Cameco Corporation (CCO) 2005年年度報告「TSX」.pdf

《Cameco Corporation (CCO) 2005年年度報告「TSX」.pdf》由會員分享，可在線閱讀，更多相關《Cameco Corporation (CCO) 2005年年度報告「TSX」.pdf（108頁珍藏版）》請在三個皮匠報告上搜索。

1、The Future is Nuclear2005 ANNUAL REPORTBridging the GeneProducing affordable,clean energy while achieving a sustainable balance between increasing electricity demand and environmental stewardship this is the promise and potential of a future powered by nuclear energy.Its why a new generation is opti

2、ng for nuclear as a reliable and secure energy choice.Cameco is poised and ready to support the new generation.We are a company with the expertise and capacity to deliver the benefits of nuclear energy starting right now.As the worlds largest uranium producer,Cameco already provides about 20%of glob

3、al uranium production from the richest mines on the planet.We are also expanding our production by developing two new mines.The company is looking ration Gap OUR PROFILECameco,with its head office in Saskatoon,Saskatchewan,is the worlds largest uranium producer as well as a significant supplier of c

4、onversion services.The companys competitive position is based on its controlling ownership of the worlds largest high-grade reserves and low-cost operations.Camecos uranium products are used to generate clean electricity in nuclear power plants around the world,including Ontario where the company is

5、 a partner in North Americas largest nuclear electricity generating facility.The company also explores for uranium in North America and Australia,while holding a majority interest in a mid-tier gold company.Camecos shares trade on the Toronto and New York stock exchanges.INSIDEGovernance 02Leadershi

6、p 04Objectives 10Analysis 12Reserves 59Financial Information 66to the long-term nuclear future,seeking new reserves through a global exploration program with emphasis in North America and Australia.In nuclear fuel production,Cameco has 38%of the western worlds UF6 conversion capacity,and provides co

7、nversion services and fuel fabrication for Candu reactors.Power production rounds out Camecos nuclear focus,with 1,000 MW of nuclear power in Ontario.A new generation,attentive to the wisdom of scientists,environmentalists and consumers,understands the future is nuclear.Cameco knows nuclear and is r

8、eady for that future.The choice being made by a new generation makes Cameco the nuclear investment of choice.Our future is clear.We at Cameco take corporate governance very seriously.Has our level of integrity and morality increased as a result of all the recent legislation and regulation concerning

9、 governance?I dont believe so because it has always been our priority to operate at the highest levels.But,over the past several years we have formalized the policies and procedures required,and disseminated them throughout our entire organization to ensure there is a clear understanding of our inte

10、ntions and expectations.Continual review and improvement of our policies and procedures ensure we remain on course to achieve our objectives.The culmination of these efforts places an added burden on our talented employees and on board members.We do,however,feel that these efforts are worthwhile and

11、 are good for Camecos business and bottom line.I am especially pleased by the boards dedication to ensuring Cameco has outstanding leadership in its various levels of management,that succession planning is continually monitored,and that employees throughout the organization are motivated and rewarde

12、d to create shareholder value.The energy industry is in the midst of a renaissance and uranium is becoming a vital piece of the worlds future energy needs.Cameco,as the worlds largest uranium producer,has amassed an extraordinary reserve base and is ready to respond to the worlds need for safe,relia

13、ble and clean electricity.“Cameco,through the solid and strategic efforts of the past,is well positioned to continue growing towards our vision to be a dominant nuclear energy company.”CHAIR VICTOR J.ZALESCHUKC A M ECO A N N U A L R E P O RT2005 From Hong Kong to Toronto,nuclear energy brightens cit

14、ies around the world.In 2007,the Cigar Lake mine will add another low-cost,high-grade source of uranium to Camecos already impressive production portfolio.L E T T E RF R O MT H EC H A I RThe market has demonstrated its confi-dence in our ability to deliver results as shown by our share performance o

15、ver the past year.Our continuing belief that we are on track to grow our business led us to the decision to split the stock and increase the dividend on February 17,2006.I would also like to take this opportunity to welcome our new board member,Mr.John Clappison,who recently retired as managing part

16、ner of PricewaterhouseCoopers Toronto office.Mr.Clappison brings a wealth of business and accounting experience,as well asleadership skills to Cameco.We look forward to working with Mr.Clappison for many years to come.Each new year brings new business challenges,as well as the desire to outperform t

17、he previous year.Cameco,through the solid and strategic efforts of the past,is well positioned to continue growing towards our vision to be a dominant nuclear energy company.Victor J.ZaleschukChairMARCH 17,2006Our VisionCameco will be a dominant nuclear energy company producing uranium fuel and gene

18、rating clean electricity.Our MissionOur mission is to bring the multiple benefits of nuclear energy to the world.We are a global supplier of uranium fuel and a growing supplier of clean electricity.We deliver superior shareholder value by combining our extraordinary assets,exceptional employee exper

19、tise and unique industry knowledge to meet the worlds rising demand for clean,safe and reliable energy.The key measures of our success are:a safe,healthy and rewarding workplace,a clean environment,supportive communities and outstanding financial performance.Our ValuesSAFETY AND ENVIRONMENT The safe

20、ty of people and protection of the environment are the foundations of our work.All of us share in the responsibility of continually improving the safety of our workplace and the quality of our environment.PEOPLEWe value the contribution of every employee and we treat people fairly by demonstrating o

21、ur respect for individual dignity,creativity and cultural diversity.By being open and honest we achieve the strong relationships we seek.INTEGRITYThrough personal and professional integrity,we lead by example,earn trust,honour our commitments and conduct our business ethically.EXCELLENCEWe pursue ex

22、cellence in all that we do.Through leadership,collaboration and innovation,we strive to achieve our full potential and inspire others to reach theirs.L E T T E R F R O M T H E C H A I RMonthly Share Price*(TSX$/share)02040DNOSAJJMAMFJCamecos share price increased76%in 2005.*Data reflects the stock s

23、plit on February 17,2006.03Our future is nuclear.Cameco is at the forefront of a worldwide rebirth of nuclear energy.Were leading the way,answering questions that demonstrate Cameco is poised to deliver the environmental,energy security and cost benefits nuclear power will provide.What were your suc

24、cesses and failures in 2005?This past year has been transformational for Cameco.The construction of two new,low-cost uranium mines,the utilization of excess capacity at our refining facility,the increase in conversion supply and the creation of value through a series of transactions has bolstered ou

25、r foundation for the next wave of growth.We did this in pursuit of our vision to be a dominant nuclear energy company producing uranium fuel and generating clean electricity.Equally important,we adhered to our values and to our four measures of success:a safe,healthy and rewarding workplace,a clean

26、environment,supportive communities and outstanding financial performance.During the year,Cameco met its uranium production targets,exceeded its refining objective in anticipation of supplying UO3to Springfields,but fell short of its UF6 conversion targets by about 17%.The difficulties experienced in

27、 our Port Hope conversion facility were particularly vexing as they persisted in spite of vigorous efforts by our dedicated employees to overcome them.Sales for the year were slightly above plan and new uranium and conversion contracting exceeded expectations by a wide margin in response to very str

28、ong market demand.Contracts negotiated during the year captured rising prices and will help mitigate exposure to any future market weakness while preserving price upside.All of this transpired while maintaining our exemplary safety and health record not an easy task when two major mine construction

29、projects were under way.And,while there were no significant releases to the environment,as always,improving this performance is a major focus for 2006.What are your highest priorities?Cameco is extraordinarily well blessed with abundant geographically diverse reserves,low-cost operations,good custom

30、ers and talented people.The first priority,then,is to enhance these assets,making sure that they are not taken for granted,while maximizing their potential.The best way I know to achieve this is by augmenting our leadership skills at all levels and by developing and nurturing the next generation of

31、Cameco leaders.Every aspect of our daily effort to create value involves leadership,whether it be leading a team,being innovative or finding a new level of excellence.“With the nuclear renaissance firmly under way,the industry will build on the successes of the past year.”C A M ECO A N N U A L R E P

32、 O RT2005 PRESIDENT AND CEO JERRY GRANDEYM E S S A G ET OS H A R E H O L D E R SAccordingly,we have defined the leadership characteristics we look for and promote,and we have embarked on a mission to implement them throughout the company.We will use these characteristics to help us judge our individ

33、ual and collective effectiveness and to guide our response to growth.By focusing on leadership at all levels we are already unleashing creativity and overcoming long-standing pockets of disengagement.Jobs are becoming broader in scope,more stimulating and,above all,more fun.And,importantly,by improv

34、ing our leadership skills we secure the path that advances toward our long-term vision the vision that will continue to create substantial value for all of our stakeholders.What news or events in 2006 would represent a major breakthrough for the nuclear industry?The last year was distinguished by a

35、number of astonishing developments in the world of nuclear energy developments that set the stage for additional breakthroughs in 2006.Countries representing over one-half the worlds population are now building new nuclear power plants,and several others without the benefit of nuclear energy are pla

36、nning for them.China and India are notable with their aggressive building programs to meet insatiable energy appetites.Energy legislation passed in the United States last August recognized,for the first time at a national level,the clean air benefits of nuclear energy and provided the encouragement

37、to jump-start the construction of a new generation of nuclear plants.And,remarkably,several icons of the environmental movement abandoned their anti-nuclear dogma and came out strongly in favour of an accelerated nuclear construction program to mitigate the consequences of global warming.So,with the

38、 nuclear renaissance firmly under way,I believe that a major breakthrough in 2006 could include such things as new plant designs.New plant designs will advance toward certification and additional plants will be ordered from vendors,providing irrefutable evidence that the next generation of plants ca

39、n be competitive.A number of countries with burgeoning energy demand will announce their first entry into nuclear plant construction.Already weve seen announcements from Indonesia,Vietnam and Turkey.And utilities in the US will advance their site licensing initiatives,positioning themselves to join

40、Asia and Europe in orderingnew plants.M E SSA G E T O S H A R E H O L D E R SFINANCIAL($millions except per share amounts)Revenue 1,313 1,048 25%Net earnings 218 279(22%)Earnings per share-diluted1 0.60 0.78(23%)Cash provided by operations 278 228 22%Cash flow per share1 0.80 0.67 19%Adjusted net ea

41、rnings2 211 185 14%Average uranium(U3O8)spot price for the year($US/lb U3O8)28.67 18.60 54%Average realized uranium price for the year -$US/Ib U3O8 15.45 12.89 20%-$Cdn/Ib U3O8 20.14 17.97 12%Average Ontario electricity spot price($/MWh)68 50 36%Average realized electricity price($/MWh)58 47 23%Aver

42、age spot market gold price for the year($US/ounce)445 409 9%Average realized gold price for the year($US/ounce)433 397 9%Weighted average number of paid common shares(millions)1 347.8 342.8 1%Net debt to capitalization 9%13%(31%)Production(Camecos share)Uranium concentrates(million lbs U3O8)21.2 20.

43、5 3%Uranium conversion(UF6 and UO2)(million kgU)11.4 9.5 20%Electricity generation(terawatt hours)9.7 10.6(9%)Gold(thousand ounces)3 407.4 321.6 27%1Data reflects the stock split on February 17,2006.2Net earnings have been adjusted for a$7 million net gain from the sale of Energy Resources of Austra

44、lia Ltd shares($69 million)and the loss on restructuring Bruce Power Limited Partnership($62 million)in 2005 and a$94 million gain on the restructuring of our gold business in 2004.3Represents Camecos beneficial ownership interest in the Kumtor and Boroo mines.Note:All dollar amounts expressed in Ca

45、nadian dollars unless otherwise noted.Adjusted Net Earnings($Per Share Adjusted and Diluted)*Earnings per share increased 14%during 2005 based on strong resultsin our uranium and electricitygeneration businesses.00.30.62005200420030.370.510.58*Net earnings have been adjusted:to reflect the stock spl

46、it on February 17,2006.in 2005 to exclude$7 million in net earnings related to the gain on sale of Energy Resources of Australia Ltd shares($69 million)and the loss recognized in restructuring the Bruce Power Limited Partnership ($62 million).in 2004 to exclude a gain of$94 million on the restructur

47、ing of our gold business.in 2003 to exclude income tax recoveries of$81 million as the result of changes in tax legislation.Highlights20052004 change05C A M ECO A N N U A L R E P O RT2005Three other things of notable significance could occur in 2006.First,trade in nuclear technology with India is li

48、kely to be approved by the vast majority of countries who are signatory to the Non-Proliferation Treaty.If so,India will be able to purchase uranium from other countries to supply its rapidly escalating requirements for its nuclear power program.Second,several countries are likely to make significan

49、t progress in demonstrating the safe disposal of used fuel while preserving the option of recycling for future energy requirements.And third,countries that have stepped outside the bounds of the Non-Proliferation Treaty will be encouraged to return.Will Cameco change its contracting strategy to get

50、more benefit from higher uranium prices?Marketing uranium and conversion services is a relationship business.Unlike gold and base metals,there is no central selling organization or exchange.Camecos uranium,then,is sold under long-term contracts negotiated individually with each of our valued utility

51、 customers.Volumes sold on the spot market in aggregate represent only 10%to 15%of annual global uranium consumption,and are far too small and infrequent for a major producer like Cameco to rely on.Customers with highly valued nuclear plants that now have life extensions and only operate on uranium,

52、eschew dependence on the spot market,preferring the security provided by long-term contracts with a reliable supplier.It is very unlikely that customers would leave themselves exposed in any significant way to the vagaries of the spot market.When prices were low due to inventory liquidation and with

53、 the abundance of supply,contracting favoured the buyer with quantity flexibility and low fixed and ceiling price protection.Now that supplies are more difficult to find,fixed prices have increased and ceiling price protection has either disappeared or been lifted to very high levels.Quantity flexib

54、ility has been eliminated or severely curtailed and more recently floor price protection for the seller has been available.Perhaps the most significant change is contract duration.When prices were low,utilities had little concern about uranium supplies and Cameco kept contract delivery terms short(t

55、hree to four years).Today,contract durations of five to 10 years are common as both customer and supplier are placing much greater emphasis on long-term relationships.During the recent period of rapid price increase,Cameco has retained its traditional portfolio weighting 40%fixed pricing adjusted fo

56、r inflation and 60%related to the market price(spot and long-term)at the time of delivery.Given the investments in growth we are making and the volatility inherent in any commodity,with uranium being no exception,we believe this balance is prudent.As we succeed,however,in obtaining meaningful floor

57、price protection in our market-related contracts we review this strategy in light of our market expectations.Air filter stations like this one at Rabbit Lake help monitor air quality at all Camecos operations.Do you believe current uranium prices adequately reflect the value of uranium?Do you believ

58、e forward demand will further increase the price of uranium?These two questions are frequently asked and five years ago were much easier to answer.Although one can legitimately argue that uranium has never found its true value given past government procurement practices and price regulation,followed

59、 by decades of inventory liquidation,uranium will eventually find an equilibrium value.Perhaps the most important factor in determining this will be the future value of the US dollar since most production is located outside the borders of the US.As the dollar depreciates,producer revenue shrinks,off

60、setting some of the appreciation in uranium price.Compound this currency uncertainty with changing inventory policies,the presence of speculators and the prospects for demand acceleration due to increased capacity utilization and new construction,and the crystal ball gets even more opaque.Events ove

61、r the past year reflect the strong market funda-mentals,as existing and new producers responded to the rising price.Many of the uranium deposits being evaluated and reactivated today were last produced 25 years ago.But perhaps the bigger unanswered questions for producers are:what is the price requi

62、red to bring these properties into production and what is the timing by which that production could be supplied to the market?Inventories in large quantities still exist and whether they are considered strategic or available is a function of ones view of future price and,in the case of Russia,intern

63、al requirements.Undeveloped lower-cost deposits also exist and their availability will be determined by such factors as permitting lead times,politics,co-product pricing and technical constraints.We now expect demand will grow at a faster rate given the renewed interest in nuclear technology and,tow

64、ard the beginning of the next decade,the“first core”effect will place an added burden on supply.Uranium prices,like any commodity,will rise and fall over time as answers to the many uncertainties appear and the struggle for equilibrium unfolds between growing demand and the range of available suppli

65、es.How high can the uranium price go?Ive heard and seen some pretty high numbers recently.Every time I encounter such prognostications,I am reminded of the last uranium price boom when there were many pundits predicting$100 per pound or higher.My answer to the previous question illustrates the many

66、variables and just how difficult it is to forecast price.Inventories remain exceedingly important and any significant shift toward rebuilding inventories would add near-term pressure to the market.Similarly,any lengthy disruption to a major supply source,for technical or political reasons,could see

67、prices rise dramatically.And,finally,we have already seen the market effect from speculators.Any significant increase in this activity could produce a price response in the spot market,given its lack of depth.But,any of these are temporary and,over time,the longer term price will depend on supply an

68、d demand fundamentals.Are you confident Cameco will discover the next high-grade uranium mine?Yes.I have great confidence in our ability to discover the next high-grade deposit.During the low-price environment of the past two decades,Cameco invested sufficient funds to:retain its large land position

69、 in the best hunting ground,Saskatchewans Athabasca Basin,establish a large property position in Arnhem Land in the Northern Territory of Australia outside Kakadu National Park,and look more globally for prospective areas.Even more important,we maintained and broadened our unique expertise in uraniu

70、m exploration and discovery,contained within our talented exploration group.As the uranium price increased during the last two years,we have almost doubled our exploration budget and aggressively recruited new talent.Today,we are exploringM E SSA G E T O S H A R E H O L D E R S Key Lake mill lab tec

71、hnologist James Southam measures uranium concentration in a mill sample using an X-ray fluorescence spectrometer.07C A M ECO A N N U A L R E P O RT2005in both northern Saskatchewan and in Australia,and land positions have been secured elsewhere in areas having promise.Perhaps most prospective in the

72、 near-term,are areas around our existing mines as exemplified by the resource additions at Rabbit Lake and by the promising drilling results last year adjacent to our McArthur River mine.Uranium is an abundant element,some 40 times more common than silver.We know that significant deposits are out th

73、ere to meet the expanding needs of the rejuvenated industry.It is just a matter of money,time and talent.After reducing your investment in Bruce Power,do you still plan to grow in the nuclear power generation business?This question,too,is answered affirmatively.Increasing our participation in nuclea

74、r generation is consistent with our vision.But,as we have explained when we decided not to invest in the Bruce A reactors,any investment we make must meet our financial and risk requirements.As much as we would have liked to expand our involvement in the Bruce A reactors,the proposed refurbishment d

75、id not meet our criteria.We continue to look for other opportunities,although I would observe that the economic and environmental advantages of existing nuclear generators is being increasingly recognized.There are now many parties interested in owning nuclear energy plants leading to a very competi

76、tive field.Absent special circumstances,it is doubtful that Cameco can obtain,from an investment in an existing plant,the return required to meet our financial hurdles.Thus,we will continue to observe and look for the right opportunities while vigorously pursuing growth in other areas that support o

77、ur vision.In what business areas do you believe Cameco will get its best returns for shareholders?Are there near-term investment opportunities in these areas?Over the history of Cameco,returns have varied by business segment illustrating the value of diversity and vertical integration.In the commodi

78、ty business,and here I include electricity generated in a deregulated market,returns are predominately a function of price.Of course,cost of production is important,but this tends to be much more stable over time as efficiencies offset inflationary pressures.Currently,all prices influencing Camecos

79、financial per-formance are robust.The two areas with the strongest longer-term fundamentals appear to be uranium and nuclear electricity production.For the reasons outlined previously,we are hesitant to invest in additional generation and are currently focused on expanding our uranium production cap

80、ability.Two projects,Cigar Lake and Inkai,are being developed and promise to provide solid returns.Exploration expenditures to find the next economically viable deposits have been substantially increased;but the time from discovery to development is lengthy.Additionally,we watch the success of other

81、s in identifying and developing new“We will build on our strong foundation to take Cameco to the next level.”Nuclear reactors around the world use fuel that is processed at Camecos conversion facility in Port Hope,Ontario.Uranium Spot Price($US/lb U3O8)Uranium spot prices increased 77%during 2005.01

82、020304005040302010099989796Source:TradeTech and Ux averagedeposits and hope that Cameco will be viewed as a partner of choice based upon our financial capability and technical expertise.Cameco will also continue to look vertically.The opportunities are scarce,but we believe there are a number that h

83、ave the potential to add significant value.Is Camecos share price over valued?Why should we expect it to rise over the coming year or two?The share price of Cameco has appreciated in excess of 200%over the past three years delivering to our shareholders considerable value.Its rise has been correlate

84、d mostly with the increase in the price of uranium,but at times with energy and precious metal prices.Some observers argue that Cameco shares are expensive.Whether true or not,it is something over which we have little or no control.The best we can do is run the business competently,always mindful of

85、 adding value.High valuations often reflect scarcity,but I would argue that in the case of Cameco,it is a manifestation of our vision of a robust nuclear future and the quality of our underlying assets.In pursuit of its vision,Cameco has put together a low-cost,geographically diversified suite of pr

86、oduction assets in both uranium refining and conversion.They are long-lived and their output is delivered into a portfolio of contracts which now reflect much improved market conditions.The confidence our shareholders have shown in us also represents,I believe,confidence in the future of nuclear ene

87、rgy and in our ability to seize opportunities.If this past year illustrated anything,it was the agility we show in pursuing our vision.The combination of Springfields,Zircatec,Energy Resources of Australia Ltd(ERA),andBruce Power restructuring demonstrate the range of decisions and their underlying

88、rationale as we pursue growth relentlessly.What keeps you awake at night?Frankly I sleep very well knowing that Cameco is blessed with an exceptional complement of very talented people.We pay attention to developing this talent and ensuring that we are capable of meeting the challenges we know will

89、come our way.Looking after the work environment making sure that it is safe,healthy and rewarding is one area that gets a lot of focus.We can never neglect our commitment to continual improvement in these areas,particularly given the special challenges experienced in mining and nuclear energy.I am v

90、ery proud that our safety record is considerably better than the mining and chemical industries.Still,we can do better.In answering the previous 10 questions you can see that I also spend a lot of time thinking about our strategic direction and growth.Here,again,I am very proud of what we have achie

91、ved,particularly in the past year.The actions taken provide the foundation from which we will be able to take Cameco to the next level.Gerald W.GrandeyPresident and Chief Executive OfficerMARCH 17,2006M E SSA G E T O S H A R E H O L D E R S Mine foreman Darren Woods is part of the McArthur River tea

92、m that produced 18.7 million pounds of U3O8 in 2005.Cameco owns 70%and is the operator of McArthur River,the worlds largest high-grade uranium mine.09Strive to achieve no lost-time injuries at all Cameco-operated sites and maintain a long-term downward trend in employee and long-term contractor inju

93、ry frequency and severity.Finalize and begin implementing a long-term people strategy to align core human resources programs and prepare for growth and increasing retirement levels.Incur no significant environmental incident.Continue to improve the Cameco Incident Reporting System(CIRS)for recording

94、,classifying,tracking,monitoring,reporting and learning from safety,environmental and operational incidents at all Cameco-operated sites.Purchase from northern Saskatchewan businesses at least 75%in value of the contracted services at Camecos Saskatchewan mines.Pursue additional growth opportunities

95、 in the nuclear fuel cycle.Increase Camecos share of uranium production to 21.2 million pounds U3O8 or higher in 2005 by obtaining regulatory approval to increase McArthur River and Key Lake production capacity to 22 million pounds U3O8.Submit an environmental assessment and design plan for the comm

96、ercial facility at Inkai to the Kazakh authorities in 2005 in order to obtain regulatory approval to proceed with construction.Commence the Cigar Lake licensing process to ensure the operating licence is obtained from the CNSC to allow for possible production in mid-2007.Complete 50%of shaft develop

97、ment,and 70%of underground development at Cigar Lake.Continue to expand exploration activity to ensure timely replacement of reserves.Aim high.2 0 0 5O B J E C T I V E SgoalVISIONCameco will be a dominant nuclear energy company producing uranium fuel and generating clean electricity.C A M ECO A N N

98、U A L R E P O RT2005goalgoalgoalSafe,Healthy and Rewarding WorkplaceClean EnvironmentSupportive CommunitiesOutstanding Financial PerformanceOBJECTIVES,GOALS AND RESULTSO B J EC T I V E S,G O A L S A N D R E S U LT SStrive to achieve no lost-time injuries at all Cameco-operated sites and maintain a l

99、ong-term downward trend in employee and long-term contractor injury frequency and severity.Implement the 2006 action plans in Camecos long-term people strategy.Incur no significant environmental incidents and show continual improvement in reducing the total number of environmental incidents.Enhance

100、environmental leadership by demonstrating excellence in meeting regulatory commitments.Purchase from northern Saskatchewan businesses at least 75%in value of the contracted services at Camecos Saskatchewan mines.Implement a community development fund in the Inkai project region in Kazakhstan.Pursue

101、additional growth opportunities in the nuclear fuel cycle.Obtain production licence increase to 22 million pounds U3O8 from the CNSC for the McArthur River and Key Lake operations.Commence commissioning of the jet boring mining method at Cigar Lake.Continue the process to obtain the operating licenc

102、e for Cigar Lake from the CNSC for startup in mid-2007.Continue to advance and expand exploration activity to ensure timely replacement of reserves.2 0 0 5R E S U LT S2 0 0 6O B J E C T I V E S Camecos accident frequency was 0.33 per 200,000 hours worked.Overall safety performance was comparable to

103、previous years.The long-term strategy was finalized and a multi-site human resources council was created to assist with corporate-wide implementation.The strategy implementation involves a series of goals supported by such drivers as workforce capacity,employee engagement,leadership and relationship

104、s.There were no significant incidents at any Cameco-operated site.Overall,environmental performance showing year-over-year continual improvement was not met.A thorough understanding of the essential system requirements was gained to make CIRS a useful tool.A detailed schedule and budget was also dev

105、eloped.Cameco purchased$163 million in services from northern Saskatchewan businesses representing 85%of the total purchases for the companys Saskatchewan mines.Camecos western world conversion supply capacity increased to 38%through a toll-processing agreement in the United Kingdom.Cameco acquired

106、100%of Zircatec,a manufacturer of nuclear fuel bundles.Cameco is now involved in all stages of the Candu nuclear fuel cycle.Cameco achieved its production target but did not receive permission to expand.Currently the CNSC is evaluating the process to complete its review of the impacts associated wit

107、h the expansion.When identified,a better estimate as to the time required for a CNSC decision will become apparent.Kazakh authorities approved Inkai construction which continues with commercial operation scheduled for 2007.Cameco made progress on the supporting documentation required to move forward

108、 with the operating licence application.At the end of 2005,the development of the second shaft was about 85%complete and development of the underground workings was about 55%complete.Reserve replacement program was again successful at Rabbit Lake and promising results were achieved at four projects

109、in northern Saskatchewan(Millennium,Dawn Lake,Collins Creek and Virgin River).Cameco also commenced exploration on several new land positions including projects in Nunavut,Northwest Territories,Quebec and Australia.11C A M ECO A N N UA L R E P O RT2005We seethe future.Toronto,Ontario,CanadaHow to us

110、e this MD&AThis managements discussion and analysis(MD&A)is designed to provideinvestors with an informed discussion of Camecos business activities andreflects events known to management to March 17,2006.The MD&A isintended to supplement and complement our audited consolidated financialstatements an

111、d notes thereto for the year ended December 31,2005,prepared in accordance with Canadian generally accepted accountingprinciples(GAAP),(collectively our financial statements).As required bysecurities authorities,a reconciliation of our Canadian GAAP financialstatements to US GAAP is included in note

112、 25 to the consolidated financialstatements.You are encouraged to review our financial statements inconjunction with your review of this MD&A.Additional information relatingto the company,including our annual information form,is available on SEDARat .For information on Camecos uranium and gold reser

113、ves andresources,see Camecos annual information form or annual report under“Reserves and Resources.”All dollar amounts are in Canadian dollars,unless otherwise specified.The financial information in this MD&A has beenprepared in accordance with Canadian GAAP,unless otherwise indicated.All sensitivit

114、ies in this MD&A noted for 2006 reflect the potential impact forthe full year.Statements contained in this MD&A,which are not historical facts,areforward-looking statements that involve risks,uncertainties and other factorsthat could cause actual results to differ materially from those expressed ori

115、mplied by such forward-looking statements.For more detail on these factors,see the section titled“Caution Regarding Forward-Looking Information”inthis MD&A.The following is a summary of the key sections of this MD&A.Overview13 Camecos Businesses13 Growth Strategy14 Trends in the Nuclear Power Indust

116、ry15 Uranium Business18Fuel Services Business29 Nuclear Electricity Generation Business34 Gold 372005 Fourth Quarter Consolidated Results3920042005 Quarterly Consolidated Financial Highlights392005 Consolidated Results40Consolidated Outlook for 200642 Liquidity and Capital Resources4320032005 Consol

117、idated Financial Highlights45Outstanding Share Data46 Risks and Risk Management46Disclosure Controls and Procedures57 Critical Accounting Estimates57 Caution Regarding Forward-Looking Information58 Additional Information58Reserves and Resources59 Argentina Belgium Canada Czech Republic Finland Franc

118、e Germany Japan South Korea Spain Sweden Taiwan United Kingdom United StatesCustomer CountriesOverviewCamecosBusinessesC A M ECO A N N UA L R E P O RT2005services from Springfields Fuels Ltd.(Springfields)inLancashire,United Kingdom.Under the 10-year agreement,Springfields will annually convert a ba

119、se quantity of5 million kgU as UO3to UF6for Cameco.This arrangementincreases our UF6conversion capacity by 40%.In addition,Port Hope is the worlds only commercial producer ofnatural UO2,the fuel used by all Canadian-designedCandu reactors.During early 2006,Cameco became a nuclear fuelmanufacturer by

120、 acquiring Zircatec Precision Industries,Inc.(Zircatec)in Port Hope.This company manufactures fuelbundles for use in Candu reactors.With this acquisition,Cameco now covers all stages of the Candu nuclear fuel cycle.NUCLEAR ELECTRICITY GENERATIONCameco generates clean electricity through its 31.6%int

121、erest in the Bruce Power Limited Partnership(BPLP),which operates the four Bruce B nuclear reactors andmanages the overall site located in southern Ontario.Cameco is the fuel procurement manager for uranium,conversion services and fuel fabrication for Bruce Powersfour B nuclear reactors.For the Bruc

122、e A reactors,Cameco is the fuel procurement manager for conversion services and fuel fabrication.In 2005,through the Bruce Powerrestructuring,Cameco no longer holds a 31.6%ownershipin the four A reactors.Bruce Powers four B reactors have acombined net generation capacity of about 3,200 megawatts(MW)

123、,supplying about 17%of Ontarios electricity.GOLDCamecohas a 52.7%interestinCenterra Gold Inc.(Centerra),which began trading on the Toronto Stock Exchange in June2004.Cameco transferred substantially all its gold assets toCenterra as part of the strategy to unlock the value of thoseassets.Centerra is

124、 a growth-orientated Canadian-based goldproducer focused on acquiring,exploring and developinggold properties in Central Asia,the former Soviet Union andother emerging markets.Centerra operates two gold mines,located in the Kyrgyz Republic and Mongolia.Camecos goal is to be a dominant nuclear energy

125、 company the supplier,partner,investment and employer of choice inthe nuclear industry.Cameco will achieve this goal throughfour main strategies to:maintain our competitive advantage in uranium and conversion,maximize growth in uranium markets,continue vertical integration,and promote growth in the

126、nuclear energy industry.Our specific strategies in the uranium and fuel servicesbusinesses the companys core businesses are discussedunder the sections“Uranium Strategies”and“FuelServices Strategies”respectively,in this MD&A.In pursuing further integration in nuclear fuel supply andexpansion in nucl

127、ear power generation,our goals are to:add significantly to shareholder value,through newopportunities within the nuclear fuel cycle,secure projects that have an attractive rate of return andprovide a basis for long-term profitability,provide fuel supply,engage Camecos operational andmanagement exper

128、tise,and achieve synergies in fuelsupply logistics and market position,capture the value added to uranium in each step of thefuel cycle,including its enormous energy value in the finalgeneration of electricity,strengthen Camecos foundation for further expansion inthe nuclear fuel cycle,and ensure ea

129、ch investment has a prudent risk/reward ratio.The key strategies are to:maximize choice by considering acquisition andinvestment opportunities in all aspects of the nuclearfuel cycle,seek opportunities to facilitate change in the nuclearindustry by supporting or leading the development,assessment,or

130、 licensing of new technology,guide and encourage Bruce Powers growth strategy,pursue partnering opportunities throughout the nuclearfuel cycle by leveraging fuel-supply relationships,and byenhancing relationships with industry leaders in nucleartechnology,seek active ownership by structuring each in

131、vestment toallow management participation and,where possible,operational involvement,and seek to maximize nuclear powers contribution to globalenergy supply through two major strategies to:-promote industry initiatives to position nuclear poweras a major part of the solution in addressing clean air

132、andclimate change by providing leadership and resources tokey industry associations and by developing governmentrelationships,and-diversify into related technologies that support nuclearenergy development.Growth StrategyM A N A G E M E N TS D I S CU SS I O N&A N A LYS I SA number of evolving trends

133、in the nuclear power industryhave the potential to affect Camecos uranium and fuelservices businesses.REACTORS OPERATING,PLANNED AND UNDER CONSTRUCTIONThere are 440 reactors operating worldwide,and a total of82 new reactors that are under construction or planned forcompletion within the next 10 year

134、s(as of January 2006).This more than offsets 16 anticipated closures for a netincrease of 66 reactors during the period.Given that newreactors tend to have higher capacities than older units,this represents 19%growth in nuclear generating capacity.Highlights include:57 reactors are scheduled to be b

135、uilt in Asia,as energydemand is driven by rapid economic expansion.Morethan half of this growth will occur in China and Indiawith plans to build 18 and 15 reactors respectively,in Russia,Ukraine and several other eastern Europeancountries,it is anticipated that nine reactors will be built,offset by

136、two closures in Bulgaria as a result of theiraccession to the European Union,for a net gain of seven reactors,Finland is building a new European Pressurized WaterReactor(EPR).Upon completion,the country will havefive nuclear reactors.France has also announced theconstruction of the new EPR beginning

137、 in 2007,and in Canada,Bruce Power has committed to restart the twoshutdown A units.The Province of New Brunswick willproceed with refurbishing the Point Lepreau reactor,a 680 MW Candu.The refurbishment is expected toextend the life of the unit by 25 years.REACTORS PENDINGA number of non-nuclear cou

138、ntries includingBelarus,Italy,Indonesia,Poland,Turkey andVietnamare considering nuclear programs.Additionally,South Africa is developing a new type of reactor,called the Pebble Bed reactor that,if successful,will be smaller and targeted at regions requiringelectricity,but lacking critical distributi

139、on andtransmission capability.PLANT PERFORMANCECAPACITY FACTORS1More electricity is being generated from existingreactors through life extensions,reactor upgradesand improved performance.World capacity factorsaveraged approximately 79%in 2005,about thesame as 2004.The US nuclear industry generated a

140、nestimated 783 billion kWh of electricity in 2005,slightlydown from the 2004 record of 789 billion kWh.Theaverage net capacity factor for the US was 89.7%in 2005,just short of 2004s record of 90.5%.A 1%improvement inworld capacity factors equates to additional demand forabout 1.5 million pounds of u

141、ranium concentrates andapproximately 0.6 million kgU of conversion services.SAFETYThere were no significant nuclear safety incidents during2005 and the industry continues to be one of the safestforms of electricity production.OPERATING COSTSIn 2004,the latest year for which data is available,the dir

142、ectcosts of US nuclear electricity production was the lowest forbaseload(non-hydro)electricity production for the fifthconsecutive year.US production costs were 1.68 cents perkWh for nuclear,1.92 cents for coal,5.39 cents for oil and5.87 cents for natural gas.CAPITAL COSTRecognizing the need to cont

143、inue to be economicallycompetitive with other baseload generation alternatives,the industry is targeting reduced capital costs for newnuclear plant construction.NUCLEAR ACCEPTANCEPOSITIVE TRENDSNorth AmericaSupport for nuclear power in North America is gaining wideracceptance.In the US,a poll conduc

144、ted by the NuclearEnergy Institute in 2005,showed that 70%of Americansfavoured the use of nuclear power.In another poll,83%ofresidents living within 16 kilometres of an operating nuclearpower plant favoured nuclear energy and 76%were willingto see another reactor built on an existing site near them.

145、15Trendsin the Nuclear Power Industry1Capacity factor for a given period represents the amount of electricity actually produced for sale as a percentage of the amount of electricity the plants are capable of producing for sale.Support for Nuclear EnergyMore people in the US are recognizing the clean

146、 air and economic advantages of nuclear energy.20406080OpposeFavour0504030201009998979695949392919089Source:Nuclear Energy Institute51447024(%)C A M ECO A N N UA L R E P O RT2005In Canada,a November 2005 pollshowed that support for nuclear powerin Ontario had increased to 62%from48%in February 2005,

147、returning tosupport levels experienced in previousyears.Similarly,support for refurbishingreactors in Ontario was 72%,up from 68%.US President George Bush signed intolaw the first national energy policy inmore than 10 years.The policy containsprovisions that encourage investmentin new nuclear reacto

148、r construction.Companies constructing new plantswill receive financial protection fordelays beyond their control for the first six new reactors and a limitedproduction tax credit for the first eightyears of operation for the first 6,000 MWof new capacity.Additionally,loanguarantees up to 80%of the p

149、rojectcost are available for non-emittingtechnologies,including nuclear power plants.In the US,10 entities are proceedingwith applications for either early sitepermits(ESP)or a combined constructionand operating licence(COL)for apotential new nuclear power plant.Three ESP applications are currentlyu

150、nder review by the US NuclearRegulatory Commission,one is beingdeveloped and six others have indicatedWorld Nuclear ReactorsCameco estimate2015Nuclear OperatingTotalGWeElectricity2006New Shutdown OperatingChange2004*(%)Argentina21030.78Brazil21031.43Canada1820201.715Mexico200205US103401074.720Americ

151、as127801358.5China91802717.42India15150309.03Iran02022.00Japan541016313.329Korea2080289.638Pakistan22040.62Taiwan62082.721Asia10657116254.6Belgium7007055Czech Republic6006031Finland41051.627France5911591.478Germany170017032Hungary4004034Lithuania1010(1.3)72The Netherlands100104Romania12031.410Slovak

152、ia6226055Slovenia1001038Spain9018(0.2)23Sweden100010052Switzerland5005040UK230815(2.5)19Europe1546131470.4Russia3160375.816Armenia1001039Bulgaria42241.142Ukraine1510161.051Russia and Eastern Europe 5192587.9South Africa22040.37Total440821650671.716*Source:World Nuclear AssociationWorld ElectricityGe

153、nerationNuclear is the worlds third largestsource of electricity at 16%.23%20%57%19%CoalNuclearHydroGasOilOther(1%)15%16%10%39%Source:World Nuclear AssociationM A N A G E M E N TS D I S CU SS I O N&A N A LYS I Sthey will go straight to a COL.Several potential sites andreactor types have been identif

154、ied with the potential forseveral new reactors to be ordered in the next several yearswith completion as early as 2014 or 2015.Licence extensions continue,with a total of 39 US reactorsgranted 20-year licence extensions,and another 39 reactoroperators having applied for or indicating applications ar

155、epending for life extensions.This covers more than 75%ofthe 103 US reactors.EuropeReliability of natural gas supply is a critical issue forEuropean consumers.As a result of a dispute over Russiangas supplies to the Ukraine,Europeans are questioningtheir increasing reliance on Russian gas and are rec

156、onsideringnuclear power to diversify energy sources.The Netherlands has reversed its policy of closing down its only nuclear reactor by 2013 and has granted a 20-yearlife extension allowing the unit to operate for a total of60 years until 2033.The United Kingdom has granted 10-year life extensions t

157、o two of its units,allowing operations until 2018.Licenceextensions for other units are being pursued.In addition,the prime minister of the UK recently acknowledged thatnew nuclear construction must be considered in the UKsplans to reduce greenhouse gas emissions and maintainenergy diversity.Several

158、 countries including Germany and Sweden aredebating the wisdom of their nuclear phase-out policies.IndiaThe US has announced plans to end nuclear sanctions on India,which would enable the country to buy nuclearfuel as well as civilian reactor technology from the US and possibly other nations.In retu

159、rn,India would have toseparate its civilian and military nuclear programs andplace its civilian nuclear facilities under the supervision of the International Atomic Energy Agency.The removal of the sanctions could provide an additional market fornuclear fuel suppliers,equivalent to about 9 millionpo

160、unds U3O8per year by 2020.India currently supplies its1.2 million pound annual requirements from its domesticuranium mines.NEGATIVE TRENDSA number of European countries such as Sweden,Germanyand Spain,still have official nuclear power phase-out policiesand it remains a political issue in many other

161、countries.Nuclear has been recognized as a non-emitting technology inUS energy legislation,but the US does not have greenhouseemission credits or carbon taxes.Other countries have resistedrecognizing nuclear power as a non-emitting technologyentitled to emission credits.The first few new nuclear pla

162、nts may face significantbusiness risks including“first-of-a-kind”costs,constructiondelays,and political,regulatory and licensing risk.Although progress is being made in several countries onthe management of radioactive waste from the nuclear fuelcycle,it remains a controversial issue.There remains s

163、trong opposition to nuclear power among certain membersof the environmental community.In the past year,however,a number of prominent environmentalists havestrongly endorsed renewed nuclear power plant construction.SUMMARY OF TRENDSThe nuclear industry is experiencing stable growththrough capacity fa

164、ctor improvements,refurbishments,life extensions and,in Asia,aggressive new-build programs.It is difficult to determine which factors will dominatethe outlook for nuclear energy in the long term.However,the demand for nuclear power has the potential to groweven more significantly as increasing elect

165、ricity demand,the need for non-emitting,affordable baseload energy anddesires for energy security begin to take hold globally.Overall,these indicators are expected to support a stable demand trend for uranium and conversion servicesin the next 10 years with the potential for acceleratedgrowth if nuc

166、lear energy continues to gain broaderacceptance worldwide.17C A M ECO A N N UA L R E P O RT2005WORLDWIDE URANIUM SUPPLY AND DEMANDThe uranium market supply and demand fundamentalsremained strong in 2005,indicating a need for more primarymine production over the coming decade.During the past20 years,

167、uranium consumption has exceeded mineproduction by a wide margin,with thedifference being made up by secondarysupply sources such as various types of inventory and recycled products.While there are still inventories,they are considerably reduced and in manycases might be classified as strategicrathe

168、r than excess and,therefore,arenot available to be used or sold.URANIUM DEMANDCurrent nuclear power trends aregenerally positive.However,it is difficultto know whether these trends and thenational debates on the long-term futureof nuclear power will result in more orless favourable conditions for th

169、e nuclear industry.Newplant construction,improved reactor operations,upratesand the extension of reactor lives make it highly likelythat,at a minimum,the current demand for uranium willcontinue for several decades.World uranium consumptiontotalled about 175 million pounds in2005.Cameco estimates tha

170、t annualworld uranium consumption willreach 217 million pounds in 2015reflecting an annual growth rate ofabout 2%.In 2006,world demand is expected to increase to about176 million pounds.Growth in demand could betempered somewhat as uraniumprice increases encourage utilities to order more enrichment

171、services.Uranium demand is affected by theUranium BusinessWorld Market(million lbs U3O8)Uranium market fundamentalsremained strong in 2005.090180200520042003ConsumptionProduction175*108*18010518093*Cameco estimateProject geologist Trevor Perkins examines core samples at McArthur River where explorat

172、ion continues.M A N A G E M E N TS D I S CU SS I O N&A N A LYS I Senrichmentprocess,which isone of the steps in making mostnuclear fuel.Utilities choose theamount of uraniumand enrichmentservices they willuse depending onthe price of each.In essence,utilitiesmay substituteenrichment foruranium,there

173、bydecreasing thedemand foruranium and increasing the demand for enrichment.Forexample,when uranium prices rise,utilities tend to usemore enrichment assuming enrichment prices remainconstant.Of course,if enrichment prices increased,utilitieswould likely use less enrichment and more uranium.Thetails a

174、ssay(percentage of uranium left after processing)isan indication of the mix of uranium and enrichment used.The lower the tails assay,the less uranium being used.For example,if world utilities choose to decrease tails assay by 0.01%,this would decrease annual uraniumrequirements by 2%or about 4 milli

175、on pounds of uraniumper year and increase the demand for enrichment servicesby 2%.The decrease in uranium consumption to 175million pounds in 2005 was due primarily to lower tailsassay,offset somewhat by new reactors coming online.It isimportant to note that there is a limit to the enrichmentcapacit

176、y that is currently available.In addition,enrichmentcontracts generally limit the ability to substitute enrichmentfor uranium.In 2005,four reactors were connected to the electricity grid,two in Japan,one in India,and a refurbished reactorrestarted in Canada.Three of these units entered commercialope

177、ration in 2005,and the other is expected to entercommercial operation in the first quarter of 2006.Therewere two reactor closures in 2005,both as a result of nuclearphase-outs,one in Germany and one in Sweden.The netresult was a 2,570 MW increase in nuclear capacity.URANIUM SUPPLYWorld uranium suppl

178、y comes from primary mineproduction and a number of secondary sources.Mine ProductionWorld production in 2005 was estimated at about108 million pounds U3O8,up 3%from 105 million pounds in 2004,largely as a result of incremental increases inproduction at existing mines.World production is expectedto

179、increase to 110 million pounds in 2006.It is expected that with higher uranium prices,new mineswill startup,but the lead-time before they enter commercialproduction may be lengthy depending on the region.As aresult,primary supply cannot significantly increase in thenear-term.The level of increase in

180、 primary mine productionis dependent on a number of factors,including:the strength of uranium prices,the efficiency of regulatory regimes in various regions,currency exchange rates in producer countries comparedto the US dollar,and prices for other mineral commodities produced inassociation with ura

181、nium(i.e.byproduct or co-product producers).Secondary SourcesSecondary sources of supply consist of surplus US andRussian military materials,excess commercial inventoryand recycled products.Recycled products include reprocesseduranium,mixed oxide fuel and re-enriched tails material.Some utilities us

182、e reprocessed uranium and mixed oxidefuel from used reactor fuel.In recent years,another sourceof supply has been re-enriched depleted uranium tailsgenerated using excess enrichment capacity.We estimatethat these recycled products will account for about 10%of world requirements over the next 10 year

183、s.With theexception of recycled material,secondary supplies are finite.Currently,most recycled products are a high-cost fuelalternative and are used by utilities in only a few countries.One of the largest sources of secondary supply is theuranium derived from Russian highly enriched uranium(HEU).As

184、a result of the 1993 HEU agreement between theUS and Russia to reduce the number of nuclear weapons,19U3O8 Revenue by RegionThe Americas are Camecos largest customer region accounting for 69%of total U3O8 revenue.69%18%North&SouthAmerica13%Far EastEurope2005 World Uranium Production*Cameco increased

185、 uranium production for the third consecutive year to 21.2 million pounds,about 20%of world output.The company plans to produce 21.4 million pounds during 2006.*Cameco estimate23%20%57%23%million lbs U3O8Australia 25Africa 18US 3Other 3Canada 30CIS/China 29Total 10817%26%28%3%3%C A M ECO A N N UA L

186、R E P O RT2005additional supplies of uraniumhave been available to the market.Under the 20-year agreement,weapons-grade HEU is blendeddown in Russia to low enricheduranium(LEU)capable of being usedin western world nuclear powerplants.Uranium derived fromRussian HEU could meet 10%ofworld demand over

187、the next 10years based on the current RussianHEU commercial agreement.Inparallel,the US has made some ofits military inventories available tothe market,albeit in quantities muchsmaller than those derived fromthe Russian HEU agreement.Historically,the other large source of secondary supply has been t

188、he use of excess inventories.Prior to 1985,uranium mine production exceeded reactor requirementsdue,in large part,to government incentive programs thatanticipated rapid growth of nuclear generated electricity.The result was a buildup of large inventories,both in thecommercial and government sectors.

189、Over the past 20 years,uranium mine production has beenless than annual requirements by a wide margin and thecompany believes that most of these excess inventories havebeen consumed.In fact,in 2005 there was evidence of thistrend starting to reverse,with some utilities purchasinguranium to build str

190、ategic inventories.With 2005 uranium production about 60%of uraniumrequirements,secondary supplies such as recycling andblended down HEU continue to bridge the gap betweenproduction and requirements and this is expected tocontinue in the near future.URANIUM MARKETSUtilities secure most of their uran

191、iumrequirements(80%to 90%in recentyears)by entering into long-term contractswith uranium suppliers.These contractsusually provide for deliveries to begin upto four years after contracts are finalized.In awarding contracts,utilities considerthe commercial terms offered,includingprice,and the producer

192、s record ofperformance and uranium reserves.There are a number of pricing formulas,including fixed prices adjusted by inflationindices,reference prices(generally spot price indicators,but also long-termreference prices)and annual pricenegotiations.Many contracts also contain floor prices,ceiling pri

193、ces and other negotiated provisions that affect the amount ultimately paid.Utilities acquire the remainder of their uranium requirementsthrough spot purchases from producers and traders.Spotmarket purchases are those that call for delivery withinone year.Traders and investors or hedge funds are acti

194、ve in the market and generally source their uranium fromorganizations holding excess inventory,including utilities,producers and governments.URANIUM SPOT MARKETThe industry average spot price(TradeTech and Ux)onDecember 31,2005 was$36.38(US)per pound U3O8,up77%from$20.60(US)at the end of 2004.Spot m

195、arketvolume totalled approximately 35 million pounds in 2005,compared to about 20 million pounds for 2004.Discretionary purchases,or purchases not for immediateconsumption,accounted for about two-thirds of the 2005spot volume with about 25%of totalpurchases attributable to investment and hedgefunds.

196、The large gap between spot and long-term prices early in 2005 resulted in a numberof buyers building inventory throughdiscretionary spot purchases.The increase in 2005 spot market volumes is largelyattributable to these discretionary purchases.Uranium Spot Price($US/lb U3O8)The uranium spot price co

197、ntinuedits steep climb in 2005,increasingby 257%since 2003.010203040200520042003Source:TradeTech and Ux averageLong-Term Uranium Price($US/lb U3O8)Long-term uranium prices increased 45%to$36.13(US)per pound during 2005 reflecting tightening supply.010203040200520042003Source:TradeTech and Ux average

198、M A N A G E M E N TS D I S CU SS I O N&A N A LYS I SLONG-TERM URANIUM MARKETLong-term contracting in 2005 isestimated to have been in excess of240 million pounds U3O8,more thantwo and a half times the 90 millionpounds contracted in 2004.Contractswritten in 2005 were generally for muchlonger duration

199、s than in the recentpast up to 10 years in comparison tothree-to-five years,resulting in highervolumes of U3O8under contract.The industry average long-term price(TradeTech and Ux)on December 31,2005 was$36.13(US)per pound U3O8,up 45%from$25.00(US)at the end of 2004.We expect long-term contracting ac

200、tivityin 2006 will remain quite strong asutilities attempt to mitigate the risk ofpotential future supply shortfalls by securing long-termcontracts with reliable primary suppliers.Currently weestimate that more than 150 million pounds will becontracted in the long-term market in 2006.URANIUM BUSINES

201、S KEY PERFORMANCE DRIVERS The major factors that drive Camecos uranium businessresults are:prices spot and long-term,volume sales,production and purchases,costs production and purchases,and the relationship between the US and Canadian dollars.PRICES SPOT/LONG-TERMBackgroundWhile Cameco generally doe

202、s not sell uranium in the spot market,about 60%of the companys uranium under its long-term contracts is sold at prices that reference thespot market price near the time of delivery.The remaining 40%is sold at fixed prices escalated by an inflation index.Uranium market price indicators arequoted by t

203、he industry in US dollarsper pound U3O8.Uranium contract terms generallyreflect market conditions at thetime the contract is negotiated.Aftera contract negotiation is completed,deliveries under that contracttypically do not begin for up to fouryears.As a result,many of thecontracts in our current po

204、rtfolio,particularly those signed prior to2005,reflect market conditions whenuranium prices were significantlylower.For example,2003 was thefirst year that the spot price averagedover$11.00(US)since the 1995-1997 period.Before that they weremuch lower,and only exceeded$11.00(US)on a sustained basis

205、in1988 and earlier.To the extent contracts have fixed or lowceiling prices,they will yield prices lower than currentmarket prices.As a result,Camecos average realized price for uraniumsales was$15.45(US)per pound of uranium compared to an average spot price of$28.67(US)and average long-termprice of$

206、30.66(US).In 2005,the benefit of improved spotprices was also partially offset by a less favourable foreignexchange rate.Our average realized selling price rose by 20%in US dollars but only 12%in Canadian dollars over 2004.As in previous years,we are continually in the marketsigning new contracts wi

207、th deliveries beginning one tofour years in the future.Generally,Cameco continues to maintain the target portfolio mix of 40%fixed prices(escalated by inflation)and 60%market-related prices,andrecently,is obtaining floor prices that escalate over time.In the current market environment of rapidly inc

208、reasinguranium prices,this strategy has allowed Cameco to addincreasingly favourable contracts to its portfolio whilemaintaining sensitivity to future price movements.Uranium Price Sensitivity 2006For deliveries in 2006,a$1.00(US)perpound change in the uranium spotprice from$33.00(US)per pound would

209、change revenue by about$4 million(Cdn)and net earnings by$2 million(Cdn).This sensitivity,which accountsfor our currency hedge program21Western World Contract Volumes(million lbs U3O8)Western world contract volumes for 2005 increased an estimated 152%over 2004 levels due primarily to discretionary p

210、urchases,which includes investment and hedge funds and utilities building inventory.0130260200520042003Long-Term Market*Spot Market(Ux)240*35*90*1975*22*Cameco estimate97109275*Uranium Market Review Year-end prices($US/lb U3O8)Market*20052004%changeSpot uranium36.3820.6077Long-term uranium36.1325.00

211、45*TradeTech and Ux average.C A M ECO A N N UA L R E P O RT2005(discussed in this MD&A under“Foreign Exchange”),isbased on an expected effective exchange rate of$1.00(US)being equivalent to about$1.22(Cdn).Uranium Price Sensitivity Analysis 2006 to 2008The table below shows an indicative range of av

212、erageprices that Cameco would expect to realize under the current sales portfolio.The prices in the table areintended to show how various market price scenarios may impact Camecos uranium revenue.This analysismakes a number of assumptions that are included as table footnotes.As shown in the$35.00(US

213、)spot price scenario,Camecowould expect to realize an average price of$28.25(US),or about 81%of the spot price,by 2008 if prices remain ator close to$35.00(US).If spot prices rose to$45.00(US),Cameco would expect to realize an average price of$32.75(US),or about 73%of the spot price,by 2008.On the o

214、ther hand,if prices fell to$25.00(US),Camecowould expect to realize an average price of$23.50(US),or about 94%of the spot price,by 2008.VOLUME SALES,PRODUCTION AND PURCHASESSales VolumeIn 2005,Cameco sold 34.2 million pounds of uranium,representing a 6%increase from 2004 sales of 32.3 millionpounds.

215、The higher sales volumes were in response tostrong market demand.Camecos uranium sales volumesare expected to total more than 35 million pounds in 2006with similar levels for 2007 and 2008.Cameco sells more uranium than it produces from its minesand meets its contractual delivery commitments through

216、 acombination of mine production,long-term purchasearrangements,spot purchases and inventory.Uranium OperationsMcArthur River/Key Lake Production at McArthur River/Key Lake reached thelicensed annual production capacity limit of 18.7 millionpounds in 2005,identical to 2004 levels.Camecos sharewas 70

217、%or 13.1 million pounds.The collective agreement for unionized employees at theMcArthur River and Key Lake operations expired onDecember 31,2005.Cameco has enteredinto negotiations with representatives ofthe United Steelworkers of America.We have applied for an increase in theannual licensed capacit

218、y at McArthurRiver and Key Lake to 22 million poundsU3O8per year from the current 18.7 millionpounds.The Canadian Nuclear SafetyCommission(CNSC)is considering theappropriate process to complete its reviewof the potential impacts associated withthis proposed expansion.Once the processis determined,we

219、 will be in a betterposition to estimate the time required for a decision.If approval is received,we expect it will take about two years toramp-up production to a sustainedplanned production rate of approximately21 million pounds per year.Thisproduction rate may change as we gainexperience in rampin

220、g up production at this operation.Production at McArthur River/Key Lake in2006 is expected to remain at the samelevel as 2005.Production would increasemodestly if the CNSC approves the capacityincreases at these facilities in 2006.Uranium ProductionCamecos share of production(million lbs U3O8)2006 2

221、005 2004PlannedActualActualMcArthur River/Key Lake13.113.113.1Rabbit Lake5.96.05.4Smith Ranch-Highland1.61.31.2Crow Butte0.80.80.8Total21.421.220.5Camecos Expected Average Realized Uranium Price In brackets,expressed as a%of spot price.(Current$US/lb U3O8)Spot Price200620072008$25$18.25(73%)$19.75(7

222、9%)$23.50(94%)$35$19.25(55%)$22.75(65%)$28.25(81%)$45$20.50(46%)$25.75(57%)$32.75(73%)Key Assumptions:2006 uranium sales volumes of about 35 million pounds U3O8and similar sales volumes for 2007 and 2008,sales volume estimates assume no interruption in the companys supply from its own production or

223、from third parties,2006 sales volumes are fully committed,2007 sales volumes are almost all committed and 2008 is less committed,all uncommitted volumes are assumed to be delivered at the prevailing spot price,the long-term price in a given year is assumed to be equal to the average spot price for t

224、hat year,all other price indicators are assumed to trend toward the spot price,and the annual inflation rate is equal to 2.5%.M A N A G E M E N TS D I S CU SS I O N&A N A LYS I SRefer to the section titled“Uranium Exploration”in thisMD&A for information on exploration programs nearMcArthur River.Rab

225、bit LakeRabbit Lake produced 6.0 million pounds U3O8in 2005,an11%increase from 2004.The additional production resultedfrom a significant increase in milled tonnage.Rabbit Lakeproduction is expected to decline slightly to 5.9 millionpounds U3O8in 2006.Work continues on the environmental assessment(EA

226、)toprocess a little over half of the uranium from Cigar Lake oreat the Rabbit Lake mill beginning in 2009.Guidelines thatdefine the scope of the EA were approved by the province inNovember 2005 and were approved by the CNSC withminor modifications in December 2005.Refer to the section titled“Uranium

227、 Exploration”in thisMD&A for information on exploration programs nearRabbit Lake.Smith Ranch-Highland and Crow ButteThe Smith Ranch-Highland(Wyoming)and Crow Butte(Nebraska)in situ leach(ISL)mines produced a total of2.1 million pounds of U3O8in 2005.Production is expectedto increase 14%in 2006 to 2.

228、4 million pounds.We are inthe process of increasing production from the Smith Ranchmine over the next several years to help meet the need fornew uranium supply.Uranium ProjectsCigar LakeConstruction began on January 1,2005 and remains onschedule for completion and commencement of operationsin the fi

229、rst half of 2007,subject to regulatory approval andsecuring skilled tradespeople.Once production begins,therewill be a ramp-up period of up to three years before themine reaches expected full production of 18 million poundsper year.Camecos share is 50%.The capital costs for the Cigar Lake project ar

230、e currentlyforecast at$520 million.Our share is 50%or$260 million.The permanent access road was connected to Saskatchewanprovincial road 905 in November 2005 and is currentlybeing utilized for material transport.The final grading of theroad is planned for 2006.The development of the secondshaft is a

231、pproximately 85%complete and development ofthe underground workings is approximately 55%complete.InkaiThe ISL test mine at Inkai in Kazakhstan produced 0.5million pounds of uranium in 2005(Camecos share is 60%).Approval was received in the third quarter of 2005 toincrease the test mines capacity to

232、0.8 million poundsU3O8.Planned production for 2006 is 0.65 million poundsU3O8.Construction to facilitate this increase is expected tobe complete in the first quarter of 2006.The regulatory authorities have approved the EA and designplan for the commercial processing facility to be located inanother

233、area at Inkai,called block 1.Initial civil work at themain processing plant and well field drilling has begun.Commercial operation is scheduled for 2007.The costs,netof sales proceeds from Inkai test mine production,are beingcapitalized until commercial production is achieved.Weexpect Inkai to ramp-

234、up to full production of 5.2 millionpounds U3O8per year by 2010.The capitalized cost to bring the new ISL mine tocommercial production is estimated at$92 million(US),up about 10%due primarily to inflation.Subject toexecuting formal amendments,Cameco has agreed inprinciple to increase its loan to the

235、 Joint Venture Inkai from$40 million(US)to a maximum of$100 million(US).Wealso agreed to reduce our financing fee from an effective10%interest rate to one based on the three-month Londoninter bank offered rate(LIBOR)plus 2%(equal to 6.54%using the December 31,2005 LIBOR rate).The earlier loanamount

236、was based on constructing a smaller plant with anannual production capacity of 2.6 million pounds annually.Repayment of the loan will begin when the mine achievescommercial production.Legal work continues onformalizing these amendments.Purchase VolumesCameco also has purchase commitments for uranium

237、products and services from various sources.Most of thesepurchase commitments are in the form of UF6.At the end of 2005,these purchase commitments totalled 59 millionpounds uranium equivalent from 2006 to 2013.Of this,54 million pounds are from exercising options under ouragreement to purchase uraniu

238、m from dismantled Russianweapons(the Russian HEU commercial agreement).CostsCamecos cost of supply is influenced by its mix of producedmine material and uranium purchases.Production costs at our Saskatchewan uranium mines,ourlargest source of production,are primarily fixed,withabout one-third attrib

239、utable to labour.The largest variableoperating cost is production supplies,followed bymaintenance materials.Uranium mine production costs are driven mostly by thecomplexity of the operation.Unit costs of production are23C A M ECO A N N UA L R E P O RT2005driven primarily by the grade and size of the

240、 reserves.McArthur River is the worlds largest,high-grade uraniummine.Its ore grade averages 24%U3O8which means it canproduce more than 18 million pounds per year by extractingonly 100 to 120 tonnes of ore per day.While Rabbit Lakesaverage ore grade of 1%U3O8is much lower,it comparesfavourably to ot

241、her operating mines in the world whereore grades are generally below 0.5%.ISL extraction methods can make even lower-grade orebodiescommercially attractive.Worldwide,ISL mines typicallyrecover uranium from orebodies with an average grade inthe range of 0.1%U3O8.Camecos cost of supply isinfluenced on

242、ly modestly by the two US ISL operations,as the production from the ISL operations accounts for asmall percentage of its total primary output.In 2006,USISL production is expected to account for about 11%of the companys planned primary output.Purchased product also affects Camecos cost of supply.Most

243、of Camecos purchase commitments are under long-term,fixed-price arrangements reflecting prices significantly lowerthan the current published spot and long-term prices.These purchase commitments totalled$661 million(US)at December 31,2005.Refer to note 21 in the notes to theconsolidated financial sta

244、tements.A significant portion ofthese purchased pounds will be delivered into existingsales contracts.Foreign ExchangeThe relationship between the Canadian and US dollarsaffects financial results of the uranium business as well asthe conversion services business.For that reason,the effect on both bu

245、sinesses will be discussed in this section.Cameco sells most of its uranium and conversion servicesin US dollars while most of its uranium and conversionservices are produced in Canada.As such,these revenues aredenominated mostly in US dollars,while production costsare denominated primarily in Canad

246、ian dollars.During 2005,the Canadian dollar strengthened againstthe US dollar from$1.20 at December 31,2004 to$1.17 atDecember 31,2005.We attempt to provide some protection against exchangerate fluctuations by planned currency hedging activitydesigned to smooth volatility.Therefore,our uranium andco

247、nversion revenues are partly sheltered against declinesin the US dollar in the shorter term.In addition,Cameco has a portion of its annual cashoutlays denominated in US dollars,including uraniumand conversion services purchases,which provide a naturalhedge against US currency fluctuations.While natu

248、ralhedges provide this protection,the influence on earningsfrom purchased material in inventory is likely to be dispersedover several fiscal periods and is more difficult to identify.At each balance sheet date,Cameco calculates the mark-to-market value of all foreign exchange contracts with thatvalu

249、e representing the gain or loss that would have occurredif the contracts had been closed at that point in time.Weaccount for foreign exchange contracts that meet certaindefined criteria(specified by generally accepted accountingprinciples)using hedge accounting.Under hedge accounting,mark-to-market

250、gains or losses are included in earnings onlyat the point in time that the contract is designated for use.In all other circumstances mark-to-market gains or lossesare reported in earnings as they occur.At December 31,2005,we had foreign currency contractsof$1,112 million(US)and 132 million that were

251、 accountedfor using hedge accounting,and foreign currency contractsof$20 million(US)that did not meet the criteria for hedgeaccounting.The foreign currency contracts are scheduledfor use as follows:2006200720082009$millions(US)4673701951001 millions91175These contracts have an average effective exch

252、ange rate of$1.25(Cdn)per$1.00(US),which reflects the original spotprices at the time contracts were entered into and includesdeferred revenue.At December 31,2005,the mark-to-marketvalue on all foreign exchange contracts was$37 million.Timing differences between the maturity dates anddesignation dat

253、es on previously closed hedge contracts may result in deferred revenue or deferred charges.AtDecember 31,2005,deferred revenue totalled$26 million.The schedule for deferred revenue to be released toearnings,by year,is as follows:Deferred revenue(loss)2006200720082009$millions(Cdn)293(6)In 2005,most

254、of the net inflows of US dollars were hedgedwith currency derivatives.Net inflows represent uraniumand conversion sales less outlays denominated in US dollars.For the uranium and conversion services businesses in 2005,the effective exchange rate,after allowing for hedging,wasabout$1.30 compared to$1

255、.39 in 2004.Results from thegold business are translated into Canadian dollars atprevailing exchange rates.For 2006,every one-cent change in the US to Canadiandollar exchange rate would change net earnings by about$4 million(Cdn).M A N A G E M E N TS D I S CU SS I O N&A N A LYS I SURANIUM STRATEGIES

256、Camecos overall objective is to build on and leverage ourcompetitive advantage in uranium.In doing so,we strive tomeet three major goals:remain the low-cost producer,protect and expand our market position,and maintain supply flexibility.There are a number of key strategies the company uses toachieve

257、 its goals.We strive to maintain our low-cost positionby adding economically attractive reserves and improvingour margins.We look to expand our low-cost reservesthrough acquisition,exploration around existing operationsand by identifying geological regions that will provide thenext tier of low-cost

258、production.We improve our margins by optimizing production to yield the highest rate of return,gaining cost efficienciesthrough quality and business process improvements,andpursuing fundamental productivity gains throughtechnological development.We seek to protect and grow market position by acquisi

259、tion,seeking to accelerate production from existing operations,and participating in new uranium opportunities atexploration and development stages.To maintain our supply flexibility,we are building ageographically diverse production base.This includesaccelerating the production at Inkai,bringing Cig

260、ar Lakeinto production,and continuing to pursue a globalexploration program.This program identifies the mostprospective regions and maximizes options to accessand/or control land positions for future business advantage.To ensure we have adequate production,we identify theoptimal resource mix(i.e.dif

261、ferent types of deposits such asunconformity versus in situ leach),and replace reservesthrough exploration and acquisition.Given Camecos leadership role in the uranium market,thecompany wants to successfully maximize uranium marketgrowth.Our goals in this regard are to:protect and expand market posi

262、tion,optimize price realization over time,and improve supply flexibility.To grow our market position,we build on our customerrelationships and expand the range of services available tocustomers while maintaining the companys reputation asa reliable supplier.In addition,we maintain participation inse

263、condary supplies including,enhancing our relationshipwith Russia,influencing the timing of sales of secondarysupplies to the market,and using market intelligence toachieve early notice of new supply sources.A key element for Cameco is our contracting strategy,which is influenced by the supply and de

264、mand outlook foruranium.Since mid-2003,the supply side has experiencedsignificant impacts that caused uranium prices to rise rapidly.This upward trend has been due,in large part,to therealization by market participants that excess secondarysupplies will not contribute as much to future uraniumsupply

265、 as they had previously expected.Consequently,agreater volume of new primary mine production will be needed.The rise in prices has triggered predictable supply sideresponses.The most notable is the increase in companiesexploring for new uranium deposits and the constructionof new mines and the propo

266、sed expansion of existingones.However,given the low prices of the last two decades,very little exploration was undertaken on a global basis,and relatively little investment was made in advancing newuranium projects.Producers were operating at close to full capacity to minimize unit costs.Undeveloped

267、 deposits,identified in previous exploration cycles,were mostlyuneconomic or located in jurisdictions with politicalchallenges.With higher prices,existing projects and newlydiscovered deposits will be developed,but the lead timebefore they enter commercial production may be lengthydepending on the r

268、egion.Consequently,the primarysupply industry cannot significantly increase supply in the near-term.Future market prices will depend on a number of supplyand demand factors,the more notable ones being:additional production from the successful expansion ofexisting production,startup of mines currentl

269、y underconstruction and development of existing deposits yet to be developed,the success of exploration programs in identifying newcommercial uranium deposits that can be developed in a reasonable period of time,the exchange rate in various producer country currenciesrelative to the US dollar,the ti

270、ming and extent of expansion of uranium producedas a byproduct or co-product of other commodities,particularly in Australia and South Africa,availability of existing and possible new secondarymaterials,such as blended down uranium from militarystock including dismantled weapons,the extent enrichment

271、 services are substituted for naturaluranium feed,and the growth rate of nuclear power.25C A M ECO A N N UA L R E P O RT2005Our goal in uranium contracting is to secure contracts thatwill maximize our realized price,support our ongoingoperations and fund new mine developments over the longterm.Given

272、 the uncertainty surrounding the foregoingsupply/demand factors and the impact on price,we believeit is prudent to continue to target a 40/60 mix of market-related and fixed price mechanisms.As market conditionschange,we may adjust this ratio.The overall strategy willcontinue to focus on achieving l

273、onger duration contracts.Today,new contracts tend to reflect contract terms of up to10 years or more.Current market-related contracts containfloor prices(at about 80%of the spot price prevailing atthe time of contract negotiation)which provide significantdownside protection and no or very high ceili

274、ng prices.In the current market environment of rapidly increasinguranium prices,this strategy has allowed Cameco to addincreasingly favourable contracts to its portfolio whilemaintaining sensitivity to future price movements.Camecobelieves its current contracting strategy will provide solidvalue for

275、 shareholders over the long term.CAPABILITY TO DELIVER RESULTSCameco will continue to enhance its capabilities in a numberof areas to execute our strategies and deliver on our goals.We need to ensure that:other mining methods and other technologies continueto be advanced to allow us to maintain or e

276、xpand ourannual production,timely regulatory approval is secured under an increasinglystringent regulatory regime,skilled tradespeople continue to be available,adequate human resources are available to replace anaging workforce,capital is readily available over the longer term given ourexpansion pla

277、ns,and adequate resources are allocated to exploration.MINING METHODSCurrently,McArthur River uses only raiseboring to extract ore from the mine.As weexpected from the start of mining,othermining methods will be used to maintain orexpand production.In 2005,we determinedthat the boxhole boring method

278、 would bebetter suited for the upper zone#4 atMcArthur River,because it would allowdevelopment from a preferred location.Production from this zone is scheduled to begin in 2012.Until Cameco has fully developed andtested the boxhole boring method,there is uncertainty in the estimated productivity.Cam

279、eco plansto develop and test the boxhole boring method over thenext four years,beginning in 2006.We do not expect thischange to significantly impact our long-term uraniumproduction plans at McArthur River.At Cigar Lake,we plan to use the jet boring method,whichhas been examined through extensive tes

280、t miningprograms.Overall,the test mine programs were consideredhighly successful with all initial objectives fulfilled.However,as the jet boring mining method is new to theuranium mining industry,the potential for technicalchallenges exist.We are confident that our engineers will be able to solve th

281、e challenges that may arise during theinitial ramp-up period.REGULATORY APPROVALCamecos growth plans depend on regulatory approvalssuch as environmental assessments,and obtainingconstruction licences and operating licences in variousjurisdictions including Canada,Kazakhstan,and the US.The timing for

282、 approvals can be impacted by various factorssuch as,the regulators assessment of current performance,the comprehensiveness of the documentation submitted tosupport the application,assessment of the significance of any anticipated incremental impacts,the number ofindustry approval applications being

283、 assessed at any giventime by the regulator,and other factors.Cameco expends significant financial and managerialresources to comply with laws and regulations.We seek tofind solutions that best respond to regulatory concerns.SKILLED TRADESPEOPLECameco has significant experience in developing uranium

284、mines.One of the biggest challenges in meeting our Cigar Lake construction timetable is securing skilled trades-people.This shortage of qualified people also affects ourother operations.Cameco is examining various options toaccelerate our extensive apprenticeship programs.Uranium Business Highlights

285、20052004%changeRevenue($millions)69058119Gross profit($millions)15910453Gross profit%231828Earnings before taxes($millions)*1309143Average realized price$US/lb U3O815.4512.8920$Cdn/lb U3O820.1417.9712Sales volume(million lbs U3O8)34.232.36Production volume(million lbs U3O8)21.220.53*Excludes the gai

286、n from sale of Energy Resources of Australia Ltd shares.M A N A G E M E N TS D I S CU SS I O N&A N A LYS I SHUMAN RESOURCESCamecos workforce reflects the global demographicswhere a large part of the eligible workforce is nearing legalretirement.Approximately 25%of the workforce at ourSaskatchewan ur

287、anium mines was age 50 or older atDecember 31,2005.Camecos challenge is to compete forthe limited number of people entering the workforce toreplace retiring employees.We have developed a strategy to meet the challenge.READY ACCESS TO CAPITALCameco has an ambitious plan to grow in the nuclearenergy i

288、ndustry.Opportunities to invest are unpredictableand often capital intensive.We intend to maintain financialflexibility to pursue opportunities as they arise.For thatreason,we maintain a conservative financial structure witha target of no more than 25%net debt to total capital.EXPLORATION PROGRAMSCa

289、meco continues to pursue a focused exploration programto identify additional uranium reserves for the future tomaintain the companys position as the worlds largesturanium producer.Cameco retained an exploration program and its expertiseduring the depressed market.As uranium prices have risenwe have

290、increased our investment in exploration to achieveour goal of expanding our reserve base to grow our uraniummarket leadership position.We plan to invest about$32 million in uranium explorationduring 2006.This is up 25%compared to the$25.7 millioninvested in 2005.For more information on our explorati

291、on activities,see thesection titled“Uranium Exploration”in this MD&A.URANIUM BUSINESS RESULTSCamecos uranium business consists of the McArthur River,Key Lake and Rabbit Lake mine and mill operations inSaskatchewan,two ISL mines in the US,the Inkai ISL testmine in Kazakhstan,the Cigar Lake developmen

292、t project in Saskatchewan and uranium exploration projects locatedprimarily in Canada and Australia.REVENUEIn 2005,we established a new record for uranium revenuefor the fourth consecutive year.Revenue from the uraniumbusiness increased by 19%to$690 million in 2005 due to ahigher realized selling pr

293、ice,which rose 12%in Canadiandollar terms(20%in US dollars)over 2004.The increase inthe average realized price was mainly the result of higherprices under fixed-price contracts and a higher uraniumspot price,which averaged$28.67(US)per pound in 2005compared to$18.60(US)in 2004.A 6%increase in salesv

294、olume also contributed to higher revenue in 2005.COST OF PRODUCTS AND SERVICES SOLDFor 2005,the cost of products and services sold was$429 million compared to$378 million in 2004,reflectingthe 6%increase in sales volume.On a per unit basis,the costof product sold was about 7%higher than in the previ

295、ousyear due primarily to higher costs for purchased uranium.DEPRECIATION,DEPLETION AND RECLAMATIONIn 2005,depreciation,depletion and reclamation(DD&R)charges were$102 million compared to$100 million in2004,due to the higher sales volume.On a per unit basis,DD&R costs were similar to those of 2004.GR

296、OSS PROFITIn 2005,our gross profit from the uranium businessamounted to$159 million compared to$104 million in2004,an increase of 53%.This was attributable to theincrease in the realized price for uranium and was partiallyoffset by higher unit costs for purchased uranium.Ourearnings before taxes fro

297、m the uranium business improvedto$130 million from$91 million last year,while the profit margin rose to 23%from18%in 2004 again due to the higherrealized selling price.2006 OUTLOOK FOR URANIUMIn 2006,we expect uranium revenue to be 20%higher than in 2005 due to aprojected 16%improvement in theexpect

298、ed realized selling price(in Canadiandollars)and a 4%increase in deliveries.Uranium sales volume is expected to totalmore than 35 million pounds in 2006.Camecos share ofuranium production for 2006 is projected to increase slightlyto 21.4 million pounds of U3O8from 21.2 million in 2005.Uranium margin

299、s are expected to improve to about 29%compared to 23%in 2005.27Uranium ExplorationHectares at2005 ActualAreaDec.31,2005Expenditures($millions)Canada610,00018.1Australia2,092,0007.3Other regions547,0000.3Total3,249,00025.7C A M ECO A N N UA L R E P O RT2005The financial results outlook for the uraniu

300、m businesssegment is based on the following key assumptions:no significant changes in our estimates for sales volumes,costs,and prices,no disruption of supply from our mines or third-partysources,and a US/Canadian spot exchange rate of$1.16.URANIUM EXPLORATIONCameco carries out mineral exploration f

301、or new uraniumresources on substantial landholdings,principally locatedin two areas:the Athabasca Basin of northern Saskatchewan,and the Arnhem Land region in Northern Territory,Australia.Subsidiary land positions are also held in the US and Canada.Cameco owns a range of participating interests in i

302、tsexploration lands,and either owns or has the right to earna majority interest in most of the companys projects.Atyear-end 2005,Cameco operated approximately 75%of itsexploration projects,including joint ventures.The majorityof Camecos exploration projects are early to middle stage,on which indicat

303、ions of economic grades or quantities ofuranium have not yet been identified.The nature of mineralexploration is such that discovery of economic deposits onnew projects is uncertain and can take many years.In 2005,Cameco also carried out surface exploration nearexisting mines,specifically the Rabbit

304、 Lake and McArthurRiver operations,with the intent to locate new resourcesthat could be developed to expand or extend these oper-ations.This exploration was successful at both locations.At Rabbit Lake,the underground diamond-drilling reservereplacement program was again successful in 2005.Over75 kil

305、ometres of drilling was completed,contributing to a net increase of 2.8 million pounds U3O8in reserves and7.2 million pounds U3O8in resources after accounting forthe 2005 mine production.With further definition andtest-hole drilling in 2006,we expect to extend the mine lifeof Rabbit Lake.Production

306、mining of two zones discoveredfrom the reserve replacement program will be under way inthe first quarter.More than four kilometres of underground lateral development were completed in 2005,with most ofthe development focused on these two zones.Continued exploration at the north end of the existingMc

307、Arthur River deposit has outlined significant new resultsthat have the potential to further expand resources withongoing exploration drilling.We are conducting additionalconfirmatory drilling from surface in 2006.Winter and summer drilling programs on another advancedexploration project,the Cree Ext

308、ension project,hasincreased indicated resources in pounds U3O8by 32%at theMillennium deposit,initially discovered in 2000.The CreeExtension Joint Venture will undertake a pre-feasibility studyon Millennium during 2006.Positive 2005 results on theCollins Creek zone,part of the Dawn Lake Joint Venture

309、,willalso be followed up in 2006,while a pre-feasibility studycarried out on the small Dawn Lake deposit itself founddevelopment to be uneconomic at this time.Since the recovery of the world uranium market,andcorresponding higher prices for uranium,the competitiveenvironment for uranium exploration

310、has changed.Thereare more than 300 uranium exploration companies listedon stock exchanges and most of these are actively fundingnew exploration programs in Canada and other regions.Inthe newly active sector,Cameco maintains an ongoingdialogue with numerous companies,with the objective ofpositioning

311、the company for future participation in areaswith promising results,and leveraging Camecos recognizedposition in the sustainable development of uraniumresources worldwide.Camecos approach to future resourcereplacement is to combine its own exploration activitieswith partnerships,joint ventures,or eq

312、uity holdings inother companies with assets that meet the companysinvestment criteria.At December 31,2005,Cameco owned a 21.7%interest inUEX Corporation,a TSX listed junior exploration companyformed in 2002 from a combination of exploration assetspreviously held by Cameco and Pioneer Metals Corporat

313、ion.Cameco has,as long as it maintains a 20%or higher interestin UEX,certain rights related to financing,and marketingproduction from future uranium deposits.As well,Camecohas the right to mill uranium produced from properties itcontributed to UEX at the time of its formation in 2002.InFebruary 2006

314、,Cameco participated in a private placementfinancing for UEX on a pro rata basis with its equity interest.This participation involved the purchase of 2,222,600common shares of UEX at a price of$5.00 per share,andleaves Camecos interest in UEX unchanged at 21.7%.M A N A G E M E N TS D I S CU SS I O N

315、&A N A LYS I SIn 2005,Camecos fuel services business consisted ofrefining and conversion services.Refining is an intermediatestep to prepare uranium to be converted into either UF6or UO2.As of 2006,this business also includes fuelfabrication services for Candu-type reactors as a result of our acquis

316、ition of Zircatec.See the following discussionunder“Fuel Fabrication.”The industry practice for measuring conversion services iskilograms of uranium(kgU)rather than pounds of U3O8.For example,66 million kgU is equivalent to about172 million pounds U3O8.CONVERSION DEMANDWorld demand for UF6and natura

317、l UO2conversionservices was estimated to be about 66 million kilograms ofuranium(kgU)in 2005.Western world demand accountedfor almost 58 million kgU with the remaining 8 million kgUcoming from the non-western world(Russia,China andeastern Europe).Over the next 10 years,world demand is expected toinc

318、rease by 27%to about 84 million kgU.In 2006,totalworld conversion demand is expected to increase by 1%.CONVERSION SUPPLYThe western world UF6conversion industry consists ofCameco and three other significant producers,with anannual conversion capacity of about 47 million kgU.In2005,Cameco signed a to

319、ll-conversion agreement to acquireUF6conversion services from one of these other converters,Springfields in Lancashire,United Kingdom.Under the 10-year agreement,Springfields will annually convert a basequantity of 5 million kgU to UF6for Cameco.This newsource,coupled with our Canadian UF6plant,will

320、 accountfor almost 40%of the western world capacity.29FuelServicesBusinessIn 2006,the Blind River refinery will utilize unused production capacity when it begins shipping UO3to Springfields,UK,for toll conversion to UF6.C A M ECO A N N UA L R E P O RT2005In addition,supplies are available from secon

321、dary sourcesincluding excess western inventories,Russian sales in the form of low enriched uranium,Russian re-enricheddepleted tails,and Russian and US uranium derived from dismantling nuclear weapons.Russia supplies most of the UF6conversion requirements of the former Soviet Union and eastern Europ

322、e in the form of lowenriched uranium.CONVERSION MARKETSUtilities contract about 90%of their UF6conversion servicesthrough long-term contracts,purchasing the remainder onthe spot market.Cameco is the only commercial supplierin the world of conversion for natural UO2customers.Inaddition to the Canadia

323、n requirements Cameco also exportsUO2to South Korea for its Candu reactors and to the USand Japan for use as blanket fuel in boiling water reactors.Cameco also sells conversion services packaged with U3O8as a UF6or UO2product.SPOT/LONG-TERM CONVERSION MARKETSpot market UF6conversion prices remained

324、strongduring 2005.Spot prices increased 28%for NorthAmerican conversion services and 15%for Europeanconversion services year-over-year.Outlined below are the industry average spot market prices(TradeTech and Ux)for North American and Europeanconversion services.The industry average long-term prices(

325、TradeTech andUx)for North American and European conversionservices are reported below.Long-term prices increased20%for North American conversion services and 12%for European conversion services year-over-year.The industry does not publish UO2prices.CONVERSION BUSINESS KEY PERFORMANCE DRIVERSThe majo

326、r factors that drive Camecos conversion businessresults are:prices spot and long-term,volume sales,production and purchases,costs production and purchases,and the relationship between the US and Canadian dollars.PRICES SPOT/LONG-TERMCameco sells its conversion services directly to utilitieslocated i

327、n many parts of the world,primarily throughlong-term contracts.Conversion services are priced in USdollars per kgU.The majority of conversion sales are atfixed prices adjusted for inflation.In 2005,most of ourconversion sales were made under long-term contractsnegotiated in a low price environment a

328、nd therefore,wedid not benefit from the increase in UF6conversion spotprices during the year.Going forward,themajority of our contractcommitments,totallingmore than 75 millionkgU over more than 10years,are at fixed pricesadjusted for inflation.We continue to signnew long-term contractswith fixed pri

329、ces thatgenerally reflect long-term prices at the timeof the contract award.Like uranium sales,webegin delivery ofconversion services upto four years after the agreement hasfinalized.Therefore,in the coming years,Camecos contract portfolio will benefitfrom higher fixed-price contracts signed.VOLUMES

330、 SALES,PRODUCTION,PURCHASESSales VolumeCameco sold 16.6 million kgU of conver-sion services in 2005,down marginallyfrom the record 16.9 million kgU in 2004.We expect conversion sales volume tototal about 19.0 million kgU in 2006,up14%from 2005.Spot Conversion Market Review Year-end prices($US/kgU as

331、 UF6)Markets20052004%changeSpot UF6conversion1North America11.509.0028Europe11.5010.0015Long-term UF6conversion1,2North America12.0010.0020Europe12.8811.50121Prices are industry averages.2TradeTech only for 2004 prices.Conversion Spot Price($US/kgU as UF6in North America)The North American spot pric

332、e for conversion services increased 28%during 2005.02468101214200520042003Source:TradeTech and Ux averageM A N A G E M E N TS D I S CU SS I O N&A N A LYS I SProduction VolumeTotal production at our Port Hopeconversion facility for 2005 was11.4 million kgU,up 21%from9.5 million kgU for 2004,whichmain

333、ly reflects the impact of a seven-week labour disruption in 2004.Production in 2005 was about 17%lower than we planned due toproblems in fluorine generation.Thiswas compounded by a difficult restartof the UF6plant after our regularmaintenance shutdown,whichprimarily resulted from the hot andhumid weather experienced duringthe summer months when the restartoccurred.Our planned production for2006,is