Exhibit 99.3
Cameco Corporation
2023 condensed consolidated interim financial statements
(unaudited)
August 1, 2023
Cameco Corporation
Consolidated statements of earnings
| (Unaudited) | Three months ended | Six months ended | ||||||||||||||||
($Cdn thousands, except per share amounts) | Note | Jun 30/23 | Jun 30/22 | Jun 30/23 | Jun 30/22 | |||||||||||||
Revenue from products and services | 11 | $ | 481,987 | $ | 557,577 | $ | 1,168,961 | $ | 955,615 | |||||||||
Cost of products and services sold | 330,162 | 403,449 | 773,584 | 711,060 | ||||||||||||||
Depreciation and amortization | 41,852 | 61,197 | 118,225 | 101,798 | ||||||||||||||
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Cost of sales | 19 | 372,014 | 464,646 | 891,809 | 812,858 | |||||||||||||
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Gross profit | 109,973 | 92,931 | 277,152 | 142,757 | ||||||||||||||
Administration | 57,048 | 23,847 | 121,059 | 81,627 | ||||||||||||||
Exploration | 3,878 | 2,304 | 10,157 | 4,922 | ||||||||||||||
Research and development | 5,107 | 3,365 | 9,339 | 6,166 | ||||||||||||||
Other operating expense (income) | 9 | 8,389 | (20,668 | ) | 6,342 | (40,641 | ) | |||||||||||
Loss (gain) on disposal of assets | 276 | 132 | 276 | (212 | ) | |||||||||||||
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Earnings from operations | 35,275 | 83,951 | 129,979 | 90,895 | ||||||||||||||
Finance costs | 12 | (22,744 | ) | (20,368 | ) | (46,342 | ) | (39,099 | ) | |||||||||
Gain (loss) on derivatives | 18 | 28,729 | (28,223 | ) | 30,999 | (18,288 | ) | |||||||||||
Finance income | 31,098 | 4,478 | 58,639 | 6,429 | ||||||||||||||
Share of earnings from equity-accounted investee | 7 | 7,726 | 26,505 | 64,262 | 69,528 | |||||||||||||
Other income (expense) | 13 | (43,033 | ) | 44,172 | (45,618 | ) | 39,915 | |||||||||||
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Earnings before income taxes | 37,051 | 110,515 | 191,919 | 149,380 | ||||||||||||||
Income tax expense | 14 | 23,358 | 26,578 | 59,262 | 25,159 | |||||||||||||
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Net earnings | 13,693 | 83,937 | 132,657 | 124,221 | ||||||||||||||
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Net earnings (loss) attributable to: | ||||||||||||||||||
Equity holders | $ | 13,693 | $ | 83,979 | $ | 132,662 | $ | 124,329 | ||||||||||
Non-controlling interest | — | (42 | ) | (5 | ) | (108 | ) | |||||||||||
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Net earnings | $ | 13,693 | $ | 83,937 | $ | 132,657 | $ | 124,221 | ||||||||||
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Earnings per common share attributable to equity holders: | ||||||||||||||||||
Basic | 15 | $ | 0.03 | $ | 0.21 | $ | 0.31 | $ | 0.31 | |||||||||
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Diluted | 15 | $ | 0.03 | $ | 0.21 | $ | 0.31 | $ | 0.31 | |||||||||
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See accompanying notes to condensed consolidated interim financial statements.
2
Cameco Corporation
Consolidated statements of comprehensive earnings
| (Unaudited) | Three months ended | Six months ended | ||||||||||||||
($Cdn thousands) | Jun 30/23 | Jun 30/22 | Jun 30/23 | Jun 30/22 | ||||||||||||
Net earnings | $ | 13,693 | $ | 83,937 | $ | 132,657 | $ | 124,221 | ||||||||
Other comprehensive loss, net of taxes | ||||||||||||||||
Items that will not be reclassified to net earnings: | ||||||||||||||||
Items that are or may be reclassified to net earnings: | ||||||||||||||||
Exchange differences on translation of foreign operations | (1,270 | ) | (31,556 | ) | (3,901 | ) | (34,223 | ) | ||||||||
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Other comprehensive loss, net of taxes | (1,270 | ) | (31,556 | ) | (3,901 | ) | (34,223 | ) | ||||||||
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Total comprehensive income | $ | 12,423 | $ | 52,381 | 128,756 | 89,998 | ||||||||||
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Other comprehensive income (loss) attributable to: | ||||||||||||||||
Equity holders | $ | (1,270 | ) | $ | (31,558 | ) | $ | (3,901 | ) | $ | (34,225 | ) | ||||
Non-controlling interest | — | 2 | — | 2 | ||||||||||||
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Other comprehensive loss | $ | (1,270 | ) | $ | (31,556 | ) | $ | (3,901 | ) | $ | (34,223 | ) | ||||
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Total comprehensive income (loss) attributable to: | ||||||||||||||||
Equity holders | $ | 12,423 | $ | 52,421 | $ | 128,761 | $ | 90,104 | ||||||||
Non-controlling interest | — | (40 | ) | (5 | ) | (106 | ) | |||||||||
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Total comprehensive income | $ | 12,423 | $ | 52,381 | $ | 128,756 | $ | 89,998 | ||||||||
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See accompanying notes to condensed consolidated interim financial statements.
3
Cameco Corporation
Consolidated statements of financial position
| (Unaudited) | As at | |||||||||||
($Cdn thousands) | Note | Jun 30/23 | Dec 31/22 | |||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 2,453,960 | $ | 1,143,674 | ||||||||
Short-term investments | 19,444 | 1,138,174 | ||||||||||
Accounts receivable | 275,628 | 183,944 | ||||||||||
Current tax assets | 3,759 | 1,056 | ||||||||||
Inventories | 5 | 633,397 | 664,698 | |||||||||
Supplies and prepaid expenses | 184,328 | 157,910 | ||||||||||
Current portion of long-term receivables, investments and other | 6 | 23,098 | 32,180 | |||||||||
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Total current assets | 3,593,614 | 3,321,636 | ||||||||||
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Property, plant and equipment | 3,370,921 | 3,473,490 | ||||||||||
Intangible assets | 45,112 | 47,117 | ||||||||||
Long-term receivables, investments and other | 6 | 545,997 | 595,507 | |||||||||
Investment in equity-accounted investee | 7 | 162,752 | 210,972 | |||||||||
Deferred tax assets | 944,375 | 984,071 | ||||||||||
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Total non-current assets | 5,069,157 | 5,311,157 | ||||||||||
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Total assets | $ | 8,662,771 | $ | 8,632,793 | ||||||||
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Liabilities and shareholders’ equity | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable and accrued liabilities | 265,062 | 374,714 | ||||||||||
Current tax liabilities | 14,190 | 6,498 | ||||||||||
Current portion of long-term debt | 499,614 | — | ||||||||||
Current portion of other liabilities | 8 | 165,470 | 131,324 | |||||||||
Current portion of provisions | 9 | 43,044 | 48,305 | |||||||||
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Total current liabilities | 987,380 | 560,841 | ||||||||||
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Long-term debt | 497,774 | 997,000 | ||||||||||
Other liabilities | 8 | 199,965 | 216,162 | |||||||||
Provisions | 9 | 1,003,427 | 1,022,725 | |||||||||
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Total non-current liabilities | 1,701,166 | 2,235,887 | ||||||||||
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Shareholders’ equity | ||||||||||||
Share capital | 10 | 2,897,540 | 2,880,336 | |||||||||
Contributed surplus | 216,884 | 224,687 | ||||||||||
Retained earnings | 2,829,044 | 2,696,379 | ||||||||||
Other components of equity | 30,751 | 34,652 | ||||||||||
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Total shareholders’ equity attributable to equity holders | 5,974,219 | 5,836,054 | ||||||||||
Non-controlling interest | 6 | 11 | ||||||||||
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Total shareholders’ equity | 5,974,225 | 5,836,065 | ||||||||||
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Total liabilities and shareholders’ equity | $ | 8,662,771 | $ | 8,632,793 | ||||||||
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Commitments and contingencies [notes 9, 14, 21]
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, 2023 | $ | 2,880,336 | $ | 224,687 | $ | 2,696,379 | $ | 35,400 | $ | (748 | ) | $ | 5,836,054 | $ | 11 | $ | 5,836,065 | |||||||||||||||
Net earnings (loss) | — | — | 132,662 | — | — | 132,662 | (5 | ) | 132,657 | |||||||||||||||||||||||
Other comprehensive loss | — | — | — | (3,901 | ) | — | (3,901 | ) | — | (3,901 | ) | |||||||||||||||||||||
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Total comprehensive income (loss) for the period | — | — | 132,662 | (3,901 | ) | — | 128,761 | (5 | ) | 128,756 | ||||||||||||||||||||||
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Share-based compensation | — | 1,761 | — | — | — | 1,761 | — | 1,761 | ||||||||||||||||||||||||
Stock options exercised | 17,204 | (3,155 | ) | — | — | — | 14,049 | — | 14,049 | |||||||||||||||||||||||
Restricted share units released | — | (6,409 | ) | — | — | — | (6,409 | ) | — | (6,409 | ) | |||||||||||||||||||||
Dividends | — | — | 3 | — | — | 3 | — | 3 | ||||||||||||||||||||||||
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Balance at June 30, 2023 | $ | 2,897,540 | $ | 216,884 | $ | 2,829,044 | $ | 31,499 | $ | (748 | ) | $ | 5,974,219 | $ | 6 | $ | 5,974,225 | |||||||||||||||
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Balance at January 1, 2022 | $ | 1,903,357 | $ | 230,039 | $ | 2,639,650 | $ | 73,543 | $ | (748 | ) | $ | 4,845,841 | $ | 127 | $ | 4,845,968 | |||||||||||||||
Net earnings (loss) | — | — | 124,329 | — | — | 124,329 | (108 | ) | 124,221 | |||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | (34,225 | ) | — | (34,225 | ) | 2 | (34,223 | ) | |||||||||||||||||||||
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Total comprehensive income (loss) for the period | — | — | 124,329 | (34,225 | ) | — | 90,104 | (106 | ) | 89,998 | ||||||||||||||||||||||
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Share-based compensation | — | 1,579 | — | — | — | 1,579 | — | 1,579 | ||||||||||||||||||||||||
Stock options exercised | 11,562 | (2,366 | ) | — | — | — | 9,196 | — | 9,196 | |||||||||||||||||||||||
Restricted share units released | — | (6,201 | ) | — | — | — | (6,201 | ) | — | (6,201 | ) | |||||||||||||||||||||
Dividends | — | — | 3 | — | — | 3 | — | 3 | ||||||||||||||||||||||||
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Balance at June 30, 2022 | $ | 1,914,919 | $ | 223,051 | $ | 2,763,982 | $ | 39,318 | $ | (748 | ) | $ | 4,940,522 | $ | 21 | $ | 4,940,543 | |||||||||||||||
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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 | Six months ended | ||||||||||||||||||
($Cdn thousands) | Note | Jun 30/23 | Jun 30/22 | Jun 30/23 | Jun 30/22 | |||||||||||||||
Operating activities | ||||||||||||||||||||
Net earnings | $ | 13,693 | $ | 83,937 | $ | 132,657 | $ | 124,221 | ||||||||||||
Adjustments for: | ||||||||||||||||||||
Depreciation and amortization | 41,852 | 61,197 | 118,225 | 101,798 | ||||||||||||||||
Deferred charges | (6,270 | ) | 20,184 | (21,212 | ) | 19,223 | ||||||||||||||
Unrealized loss (gain) on derivatives | (34,601 | ) | 32,527 | (40,883 | ) | 25,422 | ||||||||||||||
Share-based compensation | 17 | 912 | 769 | 1,761 | 1,579 | |||||||||||||||
Loss (gain) on disposal of assets | 276 | 132 | 276 | (212 | ) | |||||||||||||||
Finance costs | 12 | 22,744 | 20,368 | 46,342 | 39,099 | |||||||||||||||
Finance income | (31,099 | ) | (4,478 | ) | (58,639 | ) | (6,429 | ) | ||||||||||||
Share of earnings in equity-accounted investee | (7,726 | ) | (26,505 | ) | (64,262 | ) | (69,528 | ) | ||||||||||||
Other operating expense (income) | 9 | 8,389 | (20,668 | ) | 6,342 | (40,641 | ) | |||||||||||||
Other expense (income) | 13 | 43,032 | (44,173 | ) | 45,618 | (39,915 | ) | |||||||||||||
Income tax expense | 14 | 23,358 | 26,578 | 59,262 | 25,159 | |||||||||||||||
Interest received | 33,322 | 4,125 | 60,766 | 6,020 | ||||||||||||||||
Income taxes received (paid) | 79,065 | (987 | ) | 71,605 | (358 | ) | ||||||||||||||
Dividends from equity-accounted investee | 113,642 | 104,943 | 113,642 | 104,943 | ||||||||||||||||
Other operating items | 16 | (213,675 | ) | (156,391 | ) | (169,430 | ) | (16,637 | ) | |||||||||||
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Net cash provided by operations | 86,914 | 101,558 | 302,070 | 273,744 | ||||||||||||||||
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Investing activities | ||||||||||||||||||||
Additions to property, plant and equipment | (39,986 | ) | (36,022 | ) | (66,895 | ) | (66,071 | ) | ||||||||||||
Acquisitions [note 4] | — | (101,669 | ) | — | (101,669 | ) | ||||||||||||||
Decrease (increase) in short-term investments | 809,228 | (172,154 | ) | 1,117,180 | (276,999 | ) | ||||||||||||||
Decrease (increase) in long-term receivables, investments and other | 1,000 | (2,000 | ) | 1,000 | (2,000 | ) | ||||||||||||||
Proceeds from sale of property, plant and equipment | 36 | (76 | ) | 36 | 278 | |||||||||||||||
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Net cash provided by (used in) investing | 770,278 | (311,921 | ) | 1,051,321 | (446,461 | ) | ||||||||||||||
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Financing activities | ||||||||||||||||||||
Interest paid | (19,008 | ) | (19,130 | ) | (19,798 | ) | (19,372 | ) | ||||||||||||
Lease principal payments | (319 | ) | (543 | ) | (904 | ) | (1,165 | ) | ||||||||||||
Proceeds from issuance of shares, stock option plan | 4,437 | 477 | 14,049 | 9,196 | ||||||||||||||||
Dividends returned | — | — | 4 | 5 | ||||||||||||||||
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Net cash used in financing | (14,890 | ) | (19,196 | ) | (6,649 | ) | (11,336 | ) | ||||||||||||
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Increase (decrease) in cash and cash equivalents, during the period | 842,302 | (229,559 | ) | 1,346,742 | (184,053 | ) | ||||||||||||||
Exchange rate changes on foreign currency cash balances | (35,225 | ) | 4,663 | (36,456 | ) | 1,014 | ||||||||||||||
Cash and cash equivalents, beginning of period | 1,646,883 | 1,289,304 | 1,143,674 | 1,247,447 | ||||||||||||||||
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Cash and cash equivalents, end of period | $ | 2,453,960 | $ | 1,064,408 | $ | 2,453,960 | $ | 1,064,408 | ||||||||||||
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Cash and cash equivalents is comprised of: | ||||||||||||||||||||
Cash | 893,718 | 679,945 | ||||||||||||||||||
Cash equivalents | 1,560,242 | 384,463 | ||||||||||||||||||
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Cash and cash equivalents | $ | 2,453,960 | $ | 1,064,408 | ||||||||||||||||
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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 June 30, 2023 comprise Cameco Corporation and its subsidiaries (collectively, the Company or Cameco) and the Company’s interests in associates and joint arrangements.
Cameco is one of the world’s largest providers of the uranium needed to generate clean, reliable baseload electricity around the globe. The Company has mines in northern Saskatchewan and the United States, as well as a 40% interest in Joint Venture Inkai LLP (JV Inkai), a joint arrangement with Joint Stock Company National Atomic Company Kazatomprom (Kazatomprom), located in Kazakhstan. JV Inkai is accounted for on an equity basis (see note 7).
Cameco has two operating mines, Cigar Lake and McArthur River. Operations at McArthur River/Key Lake, which had been suspended in 2018, resumed in November of 2022. The Rabbit Lake operation was placed in care and maintenance in 2016. Cameco’s operations in the United States, Crow Butte and Smith Ranch-Highland, are also not currently producing as the decision was made in 2016 to curtail production and defer all wellfield development. See note 19 for the financial statement impact.
The Company is also a leading provider of nuclear fuel processing services, supplying much of the world’s reactor fleet with the fuel to generate one of the cleanest sources of electricity available today. It operates the world’s largest commercial refinery in Blind River, Ontario, controls a significant portion of the world UF6 primary conversion capacity in Port Hope, Ontario and is a leading manufacturer of fuel assemblies and reactor components for CANDU reactors at facilities in Port Hope and Cobourg, Ontario.
| 2. | Significant accounting policies |
| A. | Statement of compliance |
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim 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, 2022.
These condensed consolidated interim financial statements were authorized for issuance by the Company’s board of directors on August 1, 2023.
| 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:
7
| Derivative financial instruments | Fair value through profit or loss (FVTPL) | |
| Equity securities | 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, 2022.
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, 2022, consolidated financial statements.
| 3. | Accounting standards |
| A. | Changes in accounting policy |
A number of amendments to existing standards became effective January 1, 2023, but they did not have an effect on the Company’s financial statements.
| i. | Income taxes |
In May 2023, the International Accounting Standards Board issued International Tax Reform – Pillar Two Model Rules, which amended IAS 12, Income Taxes (IAS 12). The amendments are effective for annual periods beginning on or after January 1, 2023. The amendments apply to income taxes arising from changes to tax law enacted to implement the Pillar Two model rules published by the Organisation for Economic Co-operation and Development. Cameco did not apply the exception to recognizing and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes. The extent of the impact of the amendments have not yet been determined, however we do expect to have additional disclosures.
| B. | New standards and interpretations not yet adopted |
A number of amendments to existing standards are not yet effective for the period ended June 30, 2023, and have not been applied in preparing these condensed consolidated interim financial statements. Cameco does not intend to early adopt any of the amendments and does not expect them to have a material impact on its financial statements.
8
| 4. | Acquisition of additional interest in Cigar Lake Joint Venture (CLJV) |
On May 19, 2022, Cameco and Orano Canada Inc. (Orano) completed the acquisition of Idemitsu Canada Resources Ltd.’s (Idemitsu) 7.875% participating interest in the CLJV by acquiring their pro rata shares through an asset purchase. Cameco’s ownership stake in the Cigar Lake uranium mine in northern Saskatchewan is now 54.547% (previously 50.025%). The primary reason for the business combination was to increase our ownership interest.
Cash consideration of $101,681,000 was paid for the additional 4.522% interest. While Cameco received the economic benefit of owning the additional interest as of January 1, 2022, the additional interest was proportionately consolidated with the results of Cameco commencing on May 19, 2022.
CLJV allocates uranium production to each joint operation participant and the joint operation participant derives revenue directly from the sale of such product. Mining and milling expenses incurred by joint operations are included in the cost of inventory. As such, there is no revenue or profit or loss of the acquiree included in the consolidated statements of earnings. If the acquisition had occurred at the beginning of 2022, Cameco’s share of production would have included an additional 296,000 pounds. The impact to the financial statements would not have been material.
Acquisition costs of $1,508,000 were included in administration expense in the consolidated statements of earnings for the six-month period ended June 30, 2022.
Included in the identifiable assets and liabilities acquired at the date of acquisition are inputs, production processes and outputs. Therefore, Cameco has determined that together the acquired set is a business. In accordance with the acquisition method of accounting, the purchase price was allocated to the underlying assets and liabilities assumed based on their fair values at the date of acquisition. Fair values were determined based on discounted cash flows and quoted market prices. The values assigned to the net assets acquired were as follows:
Property, plant and equipment | $ | 97,930 | ||
Deferred tax asset | 28,196 | |||
Inventory | 9,909 | |||
Working capital | (24 | ) | ||
Reclamation provision | (2,528 | ) | ||
Sales contracts | (9,000 | ) | ||
|
| |||
Net assets acquired | $ | 124,483 | ||
|
| |||
Cash paid | 101,681 | |||
|
| |||
Bargain purchase gain [note 13](a) | $ | 22,802 | ||
|
|
| (a) | The bargain purchase gain resulted from applying the measurement requirements under IFRS 3, Business Combinations. This standard requires the measurement of tax attributes that were acquired as part of the transaction be in accordance with IAS 12, Income Taxes, rather than at fair value. The measured amount of these attributes exceeded the amount paid for them and the resulting gain is included in other income (expense) in the consolidated statement of earnings. |
9
| 5. | Inventories |
| Jun 30/23 | Dec 31/22 | |||||||
Uranium | ||||||||
Concentrate | $ | 479,264 | $ | 537,426 | ||||
Broken ore | 40,321 | 46,703 | ||||||
|
|
|
| |||||
| 519,585 | 584,129 | |||||||
Fuel services | 113,394 | 80,144 | ||||||
Other | 418 | 425 | ||||||
|
|
|
| |||||
Total | $ | 633,397 | $ | 664,698 | ||||
|
|
|
| |||||
Cameco expensed $331,109,000 of inventory as cost of sales during the second quarter of 2023 (2022 – $388,165,000). For the six months ended June 30, 2023, Cameco expensed $796,178,000 of inventory as cost of sales (2022 – $670,771,000).
| 6. | Long-term receivables, investments and other |
| Jun 30/23 | Dec 31/22 | |||||||
Deferred charges | $ | 16,677 | $ | 29,585 | ||||
Derivatives [note 18] | 16,949 | 2,807 | ||||||
Investment tax credits | 95,812 | 95,812 | ||||||
Amounts receivable related to tax dispute [note 14](a) | 209,125 | 295,221 | ||||||
Product loan(b) | 228,316 | 200,998 | ||||||
Other | 2,216 | 3,264 | ||||||
|
|
|
| |||||
| 569,095 | 627,687 | |||||||
Less current portion | (23,098 | ) | (32,180 | ) | ||||
|
|
|
| |||||
Net | $ | 545,997 | $ | 595,507 | ||||
|
|
|
| |||||
| (a) | Cameco was required to remit or otherwise secure 50% of the cash taxes and transfer pricing penalties, plus related interest and instalment penalties assessed, in relation to its dispute with Canada Revenue Agency (CRA). In light of our view of the likely outcome of the case, Cameco expects to recover the amounts remitted to CRA, including cash taxes, interest and penalties totalling $209,125,000 already paid as at June 30, 2023 (December 31, 2022 – $295,221,000). $86,097,000 was received during the quarter (see note 14). |
| (b) | Cameco loaned 5,400,000 pounds of uranium concentrate to its joint venture partner, Orano Canada Inc., (Orano). Orano was obligated to repay the Company in kind with uranium concentrate no later than December 31, 2023. During the first quarter of 2022, the repayment terms were extended to December 31, 2028. As at June 30, 2023, 1,828,999 pounds have been repaid on this loan. |
Cameco also agreed to lend to Orano up to 1,148,200 kgU of conversion supply and up to an additional 1,200,000 pounds of uranium concentrate over the period 2022 to 2024. Repayment to Cameco is to be made in kind with U3O8 quantities drawn being repaid by December 31, 2027 and quantities of UF6 drawn by December 31, 2035.
As at June 30, 2023, 4,171,001 pounds of U3O8 (December 31, 2022 – 3,571,001 pounds) and 700,000 kgU of UF6 conversion supply (December 31, 2022 – 700,000 kgU) were drawn on the loans and are recorded at Cameco’s weighted average cost of inventory.
10
| 7. | Equity-accounted investee |
JV Inkai is the operator of the Inkai uranium deposit located in Kazakhstan. JV Inkai is a uranium mining and milling operation that utilizes in-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 (see note 20). Cameco holds a 40% interest in JV Inkai and Kazatomprom holds a 60% interest. Cameco does not have control over the joint venture so it accounts for the investment on an equity basis.
The following tables summarize the financial information of JV Inkai (100%):
| Jun 30/23 | Dec 31/22 | |||||||
Cash and cash equivalents | $ | 58,945 | $ | 14,950 | ||||
Other current assets | 184,559 | 373,868 | ||||||
Non-current assets | 340,980 | 334,954 | ||||||
Current liabilities | (23,065 | ) | (34,606 | ) | ||||
Non-current liabilities | (36,746 | ) | (37,644 | ) | ||||
|
|
|
| |||||
Net assets | $ | 524,673 | $ | 651,522 | ||||
|
|
|
| |||||
| Three months ended | Six months ended | |||||||||||||||
| Jun 30/23 | Jun 30/22 | Jun 30/23 | Jun 30/22 | |||||||||||||
Revenue from products and services | $ | 127,197 | $ | 55,128 | $ | 201,500 | $ | 149,162 | ||||||||
Cost of products and services sold | (22,713 | ) | (9,066 | ) | (36,194 | ) | (23,024 | ) | ||||||||
Depreciation and amortization | (7,250 | ) | (2,597 | ) | (11,771 | ) | (6,354 | ) | ||||||||
Finance income | 438 | 443 | 568 | 590 | ||||||||||||
Finance costs | (312 | ) | (1,605 | ) | (571 | ) | (2,144 | ) | ||||||||
Other expense | (4,913 | ) | (6,919 | ) | (14,643 | ) | (4,956 | ) | ||||||||
Income tax expense | (18,158 | ) | (7,998 | ) | (28,001 | ) | (25,046 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net earnings from continuing operations | $ | 74,289 | $ | 27,386 | $ | 110,888 | $ | 88,228 | ||||||||
Other comprehensive income | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total comprehensive income | $ | 74,289 | $ | 27,386 | $ | 110,888 | $ | 88,228 | ||||||||
|
|
|
|
|
|
|
| |||||||||
The following table reconciles the summarized financial information to the carrying amount of Cameco’s interest in JV Inkai:
| Jun 30/23 | Dec 31/22 | |||||||
Opening net assets | $ | 651,522 | $ | 571,542 | ||||
Total comprehensive income(a) | 110,888 | 278,659 | ||||||
Dividends declared | (238,086 | ) | (195,865 | ) | ||||
Impact of foreign exchange | 349 | (2,814 | ) | |||||
|
|
|
| |||||
Closing net assets | 524,673 | 651,522 | ||||||
Cameco’s share of net assets | 209,869 | 260,609 | ||||||
Consolidating adjustments(b) | (61,413 | ) | (82,275 | ) | ||||
Fair value increment(c) | 82,718 | 83,675 | ||||||
Dividends declared but not received | 5,952 | — | ||||||
Dividends in excess of ownership percentage(d) | (74,843 | ) | (48,641 | ) | ||||
Impact of foreign exchange | 469 | (2,396 | ) | |||||
|
|
|
| |||||
Carrying amount in the statement of financial position at June 30, 2023 | $ | 162,752 | $ | 210,972 | ||||
|
|
|
| |||||
| (a) | Cameco’s share of earnings from equity-accounted investee as reported on the statement of earnings does not equal its share of JV Inkai’s total comprehensive income. Cameco’s share of earnings also includes consolidating adjustments and amortization of the fair value increment. |
11
| (b) | Cameco records certain consolidating adjustments to eliminate unrealized profit, recognize deferred profit and amortize historical differences in accounting policies. The historical differences are amortized to earnings over units of production. |
| (c) | Upon restructuring, Cameco assigned fair values to the assets and liabilities of JV Inkai. This increment is amortized to earnings over units of production. |
| (d) | Cameco’s share of dividends follows its production purchase entitlements which is currently higher than its ownership interest. |
| 8. | Other liabilities |
| Jun 30/23 | Dec 31/22 | |||||||
Deferred sales | $ | 70,266 | $ | 66,845 | ||||
Derivatives [note 18] | 31,602 | 58,342 | ||||||
Accrued pension and post-retirement benefit liability | 67,858 | 66,180 | ||||||
Lease obligation [note 18] | 9,004 | 9,287 | ||||||
Product loans(a) | 120,135 | 78,094 | ||||||
Sales contracts [note 4] | 6,314 | 9,000 | ||||||
Other | 60,256 | 59,738 | ||||||
|
|
|
| |||||
| 365,435 | 347,486 | |||||||
Less current portion | (165,470 | ) | (131,324 | ) | ||||
|
|
|
| |||||
Net | $ | 199,965 | $ | 216,162 | ||||
|
|
|
| |||||
| (a) | Cameco has standby product loan facilities with various counterparties. The arrangements allow us to borrow up to 1,988,000 kgU of UF6 conversion services and 2,817,000 pounds of U3O8 by September 30, 2026 with repayment in kind up to December 31, 2026. Under the facilities, standby fees of up to 1% are payable based on the market value of the facilities and interest is payable on the market value of any amounts drawn at rates ranging from 0.5% to 2.0%. At June 30, 2023, we have 1,787,000 kgU of UF6 conversion services (December 31, 2022 – 1,529,000 kgU) drawn on the loans with repayment due by December 31 of the following years: |
| 2023 | 2024 | 2025 | 2026 | Total | ||||||||||||||||
kgU of UF6 | 589,000 | — | 287,000 | 911,000 | 1,787,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
We also have 2,067,000 pounds of U3O8 (December 31, 2022 – 1,393,000 pounds) drawn with repayment due no later than December 31 of the following years:
| 2023 | 2024 | 2025 | 2026 | Total | ||||||||||||||||
lbs of U3O8 | 1,824,000 | — | — | 243,000 | 2,067,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
The loans are recorded at Cameco’s weighted average cost of inventory.
12
| 9. | Provisions |
| Reclamation | Waste disposal | Total | ||||||||||
Beginning of year | $ | 1,061,096 | $ | 9,934 | $ | 1,071,030 | ||||||
Changes in estimates and discount rates | ||||||||||||
Capitalized in property, plant, and equipment | (21,867 | ) | — | (21,867 | ) | |||||||
Recognized in earnings | 6,342 | 35 | 6,377 | |||||||||
Provisions used during the period | (18,294 | ) | (1,233 | ) | (19,527 | ) | ||||||
Unwinding of discount | 17,441 | 167 | 17,608 | |||||||||
Impact of foreign exchange | (7,150 | ) | — | (7,150 | ) | |||||||
|
|
|
|
|
| |||||||
End of period | $ | 1,037,568 | $ | 8,903 | $ | 1,046,471 | ||||||
|
|
|
|
|
| |||||||
Current | 40,807 | 2,237 | 43,044 | |||||||||
Non-current | 996,761 | 6,666 | 1,003,427 | |||||||||
|
|
|
|
|
| |||||||
| $ | 1,037,568 | $ | 8,903 | $ | 1,046,471 | |||||||
|
|
|
|
|
| |||||||
| 10. | Share capital |
At June 30, 2023, there were 433,308,237 common shares outstanding. Options in respect of 2,263,804 shares are outstanding under the stock option plan and are exercisable up to 2027. For the quarter ended June 30, 2023, there were 276,050 options that were exercised resulting in the issuance of shares (2022 – 33,787). For the six months ended June 30, 2023, there were 789,767 options exercised that resulted in the issuance of shares (2022 – 377,572).
| 11. | 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 a consumer price index. The Company’s contracts contain either one of these pricing mechanisms or a combination of the two. There is no variable consideration in the contracts 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 tables summarize Cameco’s sales disaggregated by geographical region and contract type and includes a reconciliation to Cameco’s reportable segments (note 19):
For the three months ended June 30, 2023
| Uranium | Fuel services | Other | Total | |||||||||||||
Customer geographical region | ||||||||||||||||
Americas | $ | 199,356 | $ | 86,870 | $ | 220 | $ | 286,446 | ||||||||
Europe | 76,895 | 26,375 | — | 103,270 | ||||||||||||
Asia | 92,057 | 214 | — | 92,271 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 368,308 | $ | 113,459 | $ | 220 | $ | 481,987 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Contract type | ||||||||||||||||
Fixed-price | $ | 106,139 | $ | 111,514 | $ | 220 | $ | 217,873 | ||||||||
Market-related | 262,169 | 1,945 | — | 264,114 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 368,308 | $ | 113,459 | $ | 220 | $ | 481,987 | |||||||||
|
|
|
|
|
|
|
| |||||||||
13
For the three months ended June 30, 2022
| Uranium | Fuel services | Other | Total | |||||||||||||
Customer geographical region | ||||||||||||||||
Americas | $ | 257,898 | $ | 84,504 | $ | 8,654 | $ | 351,056 | ||||||||
Europe | 53,476 | 9,955 | 2,769 | 66,200 | ||||||||||||
Asia | 135,852 | 4,469 | — | 140,321 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 447,226 | $ | 98,928 | $ | 11,423 | $ | 557,577 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Contract type | ||||||||||||||||
Fixed-price | $ | 158,377 | $ | 97,206 | $ | 11,423 | $ | 267,006 | ||||||||
Market-related | 288,849 | 1,722 | — | 290,571 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 447,226 | $ | 98,928 | $ | 11,423 | $ | 557,577 | |||||||||
|
|
|
|
|
|
|
| |||||||||
For the six months ended June 30, 2023
| Uranium | Fuel services | Other | Total | |||||||||||||
Customer geographical region | ||||||||||||||||
Americas | $ | 433,401 | $ | 153,040 | $ | 447 | $ | 586,888 | ||||||||
Europe | 255,037 | 45,566 | — | 300,603 | ||||||||||||
Asia | 274,218 | 7,252 | — | 281,470 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 962,656 | $ | 205,858 | $ | 447 | $ | 1,168,961 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Contract type | ||||||||||||||||
Fixed-price | $ | 307,865 | $ | 203,913 | $ | 447 | $ | 512,225 | ||||||||
Market-related | 654,791 | 1,945 | — | 656,736 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 962,656 | $ | 205,858 | $ | 447 | $ | 1,168,961 | |||||||||
|
|
|
|
|
|
|
| |||||||||
For the six months ended June 30, 2022
| Uranium | Fuel services | Other | Total | |||||||||||||
Customer geographical region | ||||||||||||||||
Americas | $ | 415,436 | $ | 138,775 | $ | 8,654 | $ | 562,865 | ||||||||
Europe | 134,358 | 23,069 | 2,769 | 160,196 | ||||||||||||
Asia | 219,804 | 12,750 | — | 232,554 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 769,598 | $ | 174,594 | $ | 11,423 | $ | 955,615 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Contract type | ||||||||||||||||
Fixed-price | $ | 288,058 | $ | 172,872 | $ | 11,423 | $ | 472,353 | ||||||||
Market-related | 481,540 | 1,722 | — | 483,262 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 769,598 | $ | 174,594 | $ | 11,423 | $ | 955,615 | |||||||||
|
|
|
|
|
|
|
| |||||||||
14
| 12. | Finance costs |
| Three months ended | Six months ended | |||||||||||||||
| Jun 30/23 | Jun 30/22 | Jun 30/23 | Jun 30/22 | |||||||||||||
Interest on long-term debt | $ | 10,480 | $ | 9,940 | $ | 20,857 | $ | 19,742 | ||||||||
Unwinding of discount on provisions | 8,269 | 6,539 | 17,608 | 11,672 | ||||||||||||
Other charges | 3,995 | 3,889 | 7,877 | 7,685 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 22,744 | $ | 20,368 | $ | 46,342 | $ | 39,099 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| 13. | Other income (expense) |
| Three months ended | Six months ended | |||||||||||||||
| Jun 30/23 | Jun 30/22 | Jun 30/23 | Jun 30/22 | |||||||||||||
Bargain purchase gain [note 4] | — | 22,802 | — | 22,802 | ||||||||||||
Foreign exchange gains (losses) | (43,578 | ) | 21,372 | (46,163 | ) | 17,113 | ||||||||||
Other | 545 | (2 | ) | 545 | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | (43,033 | ) | $ | 44,172 | $ | (45,618 | ) | $ | 39,915 | ||||||
|
|
|
|
|
|
|
| |||||||||
| 14. | Income taxes |
| Three months ended | Six months ended | |||||||||||||||
| Jun 30/23 | Jun 30/22 | Jun 30/23 | Jun 30/22 | |||||||||||||
Earnings (loss) before income taxes | ||||||||||||||||
Canada | $ | 61,832 | $ | 134,002 | $ | 211,451 | $ | 165,739 | ||||||||
Foreign | (24,781 | ) | (23,487 | ) | (19,532 | ) | (16,359 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 37,051 | $ | 110,515 | $ | 191,919 | $ | 149,380 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Current income taxes | ||||||||||||||||
Canada | $ | 3,452 | $ | 3,495 | $ | 15,337 | $ | 3,324 | ||||||||
Foreign | 1,805 | 3,887 | 4,228 | 4,945 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 5,257 | $ | 7,382 | $ | 19,565 | $ | 8,269 | |||||||||
Deferred income taxes (recovery) | ||||||||||||||||
Canada | $ | 18,349 | $ | 21,204 | $ | 39,157 | $ | 18,321 | ||||||||
Foreign | (248 | ) | (2,008 | ) | 540 | (1,431 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 18,101 | $ | 19,196 | $ | 39,697 | $ | 16,890 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Income tax expense | $ | 23,358 | $ | 26,578 | $ | 59,262 | $ | 25,159 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Cameco has recorded $944,375,000 of deferred tax assets (December 31, 2022 – $984,071,000). 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.
15
Canada
On February 18, 2021, the Supreme Court of Canada (Supreme Court) dismissed Canada Revenue Agency’s (CRA) application for leave to appeal the June 26, 2020 decision of the Federal Court of Appeal (Court of Appeal). The dismissal means that the dispute for the 2003, 2005 and 2006 tax years is fully and finally resolved in the Company’s favour.
In September 2018, the Tax Court of Canada (Tax Court) ruled that the marketing and trading structure involving foreign subsidiaries, as well as the related transfer pricing methodology used for certain intercompany uranium sales and purchasing agreements, were in full compliance with Canadian law for the tax years in question. Management believes the principles in the decision apply to all subsequent tax years, and that the ultimate resolution of those years will not be material to Cameco’s financial position, results of operations or liquidity in the year(s) of resolution. Due to a revised CRA reassessment position for certain years, CRA has released approximately $86,000,000 of cash held on account (see note 6).
As CRA continues to pursue reassessments for tax years subsequent to 2006, Cameco is utilizing its appeal rights under Canadian federal and provincial tax rules.
| 15. | 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 2023 was 432,974,012 (2022 – 398,308,899).
| Three months ended | Six months ended | |||||||||||||||
| Jun 30/23 | Jun 30/22 | Jun 30/23 | Jun 30/22 | |||||||||||||
Basic earnings per share computation | ||||||||||||||||
Net earnings attributable to equity holders | $ | 13,693 | $ | 83,979 | $ | 132,662 | $ | 124,329 | ||||||||
Weighted average common shares outstanding | 433,096 | 398,418 | 432,974 | 398,364 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Basic earnings per common share | $ | 0.03 | �� | $ | 0.21 | $ | 0.31 | $ | 0.31 | |||||||
|
|
|
|
|
|
|
| |||||||||
Diluted earnings per share computation | ||||||||||||||||
Net earnings attributable to equity holders | $ | 13,693 | $ | 83,979 | $ | 132,662 | $ | 124,329 | ||||||||
Weighted average common shares outstanding | 433,096 | 398,418 | 432,974 | 398,364 | ||||||||||||
Dilutive effect of stock options | 1,522 | 1,587 | 1,745 | 1,588 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Weighted average common shares outstanding, assuming dilution | 434,618 | 400,005 | 434,719 | 399,952 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted earnings per common share | $ | 0.03 | $ | 0.21 | $ | 0.31 | $ | 0.31 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| 16. | Statements of cash flows |
| Three months ended | Six months ended | |||||||||||||||
| Jun 30/23 | Jun 30/22 | Jun 30/23 | Jun 30/22 | |||||||||||||
Changes in non-cash working capital: | ||||||||||||||||
Accounts receivable | $ | (106,445 | ) | $ | (4,234 | ) | $ | (71,408 | ) | $ | 122,940 | |||||
Inventories | (129,521 | ) | (39,245 | ) | 71,170 | (8,876 | ) | |||||||||
Supplies and prepaid expenses | (15,688 | ) | (17,073 | ) | (26,601 | ) | (12,956 | ) | ||||||||
Accounts payable and accrued liabilities | 50,473 | (89,251 | ) | (117,570 | ) | (99,204 | ) | |||||||||
Reclamation payments | (10,634 | ) | (6,976 | ) | (19,527 | ) | (13,439 | ) | ||||||||
Other | (1,860 | ) | 388 | (5,494 | ) | (5,102 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Other operating items | $ | (213,675 | ) | $ | (156,391 | ) | $ | (169,430 | ) | $ | (16,637 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
16
| 17. | Share-based compensation plans |
| A. | Stock option plan |
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 31,328,544 shares have been issued. As of June 30, 2023, the total number of stock options held by the participants was 2,263,804 (December 31, 2022 – 3,053,571).
| B. | Executive performance share unit (PSU) |
During the quarter, the Company granted 232,160 PSUs. The weighted average fair value per unit at the date of issue was $37.30. As of June 30, 2023, the total number of PSUs held by the participants was 828,674 (December 31, 2022 – 1,255,255).
| C. | Restricted share unit (RSU) |
During the quarter, the Company granted 292,553 RSUs. The weighted average fair value per unit at the date of issue was $37.30. As of June 30, 2023, the total number of RSUs held by the participants was 817,696 (December 31, 2022 – 1,131,493).
| D. | Deferred share unit (DSU) |
As of June 30, 2023, the total number of DSUs held by participating directors was 556,122 (December 31, 2022 – 547,304).
Equity-settled plans
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 30/23 | Jun 30/22 | Jun 30/23 | Jun 30/22 | |||||||||||||
Restricted share unit plan | $ | 912 | $ | 769 | $ | 1,761 | $ | 1,534 | ||||||||
Stock option plan | — | — | — | 45 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 912 | 769 | 1,761 | 1,579 | |||||||||||||
Employee share ownership plan(a) | 1,133 | 939 | 2,046 | 1,711 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 2,045 | $ | 1,708 | $ | 3,807 | $ | 3,290 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| (a) | The total number of shares purchased in 2023 with Company contributions was 55,807 (2022 – 56,196). |
Cash-settled plans
During the period, the Company recognized the following expenses (income) under these plans:
| Three months ended | Six months ended | |||||||||||||||
| Jun 30/23 | Jun 30/22 | Jun 30/23 | Jun 30/22 | |||||||||||||
Performance share unit plan | $ | 3,117 | $ | (2,898 | ) | $ | 11,245 | $ | 5,840 | |||||||
Deferred share unit plan | 3,371 | (5,076 | ) | 5,946 | 75 | |||||||||||
Restricted share unit plan | 3,270 | (1,648 | ) | 9,403 | 3,321 | |||||||||||
Phantom stock option plan | 504 | (772 | ) | 988 | 338 | |||||||||||
Phantom restricted share unit plan | 168 | (30 | ) | 308 | 93 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 10,430 | $ | (10,424 | ) | $ | 27,890 | $ | 9,667 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Expenses related to share-based compensation plans are primarily included as part of administration expense in the statement of earnings.
17
| 18. | Financial instruments and related risk management |
| A. | Accounting classifications |
The following tables summarize the carrying amounts and accounting classifications of Cameco’s financial instruments at the reporting date:
At June 30, 2023
| FVTPL | Amortized cost | Total | ||||||||||
Financial assets | ||||||||||||
Cash and cash equivalents(a) | $ | — | $ | 2,453,960 | $ | 2,453,960 | ||||||
Short-term investments | — | 19,444 | 19,444 | |||||||||
Accounts receivable | — | 275,628 | 275,628 | |||||||||
Derivative assets [note 6] | ||||||||||||
Foreign currency contracts | 16,949 | — | 16,949 | |||||||||
|
|
|
|
|
| |||||||
| 16,949 | 2,749,032 | 2,765,981 | ||||||||||
|
|
|
|
|
| |||||||
Financial liabilities | ||||||||||||
Accounts payable and accrued liabilities | — | 265,062 | 265,062 | |||||||||
Lease obligation [note 8] | — | 9,004 | 9,004 | |||||||||
Current portion of long-term debt | — | 499,614 | 499,614 | |||||||||
Derivative liabilities [note 8] | ||||||||||||
Foreign currency contracts | 23,567 | — | 23,567 | |||||||||
Interest rate contracts | 8,035 | — | 8,035 | |||||||||
Long-term debt | — | 497,774 | 497,774 | |||||||||
|
|
|
|
|
| |||||||
| 31,602 | 1,271,454 | 1,303,056 | ||||||||||
|
|
|
|
|
| |||||||
Net | (14,653 | ) | 1,477,578 | 1,462,925 | ||||||||
|
|
|
|
|
| |||||||
At December 31, 2022
| FVTPL | Amortized cost | Total | ||||||||||
Financial assets | ||||||||||||
Cash and cash equivalents | $ | — | $ | 1,143,674 | $ | 1,143,674 | ||||||
Short-term investments | — | 1,138,174 | 1,138,174 | |||||||||
Accounts receivable | — | 183,944 | 183,944 | |||||||||
Derivative assets [note 6] | ||||||||||||
Foreign currency contracts | 2,807 | — | 2,807 | |||||||||
|
|
|
|
|
| |||||||
| $ | 2,807 | $ | 2,465,792 | $ | 2,468,599 | |||||||
|
|
|
|
|
| |||||||
Financial liabilities | ||||||||||||
Accounts payable and accrued liabilities | $ | — | $ | 374,714 | $ | 374,714 | ||||||
Lease obligation [note 8] | — | 9,287 | 9,287 | |||||||||
Derivative liabilities [note 8] | ||||||||||||
Foreign currency contracts | 51,058 | — | 51,058 | |||||||||
Interest rate contracts | 7,284 | — | 7,284 | |||||||||
Long-term debt | — | 997,000 | 997,000 | |||||||||
|
|
|
|
|
| |||||||
| 58,342 | 1,381,001 | 1,439,343 | ||||||||||
|
|
|
|
|
| |||||||
Net | $ | (55,535 | ) | $ | 1,084,791 | $ | 1,029,256 | |||||
|
|
|
|
|
| |||||||
18
| (a) | Cameco has pledged $244,983,000 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. |
| 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.
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 level 2 fair values of Cameco’s financial instruments that are measured at fair value:
As at June 30, 2023
| Carrying value | Fair Value | |||||||
Derivative assets [note 6] | ||||||||
Foreign currency contracts | $ | 16,949 | $ | 16,949 | ||||
Current portion of long-term debt | (499,614 | ) | (500,000 | ) | ||||
Derivative liabilities [note 8] | ||||||||
Foreign currency contracts | (23,567 | ) | (23,567 | ) | ||||
Interest rate contracts | (8,035 | ) | (8,035 | ) | ||||
Long-term debt | (497,774 | ) | (515,981 | ) | ||||
|
|
|
| |||||
Net | $ | (1,012,041 | ) | $ | (1,030,634 | ) | ||
|
|
|
| |||||
19
As at December 31, 2022
| Carrying value | Fair Value | |||||||
Derivative assets [note 6] | ||||||||
Foreign currency contracts | $ | 2,807 | $ | 2,807 | ||||
Derivative liabilities [note 8] | ||||||||
Foreign currency contracts | (51,058 | ) | (51,058 | ) | ||||
Interest rate contracts | (7,284 | ) | (7,284 | ) | ||||
Long-term debt | (997,000 | ) | (1,014,010 | ) | ||||
|
|
|
| |||||
Net | $ | (1,052,535 | ) | $ | (1,069,545 | ) | ||
|
|
|
| |||||
The preceding tables exclude fair value information for financial instruments whose carrying amounts are a reasonable approximation of fair value. The carrying value of Cameco’s cash and cash equivalents, short-term investments, accounts receivable, and accounts payable and accrued liabilities approximates its fair value as a result of the short-term nature of the instruments.
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 and long-term debt at fair value. Derivative financial instruments and current and long-term debt are classified as recurring level 2 fair value measurements.
The fair value of Cameco’s long-term debt is determined using quoted market yields as of the reporting date, which ranged from 3.2% to 5.0% (2022 – 3.3% to 4.2%).
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.
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.
20
| D. | Derivatives |
The following table summarizes the fair value of derivatives and classification on the consolidated statements of financial position:
| Jun 30/23 | Dec 31/22 | |||||||
Non-hedge derivatives: | ||||||||
Foreign currency contracts | $ | (6,618 | ) | $ | (48,251 | ) | ||
Interest rate contracts | (8,035 | ) | (7,284 | ) | ||||
|
|
|
| |||||
Net | $ | (14,653 | ) | $ | (55,535 | ) | ||
|
|
|
| |||||
Classification: | ||||||||
Current portion of long-term receivables, investments and other [note 6] | $ | 5,356 | $ | 1,331 | ||||
Long-term receivables, investments and other [note 6] | 11,593 | 1,476 | ||||||
Current portion of other liabilities [note 8] | (16,325 | ) | (25,913 | ) | ||||
Other liabilities [note 8] | (15,277 | ) | (32,429 | ) | ||||
|
|
|
| |||||
Net | $ | (14,653 | ) | $ | (55,535 | ) | ||
|
|
|
| |||||
The following table summarizes the different components of the gain (loss) on derivatives included in net earnings (loss):
| Three months ended | Six months ended | |||||||||||||||
| Jun 30/23 | Jun 30/22 | Jun 30/23 | Jun 30/22 | |||||||||||||
Non-hedge derivatives: | ||||||||||||||||
Foreign currency contracts | $ | 31,346 | $ | (26,219 | ) | $ | 32,974 | $ | (12,855 | ) | ||||||
Interest rate contracts | (2,617 | ) | (2,004 | ) | (1,975 | ) | (5,433 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net | $ | 28,729 | $ | (28,223 | ) | $ | 30,999 | $ | (18,288 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
| 19. | Segmented information |
Cameco 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 as well as operational readiness costs for our operations that are resuming operations. Operational readiness costs include costs to complete critical projects, perform maintenance readiness checks, and recruit and train sufficient mine and mill personnel before beginning operations. Cameco expensed $12,139,000 of care and maintenance costs during the second quarter of 2023 (2022 – $57,605,000 of care and maintenance and operational readiness costs). For the six months ended June 30, 2023, Cameco expensed $25,693,000 (2022 – $111,732,000 of care and maintenance costs).
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.
21
Business segments
For the three months ended June 30, 2023
| Uranium | Fuel services | Other | Total | |||||||||||||
Revenue | $ | 368,308 | $ | 113,459 | $ | 220 | $ | 481,987 | ||||||||
Expenses | ||||||||||||||||
Cost of products and services sold | 264,491 | 65,671 | — | 330,162 | ||||||||||||
Depreciation and amortization | 31,752 | 8,767 | 1,333 | 41,852 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Cost of sales | 296,243 | 74,438 | 1,333 | 372,014 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit (loss) | 72,065 | 39,021 | (1,113 | ) | 109,973 | |||||||||||
Administration | — | — | 57,048 | 57,048 | ||||||||||||
Exploration | 3,878 | — | — | 3,878 | ||||||||||||
Research and development | — | — | 5,107 | 5,107 | ||||||||||||
Other operating expense (income) | 8,535 | (146 | ) | — | 8,389 | |||||||||||
Gain (loss) on disposal of assets | (36 | ) | 312 | — | 276 | |||||||||||
Finance costs | — | — | 22,744 | 22,744 | ||||||||||||
Gain on derivatives | — | — | (28,729 | ) | (28,729 | ) | ||||||||||
Finance income | — | — | (31,098 | ) | (31,098 | ) | ||||||||||
Share of earnings from equity-accounted investee | (7,726 | ) | — | — | (7,726 | ) | ||||||||||
Other expense (income) | (545 | ) | — | 43,578 | 43,033 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Earnings (loss) before income taxes | 67,959 | 38,855 | (69,763 | ) | 37,051 | |||||||||||
Income tax expense | 23,358 | |||||||||||||||
|
| |||||||||||||||
Net earnings | $ | 13,693 | ||||||||||||||
|
| |||||||||||||||
For the three months ended June 30, 2022
| Uranium | Fuel services | Other | Total | |||||||||||||
Revenue | $ | 447,226 | $ | 98,928 | $ | 11,423 | $ | 557,577 | ||||||||
Expenses | ||||||||||||||||
Cost of products and services sold | 343,861 | 50,741 | 8,847 | 403,449 | ||||||||||||
Depreciation and amortization | 49,576 | 7,762 | 3,859 | 61,197 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Cost of sales | 393,437 | 58,503 | 12,706 | 464,646 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit (loss) | 53,789 | 40,425 | (1,283 | ) | 92,931 | |||||||||||
Administration | — | — | 23,847 | 23,847 | ||||||||||||
Exploration | 2,304 | — | — | 2,304 | ||||||||||||
Research and development | — | — | 3,365 | 3,365 | ||||||||||||
Other operating income | (18,891 | ) | (1,777 | ) | — | (20,668 | ) | |||||||||
Loss on disposal of assets | 19 | 113 | — | 132 | ||||||||||||
Finance costs | — | — | 20,368 | 20,368 | ||||||||||||
Loss on derivatives | — | — | 28,223 | 28,223 | ||||||||||||
Finance income | — | — | (4,478 | ) | (4,478 | ) | ||||||||||
Share of earnings from equity-accounted investee | (26,505 | ) | — | — | (26,505 | ) | ||||||||||
Other income | (22,802 | ) | — | (21,370 | ) | (44,172 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Earnings (loss) before income taxes | 119,664 | 42,089 | (51,238 | ) | 110,515 | |||||||||||
Income tax expense | 26,578 | |||||||||||||||
|
| |||||||||||||||
Net earnings | $ | 83,937 | ||||||||||||||
|
| |||||||||||||||
22
For the six months ended June 30, 2023
| Uranium | Fuel services | Other | Total | |||||||||||||
Revenue | $ | 962,656 | $ | 205,858 | $ | 447 | $ | 1,168,961 | ||||||||
Expenses | ||||||||||||||||
Cost of products and services sold | 654,509 | 119,800 | (725 | ) | 773,584 | |||||||||||
Depreciation and amortization | 97,845 | 16,317 | 4,063 | 118,225 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Cost of sales | 752,354 | 136,117 | 3,338 | 891,809 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit (loss) | 210,302 | 69,741 | (2,891 | ) | 277,152 | |||||||||||
Administration | — | — | 121,059 | 121,059 | ||||||||||||
Exploration | 10,157 | — | — | 10,157 | ||||||||||||
Research and development | — | — | 9,339 | 9,339 | ||||||||||||
Other operating expense (income) | 6,779 | (437 | ) | — | 6,342 | |||||||||||
Gain (loss) on disposal of assets | (36 | ) | 312 | — | 276 | |||||||||||
Finance costs | — | — | 46,342 | 46,342 | ||||||||||||
Gain on derivatives | — | — | (30,999 | ) | (30,999 | ) | ||||||||||
Finance income | — | — | (58,639 | ) | (58,639 | ) | ||||||||||
Share of earnings from equity-accounted investee | (64,262 | ) | — | — | (64,262 | ) | ||||||||||
Other expense (income) | (545 | ) | — | 46,163 | 45,618 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Earnings (loss) before income taxes | 258,209 | 69,866 | (136,156 | ) | 191,919 | |||||||||||
Income tax expense | 59,262 | |||||||||||||||
|
| |||||||||||||||
Net earnings | $ | 132,657 | ||||||||||||||
|
| |||||||||||||||
For the six months ended June 30, 2022
| Uranium | Fuel services | Other | Total | |||||||||||||
Revenue | $ | 769,598 | $ | 174,594 | $ | 11,423 | $ | 955,615 | ||||||||
Expenses | ||||||||||||||||
Cost of products and services sold | 610,794 | 92,089 | 8,177 | 711,060 | ||||||||||||
Depreciation and amortization | 80,781 | 15,940 | 5,077 | 101,798 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Cost of sales | 691,575 | 108,029 | 13,254 | 812,858 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit (loss) | 78,023 | 66,565 | (1,831 | ) | 142,757 | |||||||||||
Administration | — | — | 81,627 | 81,627 | ||||||||||||
Exploration | 4,922 | — | — | 4,922 | ||||||||||||
Research and development | — | — | 6,166 | 6,166 | ||||||||||||
Other operating income | (37,415 | ) | (3,226 | ) | — | (40,641 | ) | |||||||||
Gain on disposal of assets | (5 | ) | (207 | ) | — | (212 | ) | |||||||||
Finance costs | — | — | 39,099 | 39,099 | ||||||||||||
Loss on derivatives | — | — | 18,288 | 18,288 | ||||||||||||
Finance income | — | — | (6,429 | ) | (6,429 | ) | ||||||||||
Share of earnings from equity-accounted investee | (69,528 | ) | — | — | (69,528 | ) | ||||||||||
Other income | (22,802 | ) | — | (17,113 | ) | (39,915 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Earnings (loss) before income taxes | 202,851 | 69,998 | (123,469 | ) | 149,380 | |||||||||||
Income tax expense | 25,159 | |||||||||||||||
|
| |||||||||||||||
Net earnings | $ | 124,221 | ||||||||||||||
|
| |||||||||||||||
23
| 20. | Related parties |
Cameco purchases uranium concentrate from JV Inkai. For the quarter ended June 30, 2023, Cameco had purchases of $93,430,000 ($68,394,000 (US)) (2022 – Cameco recorded physical weight adjustments of $948,000 ($749,000 (US)) related to the finalization of prior period deliveries). For the six-month period ended June 30, 2023, purchases were $93,430,000 ($68,394,000 (US)) (2022 – $44,460,000 ($34,965,000 (US))).
For the quarter ended June 30, 2023, Cameco received a cash dividend from JV Inkai of $113,642,000 ($83,059,000 (US)) (2022 – $104,943,000 ($82,933,000 (US))). For the six months ended June 30, 2023, cash dividends received were $113,642,000 ($83,059,000 (US)) (2022 – $104,943,000 ($82,933,000 (US))).
| 21. | Commitment |
On October 11, 2022, Cameco announced that it had entered into a strategic partnership with Brookfield Renewable Partners (Brookfield Renewable) and its institutional partners to acquire Westinghouse Electric Company (Westinghouse), one of the world’s largest nuclear services businesses. Brookfield Renewable, with its institutional partners, will own a 51% interest in Westinghouse and Cameco will own 49%.
Cameco’s share of the purchase price will be funded with a combination of cash, debt and equity. In 2022, the Company secured a bridge loan facility of $280,000,000 (US) as well as $600,000,000 (US) in term loans. The bridge facility, if funded, will mature 364 days after the acquisition closing date and the term loans, which consist of two $300,000,000 (US) tranches, are expected to mature two and three years after the closing of the acquisition. In addition, Cameco issued 34,057,250 common shares pursuant to a public offering.
Transaction costs of $51,700,000 have been included in supplies and prepaid expenses in the consolidated statement of financial position as at June 30, 2023 (December 31, 2022 – $41,227,000). Under the terms of the agreement, if the transaction does not close, Cameco is entitled to recover a portion of these costs.
24