Cameco Corp (CCJ) 2009 Q4 法說會逐字稿

Good morning, ladies and gentlemen.

Welcome to the Cameco Corporation fourth quarter and year end results conference call.

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

Bob Lillie, Director of Investor Relations.

Please go ahead, Mr.

Lillie.

Thank you, Operator, and good morning, 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 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 open the call with comments on Cameco's operating results and updates on our operations, development projects and global markets.

Then we'll open it up for your questions.

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

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

Please note that this conference call will include forward-looking information which is based on a number of assumptions, and actual results could differ materially.

Please refer to our annual information form and MD&A for more information about the factors that could cause these different results, and the assumptions we have made.

With that, I will turn it over to Gerry.

Thank you, Bob.

Welcome to all that have joined us today to discuss Cameco's fourth quarter and annual results.

With a global economic recovery that has been slow in starting, not everyone has reported 2009 as positive.

But for Cameco, 2009 was a very good year.

It was a year which saw a new record for revenue, a 30% increase in cash from operations, and production success from each of our operating assets.

The second to the last day of 2009 saw the successful exit from the gold business.

This allowed Cameco to enter 2010 as a pure play nuclear energy investment.

This long-anticipated milestone was in keeping with Cameco's vision of being a dominant nuclear energy Company producing uranium fuel and generating clean electricity.

We intend to retain and strengthen our leading position as a trusted supplier to utilities around the globe.

Our goal is to double our annual uranium production to help fuel the nuclear renaissance.

We have said doubling our production can be achieved by building upon our existing foundation, a strong and diversified mineral asset base that we have developed over the past decade at locations around the world.

In 2009, our internal program to strengthen operations at existing mines paid dividends.

Output from each and every one of our five operating mines surpassed their production levels of 2008, and either met or exceeded their forecast production for 2009.

A few examples tell the story.

At McArthur River, new milestones were achieved in the mine's development.

Extensive preparation work, including the innovative freeze wall development required for mining the next two zones, was successfully completed.

We expect these two zones will now provide access for ore for the next ten years.

This demonstrates our ever-increasing understanding of how to operate within the challenging geology of the Athabasca Basin, while achieving our production forecast from existing zones.

At Key Lake, a well planned and executed [low] maintenance shutdown taken last Spring allowed uninterrupted production for the remainder of 2009.

As a result, Key Lake took advantage of the new flux production provisions within our license, and this added another 200,000 pounds to Cameco's share to close out the year.

At Rabbit Lake, consistent production continued as the Eagle Point mine entered new development areas, with exploration continuing to identify resources that hold the promise of an extended mine life.

Production goals were exceeded at our US in situ recovery operations, and the ramp up of production at our Inkai joint venture occurred at a pace greater than what was anticipated.

Inkai is on track to reach its initial license limit by 2011.

In fuel services, we saw both increased realized prices for conversion services and higher production, as our Port Hope facility returned to steady operations in the last half of the year.

At Cigar Lake, our systematic and delivered approach to remediation was evident.

The dewatering phase is over.

Now that we can walk through the 480-meter level, we are in a position to assess the condition of the underground workings.

After that, we will undertake the final stages of remediation before we resume development work.

After reviewing our progress and successes thus far, the regulator in December approved a new four-year license for Cigar Lake.

This approval coincides with our own increasing confidence as we move toward production in mid-2013.

In the coming weeks we will release the detailed technical report on Cigar Lake that will provide further clarity on our plans to mine this extremely valuable deposit.

Bringing Cigar Lake into production remains a cornerstone of our goal of doubling Cameco's uranium output.

We intend to produce 40 million pounds before this decade is out.

World uranium supply must grow to meet the demand being created by the global nuclear renaissance.

Skeptics who dismiss the idea of a nuclear renaissance ignore the accelerating momentum.

They look at the entire global reactor fleet, and see that in 2009 there was no net gain in reactors.

However, this overlooked the more than 50 reactors in various stages of construction or final planning, and many of these will be fueled and ready to start operations by the middle of this decade.

In China alone, state planners want the electrical output of their nuclear power sector to increase six-fold by 2020.

Eleven units are now operating, and construction is under way on 20 more at ten different sites, with others being planned; and that is just in China.

India is already reaping the benefits of nuclear cooperation by supplementing their own domestic uranium fuel supply.

Currently, some 4,500 megawatts of electricity comes from existing nuclear plants in India.

By 2020, the government wants to have at least 20,000 megawatts of installed nuclear capacity.

This could rise to 63,000 megawatts by 2030 through building clusters at new reactors, existing sites, plus the addition of at least five new nuclear energy parks.

In South Korea, which operates 20 reactors currently, there are six reactors under construction and six more in the planning stage.

And Korea, we have seen, recently joined the world of new plant vendors, with a successful sale of four reactors to the United Arab Emirates, and aggressive plans to do more in other developing countries.

As a result of this new build activity, utility companies from South Korea and Japan are joining Chinese and Russian state companies in a competition to be an investment partner in new uranium projects around the world.

These decisions to build new reactors are all being made in the emerging economic powerhouses of Asia and the Middle East.

The countries in the West, where nuclear energy programs were pioneered, are also taking steps to renew and expand their capacity.

In the US, it has taken a year for the new Administration to realize the benefits of nuclear energy, and settle on a path that will address climate change in a meaningful way.

Last week, President Obama declared his clear preference for nuclear power as a base load generating source.

The first loan guarantee of $8.3 billion has been earmarked for two new units in Georgia, at Southern Company's Plant Vogtle, where site preparation is already underway.

As a result of the Administration's commitment to an expanded loan guarantee program, the planning and regulatory process will continue, and other utilities will move forward in the coming months.

In the United Kingdom, construction of new nuclear plants remains the leading contender for heading off the looming power shortage in that country.

As we have said, we need to look beyond today's relatively weak spot market price for uranium.

This current reality reflects the fact that the world's utilities are well covered for the next few years, when relatively few new reactors will start up.

But with a total of 53 reactors in various stages of construction around the world, suppliers must take steps now to meet this increase in demand.

That is why Cameco is building upon our reserves and resources to take advantage of the opportunities that are coming.

In the past three years, our well-funded exploration program working within our own extensive land base, has paid benefits to Cameco.

Additions to our reserves and resources exceeded production by an average of 15 million pounds per year in each of the last three years.

We intend to continue to build upon this resource endowment to achieve organic growth as we go forward.

However, the acquisition option remains open.

On that point, let me reiterate our strategy.

Our financial position at the end of 2009 is strong, including $1.3 billion in available cash.

Let us be clear, the money is not burning a hole in our pockets.

The financial position gives us great flexibility.

We intend to take our time to ensure that any new investment will bring real value to our shareholders.

With both an enviable balance sheet and an extraordinary reserve and resource base to build upon, Cameco has a number of pathways to reach our goal of doubling production.

You can rest assured that the pathways we pick will be the ones that will add the best long-term value to Cameco.

With that, I will turn the call over to the Operator for questions.

Thank you.

Thank you.

(Operator Instructions)

Our first question is from David Snow of Energy Equities.

Please go ahead.

Hi.

Good morning.

You said you were able to walk through the 480-meter level of Cigar.

I'm wondering, how does the water damage to the walls of the mine look?

Does it seem the mine walls have retained their integrity?

Tim, do you want to go ahead and handle that one?

David, we had people down there looking around, moving out from the cage, and it looks pretty good.

In fact, it looks a little bit better than we might have expected.

We're pretty happy about that.

And is that the main level that you have to go to?

I can't remember.

That would be the main level we'll be working on.

Great.

And could you just give me a little idea as to how you expect the DOE stockpiles to interplay over the next few years with the market?

You mentioned the utilities are covered up for the next few years relatively well; does the DOE become an elephant in the room as a result of that balance before they came along, or what's your --

Toss that one to George.

Yes, well, David, you're right the DOE sales have been disruptive, certainly a negative impact on the market.

They will continue through 2010, and it is always interesting the manner in which in DOE sells uranium always has the maximum negative impact on the market.

They have come to realize that, and so Secretary Chu has signaled that they do not intend to barter uranium after the 2010 fiscal year.

They're not going to sell after the fiscal 2010?

After 2010, they said they will not barter uranium.

Now, you know -- how do I put this politely?

They have not always lived up to statements that they made in the past, so it remains to be seen, but that is what the Secretary has said at this time.

Thank you.

Our next question is from Lawrence Smith of Scotia Capital.

Please go ahead.

Good morning.

Two questions.

First on the fourth quarter, I was trying to understand how the fourth quarter looked, and you didn't provide fourth quarter income statements.

I am wondering if you could kind of help me with like what would the effective tax rate have been in Q4, and related to that, going forward you are guiding to a sub-5% tax rate in 2010.

At what point would you expect that your tax rates would become sort of more normal, fairly well into double-digits?

Thank you.

Thank you.

Tim?

Yes.

Don't have the fourth quarter tax rate right in front of me, but it would not have been that different than the full year's.

As to how long it will stay in that range, we really don't project that kind of number out.

It will be here with us for a while still.

Thank you.

Thank you.

Our next question is from Greg Barnes from TD Newcrest.

Please go ahead.

Thank you.

Just wanted to explore the reserves at Cigar a little bit.

They seem to have come down, both in terms of tons proven and actually the grade is down 18% on average.

What exactly is going on there?

Tim, do you want to go ahead and handle that one?

So -- thank you.

As we normally do, as we have to do, we update our reserve and resource estimates from time to time.

We have done that now, given some of the increased information we have on Cigar Lake.

What I would say is we're delighted to still have over 200 million pounds in the reserve category.

Of course, half of that our share of 105 million pounds.

We have done a bit of reinterpretation of some of the envelopes and some block modeling, and so that's given us more information.

But as I say, we're still very happy with where the reserves come out.

Greg, I would say the added information, a slight reduction, I don't think that's -- shouldn't read anything into that, but in -- and all of this was independent of the water, it is just added geotechnical information, and a look at the various categories, and as Tim said we're after all of this ecstatic that we still have over 200 million pounds of -- I think high grade, yes the grade's come down a little bit, but I don't think that's all that material.

Okay, fair enough.

Just a quick follow-up.

You provided your production guidance out to 2014, and you say Cigar will be in production by mid-2013; but it is not actually included in your longer-term guidance.

If you look in the MD&A, there is a little footnote that says the technical report will cover that.

Okay, fair enough.

Thank you.

Thank you.

Our next question is from Borden Putnam from Mione Capital.

Please go ahead.

Can't hear you, Borden.

Are you there?

I am sorry about that.

Maybe over to Tim first.

At the hearings in November, Grant Goddard was speaking, and he mentioned the 265 level is going to be abandoned and completely back-filled with concrete, and you're going to make the 480 level your primary production level, and also that will be your freeze wall drilling level.

Can you explain a little bit more what work is going to be involved with that, and why that decision was taken?

Borden, that's the -- I think you said 265, it would be the 465 where we had the initial in-flow, you're right.

We are looking at moving down to the 480 level to do both production and freezing, and I think if you can be patient with us for another couple of weeks, the technical report will be out on Cigar, and we'll explain all of that.

But that is indeed the way we're moving.

Okay.

A follow-up to Greg Barnes's questions on the reserves.

I also was a little surprised with the reclassification, and Gerry about three years ago you and I talked about this, and I was concerned about the risk of carrying proven reserves with a mine that was flooded, and where you were evaluating going in, and now you have downgraded 136 million pounds into probable and it looks like a total of 15 million pounds were just lost, that they have actually been written off.

Can you give us -- I mean you have done two years, almost three years of additional work in drilling.

What have you learned in that period about the relief on the unconformity or faulting down there that has caused you to -- in other words, what led to this reclassification decision if you can help us?

The statement about loss, Borden, I don't think is correct.

A very minor reduction of 7 or 8 million pounds.

Fundamentally, I think -- in all of this I emphasize it had nothing to do with the in-flow, other than all of the additional information we have gathered geotechnical as a result of all of the extensive drilling has allowed us to begin to look with newer technology, using the three-dimensional models and not the typical models of three or four or five years ago that were two dimensional.

I would say that's really, given the categories that we live with, has now caused the shift from proven to probable, but I think the happy news and the thing that we're delighted with is it's remained relatively static even within those classifications.

Okay, thanks.

I had tallied up 14.7 million pounds difference between the two when I looked at all the reclassifications.

I am talking Cameco's share.

Sorry, I was working on gross numbers.

That's all we had.

Thank you.

You bet.

And I would say finally technical report comes out, it will go into a lot more detail on exactly where and distribution and these kinds of things.

Will you have a call at that release or will it be the next quarter, Gerry?

I think it will be the next quarter.

Thanks.

Thank you.

(Operator Instructions)

Our next question is from Duncan McKeen from Macquarie Securities.

Please go ahead.

Thanks very much.

Gentlemen, just with the new start update for Cigar Lake in mid-2013, I was wondering if you could give us just some guidance on what would be the key milestones between now and then, in terms of what you are looking at, the order of operations in terms of restoring that mine?

I will just make an early comment, is we're early days yet in sort of walking through the 480 level and looking at everything.

Then you have whatever further remediation will need to be done, and that's sort of yet to be determined.

We had said I think in earlier release that hopefully October is kind of a next milestone, maybe it will be earlier, maybe it will be later.

It is kind of day by day, month by month, as we go and figure out what's happened.

Tim indicated that so far what we have seen looks like it is in better shape than what we had anticipated.

I would say in that timeframe, and then the technical report itself will have some milestones in it, but I think we feel comfortable with the mid-2013 date in terms of commencing production, and we'll try to work back from there.

Tim, do you have anything to add to that?

Other than some of the longer lead items we want to get the freezing back on obviously and the [shaft] sinking, so those will be a couple of the bigger tickets.

Would you have the freezing back on in this calendar year?

And then once it comes on, how long does it take to fully establish the freeze walls again?

I am not sure we know that yet whether we'll be able to -- it will depend on the condition of the mine, and as Gerry said, it is really early days.

They're just venturing out from the cage right now, and there's mud on the floor that has to be cleaned up and have to redo the infrastructure down there, so it is really a bit early for us to say.

Again, if you can bear with us, even the six weeks to do the technical report, we'll have more information there.

Understood.

Thanks very, very much, gentlemen.

Thank you.

Our next question is from Greg Barnes with TD Newcrest.

Please go ahead.

I guess this is for George.

Can you give us an idea what is going on in the spot market?

The price has been quite weak, and volumes have been relatively low.

Do you see that changing for the balance of the year?

At this point, Greg, our view -- you're absolutely right, utilities are well covered in the near term, and the demand that we see is purely discretionary.

The DOE is still selling, as I described earlier, through the first eight or nine months of this year, and so right now I think that's a recipe for probably some weaker prices here in the near term.

We are of the view that we think demand is likely to be stronger in the second half of the year than it will in the first half of the year.

Our projections are for a spot market of somewhere between 25 million and 35 million pounds in total, so bottom line I guess it all equates to near term weakness but some larger demand by the end of the year.

I guess UX dropped their longer term price again this week to $52 -- or $60, I guess.

Yes.

What do you see going on in the longer term market?

The longer term market is quite interesting, because really what they're reporting in the longer-term market as you know if you read the UX definition, it is the lowest price at which they're aware for a longer-term deal.

Longer-term deals now that are being reported that are reflected in those prices are deals that I would say -- I would call more like mid-term deals; they start in 2013, something like that, maybe run through 2017.

If the utility were coming out looking for a 10-year or 15-year deal with first deliveries of 13 or 14, prices would be well above the $60.

So that's what that $60 represents.

Obviously, the weaker you see the spot price, it does have an influence on that long-term price, and I think that's what we see occurring today.

But the longer-term fundamentals remain very positive, and that's the way we see it playing.

So it is well above $60, George.

(Laughter)

$65, $70 at least.

$65, $70.

Great.

Thanks, George.

Thank you.

Your next question is from Borden Putnam from Mione Capital.

Please go ahead.

I have a question on McArthur River, if I could.

You've obviously succeeded in going through the unconformity with the development, which is pretty exciting.

I look back on that 43101 report, and wonder why you didn't use box hole boring technique there?

Because it looks like the configuration would be about perfect for that, and might be a safer method.

Is that just not entirely ready to be used at McArthur right now?

I think that's the sum of it.

We're still experimenting with box hole, and frankly, the configuration in Zone 2 there I think is probably, Borden, more conducive to what we have done, gives you a lot more flexibility.

Okay, I had another question on the financials, and this -- I may be reading things wrong here.

But on page 40 of the AIF you gave a little bit more -- actually it's not, it is the MD&A.

You gave a little bit more detail on unit costs than you have in the past, I think, and they're up 23% for your produced material, but in that same period your volumes are -- you have a greater contribution from ISL production.

It has gone from 11% to 22% of total production.

So I was a little surprised, if I am reading this right, that the costs have gone up.

Can you talk about where those additional cost increases -- or where the cost increases have come from in your other operations?

I think if you take a look at some of the words there, part of that is royalties, and I will toss it to Tim here in a minute.

Remember, during the period Inkai has been ramping up, and while it ramps up you will see necessarily higher unit costs that flow back in; so part of it is royalties, part of it is just Inkai ramping up, and we're still very, very positive about Inkai and its future contribution and its future cost profile.

And the balance of it would be labor and reagents and some of these things, some of which we saw come down during the year, but labor of course hasn't.

Tim, do you have further comments on this?

The key pieces there, Borden, was the incremental contribution or added costs associated with ramping up at Inkai, and then the extra royalties which we have described on that same page there.

Okay, thanks.

Thank you.

The next question is from David Snow of Energy Equities.

Please go ahead.

I was rather curious when you talked about the DOE bartering, that's their word for sales, those are basically the way they have been disposing?

That's right.

What they do is barter their uranium really, in this case to USEC at this point, to pay for the cleanup work that USEC is doing.

Okay, and did it appear that the change in sales profile coincided with Obama's commitment a year after taking office to support more aggressively nuclear power, or do you not see a connection?

I am not so sure that I see a connection.

I think it is more Chu's recognition they are indeed having a very significant impact on the uranium market, and more a recognition of that.

Thank you very much.

Thank you.

The next question is from Simon Tonkin from Thomas Weisel.

Please go ahead.

Good morning.

Just wondered if I can have a breakdown of the CapEx in 2010?

I think you have $552 million.

What are you planning to spend that on?

Tim, do you want to go through that?

Sure.

Simon, in the MD&A that is on page 36, we have a table showing by site where the expenditures are.

The bulk of that on the growth front is at Cigar, and on the sustaining capital the largest component is McArthur River, Key Lake and the explanations are there on page 36.

Thank you.

The next question is from Ian Howat from National Bank Financial.

Please go ahead.

Good morning, everybody.

This should be pretty simple.

Just on page 3 of the release, you talk about exploration being between 90 and 95, and then 40 at Kintyre or Inkai.

What would be the amount you're actually expensing on the income statement?

Tim?

It would be that full amount.

Okay.

So for Inkai and that, they're not in because you don't have established reserves and operating history?

That was just there to confuse me?

That is the point, yes.

Okay, thanks very much.

Thank you.

The next question is from Ben Elias from Sterne, Agee.

Please go ahead.

Thank you, good morning.

Your targets to double uranium production by 2018 are certainly very encouraging, and when we look at the reserve and resource base I think you have enough to back that up, as well as low-cost operations, but when we get to 2018 and if you have doubled production, the profile of the nuclear fleet is very different.

Do you think there is going to be lack of capacity and enrichment, and how does that sort of affect your thoughts of cash balance, your desire to make acquisitions?

And I think in September at your Analyst Day you certainly alluded to more vertical integration.

How do we think about the opportunity on the fuel side, the uranium mining side on -- I guess the fuel fabrication enrichment side?

Ben, I don't think there will be any limitation because of enrichment capacity.

There is a lot of capacity being added.

Obviously Cameco is part of this new laser technology, and we'll be looking and focusing on that in 2013, and hopefully if it works, that will be there to help supply enrichment services to the world, so I don't think that's a limitation.

A focus, as we tried to demonstrate or illustrate through the MD&A is on getting the production level doubled, and you noted, properly so, that we have certainly got the reserve and resource base to do it, from lower cost properties that we have been putting together over the years.

So I don't think there are any constraints out there.

We believe very strongly that given the construction activity going on in Asia and sort of the renewed interest in Europe and the US, that the market will be there, and I think the supply side is responding, particularly with respect to enrichment.

I think the issue is can the production of uranium side, can the suppliers catch up, given the fact that there are major issues come 2013 with supply, in the middle of the decade I would say.

And if I could just follow-up, Energy Solutions are actually having their conference call and they're on the back end, and what we're seeing there, and I think you referenced that earlier in the call, is the DOE is paying for a lot of site clean up by bartering or selling a lot of uranium.

Do you foresee that longer term as the US Government is sort of broke?

George, do you want to -- without commenting on the solvency of the US Government?

Okay.

The answer would be yes.

In the near term here, by the near term in the next few years, Chu indicated they're going to barter this year, but given the impact it's had on the market they won't barter next year.

Certainly in future years, we would expect that material to make its way to the market.

The thing to keep in mind is it is not all natural uranium.

Some of that material would have to be processed, and comes over a period of time, et cetera, but eventually, yes, it will come to the market.

Okay, thank you.

The next question is from David Wargo of GMP.

Please go ahead.

Hi guys, just a quick question regards to the global laser enrichment program.

Can you maybe go into a bit more detail on where the program stands, if there is any test results that you might be able to share, and what your feeling is on probability of the technology working?

You did spend $125 million on your percentage stake, and I am hoping it is more than "We hope it works."

We are, too.

George, do you want to cover that?

Sure.

The program that is currently running what's called a test loop, so it is in the test phase, and in fact, it should be -- that should be winding up over the course of the next month or so.

Of course there has to be then a lot of interpretation of the results from the test work, and we'll have an expert representing us looking at those results, et cetera, so we expect to have better sense of the technical go/no-go decision certainly by mid-year, and at this point I guess all we can say is, you know, we are still very optimistic, so we'll know more probably in a few months.

You actually have -- they have enriched uranium up to a certain level, then, from the test program?

We're not free to discuss any of the results of that work, so I am not able to respond to that.

Okay.

One last question with regards to pricing.

Just to confirm, you're seeing pricing past 2012 on the term market in and around $65 to say $75 a pound, is that safe to assume?

What I am telling you is that the prices that are being reported by those that publish price are more reflective of what I am calling shorter-term deals, and I don't mean real short-term.

I mean 2013, 2017, five-year deals, for example; those are the most aggressive prices being put out.

If the utility needs or wants to look at supply that's going to run out 10, 15 years beyond that, yes, you're going to be looking at prices at least in that range of $65, $70.

Okay.

And then just to confirm again on the spot market, you're pretty confident that the volumes are going to pick up in the second half of 2010?

Well, that's the way we see it playing out.

A lot of this depends on what the utilities do, what happens with first quarter buying, what did China and India do, et cetera.

Normally, when our market is never less than -- I am just throwing out averages, $15 and last year was as high as $54, we're saying for this year somewhere in the range of $25 to $35.

So more of an average year.

Last year was certainly a big year, in large part related to China.

Thank you.

The next question is from Duncan McKeen of Macquarie.

Please go ahead.

I just wanted to follow up.

We saw some numbers come out, at least reported by Dow Jones, that China had some pretty high uranium imports for January.

I guess depending -- the units weren't clear but depending on the conversion, it looked like it was between 7.3 million and 8.7 million pounds imported for that country just for that month.

So I'm wondering if you had any color or clarity on that?

And also if you had an estimate of what you think China may represent in the spot market this year, compared to the over 12 million pounds that they did last year?

Thanks.

I saw that number as well, and found it quite interesting, you're right, it is somewhere between 7 million and 10 million pounds, and my view on that, I guess I don't read too much into it.

It suggests that's what came in, in a single month.

Perhaps that's true.

If it is, I would say that that's maybe somewhat of a coincidence.

I wouldn't suggest they're going to import 10 million pounds a month over the course of this year, so I guess I am saying I am looking at that a little bit suspect.

Last year we expected or we believed they purchased in excess of 12 million pounds.

This year we have them -- our forecast is for 5 million to 6 million pounds.

We know that they will be active, and maybe we're taking a bit of a conservative view, but that's our forecast.

If the nuclear buildout in China just keeps expanding each year, why would you expect them to be about half the level this year that they were last year?

It is all related to timing, and also the fact that we expect that they would not be just making spot purchases but also entering into term purchases.

Now we're talking about spot purchases.

So they will enter into term purchase contracts over time.

Right now, everybody talks about all the quantities that they have been buying in the spot market.

To our knowledge, they have not been particularly active in terms of [turn] purchases.

We know they will be, and as they are then they may have less of an influence on the spot market.

Okay.

Do we have any indication of what they have purchased in the spot market so far this year?

I don't know.

Okay, super.

Thanks so much.

You're welcome.

The next question is from Borden Putnam of Mione Capital.

Please go ahead.

Tim, one last question for you.

On the four-year license at Cigar, there was a discussion during your hearings in November that phase 5 of the remediation at Cigar Lake, which is the normal development and construction, the CNSC was suggesting this might be held back until the new mine plan is submitted, and I take it that that's not a part of the 43101; so when will have you a new mine plan, and be able to submit it to CNSC?

I think you will see part of that coming forward with our technical report.

We have a new mine plan, and if not completed, close, so you will see that within a few weeks.

Great.

Thank you.

Thank you.

The next question is from Orest Wowkodaw from Canaccord Adams.

Please go ahead.

Good morning.

Two questions around Cigar Lake.

Should we anticipate that the remediation expenses we're seeing on income statement essentially stop in -- as of now and everything just go through the CapEx line, is the first question.

And secondly, can you give us -- you have given us an indication of start up timeline and CapEx, but can you give us any idea where you expect cash costs to be at Cigar Lake on a per pound basis?

Kim, the first one, my recollection is a little bit yet to go through, $25 million or something like that.

That's correct.

We have $29 million in total Orest, of which $25 million of the $29 million is in 2010 remediation costs.

And is that included in your revised CapEx number?

No.

It is separate.

That will be expensed.

Okay.

And cash costs will come through the technical report?

Okay.

Thought I would try.

Thanks very much.

You bet.

Thank you.

The next question is from Lawrence Smith of Scotia Capital.

Please go ahead.

Sorry.

A follow-up question on capital.

Probably a definitional issue.

You talked about sustaining capital at McArthur and Key Lake of $220 million, but that includes $80 million-some for new asset plant.

Longer term, what would sort of a true sustaining number be taking out one-off items like that?

Thank you.

Tim, go ahead.

Sustaining capital at McArthur and Key Lake would be normally, Kim can correct me, but somewhere in the $50 million, $40 million a year range.

That's great.

Thank you very much.

Thank you.

The next question is from Sam Tranum from Energy Intelligence.

Please go ahead.

I wanted to follow occupy the GLE project.

I know GE was saying in 2008 they were expecting to make a decision whether to go ahead with a commercial plant in early 2009, and then in July they told us they were expecting that decision in late 2009, and it still doesn't seem to be on the horizon.

I am wondering, what's slowing things down?

Sam, they didn't really begin the test until the middle of last year, like July, so they were a little behind.

I don't think they were as behind post our entry as you might suggest, so we viewed it as being around six months behind, so now they're talking about middle part of this year for this go/no-go decision.

George, do you have anything to add to that or not?

That's on the technology.

There is still work to be done after that before you make a commercial decision to finally go forward.

But on the technology, the decision is expected around [mid] this year.

Okay.

Thank you.

Thank you.

Our next question is from David Snow of Energy Equities.

Please go ahead.

I usually ask about the other low cost supply source, and that's Kazakhstan.

Can you give us an update on the profile about what they did last year versus year before at this point, and what your expectations are going forward?

And are there any specific new hurdles?

David, just to clarify, you're talking about Kazakhstan in its overall country?

Yes.

George?

Last year we had them -- 2008, they produced around 22 million pounds.

In 2009 we had them up quite significantly, and right now I am having trouble recalling the number.

Was it 36?

I don't know for sure.

In the mid-30s somewhere.

Anyway, they were up quite significantly, and they are expected to be up again this year.

The view is that rate of increase just can't keep going, that they're starting to reach some practical limits there, and that certainly expansions beyond that don't come inexpensively, but the production costs will be significantly higher.

The Kazakhs themselves have expressed concern about how quickly their production is expanding.

Do you have a number for this year?

Well -- you are going to quote me on this?

No, I won't.

(Laughter) Somebody will.

Somebody will.

I believe the number is something close to 40 million pounds.

Okay.

Do you have one out in the mid-century, 15 or so?

No, I don't.

Thank you very much.

Thank you.

(Operator Instructions)

Our next question is from Ralph Profiti from Credit Suisse.

Please go ahead.

Hi, everyone.

Thanks for taking my questions.

Just looking at the sales guidance of 31 million to 33 million and trying to get a better break down; do you still anticipate sort of 7 million pounds or so your share of HEU sales?

And that would put previous spot market purchases around 2.5 million to 4.5 million pounds, is that the right math?

George?

Yes, generally that's the right math.

Okay.

Great.

Just a follow-up; with sort of the weaker prices in uranium have we seen the floor prices and the ceiling prices move around at all?

We have heard before that floor prices were in the mid-$40 a pound.

Have those held firm?

And same question for the ceilings which over the last couple of years have hovered around $100 a pound?

I will answer.

For us it has, because we're very heavily committed through 2016, so really when we're talking about sales commitments, we're talking about commitments that go well beyond that, and given our view of the long-term fundamentals of the market we have not been willing to discount our floor prices below that mid-$40 range, and also the ceiling prices haven't changed either.

Great.

Thank you.

Thank you.

The next question is from Sam Tranum of Energy Intelligence.

Please go ahead.

Hi.

In the MD&A I noticed that it was talking a little bit about how you guys missed your sales volume projections by a smidgen this year, and talked about that being a result of the delayed delivery of about a million pounds because of a logistical issue?

I was wondering if you could tell me more about that?

Have you ever heard the story about the slow boat to China?

I sure have.

Okay.

So literally the boat was just slow on the way to China?

Yes.

(Laughter) All right.

Thanks.

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, Operator, very much.

A new year and a new decade is I think bringing a little renewed optimism that sustained economic recovery will now be achieved.

We have seen that countries that were least impacted by the global recession are the ones that are making their massive investments in infrastructure to generate electricity, obviously intended to sustain their growth.

So as these countries with large populations modernize, we believe that base load nuclear is emerging as the leading reliable clean energy source; and as we have said repeatedly, Cameco intends to remain a global leader.

We will work to fulfill that bright future by supplying uranium to generate the clean electricity for all of the good customers that we have out there in the various regions of the world.

So we thank you all for joining us on the call today, and certainly for your support of Cameco.

Thank you.

Thank you.

The Cameco Corporation fourth quarter and year end results conference call has now ended.

Please disconnect your lines at this time.

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