needed to condition the well fields.

Construction and commissioning of the facilities is on track, and we now expect to produce 1 million pounds at Inkai in 2008, about half of our earlier estimate.

At Port Hope we begun commissioning new systems in the US plant to prepare for restart.

It has been just over a year since the issue was discovered.

Since then, we developed and implemented an environmental management plan, and completed extensive upgrades to the plant, and operating practices.

When the plant resumes production, which is expected next month, we have a cleaner and more reliable facility.

At MacArthur River we continue to make progress on transitioning to new mining areas of the ore body.

We are adjusting our mine plans in order to continue producing license capacity in 2009.

Along with our partners, Cameco reached an agreement with Tenex on the pricing structure for the remaining term of the agreement to purchase uranium derived from recycled Russian nuclear weapons, otherwise know as the HEU commercial agreement.

This agreement assures Cameco access to the material to the end of the HEU commercial agreement in 2013, on terms that are fair to all parties involved.

The agreement preserves a reliable source of uranium for Cameco and further strengthens an important relationship with Tenex.

Turning now to our markets, we continue to see volatility in uranium prices.

The spot price has rebounded to around $65 a pound since declining below $60 in June.

The latest upturn reflects financial players, stepping in to the market to take advantage of soft prices.

This volatility is not surprising.

The spot market is thinly traded, and minor quantities either purchased or sold can have a dramatic impact on price.

Utilities are generally well covered for the next few years under existing contracts and old modest inventories.

As a result, they have placed little demand in to the spot market.

There is some speculation that utility purchases will pick up in the fall.

In the long-term market, prices have declined since April, and now stand at $80 per pound.

The decline is attributable to the wide discrepancy that had existed between the spot and long-term prices.

As noted previously in earlier calls, this gap must close over time.

However, the long-term price remains well above the spot price.

The continued strength of the long-term price reflects the market a few years out where utilities' uncovered requirements are growing and suppliers are heavily committed.

The persistent spread between the spot and long-term prices suggest three things.

One, that buyers believe uranium prices will trend up over the long -- longer term.

Two, that customers generally value price predictability for a portion of their requirements.

And three, some customers are willing to pay a premium for security of supply in the longer term.

We continue to sign long-term contracts that will deliver strong revenue and earnings to our shareholders for many years to come.

While our realized price has not tracked the peaks of the spot market, our average realized price increased 27% in the second quarter compared to 2007.

Looking ahead, we expect 2008 will be a good year for Cameco, both in financial terms, and in overcoming operational challenges.

Despite the setback at Cigar Lake, we are making significant progress.

We are preparing for restart at Port Hope, we have restored a solid footing for the HEU deal, completed a major transaction that strengthens our relationship as well as our long-term production potential, at the same time, we continue to deliver outstanding financial results.

With that, we would be pleased to answer your questions, and I'll turn the call back to the 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 then allow one follow-up question.

Then, if you have any 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 their questions.

Thank you for your patience.

The first question is from Orest Wowkodaw from Canaccord Adams.

Please go ahead.

Good morning.

You allude in your release to a change in the mine plan at MacArthur River next year.

I'm wondering if that's going to have any impact on your production plans for next year for MacArthur.

We still anticipate Orest producing at the licensed capacity at 18.7 million pounds.

Thanks very much.

The next question is from Greg Barnes from TD Newcrest.

Please go ahead.

Question for George.

You seem to indicate in the press release that you have been active in the spot market in Q2.

I was wondering to what kind of extent you were active.

Greg, I'm not sure we got it fully.

Did you ask whether we had been participating in the spot market in Q2?

Yes.

You are referring to the sell side?

Or the buy side.

Well, there was widely reported a transaction on the buy side that we had completed, so that's correct.

I didn't see those reports.

What was it?

Oh, well this is the report of the purchase of the Iraqi material.

Okay.

I completely unaware of that.

Or did you miss it.

Yeah.

1.4 million pound, Greg, that Cameco in conjunction with the Canadian and US government procured out of Iraq with delivery actually taking place early in July.

So that wouldn't quite qualify as second quarter, but it was all negotiated in second quarter.

Was there a price disclosed on that?

No price disclosed, no.

Out to 2011, 2013, George, how covered are the utilities in that time frame?

I would say they are reasonably well covered out through certainly 9, 10, even reasonably well covered to 11, but then it would start to grow -- uncovered requirements would start to grow significantly after that.

12, 13, definitely.

So delay at Cigar would force them in to the market in a bigger way potentially?

At the latest, yes -- at the latest Cigar would have an impact.

Okay.

Thank you.

Thank you.

The next question is from [Brian Hodgeman] from private investor.

Please go ahead.

Yes, last fall Cameco made investments in two uranium companies, Western Uranium and Q Resources.

Since that time, their values have plummeted around 75 and 85% respectively.

Could you please comment on the status of these investments and their projects?

Thanks.

Yeah, Brian, it's true those were two of a number of investments we had made in some of the junior mining companies.

Really part of the strategy to diversify our portfolio.

Since we know that Cameco can't be everywhere at once, we identified juniors with more perspective ground and management committed to -- exploration committed to the uranium industry.

These were two of several.

We continue to maintain our investment.

Their share prices have suffered like everybody else's, all of the other juniors.

They have gone up and down with the price of uranium, so we continue to maintain and work with both of these companies and their investments.

Okay.

You report those as available for sale securities as opposed to other investments.

You carry as equity accounted investments.

Because that would be marketable securities.

As opposed to your UEX and Unor investment?

Brian it's a matter of how we account for those -- those two investments.

We do not have a large enough block in them actually to move up in to the equity section.

It's just a quirk of the accounting here.

Nothing more than that at all.

Okay.

And just another quick unrelated question.

What are the reserves and grades at Kintyre that you used in deciding to purchase that project?

No -- no reserves under the national instruments of either Australia or Canada.

We had talked about sort of exploration potential of 60 to 80 million pounds at a grade between 0.3 and 0.4.

Probably recoverable by open pit technology.

Okay.

Great.

And that's in Western Australia?

That's correct.

Thank you very much.

You bet.

Thank you.

The next question is from [Nikesh Prakar] from FBR CAO markets.

Please go ahead.

Yeah, good morning, everybody.

Quick question on Inkai regarding the [necessity capitalized situation there], I understand that investments, smarter debits had eased the supply situation a bit.

But how does it impact overall cost of sulfuric acid and in terms of cost of production for Inkai?

And the reintroduction at Inkai, how does it impact our 2009 plans?

Tim, you want to go ahead?

Yep.

In fact that's right.

Kazakh missed acid plan at volcash is now back up and producing, so ramping up, and we're seeing now our acid supply increasing.

It's not yet at the level we need it to be at the maximum quantities to acidify our well field, but it is coming back up, so we're encouraged by that, and in conjunction with that the prices have dropped for acid.

Yeah.

The other question was, did you see any escalation of cost and -- escalation of cost of production, and of course, the delay -- the delay cost on Inkai, how it affect the 2009 production plans?

Well, we plan to -- assuming we do get up to our requirements of acid, we'll be able to ramp up as we had planned our production in 2009 and with the acid price coming back down to where it was before the shortage, we don't see any big changes.

Thank you.

Thank you.

The next question is from Ian Howat from the National Bank Financial, please go ahead.

Good morning.

In the first half of the year you realized $43.84 for your realized price.

In your expected realized price table, let's even assume it was 80 for the whole year.

You have 41.

In that would sort of imply for the latter part of the year, you are going to be selling in the high 30s.

Is that correct, for your pricing?

There are several things that affect that table.

I guess on the one hand, we should point out that escalation and some of the government indicators have been lower than what had been expected in the forecast.

The other factor that needs to be taken in to account, is that we make the simplifying assumption here that average long-term price indicator in the given year is going to equal the spot price indicator for that year.

In the second quarter, we did not have -- it was coincidental, we did not have any deliveries under contract that referenced the long-term indicator.

We do in the latter part of the year.

So, if the differential is maintained, for example, the long-term indicator is at $80, then we're going to have volume, not insignificant volume in the second half of the year that will be keyed off of that indicator, rather than the table which uses 64.50 today, or 60 or 80 the spot price.

Even if you use 80 as the term market, that would still be 41, and if you have done 43.84 -- or in this quarter you averaged 47 -- I guess the question is that sort of stolen from potential prices in the second half of the year?

I guess I would be -- if I look at it, yeah, the US price today is 43.84, and if I look at it for the year, based upon the current assumptions today, it would be a little softer.

Okay.

Thanks very much.

Thank you.

(OPERATOR INSTRUCTIONS).

The next question is from Borden Putnam from Eastbourne Capital.

Please go ahead.

Good morning, before my question I would like to comment on something you guys reported in your amendments for changing the Cigar Lake license that you sealed the open stand pipe at the bottom of shaft number 2, and that's some good success that must have been difficult work.

Thank you, Borden.

Yeah, with we're proud of that.

On the MacArthur production, I know you are wire brushing this, but the past information I have and the current stuff reading it looks like there's three sources of ore for the near future, zone two panel 5, zone 2 remnants, and zone 4 lower.

Reading the press release, I'm trying to guess the area that's a little bit sluggish and you now pushed out to 2010 is zone 4 lower.

Which means zone 2 panel 5 and zone 2 remnants is where you've got to concentrate and in the press release, you talked about Q2 production being constrained by mill limitations because of the the water treatment, and I presume at Key Lake that relates to that [isotechynol] problem which comes out of the processing of the backfill from the raises.

Is that what the problems was?

It is zone 2 remnants that's still giving you some trouble?

Borden, you are bang on on all of those counts.

Our plan is going forward on the mining for the first part of your question.

We're preparing zone 2 panel 5 for productions next year.

The main parts right now.

Right.

The remnants of that will help us again next year, and you are right, lower zone 4 is a little bit behind, and we're looking at that for 2010.

So on the production side, you are absolutely right.

On the technical issues at Key, you are right again, we're seeing some of the low grade out of MacArthur at Key and we're having some issue with some crag form in the SX.

We have had a few issues with power bumps and power outages and we're commissioning the molly sleeve circuit which is coming on, it certainly brought the molly down which we still have to work on, so those are the issues, you are right, yeah.

Excellent.

So zone 2 panel 5 that appears to be going almost on plan.

I understand it was a little bit delayed.

But that's also the area in 2003 caused a bit of a break through in some water.

What were you doing there in zone 2 panel 5 back in 2003?

Were you too close to though P2 fault and how much of a risk, but going forward, as you mine there, what is being done differently besides additional freeze wall that's going to prevent you from getting to close to that area of the break through, or the reason for the break through.

In fact it is the precautions we're taking in doing additional freezing so that we make sure that we've got a good clear curtain before we go into that area.

Oh, okay.

Thank you.

Thank you.

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

Please go ahead.

Good morning, everyone just a quick question on Cigar and I understand you might not have the information yet to answer the question, but given your comments that you made, do we think the excess water that's coming through relative to initial expectations is due to leakage around the plug, or is there any concern that given the environmental changes that have happened underground, that the water could be coming in from additional sources that will have to be investigated going forward?

I think your first statement is right.

It is really too early to tell.

We have got to collect and evaluate all of the data that we amassed far, and then we have got a number of things to do to try to pinpoint where the inflow is coming from, and obviously around the seal is one possibility, but we're going to need to look at a number of others as well.

But I guess just going on from that, assuming it is just around the seal, because in all likelihood, the first shot at lowering the water was not going to work.

You are just going to step back and continue to pump additional concrete, would be the simplest approach, I would assume at first blush.

Again, one alternative, but we'll be evaluating lots of alternatives which we have talked about freezing from the surface, additional grouting, other techniques that we might come up with, so all of those are going to be looked at.

Thanks for that.

Thank you.

Thank you.

The next question is from [Greg Lockhart] from UBS.

Please go ahead.

Good morning.

I was just wondering if you could remind me what your forward sales obligations are in the next couple of years in terms of volume?

And in particular I'm just trying to understand if Cigar Lake gets pushed out how would you place in terms of forward sales commitments for volume?

We make -- in the table there we note that we're assuming a sales volume of 30 million pounds, so that's probably a safe assumption to use, but, you know, we have protection in our contracts in respect of Cigar Lake volumes.

Both -- we have certain contracts that are specific to Cigar Lake and the rest of our contracts provide us with protection there, so --you know, if -- if forced to, we could reduce deliveries under those contracts.

We have the contractual right to do that.

Okay.

Thank you.

Thank you.

The next question is from [Alca Cinq] from Merrill Lynch.

Please go ahead.

Alca are you there?

Yes, I am my question has been answered.

Just -- if you can tell us like what your views are on where the water inflow is coming from?

I mean, any initial parts that you might have on where the water inflow is coming from?

I wish I could do that.

I can't see in the ground any better than our people at site, and right now all of the information that they have says this is an investigation we now need to conduct over the next little while.

So we'll get an update, I guess on --

As we indicated, we will update the market as we get new information.

Okay.

Now a second follow-up question on that.

At Port Hope, you guys were testing the new wells.

Any -- any progress on that, because I thought we were going to receive some sort of results in the following two to three weeks, and it has been more than month now.

Could you come back to the first part of your question?

I was just saying that on Port Hope you guys had drilled additional wells and with were trying to test water for contamination.

And if I remember correctly we were supposed to get results in the next two to three weeks, and it has been almost a month and just wondering if you have the results back from -- where you, drilling the wells or testing the water in the wells near the harbor.

We continue to do drilling and testing and analysis, and when we have a full picture -- and this is really everybody's request -- that when we have a full picture, then we'll go ahead and put it all together so it's understandable and release it.

Okay.

Thanks.

Thank you.

Thank you.

The next question is from David Shield from CBC Radio please go ahead.

Morning.

This question probably has been answered to a certain degree, but I did want to try and sort of ask it again.

As far as volumes go, from Cigar Lake, how worried are you about moving forward, especially if this -- if this leak does -- does push uranium production back from -- from Cigar Lake?

Well, the -- there's no question that the inflow is a setback for the remediation program.

I have to say that as we've approached remediation that we anticipated that there were going to be technical challenges including further the potential for further inflow, and as I tried to indicate in my opening remarks, it was part of the plan as to how to deal with it, no doubt this is going to delay things.

We have got to understand where the inflow is coming from, and then once we understand that, then we're going to have to develop a plan to deal with it, and there's lots of all alternatives as we talked about before.

So -- but at this stage of the game, it's just too early to speculate on location and consequence.

Right.

But I mean, did -- so in general, though, your company isn't worried about, you know, getting enough uranium on the market to sort of satisfy demand and make sure your bottom line is okay?

I think one of the advantages is we have got a diversified portfolio of sources, and as George indicated, contractual protection in the event Cigar is delayed as a result of the inflow.

Okay.

Thanks.

Thank you.

Thank you.

The next question is from George Topping from Blackmont.

Please go ahead.

Hi, hello, everyone.

Still on -- still on the Cigar Lake.

Could you give us an idea of what the increase in the flow was as you were pumping down towards the 430 meters?

And how sharp was the increase reported on early Tuesday?

Prior -- prior to the latest event it was around 25 to 30 cubic meters an hour, which was remarkably low.

We were very, very happy with that result, which seemed to hold pretty steady as we lowered the water in the shaft, and then beginning at about 1:00 on that Tuesday morning, we -- we began to notice a gradual, but steadily increasing amount of inflow coming in, and of course, it's all measured in the shaft, and over the course of a number of hours, it went from that baseline of 25 to 30 up to as high as -- as best we can decipher the information now, about 600 cubic meters per hour.

Sounds like a lot, but indeed it is still a relatively small amount of water, and hard to figure out where it comes from.

That's the best information we have, and then as the shaft level increases, and the hydro static head builds up, the water -- the amount flowing in naturally decreases.

That's right.

Did it accelerate rapidly during the day or was there a --

You know, I haven't heard -- I haven't seen a graph of it, but my sense is it was slows closer to a straight line than a sharp curve, but I haven't seen a graph of it.

I see a straight 45-degree type curve -- sorry line -- not vertical?

It clearly wasn't vertical from --

Yeah.

-- from the information we have now.

And I have always have to caution, your first evaluation based upon the limited data you have is likely to be wrong, and whether the -- the slope is flat or steep we'll have to wait and collect all of the data we have and then evaluate it, so .

Right.

Okay.

Good.

Thank you.

Thank you.

Thank you.

The next question is from Brian Hodgeman, private investor.

Please go ahead.

Hi, the first set of hearings with the CNSC for reviewing operating licenses at MacArthur Key, and Rabbit occurred back in June, were there any issues there?

Indeed they did incur.

And no there were no issues.

We presented the projects and our request for continued licensing, and I can say that it went quite well from our point of view.

Our relationship with the regulator and the work we have been doing has clearly been good and improving, so they went very well.

Okay.

And how -- you mentioned in previous calls that you're intending to expand production down the road at MacArthur, but you need a license for that, what is the status of that process?

Well, we -- we have to do some environmental assessment work before we can -- before we can apply -- there's the environmental assessment piece and then licensing application.

So we're working on the environmental assessment part of that.

And part of that is what we talked about a little bit earlier.

Some work we're doing on our affluent quality.

And now that we have got that in hand, I think we can progress with the other piece.

And what kind of time frame to do you foresee for maybe increasing that production.

It will be a few years yet before we get all of the processes required to get the approvals.

Thank you.

Thank you the next question is from Richard Tattersall from Heathbridge Capital Management.

Please go ahead.

Hi.

About the Port Hope comments you have got in page 19 of the MD&A, maybe if you can just provide a little more clarity.

July 8th -- does that anything to do with the Iraq yellow cake?

Or is there a broader --

Richard it has nothing to do with the Iraqi yellow cake.

In that yellow cake is just like all other uranium oxide we deal with from mining operations around the world.

The permission at Port Hope as you refer to is now the ability to produce slightly enriched uranium fuel bundles.

Slightly enriched uranium will be produced by others somewhere in North America.

And the -- the hydrofluoric acid problem, now long does it -- will it take to get alternate supplies?

And are you at the stage where you filed lawsuits or?

It's Tim Gitzel.

We're still working with our current supplier to try to resolve the situation.

We can access HF now and in the future from them.

But we're going to also be looking to see which other suppliers are available so that we can have several sources.

If you decided today you wanted to get an alternate one, it a matter of weeks or months?

I would say it's some months to get to all of your -- you know, emergency response for transport issues revolved.

You would have to have programs and plans in place for that, so it would be some months.

Okay.

And I guess the facility itself, the costs sent are detailed in then -- as it says an estimated 20 to 25.

That -- I guess you need approval, and would that be spent in '09, most likely --

I missed.

It says in addition to cost of planned improvements, the anticipated range is $125 million, is that likely 2009 or does that require until you get the full green light --

That's this year.

We're talking about this year.

Okay.

So what about '09 expenditures?

Anything material?

We should be back up and producing in '09, and have the repairs and changes made.

So you --

Let's move on.

That's it?

Thank you.

The next question from Greg Barnes from TD Newcrest.

Thank you.

I guess this is for Gerry or Tim, what is the action plan over the next month at Cigar specifically?

What are you going to do to figure out how you approach the remediation plan again?

I tried Greg, to say we're going to look back at all of the lessons that have been learned over the last 18 to 20, and we're going to look at the inflow data that we have collected.

We're going to use some of the sensing devices that we have there in the mine, and probably do a little bit more drilling, try to source -- or identify the source of the inflow and the extent and then develop plans to get back after it, and seal it off.

We're going to be looking at remediated shaft 2, which is successfully plugged up, and so now we've got approval to go back in there and begin rehabilitating that.

It's going to be largely a data gathering, and an evaluation exercise.

Is a month long enough to get a realistic view of what you need to do next?

Little early to say.

I think we're still trying to gather current data and figure out what kind of tools and technology -- and what kind of equipment we need to source to do it?

Just quick.

I know the remediation budget you put out a couple of years ago, I think now, was $46 million.

And the CapEx budget, your share was $554 million.

Have you revisited those numbers?

Those numbers have not be revisited at that point in time.

And how much of the 46 million have you spent in.

Do you know?

Greg, I don't have the actual -- the -- the firm number in front of me.

Much of that has been spent already.

Okay.

Good.

Thank you.

Thank you.

The next question is from Borden Putnam from Eastbourne Capital.

Please go ahead.

Hi, somebody us asked my question, so Tim, I'll go back to the zone 2 remnants for a second.

In the application for the MacArthur River license there was a discussion in there.

Is that being driven because of a desire to reduce the length of the raise boards which would -- on this diagram look like they are getting quite long to get to these remnants, and or is it a desire to reduce the amount net fill going to Key Lake?

I think it is both of those.

And has this -- I guess this method hasn't been used before there, and so what are you -- you are going to have to put in an extra drill drift above it , and if you do that extra drill drift, why not just go to raise boring from that drill bit half the distance above the remnants rather than try the open

You know, we have looked at that with our experts at the site, as they have decided that the stoping is the better option in that area.

But it's not something you have done before at MacArthur or am I wrong about that?

We're not unfamiliar with the technology at all.

Sure.

It's a better option for that area in the MacArthur mine.

Sure, better productivity would be good.

Thanks.

Thank you.

The next question is from Orest Wowkodaw.

Canaccord Adams.

There is a huge stock-based compensation expense of $43 million in the quarter.

I think that was probably a lot higher than most of us were looking for.

Was there a normal quarter or is this reflecting the quarter-end price, is my first question?

Orest is it just absolutely just a quarter-en price.

That method of expensing that we've been using for some time, really do look and should expect large swings from quarter-to-quarter.

So that l that be reversed if your stock price stays where it is today?

Yes.

Okay.

And second question at Port Hope, how much of the material is this -- is this acid -- the HF to the cost?

You know, your unit cost at the conversion services business?

Orest it is a significant input cost.

I don't have the percentage here right away, maybe George has got a better estimate, but it's -- Yeah.

It is a significant input cost.

Okay.

And when you say that your supplier is offering you additional supply but at an increased price.

Can you give us a scale of the escalation they are looking for?

At this taken stage of the game, no, I don't think we can.

Okay.

Thank you.

Thank you.

The next question from Bart Jaworski from Raymond James.

Please go ahead.

Good morning.

I just had a question regarding Cigar again, and just to pinpoint, do you have to reseal the current leak before you know if there are other leaks in the mine, or other interim measures using some measuring devices you can use to try to figure out if there's one point source or more?

Tim?

Well, you know, I think we have to go back -- we need to first determine the -- the source of the current inflow.

That's -- that's our first step.

Once we do that, and then find a remediation plan for that, I think we'll carry on again.

We have ways of -- we're looking at different ways of sending maybe some cameras down to have a look around in there.

So we might get more information, but our principal goal is to determine the cause of the inflow of yesterday.

Yeah, that's sort of what I mean is -- do you have to wait to reseal it before you know where that point source is or --

You use the world reseal.

We don't even know that the seal has failed at this point.

Right.

Really it will be an exercise of prying to pinpoint where is the leak and then developing a plan to attack it.

Okay.

Thanks very much.

Thank you.

The next question is from Brian MacArthur from UBS.

Please go ahead.

Good morning.

I think is probably for Kim.

Can you just walk me through the taxes this quarter?

You've got the tax recovery impaired, but looking at your earnings from Canada, they are still negative even before that, and adjusting for that, so can you just walk me through exactly what is going in there?

Well, Brian, what happens is the -- as we have said in the past, the -- the admin services -- the exploration activities are performed by employees working for Canadian companies, at Cameco or one of our Canadian subsidiaries which results in the bulk of those type costs showing up against the Canadian tax return.

Right.

That happens.

The purchase of materials, such as George mentioned earlier, was done by Cameco Corp, which brings that high-cost material then in to Canada as well.

And those kind of activities are what is creating the tax losses in Canada as compared to elsewhere in the family of companies.

Right.

But that $34.5 million income tax recovery, that sits all in Canada, and that 57.6 feature income things for Canada; is that right?

Well --

As an extraordinary item.

The extraordinary item relates to our holdings of Centerra's share, which is held by Cameco, yes.

That's all on the Canadian side here?

That's correct.

Okay.

Thank you.

Thank you.

(OPERATOR INSTRUCTIONS).

The next question is from Richard from Heath bridge Capital management.

Please go ahead.

Can you walk us through the key CNSC events that are going to happen between now and the end of the year.

We've got a potential approval of Port Hope.

The hearing for Port Hope in October of 2008.

What about on the mining side and any other key regulatory time lines?

Richard that's the biggest piece for us, in fact.

We have day two hearings for Robert Lake, Key Lake, and MacArthur coming up here in Saskatoon, in fact in mid-September.

And also Cigar Lake, looking at the rest of the phases of our remediation plan.

So that's the big one, and then I think we have a vision 2010 hearing somewhere along the way, which is our Port Hope remediation plan, and I think we have a Blind River.

We have got a lot of them -- Blind River EA hearing as well.

There is a table that we have on our website which sup rises the upcoming hearings and meeting for Cameco.

Okay.

Thank you.

Page 14 of the MD&A.

Just on the Port Hope thing, then, we're halfway through the third quarter.

Is it more likely that it will be slip in to the fourth quarter for Port Hope?

In my opening remarks I indicated probably next month is our best estimate now.

Thank you.

Thank you.

This concludes the questions from the telephone lines.

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

Gerry Grandey for his closing remarks.

Okay.

Operator, I appreciate that.

I indicated earlier that as we have done in the past, we'll provide regular updates for Cigar Lake as new information becomes available.

And the first update we plan for September 24th, and with that I'll wish you all a good day and a good remainder of the summer.

Take care.

Thank you.

The Cameco Corporation second 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.