Cameco (CCJ) 6-K Cameco reports second quarter financial results

Exhibit 99.3

Cameco Corporation

2015 condensed consolidated interim financial statements

(unaudited)

July 29, 2015

Cameco Corporation

Consolidated statements of earnings

(Unaudited)	Note		Three months ended						Six months ended
($Cdn thousands, except per share amounts)			Jun 30/15			Jun 30/14			Jun 30/15			Jun 30/14
Revenue from products and services			$	564,521		$	501,971		$	1,130,288		$	921,200
Cost of products and services sold				346,502			295,029			722,873			540,326
Depreciation and amortization				65,044			71,111			125,278			137,445
Cost of sales				411,546			366,140			848,151			677,771
Gross profit				152,975			135,831			282,137			243,429
Administration				49,441			36,436			91,672			81,649
Impairment charge		6		—			—			5,688			—
Exploration				11,494			9,318			23,272			23,738
Research and development				1,467			421			3,294			1,693
Loss on sale of assets				462			6,665			444			5,556
Earnings from operations				90,111			82,991			157,767			130,793
Finance costs		10		(25,104	)		(35,771	)		(50,336	)		(59,239	)
Gain (loss) on derivatives		16		32,748			60,367			(109,633	)		1,479
Finance income				1,567			2,094			3,770			3,239
Share of loss from equity-accounted investees				(1,386	)		(3,469	)		(1,368	)		(13,503	)
Other income (expense)		11		(14,424	)		14,942			28,085			16,573
Earnings before income taxes				83,512			121,154			28,285			79,342
Income tax recovery		12		(4,524	)		(5,691	)		(49,911	)		(51,067	)
Net earnings from continuing operations				88,036			126,845			78,196			130,409
Net earnings from discontinued operation		4		—			—			—			127,243
Net earnings			$	88,036		$	126,845		$	78,196		$	257,652
Net earnings (loss) attributable to:
Equity holders			$	88,037		$	127,208		$	79,134		$	258,544
Non-controlling interest				(1	)		(363	)		(938	)		(892	)
Net earnings			$	88,036		$	126,845		$	78,196		$	257,652
Earnings per common share attributable to equity holders
Continuing operations				0.22			0.32			0.20			0.33
Discontinued operation				—			—			—			0.32
Total basic earnings per share		13	$	0.22		$	0.32		$	0.20		$	0.65
Continuing operations				0.22			0.32			0.20			0.33
Discontinued operation				—			—			—			0.32
Total diluted earnings per share		13	$	0.22		$	0.32		$	0.20		$	0.65

See accompanying notes to condensed consolidated interim financial statements.

2    CAMECO CORPORATION

Cameco Corporation

Consolidated statements of comprehensive income

(Unaudited)	Note		Three months ended						Six months ended
($Cdn thousands)			Jun 30/15			Jun 30/14			Jun 30/15			Jun 30/14
Net earnings			$	88,036		$	126,845		$	78,196		$	257,652
Other comprehensive income (loss), net of taxes		12
Items that are or may be reclassified to net earnings:
Exchange differences on translation of foreign operations				(15,501	)		(48,832	)		50,538			31,704
Gains on derivatives designated as cash flow hedges transferred to net earnings—discontinued operation				—			—			—			(300	)
Unrealized gains (losses) on available-for-sale assets				(22	)		(362	)		22			(442	)
Other comprehensive income (loss), net of taxes				(15,523	)		(49,194	)		50,560			30,962
Total comprehensive income			$	72,513		$	77,651		$	128,756		$	288,614
Comprehensive income from continuing operations			$	72,513		$	77,651		$	128,756		$	161,671
Comprehensive income from discontinued operation		4		—			—			—			126,943
Total comprehensive income			$	72,513		$	77,651		$	128,756		$	288,614
Other comprehensive income (loss) attributable to:
Equity holders			$	(15,543	)	$	(49,177	)	$	50,580		$	30,936
Non-controlling interest				20			(17	)		(20	)		26
Other comprehensive income (loss) for the period			$	(15,523	)	$	(49,194	)	$	50,560		$	30,962
Total comprehensive income (loss) attributable to:
Equity holders			$	72,495		$	78,031		$	129,714		$	289,480
Non-controlling interest				18			(380	)		(958	)		(866	)
Total comprehensive income for the period			$	72,513		$	77,651		$	128,756		$	288,614

See accompanying notes to condensed consolidated interim financial statements.

2015 SECOND QUARTER REPORT    3

Cameco Corporation

Consolidated statements of financial position

(Unaudited)	Note		As at
($Cdn thousands)			Jun 30/15			Dec 31/14
Assets
Current assets
Cash and cash equivalents			$	330,862		$	566,583
Accounts receivable				153,751			455,002
Current tax assets				5,931			3,096
Inventories		5		1,255,144			902,278
Supplies and prepaid expenses				155,081			130,406
Current portion of long-term receivables, investments and other		6		27,162			10,341
Total current assets				1,927,931			2,067,706
Property, plant and equipment				5,360,421			5,291,021
Goodwill and intangible assets				207,538			201,102
Long-term receivables, investments and other		6		465,106			423,280
Investment in equity-accounted investee				1,862			3,230
Deferred tax assets				559,945			486,328
Total non-current assets				6,594,872			6,404,961
Total assets			$	8,522,803		$	8,472,667
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities			$	269,621		$	316,258
Current tax liabilities				19,877			51,719
Dividends payable				39,579			39,579
Current portion of other liabilities		7		164,208			87,883
Current portion of provisions		8		22,861			20,375
Total current liabilities				516,146			515,814
Long-term debt				1,491,703			1,491,198
Other liabilities		7		155,924			172,034
Provisions		8		838,267			825,935
Deferred tax liabilities				22,770			23,882
Total non-current liabilities				2,508,664			2,513,049
Shareholders’ equity
Share capital				1,862,646			1,862,646
Contributed surplus				201,403			196,815
Retained earnings				3,333,078			3,333,099
Other components of equity				101,664			51,084
Total shareholders’ equity attributable to equity holders				5,498,791			5,443,644
Non-controlling interest				(798	)		160
Total shareholders’ equity				5,497,993			5,443,804
Total liabilities and shareholders’ equity			$	8,522,803		$	8,472,667

Commitments and contingencies [notes 8, 12]

See accompanying notes to condensed consolidated interim financial statements.

4    CAMECO CORPORATION

Cameco Corporation

Consolidated statements of changes in equity

	Attributable to equity holders
($Cdn thousands)	Share capital		Contributed surplus			Retained earnings			Foreign currency translation			Cash flow hedges			Available- for-sale assets			Total			Non- controlling interest			Total equity
Balance at January 1, 2015	$	1,862,646	$	196,815		$	3,333,099		$	51,667		$	—		$	(583	)	$	5,443,644		$	160		$	5,443,804
Net earnings (loss)		—		—			79,134			—			—			—			79,134			(938	)		78,196
Total comprehensive income (loss) for the period		—		—			—			50,558			—			22			50,580			(20	)		50,560
Total comprehensive income (loss) for the period		—		—			79,134			50,558			—			22			129,714			(958	)		128,756
Share-based compensation		—		9,141			—			—			—			—			9,141			—			9,141
Share options exercised		—		(4,553	)		—			—			—			—			(4,553	)		—			(4,553	)
Dividends		—		—			(79,155	)		—			—			—			(79,155	)		—			(79,155	)
Balance at June 30, 2015	$	1,862,646	$	201,403		$	3,333,078		$	102,225		$	—		$	(561	)	$	5,498,791		$	(798	)	$	5,497,993
Balance at January 1, 2014	$	1,854,671	$	186,382		$	3,314,049		$	(7,165	)	$	300		$	28		$	5,348,265		$	1,129		$	5,349,394
Net earnings (loss)		—		—			258,544			—			—			—			258,544			(892	)		257,652
Total comprehensive income (loss) for the period		—		—			—			31,678			(300	)		(442	)		30,936			26			30,962
Total comprehensive income (loss) for the period		—		—			258,544			31,678			(300	)		(442	)		289,480			(866	)		288,614
Share-based compensation		—		8,838			—			—			—			—			8,838			—			8,838
Share options exercised		7,573		(3,808	)		—			—			—			—			3,765			—			3,765
Dividends		—		—			(79,074	)		—			—			—			(79,074	)		—			(79,074	)
Balance at June 30, 2014	$	1,862,244	$	191,412		$	3,493,519		$	24,513		$	—		$	(414	)	$	5,571,274		$	263		$	5,571,537

See accompanying notes to condensed consolidated interim financial statements.

2015 SECOND QUARTER REPORT    5

Cameco Corporation

Consolidated statements of cash flows

(Unaudited)	Note		Three months ended						Six months ended
($Cdn thousands)			Jun 30/15			Jun 30/14			Jun 30/15			Jun 30/14
Operating activities
Net earnings			$	88,036		$	126,845		$	78,196		$	257,652
Adjustments for:
Depreciation and amortization				65,044			71,111			125,278			137,445
Deferred charges				(20,321	)		(7,785	)		(18,931	)		(10,844	)
Unrealized loss (gain) on derivatives				(62,550	)		(80,143	)		46,260			(49,344	)
Share-based compensation		15		4,168			3,960			9,141			8,838
Loss on disposal of assets				462			6,665			444			5,556
Finance costs		10		25,104			35,771			50,336			59,239
Finance income				(1,567	)		(2,094	)		(3,770	)		(3,239	)
Share of loss in equity-accounted investees				1,386			3,469			1,368			13,503
Impairment charge		6		—			—			5,688			—
Other expense (income)		11		14,437			13,808			(27,774	)		(6,124	)
Discontinued operation		4		—			—			—			(127,243	)
Income tax recovery		12		(4,524	)		(5,691	)		(49,911	)		(51,067	)
Interest received				1,312			1,451			3,203			2,197
Income taxes paid				(4,054	)		(98,643	)		(96,199	)		(207,861	)
Other operating items		14		(172,061	)		(94,196	)		(54,900	)		(47,192	)
Net cash provided by (used in) operations				(65,128	)		(25,472	)		68,429			(18,484	)
Investing activities
Additions to property, plant and equipment				(97,492	)		(111,221	)		(195,094	)		(223,130	)
Increase in short-term investments				—			(28,849	)		—			(138,265	)
Decrease (increase) in long-term receivables, investments and other				(2,052	)		(2,093	)		1,938			(566	)
Proceeds from sale of property, plant and equipment				14			698			96			676
Net cash used in investing (continuing operations)				(99,530	)		(141,465	)		(193,060	)		(361,285	)
Net cash provided by investing (discontinued operation)		4		—			—			—			447,096
Net cash provided by (used in) investing				(99,530	)		(141,465	)		(193,060	)		85,811
Financing activities
Increase in debt				—			496,357			—			496,357
Decrease in debt				(5	)		(30,305	)		(5	)		(41,049	)
Interest paid				(20,518	)		(10,045	)		(34,695	)		(31,314	)
Proceeds from issuance of shares, stock option plan				—			522			—			5,914
Dividends paid				(39,579	)		(39,540	)		(79,155	)		(79,044	)
Net cash provided by (used in) financing				(60,102	)		416,989			(113,855	)		350,864
Increase (decrease) in cash and cash equivalents net of bank overdraft, during the period				(224,760	)		250,052			(238,486	)		418,191
Exchange rate changes on foreign currency cash balances				(2,265	)		(1,823	)		2,765			(549	)
Cash and cash equivalents, net of bank overdraft, beginning of year				557,887			357,322			566,583			187,909
Cash and cash equivalents, net of bank overdraft, end of period			$	330,862		$	605,551		$	330,862		$	605,551
Cash and cash equivalents is comprised of:
Cash										71,876			61,464
Cash equivalents										258,986			628,784
Cash and cash equivalents									$	330,862		$	690,248
Bank overdraft										—			(84,697	)
Cash and cash equivalents and bank overdraft									$	330,862		$	605,551

See accompanying notes to condensed consolidated interim financial statements.

6    CAMECO CORPORATION

Cameco Corporation

Notes to condensed consolidated interim financial statements

(Unaudited)

(Cdn$ thousands, except per share amounts and as noted)

1. Cameco Corporation

Cameco Corporation is incorporated under the Canada Business Corporations Act. The address of its registered office is 2121 11th Street West, Saskatoon, Saskatchewan, S7M 1J3. The condensed consolidated interim financial statements as at and for the period ended June 30, 2015 comprise Cameco Corporation and its subsidiaries (collectively, the Company or Cameco) and the Company’s interests in associates and joint arrangements. The Company is primarily engaged in the exploration for and the development, mining, refining, conversion, fabrication and trading of uranium for sale as fuel for generating electricity in nuclear power reactors in Canada and other countries.

2. Significant accounting policies

A. Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34Interim Financial Reporting.The condensed consolidated interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with Cameco’s annual consolidated financial statements as at and for the year ended December 31, 2014.

These condensed consolidated interim financial statements were authorized for issuance by the Company’s board of directors on July 29, 2015.

B. Basis of presentation

These condensed consolidated interim financial statements are presented in Canadian dollars, which is the Company’s functional currency. All financial information is presented in Canadian dollars, unless otherwise noted. Amounts presented in tabular format have been rounded to the nearest thousand except per share amounts and where otherwise noted.

The condensed consolidated interim financial statements have been prepared on the historical cost basis except for the following material items which are measured on an alternative basis at each reporting date:

Derivative financial instruments at fair value through profit and loss	Fair value
Non-derivative financial instruments at fair value through profit and loss	Fair value
Available-for-sale financial assets	Fair value
Liabilities for cash-settled share-based payment arrangements	Fair value
Net defined benefit liability	Fair value of plan assets less the present value of the defined benefit obligation

The preparation of the condensed consolidated interim financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may vary from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2014.

2015 SECOND QUARTER REPORT    7

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 5 of the December 31, 2014 consolidated financial statements.

3. Accounting standards

New standards and interpretations not yet adopted

A number of new standards and amendments to existing standards are not yet effective for the period ended June 30, 2015 and have not been applied in preparing these condensed consolidated interim financial statements. The following standards and amendments to existing standards have been published and are mandatory for Cameco’s accounting periods beginning on or after January 1, 2016, unless otherwise noted. Cameco does not intend to early adopt any of the following amendments to existing standards and does not expect the amendments to have a material impact on the financial statements, unless otherwise noted.

i. Property, plant and equipment and intangible assets

In May 2014, the IASB issued amendments to IAS 16,Property, Plant and Equipment and IAS 38,Intangible Assets. The amendments are to be applied prospectively. The amendments clarify the factors to be considered in assessing the technical or commercial obsolescence and the resulting depreciation period of an asset and state that a depreciation method based on revenue is not appropriate.

ii. Joint arrangements

In May 2014, the IASB issued amendments to IFRS 11,Joint Arrangements (IFRS 11). The amendments in IFRS 11 are to be applied prospectively. The amendments clarify the accounting for the acquisition of interests in joint operations and require the acquirer to apply the principles of business combinations accounting in IFRS 3,Business Combinations.

iii. Sale or contribution of assets

In September 2014, the IASB issued amendments to IFRS 10,Consolidated Financial Statements and IAS 28, Investments in Associates and Joint Ventures.The amendments provide clarification on the recognition of gains or losses upon the sale or contribution of assets between an investor and its associate or joint venture.

iv. Noncurrent assets held for sale and discontinued operations

In September 2014, the IASB issued amendments to IFRS 5,Non-Current Assets Held for Sale and Discontinued Operations(IFRS 5). The amendments are to be applied prospectively, with earlier application permitted. Assets are generally disposed of either through sale or through distribution to owners. The amendments to IFRS 5 clarify the application of IFRS 5 when changing from one of these disposal methods to the other.

v. Financial instruments disclosures

In September 2014, the IASB issued amendments to IFRS 7,Financial Instruments: Disclosures(IFRS 7). The amendments in IFRS 7 are to be applied retrospectively, with earlier application permitted. The amendments to IFRS 7 clarify the disclosure required for any continuing involvement in a transferred asset that has been derecognized. The amendments also provide guidance on disclosures regarding the offsetting of financial assets and financial liabilities in interim financial reports.

vi. Interim financial reporting

In September 2014, the IASB issued amendments to IAS 34,Interim Financial Reporting (IAS 34). The amendments to IAS 34 are to be applied retrospectively, with earlier application permitted. The amendments provide additional guidance on interim disclosures and whether they are provided in the interim financial statements or incorporated by cross-reference between the interim financial statements and other financial disclosures.

8    CAMECO CORPORATION

vii. Revenue

In May 2014, the IASB issued IFRS 15,Revenue from Contracts with Customers(IFRS 15). IFRS 15 is effective for periods beginning on or after January 1, 2018 and is to be applied retrospectively. IFRS 15 clarifies the principles for recognizing revenue from contracts with customers. The extent of the impact of adoption of IFRS 15 has not yet been determined.

viii. Financial instruments

In July 2014, the IASB issued IFRS 9,Financial Instruments (IFRS 9). IFRS 9 replaces the current multiple classification and measurement models for financial assets and liabilities with a single model that has only two classification categories: amortized cost and fair value. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset or liability. It also introduces additional changes relating to financial liabilities and aligns hedge accounting more closely with risk management.

IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early adoption of the new standard permitted. Cameco does not intend to early adopt IFRS 9. The extent of the impact of adoption of IFRS 9 has not yet been determined.

4. Discontinued operation

On March 27, 2014, Cameco completed the sale of its 31.6% limited partnership interest in Bruce Power L.P. (BPLP) which operates the four Bruce B nuclear reactors in Ontario. The aggregate sale price for Cameco’s interest in BPLP and certain related entities was $450,000,000. The sale was accounted for effective January 1, 2014. Cameco received net proceeds of approximately $447,096,000 and realized an after tax gain of $127,243,000 on this divestiture. As a result of the transaction, Cameco presented the results of BPLP as a discontinued operation and revised its statement of earnings, statement of comprehensive income and statement of cash flows to reflect this change in presentation.

5. Inventories

	Jun 30/15		Dec 31/14
Uranium
Concentrate	$	703,282	$	500,342
Broken ore		77,305		21,289
		780,587		521,631
NUKEM		312,723		251,942
Fuel services		161,834		128,705
Total	$	1,255,144	$	902,278

In the second quarter of 2015, commercial production was achieved at Cameco’s Cigar Lake operation. Effective May 1, 2015, we commenced charging all production costs, including depreciation, to inventory and subsequently recognizing in cost of sales as the product is sold.

Cameco expensed $395,500,000 of inventory as cost of sales during the second quarter of 2015 (2014—$327,200,000). For the six months ended June 30, 2015, Cameco expensed $813,700,000 of inventory as cost of sales (2014—$602,200,000).

NUKEM enters into financing arrangements where future receivables arising from certain sales contracts are sold to financial institutions in exchange for cash. These arrangements require NUKEM to satisfy its delivery obligations under the sales contracts, which are recognized as deferred sales (note 7). In some of the arrangements, NUKEM is also required to pledge the underlying inventory as security against these performance obligations. As of June 30, 2015, NUKEM had $54,099,000 (US) (December 31, 2014—$64,687,000 (US)) of inventory pledged as security under financing arrangements.

2015 SECOND QUARTER REPORT    9

6. Long-term receivables, investments and other

	Jun 30/15			Dec 31/14
Investments in equity securities [note 16]	$	938		$	6,601
Derivatives [note 16]		14,321			3,889
Advances receivable from JV Inkai LLP [note 18]		93,593			91,672
Investment tax credits		93,155			90,658
Amounts receivable related to tax dispute [note 12]		247,444			211,604
Other		42,817			29,197
		492,268			433,621
Less current portion		(27,162	)		(10,341	)
Net	$	465,106		$	423,280

In 2014, GoviEx Uranium (GoviEx) became listed on the Canadian Securities Exchange. With the availability of a quoted market price, Cameco determined that there was a significant decline in the fair value of its investment in GoviEx. As a result, an impairment charge of $5,688,000 was recorded during the first quarter of 2015 (2014—nil).

7. Other liabilities

	Jun 30/15			Dec 31/14
Deferred sales	$	121,377		$	123,298
Derivatives [note 16]		125,551			67,916
Accrued pension and post-retirement benefit liability		65,816			61,670
Other		7,388			7,033
		320,132			259,917
Less current portion		(164,208	)		(87,883	)
Net	$	155,924		$	172,034

Deferred sales includes $80,021,000 (US) (December 31, 2014—$92,299,000 (US)) of performance obligations relating to financing arrangements entered into by NUKEM (note 5).

8. Provisions

	Reclamation			Waste disposal			Total
Beginning of year	$	828,015		$	18,295		$	846,310
Changes in estimates and discount rates		(13,657	)		366			(13,291	)
Provisions used during the period		(4,065	)		(13	)		(4,078	)
Unwinding of discount		9,935			164			10,099
Impact of foreign exchange		22,088			—			22,088
End of period	$	842,316		$	18,812		$	861,128
Current		20,246			2,615			22,861
Non-current		822,070			16,197			838,267
	$	842,316		$	18,812		$	861,128

10    CAMECO CORPORATION

9. Share capital

At June 30, 2015, there were 395,792,522 common shares outstanding. Options in respect of 8,713,524 shares are outstanding under the stock option plan and are exercisable up to 2023. For the quarter ended June 30, 2015, there were no options that were exercised resulting in the issuance of shares (2014 - 25,957). For the six months ended June 30, 2015, there were no options exercised that that resulted in the issuance of shares (2014 - 299,592).

10. Finance costs

	Three months ended				Six months ended
	Jun 30/15		Jun 30/14		Jun 30/15		Jun 30/14
Interest on long-term debt	$	18,717	$	16,205	$	37,258	$	31,856
Unwinding of discount on provisions		4,873		4,950		10,099		10,065
Loss on redemption of Series C debentures		—		12,135		—		12,135
Other charges		1,514		1,538		2,961		2,955
Interest on short-term debt		—		943		18		2,228
Total	$	25,104	$	35,771	$	50,336	$	59,239

11. Other income (expense)

	Three months ended						Six months ended
	Jun 30/15			Jun 30/14			Jun 30/15		Jun 30/14
Foreign exchange gains (losses)	$	(14,437	)	$	(13,808	)	$	27,774	$	5,644
Contract settlement		—			28,481			—		28,481
Contract termination fee		—			—			—		(18,304	)
Other		13			269			311		752
Total	$	(14,424	)	$	14,942		$	28,085	$	16,573

In the first quarter of 2014, Cameco recorded an early termination fee of $18,304,000, incurred as a result of the cancellation of our toll conversion agreement with Springfields Fuels Ltd., which was to expire in 2016.

During the second quarter of 2014, Cameco recorded a gain with respect to a long-term supply contract with one of its utility customers. The $28,481,000 reflected as income from contract settlement related to deliveries that the customer refused to take in 2012 and 2013.

2015 SECOND QUARTER REPORT    11

12. Income taxes

	Three months ended						Six months ended
	Jun 30/15			Jun 30/14			Jun 30/15			Jun 30/14
Earnings (loss) from continuing operations before income taxes
Canada	$	(106,920	)	$	(48,803	)	$	(317,265	)	$	(242,113	)
Foreign		190,432			169,957			345,550			321,455
	$	83,512		$	121,154		$	28,285		$	79,342
Current income taxes (recovery)
Canada	$	313		$	(1,338	)	$	1,222		$	(6,468	)
Foreign		12,564			11,219			21,266			19,388
	$	12,877		$	9,881		$	22,488		$	12,920
Deferred income taxes (recovery)
Canada	$	(17,858	)	$	(10,748	)	$	(72,345	)	$	(54,186	)
Foreign		457			(4,824	)		(54	)		(9,801	)
	$	(17,401	)	$	(15,572	)	$	(72,399	)	$	(63,987	)
Income tax recovery	$	(4,524	)	$	(5,691	)	$	(49,911	)	$	(51,067	)

Cameco has recorded $559,945,000 of deferred tax assets (December 31, 2014 - 486,328,000). Based on projections of future income, realization of these deferred tax assets is probable and consequently a deferred tax asset has been recorded.

Canada

In 2008, as part of the ongoing annual audits of Cameco’s Canadian tax returns, Canada Revenue Agency (CRA) disputed the transfer pricing structure and methodology used by Cameco and its wholly owned Swiss subsidiary, Cameco Europe Ltd., in respect of sale and purchase agreements for uranium products. From December 2008 to date, CRA issued notices of reassessment for the taxation years 2003 through 2009, which in aggregate have increased Cameco’s income for Canadian tax purposes by approximately $2,795,000,000. CRA has also issued notices of reassessment for transfer pricing penalties for the years 2007 through 2009 in the amount of $229,300,000. Cameco believes it is likely that CRA will reassess Cameco’s tax returns for subsequent years on a similar basis and that these will require Cameco to make future remittances on receipt of the reassessments.

Using the methodology we believe that CRA will continue to apply and including the $2,795,000,000 already reassessed, we expect to receive notices of reassessment for a total of approximately $6,600,000,000 for the years 2003 through 2014, which would increase Cameco’s income for Canadian tax purposes and result in a related tax expense of approximately $1,900,000,000. In addition to penalties already imposed, CRA may continue to apply penalties to taxation years subsequent to 2009. As a result, we estimate that cash taxes and transfer pricing penalties would be between $1,450,000,000 and $1,500,000,000. In addition, we estimate there would be interest and instalment penalties applied that would be material to Cameco. While in dispute, we would be responsible for remitting 50% of the cash taxes and transfer pricing penalties (between $725,000,000 and $750,000,000), plus related interest and instalment penalties assessed, which would be material to Cameco. As an alternative to paying cash, we are exploring the possibility of providing security in the form of letters of credit to satisfy our requirements under these provisions.

Under Canadian federal and provincial tax rules, the amount required to be remitted each year will depend on the amount of income reassessed in that year and the availability of elective deductions and tax loss carryovers. In light of our view of the likely outcome of the case, we expect to recover the amounts remitted to CRA, including cash taxes, interest and penalties totalling $247,444,000 already paid as at June 30, 2015 (December 31, 2014 - $211,604,000) (note 6).

12    CAMECO CORPORATION

The case on the 2003 reassessment is expected to go to trial in 2016. If this timing is adhered to, we expect to have a Tax Court decision within six to 18 months after the trial is complete.

Having regard to advice from its external advisors, Cameco’s opinion is that CRA’s position is incorrect and Cameco is contesting CRA’s position and expects to recover any amounts remitted as a result of the reassessments. However, to reflect the uncertainties of CRA’s appeals process and litigation, Cameco has recorded a cumulative tax provision related to this matter for the years 2003 through the current period in the amount of $89,000,000. While the resolution of this matter may result in liabilities that are higher or lower than the reserve, management believes that the ultimate resolution will not be material to Cameco’s financial position, results of operations or liquidity in the year(s) of resolution. Resolution of this matter as stipulated by CRA would be material to Cameco’s financial position, results of operations or liquidity in the year(s) of resolution and other unfavourable outcomes for the years 2003 to date could be material to Cameco’s financial position, results of operations and cash flows in the year(s) of resolution.

Further to Cameco’s decision to contest CRA’s reassessments, Cameco is pursuing its appeal rights under Canadian federal and provincial tax rules.

United States

In February 2015, one of Cameco’s subsidiaries received a Revenue Agent’s Report (RAR) from the Internal Revenue Service (IRS) pertaining to the 2009 taxation year. The RAR lists the IRS’ proposed adjustments to taxable income and calculates tax and penalties owing based on the proposed adjustments.

The proposed adjustments reflected in the RAR are focused on transfer pricing in respect of certain intercompany transactions within our corporate structure. The IRS asserts that a portion of the non-US income reported under our corporate structure and taxed outside the US should be recognized and taxed in the US. Having regard to advice from its external advisors, management believes that the conclusions of the IRS in the RAR are incorrect and is contesting them in an administrative appeal of the proposed adjustments. No cash payments are required while pursuing an administrative appeal. Management believes that the ultimate resolution of this matter will not be material to our financial position, results of operations or liquidity in the year(s) of resolution.

Other comprehensive income (loss)

Other comprehensive income included on the consolidated statements of comprehensive income and the consolidated statements of changes in equity is presented net of income taxes. The following income tax amounts are included in each component of other comprehensive income:

For the three months ended June 30, 2015

	Before tax			Income tax Recovery		Net of tax
Exchange differences on translation of foreign operations	$	(15,501	)	$	—	$	(15,501	)
Unrealized losses on available-for-sale assets		(25	)		3		(22	)
	$	(15,526	)	$	3	$	(15,523	)

2015 SECOND QUARTER REPORT    13

For the three months ended June 30, 2014

	Before tax			Income tax recovery		Net of tax
Exchange differences on translation of foreign operations	$	(48,832	)	$	—	$	(48,832	)
Unrealized losses on available-for-sale assets		(418	)		56		(362	)
	$	(49,250	)	$	56	$	(49,194	)

For the six months ended June 30, 2015

	Before tax		Income tax expense			Net of tax
Exchange differences on translation of foreign operations	$	50,538	$	—		$	50,538
Unrealized gains on available-for-sale assets		25		(3	)		22
	$	50,563	$	(3	)	$	50,560

For the six months ended June 30, 2014

	Before tax			Income tax Recovery		Net of tax
Exchange differences on translation of foreign operations	$	31,704		$	—	$	31,704
Gains on derivatives designated as cash flow hedges transferred to net earnings—discontinued operation		(400	)		100		(300	)
Unrealized losses on available-for-sale assets		(511	)		69		(442	)
	$	30,793		$	169	$	30,962

13. Per share amounts

Per share amounts have been calculated based on the weighted average number of common shares outstanding during the period. The weighted average number of paid shares outstanding in 2015 was 395,792,522 (2014—395,689,970).

	Three months ended				Six months ended
	Jun 30/15		Jun 30/14		Jun 30/15		Jun 30/14
Basic earnings per share computation
Net earnings attributable to equity holders	$	88,037	$	127,208	$	79,134	$	258,544
Weighted average common shares outstanding		395,793		395,764		395,793		395,690
Basic earnings per common share	$	0.22	$	0.32	$	0.20	$	0.65
Diluted earnings per share computation
Net earnings attributable to equity holders	$	88,037	$	127,208	$	79,134	$	258,544
Weighted average common shares outstanding		395,793		395,764		395,793		395,690
Dilutive effect of stock options		5		292		—		495
Weighted average common shares outstanding, assuming dilution		395,798		396,056		395,793		396,185
Diluted earnings per common share	$	0.22	$	0.32	$	0.20	$	0.65

14    CAMECO CORPORATION

14. Statements of cash flows

	Three months ended						Six months ended
	Jun 30/15			Jun 30/14			Jun 30/15			Jun 30/14
Changes in non-cash working capital:
Accounts receivable	$	190,690		$	(4,115	)	$	297,772		$	158,925
Inventories		(199,201	)		23,996			(285,048	)		(68,136	)
Supplies and prepaid expenses		(12,313	)		(5,775	)		(23,195	)		50,176
Accounts payable and accrued liabilities		(150,404	)		(92,469	)		(50,180	)		(163,297	)
Reclamation payments		(2,524	)		(2,612	)		(4,077	)		(4,198	)
Other		1,691			(13,221	)		9,828			(20,662	)
Other operating items	$	(172,061	)	$	(94,196	)	$	(54,900	)	$	(47,192	)

15. Share-based compensation plans

A. Stock option plan

The Company has established a stock option plan under which options to purchase common shares may be granted to employees of Cameco. Options granted under the stock option plan have an exercise price of not less than the closing price quoted on the Toronto Stock Exchange (TSX) for the common shares of Cameco on the trading day prior to the date on which the option is granted. The options carry vesting periods of one to three years, and expire eight years from the date granted.

The aggregate number of common shares that may be issued pursuant to the Cameco stock option plan shall not exceed 43,017,198 of which 27,870,079 shares have been issued.

B. Executive performance share unit (PSU)

The Company has established a PSU plan whereby it provides each plan participant an annual grant of PSUs in an amount determined by the board. Each PSU represents one phantom common share that entitles the participant to a payment of one Cameco common share purchased on the open market or cash, at the board’s discretion, at the end of each three-year period if certain performance and vesting criteria have been met. The final value of the PSUs will be based on the value of Cameco common shares at the end of the three-year period and the number of PSUs that ultimately vest. Vesting of PSUs is based on Cameco’s performance for total shareholder return, average realized selling price and uranium production over the three year period and whether the participating executive remains employed by Cameco. As of June 30, 2015, the total number of PSUs held by the participants, after adjusting for forfeitures on retirement, was 791,071 (December 31, 2014—620,654).

C. Restricted share unit (RSU)

The Company has established an RSU plan whereby it provides each plan participant an annual grant of RSUs in an amount determined by the board. Each RSU represents one phantom common share that entitles the participant to a payment of one Cameco common share purchased on the open market, or cash, at the board’s discretion. The RSUs carry vesting periods of one to three years, and the final value of the units will be based on the value of Cameco common shares at the end of the vesting periods. As of June 30, 2015, the total number of RSUs held by the participants was 486,072 (December 31, 2014—246,394).

2015 SECOND QUARTER REPORT    15

Cameco records compensation expense under its equity-settled plans with an offsetting credit to contributed surplus, to reflect the estimated fair value of units granted to employees. During the period, the Company recognized the following expenses under these plans:

	Three months ended				Six months ended
	Jun 30/15		Jun 30/14		Jun 30/15		Jun 30/14
Stock option plan	$	1,065	$	1,628	$	3,676	$	5,160
Performance share unit plan		1,898		1,421		3,325		2,357
Restricted share unit plan		1,205		911		2,140		1,321
	$	4,168	$	3,960	$	9,141	$	8,838

Fair value measurement of equity-settled plans

The fair value of the units granted through the PSU plan was determined based on Monte Carlo simulation and the fair value of options granted under the stock option plan was measured based on the Black-Scholes option-pricing model. The fair value of RSUs granted was determined based on their intrinsic value on the date of grant. Expected volatility was estimated by considering historic average share price volatility.

The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as follows:

	Stock option plan			PSU			RSU
Number of options granted		965,823			336,602			298,662
Average strike price	$	19.30			—		$	18.89
Expected dividend	$	0.40			—			—
Expected volatility		32	%		29	%		—
Risk-free interest rate		0.7	%		0.5	%		—
Expected life of option		4.5 years			3 years			—
Expected forfeitures		7	%		5	%		5	%
Weighted average grant date fair values	$	4.30		$	18.88		$	18.89

In addition to these inputs, other features of the PSU grant were incorporated into the measurement of fair value. The market condition based on total shareholder return was incorporated by utilizing a Monte Carlo simulation. The non-market criteria relating to realized selling prices, production targets and cost control have been incorporated into the valuation at grant date by reviewing prior history and corporate budgets.

16. Financial instruments and related risk management

A. Fair value hierarchy

The fair value of an asset or liability is generally estimated as the amount that would be received on sale of an asset, or paid to transfer a liability in an orderly transaction between market participants at the reporting date. Fair values of assets and liabilities traded in an active market are determined by reference to last quoted prices, in the principal market for the asset or liability. In the absence of an active market for an asset or liability, fair values are determined based on market quotes for assets or liabilities with similar characteristics and risk profiles, or through other valuation techniques. Fair values determined using valuation techniques require the use of inputs, which are obtained from external, readily observable market data when available. In some circumstances, inputs that are not based on observable data must be used. In these cases, the estimated fair values may be adjusted in order to account for valuation uncertainty, or to reflect the assumptions that market participants would use in pricing the asset or liability.

16    CAMECO CORPORATION

All fair value measurements are categorized into one of three hierarchy levels, described below, for disclosure purposes. Each level is based on the transparency of the inputs used to measure the fair values of assets and liabilities:

Level 1 – Values based on unadjusted quoted prices in active markets that are accessible at the reporting date for identical assets or liabilities.

Level 2 – Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.

Level 3 – Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

When the inputs used to measure fair value fall within more than one level of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety.

The following tables summarize the carrying amounts and fair values of Cameco’s financial instruments that are measured at fair value, including their levels in the fair value hierarchy:

As at June 30, 2015

				Fair value
	Carrying value			Level 1		Level 2			Total
Derivative assets [note 6]
Foreign currency contracts	$	4,943		$	—	$	4,943		$	4,943
Interest rate contracts		9,378			—		9,378			9,378
Investments in equity securities [note 6]		938			938		—			938
Derivative liabilities [note 7]
Foreign currency contracts		(125,203	)		—		(125,203	)		(125,203	)
Other		(348	)		—		(348	)		(348	)
Net	$	(110,292	)	$	938	$	(111,230	)	$	(110,292	)

As at December 31, 2014

				Fair value
	Carrying value			Level 1		Level 2			Total
Derivative assets [note 6]
Foreign currency contracts	$	911		$	—	$	911		$	911
Interest rate contracts		2,978			—		2,978			2,978
Investments in equity securities [note 6]		6,601			6,601		—			6,601
Derivative liabilities [note 7]
Foreign currency contracts		(67,916	)		—		(67,916	)		(67,916	)
Net	$	(57,426	)	$	6,601	$	(64,027	)	$	(57,426	)

The preceding tables exclude fair value information for financial instruments whose carrying amounts are a reasonable approximation of fair value.

There were no transfers between level 1 and level 2 during the period. Cameco does not have any financial instruments that are classified as level 3 as of the reporting date.

B. Financial instruments measured at fair value

Cameco measures its short-term investments, derivative financial instruments and material investments in equity securities at fair value. Short-term investments and investments in publicly held equity securities are classified as a recurring level 1 fair value measurement and derivative financial instruments are classified as a recurring level 2 fair value measurement.

2015 SECOND QUARTER REPORT    17

Short-term investments represent available-for-sale money market instruments. The fair value of these instruments is determined using quoted market yields as of the reporting date. The fair value of investments in equity securities is determined using quoted share prices observed in the principal market for the securities as of the reporting date.

Foreign currency derivatives consist of foreign currency forward contracts, options and swaps. The fair value of foreign currency options is measured based on the Black Scholes option-pricing model. The fair value of foreign currency forward contracts and swaps is measured using a market approach, based on the difference between contracted foreign exchange rates and quoted forward exchange rates as of the reporting date.

Interest rate derivatives consist of interest rate swap contracts and interest rate caps. The fair value of interest rate swaps is determined by discounting expected future cash flows from the contracts. The future cash flows are determined by measuring the difference between fixed interest payments to be received and floating interest payments to be made to the counterparty based on Canada Dealer Offer Rate forward interest rate curves. The fair value of interest rate caps is determined based on broker quotes observed in active markets at the reporting date.

Where applicable, the fair value of the derivatives reflects the credit risk of the instrument and includes adjustments to take into account the credit risk of the Company and counterparty. These adjustments are based on credit ratings and yield curves observed in active markets at the reporting date.

C. Financial instruments not measured at fair value

The carrying value of Cameco’s cash and cash equivalents, receivables, payables and accrued liabilities is assumed to approximate the fair value as a result of the short-term nature of the instruments. The carrying value of Cameco’s long-term debt (debentures) is assumed to approximate the fair value as a result of the variable interest rate associated with the instruments or the fixed interest rate of the instruments being similar to market rates.

18    CAMECO CORPORATION

D. Derivatives

The following table summarizes the fair value of derivatives and classification on the consolidated statements of financial position:

	Jun 30/15			Dec 31/14
Non-hedge derivatives:
Foreign currency contracts	$	(120,260	)	$	(67,005	)
Interest rate contracts		9,378			2,978
Other		(348	)		—
Net	$	(111,230	)	$	(64,027	)
Classification:
Current portion of long-term receivables, investments and other [note 6]	$	8,170		$	500
Long-term receivables, investments and other [note 6]		6,151			3,389
Current portion of other liabilities [note 7]		(22,191	)		(53,873	)
Other liabilities [note 7]		(103,360	)		(14,043	)
Net	$	(111,230	)	$	(64,027	)

The following table summarizes the different components of the gain (loss) on derivatives included in net earnings:

	Three months ended					Six months ended
	Jun 30/15			Jun 30/14		Jun 30/15			Jun 30/14
Non-hedge derivatives:
Foreign currency contracts	$	33,744		$	58,978	$	(117,934	)	$	14
Interest rate contracts		(1,381	)		1,389		7,715			1,449
Share purchase options		—			—		—			16
Other		385			—		586			—
Net	$	32,748		$	60,367	$	(109,633	)	$	1,479

17. Segmented information

Cameco has three reportable segments: uranium, fuel services and NUKEM. The uranium segment involves the exploration for, mining, milling, purchase and sale of uranium concentrate. The fuel services segment involves the refining, conversion and fabrication of uranium concentrate and the purchase and sale of conversion services. The NUKEM segment acts as a market intermediary between uranium producers and nuclear-electric utilities.

Cameco’s reportable segments are strategic business units with different products, processes and marketing strategies.

Accounting policies used in each segment are consistent with the policies outlined in the summary of significant accounting policies. Segment revenues, expenses and results include transactions between segments incurred in the ordinary course of business. These transactions are priced on an arm’s length basis, are eliminated on consolidation and are reflected in the “other” column.

2015 SECOND QUARTER REPORT    19

Business segments

For the three months ended June 30, 2015

	Uranium			Fuel services		NUKEM			Other			Total
Revenue	$	423,628		$	69,860	$	80,835		$	(9,802	)	$	564,521
Expenses
Cost of products and services sold		251,198			44,261		61,295			(10,252	)		346,502
Depreciation and amortization		45,929			6,168		8,524			4,423			65,044
Cost of sales		297,127			50,429		69,819			(5,829	)		411,546
Gross profit (loss)		126,501			19,431		11,016			(3,973	)		152,975
Administration		—			—		3,621			45,820			49,441
Exploration		11,494			—		—			—			11,494
Research and development		—			—		—			1,467			1,467
Loss on sale of assets		419			40		3			—			462
Finance costs		—			—		1,119			23,985			25,104
Gain on derivatives		—			—		(487	)		(32,261	)		(32,748	)
Finance income		—			—		(1	)		(1,566	)		(1,567	)
Share of loss from equity-accounted investees		1,386			—		—			—			1,386
Other expense (income)		(12	)		—		(340	)		14,776			14,424
Earnings (loss) before income taxes		113,214			19,391		7,101			(56,194	)		83,512
Income tax recovery													(4,524	)
Net earnings												$	88,036

For the three months ended June 30, 2014

	Uranium			Fuel services			NUKEM			Other			Total
Revenue	$	375,855		$	70,169		$	61,832		$	(5,885	)	$	501,971
Expenses
Cost of products and services sold		204,638			48,513			48,369			(6,491	)		295,029
Depreciation and amortization		60,914			5,788			821			3,588			71,111
Cost of sales		265,552			54,301			49,190			(2,903	)		366,140
Gross profit (loss)		110,303			15,868			12,642			(2,982	)		135,831
Administration		—			—			2,959			33,477			36,436
Exploration		9,318			—			—			—			9,318
Research and development		—			—			—			421			421
Loss on sale of assets		6,665			—			—			—			6,665
Finance costs		—			—			897			34,874			35,771
Loss (gain) on derivatives		—			—			739			(61,106	)		(60,367	)
Finance income		—			—			(2	)		(2,092	)		(2,094	)
Share of loss from equity-accounted investees		162			3,307			—			—			3,469
Other expense (income)		(28,481	)		(269	)		(292	)		14,100			(14,942	)
Earnings (loss) before income taxes		122,639			12,830			8,341			(22,656	)		121,154
Income tax recovery														(5,691	)
Net earnings from continuing operations													$	126,845

20    CAMECO CORPORATION

For the six months ended June 30, 2015

	Uranium			Fuel services		NUKEM			Other			Total
Revenue	$	791,495		$	136,232	$	177,939		$	24,622		$	1,130,288
Expenses
Cost of products and services sold		455,447			96,301		148,204			22,921			722,873
Depreciation and amortization		96,054			12,847		8,023			8,354			125,278
Cost of sales		551,501			109,148		156,227			31,275			848,151
Gross profit (loss)		239,994			27,084		21,712			(6,653	)		282,137
Administration		—			—		7,085			84,587			91,672
Impairment charge		5,688			—		—			—			5,688
Exploration		23,272			—		—			—			23,272
Research and development		—			—		—			3,294			3,294
Loss on sale of assets		413			28		3			—			444
Finance costs		—			—		2,303			48,033			50,336
Loss (gain) on derivatives		—			—		(767	)		110,400			109,633
Finance income		—			—		(1	)		(3,769	)		(3,770	)
Share of loss from equity-accounted investees		1,368			—		—			—			1,368
Other expense (income)		(312	)		—		258			(28,031	)		(28,085	)
Earnings (loss) before income taxes		209,565			27,056		12,831			(221,167	)		28,285
Income tax recovery													(49,911	)
Net earnings												$	78,196

For the six months ended June 30, 2014

	Uranium			Fuel services			NUKEM			Other			Total
Revenue	$	723,981		$	110,447		$	93,622		$	(6,850	)	$	921,200
Expenses
Cost of products and services sold		385,560			82,172			80,573			(7,979	)		540,326
Depreciation and amortization		109,238			10,514			3,515			14,178			137,445
Cost of sales		494,798			92,686			84,088			6,199			677,771
Gross profit (loss)		229,183			17,761			9,534			(13,049	)		243,429
Administration		—			—			6,414			75,235			81,649
Exploration		23,738			—			—			—			23,738
Research and development		—			—			—			1,693			1,693
Loss on sale of assets		5,556			—			—			—			5,556
Finance costs		—			—			2,091			57,148			59,239
Loss (gain) on derivatives		—			—			1,694			(3,173	)		(1,479	)
Finance income		—			—			(2	)		(3,237	)		(3,239	)
Share of loss from equity-accounted investees		236			13,267			—			—			13,503
Other expense (income)		(28,964	)		18,035			(1,249	)		(4,395	)		(16,573	)
Earnings (loss) before income taxes		228,617			(13,541	)		586			(136,320	)		79,342
Income tax recovery														(51,067	)
Net earnings from continuing operations													$	130,409

2015 SECOND QUARTER REPORT    21

18. Related parties

The shares of Cameco are widely held and no shareholder, resident in Canada, is allowed to own more than 25% of the Company’s outstanding common shares, either individually or together with associates. A non-resident of Canada is not allowed to own more than 15%.

Related party transactions

Through unsecured shareholder loans, Cameco has agreed to fund Inkai’s project development costs as well as further evaluation on block 3. The limits of the loan facilities are $229,650,000 (US) and advances under these facilities bear interest at a rate of LIBOR plus 2%. At June 30, 2015, $187,576,000 (US) of principal and interest was outstanding (December 31, 2014—$197,551,000 (US)).

Cameco’s share of the outstanding principal and interest was $93,593,000 at June 30, 2015 (December 31, 2014—$91,672,000) (note 6). For the quarter ended June 30, 2015, Cameco recorded interest income of $500,000 relating to this balance (2014—$519,000). For the six month period ended June 30, 2015, interest income was $982,000 (2014—$1,049,000).

22    CAMECO CORPORATION