Cameco's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Cameco (CCJ)

Q4 2011 Earnings Call

February 10, 2012 11:00 am ET


Rachelle Girard -

Timothy S. Gitzel - Chief Executive Officer, President and Director

Kenneth A. Seitz - Senior Vice President of Marketing and Business Development

Grant E. Isaac - Chief Financial Officer and Senior Vice President

Robert A. Steane - Chief Operating Officer and Senior Vice President


Terence Ortslan

John Hughes - Desjardins Securities Inc., Research Division

Unknown Analyst

Greg Barnes - TD Securities Inc., Fixed Income Research

Daniel Rohr - Morningstar Inc., Research Division

Borden Putnam

Greg Barnes - TD Securities Equity Research

Brian MacArthur - UBS Investment Bank, Research Division



Good day, ladies and gentlemen, and welcome to the Cameco Corp. Fourth Quarter and Year-End Results Conference Call. I would now like to turn the meeting over to Ms. Rachelle Girard, Director, Investor Relations. Please go ahead, Ms. Girard.

Rachelle Girard

Thank you, operator, and good morning, everyone. Welcome to Cameco's fourth quarter conference call to discuss our financial results. Thank you for joining us. With us today are, 4 of Cameco's senior management team. They are Tim Gitzel, President and CEO; Bob Steane, Senior Vice President and Chief Operating Officer; Grant Isaac, Senior Vice President and Chief Financial Officer; and Ken Seitz, Senior Vice President, Marketing and Business Development. We are also joined by our colleague, Bob Lillie.

Tim will begin with comments on Cameco's results for the fourth quarter and for 2011, and on how he sees the future for Cameco and the nuclear industry. Then we will open it up for your questions.

Today's conference call is open to all members of the investment community including the media. [Operator Instructions] Please note that this conference call will include forward-looking information, which is based on a number of assumptions, and actual results could differ materially. Please refer to our Annual Information Form and MD&A for more information about the factors that could cause these different results and the assumptions we have made. With that, I will turn it over to Tim.

Timothy S. Gitzel

Well, thank you, Rachelle, and welcome to everyone who has joined us on the call today as we discuss Cameco's fourth quarter results, our progress through 2011 and our view of the future. We have several pieces of good news to report.

Just yesterday, it was announced that Canada and China have agreed on a protocol to allow deliveries of Canadian uranium concentrate to the world's fastest-growing nuclear market. Once ratified, this will help us build our position as a key uranium supplier to China and grow employment and investment in Canada's uranium mining industry. We commend the governments of both countries for getting this done.

Also announced yesterday was the news that the U.S. Nuclear Regulatory Commission granted Southern Co. a combined construction and operating license for 2 new units at the Volvo plant in Georgia. These are the first new reactors to be approved in the United States for more than 30 years.

Turning now to Cameco's fourth quarter and annual results. Well, 2011 was a year of global economic, political and environmental challenges. In addition, the nuclear industry has felt the effects of the events in Japan in the way of new build slowdowns and lower uranium prices. But it was also a year of record performance for Cameco.

For us, it has been business as usual, and in some ways, even a little better than usual. Our safety record was, once again, very strong. A number of our operations achieved important safety milestones. Cigar Lake reached 2 years without a lost-time injury, Crow Butte reached 4 years and Blind River reached an impressive 5 years without a lost-time injury. Safety is an important part of our commitment to operational excellence and we have worked hard to ensure a strong safety culture permeates the entire organization.

2011 was also strong from a financial and operational perspective. We saw high uranium sales volumes and record realized prices, which combined to generate almost $2.4 billion in revenue for our nuclear business, 12% higher than in 2010 and a record for the company. $1.6 billion of that was from our Uranium segment.

As we said throughout the year, our uranium sales were heavily weighted to the fourth quarter this year, and so we achieved record results for the quarter as well.

Quarterly revenue from our Uranium segment reached a record $731 million from 13.8 million pounds of sales volume. Overall, consolidated revenue for the quarter was another record at $977 million. Production was just as strong, coming in 3% higher than we had planned for 2011.

McArthur River and Rabbit Lake performed particularly well. Our share of production from McArthur River was 5% higher than planned and matched the record production achieved in 2010.

At Rabbit Lake, production was 6% higher than our plan, at 3.8 million pounds. Production at Inkai, however, was down from 2010 levels. We had previously benefited from some built-up inventory that has now been drawn down, as well as the higher uranium grades that are associated with new wells, which are now beginning to mature.

A key highlight for Inkai this year was the signing of a memorandum of agreement to increase total annual production from 3.9 million pounds to 5.2 million pounds. At Cigar Lake, we made significant advances in moving the project toward production, including completing remediation of the underground, resuming construction and breaking through with the second shaft on the 4E level.

In the MD&A, we announced some changes to the Cigar Lake project that will be detailed in the updated technical report to be released later this month. The report incorporates more comprehensive knowledge of the geology of the ore body and changes we have made over the year to improve the project such as surface freeze and the milling agreement we signed to have the ore processed at the McClean Lake mill.

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