Cameco Earnings Call Insights: Environmental Assessments and Uranium Forecast in Kazakhstan

Cameco Corp (NYSE:CCJ) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Environmental Assessments

Ralph Profiti – Credit Suisse: I have two questions, firstly the environmental assessments and approval that McArthur River seems to have changed in terms of procedures within the Canadian Nuclear Safety Council. Is this indeed a procedural change or is there something that has changed within the scope of that expansion plans that are result of this new agency approving it?

Tim S. Gitzel – President and CEO: Ralph, it is Tim. I don’t think there has been any change to the scope of what we’ve proposed there, certainly at the federal level. Over the course of 2012, the federal government has been very active in, I would say, streamlining the environmental assessment rules and regulations in Canada, they put forward new legislation making the process more certain and predictable with timelines more certain. So, those pieces have changed. But with respect to our proposal that remains the same.

Ralph Profiti – Credit Suisse: My follow-up question is on 2007 tax reassessment. I just want to clarify that the $54 million in tax assessments under dispute is after tax loss carryforwards are taken into account. And if you can also give some clarity on where you are in that litigation process that would be very useful?

Tim S. Gitzel – President and CEO: Ralph, I am going to turn you over to Grant Isaac to answer the first part of the question. I’ll just say on the second part as to where we are on the litigation. The lawyers continue to work on the file removing into. I think the discovery phase of the file which would probably take most of this year to do and then I think we are probably looking at – hopefully going to court some time in 2014, but we just don’t know that, that as you know is driven by the lawyers. So, in the discovery phase this year and we will see what happens going forward. But I’ll turn it over to Grant to give you a little bit more information.

Grant E. Isaac – SVP and CFO: Ralph, with respect to the 2007 reassessments there are provisions in the tax act that of course require companies to pay half of the tax associated with these types of reassessments. And so for 2007 that was 54 million or half of that 27 million. In the past what we’ve been able to do is take those assessments and put them against tax loss carryforwards and so we’ve exhausted that option, so now we’re paying half the reassessed amount and we’ll continue on that path until the settlement and Tim described the process there.

Uranium Forecast in Kazakhstan

Oscar Cabrera – Bank of America Merrill Lynch: I want to start with your uranium forecast in Kazakhstan. During the last conference call, you provided context around what these permits are taking so long to achieve and can you just provide an update on where you are and how confident are you on getting the permits and there for the higher production levels that you quoted in your release?

Tim S. Gitzel – President and CEO: So, just let me see on the production side, the good news for us is that the plant is operating at the 2,000 ton design capacity now and has been for some period of time now, which is good news. We are waiting on one approval or permit from the government to have full authority to produce at the 2,000 ton a year level. In 2013, we’re in contact with them every day and we understand it is forthcoming. We just haven’t received the piece of paper yet, so that said, we’re producing in any event at the 2,000 per year level in 2013 and we’ll continue to do so.

Oscar Cabrera – Bank of America Merrill Lynch: Then on the new segment, in NUKEM, you provided an outlook for 2013, but just wondering, in terms of sales, you mentioned 9 million to 11 million pounds in 2013 that that includes HEU sales so, wondering how that profile will look in 2014 or going forward.

Tim S. Gitzel – President and CEO: So, Oscar, let me turn you over to Ken Seitz, who’s been very deep on the NUKEM file and can answer that question for you. Ken?

Ken Seitz – SVP Marketing and Business Development: Yeah, absolutely, Tim. So, yes, it’s a fair comment that a large part of the volumes for NUKEM are HEU but if we look back in NUKEM’s past even prior to HEU, they’ve always done sort of that 3,000 to 4,000 ton range per year and then it has to do with some term contracting where they’re getting term supplies out of places like Kazakhstan and Uzbekistan, and then spot market activity as well, but you put that all together and it results in as a stable sort of 4,000 ton per year. At least that’s how we’re seeing the future.

Oscar Cabrera – Bank of America Merrill Lynch: Not wanting to hug the floor, but, those 4,000 tons after HEU will the profit margin change much given your prices weren’t going to change?

Ken Seitz – SVP Marketing and Business Development: Yeah, I think it’s fair to say that for those involved in the HEU agreement, those are fairly attractively priced terms and yes, for NUKEM as the HEU plants come off and they look for new volumes and continue to transact as I said, both into the spot and the term market, I think we can assume that they will go to sort of standard trading margins for our business.

A Closer Look: Cameco Earnings Cheat Sheet>>