Cameco Q3 2007 Earnings Call Transcript

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Cameco Corporation (CCJ)

Q3 2007 Earnings Call

October 31, 2007 1:00 pm ET

Executives

Bob Lillie - Director, Investor Relations

Gerry Grandey - President and CEO

Kim Goheen - Senior Vice President and CFO

Tim Gitzel - Senior Vice President and COO

Alice Wong – VP, IR

Analysts

Raymond Goldie - Salman Partners

Mark Caruso - Millennium Partners

Brian MacArthur - UBS Securities

Greg Barnes - TD Newcrest

John Redstone - Desjardins Securities

Gene Mueller - private investor

Ralph Sarr - Sarrco Investments

Steve Smith - private investor

Borden Putnam - Eastbourne Capital

Fadi Shadid - Friedman, Billings, Ramsey

Cliff Hale-Sanders - CIBC World Markets

Ian Howat - National Bank Financial

Orest Wowkodaw - Canaccord

Presentation

Operator

Welcome to the Cameco Corporation third 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.

Bob Lillie

Thank you, operator, and good afternoon everyone. Welcome to Cameco’s third quarter conference call to discuss the financial results. Thanks for joining us.

With us today are three of Cameco’s senior executives. They are Gerry Grandey, President and CEO; Kim Goheen, Senior Vice President and CFO; and Tim Gitzel, Senior Vice President and Chief Operating Officer. George Assie, SVP, Marketing and Business Development is traveling and not able to be on the call today.

Also with us today is Alice Wong, Vice President of Investor, Corporate and Government Relations. Gerry will start things off with comments on the highlights of the quarterly financial results, provide an operational update and a few words on Cameco’s strategy and then we will get right to your questions.

Today’s conference call is open to all members of the investment community and the media. During the question-and-answer session we would ask that you ask one question only, followed by one follow-up question. If you have additional questions, please return to the queue until others have had a chance to ask theirs.

Please note that statements made during this call by the company regarding its objectives, projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations.

The company cautions that such statements involve risks and uncertainties and that actual results may differ from those expressed or implied. Important risk factors are outlined in the company’s annual information form dated March 30th, 2007.

With that I’ll turn the things over to Gerry.

Gerald Grandey

Thank you very much and let me add my welcome to everyone on the call. During my remarks today, I’m going to comment briefly on earnings, provide updates on activities at Port Hope and Cigar Lake, as well as how we are responding to both those issues and then comment our strategy and how it is unfolding.

Cameco had another good quarter. We continue to see increasing realized prices for uranium. In fact, we recorded the highest realized price in Cameco’s history even though the spot price of uranium actually fell during the quarter. These higher realized uranium prices generated an outstanding gross profit margin of 67% for uranium in the quarter and made a significant contribution to Cameco’s earnings and cash flow.

The earnings are particularly satisfying. Our adjusted quarterly net earnings after unusual items are more than five times higher than last year and our nine month earnings are more than double last year’s total, coming in at $539 million, another Cameco record.

These strong earnings are driven by our uranium business, anchored by a powerful portfolio of uranium contracts that will continue to deliver superb results year after year, even with market fluctuations. Let me summarize by saying we are in great financial shape and that we are returning value to our shareholders. Over the past couple of years, we have committed to consider buybacks as a way to return excess cash to shareholders if acquisition targets are too richly valued.

In early September, we announced an open market share repurchase program to buy back a maximum of 17.7 million shares and we have followed through. To the end of September, we have purchased almost 40% of this target.

Now to the Port Hope conversion facility. In the MD&A we indicated that we expect to restart production in the latter part of the first quarter of 2008. We have sufficient inventory on hand to meet delivery commitments through that time, assuming deliveries proceed as planned. U02 production is unaffected and continues at the site.

Since discovering contamination at the UF6 facility in July we have drilled numerous test wells to identify the key affected area. We’ve completed a root cause analysis to identity the cause. We’ve began corrective actions and we’ve developed plans for improved monitoring.

It’s important to note that there has been no effect on the safety or health of the employees or the public. We are already taking steps to contain and extract the very low levels of contamination. The staff at Port Hope have worked long hard hours to deal with this situation and keep the local community informed. We look forward to getting the plants running again in the coming months.

Now moving on to Cigar Lake. There too we’re making good progress. We’ve completed the holes necessary for dewatering and reinforced an adjacent tunnel. The concrete barrier plug in the tunnel where the inflow occurred last October is nearing completion. We are now working on sealing the top and bottom of the plug. Once that’s complete, we will finish foreign concrete behind the plug to still avoid and rock pile where the inflow occurred. We expect this to take about six more weeks.

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