Better bottom line for Cameco

A long-awaited rise in uranium prices helped Cameco (CCO-T) dramatically improve both its top and bottom lines over the first three months of the year.

Cameco earned $11 million (9 per share) on revenue of $124 million during the first quarter, compared with earnings of $3 million (1 per share) on $70 million during the corresponding quarter of last year.

Between the two periods, the average spot price for uranium rose 27% to US$9.79 per lb. U3O8. For Cameco, this translated into a substantial rise in first-quarter revenues within its uranium business to $72 million, up from $27 million. Gross profits rose to $12 million from $1 million.

From its varied interests in four North American uranium mines — McArthur River, Key Lake, Crow Butte and Highland — Cameco’s share of production was 3,596 lbs. U3O8 during the first quarter, down from 5,892 lbs. U3O8 a year earlier, when the Rabbit Lake mine in Saskatchewan was still in production. Mining operations should resume there in mid-May.

From Cameco’s new power-generation business, which consists of a small stake in Bruce Power in Ontario, the company recorded a loss of $2 million. In total, Bruce Power generated $199 million in revenues and a loss of $11 million during the recent quarter.

Cameco’s gold business, which amounts to a one-third interest in the Kumtor gold mine in Kyrgyzstan, recorded first-quarter earnings and revenues that were virtually flat at $6 million and $26 million, respectively.

Unfortunately, production fell 18% during the quarter, owing to a fall in head grade to 4.2 grams gold per tonne for 5.1 grams last year. Consequently, cash costs jumped up $39 to US$166 per oz. gold.

Cameco’s share of production fell to 51,566 oz. gold during the quarter, but the partners have raised their production estimate for 2002 from a more bearish estimate of 660,000 oz. gold to 700,000 oz. This compares with 2001’s output of 753,000 oz. gold.

Kumtor’s hedge position at the end of March was 1.1 million oz. gold, one-third being Cameco’s share. The company expects these hedges will yield average prices of about US$300 per oz. going forward.

Cameco operates the mine, while the Kyrgyzstani government owns the remaining 67% interest.

In March, Cameco acquired a 52% interest in AGR Ltd., an Australian exploration company whose principal asset is a 95% interest in the Boroo gold deposit, currently under development in Mongolia. The major paid US$12 million in cash and signed a promissory note for US$4.8 million.

Cameco ended the period with $101 million in cash and $361 million in inventories. Short and long-term debt exceeded $300 million.