Exhibit 99.3
Cameco Corporation
2018 condensed consolidated interim financial statements
(unaudited)
November 1, 2018
Cameco Corporation
Consolidated statements of earnings
| (Unaudited) | Three months ended | Nine months ended | ||||||||||||||||||
($Cdn thousands, except per share amounts) | Note | Sep 30/18 | Sep 30/17 | Sep 30/18 | Sep 30/17 | |||||||||||||||
Revenue from products and services | 12 | $ | 487,644 | $ | 485,594 | $ | 1,260,327 | $ | 1,347,880 | |||||||||||
Cost of products and services sold | 393,511 | 337,941 | 940,666 | 931,090 | ||||||||||||||||
Depreciation and amortization | 99,888 | 96,626 | 231,067 | 217,527 | ||||||||||||||||
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Cost of sales | 20 | 493,399 | 434,567 | 1,171,733 | 1,148,617 | |||||||||||||||
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Gross profit (loss) | (5,755 | ) | 51,027 | 88,594 | 199,263 | |||||||||||||||
Administration | 39,444 | 40,132 | 105,806 | 124,562 | ||||||||||||||||
Impairment charges | 4 | — | 111,399 | — | 111,399 | |||||||||||||||
Exploration | 4,834 | 8,080 | 17,380 | 24,478 | ||||||||||||||||
Research and development | 187 | 943 | (852 | ) | 5,310 | |||||||||||||||
Other operating expense (income) | 10 | 4,548 | (9,338 | ) | 49,487 | (15,178 | ) | |||||||||||||
Loss (gain) on disposal of assets | (142 | ) | 1,207 | 525 | 5,780 | |||||||||||||||
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Loss from operations | (54,626 | ) | (101,396 | ) | (83,752 | ) | (57,088 | ) | ||||||||||||
Finance costs | 13 | (28,038 | ) | (27,217 | ) | (83,176 | ) | (82,964 | ) | |||||||||||
Gain (loss) on derivatives | 19 | 22,395 | 21,727 | (30,283 | ) | 55,807 | ||||||||||||||
Finance income | 5,751 | 1,341 | 14,760 | 3,516 | ||||||||||||||||
Share of earnings from equity-accounted investee | 8 | 1,577 | — | 6,067 | — | |||||||||||||||
Other income (expense) | 14 | (6,084 | ) | (20,848 | ) | 76,682 | (32,020 | ) | ||||||||||||
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Loss before income taxes | (59,025 | ) | (126,393 | ) | (99,702 | ) | (112,749 | ) | ||||||||||||
Income tax expense (recovery) | 15 | (87,132 | ) | (2,636 | ) | (106,098 | ) | 30,740 | ||||||||||||
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Net earnings (loss) | 28,107 | (123,757 | ) | 6,396 | (143,489 | ) | ||||||||||||||
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Net earnings (loss) attributable to: | ||||||||||||||||||||
Equity holders | $ | 28,124 | $ | (123,712 | ) | $ | 6,451 | $ | (143,316 | ) | ||||||||||
Non-controlling interest | (17 | ) | (45 | ) | (55 | ) | (173 | ) | ||||||||||||
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Net earnings (loss) | $ | 28,107 | $ | (123,757 | ) | $ | 6,396 | $ | (143,489 | ) | ||||||||||
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Earnings (loss) per common share attributable to equity holders: | ||||||||||||||||||||
Basic | 16 | $ | 0.07 | $ | (0.31 | ) | $ | 0.02 | $ | (0.36 | ) | |||||||||
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Diluted | 16 | $ | 0.07 | $ | (0.31 | ) | $ | 0.02 | $ | (0.36 | ) | |||||||||
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See accompanying notes to condensed consolidated interim financial statements.
2
Cameco Corporation
Consolidated statements of comprehensive income
| (Unaudited) | Three months ended | Nine months ended | ||||||||||||||||||
($Cdn thousands) | Sep 30/18 | Sep 30/17 | Sep 30/18 | Sep 30/17 | ||||||||||||||||
Net earnings (loss) | $ | 28,107 | $ | (123,757 | ) | $ | 6,396 | $ | (143,489 | ) | ||||||||||
Other comprehensive loss, net of taxes | 15 | |||||||||||||||||||
Items that will not be reclassified to net earnings: | ||||||||||||||||||||
Equity investments at FVOCI - net change in fair value1 | (1,763 | ) | — | (6,977 | ) | (1,102 | ) | |||||||||||||
Items that are or may be reclassified to net earnings: | ||||||||||||||||||||
Exchange differences on translation of foreign operations | (32,385 | ) | (38,396 | ) | (26,765 | ) | (52,963 | ) | ||||||||||||
Reclassification of foreign currency translation reserve to net earnings | 14 | — | — | (5,450 | ) | — | ||||||||||||||
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Other comprehensive loss, net of taxes | (34,148 | ) | (38,396 | ) | (39,192 | ) | (54,065 | ) | ||||||||||||
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Total comprehensive loss | $ | (6,041 | ) | $ | (162,153 | ) | (32,796 | ) | (197,554 | ) | ||||||||||
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Other comprehensive income (loss) attributable to: | ||||||||||||||||||||
Equity holders | $ | (34,141 | ) | $ | (38,396 | ) | $ | (39,202 | ) | $ | (54,063 | ) | ||||||||
Non-controlling interest | (7 | ) | — | 10 | (2 | ) | ||||||||||||||
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Other comprehensive loss | $ | (34,148 | ) | $ | (38,396 | ) | $ | (39,192 | ) | $ | (54,065 | ) | ||||||||
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Total comprehensive loss attributable to: | ||||||||||||||||||||
Equity holders | $ | (6,017 | ) | $ | (162,108 | ) | $ | (32,751 | ) | $ | (197,379 | ) | ||||||||
Non-controlling interest | (24 | ) | (45 | ) | (45 | ) | (175 | ) | ||||||||||||
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Total comprehensive loss | $ | (6,041 | ) | $ | (162,153 | ) | $ | (32,796 | ) | $ | (197,554 | ) | ||||||||
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| 1 | Net of tax (Q3 2018 - $290; Q3 2017 - $nil; 2018 - $1,032; 2017 - $399) |
See accompanying notes to condensed consolidated interim financial statements.
3
Cameco Corporation
Consolidated statements of financial position
| (Unaudited) | As at | |||||||||||
($Cdn thousands) | Note | Sep 30/18 | Dec 31/17 | |||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 609,182 | $ | 591,620 | ||||||||
Short-term investments | 5 | 485,589 | — | |||||||||
Accounts receivable | 271,933 | 396,824 | ||||||||||
Current tax assets | 6,911 | 11,408 | ||||||||||
Inventories | 6 | 544,795 | 949,766 | |||||||||
Supplies and prepaid expenses | 104,503 | 149,872 | ||||||||||
Current portion of long-term receivables, investments and other | 7 | 25,010 | 36,089 | |||||||||
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Total current assets | 2,047,923 | 2,135,579 | ||||||||||
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Property, plant and equipment | 3,880,674 | 4,191,892 | ||||||||||
Intangible assets | 66,234 | 70,012 | ||||||||||
Long-term receivables, investments and other | 7 | 707,086 | 520,073 | |||||||||
Investment in equity-accounted investee | 8 | 204,416 | — | |||||||||
Deferred tax assets | 980,200 | 861,171 | ||||||||||
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Totalnon-current assets | 5,838,610 | 5,643,148 | ||||||||||
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Total assets | $ | 7,886,533 | $ | 7,778,727 | ||||||||
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Liabilities and shareholders’ equity | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable and accrued liabilities | 320,027 | 258,405 | ||||||||||
Current tax liabilities | 10,440 | 20,133 | ||||||||||
Dividends payable | — | 39,579 | ||||||||||
Current portion of long-term debt | 499,448 | — | ||||||||||
Current portion of other liabilities | 9 | 73,600 | 54,370 | |||||||||
Current portion of provisions | 10 | 53,910 | 38,507 | |||||||||
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Total current liabilities | 957,425 | 410,994 | ||||||||||
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Long-term debt | 995,912 | 1,494,471 | ||||||||||
Other liabilities | 9 | 147,403 | 126,103 | |||||||||
Provisions | 10 | 948,603 | 875,033 | |||||||||
Deferred tax liabilities | 2,858 | 12,467 | ||||||||||
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Totalnon-current liabilities | 2,094,776 | 2,508,074 | ||||||||||
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Shareholders’ equity | ||||||||||||
Share capital | 11 | 1,862,652 | 1,862,652 | |||||||||
Contributed surplus | 232,262 | 224,812 | ||||||||||
Retained earnings | 2,656,887 | 2,650,417 | ||||||||||
Other components of equity | 82,205 | 121,407 | ||||||||||
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Total shareholders’ equity attributable to equity holders | 4,834,006 | 4,859,288 | ||||||||||
Non-controlling interest | 326 | 371 | ||||||||||
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Total shareholders’ equity | 4,834,332 | 4,859,659 | ||||||||||
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Total liabilities and shareholders’ equity | $ | 7,886,533 | $ | 7,778,727 | ||||||||
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Commitments and contingencies [notes 10, 15]
See accompanying notes to condensed consolidated interim financial statements.
4
Cameco Corporation
Consolidated statements of changes in equity
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(Unaudited) ($Cdn thousands) | Share capital | Contributed surplus | Retained earnings | Foreign currency translation | Equity investments at FVOCI | Total | Non- controlling interest | Total equity | ||||||||||||||||||||||||
Balance at January 1, 2018 | $ | 1,862,652 | $ | 224,812 | $ | 2,650,417 | $ | 112,341 | $ | 9,066 | $ | 4,859,288 | $ | 371 | $ | 4,859,659 | ||||||||||||||||
Net earnings (loss) | — | — | 6,451 | — | — | 6,451 | (55 | ) | 6,396 | |||||||||||||||||||||||
Other comprehensive income (loss) for the period | — | — | — | (32,225 | ) | (6,977 | ) | (39,202 | ) | 10 | (39,192 | ) | ||||||||||||||||||||
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Total comprehensive income (loss) for the period | — | — | 6,451 | (32,225 | ) | (6,977 | ) | (32,751 | ) | (45 | ) | (32,796 | ) | |||||||||||||||||||
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Share-based compensation | — | 12,256 | — | — | — | 12,256 | — | 12,256 | ||||||||||||||||||||||||
Restricted and performance share units released | — | (4,806 | ) | — | — | — | (4,806 | ) | — | (4,806 | ) | |||||||||||||||||||||
Dividends | — | — | 19 | — | — | 19 | — | 19 | ||||||||||||||||||||||||
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Balance at September 30, 2018 | $ | 1,862,652 | $ | 232,262 | $ | 2,656,887 | $ | 80,116 | $ | 2,089 | $ | 4,834,006 | $ | 326 | $ | 4,834,332 | ||||||||||||||||
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Balance at January 1, 2017 | $ | 1,862,646 | $ | 216,213 | $ | 3,019,872 | $ | 156,411 | $ | 3,229 | $ | 5,258,371 | $ | 157 | $ | 5,258,528 | ||||||||||||||||
Net loss | — | — | (143,316 | ) | — | — | (143,316 | ) | (173 | ) | (143,489 | ) | ||||||||||||||||||||
Total comprehensive loss | — | — | — | (52,961 | ) | (1,102 | ) | (54,063 | ) | (2 | ) | (54,065 | ) | |||||||||||||||||||
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Total comprehensive loss for the period | — | — | (143,316 | ) | (52,961 | ) | (1,102 | ) | (197,379 | ) | (175 | ) | (197,554 | ) | ||||||||||||||||||
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Share-based compensation | — | 11,213 | — | — | — | 11,213 | — | 11,213 | ||||||||||||||||||||||||
Stock options exercised | 6 | (1 | ) | — | — | — | 5 | — | 5 | |||||||||||||||||||||||
Restricted and performance share units released | — | (5,360 | ) | — | — | — | (5,360 | ) | — | (5,360 | ) | |||||||||||||||||||||
Dividends | — | — | (118,718 | ) | — | — | (118,718 | ) | — | (118,718 | ) | |||||||||||||||||||||
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Balance at September 30, 2017 | $ | 1,862,652 | $ | 222,065 | $ | 2,757,838 | $ | 103,450 | $ | 2,127 | $ | 4,948,132 | $ | (18 | ) | $ | 4,948,114 | |||||||||||||||
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See accompanying notes to condensed consolidated interim financial statements.
5
Cameco Corporation
Consolidated statements of cash flows
| (Unaudited) | Three months ended | Nine months ended | ||||||||||||||||||
($Cdn thousands) | Note | Sep 30/18 | Sep 30/17 | Sep 30/18 | Sep 30/17 | |||||||||||||||
Operating activities | ||||||||||||||||||||
Net earnings (loss) | $ | 28,107 | $ | (123,757 | ) | $ | 6,396 | $ | (143,489 | ) | ||||||||||
Adjustments for: | ||||||||||||||||||||
Depreciation and amortization | 99,888 | 96,626 | 231,067 | 217,527 | ||||||||||||||||
Deferred charges | (613 | ) | 1,376 | 9,016 | 868 | |||||||||||||||
Unrealized loss (gain) on derivatives | (23,876 | ) | (22,840 | ) | 38,389 | (60,683 | ) | |||||||||||||
Share-based compensation | 18 | 2,866 | 2,924 | 12,256 | 11,213 | |||||||||||||||
Loss (gain) on disposal of assets | (142 | ) | 1,207 | 525 | 5,780 | |||||||||||||||
Finance costs | 13 | 28,038 | 27,217 | 83,176 | 82,964 | |||||||||||||||
Finance income | (5,751 | ) | (1,341 | ) | (14,760 | ) | (3,516 | ) | ||||||||||||
Share of earnings in equity-accounted investee | (1,577 | ) | — | (6,067 | ) | — | ||||||||||||||
Impairment charges | 4 | — | 111,399 | — | 111,399 | |||||||||||||||
Other operating expense (income) | 10 | 4,548 | (9,338 | ) | 49,487 | (15,178 | ) | |||||||||||||
Other expense (income) | 14 | 6,187 | 20,849 | (68,686 | ) | 32,008 | ||||||||||||||
Income tax expense (recovery) | 15 | (87,132 | ) | (2,636 | ) | (106,098 | ) | 30,740 | ||||||||||||
Interest received | 4,687 | 2,081 | 12,096 | 10,293 | ||||||||||||||||
Income taxes paid | (619 | ) | (42,667 | ) | (19,415 | ) | (84,925 | ) | ||||||||||||
Other operating items | 17 | 223,363 | 92,691 | 382,725 | 81,062 | |||||||||||||||
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Net cash provided by operations | 277,974 | 153,791 | 610,107 | 276,063 | ||||||||||||||||
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Investing activities | ||||||||||||||||||||
Additions to property, plant and equipment | (15,357 | ) | (35,346 | ) | (45,347 | ) | (88,665 | ) | ||||||||||||
Increase in short-term investments | (152,426 | ) | — | (485,589 | ) | — | ||||||||||||||
Decrease in long-term receivables, investments and other | 12,403 | 4,937 | 25,827 | 13,406 | ||||||||||||||||
Proceeds from sale of property, plant and equipment | 152 | 254 | 586 | 970 | ||||||||||||||||
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Net cash used in investing | (155,228 | ) | (30,155 | ) | (504,523 | ) | (74,289 | ) | ||||||||||||
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Financing activities | ||||||||||||||||||||
Interest paid | (14,175 | ) | (14,254 | ) | (48,870 | ) | (48,949 | ) | ||||||||||||
Proceeds from issuance of shares, stock option plan | — | — | — | 4 | ||||||||||||||||
Dividends paid | — | (39,580 | ) | (39,561 | ) | (118,718 | ) | |||||||||||||
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Net cash used in financing | (14,175 | ) | (53,834 | ) | (88,431 | ) | (167,663 | ) | ||||||||||||
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Increase in cash and cash equivalents, during the period | 108,571 | 69,802 | 17,153 | 34,111 | ||||||||||||||||
Exchange rate changes on foreign currency cash balances | (3,522 | ) | (651 | ) | 409 | (2,545 | ) | |||||||||||||
Cash and cash equivalents, beginning of period | 504,133 | 282,693 | 591,620 | 320,278 | ||||||||||||||||
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Cash and cash equivalents, end of period | $ | 609,182 | $ | 351,844 | $ | 609,182 | $ | 351,844 | ||||||||||||
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Cash and cash equivalents is comprised of: | ||||||||||||||||||||
Cash | 260,745 | 60,292 | ||||||||||||||||||
Cash equivalents | 348,437 | 291,552 | ||||||||||||||||||
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Cash and cash equivalents | $ | 609,182 | $ | 351,844 | ||||||||||||||||
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See accompanying notes to condensed consolidated interim financial statements.
6
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 September 30, 2018 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, 2017.
These condensed consolidated interim financial statements were authorized for issuance by the Company’s board of directors on November 1, 2018.
| 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 | Fair value through profit or loss (FVTPL) | |
| Equity investments | Fair value through other comprehensive income (FVOCI) | |
| Liabilities for cash-settled share-based payment arrangements | Fair value through profit or loss (FVTPL) | |
| 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 International Financial Reporting Standards (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, 2017.
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, 2017 consolidated financial statements.
| 3. | Accounting standards |
| A. | Changes in accounting policy |
On January 1, 2018, Cameco adopted the new standards, IFRS 15 and IFRS 9, as issued by the IASB.
| i. | Revenue |
IFRS 15 clarifies the principles for recognizing revenue from contracts with customers. Cameco adopted IFRS 15 using the cumulative effect method without practical expedients which does not require comparative financial statements to be restated. As the adoption of the new standard did not have a material impact on our existing revenue recognition practices, there was no cumulative effect on net earnings at January 1, 2018 that would have required restatement. The new standard did result in additional disclosures. (See note 12)
| ii. | Financial instruments |
IFRS 9 includes revised guidance on the classification and measurement of financial assets. While it largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities, it eliminates the previous categories for financial assets of held to maturity, loans and receivables and available for sale. Upon adoption, we reclassified financial assets from loans and receivable to amortized cost and equity securities from available for sale to FVOCI. In addition, accounts receivable that may be subject to factoring arrangements are now classified as either FVOCI or FVTPL depending on the terms of the arrangement. There was no impact on the measurement of any of these instruments. (See note 19)
The new standard also includes a new expected credit loss model for calculating impairment on financial assets. Due to risk management practices that the Company has in place, this change did not have a material impact on the consolidated financial statements.
IFRS 9 also introduces new hedge accounting requirements. Since Cameco does not apply hedge accounting, there was no impact on the consolidated financial statements.
| B. | 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 September 30, 2018 and have not been applied in preparing these condensed consolidated interim financial statements. Cameco does not intend to early adopt any of the following standards or amendments to existing standards, unless otherwise noted.
| i. | Leases |
In January 2016, the IASB issued IFRS 16,Leases(IFRS 16). IFRS 16 is effective for periods beginning on or after January 1, 2019, with early adoption permitted. IFRS 16 eliminates the current dual model for lessees, which distinguishes betweenon-balance sheet finance leases andoff-balance sheet operating leases. Instead, there is a single,on-balance sheet accounting model that is similar to current finance lease accounting. Based on our assessment completed to date, we do not expect adoption of the standard to have a material impact on the financial statements, however we do expect to have additional disclosures.
| ii. | Income tax |
In June 2017, the IASB issued IFRIC 23,Uncertainty over Income Tax Treatments (IFRIC 23). IFRIC 23 is effective for periods beginning on or after January 1, 2019, with early adoption permitted. IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. We do not expect adoption of the standard to have a material impact on the financial statements.
8
| 4. | Impairment |
In the third quarter of 2017, Cameco restructured its global marketing organization in response to the changing business environment. The restructuring significantly impacted the marketing activities historically performed by NUKEM. In accordance with the provisions of IAS 36,Impairment of Assets, Cameco considered this to be an indicator that the assets of the cash generating unit could potentially be impaired and accordingly, we were required to estimate the recoverable amount of these assets.
The recoverable amount of NUKEM was estimated based on a fair value less costs to sell calculation and was concluded to be equal to the carrying value of its inventory and existing contracts. A change in the previous assumption, that there would be cash flows generated beyond a five-year period, resulted in the elimination of the terminal value. Accordingly, an impairment charge of $111,399,000 ($88,377,000 (US)) was recorded, representing the full carrying value of NUKEM goodwill.
| 5. | Short-term investments |
Short-term investments are denominated in Canadian dollars and are comprised of money market instruments with terms to maturity between three and 12 months. Short-term investments are classified as at amortized cost.
| 6. | Inventories |
| Sep 30/18 | Dec 31/17 | |||||||
Uranium | ||||||||
Concentrate | $ | 302,428 | $ | 820,426 | ||||
Broken ore | 49,909 | 47,083 | ||||||
|
|
|
| |||||
| 352,337 | 867,509 | |||||||
NUKEM | 101,644 | 13,801 | ||||||
Fuel services | 90,814 | 68,456 | ||||||
|
|
|
| |||||
Total | $ | 544,795 | $ | 949,766 | ||||
|
|
|
| |||||
Cameco expensed $417,498,000 of inventory as cost of sales during the third quarter of 2018 (2017 - $400,962,000). For the nine months ended September 30, 2018, Cameco expensed $957,249,000 of inventory as cost of sales (2017 - $1,059,824,000). Included in cost of sales for the period ended September 30, 2018, is a $29,599,000 write-down of NUKEM inventory to reflect net realizable value (September 30, 2017 - $11,809,000).
| 7. | Long-term receivables, investments and other |
| Sep 30/18 | Dec 31/17 | |||||||
Investments in equity securities [note 19] | $ | 14,755 | $ | 21,417 | ||||
Derivatives [note 19] | 14,333 | 40,804 | ||||||
Advances receivable from JV Inkai LLP [note 21] | 125,337 | 58,820 | ||||||
Investment tax credits | 95,246 | 92,846 | ||||||
Amounts receivable related to tax dispute [note 15] | 303,222 | 303,222 | ||||||
Product loan(a) | 129,357 | — | ||||||
Other | 49,846 | 39,053 | ||||||
|
|
|
| |||||
| 732,096 | 556,162 | |||||||
Less current portion | (25,010 | ) | (36,089 | ) | ||||
|
|
|
| |||||
Net | $ | 707,086 | $ | 520,073 | ||||
|
|
|
| |||||
9
| (a) | As a result of the decision to temporarily suspend production at the McArthur River mine, Cameco has entered into an agreement with its joint venture partner, Orano Canada Inc., (Orano) to provide them with up to 5,400,000 pounds of uranium concentrate through 2018. The product is deliverable in 12 equal monthly instalments of 450,000 pounds. Orano is not obligated to take delivery but must provide 30 days’ notice prior to the upcoming delivery date if they do not wish to take that delivery. Orano is obligated to repay us in kind with uranium concentrate no later than December 31, 2023. At September 30, 2018, Cameco had provided 4,050,000 pounds under this agreement. The loan is recorded at Cameco’s weighted average cost of inventory. |
| 8. | Equity-accounted investee |
On December 11, 2017, the Company announced that the restructuring of JV Inkai outlined in the implementation agreement dated May 27, 2016 with Joint Stock Company National Atomic Company Kazatomprom (Kazatomprom) and JV Inkai closed and would take effect January 1, 2018. As a result of the restructuring, Cameco’s ownership interest was adjusted to 40% (previously 60%) and Cameco began accounting for JV Inkai on an equity basis, prospectively, as of January 1, 2018 as it was concluded Cameco no longer has joint control over the joint venture.
JV Inkai is the operator of the Inkai uranium deposit located in Kazakhstan. Cameco holds a 40% interest and Kazatomprom holds a 60% interest in JV Inkai. JV Inkai is a uranium mining and milling operation that utilizesin-situ recovery (ISR) technology to extract uranium. The participants in JV Inkai purchase uranium from Inkai and, in turn, derive revenue directly from the sale of such product to third-party customers.
The following tables summarize the financial information of JV Inkai (100%) at September 30, 2018 and for the three and nine months ended September 30, 2018:
| Sep 30/18 | ||||
Cash and cash equivalents | $ | 14,153 | ||
Other current assets | 77,288 | |||
Non-current assets | 485,503 | |||
Current liabilities | (140,738 | ) | ||
Non-current liabilities | (45,893 | ) | ||
|
| |||
Net assets | $ | 390,313 | ||
|
| |||
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/18 | Sep 30/17 | Sep 30/18 | Sep 30/17 | |||||||||||||
Revenue from products and services | $ | 37,710 | $ | — | $ | 92,926 | $ | — | ||||||||
Cost of products and services sold | (9,620 | ) | — | (29,485 | ) | — | ||||||||||
Depreciation and amortization | (5,089 | ) | — | (15,628 | ) | — | ||||||||||
Finance income | 49 | — | 121 | — | ||||||||||||
Finance costs | (1,640 | ) | — | (4,721 | ) | — | ||||||||||
Other expense | (9,632 | ) | — | (18,502 | ) | — | ||||||||||
Income tax expense | (2,886 | ) | — | (5,678 | ) | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net earnings | $ | 8,892 | $ | — | $ | 19,033 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Cameco’s share | 3,557 | — | 7,613 | — | ||||||||||||
Adjustments(b) | (1,980 | ) | — | (1,546 | ) | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Cameco’s share of net earnings | $ | 1,577 | $ | — | $ | 6,067 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
10
The following table reconciles the summarized financial information to the carrying amount of Cameco’s interest in JV Inkai:
Cameco’s share of net assets, before restructuring | $ | 236,857 | ||
Adjustments(a) | (75,257 | ) | ||
|
| |||
Carrying amount in the statement of financial position, before restructuring | 161,600 | |||
Share of net earnings | 7,613 | |||
Gain on restructuring [note 14] | 43,120 | |||
Impact of foreign exchange | (6,371 | ) | ||
Adjustments(b) | (1,546 | ) | ||
|
| |||
Carrying amount in the statement of financial position at September 30, 2018 | $ | 204,416 | ||
|
|
| (a) | In addition to its proportionate share of earnings from JV Inkai, Cameco records certain consolidating adjustments to eliminate unrealized profit and amortize historical differences in accounting policies. This amount is amortized to earnings over units of production. |
| (b) | Following the restructuring, in addition to the adjustments noted in (a), Cameco also amortizes the fair values assigned to assets and liabilities at the time of the restructuring over units of production. |
| 9. | Other liabilities |
| Sep 30/18 | Dec 31/17 | |||||||
Deferred sales | $ | 36,526 | $ | 29,148 | ||||
Derivatives [note 19] | 35,852 | 23,414 | ||||||
Accrued pension and post-retirement benefit liability | 77,276 | 74,804 | ||||||
Other | 71,349 | 53,107 | ||||||
|
|
|
| |||||
| 221,003 | 180,473 | |||||||
Less current portion | (73,600 | ) | (54,370 | ) | ||||
|
|
|
| |||||
Net | $ | 147,403 | $ | 126,103 | ||||
|
|
|
| |||||
| 10. | Provisions |
| Reclamation | Waste disposal | Total | ||||||||||
Beginning of year | $ | 905,400 | $ | 8,140 | $ | 913,540 | ||||||
Changes in estimates and discount rates | ||||||||||||
Capitalized in property, plant, and equipment | 36,017 | — | 36,017 | |||||||||
Recognized in earnings | 49,487 | 1,163 | 50,650 | |||||||||
Change to equity accounting | (3,049 | ) | — | (3,049 | ) | |||||||
Provisions used during the period | (20,515 | ) | (33 | ) | (20,548 | ) | ||||||
Unwinding of discount | 16,868 | 116 | 16,984 | |||||||||
Impact of foreign exchange | 8,919 | — | 8,919 | |||||||||
|
|
|
|
|
| |||||||
End of period | $ | 993,127 | $ | 9,386 | $ | 1,002,513 | ||||||
|
|
|
|
|
| |||||||
Current | 51,744 | 2,166 | 53,910 | |||||||||
Non-current | 941,383 | 7,220 | 948,603 | |||||||||
|
|
|
|
|
| |||||||
| $ | 993,127 | $ | 9,386 | $ | 1,002,513 | |||||||
|
|
|
|
|
| |||||||
11
| 11. | Share capital |
At September 30, 2018, there were 395,792,732 common shares outstanding. Options in respect of 9,003,460 shares are outstanding under the stock option plan and are exercisable up to 2026. For the quarter ended September 30, 2018, there were no options that were exercised resulting in the issuance of shares (2017 - nil). For the nine months ended September 30, 2018, no options were exercised that resulted in the issuance of shares (2017 - 210).
| 12. | Revenue |
Cameco’s uranium and fuel services sales contracts with customers contain both fixed and market-related pricing. Fixed-price contracts are typically based on a term-price indicator at the time the contract is accepted and escalated over the term of the contract. Market-related contracts are based on either the spot price or long-term price, and the price is quoted at the time of delivery rather than at the time the contract is accepted. These contracts often include a floor and/or ceiling prices, which are usually escalated over the term of the contract. Escalation is generally based on the Consumer Price Index. Cameco’s contracts contain either one of these pricing mechanisms or a combination of the two. Cameco’s contracts do not contain variable consideration and therefore no revenue is considered constrained at the time of delivery. Cameco expenses the incremental costs of obtaining a contract as incurred as the amortization period is less than a year.
The following table summarizes Cameco’s sales disaggregated by geographical region and contract type and includes a reconciliation to Cameco’s reportable segments (note 20):
For the three months ended September 30, 2018
| Uranium | Fuel services | Other | Total | |||||||||||||
Customer geographical region | ||||||||||||||||
Americas | $ | 183,580 | $ | 45,914 | $ | 2,132 | $ | 231,626 | ||||||||
Europe | 55,596 | 8,268 | — | 63,864 | ||||||||||||
Asia | 178,894 | 6,450 | 6,810 | 192,154 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 418,070 | $ | 60,632 | $ | 8,942 | $ | 487,644 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Contract type | ||||||||||||||||
Fixed-price | $ | 101,782 | $ | 57,362 | $ | 4,314 | $ | 163,458 | ||||||||
Market-related | 316,288 | 3,270 | 4,628 | 324,186 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 418,070 | $ | 60,632 | $ | 8,942 | $ | 487,644 | |||||||||
|
|
|
|
|
|
|
| |||||||||
For the three months ended September 30, 2017
| Uranium | Fuel services | Other | Total | |||||||||||||
Customer geographical region | ||||||||||||||||
Americas | $ | 219,236 | $ | 51,360 | $ | 9,658 | $ | 280,254 | ||||||||
Europe | 52,002 | 13,941 | 6,408 | 72,351 | ||||||||||||
Asia | 113,521 | 3,738 | 15,730 | 132,989 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 384,759 | $ | 69,039 | $ | 31,796 | $ | 485,594 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Contract type | ||||||||||||||||
Fixed-price | $ | 124,561 | $ | 60,933 | $ | 31,796 | $ | 217,290 | ||||||||
Market-related | 260,198 | 8,106 | — | 268,304 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 384,759 | $ | 69,039 | $ | 31,796 | $ | 485,594 | |||||||||
|
|
|
|
|
|
|
| |||||||||
12
For the nine months ended September 30, 2018
| Uranium | Fuel services | Other | Total | |||||||||||||
Customer geographical region | ||||||||||||||||
Americas | $ | 468,514 | $ | 141,143 | $ | 34,734 | $ | 644,391 | ||||||||
Europe | 152,931 | 31,190 | 10,693 | 194,814 | ||||||||||||
Asia | 392,901 | 21,363 | 6,858 | 421,122 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 1,014,346 | $ | 193,696 | $ | 52,285 | $ | 1,260,327 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Contract type | ||||||||||||||||
Fixed-price | $ | 335,816 | $ | 184,690 | $ | 47,657 | $ | 568,163 | ||||||||
Market-related | 678,530 | 9,006 | 4,628 | 692,164 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 1,014,346 | $ | 193,696 | $ | 52,285 | $ | 1,260,327 | |||||||||
|
|
|
|
|
|
|
| |||||||||
For the nine months ended September 30, 2017
| Uranium | Fuel services | Other | Total | |||||||||||||
Customer geographical region | ||||||||||||||||
Americas | $ | 494,349 | $ | 155,411 | $ | 73,464 | $ | 723,224 | ||||||||
Europe | 150,702 | 34,944 | 99,059 | 284,705 | ||||||||||||
Asia | 298,045 | 15,580 | 26,326 | 339,951 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 943,096 | $ | 205,935 | $ | 198,849 | $ | 1,347,880 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Contract type | ||||||||||||||||
Fixed-price | $ | 317,138 | $ | 188,228 | $ | 196,314 | $ | 701,680 | ||||||||
Market-related | 625,958 | 17,707 | 2,535 | 646,200 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 943,096 | $ | 205,935 | $ | 198,849 | $ | 1,347,880 | |||||||||
|
|
|
|
|
|
|
| |||||||||
| 13. | Finance costs |
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/18 | Sep 30/17 | Sep 30/18 | Sep 30/17 | |||||||||||||
Interest on long-term debt | $ | 18,308 | $ | 18,365 | $ | 54,975 | $ | 54,761 | ||||||||
Unwinding of discount on provisions | 5,853 | 5,026 | 16,984 | 16,685 | ||||||||||||
Other charges | 3,877 | 3,826 | 11,217 | 11,518 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 28,038 | $ | 27,217 | $ | 83,176 | $ | 82,964 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| 14. | Other income (expense) |
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/18 | Sep 30/17 | Sep 30/18 | Sep 30/17 | |||||||||||||
Foreign exchange gains (losses) | $ | (6,103 | ) | $ | (20,850 | ) | $ | 13,992 | $ | (32,009 | ) | |||||
Gain on restructuring of JV Inkai(a) | — | — | 48,570 | — | ||||||||||||
Sale of exploration interests | — | — | 7,797 | — | ||||||||||||
Contract restructuring | — | — | 6,201 | — | ||||||||||||
Other | 19 | 2 | 122 | (11 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | (6,084 | ) | $ | (20,848 | ) | $ | 76,682 | $ | (32,020 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
13
| (a) | Effective January 1, 2018, Cameco’s ownership interest in JV Inkai was reduced from 60% to 40% based on an implementation agreement with Kazatomprom. Cameco recognized a gain on the change in ownership interests of $48,570,000. Included in this gain is $5,450,000 which has been reclassified from the foreign currency translation reserve to net earnings. |
| 15. | Income taxes |
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/18 | Sep 30/17 | Sep 30/18 | Sep 30/17 | |||||||||||||
Earnings (loss) before income taxes | ||||||||||||||||
Canada | $ | (99,614 | ) | $ | 18,401 | $ | (173,993 | ) | $ | 93,587 | ||||||
Foreign | 40,589 | (144,794 | ) | 74,291 | (206,336 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | (59,025 | ) | $ | (126,393 | ) | $ | (99,702 | ) | $ | (112,749 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
Current income taxes (recovery) | ||||||||||||||||
Canada | $ | 410 | $ | 1,445 | $ | 4,798 | $ | 3,545 | ||||||||
Foreign | 977 | (9,471 | ) | 5,676 | (4,585 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 1,387 | �� | $ | (8,026 | ) | $ | 10,474 | $ | (1,040 | ) | ||||||
Deferred income taxes (recovery) | ||||||||||||||||
Canada | $ | (90,662 | ) | $ | 2,007 | $ | (120,698 | ) | $ | 37,811 | ||||||
Foreign | 2,143 | 3,383 | 4,126 | (6,031 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | (88,519 | ) | $ | 5,390 | $ | (116,572 | ) | $ | 31,780 | |||||||
|
|
|
|
|
|
|
| |||||||||
Income tax expense (recovery) | $ | (87,132 | ) | $ | (2,636 | ) | $ | (106,098 | ) | $ | 30,740 | |||||
|
|
|
|
|
|
|
| |||||||||
Cameco has recorded $980,200,000 of deferred tax assets (December 31, 2017 - $861,171,000). The realization of these deferred tax assets is dependent upon the generation of future taxable income in certain jurisdictions during the periods in which the Company’s temporary tax differences are available. The Company considers whether it is probable that all or a portion of the deferred tax assets will not be realized. In making this assessment, management considers all available evidence, including recent financial operations, projected future taxable income and tax planning strategies. Based on projections of future taxable income over the periods in which the deferred tax assets are available, realization of these deferred tax assets is probable and consequently the deferred tax assets have 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 2012, which in aggregate have increased Cameco’s income for Canadian tax purposes by approximately $4,900,000,000. CRA has also issued notices of reassessment for transfer pricing penalties for the years 2007 through 2011 in the amount of $371,000,000. It is uncertain whether CRA will reassess Cameco’s tax returns for subsequent years on a similar basis and if these will require Cameco to make future remittances or provide security on receipt of the reassessments.
On September 26, the Tax Court of Canada (Tax Court) ruled in our favour in our case with the Canada Revenue Agency (CRA) for the 2003, 2005 and 2006 tax years.
14
The Tax Court ruled that our marketing and trading structure involving foreign subsidiaries and the related transfer pricing methodology used for certain intercompany uranium purchase and sale agreements were in full compliance with Canadian laws for the three tax years in question. While the decision applies only to the first three tax years under dispute, we believe there is nothing in the decision that would warrant a materially different outcome for subsequent tax years. Given the ruling in our favor, and the endorsement by the Tax Court of our transfer pricing methodology, we have reversed the cumulative tax provision related to this matter for the years 2003 through the current period in the amount of $61,000,000. We expect to recover any amounts remitted or secured as a result of the reassessments.
On October 25, 2018, CRA filed a notice of appeal with the Federal Court of Appeal. We anticipate that it will take about two years to receive a decision from the Federal Court of Appeal.
We expect the Tax Court’s decision to be upheld on appeal. We expect any further actions regarding the tax years 2007 through 2012 will be suspended until the three years covered in the decision are finally resolved, with the exception of a potential transfer pricing penalty for 2012. Despite the fact that we believe there is no basis to do so, and it is not our view of the likely outcome, CRA may continue to reassess us using the methodology it reassessed the 2003 through 2012 tax years with. In that scenario, and including the $4,900,000,000 already reassessed, we expect to receive notices of reassessment for a total of approximately $8,400,000,000 for the years 2003 through 2017, which would increase Cameco’s income for Canadian tax purposes and result in a related tax expense of approximately $2,500,000,000. In addition to penalties already imposed, CRA may continue to apply penalties to taxation years subsequent to 2011. As a result, we estimate that cash taxes and transfer pricing penalties would be between $1,950,000,000 and $2,150,000,000. 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 or otherwise securing 50% of the cash taxes and transfer pricing penalties (between $970,000,000 and $1,070,000,000), plus related interest and instalment penalties assessed, which would be material to Cameco.
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. CRA disallowed the use of any loss carry-backs to be applied to any transfer pricing adjustment, starting with the 2008 tax year. 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 $303,222,000 already paid as at September 30, 2018 (December 31, 2017 - $303,222,000) (note 7). In addition to the cash remitted, we have provided $478,000,000 in letters of credit to secure 50% of the cash taxes and related interest.
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.
15
| 16. | 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 2018 was 395,792,732 (2017 - 395,792,670).
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/18 | Sep 30/17 | Sep 30/18 | Sep 30/17 | |||||||||||||
Basic earnings (loss) per share computation | ||||||||||||||||
Net earnings (loss) attributable to equity holders | $ | 28,124 | $ | (123,712 | ) | $ | 6,451 | $ | (143,316 | ) | ||||||
Weighted average common shares outstanding | 395,793 | 395,793 | 395,793 | 395,793 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Basic earnings (loss) per common share | $ | 0.07 | $ | (0.31 | ) | $ | 0.02 | $ | (0.36 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Diluted earnings (loss) per share computation | ||||||||||||||||
Net earnings (loss) attributable to equity holders | $ | 28,124 | $ | (123,712 | ) | $ | 6,451 | $ | (143,316 | ) | ||||||
Weighted average common shares outstanding | 395,793 | 395,793 | 395,793 | 395,793 | ||||||||||||
Dilutive effect of stock options | 258 | — | 208 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Weighted average common shares outstanding, assuming dilution | 396,051 | 395,793 | 396,001 | 395,793 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted earnings (loss) per common share | $ | 0.07 | $ | (0.31 | ) | $ | 0.02 | $ | (0.36 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
| 17. | Statements of cash flows |
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/18 | Sep 30/17 | Sep 30/18 | Sep 30/17 | |||||||||||||
Changes innon-cash working capital: | ||||||||||||||||
Accounts receivable | $ | (95,979 | ) | $ | (75,753 | ) | $ | 73,120 | $ | 51,748 | ||||||
Inventories | 189,245 | 150,297 | 237,347 | 136,222 | ||||||||||||
Supplies and prepaid expenses | 14,980 | 2,662 | 36,805 | 5,463 | ||||||||||||
Accounts payable and accrued liabilities | 126,846 | 4,619 | 57,592 | (115,660 | ) | |||||||||||
Reclamation payments | (8,972 | ) | (5,646 | ) | (20,548 | ) | (11,494 | ) | ||||||||
Other | (2,757 | ) | 16,512 | (1,591 | ) | 14,783 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Other operating items | $ | 223,363 | $ | 92,691 | $ | 382,725 | $ | 81,062 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| 18. | 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 27,870,289 shares have been issued.
16
| 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 with an equivalent market value, 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 at the end of the three-year period will be based on total shareholder return over the three years, Cameco’s ability to meet its annual operating targets and whether the participating executive remains employed by Cameco at the end of the three-year vesting period. As of September 30, 2018, the total number of PSUs held by the participants, after adjusting for forfeitures on retirement, was 1,340,970 (December 31, 2017 - 1,070,997).
| 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 with an equivalent market value, 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 September 30, 2018, the total number of RSUs held by the participants was 538,386 (December 31, 2017 - 463,151).
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 | Nine months ended | |||||||||||||||
| Sep 30/18 | Sep 30/17 | Sep 30/18 | Sep 30/17 | |||||||||||||
Stock option plan | $ | 470 | $ | 393 | $ | 4,258 | $ | 4,545 | ||||||||
Performance share unit plan | 1,819 | 1,730 | 5,857 | 4,634 | ||||||||||||
Restricted share unit plan | 577 | 801 | 2,141 | 2,034 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 2,866 | $ | 2,924 | $ | 12,256 | $ | 11,213 | |||||||||
|
|
|
|
|
|
|
| |||||||||
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.
17
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 | 1,473,430 | 602,530 | 377,021 | |||||||||
Average strike price | $ | 11.32 | — | $ | 11.46 | |||||||
Expected dividend | $ | 0.08 | — | — | ||||||||
Expected volatility | 35 | % | 37 | % | — | |||||||
Risk-free interest rate | 2.0 | % | 1.9 | % | — | |||||||
Expected life of option | 4.8 years | 3 years | — | |||||||||
Expected forfeitures | 7 | % | 9 | % | 13 | % | ||||||
Weighted average grant date fair values | $ | 3.48 | $ | 11.43 | $ | 11.46 | ||||||
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. Thenon-market criteria relating to realized selling prices and operating targets have been incorporated into the valuation at grant date by reviewing prior history and corporate budgets.
| 19. | Financial instruments and related risk management |
| A. | Accounting classifications and fair values |
The following tables summarize the carrying amounts and accounting classifications of Cameco’s financial instruments at the reporting date:
At September 30, 2018
| FVTPL | Amortized cost | FVOCI - designated | FVOCI | Total | ||||||||||||||||
Financial assets | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 609,182 | $ | — | $ | — | $ | 609,182 | ||||||||||
Short-term investments | — | 485,589 | — | — | 485,589 | |||||||||||||||
Accounts receivable | — | 195,816 | — | 76,117 | 271,933 | |||||||||||||||
Derivative assets [note 7] | ||||||||||||||||||||
Foreign currency contracts | 14,127 | — | — | — | 14,127 | |||||||||||||||
Interest rate contracts | 206 | — | — | — | 206 | |||||||||||||||
Investments in equity securities [note 7] | — | — | 14,755 | — | 14,755 | |||||||||||||||
Advances receivable from Inkai [note 21] | — | 125,337 | — | — | 125,337 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 14,333 | 1,415,924 | 14,755 | 76,117 | 1,521,129 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities | ||||||||||||||||||||
Accounts payable and accrued liabilities | — | 320,027 | — | — | 320,027 | |||||||||||||||
Current portion of long-term debt | — | 499,448 | — | — | 499,448 | |||||||||||||||
Derivative liabilities [note 9] | ||||||||||||||||||||
Foreign currency contracts | 17,693 | — | — | — | 17,693 | |||||||||||||||
Interest rate contracts | 2,644 | — | — | — | 2,644 | |||||||||||||||
Uranium contracts | 15,515 | — | — | — | 15,515 | |||||||||||||||
Long-term debt | — | 995,912 | — | — | 995,912 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 35,852 | 1,815,387 | — | — | 1,851,239 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net | (21,519 | ) | (399,463 | ) | 14,755 | 76,117 | (330,110 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
18
At December 31, 2017
| FVTPL | Amortized cost | FVOCI - designated | FVOCI | Total | ||||||||||||||||
Financial assets | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 591,620 | $ | — | $ | — | $ | 591,620 | ||||||||||
Accounts receivable | — | 362,128 | — | 34,696 | 396,824 | |||||||||||||||
Derivative assets [note 7] | ||||||||||||||||||||
Foreign currency contracts | 39,984 | — | — | — | 39,984 | |||||||||||||||
Interest rate contracts | 820 | — | — | — | 820 | |||||||||||||||
Investments in equity securities [note 7] | — | — | 21,417 | — | 21,417 | |||||||||||||||
Advances receivable from Inkai [note 21] | — | 58,820 | — | — | 58,820 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| $ | 40,804 | $ | 1,012,568 | $ | 21,417 | $ | 34,696 | $ | 1,109,485 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial liabilities | ||||||||||||||||||||
Accounts payable and accrued liabilities | $ | — | $ | 258,405 | $ | — | $ | — | $ | 258,405 | ||||||||||
Derivative liabilities [note 9] | ||||||||||||||||||||
Foreign currency contracts | 5,624 | — | — | — | 5,624 | |||||||||||||||
Interest rate contracts | 970 | — | — | — | 970 | |||||||||||||||
Uranium contracts | 16,820 | — | — | — | 16,820 | |||||||||||||||
Dividends payable | — | 39,579 | — | — | 39,579 | |||||||||||||||
Long-term debt | — | 1,494,471 | — | — | 1,494,471 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 23,414 | 1,792,455 | — | — | 1,815,869 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net | $ | 17,390 | $ | (779,887 | ) | $ | 21,417 | $ | 34,696 | $ | (706,384 | ) | ||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cameco has pledged $140,528,000 of cash as security against certain of its letter of credit facilities. This cash is being used as collateral for an interest rate reduction on the letter of credit facilities. The collateral account has a term of five years effective July 1, 2018. Cameco retains full access to this cash.
Under IAS 39, Cameco had classified its accounts receivable as loans and receivable. As required by IFRS 9, accounts receivable has been reclassified as measured at amortized cost with the exception of balances that are subject to factoring arrangements which are now classified as measured at FVOCI.
The investments in equity securities represent investments that Cameco intends to hold for the long-term for strategic purposes. As permitted by IFRS 9, these investments have been designated at the date of initial application as measured at FVOCI. Unlike IAS 39, the accumulated fair value reserve related to these investments will never be reclassified to profit or loss.
| B. | 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.
19
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 September 30, 2018
| Fair value | ||||||||||||||||
| Carrying value | Level 1 | Level 2 | Total | |||||||||||||
Derivative assets [note 7] | ||||||||||||||||
Foreign currency contracts | $ | 14,127 | $ | — | $ | 14,127 | $ | 14,127 | ||||||||
Interest rate contracts | 206 | — | 206 | 206 | ||||||||||||
Investments in equity securities [note 7] | 14,755 | 14,755 | — | 14,755 | ||||||||||||
Current portion of long-term debt | (499,448 | ) | — | (514,127 | ) | (514,127 | ) | |||||||||
Derivative liabilities [note 9] | ||||||||||||||||
Foreign currency contracts | (17,693 | ) | — | (17,693 | ) | (17,693 | ) | |||||||||
Interest rate contracts | (2,644 | ) | — | (2,644 | ) | (2,644 | ) | |||||||||
Uranium contracts | (15,515 | ) | — | (15,515 | ) | (15,515 | ) | |||||||||
Long-term debt | (995,912 | ) | — | (1,090,421 | ) | (1,090,421 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net | $ | (1,502,124 | ) | $ | 14,755 | $ | (1,626,067 | ) | $ | (1,611,312 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
As at December 31, 2017
| Fair value | ||||||||||||||||
| Carrying value | Level 1 | Level 2 | Total | |||||||||||||
Derivative assets [note 7] | ||||||||||||||||
Foreign currency contracts | $ | 39,984 | $ | — | $ | 39,984 | $ | 39,984 | ||||||||
Interest rate contracts | 820 | — | 820 | 820 | ||||||||||||
Investments in equity securities [note 7] | 21,417 | 21,417 | — | 21,417 | ||||||||||||
Derivative liabilities [note 9] | ||||||||||||||||
Foreign currency contracts | (5,624 | ) | — | (5,624 | ) | (5,624 | ) | |||||||||
Interest rate contracts | (970 | ) | — | (970 | ) | (970 | ) | |||||||||
Uranium contracts | (16,820 | ) | — | (16,820 | ) | (16,820 | ) | |||||||||
Long-term debt | (1,494,471 | ) | — | (1,652,230 | ) | (1,652,230 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net | $ | (1,455,664 | ) | $ | 21,417 | $ | (1,634,840 | ) | $ | (1,613,423 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
The preceding tables exclude fair value information for financial instruments whose carrying amounts are a reasonable approximation of fair value.
20
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.
| C. | Financial instruments measured at fair value |
Cameco measures its derivative financial instruments, material investments in equity securities and long-term debt at fair value. Investments in publicly held equity securities are classified as a recurring level 1 fair value measurement while derivative financial instruments and long-term debt are classified as recurring level 2 fair value measurements.
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. The fair value of Cameco’s long-term debt is determined using quoted market yields as of the reporting date, which ranged from 1.9% to 2.5% (2017 - 1.6% to 2.3%).
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. 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.
Uranium contract derivatives consist of written options and price swaps. The fair value of uranium options is measured based on the Black Scholes option-pricing model. The fair value of uranium price swaps is determined by discounting expected future cash flows from the contracts. The future cash flows are determined by measuring the difference between fixed purchases or sales under contracted prices, and floating purchases or sales based on Numerco forward uranium price curves.
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.
| D. | Other financial instruments |
The carrying value of Cameco’s cash and cash equivalents, short-term investments, accounts receivable, including accounts receivable subject to factoring arrangements and classified as measured at FVOCI, and accounts payable and accrued liabilities approximates its fair value as a result of the short-term nature of the instruments.
21
| E. | Derivatives |
The following table summarizes the fair value of derivatives and classification on the consolidated statements of financial position:
| Sep 30/18 | Dec 31/17 | |||||||
Non-hedge derivatives: | ||||||||
Foreign currency contracts | $ | (3,566 | ) | $ | 34,360 | |||
Interest rate contracts | (2,438 | ) | (150 | ) | ||||
Uranium contracts | (15,515 | ) | (16,820 | ) | ||||
|
|
|
| |||||
Net | $ | (21,519 | ) | $ | 17,390 | |||
|
|
|
| |||||
Classification: | ||||||||
Current portion of long-term receivables, investments and other [note 7] | $ | 6,323 | $ | 25,948 | ||||
Long-term receivables, investments and other [note 7] | 8,010 | 14,856 | ||||||
Current portion of other liabilities [note 9] | (19,267 | ) | (11,249 | ) | ||||
Other liabilities [note 9] | (16,585 | ) | (12,165 | ) | ||||
|
|
|
| |||||
Net | $ | (21,519 | ) | $ | 17,390 | |||
|
|
|
| |||||
The following table summarizes the different components of the gain (loss) on derivatives included in net earnings (loss):
| Three months ended | Nine months ended | |||||||||||||||
| Sep 30/18 | Sep 30/17 | Sep 30/18 | Sep 30/17 | |||||||||||||
Non-hedge derivatives | ||||||||||||||||
Foreign currency contracts | $ | 22,051 | $ | 24,383 | $ | (30,669 | ) | $ | 61,649 | |||||||
Interest rate contracts | (1,708 | ) | (2,361 | ) | (1,439 | ) | (3,613 | ) | ||||||||
Uranium contracts | 2,052 | (295 | ) | 1,825 | (2,229 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net | $ | 22,395 | $ | 21,727 | $ | (30,283 | ) | $ | 55,807 | |||||||
|
|
|
|
|
|
|
| |||||||||
| 20. | Segmented information |
As a result of a change to the way its global marketing activities are organized, during the first quarter, Cameco discontinued the reporting of NUKEM as a reportable segment. The consolidation of Canadian and international marketing activities in Saskatoon has resulted in NUKEM’s activities no longer meeting the quantitative thresholds for separate disclosure. Its results are now included in the “other” column and comparative information has been adjusted.
Cameco now has two reportable segments: uranium and fuel services. Cameco’s reportable segments are strategic business units with different products, processes and marketing strategies. 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.
Cost of sales in the uranium segment includes care and maintenance costs for our operations that have had production suspensions. Cameco expensed $64,950,000 of care and maintenance costs during the third quarter of 2018 (2017 - $8,041,000). For the nine months ended September 30, 2018, Cameco expensed $160,440,000 (2017 - $27,907,000).
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.
22
Business segments
For the three months ended September 30, 2018
| Uranium | Fuel services | Other | Total | |||||||||||||
Revenue | $ | 418,070 | $ | 60,632 | $ | 8,942 | $ | 487,644 | ||||||||
Expenses | ||||||||||||||||
Cost of products and services sold | 341,645 | 48,374 | 3,492 | 393,511 | ||||||||||||
Depreciation and amortization | 85,599 | 7,933 | 6,356 | 99,888 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Cost of sales | 427,244 | 56,307 | 9,848 | 493,399 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit (loss) | (9,174 | ) | 4,325 | (906 | ) | (5,755 | ) | |||||||||
Administration | — | — | 39,444 | 39,444 | ||||||||||||
Exploration | 4,834 | — | — | 4,834 | ||||||||||||
Research and development | — | — | 187 | 187 | ||||||||||||
Other operating expense | 4,548 | — | — | 4,548 | ||||||||||||
Gain (loss) on disposal of assets | (176 | ) | 34 | — | (142 | ) | ||||||||||
Finance costs | — | — | 28,038 | 28,038 | ||||||||||||
Gain on derivatives | — | — | (22,395 | ) | (22,395 | ) | ||||||||||
Finance income | — | — | (5,751 | ) | (5,751 | ) | ||||||||||
Share of earnings from equity-accounted investee | (1,577 | ) | — | — | (1,577 | ) | ||||||||||
Other expense (income) | (20 | ) | — | 6,104 | 6,084 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Earnings (loss) before income taxes | (16,783 | ) | 4,291 | (46,533 | ) | (59,025 | ) | |||||||||
Income tax recovery | (87,132 | ) | ||||||||||||||
|
| |||||||||||||||
Net earnings | $ | 28,107 | ||||||||||||||
|
| |||||||||||||||
For the three months ended September 30, 2017
| Uranium | Fuel services | Other | Total | |||||||||||||
Revenue | $ | 384,759 | $ | 69,039 | $ | 31,796 | $ | 485,594 | ||||||||
Expenses | ||||||||||||||||
Cost of products and services sold | 250,508 | 55,039 | 32,394 | 337,941 | ||||||||||||
Depreciation and amortization | 83,161 | 10,387 | 3,078 | 96,626 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Cost of sales | 333,669 | 65,426 | 35,472 | 434,567 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit (loss) | 51,090 | 3,613 | (3,676 | ) | 51,027 | |||||||||||
Administration | — | — | 40,132 | 40,132 | ||||||||||||
Impairment charge | — | — | 111,399 | 111,399 | ||||||||||||
Exploration | 8,080 | — | — | 8,080 | ||||||||||||
Research and development | — | — | 943 | 943 | ||||||||||||
Other operating income | (9,338 | ) | — | — | (9,338 | ) | ||||||||||
Loss on disposal of assets | 1,135 | 67 | 5 | 1,207 | ||||||||||||
Finance costs | — | — | 27,217 | 27,217 | ||||||||||||
Gain on derivatives | — | — | (21,727 | ) | (21,727 | ) | ||||||||||
Finance income | — | — | (1,341 | ) | (1,341 | ) | ||||||||||
Other expense | — | — | 20,848 | 20,848 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Earnings (loss) before income taxes | 51,213 | 3,546 | (181,152 | ) | (126,393 | ) | ||||||||||
Income tax recovery | (2,636 | ) | ||||||||||||||
|
| |||||||||||||||
Net loss | $ | (123,757 | ) | |||||||||||||
|
| |||||||||||||||
23
For the nine months ended September 30, 2018
| Uranium | Fuel services | Other | Total | |||||||||||||
Revenue | $ | 1,014,346 | $ | 193,696 | $ | 52,285 | $ | 1,260,327 | ||||||||
Expenses | ||||||||||||||||
Cost of products and services sold | 729,734 | 136,884 | 74,048 | 940,666 | ||||||||||||
Depreciation and amortization | 196,053 | 22,759 | 12,255 | 231,067 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Cost of sales | 925,787 | 159,643 | 86,303 | 1,171,733 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit (loss) | 88,559 | 34,053 | (34,018 | ) | 88,594 | |||||||||||
Administration | — | — | 105,806 | 105,806 | ||||||||||||
Exploration | 17,380 | — | — | 17,380 | ||||||||||||
Research and development | — | — | (852 | ) | (852 | ) | ||||||||||
Other operating expense | 49,487 | — | — | 49,487 | ||||||||||||
Loss on disposal of assets | 253 | 251 | 21 | 525 | ||||||||||||
Finance costs | — | — | 83,176 | 83,176 | ||||||||||||
Loss on derivatives | — | — | 30,283 | 30,283 | ||||||||||||
Finance income | — | — | (14,760 | ) | (14,760 | ) | ||||||||||
Share of earnings from equity-accounted investee | (6,067 | ) | — | — | (6,067 | ) | ||||||||||
Other income | (62,689 | ) | — | (13,993 | ) | (76,682 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Earnings (loss) before income taxes | 90,195 | 33,802 | (223,699 | ) | (99,702 | ) | ||||||||||
Income tax recovery | (106,098 | ) | ||||||||||||||
|
| |||||||||||||||
Net earnings | $ | 6,396 | ||||||||||||||
|
| |||||||||||||||
For the nine months ended September 30, 2017
| Uranium | Fuel services | Other | Total | |||||||||||||
Revenue | $ | 943,096 | $ | 205,935 | $ | 198,849 | $ | 1,347,880 | ||||||||
Expenses | ||||||||||||||||
Cost of products and services sold | 591,449 | 138,138 | 201,503 | 931,090 | ||||||||||||
Depreciation and amortization | 172,159 | 25,764 | 19,604 | 217,527 | ||||||||||||
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Cost of sales | 763,608 | 163,902 | 221,107 | 1,148,617 | ||||||||||||
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Gross profit (loss) | 179,488 | 42,033 | (22,258 | ) | 199,263 | |||||||||||
Administration | — | — | 124,562 | 124,562 | ||||||||||||
Impairment charge | — | — | 111,399 | 111,399 | ||||||||||||
Exploration | 24,478 | — | — | 24,478 | ||||||||||||
Research and development | — | — | 5,310 | 5,310 | ||||||||||||
Other operating income | (15,178 | ) | — | — | (15,178 | ) | ||||||||||
Loss on disposal of assets | 5,700 | 71 | 9 | 5,780 | ||||||||||||
Finance costs | — | — | 82,964 | 82,964 | ||||||||||||
Gain on derivatives | — | — | (55,807 | ) | (55,807 | ) | ||||||||||
Finance income | — | — | (3,516 | ) | (3,516 | ) | ||||||||||
Other expense (income) | (8 | ) | — | 32,028 | 32,020 | |||||||||||
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Earnings (loss) before income taxes | 164,496 | 41,962 | (319,207 | ) | (112,749 | ) | ||||||||||
Income tax expense | 30,740 | |||||||||||||||
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Net loss | $ | (143,489 | ) | |||||||||||||
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| 21. | 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. Anon-resident of Canada is not allowed to own more than 15%.
Related party transactions
Cameco funded JV Inkai’s project development costs through an unsecured shareholder loan. The limit of the loan facility is $175,000,000 (US) and advances under the facility bear interest at a rate of LIBOR plus 2%. At September 30, 2018, $125,337,000 ($97,100,000 (US)) of principal was outstanding (December 31, 2017 - $147,050,000 ($117,218,000 (US))) (note 7).
Effective January 1, 2018, due to a change in its ownership interest, Cameco now accounts for its interest in JV Inkai under the equity method. As a result, the full amount of the outstanding loan is reflected on the balance sheet as opposed to its 40% share as was reflected at December 31, 2017.
For the quarter ended September 30, 2018, Cameco recorded interest income of $1,451,000 relating to this balance (2017 - $554,000). For the nine month period ended September 30, 2018, interest income was $4,227,000 (2017 - $1,685,000).
| 22. | Subsequent event |
During the quarter it was announced that we had entered into an agreement to sell our interest in the Wheeler River Joint Venture. The deal closed on October 26, 2018. We will report a gain on the transaction in our fourth quarter financial results.
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