UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
Under the Securities Exchange Act of 1934
For the month of April, 2015
Cameco
Corporation
(Commission file No. 1-14228)
2121-11th Street West
Saskatoon, Saskatchewan, Canada S7M 1J3
(Address of Principal Executive Offices)
Indicate by check mark whether
the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ¨ Form 40-F x
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨ No
x
If “Yes” is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
Exhibit Index
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| Exhibit
No. |
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Description |
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Page No. |
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| 99.1 |
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Notice of 2015 Annual Meeting of Shareholders |
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| 99.2 |
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Cameco Corporation Management Proxy Circular |
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| 99.3 |
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Cameco Corporation Proxy Form |
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| 99.4 |
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Cameco Corporation 2014 Annual Report |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
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| Date: April 8, 2015 |
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Cameco Corporation |
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By: |
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“Sean A. Quinn” |
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Sean A. Quinn |
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Senior Vice-President, Chief Legal Officer and Corporate Secretary |
Page 2
Exhibit 99.1
Notice of our 2015 annual meeting of shareholders
You are invited to our 2015 annual meeting:
When
Friday, May 22, 2015
10 a.m.
CST
Where
Cameco Corporation
2121 - 11th Street West
Saskatoon, Saskatchewan
Your vote is important
If you held Cameco common
shares on March 24, 2015, you are entitled to receive notice of and to vote at this meeting.
You can vote in person at the meeting or by proxy.
See pages 5 through 10 of the attached management proxy circular for information about what the meeting will cover, who can vote and how to vote.
By order of the board of directors,
Sean Quinn
Senior Vice-President,
Chief Legal Officer and Corporate Secretary
Saskatoon, Saskatchewan
April 8, 2015
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FOR MORE INFORMATION |
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Read about the business of the meeting beginning
on page 5 of the attached management proxy circular. |
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The deadline for submitting a shareholder
proposal for our 2016 annual meeting is January 11, 2016 and we require advance notice for nominating directors (see page 93 for details). |
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Access our 2014 annual report and other documents
online: |
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· cameco.com |
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· sedar.com (SEDAR) |
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· sec.gov/edgar.shtml (EDGAR) |
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See page
93 for more information. |
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TOTAL COMMON SHARES OUTSTANDING |
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395,792,522 |
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December 31, 2014 |
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395,792,522 |
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March 9, 2015 |
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CST Trust
Company is our transfer agent and registrar (see page 10 for details). |
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Exhibit 99.2
Management Proxy Circular
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Notice of Annual Meeting of Shareholders to be held May 22, 2015
Cameco
Cameco is one of the world’s largest uranium producers, accounting for about 16% of the
world’s production.
We also supply much of the world’s reactor fleet with the fuel to generate one of the cleanest sources
of electricity available today.
You have received this document because you are a Cameco shareholder and are entitled to vote at our
2015 annual meeting of shareholders. Please remember to vote.
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Cameco has been widely recognized for excellence
in corporate governance and best practices in building and sustaining shareholder value |
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winner of the 2014 New York Stock Exchange
inaugural leadership award for exemplary CD&A disclosure by a compensation committee |
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our best-ever ranking of 8th in the Globe and Mail Board Games
in 2014, a governance ranking of 247 Canadian issuers |
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two-time winner of the Governance Gavel award from the Canadian Coalition for Good Governance:
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2009: Best disclosure for approach to executive compensation
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2010: Best disclosure of board governance practices and director qualifications for governance
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| TSX: |
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CCO |
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Cameco Corporation 2121-11th Street West Saskatoon, Saskatchewan
S7M 1J3 |
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CCJ |
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| cameco.com |
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Letter to shareholders
Dear fellow shareholder,
On behalf of Cameco’s board of directors, I am pleased to invite you to the
2015 annual meeting of shareholders.
The meeting will be held on Friday, May 22, 2015 in Saskatoon, and you
can read about each item of business in the management proxy circular, which begins on page 4.
The circular also
provides important information about voting your shares, the nominated directors, our governance practices and director and executive compensation. The report by the chair of the human resources and compensation committee (see page 50) gives
important insights into the nuclear industry, executive compensation at Cameco and decisions by the committee and board on executive pay for 2014.
The board has worked diligently over the past year to oversee Cameco’s affairs and work with management on the
company’s strategic direction, with a focus on achieving steady progress on Cameco’s four measures of success. Similar to 2013, the board’s priorities included strategic focus and value creation, risk oversight and board governance
because they are fundamental to Cameco’s future growth and success.
Strategic focus
We address corporate strategy at every regular board meeting and work with the management team to ensure the strategy addresses
the near- and medium-term challenges in the nuclear industry and positions Cameco to benefit from the strong demand
we anticipate over the long term. This focus has resulted in an adjustment to Cameco’s growth plans to better match market opportunities that we believe will position Cameco to deliver the
best value to shareholders.
Risk oversight
Strong risk oversight is also important. Management provides quarterly updates on all our risks and regularly presents to the
board and committees on our top-tier risks, resulting in a deeper analysis of our significant risks. We also dedicated time this past year to a board workshop on evaluating risk appetite and tolerance. All of this work has helped the board develop a
solid understanding of Cameco’s key risks, and we plan to continue our emphasis on risk oversight into 2015.
Sound governance
We also devoted considerable time to having a strong and diverse board to carry out our duties and responsibilities. We
implemented a board diversity policy in early 2014 and undertook a rigorous review of our skills matrix to make sure we assemble the right mix of skills, experience and qualities, and achieve gender balance (see page 28).
We implemented a tenure policy that includes term limits to support ongoing refreshment and renewal of the board (see page 27)
and a rotation policy for committee chair and member assignments. Our goal in implementing these new policies on a staggered basis is to balance the need for board renewal with continuity of knowledge and experience.
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| Despite challenging market conditions, Cameco performed well in 2014, exceeding its
production guidance,
delivering on its financial guidance and achieving record annual
revenue from its uranium segment. |
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| Annual revenue of
$2.4 billion |
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Started up the Cigar Lake mine and produced 340,000 lbs of packaged
uranium concentrate
(100% basis) |
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Record average realized uranium price of
$52.37 ($Cdn) |
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LETTER TO SHAREHOLDERS 1
We conduct annual board assessments to increase the effectiveness of the board,
committees and individual directors. In 2014 we implemented an independent third-party director assessment process to augment these annual assessments. The first third-party review will take place in 2017 (see page 34).
All members of the board are Cameco shareholders and we continue to build our equity ownership. In 2014, we increased the share
ownership requirement for directors to highlight its importance and reinforce our commitment to our role as directors.
Looking ahead
Despite the prolonged weakness in the uranium market and downward pressure on
Cameco’s share price toward year-end, we remain confident of a bright future and strong growth for both Cameco and the nuclear industry.
This year we have 11 candidates who have been nominated for election to the board, all of whom currently serve as directors.
Three of the nominees (27%) are women.
Two of our current directors are retiring this year. On behalf of the
board, I want to thank Victor Zaleschuk and Joe Colvin for their wisdom, judgment and contributions over many years of service. The board
benefited from Victor’s vast experience in the resource sector, and he served
as our board chair for 10 of his 14 years as a Cameco director. Joe completes 15 years on the Cameco board, and brought extensive knowledge and understanding of the nuclear industry. He served as chair of the safety, health and environment committee
for 14 years.
Please take some time to read the attached management proxy circular and decide how you want to vote
your shares. Your vote is important.
The board and management thank you for your continued confidence, and we look
forward to seeing you on May 22, 2015.
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| Sincerely, |
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| Neil McMillan |
| Chair of the board |
| Cameco Corporation |
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2014 AWARDS
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Top 100 Employers in Canada
(Mediacorp) |
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Canada’s Top Employers for People
over 40 (Mediacorp) |
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Saskatchewan’s Top Employers |
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Environmental and Social Responsibility Award
(Prospectors and Developers Association of Canada) |
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Canada’s Best Diversity Employers (Mediacorp) |
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Canada’s Top Employers for Young People (Mediacorp) |
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Supply Chain Management Association
Sustainability Award |
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2 CAMECO CORPORATION
Notice of our 2015 annual meeting of shareholders
You are invited to our 2015 annual meeting:
When
Friday, May 22, 2015
10 a.m. CST
Where
Cameco Corporation
2121 - 11th
Street West
Saskatoon, Saskatchewan
Your vote is important
If you held Cameco common shares on March 24, 2015, you are entitled to receive notice of and
to vote at this meeting.
You can vote in person at the meeting or by proxy.
See pages 5 through 10 of the attached management proxy circular for information about what the meeting will cover, who can vote and how to vote.
By order of the board of directors,
Sean Quinn
Senior Vice-President,
Chief Legal Officer and
Corporate Secretary
Saskatoon, Saskatchewan
April 8, 2015
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FOR MORE INFORMATION |
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Read about the business of the meeting beginning
on page 5 of the attached management proxy circular. |
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The deadline for submitting a shareholder
proposal for our 2016 annual meeting is January 11, 2016 and we require advance notice for nominating directors (see page 93 for details). |
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Access our 2014 annual report and other documents
online: |
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cameco.com |
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sedar.com (SEDAR) |
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sec.gov/edgar.shtml (EDGAR) |
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See page
93 for more information. |
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TOTAL COMMON SHARES OUTSTANDING |
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395,792,522 |
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December 31,
2014 |
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395,792,522 |
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March 9, 2015 |
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CST Trust
Company is our transfer agent and registrar (see page 10 for details). |
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NOTICE OF 2015 ANNUAL MEETING OF SHAREHOLDERS 3
Management proxy circular
You have received this circular because you owned Cameco common shares on March 24, 2015. Management is soliciting your proxy for
our 2015 annual meeting of shareholders.
As a shareholder, you have the right to attend the annual meeting of shareholders on
May 22, 2015 and to vote your shares in person or by proxy.
The board of directors has approved the contents of this
document and has authorized us to send it to you. We have also sent a copy to each of our directors and to our auditors.
Your
package may also include our 2014 annual report (if you requested a copy or one was otherwise required to be sent to you). This information is also available on our website (cameco.com).
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THINGS TO NOTE |
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Key terms in this document |
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— you and your refer to the shareholder |
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— we, us, our and Cameco mean Cameco
Corporation |
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— shares and Cameco shares mean Cameco’s common shares,
unless indicated otherwise |
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— all dollar amounts are in Canadian dollars, unless indicated
otherwise |
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— information is as of March 9, 2015, unless indicated
otherwise. |
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Your vote is important |
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This circular describes what the meeting will cover and how to vote. Please read it carefully and vote, either by completing the form included with this package or voting in person at the
meeting. |
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To encourage you to vote, Cameco employees or
representatives of Kingsdale Shareholder Services (Kingsdale) may contact you. If you have any questions or need more information about voting your shares, call Kingsdale at 1.888.518.1558 (toll free in North America) or 416.867.2272 (collect calls
accepted) outside of North America. Or send an email to contactus@kingsdaleshareholder.com. |
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We are
paying Kingsdale approximately $47,500 for their services. |
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4 CAMECO CORPORATION
About our shareholder meeting
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| You can vote on items of Cameco business, receive an update on the company, meet face to face with management and interact with our board
of directors. We require majority approval on the items of business, except for the election of
directors (see Our policy on majority voting on page 11). |
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The board, on the recommendation of the audit and finance committee, has proposed that KPMG LLP (KPMG) be reappointed as our auditors
until the end of our next annual meeting. KPMG, or its predecessor firms, have been our auditors since we incorporated. You can vote for reappointing KPMG, or you can withhold your vote.
KPMG provides us with three types of services:
• audit
services — generally relate to the audit and review of annual and interim financial statements and notes, conducting the annual audits of affiliates, auditing our internal controls over financial reporting and providing other services that
may be required by regulators. These may include services for registration statements, prospectuses, reports and other documents that are filed with securities regulators, or other documents issued for securities offerings.
• audit-related services — include advising on accounting matters,
attest services not directly linked to the financial statements that are required by regulators and conducting audits of employee benefit plans.
• tax services — relate to tax compliance and tax advice that are
beyond the scope of the annual audit. These include reviewing transfer-pricing documentation and correspondence with tax authorities, preparing corporate tax returns, and advice on international tax matters, tax implications of capital market
transactions and capital tax. The table below shows the fees we paid to KPMG and its affiliates
for services in 2013 and 2014. The board has invited a representative of KPMG to attend the meeting.
We recommend you vote for reappointing KPMG as our auditors. |
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WE NEED A QUOROM |
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We can only hold the meeting and transact business if we have a quorum at the beginning of the meeting — when the
people at the meeting hold, or represent by proxy, at least 25% of our total common shares issued and outstanding. |
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| Business of the
meeting 1. DIRECTORS
You will elect 11 directors to our board to serve for a term of one year. All of the nominated
directors currently serve on the board. You can vote for all of the nominated directors, vote for some of them and withhold votes for others, or withhold votes for all of them (see page 11).
The director profiles starting on page 12 tell you about their background and experience and
membership on Cameco board committees. We recommend you vote for all of the
nominated directors. 2. AUDITORS
You will vote on reappointing the auditors. Auditors reinforce the importance of a diligent and
transparent financial reporting process. They strengthen investor confidence in our financial reporting. |
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2014 ($) |
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% OF TOTAL FEES (%)
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2013 ($) |
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% OF TOTAL FEES (%)
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| Audit fees |
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| Cameco |
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1,743,300 |
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48.7 |
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1,443,700 |
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45.9 |
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| Subsidiaries |
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798,900 |
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22.4 |
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879,500 |
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28.0 |
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| Total audit fees |
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2,542,200 |
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71.1 |
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2,323,200 |
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73.9 |
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| Audit-related fees |
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| Translation services |
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178,500 |
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5.0 |
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67,200 |
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2.1 |
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| Pensions and other |
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177,800 |
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5.0 |
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104,300 |
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3.3 |
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| Total audit-related fees |
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356,300 |
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10.0 |
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171,500 |
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5.4 |
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| Tax fees |
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| Compliance |
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307,800 |
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8.6 |
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252,500 |
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8.0 |
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| Planning and advice |
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367,400 |
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10.3 |
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398,600 |
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12.7 |
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| Total tax fees |
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675,200 |
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18.9 |
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651,100 |
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20.7 |
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| All other fees |
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– |
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– |
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– |
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| Total fees |
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3,573,700 |
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100.0 |
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3,145,800 |
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100.0 |
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2015 MANAGEMENT PROXY CIRCULAR 5
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FINANCIAL STATEMENTS |
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MORE ABOUT ‘SAY ON PAY’ |
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Your package includes our 2014 annual report (which includes our consolidated financial statements for the year ended December 31, 2014
and the auditors’ report) if you requested a copy or one was otherwise required to be sent to you. You can also download a copy from our website (cameco.com/invest/financial-information).
3. ‘SAY ON PAY’
You will vote on our approach to executive compensation as disclosed in this circular. This is a
non-binding advisory vote that will provide the board and the human resources and compensation committee with important feedback. |
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We introduced ‘say on pay’ in 2010 and have held an advisory vote every year since. We continue to monitor
developments in executive compensation and evolving best practices to make sure our programs and decisions are appropriate. We do a comprehensive risk assessment of our executive compensation program every three years.
Preliminary work has started for the review in 2015. You can write to the board or committee chair about your views on executive compensation. See page 23 for details on our accessible board. |
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The board believes it is important for shareholders to have a timely and
effective way to provide input on this matter. This is the sixth year that shareholders will have an opportunity to have a ‘say on pay’.
The board and the human resources and compensation committee discussed last year’s results and the trend since 2010 on shareholders’ views on our approach to
executive compensation. These discussions provided important background information and insights for our 2014 compensation review and our ongoing efforts to encourage dialogue and outreach with shareholders generally (see page 23).
Following this year’s vote, the board will again examine the level of interest and nature of
shareholder comments and evolving best practices by other companies. Please take some time to
read about our compensation strategy and how we assess performance, make compensation decisions and manage compensation risk (see page 55 and pages 61 through 72).
Vote for or against our approach to executive compensation by voting on the following resolution:
Resolved, on an advisory basis and not to diminish the role and responsibilities of the board of
directors, that the shareholders accept the approach to executive compensation disclosed in Cameco’s management proxy circular delivered in advance of the 2015 annual meeting of shareholders.
We recommend you vote for our approach to executive compensation.
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OTHER
BUSINESS We did not receive any shareholder proposals for this
meeting, and are not aware of any other items of business to be considered at the meeting.
If other items of business are properly brought before the meeting, you (or your proxyholder) can vote as you see fit.
Voting results
We will disclose the voting results on the items of business in our report on
the 2015 annual meeting voting results, available on our website (cameco.com/invest/events-presentations/2015- annual-meeting-of-shareholders) and on SEDAR. |
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6 CAMECO CORPORATION
Who can vote
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| We have common shares and one class B share, but only holders of our common shares have full voting rights.
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WHY RESIDENCY IS IMPORTANT |
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| If you held common shares at the close of business on March 24, 2015 (the record date), you or the person you appoint as your
proxyholder can attend the annual meeting and vote your shares. Each Cameco common share you own represents one vote, except where ownership and voting restrictions apply.
As of March 9, 2015, we had 395,792,522 common shares issued and outstanding.
Ownership and voting restrictions
There are restrictions on owning, controlling and voting Cameco common shares whether you own the shares as a registered shareholder, hold them beneficially, or control
your investment interest in Cameco directly or indirectly. These are described in the Eldorado Nuclear Limited Reorganization and Divestiture Act (Canada) (ENL Reorganization Act) and our company articles.
The following is a summary of the limitations listed in our company articles. See Appendix A on
page 94 for the definitions in the ENL Reorganization Act, including definitions of resident and non-resident.
RESIDENTS
A Canadian resident, either individually or together with associates, cannot hold, beneficially own or control shares or other Cameco securities, directly or
indirectly, representing more than 25% of the total votes that can be cast to elect directors. NON-RESIDENTS A non-resident of Canada, either individually or
together with associates, cannot hold, beneficially own or control shares or other Cameco securities, directly or indirectly, representing more than 15% of the total votes that can be cast to elect directors.
VOTING RESTRICTIONS
All votes cast at the meeting by non-residents, either beneficially or controlled directly or
indirectly, will be counted and pro-rated collectively to limit the proportion of votes cast by non-residents to no more than 25% of the total shareholder votes cast at the meeting. |
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Cameco shares have restrictions on ownership and voting for residents and non-residents of Canada. Ownership restrictions were put in place so that Cameco would remain Canadian controlled. The uranium mining industry has
restrictions on ownership by non-residents. A
non-resident is: • an individual, other than a Canadian citizen,
who is not ordinarily resident in Canada • a corporation
• that was incorporated, formed or otherwise organized outside Canada, or
• that is controlled by non-residents, either directly or indirectly
• a trust
• that was established by a non-resident, other than a trust for the administration of a
pension fund for individuals where the majority of the individuals are residents or
• where non-residents have more than 50% of the beneficial interest
• a foreign government or foreign government agency.
Anyone not included in the above description of
non-resident is considered a resident. Residents can be individuals, corporations, trusts and governments or government agencies. |
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RESIDENCY
DECLARATIONS We require shareholders to declare their residency,
ownership of Cameco shares, and other things relating to the restrictions, so we can verify compliance with the ownership and voting restrictions on our shares.
Nominees such as banks, trust companies, securities brokers or other financial institutions who hold the shares on behalf of non-registered
shareholders need to make the declaration on their behalf. If you own the
shares in your name, you will need to complete the residency declaration on the enclosed proxy form. Copies will be available at the meeting if you are planning to attend the meeting. If we do not receive your residency declaration, we may consider
you to be a non-resident of Canada. The chair of the meeting may ask
shareholders and their nominees for additional information to verify compliance with our ownership and voting restrictions. The chair of the meeting will use the declarations and other information to decide whether our ownership restrictions have
been complied with. |
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2015 MANAGEMENT PROXY CIRCULAR 7
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| ENFORCEMENT |
| The company articles allow us to enforce the ownership and
voting restrictions by: |
| • |
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suspending voting rights |
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forfeiting dividends |
| • |
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prohibiting the issue and transfer of Cameco shares |
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requiring the sale or disposition of Cameco shares |
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suspending all other shareholder rights. |
| Principal holders of common
shares |
| Based on Schedule 13G filings made with the US Securities Exchange
Commission, our principal holders of common shares as of December 31, 2014 are: |
| • |
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BlackRock, Inc. of New York, NY – held 24,338,452 common shares (including its subsidiaries), or approximately 6.1% of our total common shares outstanding |
| • |
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Wellington Management Group LLP of Boston, MA – held 21,120,750 common shares (including its subsidiaries), or approximately 5.3% of our total common shares outstanding. |
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| Management is not aware of any other shareholder who holds 5% or more of our common shares. |
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| Our class B share |
| The province of Saskatchewan holds our one class B share. This
entitles the province to receive notices of and attend all meetings of shareholders, for any class or series. |
| The class B shareholder can only vote at a meeting of class B
shareholders, and votes as a separate class if there is a proposal to: |
| • |
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amend Part 1 of Schedule B of the articles, which states that: |
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Cameco’s registered office and head office operations must be in Saskatchewan |
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the vice-chairman of the board, chief executive officer (CEO), president, chief financial officer (CFO) and generally all of the senior officers (vice-presidents and above) must live in Saskatchewan |
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all annual meetings of shareholders must be held in Saskatchewan |
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amalgamate, if it would require an amendment to Part 1 of Schedule B, or |
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amend the articles in a way that would change the rights of class B shareholders. |
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HOW CAMECO WAS FORMED |
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Cameco Corporation was formed in 1988 by
privatizing two Crown corporations, combining the uranium mining and milling operations of Saskatchewan Mining Development Corporation and the uranium mining, refining and conversion operations of Eldorado Nuclear Limited. |
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Cameco received these assets in exchange
for: |
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assuming substantially all of the current liabilities and certain other liabilities of the two companies |
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issuing common shares |
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issuing one class B share |
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issuing promissory notes. |
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The company was incorporated under the Canada Business Corporations Act.
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You can find more information about our history in our most recent
annual information form, which is available on our website (cameco.com/investors). |
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QUESTIONS? |
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If you have questions about voting, completing
the proxy form or residency declaration, or about the meeting in general, please contact our proxy solicitation agent, Kingsdale Shareholder Services. |
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Phone: 1.888.518.1558
(toll free within North America)
1.416.867.2272 (collect from outside North America)
Email contactus@kingsdaleshareholder.com.
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8 CAMECO CORPORATION
How to vote
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| You can vote by proxy, or you can attend the meeting and vote your shares in person.
Voting by proxy
Voting by proxy is the easiest way to vote. It means you are giving someone else the authority to
attend the meeting and vote for you (called your proxyholder). Tim Gitzel, president and
CEO of Cameco, or in his absence Sean Quinn, senior vice-president, chief legal officer and corporate secretary (the Cameco proxyholders), have agreed to act as proxyholders to vote your shares at the meeting according to your instructions.
Or, you can appoint someone else to represent you and vote your shares at the meeting.
If you appoint the Cameco proxyholders but do not tell them how you want to vote your shares, your shares will be voted:
— for electing each nominated director — for appointing KPMG LLP as auditors
— for the advisory vote on our
approach to executive compensation.
If for any reason a nominated director becomes unable to serve, the Cameco proxyholders have the right to vote for another nominated director at their discretion,
unless you have indicated that you want to withhold your shares from voting on the election of directors.
If there are amendments or other items of business that properly come before the meeting, your proxyholder can vote on each matter as he or she sees fit, as permitted
by law, whether or not it is a routine matter, an amendment or contested item of business. |
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ARE YOU A REGISTERED OR A NON-REGISTERED SHAREHOLDER? |
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You are a registered shareholder if your name appears on your share certificate.
You are a non-registered (beneficial) shareholder if
your bank, trust company, securities broker, trustee or other financial institution holds your shares (your nominee). This means the shares are registered in your nominee’s name, and you are the beneficial shareholder. Many of our
shareholders are non-registered shareholders.
The voting process is different depending on whether you are a registered or non-registered shareholder (see below for
details). |
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WAYS TO VOTE BY PROXY
Registered shareholders can vote in one of four ways. 1 On the
internet Go to cstvotemyproxy.com and follow the instructions on screen. You will need your 13-digit control number, which appears below your name and address
on your proxy form. 2 By fax
Complete the enclosed proxy form, including the residency declaration, sign and date it and fax both pages of the form to:
CST Trust Company Attention: Proxy department
1.866.781.3111 (toll free within North America) 1.416.368.2502 (from outside North
America) 3 By mail
Complete your proxy form, including the residency declaration, sign and date it, and send it to our transfer agent in the envelope provided or to the following
address: CST Trust Company Attention: Proxy department
P.O. Box 721 Agincourt, Ontario M1S 0A1
4 By appointing someone else to attend the meeting and vote your shares for you
Print the name of the person you are appointing as your proxyholder in the space provided. This person does not need to be a shareholder.
Make sure your appointee is aware and attends the meeting for you as your vote will not be counted
unless this person attends. Your proxyholder will need to check in with a CST Trust Company representative when they arrive at the meeting. |
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Non-registered
shareholders: Submit your voting instructions by following the instructions on the enclosed voting instruction form. In most cases, you can send your voting instructions via the internet or by fax or mail.
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Send your completed proxy form right away.
Make sure you allow enough time for it to reach our transfer agent if you are sending it by mail. CST Trust Company must receive your proxy voting instructions
before 10 a.m. CST on Wednesday, May 20, 2015 for it to be valid. |
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Non-registered
shareholders: Submit your voting instructions right away to give your nominee enough time to receive them and send them to our transfer agent in time for the meeting. Your nominee will likely need to receive instructions from you at least one
business day before Wednesday, May 20, 2015. |
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2015 MANAGEMENT PROXY CIRCULAR 9
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| If the meeting is postponed or adjourned, CST Trust Company must receive your voting instructions at least 48 hours (excluding Saturdays, Sundays and
statutory holidays) before the reconvened meeting. If you are an administrator, trustee,
attorney or guardian for a person who beneficially holds or controls Cameco shares, or an authorized officer or attorney acting on behalf of a corporation, estate or trust that beneficially holds or controls our common shares, follow the
instructions on the proxy form. The notice can be from you or your attorney, if they have your
written authorization. If the shares are owned by a corporation, the written notice must be from its authorized officer or attorney.
The chair of the meeting has the discretion to accept or reject any late proxies, and can waive or extend the deadline for the receipt of proxy voting instructions
without notice. VOTING IN PERSON
Do not complete the enclosed proxy form if you are a registered shareholder and want to vote in
person. Your vote will be taken and counted at the meeting. |
| Non-registered
shareholders: If you want to vote in person at the meeting, follow the instructions on the enclosed voting instruction form to appoint yourself as proxyholder, or to appoint someone else to attend the meeting and vote for you.
If you appoint yourself or someone other than the Cameco
proxyholders and do not specify how your shares are to be voted, you or your appointee will have full discretionary authority to vote at the meeting. |
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If you change your mind
If you change your mind about how you want to vote your shares, you can revoke your proxy or voting instructions. Instructions provided on a proxy form or voting
instruction form with a later date, or at a later time if you are voting on the internet, will revoke any prior instructions.
Any new instructions will only take effect if they are received by CST Trust Company before 10 a.m. CST on Wednesday, May 20, 2015. If the meeting is postponed or
adjourned, CST Trust Company must receive your new voting instructions at least 48 hours (excluding Saturdays, Sundays and statutory holidays) before the meeting is reconvened for your new voting instructions to be valid. If you are a registered
shareholder, you can revoke your proxy without providing new voting instructions by: |
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sending a notice in writing to the corporate secretary at Cameco, at 2121 - 11th Street West, Saskatoon, Saskatchewan S7M 1J3, so he receives it by 5 p.m. CST on Thursday, May 21, 2015. If the meeting is postponed or adjourned, the
corporate secretary must receive the notice by 5 p.m. CST on the day before the meeting is reconvened. |
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giving a notice in writing to the chair of the meeting before the start of the meeting. |
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responding in any other manner permitted by law. |
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Non-registered shareholders: Contact your nominee if you need help
providing new voting instructions, if you want to revoke your voting instructions (without giving new instructions) or you want to vote in person instead. |
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VOTING RESULTS |
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CST Trust Company, our transfer agent and registrar, receives
the votes and counts them on our behalf. We report on voting results
shortly after the meeting. Go to cameco.com/invest/events-presentations/2015-annual-meeting-of-shareholders or sedar.com following the meeting to see the voting results. |
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10 CAMECO CORPORATION
About the nominated directors
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| Our board of directors is responsible for overseeing management and our business affairs. As shareholders, you elect the board to act in
the best interests of Cameco. This year the board has nominated 11 directors. They all
currently serve on the board and have agreed to stand for re-election: |
| Ian Bruce |
|
Tim Gitzel |
| Daniel Camus |
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James Gowans |
| John Clappison |
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Nancy Hopkins |
| James Curtiss |
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Anne McLellan |
| Donald Deranger |
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Neil McMillan |
| Catherine Gignac |
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| Directors who are elected will serve until the end of the next annual meeting, or until a successor is elected or appointed.
You can vote for all of the nominated directors, vote for some of them and
withhold votes for others, or withhold votes for all of them. Unless otherwise instructed, the named proxyholders will vote for each of the nominated directors (see pages 12 to 17 for details).
The director profiles tell you about each of them, including their qualifications, background,
experience, committee membership, meeting attendance and voting results. |
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WHERE TO FIND IT |
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• Director profiles |
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• Meeting attendance |
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• Director development |
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• About the board |
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OUR POLICY ON MAJORITY VOTING
Under corporate law, a nominated director can be elected with a single for vote, no matter how many votes were withheld.
We adopted a majority voting policy in 2006 to govern the election of directors in an uncontested
election (where the number of nominated directors equals the number of board positions). It requires each director to receive a majority of for votes in order to be elected.
Any director who receives more withhold than for votes, in an uncontested election
must offer to resign immediately. Our nominating, corporate governance and risk committee will
review the voting result and recommend to the board whether to accept the resignation or not. Unless there are exceptional circumstances, the committee and the board will accept the resignation and it will take effect when accepted by the board. The
resigning director does not participate in any board or committee deliberations on the matter.
The board will announce its decision within 90 days of the meeting. If it rejects the resignation, it will explain why. If it accepts the resignation, it may appoint a
new director to fill the vacancy. |
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2015 MANAGEMENT PROXY CIRCULAR 11
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| Director profiles |
| The following pages tell you about each nominated director as of
March 9, 2015, including their background, experience and memberships on other public company boards. Nine of the 11 nominated directors (82%) are independent. |
| The profiles include the voting results for each director at last
year’s annual meeting and information about their meeting attendance in 2014. Each director has provided the information about the Cameco shares they own or exercise control or direction over. Their holdings of Cameco shares and deferred share
units (DSUs) is as of December 31, 2014. |
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| Non-executive directors receive part of their compensation in DSUs, aligning the interests of our directors and shareholders. We
calculated the total value of their shares and DSUs below using $19.05 for 2014 and $22.04 for 2013, the year-end closing prices of Cameco shares on the Toronto Stock Exchange (TSX). All non-executive directors are in compliance with our share
ownership guidelines for directors. Tim Gitzel is our only executive director, and he does not receive DSUs or any other director compensation.
When reviewing compliance, we value each director’s holdings at the price they were acquired or the year-end closing price of Cameco shares on the TSX, whichever
is higher, in accordance with our share ownership guidelines. |
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DIRECTOR SHARE OWNERSHIP |
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We increased our share ownership requirements for directors and the board chair from three times to four times their annual retainer in 2014 (see page 46).
Directors continued to build their share ownership in 2014
and each director increased the number of Cameco DSUs and/or shares held. |
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| See page 48 for the proportion of the total retainer that each non-executive director received in DSUs in 2014. |
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Neil McMillan (63) | Chair of the board (since May 2013) | Independent
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Neil McMillan is the former president and CEO of Claude Resources Inc., a Saskatchewan-based gold mining company. Neil previously served on the board of Atomic Energy Canada Ltd., a
Canadian government nuclear reactor production and services company. |
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Neil holds a bachelor of arts degree from the University of Saskatchewan, and is a former member of the Saskatchewan legislature.
Neil’s CEO experience gives the board access to a ground level view of many of the daily mining risks and opportunities faced by Cameco. His background as an investment adviser and legislator, and his knowledge of the political and business
environment in Saskatchewan, are valuable when the board is reviewing investment opportunities. In addition to his extensive experience as a senior executive, he has served on the compensation and audit committees of other public company boards and
served two years on Cameco’s human resources and compensation committee. Neil served as a director of Philom Bios Inc. from 1997 to 2003 and as a director of Claude Resources Inc. from 1995 to 2014.
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2014
VOTING RESULTS |
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2014
ATTENDANCE |
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BOARD AND COMMITTEE
MEMBERSHIP |
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IN PERSON |
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TELECONFERENCE
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OVERALL*
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99.0% for |
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Board of directors (chair) |
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6 of 6 |
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5 of 5 |
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100% |
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1.0% withheld
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| Director since 2002 Saskatoon, SK
Canadian
Experience • CEO experience
• Executive compensation
• Government relations
• Investment industry • Mining
• Risk management |
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* As board chair, Neil also attended 27 committee meetings in an
ex-officio capacity. |
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OTHER PUBLIC COMPANY BOARDS
AND COMMITTEE MEMBERSHIPS |
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Shore Gold Inc.
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Audit, Compensation |
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SECURITIES HELD
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Year |
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Cameco shares
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DSUs
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Total shares and DSUs
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Total value of shares and DSUs
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In compliance with
ownership guidelines |
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2014
2013 Change |
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600
600 – |
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49,959
44,842 5,117 |
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50,559
45,442 5,117 |
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963,149
$1,001,542 $(38,393) |
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Yes (as he has until May 2018 to acquire additional shares
and DSUs to meet his new target)
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Options held: nil
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12 CAMECO CORPORATION
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Director since 2012 Calgary, AB |
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Ian Bruce (61) | Independent |
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Ian Bruce is the former co-chairman of the board of Peters & Co. Limited, an independent investment dealer, where he served as vice chairman, president and CEO, and CEO and co-chairman. |
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Ian is a fellow of the Chartered Professional Accountants of
Alberta, a recognized Specialist in Valuation under Canadian CPA rules, and has his Corporate Finance Specialist designation in Canada and the UK. He is a past member of the Expert Panel on Securities Regulation for the Minister of Finance of
Canada. Ian is also a past board member and chair of the Investment Industry Association of Canada. |
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In addition to the public company boards listed below, Ian is a
director of the private companies Laricina Energy Ltd., Pumpwell Solutions Ltd. and TriAxon Oil Corp. He was a director of the public company Hardy Oil & Gas plc from 2008 to 2012.
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2014 VOTING RESULTS |
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2014 ATTENDANCE |
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BOARD AND COMMITTEE MEMBERSHIP
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IN PERSON
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TELECONFERENCE
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OVERALL
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99.2% for |
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Board of directors |
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6 of 6 |
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5 of 5 |
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100% |
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0.8% withheld |
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Audit and finance |
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6 of 6 |
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2 of 2 |
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100% |
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Human resources and compensation |
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4 of 4 |
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100% |
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Reserves oversight |
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3 of 3 |
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100% |
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Safety, health and environment |
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1 of 1 |
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100% |
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OTHER PUBLIC COMPANY BOARDS
AND COMMITTEE MEMBERSHIPS |
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| Canadian
Experience |
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Logan International Inc.
Northern Blizzard Resources Inc. |
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Audit
Lead director, Audit (chair), Compensation |
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—
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CEO experience Finance
Investment banking Mergers and acquisitions
Risk management |
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SECURITIES HELD
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Year |
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Cameco shares |
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DSUs |
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Total shares and
DSUs |
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Total value of shares
and DSUs
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In compliance with
ownership guidelines
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2014 |
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75,000 |
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13,118 |
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88,118 |
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$1,678,648 |
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Yes |
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2013 |
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75,000 |
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7,913 |
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82,913 |
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$1,827,406 |
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Change |
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– |
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5,205 |
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5,205 |
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$(148,758) |
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Options held: nil
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Daniel Camus (62) | Independent |
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Daniel Camus is the CFO of the humanitarian finance organization, The Global Fund to Fight AIDS, Tuberculosis and Malaria. He is the former group CFO and head of strategy and international activities of
Electricité de France SA (EDF). Based in France, EDF is an integrated energy operator active in the generation (including nuclear generation), distribution, transmission, supply and trading of electrical energy with international
subsidiaries. |
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Daniel holds a PhD in Economics from Sorbonne University, and an MBA
in finance and economics from the Institute d’Études Politiques de Paris. Over the past 25 years, he has held various senior roles with the Aventis and Hoechst AG Groups in Germany, the US, Canada and France. He has been chair of several
audit committees and brings to Cameco’s board his experience in human resources and executive compensation through his senior executive roles at international companies where he worked on business integrations in Germany, the US, Canada and
France. |
|
2014 VOTING RESULTS |
|
|
|
|
|
|
|
|
|
|
|
2014 ATTENDANCE |
| |
|
|
|
|
|
|
|
|
|
|
BOARD AND COMMITTEE MEMBERSHIP
|
|
IN PERSON
|
|
TELECONFERENCE
|
|
OVERALL
|
| |
|
|
92.2% for |
|
Board of directors |
|
|
|
|
|
6 of 6 |
|
5 of 5 |
|
100% |
|
7.8% withheld |
|
Audit and finance |
|
|
|
6 of 6 |
|
2 of 2 |
|
100% |
|
|
|
Human resources and compensation |
|
|
|
|
|
5 of 5 |
|
1 of 1 |
|
100% |
|
|
|
Safety, health and environment |
|
|
|
|
|
5 of 5 |
|
|
|
100% |
|
OTHER PUBLIC COMPANY BOARDS
AND COMMITTEE MEMBERSHIPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Director since 2011 Geneva, Switzerland
Canadian and French |
|
Morphosys AG, Munich*
Valeo SA, Paris Vivendi SA, Paris
SGL Carbon AG, Wiesbaden |
|
|
Audit (chair)
Audit and risks (chair) Audit (chair)
Nomination, Strategy/technology |
|
|
|
|
|
| Experience |
|
* Daniel retires from the board of Morphosys AG on May 8,
2015. |
| —
—
—
—
—
—
— |
|
Electricity industry
Executive compensation Finance
International Mergers and acquisitions
Nuclear industry Risk management |
|
SECURITIES HELD
|
| |
|
|
|
|
Year |
|
Cameco shares |
|
DSUs |
|
|
Total shares and
DSUs
|
|
Total value of shares
and DSUs
|
|
In compliance with
ownership guidelines
|
| |
|
|
|
|
2014 |
|
– |
|
|
39,012 |
|
|
39,012 |
|
$743,179 |
|
Yes |
|
|
2013 |
|
– |
|
|
26,277 |
|
|
26,277 |
|
$579,143 |
|
|
|
|
Change |
|
– |
|
|
12,735 |
|
|
12,735 |
|
$164,036 |
|
|
|
|
|
|
|
|
|
|
|
Options held: nil
|
| |
2015 MANAGEMENT PROXY CIRCULAR 13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director since 2006 Toronto, ON
Canadian |
|
John Clappison (68) | Independent |
|
John Clappison is the former managing partner of the Greater Toronto Area office of PricewaterhouseCoopers LLP, where he spent 37 years. He is a fellow of the Chartered Professional Accountants of Ontario. |
|
In addition to his extensive financial experience, John brings to Cameco’s board his experience in human resources, risk management, executive compensation and international business as a senior member of the PwC
executive team. He is also a former member of the compensation committee at Canadian Real Estate Investment Trust. |
|
In addition to the public company boards listed below, John serves as a director of the private company, Summitt Energy Holdings GP Inc. and was a director of the public companies Inmet Mining Corporation from 2010 to
2013 and Canadian Real Estate Investment from 2007 to 2011. He is actively involved with the Face the Future Foundation, the Shaw Festival Theatre Endowment Foundation and the Corporation of Roy Thomson Hall and Massey Hall Foundation. John also
serves as a member of the CFO of the Year selection committee. |
|
2014 VOTING RESULTS |
|
|
|
|
|
|
|
|
|
|
|
2014 ATTENDANCE |
| |
|
|
|
|
|
|
|
|
|
|
BOARD AND COMMITTEE MEMBERSHIP
|
|
IN PERSON
|
|
TELECONFERENCE
|
|
OVERALL
|
| |
|
|
99.4% for |
|
Board of directors |
|
|
|
|
|
6 of 6 |
|
5 of 5 |
|
100% |
|
0.6% withheld |
|
Audit and finance (chair) |
|
|
|
|
|
6 of 6 |
|
2 of 2 |
|
100% |
|
|
|
Nominating, corporate governance and risk |
|
|
|
|
|
5 of 5 |
|
|
|
100% |
|
OTHER PUBLIC COMPANY BOARDS
AND COMMITTEE MEMBERSHIPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Experience |
|
Rogers Communications Inc. Sun Life Financial
Inc. |
|
Audit (chair), Pension, Corporate governance Risk
review (chair), Audit |
| — —
—
—
— |
|
Finance Risk management
Corporate governance
Executive compensation International |
|
SECURITIES HELD
|
| |
|
|
|
|
Year |
|
Cameco shares |
|
DSUs |
|
|
Total shares and
DSUs |
|
Total value of shares
and DSUs
|
|
In compliance with
ownership guidelines |
| |
|
|
|
|
2014 |
|
4,200 |
|
|
35,699 |
|
|
39,899 |
|
$760,076 |
|
Yes |
|
|
2013 |
|
4,200 |
|
|
30,802 |
|
|
35,002 |
|
$771,444 |
|
|
|
|
|
|
Change |
|
– |
|
|
4,897 |
|
|
4,897 |
|
$(11,368) |
|
|
|
|
|
|
|
|
|
|
|
Options held: nil |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director since 1994 Wagener, SC, USA
American |
|
James Curtiss (61) | Independent |
| |
James Curtiss has been the principal of Curtiss Law since 2008. Prior to this, he was a partner with the law firm Winston & Strawn LLP in Washington, DC, where he concentrated on energy policy and nuclear regulatory
law. He was a commissioner with the US Nuclear Regulatory Commission from 1988 to 1993. |
| |
James received a bachelor of arts and a juris doctorate from the University of Nebraska. He is a frequent speaker at nuclear industry conferences and has spoken on topics such as licensing and regulatory reform,
advanced reactors and fuel cycle issues. He brings his legal experience in this field to the board. In addition to his extensive energy and nuclear regulatory experience as a lawyer, he has served on our human resources and compensation committee
for the past 15 years and as the committee chair since 2002. James is a director of the private company, Baltimore Gas and Electric, and served on the board of Constellation Energy Group from 1994 to 2012. He is also a director of the Citizens for
Nuclear Technology Awareness. |
| |
2014 VOTING RESULTS |
|
|
|
|
|
|
|
|
|
|
|
2014 ATTENDANCE |
|
|
|
|
|
BOARD AND COMMITTEE MEMBERSHIP AND ATTENDANCE
|
|
IN PERSON
|
|
TELECONFERENCE
|
|
OVERALL
|
| |
|
|
92.9% for |
|
Board of directors |
|
|
|
|
|
6 of 6 |
|
5 of 5 |
|
100% |
|
7.1% withheld |
|
Human resources and compensation (chair) |
|
|
|
5 of 5 |
|
1 of 1 |
|
100% |
|
|
|
Nominating, corporate governance and risk |
|
|
|
5 of 5 |
|
|
|
100% |
|
|
|
|
|
| |
|
|
|
Other public company boards and committee memberships: none
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Experience |
|
|
|
|
| —
—
—
—
— |
|
Executive compensation
Government relations
Legal Nuclear industry
Risk management |
|
SECURITIES HELD
|
| |
|
|
|
|
Year |
|
Cameco shares |
|
DSUs |
|
|
Total shares and
DSUs
|
|
Total value of shares
and DSUs
|
|
In compliance with
ownership guidelines
|
| |
|
|
|
|
2014 |
|
17,321 |
|
|
110,059 |
|
|
127,380 |
|
$2,426,589 |
|
Yes |
|
|
2013 |
|
17,321 |
|
|
108,028 |
|
|
125,349 |
|
$2,762,698 |
|
|
|
|
|
|
Change |
|
– |
|
|
2,031 |
|
|
2,031 |
|
$(336,109) |
|
|
|
|
|
|
|
|
|
|
|
Options held: nil |
| |
14 CAMECO CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director since 2009 Prince Albert, SK
Canadian |
|
Donald Deranger (59) | Not independent |
|
Donald Deranger is an advisor to the Athabasca Basin Development Corporation and non-executive chair of the board of Points Athabasca Contracting Limited Partnership, a northern Saskatchewan aboriginal contractor, which
does business with Cameco. He is the past president of Learning Together, a non-profit aboriginal organization that works to build relationships with the mining industry and continues to assist in an ex-officio capacity. He was the Athabasca Vice
Chief of the Prince Albert Grand Council from 2003 to 2012. Donald also serves as a director of the Tazi Twe Hydroelectric Project and Sylvia Fedorchuk Centre for Nuclear Innovation. |
|
An award-winning leader in the Saskatchewan aboriginal community, Donald brings to the board a deep understanding of the culture and peoples of northern Saskatchewan where our richest assets are located. Donald has not
served on any other public company boards over the past five years. |
|
2014 VOTING RESULTS |
|
|
|
|
|
|
|
|
|
|
|
2014 ATTENDANCE |
| |
|
|
|
|
|
|
|
|
|
|
BOARD AND COMMITTEE MEMBERSHIP
|
|
IN PERSON
|
|
TELECONFERENCE
|
|
OVERALL
|
| |
|
|
98.5% for |
|
Board of directors |
|
|
|
|
|
6 of 6 |
|
5 of 5 |
|
100% |
|
1.5% withheld |
|
Reserves oversight |
|
|
|
|
|
3 of 3 |
|
|
|
100% |
|
|
|
Safety, health and environment |
|
|
|
|
|
5 of 5 |
|
|
|
100% |
|
Other public company boards and committee memberships: none
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Experience |
|
|
|
|
| — —
— |
|
Aboriginal affairs
First Nations
governance
Corporate governance |
|
SECURITIES HELD
|
| |
|
|
|
|
Year |
|
Cameco shares
|
|
DSUs |
|
|
Total shares and
DSUs
|
|
Total value of shares
and DSUs
|
|
In compliance with ownership
guidelines |
| |
|
|
|
|
2014 |
|
– |
|
|
24,710 |
|
|
24,710 |
|
$470,726 |
|
Yes (as he has until July |
|
|
2013 |
|
– |
|
|
20,015 |
|
|
20,015 |
|
$441,135 |
|
2016 to acquire additional |
|
|
Change |
|
– |
|
|
4,695 |
|
|
4,695 |
|
$29,591 |
|
shares and DSUs to meet
his new target) |
|
|
|
|
|
|
|
|
|
Options held: nil
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director since 2014 Mississauga, ON
Canadian
Experience — Mining, exploration and operations
— Investment
industry
— Mineral
resource estimation
— Project value
analysis |
|
Catherine Gignac (53) | Independent |
|
Catherine Gignac is the principal of Catherine Gignac & Associates since 2011. Formerly, she was a mining equity research analyst
with NCP Northland Capital Partners from 2009 to 2011 and prior to that she held the same position with Wellington West Capital Markets. She has more than 30 years’ experience as a mining equity research analyst and geologist. She held senior
positions with leading firms, including Merrill Lynch Canada, RBC Capital Markets, UBS Investment Bank and Dundee Capital Markets Inc. and Loewen Ondaatje McCutcheon Limited.
|
|
Catherine is a member of the CSA’s mining technical advisory and monitoring committee, the CFA Institute, the Mineral Resource
Analyst Group, the Canadian Institute of Mining & Metallurgy and the Prospectors and Developers Association of Canada.
As an analyst she has covered the mining and minerals sector, including large and small cap companies with a focus on precious and base metal mining. She has extensive
experience in project value analysis and mergers and acquisitions. Catherine served on the board of Azul Ventures Inc. from 2012 to 2013. She is actively involved with Crohn’s & Colitis Canada.
|
|
2014 VOTING RESULTS |
|
|
|
|
|
|
|
|
|
|
|
2014 ATTENDANCE |
| |
|
|
|
|
|
|
|
|
|
|
BOARD AND COMMITTEE MEMBERSHIP
|
|
IN PERSON
|
|
TELECONFERENCE
|
|
OVERALL*
|
| |
|
|
99.3% for |
|
Board of directors |
|
|
|
|
|
6 of 6 |
|
4 of 5 |
|
91% |
|
0.7% withheld |
|
Audit and finance |
|
|
|
4 of 4 |
|
|
|
100% |
|
|
|
Reserves oversight |
|
|
|
2 of 2 |
|
|
|
100% |
|
|
|
Safety, health and environment |
|
|
|
4 of 4 |
|
|
|
100% |
| |
|
|
* Catherine was appointed to three committees in May 2014. She also attended 10 committee meetings from
February through May as part of her director orientation. |
|
OTHER PUBLIC COMPANY BOARDS
AND COMMITTEE MEMBERSHIPS |
| |
|
|
Corvus Gold Inc. |
|
Board chair, Compensation, Corporate governance and nominating |
|
St. Andrew Goldfields Ltd.* |
|
Audit, Sustainability (chair) |
|
|
|
|
|
|
|
|
|
|
|
Trevali Mining Corporation |
|
Audit, Nominating and corporate governance, Sustainability |
|
* Catherine retires from
the board of St. Andrew Goldfields Ltd. on May 13, 2015. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
SECURITIES HELD
|
| |
|
|
|
|
Year |
|
Cameco shares |
|
DSUs |
|
|
Total shares and
DSUs
|
|
Total value of shares
and DSUs
|
|
In compliance with
ownership guidelines
|
| |
|
|
|
|
2014 |
|
3,000 |
|
|
4,318 |
|
|
7,318 |
|
$139,408 |
|
Yes (as she has until
January 2021 to acquire additional shares and
DSUs to meet her new target) |
| |
|
|
|
|
|
|
Options held: nil |
| |
2015 MANAGEMENT PROXY CIRCULAR 15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director since 2011 Saskatoon, SK
Canadian |
|
Tim Gitzel (52) | President and CEO | Not independent
|
|
Tim Gitzel is president and CEO of Cameco since 2011. He was appointed president in 2010 and served as senior vice-president and COO from 2007 to 2010. Tim has 20 years of senior management experience in Canadian and
international uranium activities. Prior to joining Cameco, he was executive vice president, mining business unit for AREVA in Paris, France, where he was responsible for global uranium, gold, exploration and decommissioning operations in 11
countries. |
|
Tim received his bachelor of arts and law degrees from the University of Saskatchewan. He was appointed to the board of the Nuclear Energy Institute in 2011 and to The Mosaic Company board in October 2013. He served as
chair of the World Nuclear Association from 2012 to 2014 and continues to serve as a member of the board. He is also a member of the Canadian Council of Chief Executives. |
|
Tim is also past president of the Saskatchewan Mining Association, and has served on the boards of SaskEnergy Corporation, the Saskatchewan Chamber of Commerce and Junior Achievement of Saskatchewan. He was vice chair
of the 2013 Memorial Cup Organizing Committee for the Canadian Junior Hockey Championships held in Saskatoon. Except for the public company listed below, Tim has not served on any other public company boards over the past five years. |
|
2014 VOTING RESULTS |
|
|
|
|
|
|
|
|
|
|
|
2014 ATTENDANCE |
| |
|
|
|
|
|
|
|
|
|
|
BOARD AND COMMITTEE MEMBERSHIP
|
|
IN PERSON
|
|
TELECONFERENCE
|
|
OVERALL
|
| |
|
|
99.2% for |
|
Board of directors |
|
|
|
|
|
6 of 6 |
|
5 of 5 |
|
100% |
|
0.8% withheld |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER PUBLIC COMPANY BOARDS
AND COMMITTEE MEMBERSHIPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Experience |
|
The Mosaic Company |
|
Audit, Corporate governance and nominating |
| — —
—
— |
|
International Mining
Nuclear industry Risk management |
|
SECURITIES HELD
|
| |
|
|
|
|
Year |
|
Cameco shares |
|
PSUs* |
|
|
RSUs |
|
|
Total shares,
PSUs and RSUs
|
|
Total value of shares,
PSUs and RSUs**
|
|
In compliance with ownership
guidelines |
| |
|
|
|
|
2014 |
|
99,252 |
|
|
190,100 |
|
|
|
– |
|
|
289,352 |
|
$5,512,156 |
|
See page 63 for the CEO |
|
|
2013 |
|
40,462 |
|
|
152,200 |
|
|
|
70,000 |
|
|
262,662 |
|
$5,789,070 |
|
ownership requirement (no |
|
|
|
|
Change |
|
58,790 |
|
|
37,900 |
|
|
|
(70,000) |
|
|
26,690 |
|
$(276,914) |
|
requirement as a director) |
|
|
|
|
|
|
|
|
|
* |
|
Tim’s 52,100 PSUs from 2012 vested on December 31, 2014, and
were paid out on March 2, 2015. These 2012 PSUs, prior to any adjustment based on performance, are included in the PSU totals. |
|
|
|
|
** |
|
Value of shares ($1,890,751) and PSUs ($3,621,405) are calculated
using $19.05 for 2014, the year-end closing price of Cameco shares on the TSX. This is the total value of Tim’s accumulated shares and other equity-based holdings. |
|
|
|
|
Options held: See Incentive plan awards on page 84.
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director since 2009 Toronto, ON
Canadian |
|
James (Jim) Gowans (63) | Independent |
|
Jim Gowans is Co-President of Barrick Gold Corporation since July 2014. He was Executive Vice President and Chief Operating Officer of Barrick Gold Corporation from January to July 2014 and managing director of the
Debswana Diamond Company in Botswana from 2011 to 2014. He is the former COO and chief technical officer of DeBeers SA (2010), and was the CEO of DeBeers Canada Inc. from 2006 to 2010. Prior to that, he was the senior vice-president and COO of PT
Inco in Indonesia, a nickel producing company. Jim is the past chair of The Mining Association of Canada. |
|
Jim received a bachelor of applied science degree in mineral engineering from the University of British Columbia and attended the Banff School of Advanced Management. He has extensive mining knowledge and perspective on
the importance of corporate social responsibility. His human resources experience includes a previous position as vice president, human resources at Placer Dome. Jim was a director of the public company PhosCan Chemical Corp. from 2008 to June 2014,
and he served on its compensation committee for the full tenure. |
|
2014 VOTING RESULTS |
|
|
|
|
|
|
|
|
|
|
|
2014 ATTENDANCE |
| |
|
|
|
|
|
|
|
|
|
|
BOARD AND COMMITTEE MEMBERSHIP
|
|
IN PERSON
|
|
TELECONFERENCE
|
|
OVERALL
|
| |
|
|
99.4% for |
|
Board of directors |
|
|
|
|
|
5 of 6 |
|
5 of 5 |
|
91% |
|
0.6% withheld |
|
Reserves oversight (chair) |
|
|
|
3 of 3 |
|
|
|
100% |
|
|
|
Safety, health and environment |
|
|
|
5 of 5 |
|
|
|
100% |
|
OTHER PUBLIC COMPANY BOARDS
AND COMMITTEE MEMBERSHIPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Experience |
|
None
|
|
|
| — —
—
— |
|
CEO experience Executive
compensation Mining and exploration
International |
|
SECURITIES HELD
|
| |
|
|
|
|
Year |
|
Cameco shares |
|
DSUs |
|
|
Total shares and
DSUs
|
|
Total value of shares
and DSUs
|
|
In compliance with
ownership guidelines
|
| |
|
|
|
|
2014 |
|
1,000 |
|
|
43,209 |
|
|
44,209 |
|
$842,181 |
|
Yes |
|
|
2013 |
|
1,000 |
|
|
35,301 |
|
|
36,301 |
|
$800,066 |
|
|
|
|
|
|
Change |
|
– |
|
|
7,908 |
|
|
7,908 |
|
$42,115 |
|
|
|
|
|
|
|
|
|
|
|
Options held: nil |
| |
16 CAMECO CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nancy Hopkins (60) | Independent |
|
Nancy Hopkins, Q.C., is a partner with the law firm McDougall Gauley LLP in Saskatoon, where she concentrates on corporate and commercial law and merger and acquisition transactions. Nancy
was chair of the board of governors of the University of Saskatchewan from 2010 to 2013, chair of the board of the Saskatoon Airport Authority from 2009 to 2012, and serves as a director and member of the human resources and compensation and audit
committees of the Canada Pension Plan Investment Board. Nancy served on the compensation committee during her board service with both the Saskatoon Airport Authority and the University of Saskatchewan. |
|
Nancy received her bachelor of commerce and laws degrees from the University of Saskatchewan, and is an honorary member of the Chartered Professional Accountants of Saskatchewan. She brings
to the board extensive experience in the Saskatchewan business community, and her board experience with a wide range of respected organizations has provided her with a strong governance and compensation background and a wealth of knowledge. Nancy
formerly served as the chair of our compensation committee. Nancy was a director of the public company Growthworks Canadian Fund Ltd. from 2003 to 2014. |
|
2014 VOTING RESULTS |
|
|
|
|
|
2014
ATTENDANCE |
| |
|
|
|
|
|
|
|
|
|
|
BOARD AND COMMITTEE
MEMBERSHIP |
|
IN PERSON |
|
TELECONFERENCE
|
|
OVERALL
|
| |
|
|
98.9% for |
|
|
|
Board of directors |
|
6 of 6 |
|
5 of 5 |
|
100% |
| Director since 1992 Saskatoon, SK
Canadian |
|
1.1% withheld |
|
|
|
Audit and finance Nominating, corporate governance and risk
(chair) |
|
6 of 6 5 of 5 |
|
2 of 2 |
|
100%
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Experience • Corporate
governance • Legal
• Executive compensation
• Risk management |
|
OTHER PUBLIC COMPANY BOARDS
AND COMMITTEE MEMBERSHIPS |
| |
|
|
Growthworks Commercialization Fund Ltd.
|
|
Audit and valuation (chair) |
|
|
|
SECURITIES HELD
|
| |
|
|
Year |
|
Cameco shares
|
|
DSUs
|
|
Total shares and DSUs
|
|
Total value of shares and DSUs
|
|
In compliance with
ownership guidelines |
| |
|
|
2014
2013 Change |
|
38,500
38,500 – |
|
25,843
22,946 2,897 |
|
64,343
61,446 2,897 |
|
$1,225,734
$1,354,266 $(128,532) |
|
Yes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options held: nil
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anne McLellan (64) | Independent
The Honourable Anne McLellan is a former Deputy Prime Minister of Canada and has held several senior cabinet positions, including federal Minister of Natural Resources,
Minister of Health, Minister of Justice and Attorney General of Canada, and federal interlocutor of Métis and non-status Indians. Since leaving politics, she served as distinguished scholar in residence at the University of Alberta in the
Alberta Institute for American Studies from 2006 to 2013 and is senior advisor in the national law firm Bennett Jones LLP. Anne will be installed as Chancellor of Dalhousie University in May 2015. |
|
|
Anne holds a bachelor of arts degree and a law degree from Dalhousie University, and a master of laws degree from King’s College, University of London. She serves on the Royal
Alexandra Hospital Foundation where she was chair from 2011 to 2013, and served on the board of Canadian Business for Social Responsibility from 2007 to 2011. In addition to her extensive experience in federal administration and policy, Anne served
on the board of Nexen Inc. from 2006 to 2013 and as a member of its compensation committee. Anne also serves on the board of Agrium Inc. where she chairs the environmental, health and safety committee, and is a director of the Edmonton Regional
Airport Authority, Canada’s fifth largest airport, where she formerly served as chair of the governance and compensation committee. |
|
2014 VOTING RESULTS |
|
|
|
|
|
2014
ATTENDANCE |
| |
|
|
|
|
|
|
| Director since 2006 Edmonton, AB
Canadian
Experience • Corporate social
responsibility |
|
|
|
|
BOARD AND COMMITTEE
MEMBERSHIP |
|
IN PERSON |
|
TELECONFERENCE
|
|
OVERALL
|
| |
|
|
93.4% for |
|
|
|
Board of directors |
|
6 of 6 |
|
5 of 5 |
|
100% |
|
6.6% withheld |
|
|
|
Audit and finance Human resources and compensation
Nominating, corporate governance and risk Safety, health and environment
|
|
3 of 3 5 of 5
5 of 5 4 of 4 |
|
2 of 2 1 of 1 |
|
100% 100%
100%
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| • Executive
compensation • Government
relations |
|
OTHER PUBLIC COMPANY BOARDS
AND COMMITTEE MEMBERSHIPS |
| |
|
|
Agrium Inc.
|
|
Audit, Health, safety and security |
|
|
|
SECURITIES HELD
|
| |
|
|
Year |
|
Cameco shares
|
|
DSUs
|
|
Total shares and DSUs
|
|
Total value of shares and DSUs
|
|
In compliance with
ownership guidelines |
| |
|
|
2014
2013 Change |
|
100
100 – |
|
27,224
24,206 3,018 |
|
27,324
24,306 3,018 |
|
$520,522
$535,693 $(15,171) |
|
Yes (as she has until July
2016 to acquire additional
shares and DSUs to meet her new
target) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options held: nil
|
| |
2015 MANAGEMENT PROXY CIRCULAR 17
Meeting attendance
We believe that an active board governs more effectively. We expect our directors to attend all board meetings, all of their committee
meetings and the annual meeting of shareholders. Directors can participate by teleconference if they are unable to attend board and committee meetings in person. The board must have a majority of directors in attendance to hold a meeting and
transact business.
The table below shows the number of meetings each director attended in 2014. The board and committees met in
camera without management present at each meeting, and the independent directors met in camera once. The independent directors are indicated in the table below (see pages 24 and 26 for more about director independence).
As board chair, Neil McMillan is an ex-officio member of each board committee and attended 27 committee meetings. Board committees
function separately from management, so Tim Gitzel, our president and CEO, is not a member of any board committee.
All directors
attended the 2014 annual meeting.
See Our expectations for directors on page 27 for more information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2014 MEETING ATTENDANCE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NAME |
|
INDEPENDENT |
|
BOARD |
|
|
AUDIT AND
FINANCE
COMMITTEE |
|
|
HUMAN
RESOURCES AND
COMPENSATION
COMMITTEE |
|
|
NOMINATING,
CORPORATE
GOVERNANCE
AND RISK
COMMITTEE |
|
|
RESERVES
OVERSIGHT
COMMITTEE |
|
|
SAFETY,
HEALTH AND
ENVIRONMENT
COMMITTEE |
| Ian Bruce |
|
Ö |
|
|
11 of 11 |
|
|
|
100% |
|
|
|
8 of 8 |
|
|
|
100% |
|
|
|
4 of 4 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
3 of 3 |
|
|
|
100% |
|
|
1 of 1 |
|
100% |
| Daniel Camus |
|
Ö |
|
|
11 of 11 |
|
|
|
100% |
|
|
|
8 of 8 |
|
|
|
100% |
|
|
|
6 of 6 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 of 5 |
|
100% |
| John Clappison |
|
Ö |
|
|
11 of 11 |
|
|
|
100% |
|
|
|
8 of 8
(chair) |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
5 of 5 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Joe Colvin |
|
Ö |
|
|
11 of 11 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
6 of 6 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 of 5
(chair) |
|
100% |
| James Curtiss |
|
Ö |
|
|
11 of 11 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
6 of 6
(chair) |
|
|
|
100% |
|
|
|
5 of 5 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Donald Deranger |
|
X |
|
|
11 of 11 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 of 3 |
|
|
|
100% |
|
|
5 of 5 |
|
100% |
| Catherine Gignac |
|
Ö |
|
|
10 of 11 |
|
|
|
91% |
|
|
|
4 of 4 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 of 2 |
|
|
|
100% |
|
|
4 of 4 |
|
100% |
| Tim Gitzel |
|
X |
|
|
11 of 11 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| James Gowans |
|
Ö |
|
|
10 of 11 |
|
|
|
91% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 of 3
(chair) |
|
|
|
100% |
|
|
5 of 5 |
|
100% |
| Nancy Hopkins |
|
Ö |
|
|
11 of 11 |
|
|
|
100% |
|
|
|
8 of 8 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
5 of 5
(chair) |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Anne McLellan |
|
Ö |
|
|
11 of 11 |
|
|
|
100% |
|
|
|
5 of 5 |
|
|
|
100% |
|
|
|
6 of 6 |
|
|
|
100% |
|
|
|
5 of 5 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
4 of 4 |
|
100% |
| Neil McMillan |
|
Ö |
|
|
11 of 11
(chair) |
|
|
|
100% |
|
|
|
8 of 8 |
|
|
|
100% |
|
|
|
6 of 6 |
|
|
|
100% |
|
|
|
5 of 5 |
|
|
|
100% |
|
|
|
3 of 3 |
|
|
|
100% |
|
|
5 of 5 |
|
100% |
| Victor Zaleschuk |
|
Ö |
|
|
11 of 11 |
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
6 of 6 |
|
|
|
100% |
|
|
|
5 of 5 |
|
|
|
100% |
|
|
|
3 of 3 |
|
|
|
100% |
|
|
|
|
|
| 82% of the nominated directors are independent |
|
|
|
|
Total # of
meetings |
|
|
|
11 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
3 |
|
|
|
|
5 |
18 CAMECO CORPORATION
Director development
Members of our board are knowledgeable about issues affecting our business, the nuclear industry, governance, compensation and related
matters. We believe that our education program gives them additional knowledge to help them effectively oversee our affairs and stay abreast of important developments and issues within the context of our business.
ORIENTATION
Our orientation program familiarizes new directors with Cameco, the nuclear and uranium mining industries and what we expect of the
board and committees. All new directors:
| |
— |
|
receive an educational manual with information about Cameco and the uranium and nuclear industries, including copies of our recent regulatory filings, financial statements, governance documents and key policies |
|
| |
— |
|
attend a two-day nuclear industry seminar presented by management |
|
| |
— |
|
participate in a round table discussion with the committee chair and appropriate management representatives for each committee they join. |
|
All directors are welcome to attend the round table discussions and many take advantage of this
opportunity to learn more about Cameco.
Existing directors who join new committees also participate in round table discussions,
and are given a copy of the committee’s mandate and the minutes of its four most recent meetings.
In 2014, Catherine Gignac
participated in round table discussions for the three committees she joined as a new director. Ian Bruce participated in a round table discussion for the human resources and compensation committee, which he joined in May.
CONTINUING EDUCATION
Directors enhance their understanding of our business throughout the year in several ways:
| |
— |
|
attend seminars provided by management that cover issues relating to key business decisions, strategic planning and enterprise risks |
|
| |
— |
|
attend seminars on topics directors request |
|
| |
— |
|
tour facilities we operate or other nuclear facilities |
|
| |
— |
|
attend external conferences and seminars |
|
| |
— |
|
meet with senior management at informal social gatherings. |
|
The corporate secretary maintains a calendar of educational opportunities for the board
members.
Educational needs of directors are identified through a self-assessment questionnaire, in individual meetings with the
chair of the board and in board and committee meetings. We encourage directors to learn about issues related to the committees they are members of, and send them information about relevant webinars and other educational opportunities with
management’s recommendations and comments.
We pay the fees and expenses for directors to attend applicable conferences and
events. We updated our board education policy in October 2014 to provide clearer approval processes and budgets for directors’ attendance at conferences and events that are paid for by Cameco.
|
|
|
|
|
|
|
| 2014 DIRECTOR DEVELOPMENT
|
|
PRESENTED/HOSTED BY
|
|
ATTENDED BY
|
| |
| Audit and finance |
| |
| New IFRS developments and non-GAAP financial indicators |
|
Committee of Audit Chairs, Institute of Board of Directors
(IFA) |
|
Daniel Camus |
|
|
| |
| Applying IFRS in the mining industry |
|
Chartered Professional Accountants Canada (CPA)
KPMG |
|
Ian Bruce John Clappison |
|
Nancy Hopkins |
| |
| Enhancing audit committee oversight of the external auditor |
|
BrightTALK |
|
A. Anne McLellan |
|
|
| |
| Audit committee meeting for members of financial institutions |
|
PwC |
|
John Clappison |
|
|
| |
| Overcoming challenges in risk oversight |
|
Canadian Audit Committee Network |
|
John Clappison |
|
|
| |
| Board oversight of major capital projects |
|
Institute of Corporate Directors (ICD) |
|
John Clappison(presenter) |
|
Catherine Gignac |
| |
| Audit quality |
|
KPMG Audit Committee Institute |
|
John Clappison |
|
|
| |
| Audit committee symposium |
|
Deloitte |
|
John Clappison |
|
|
| |
| Quarterly audit committee roundtable |
|
NACD KPMG |
|
Nancy Hopkins |
|
|
| |
2015 MANAGEMENT PROXY CIRCULAR 19
|
|
|
|
|
|
|
| 2014 DIRECTOR DEVELOPMENT
|
|
PRESENTED/HOSTED BY
|
|
ATTENDED BY
|
| |
| Compensation |
| |
| NYSE compensation committee boot camp |
|
NYSE Governance Services |
|
James Curtiss (speaker) |
|
|
| |
| Pay for performance, compensation risk assessment and the role of ISS |
|
Meridian Compensation Partners |
|
All directors |
|
|
| |
| Human resources and compensation committee effectiveness |
|
ICD |
|
Anne McLellan |
|
|
| |
| Calibrate risks and rewards |
|
NACD |
|
Anne McLellan |
|
|
| |
| Economic and market |
|
|
|
|
|
|
| |
| Macro topics energy conference |
|
Peters & Co. |
|
Ian Bruce |
|
|
| |
| A behind the scenes look at the monetary and financial system, global bond markets, hedge funds and regulators |
|
Glenn Hadden Partner & Portfolio Manager
Alphadyne Assessment Management |
|
Catherine Gignac |
|
|
| |
| Governance |
|
|
|
|
|
|
| |
| Governance and compliance leadership peer exchange |
|
NYSE Governance Services |
|
James Curtiss |
|
|
| |
| 11th annual board room summit |
|
NYSE Governance Services / Corporate Board Member |
|
Joe Colvin James Curtiss |
|
|
| |
| Board decision making dynamics |
|
ICD |
|
Ian Bruce |
|
|
| |
| A preview of the regulatory environment in 2015 |
|
NACD |
|
Anne McLellan |
|
|
| |
| Governance review |
|
Russell Reynolds Associates |
|
John Clappison |
|
|
| |
| ICD.D designation achieved |
|
ICD Directors’ education program |
|
Catherine Gignac |
|
|
| |
| Mergers and acquisitions / shareholder activists |
|
ICD |
|
Catherine Gignac |
|
|
| |
| Leadership, character and corporate governance |
|
ICD |
|
Nancy Hopkins |
|
|
| |
| Boards and shareholders – the case for engagement |
|
NACD |
|
Nancy Hopkins |
|
|
| |
| National conference: Transformational governance – embracing change and innovation successfully |
|
ICD |
|
Nancy Hopkins |
|
|
| |
| Building better boards: Board evaluations – essential tool or non-productive popularity contest |
|
ICD |
|
Nancy Hopkins |
|
|
| |
| The industry has spoken: are we ready to make the leap from global business services (GBS) to digital business services? |
|
HfS Research KPMG |
|
Nancy Hopkins |
|
|
| |
| Mining and operations |
|
|
|
|
|
|
| |
| Cigar Lake minesite visit |
|
Cameco management |
|
All directors |
|
|
| |
| US restoration window and plans |
|
Brent Berg President, Cameco Resources |
|
SHE committee members |
|
|
| |
| Supply chain management strategic direction |
|
Dmitry Barsukov, Vice-President, Supply Chain Management |
|
Audit and finance committee members |
|
Joe Colvin James Gowans |
| |
| Nuclear industry |
|
|
|
|
|
|
| |
| World nuclear fuel cycle |
|
World Nuclear Association (WNA) |
|
Joe Colvin |
|
Tim Gitzel |
| |
| Annual symposium |
|
WNA |
|
Daniel Camus Tim Gitzel (presenter) |
|
Neil McMillan |
| |
| Nuclear industry summit |
|
WNA |
|
Tim Gitzel (presenter) |
|
|
| |
| World nuclear fuel market 41st annual meeting |
|
World Nuclear Fuel Market |
|
Ian Bruce Nancy Hopkins |
|
|
| |
| International symposium on uranium raw material for nuclear energy cycle |
|
International Atomic Energy Agency |
|
Tim Gitzel (presenter) |
|
|
| |
| Leadership in challenging times |
|
Pacific Basin Nuclear Conference |
|
Tim Gitzel (presenter) |
|
|
| |
| Financing for anti-uranium NGO’s |
|
Vivian Krause, Researcher, Writer and Special Columnist,
Financial Post |
|
All directors |
|
|
| |
20 CAMECO CORPORATION
|
|
|
|
|
|
|
| 2014 DIRECTOR DEVELOPMENT
|
|
PRESENTED/HOSTED BY
|
|
ATTENDED BY
|
| |
| Annual CEO conference |
|
Institute of Nuclear Power Operations (INPO) |
|
Joe Colvin |
|
Tim Gitzel |
| |
| Risk |
| |
| IT risks and cyber security |
|
IFA |
|
Daniel Camus |
|
|
| |
| Information security and security while traveling |
|
Mark Leach, Vice-President, BTS Gustav Erasmus, Director, IT
Governance, Risk & Compliance, BTS Bruce Moore, Canadian Cyber Incident Response Centre |
|
All directors |
|
|
| |
| Business technology services (BTS) governance and cyber risk management |
|
Mark Leach, Vice-President, BTS Alice Wong, Senior Vice-President
and Chief Corporate Officer |
|
All directors |
|
|
| |
| Global tax evolution: implications of base erosion and profit shifting (BEPS) |
|
Albert Baker, Partner, Global Tax Policy and National Quality & Risk Leader,
Deloitte |
|
All directors |
|
|
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John Clappison (presenter) |
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Nancy Hopkins |
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2015 MANAGEMENT PROXY CIRCULAR 21
Governance at Cameco
We believe that sound governance is the foundation for strong corporate
performance.
This section tells you about three key elements of governance at Cameco: our shareholder commitment,
our governance principles and how our board operates.
Cameco governance practices
The nominating, corporate governance and risk committee ensures our governance policies and
practices are sound and support the board in carrying out its duties.
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| Our shareholder
commitment |
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Separate chair and CEO positions |
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Shareholder engagement |
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Accessible board
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Policies and guidelines
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| About the board |
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Independence |
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Tenure |
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Our expectations for directors |
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Board diversity |
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Skills, attributes and experience |
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Director recruitment and board succession |
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Role of the board |
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Board committees
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Independent board – 9 of our 11 directors or 82% are independent (see pages 24 and 26)
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Non-executive chair leads the board – we maintain separate chair and CEO positions and have had a non-executive, independent board chair
since 2003 (see page 23) |
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Share ownership – we require our directors and executives to own shares in Cameco to align their interests with those of our shareholders
(see pages 46 and 63) |
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Majority voting for directors – the board adopted a majority voting policy in 2006 (see page 11)
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Strong risk oversight – the board and committees oversee our risk management program and strategic business, financial and operational risks
(see page 31) |
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Formal assessment process – the directors complete a formal assessment that reviews the board overall, the committees and their individual
performance (see page 34) |
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Director recruitment and board succession – we have term limits and a retirement policy for directors (see page 27)
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Diverse board – our board has a diverse mix of skills, background and experience and over 25% of our directors are women
(see page 28) |
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Independent advice – board committees can retain independent advisors to help them carry out their duties and responsibilities (see page
35) |
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Code of conduct and ethics – directors, officers and employees must comply with our code of conduct and confirm their compliance every year
(see page 24) |
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Long-standing shareholder engagement – we communicate openly with shareholders and other stakeholders (see page 23)
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Say on pay – we have held an advisory vote on our approach to executive compensation every year since 2010 (see page 6)
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No slate voting |
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No overboarding of directors |
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No stock option awards for directors |
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22 CAMECO CORPORATION
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| Our shareholder commitment
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| We believe in transparency, integrity and strong stewardship, and are committed to increasing Cameco’s value to benefit all
shareholders. Separate chair and CEO positions
Leadership starts at the top, and we believe it is important to maintain separate chair and CEO
positions. Both positions are appointed by the board. We have had an independent, non-executive
chair of the board since 2003. A non-executive chair provides stronger board leadership, fosters more effective decision-making and avoids conflicts of interest. It also allows for more effective oversight and the ability to hold management
accountable for the company’s activities. |
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We meet with our large shareholders, governance organizations and shareholder groups on request or as a follow-up to governance questions
raised in our regular investor meetings. Following our 2014 annual meeting, we met with Glass
Lewis & Co., LLC and ISS Corporate Services (ISS), two proxy advisory firms that provide voting and other governance advice to institutional investors, to maintain a dialogue on governance and compensation matters.
COMPENSATION
We have long recognized the spotlight the investor community has put on executive compensation, pay
for performance and delivering value to shareholders. We have held a ‘say on pay’
advisory vote every year since 2010 to give shareholders an opportunity to express their views on our approach to executive compensation, and have received approval ratings of over 90% every year (see page 6 for details about the advisory vote).
Accessible board
Shareholders, employees and other interested parties can write to the chair of the board, the
committee chairs or the independent directors as a group. Send your sealed envelope to our
corporate office: Cameco Corporation 2121-11th Street West
Saskatoon, SK S7M 1J3
Private and strictly confidential Attention – Chair of the board of
directors You can also use this address to write to the chair of the audit and finance
committee or the human resources and compensation committee – make sure you mark on the envelope who you are directing the letter to.
Envelopes will be delivered to the appropriate party unopened. |
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ACCOUNTABILITY |
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The current position description for the CEO was adopted in 2012. The CEO is evaluated as part of the board survey assessment
process (see page 34). We also have a position
description for the board chair, which describes the terms and responsibilities of the role.
You can find the position descriptions on our website
(cameco.com/about/governance). |
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| Shareholder engagement
We communicate openly with shareholders and other key stakeholders.
The board adopted a position on shareholder engagement in 2010 to establish engagement practices
based on shareholder needs and evolving governance practices. Our goal is to provide shareholders with clear information about our governance and compensation practices, and to continuously improve our practices and our disclosure. |
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2015 MANAGEMENT PROXY CIRCULAR 23
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| Governance principles
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| Policies and guidelines
CODE OF CONDUCT AND ETHICS
We expect employees, officers, directors and contractors to act with honesty, integrity and impartiality to earn the trust of our shareholders, other stakeholders,
customers and communities where we operate. The code contains principles and guidelines for
ethical behaviour in eight key areas: — financial reporting and accountability — confidentiality
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conflicts of interest
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complying with the laws, rules and regulations that apply to us (including safety, health, environmental, import, export, securities disclosure and insider trading laws)
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corporate opportunities — identifying and preventing fraud — reporting illegal or unethical behaviour
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reporting violations of the code. New employees must read the code, sign an
acknowledgement that they will follow the code and disclose any conflicts of interest. Directors, officers and employees who have management responsibilities or work in supply chain management, internal audit, investor relations,
finance/treasury/tax, business technology services, marketing, corporate development, legal, human resources and executive offices must review the code every year and sign a certificate of compliance. Employees who participate in the annual
certification process agree to communicate the code’s importance and mandatory adherence to all team members. |
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COMPLIANCE
We are a public company and our shares trade on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).
We comply with applicable corporate governance guidelines and requirements in Canada and the United
States, including:
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the corporate governance standards that apply to Canadian companies listed on the TSX — the requirements of the Sarbanes-Oxley Act of 2002 (SOx)
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the NYSE corporate governance standards that apply to foreign private issuers registered with the Securities and Exchange Commission (SEC) in the US.
We also voluntarily comply with most of the NYSE corporate governance standards that apply to US issuers, with the following exceptions:
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director independence standards: we generally comply with the NYSE standards, but in some cases we may determine that a director is independent when only the Canadian independence standards are satisfied
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shareholder approval of equity compensation plans: we comply with the TSX rules, which require shareholders to approve equity compensation plans only if they involve newly issued securities. The NYSE standards require shareholders to approve
the plans and any material revisions, whether or not the securities issued under the plans are newly issued or purchased on the open market, subject to a few limited exceptions.
The board has formal governance guidelines that set out our approach to governance and the
board’s governance role and practices. These guidelines ensure we comply with the legal requirements and standards listed above, conduct ourselves in the best interests of Cameco and meet industry best practices. The governance guidelines are
reviewed and updated regularly and are available on our website (cameco.com/about/governance/governance-guidelines).
INDEPENDENCE
We believe that a substantial majority of the directors must be independent for the board to be effective and that the audit and finance committee, human resources and
compensation committee and nominating, corporate governance and risk committee must only have independent directors as members. The majority of our directors are unrelated, and these three committees are 100% independent.
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CODE OF CONDUCT AND ETHICS |
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You can find a copy of the code on our website (cameco.com/about/governance/code-of-conduct) or write to our corporate secretary.
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| Directors must declare any conflicts of interest and
excuse themselves from any discussions or decisions where their business or personal interests would create a conflict of interest.
Any potential concerns are reported to management’s conduct and ethics committee. The audit and finance committee reviews concerns relating to senior management
and directors. Management’s conduct and ethics committee reviews all other concerns.
Employees can report a concern about inappropriate business conduct confidentially and anonymously through our ethics (whistleblower) hotline or online. We implemented
the hotline in 2006 and a web-based training and compliance tool in 2012. |
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WHAT IT MEANS |
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A director is independent if he or she does not have a direct or indirect material relationship with us. A relationship is material if it could reasonably interfere with a director’s ability to make independent decisions, regardless of any other association he or she may have.
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24 CAMECO CORPORATION
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| Our independence criteria meets the standards of the Canadian Securities Administrators as set out in Multilateral Instrument 52-110
– Audit Committees, National Policy 58-201 – Corporate Governance Guidelines and the NYSE corporate governance standards, including the NYSE standards on independence of human resources committee members introduced in
2013. We review our independence criteria and director status every year. You can find our complete definition of independence on our website (cameco.com/about/governance/governance-guidelines).
Independent chair
We have had a non-executive, independent chair of our board since 2003. The board appoints the independent chair to help it function independently of management.
The chair has various duties and responsibilities:
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leading, managing and organizing the board consistent with our approach to governance — encouraging high performance and commitment of all directors
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presiding as the chair at all board and shareholder meetings
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overseeing the board’s strategic focus to ensure that it represents Cameco’s best interests — helping to set the tone and culture of Cameco
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overseeing the board’s procedures so it can carry out its work effectively, efficiently and independently of management
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overseeing all board matters so they are properly addressed and brought to resolution as required — requiring any matters delegated to the board committees to be properly carried out
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acting as the liaison between the board and the CEO and providing advice, counsel and mentorship to the CEO — meeting with shareholders and other stakeholders as requested by the CEO
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participating in the recruitment and orientation of new directors — requiring Cameco to provide timely and relevant information and access to other resources to support board work.
You can access a copy of the chair’s position description on our website
(cameco.com/about/governance/chairs- role) or by writing to our corporate secretary. DISCLOSURE We are committed to communicating openly and on a
timely basis with shareholders, employees and the public, and to providing complete, accurate and balanced information in our disclosure documents. You can read more about this commitment and our process for disseminating material information in our
disclosure policy, which is available on our website (cameco.com/about/governance/policies-programs).
The audit and finance committee is responsible for reviewing our disclosure controls and procedures once a year and recommending any changes to the board for
approval. |
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Our disclosure committee, which includes members of senior management, is responsible for:
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reviewing all news releases and public filings containing material information prior to their release — evaluating the design and effectiveness of our disclosure controls and procedures to make sure they continue to provide
reasonable assurance that information is gathered promptly and accurately, so we can make appropriate public disclosure that complies with legal requirements
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providing regular updates to the audit and finance committee. Each board committee reviews
the material public disclosure relevant to its mandate before the board considers it for approval: — the audit and finance committee reviews the annual and interim financial statements, management’s discussion and
analysis (MD&A) and related news releases — the safety, health and environment committee reviews the sustainable development report
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the reserves oversight committee reviews the reserve and resource information — the human resources and compensation committee and the nominating, corporate governance and risk committee review this
management proxy circular. The board also reviews and approves the following publicly-filed
documents:
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prospectuses
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annual information forms — US Form 40-F filings — other disclosure documents that must be approved by the directors according to securities laws, securities regulations or
stock exchange rules. The CEO and other senior officers meet regularly with investment analysts
and institutional investors. Our website (cameco.com) has information for shareholders, investment analysts, the media and the public, and our Investor Relations department also provides information to shareholders and responds to general questions
or concerns. |
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You can contact our Investor Relations department by: |
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306.956.6340 |
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306.956.6318 |
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go to the Contact section of our website and complete the email form. |
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2015 MANAGEMENT PROXY CIRCULAR 25
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| About the board
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| The board is responsible for overseeing management and our strategy and business affairs. Its goal is to ensure we operate as a successful
business, optimizing financial returns while effectively managing risk. The board encourages
open dialogue and works within a climate of respect, trust and candor. It fulfills its duties by: — maintaining a governance framework that establishes broad areas of responsibility and has appropriate checks and balances for
effective decision-making and approvals — making decisions that set the tone, character and strategic direction for Cameco and approving the vision, mission, value statements and enterprise level policies developed by
management
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regularly monitoring management, including its leadership, recommendations, decisions and execution of strategies to ensure that they carry out their responsibilities and deliver shareholder value.
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The board carries out its responsibilities directly and through its five standing committees. This provides proper oversight and
accountability for specific aspects of governance, risk and Cameco’s business activities and affairs, and frees up the board to focus more on our strategic priorities and broader oversight of enterprise risk and other matters (see Role of
the board and Board committees beginning on pages 31 and 35). The board and
committees meet in camera without management present at all meetings, including those held by teleconference.
Independence
All of the nominated directors are independent, except for Tim Gitzel, our president and CEO, and Donald Deranger. Our independence principles are described on page 24.
Tim is our president and CEO, and Donald is the non-executive chair of the board of Points Athabasca Contracting Limited Partnership (Points Athabasca), a northern Saskatchewan aboriginal contractor that does business with Cameco in the region.
Donald is not currently employed by Points Athabasca, but has close ties because he is their
non-executive chair and was president prior to May 2013. The board values the contributions of a director with aboriginal heritage because our richest resources are near aboriginal communities in northern Saskatchewan.
Donald brings a deep understanding of the culture and peoples of northern Saskatchewan, combined
with a valuable mix of skills and experience as an aboriginal and business leader with direct experience in employee training, economic development and uranium mining. He is an acknowledged leader in the Saskatchewan aboriginal community. He
discloses any business relationships to our board that would present a conflict of interest and does not participate in board discussions or decisions about Points Athabasca. In 2014, we paid Points Athabasca $38 million for construction and
contracting services. The board also recognizes the importance of having a chair that functions
independently from management. Neil McMillan has been the independent chair of our board since May 2013. He has been a member of the board since 2002, and has CEO experience and diverse expertise in mining, government relations and the investment
industry. The chair’s duties are described on page 25. BOARD CHAIR
SELECTION Neil McMillan became our board chair in 2013. In 2011, the nominating,
corporate governance and risk committee developed a position description, list of preferred characteristics and qualities and selection process for the board chair position.
A selection committee was formed in 2012 to consider potential candidates for an incoming chair. When Victor Zaleschuk stepped down as chair in May 2013, the board
voted and selected Neil McMillan as the new chair. Neil has been an independent member of our board since 2002 and has diverse experience as a former CEO and |
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2014 BOARD PRIORITIES |
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The board focused on three main areas in 2014 based on our strategy, performance, evolving governance practices and changing
market dynamics. Strategic
focus — Worked with management on our growth strategy to adequately address near-term challenges and long-term supply and demand fundamentals
Risk oversight
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Participated in regular presentations by management to gain a fuller understanding of the major enterprise risks and risk mitigation strategies
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Participated in a risk appetite and tolerance workshop held by management — Held a meeting of the committee chairs to assess the risk oversight process and program
Board governance
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Adopted a diversity policy that reflects broad diversity characteristics for a successful board, including a stated objective of having at least 25% female directors
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Adopted a new director skills matrix through an independent consultation process — Adopted a director tenure policy that includes a 15-year term limit and retains the retirement age of
72 (with no grandfathering) — Increased director share ownership guidelines from three times to four times their annual retainer
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Implemented an independent board assessment process — Adopted a committee chair and member rotation policy
The board met 11 times in 2014.
You can read about the committees’ activities in 2014
in the reports starting on page 36. |
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26 CAMECO CORPORATION
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| his work in mining, government relations and the investment industry. You can read more about the board chair in his letter to shareholders and
director profile (see pages 1 and 12). When considering potential candidates, the selection
committee considers the ideal characteristics and qualities for the role, the position description and potential candidates and their experience and qualifications. It specifically looks at each candidate’s leadership and communication skills,
business and industry experience, capacity and availability, combined with the opportunity, risks and strategic direction of Cameco.
The committee also consults with the CEO because the relationship between the board chair and the CEO is an important consideration.
Tenure
The nominating, corporate governance and risk committee reviewed the board’s policy on tenure
and retirement in 2014 to make sure the policy, the annual review of board composition and the succession planning process provide for board refreshment that meets our ongoing needs.
TERM LIMITS AND RETIREMENT
The board recognizes the need to balance the benefits of experience and the need for new
perspective. To ensure ongoing renewal, the board recently approved a 15-year term limit for directors for implementation in 2016 to give the committee sufficient time to identify new, qualified independent directors with the appropriate mix of
skills and experience to replace our retiring directors. Joe Colvin and Victor Zaleschuk are retiring this year. Nancy Hopkins and James Curtiss are scheduled to retire in 2016 under the new policy.
As of 2016, directors will not be re-nominated for election at an annual meeting after they turn 72
or complete 15 years of continuous service, whichever is earlier. In exceptional circumstances, if it is in Cameco’s best interests, the board has the discretion to nominate a director for re-election for an additional one-year term after age
72 or 15 years of board service. The CEO typically resigns from the board when he retires from
Cameco. Our nominated directors (not including Tim Gitzel) have an average tenure of 9.5
years.
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Our expectations for directors
We expect each member of the board to act honestly and in good faith, and to exercise business judgment that is in Cameco’s best interest. We expect our directors
to bring their skills, experience and functional expertise to the board. They are expected to draw on a variety of resources to support their decision making, including materials prepared by management, their own research and business experience,
independently-prepared media reports on Cameco and the industry and knowledge gained from serving on other boards.
We also expect each director to: — comply with our code of conduct and ethics
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promptly report any perceived, potential or actual conflicts of interest — develop an understanding of our strategy, business environment, operations, performance, financial position and the markets
we operate in
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diligently prepare for each board and committee meeting — attend all board meetings, their committee meetings and the annual meeting of shareholders
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actively participate in each meeting, and seek clarification from management and outside advisors to fully understand the issues
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participate in our board education program — participate in the board, committee and director assessment process.
AVOIDING CONFLICTS OF INTEREST
Each director must promptly report a potential, perceived or actual conflict of interest to the corporate secretary, who maintains a list of issues and monitors them on
an ongoing basis. The nominating, corporate governance and risk committee reviews the list and
decides whether any issue interferes with a director’s ability to serve on our board. If necessary, consultations with legal counsel will occur to determine whether the director has a conflict. Directors who have an actual or potential conflict
of interest do not participate in related discussions or decisions. The board receives a report
about conflicts of interest once a year and uses it when determining director independence. SERVING ON OTHER BOARDS Our directors do not serve on the boards
of competitor firms, and they cannot join organizations or groups that may have adverse interests, unless they have the board’s permission.
A director who is an active CEO can serve on a total of three public company boards, including their own board and the Cameco board. Other directors can serve on a
total of five public company boards, including the Cameco board. We impose these limits because of the increasing demands on directors of public companies. |
2015 MANAGEMENT PROXY CIRCULAR 27
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| In addition, Cameco’s CEO will not sit on a board of another public company without our board’s consent. The board approved Tim
Gitzel’s appointment to the board of The Mosaic Company in October 2013. A director can
temporarily exceed the limit by one directorship if they have declared an intention to resign from, or not stand for re-election to, at least one other board as of that company’s next annual general meeting. Directors must advise the chair of
the board and chair of the nominating, corporate governance and risk committee if they are considering a directorship with another public company. No directors currently exceed the limit.
Members of the audit and finance committee are not to serve on the audit committees of more than
two additional public companies, without the board’s approval. Daniel Camus currently
serves on the audit committees of three other public companies, but will only sit on two as of May 8, 2015. When approving Daniel’s participation on more than two additional audit committees, the board considered his 25+ years of
experience in CFO and other senior leadership roles in international organizations, and determined that he is a valuable member of our audit and finance committee and is able to fully serve in this role. As a retired CFO and head of strategy and
international activities of Electricité de France SA (EDF), his only business commitments were his directorships and his CFO position with a humanitarian finance organization. See the director profiles beginning on page 12 for the other
directorships held by each nominated director. |
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Board diversity
We have long believed that a board with a diverse mix of skills, backgrounds, experience, gender and age, that also reflects the evolving demographics and geographic
areas where we carry out business is important for good decision-making and good governance. The board formally adopted a diversity policy in February 2014, and refined it in December 2014. You can find a copy of our diversity policy on our website
(cameco.com/about/governance/governance-guidelines). The nominating, corporate governance and
risk committee reviews board diversity every year as part of its review of our skills matrix (see page 29). The committee recommends measurable objectives for enhancing diversity, including objectives for female, aboriginal and geographic
representation and age. The committee also reviews progress made in achieving the objectives and uses these objectives when selecting new directors (see page 30) and as part of the annual performance and effectiveness evaluations of the board and
committees. FEMALE REPRESENTATION
The board recognizes the importance of promoting gender diversity on the board, and our diversity
policy requires at least 25% of directors to be women. Catherine Gignac was appointed to the board in early 2014, bringing the number of women on our board to three. Catherine has a strong background in mining, exploration, operations and mineral
resources estimation. The graph below shows the gender breakdown of this year’s nominated directors.
ABORIGINAL REPRESENTATION
The board is committed to building long-lasting and trusting relationships with communities where
we operate, and a significant portion of Cameco’s operations are in northern Saskatchewan. Our diversity policy requires at least one director to have an aboriginal background and be from Saskatchewan, to bring an understanding of the culture,
heritage, values, beliefs and rights of the local indigenous peoples to the board. GEOGRAPHIC REPRESENTATION The board understands the importance
of having directors with experience in jurisdictions where we operate or do business. The board believes that directors can bring this experience without actually living there. Our diversity policy specifically requires that the board include
directors with extensive experience in geographical areas where Cameco has or anticipates having significant business interests.
We also note that our board is subject to the terms of the Investment Canada Act and the Uranium Non-Resident Ownership Policy, which require at least two-thirds
of our directors to be Canadian citizens, and the Canada Business Corporations Act, which requires at least half of our directors to be Canadian
residents. |
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A board interlock is when two or more directors serve as directors on another company board. Currently, Victor Zaleschuk
and Anne McLellan both serve on the board of directors of Agrium Inc. When Mr. Zaleschuk retires from our board in May, there will be no board interlocks. |
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| CHANGE IN POSITION
If a director’s principal occupation or business association changes substantially, the
director is required to promptly offer his or her resignation to the board chair. James
Gowans’ principal occupation changed from executive vice president and chief operating officer of Barrick Gold Corporation to co-president as of September 15, 2014. He promptly offered his resignation in July 2014 once Barrick had issued
its press release. The nominating, corporate governance and risk committee considered the
change in job responsibility and recommended that the board not accept his resignation because of his extensive mining, exploration and international experience and the valuable contributions he makes to the board. |
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28 CAMECO CORPORATION
AGE
While the board recognizes the correlation between age and experience, it believes that directors of different ages bring a wider range
of viewpoints. Our diversity policy requires directors to represent a range of ages. The graph below shows the age range of this year’s nominated directors.
Skills, attributes and experience
We expect every Cameco director to possess certain core attributes that are fundamental to serving on our board. The core attributes
that we have identified are highlighted in the diagram below:
We also believe that a board with a broad mix of skills and experience is best equipped to oversee
our strategic direction, understand issues that can arise with a company of our size and complexity and make informed decisions.
2014 COMPREHENSIVE SKILLS MATRIX REVIEW
In 2014, the nominating, corporate governance and risk
committee engaged an independent third-party consultant to conduct a review of our skills matrix. The rigorous process included in-person interviews with management and each director. Following the process, and upon the recommendation of the
committee, the board refined what we now call our competency and attribute matrix by adding and deleting skills and revising the descriptions of others. The board diversity policy (see page 28) and core attributes (see above) also went through some
revisions as a result of this process.
Competency and attribute matrix
The competency and attribute matrix is used to assess board composition and ensure the board has an appropriate mix of skills and
competencies to govern effectively and be a strategic resource for Cameco.
The table below shows the current categories of
essential skills and experience that have been recognized as key to Cameco, as well as the levels of expertise indicated by the nominated directors in their annual self-assessments.
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| SELF-ASSESSMENT OF SKILLS AND EXPERIENCE |
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EXPERT |
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STRONG WORKING
KNOWLEDGE |
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BASIC LEVEL OF
KNOWLEDGE |
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| Board, corporate governance and risk oversight |
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3 |
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| Prior or current director of a major organization with mature governance and risk management practices |
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| Capital projects |
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5 |
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| Experience overseeing and evaluating large capital projects and in project management |
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| Enterprise leadership |
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| Experience, whether as a prior or current CEO or senior officer or otherwise, of a large public company or major organization with a track record of value creation and successful implementation of strategic direction |
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| Financial acumen |
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4 |
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6 |
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| Experience, whether as a professional accountant, CFO or otherwise, in financial accounting and reporting, including internal controls, IFRS, evaluation of financial statements and corporate finance |
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2015 MANAGEMENT PROXY CIRCULAR 29
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| SELF-ASSESSMENT OF SKILLS AND EXPERIENCE
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EXPERT
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STRONG WORKING KNOWLEDGE |
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KNOWLEDGE |
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| Investor relations
Experience with, or strong understanding of, the perspectives of major, long-term and other investors, capital markets, and the investment community, both domestically
and internationally, and in shareholder engagement |
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6 |
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| Stakeholder relations
Experience in, or a strong understanding of, the workings of government and public policy both domestically and internationally, and in stakeholder engagement or
management |
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2 |
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| Human resources and executive compensation
Thorough understanding of executive compensation, the oversight of succession planning, talent development and retention, and pension programs
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5 |
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5 |
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| Uranium/nuclear
Strong knowledge of markets, competitors, business issues and imperatives, and the domestic and international regulatory environment
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6 |
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3 |
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| International
Experience with, or strong understanding of, international operations, economics, commodity trading and geo-politics, preferably
in countries or regions where we have or are developing operations |
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5 |
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2 |
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| Investments/mergers and acquisitions
Experience in the field of investment banking or with mergers and acquisitions, evaluation of investment strategy, and capital allocation, structure and markets
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4 |
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2 |
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| Mining, exploration and operations
Experience with a leading mining or resource company with reserves, technology, exploration and operations expertise
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4 |
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4 |
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3 |
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| Operational excellence
Experience in a complex chemical or nuclear operating environment, creating and maintaining a culture focused on safety, the environment and operational excellence
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2 |
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6 |
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| Safety, health and environment/corporate responsibility
Experience in, or strong understanding of, leading safety, health and environmental practices, associated risks and regulatory requirements, and in sound corporate
responsibility and sustainable development practices, advocacy and reporting |
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7 |
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1 |
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Director recruitment and board succession
Board succession must support our business needs, the interests of shareholders and the ongoing development of the board’s skills
and experience. Five non-executive directors have joined the board in the last six years, bringing a range of diversity and experience in Canadian aboriginal affairs, mining and exploration, finance and investment banking, mergers and acquisitions,
and international experience in the energy and nuclear industries.
The nominating, corporate governance and risk committee reviews
the board’s level of diversity and skills annually and recommends measurable objectives for achieving the right mix of skills and diversity on our board.
The nominating, corporate governance and risk committee is also responsible for maintaining a board succession plan and recruiting new
directors. It maintains an evergreen list of suitable candidates selected based on their skills, experience, character, integrity, judgment, record of achievement, diversity and any other qualities or qualifications that would enhance the overall
composition of the board, its decision-making process and its oversight of our business and affairs. The committee also considers the representation of women on the board when identifying potential candidates (see page 28).
We have a formalized process in place for the selection of new directors. The committee follows established guidelines and procedures
for selecting the best candidates when a vacancy is available, and also, when appropriate, uses an external search firm to supplement the recruitment process. The board may also recruit potential directors from time to time to fill specific needs.
30 CAMECO CORPORATION
Role of the board
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| The company articles require our board to have at least three directors and no more than 15. The board has decided that 11 directors are
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The board must approve several kinds of decisions, including:
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operating expenditures that exceed the total operating budget by more than 10% — unbudgeted project expenditures over $10 million per transaction, or over $50 million in total per year
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cost overruns on budgeted project expenditures that are more than $15 million per transaction, or over $50 million in total per year
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any acquisition or disposition of assets over $10 million per transaction, or over $50 million in total per year.
The CEO position description is available on our website (cameco.com/about/governance/ceos-role) or by writing to our corporate secretary.
STRATEGIC PLANNING
The board oversees the planning, progress and fulfillment of our strategic goals.
The board is actively involved in the annual strategic planning process and sets aside time at each
board meeting to discuss strategy with management and monitor our progress. Board members discuss and analyze the main risks facing our business, strategic issues, competitive developments and corporate opportunities. The board also discusses
possible adjustments to the strategic plan in light of our progress and the current business climate. The board measures success and fulfillment of our strategic plan by assessing our performance results against our annual corporate objectives.
The committees are also involved in the strategic planning process:
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the audit and finance committee reviews and makes recommendations on our three-year plans (current year annual budgets and additional two-year financial plans) and the corporate opportunities relating to the strategic plan
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committees review the annual corporate objectives that relate to their specific area of oversight — the nominating, corporate governance and risk committee ensures that we have a robust risk management process in place and
oversees the development of ERM program that puts in place action plans to mitigate strategic risks (see Risk oversight below).
RISK OVERSIGHT
We have long believed that risk oversight is a primary responsibility of the board. For many years, the board has demonstrated this by continually enhancing its
oversight role with respect to the identification, management, reporting and mitigation of risk.
Management also dedicates significant time to risk management and reporting, and has developed a robust risk program that involves all aspects of Cameco’s
business. Our enterprise risk management (ERM) program follows the guidance of ISO 31000:2009, and the board oversees management to ensure our system works effectively. |
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ABOUT OUR BOARD MEETINGS
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The board engages in
lively debate on strategy and items of business, challenging management in a constructive and healthy manner.
The board considers the interests of our shareholders, debt holders, customers, employees, communities where we operate, the environment,
governments, regulators and the general public it considers relevant when making business decisions. |
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| MANDATE
The board has a formal mandate (see Appendix B) that lists its specific duties and responsibilities
including the following, among others: — selecting, evaluating and, if necessary, terminating the CEO
— assessing the integrity of the executive officers and ensuring there is a culture of integrity throughout Cameco
— adopting an annual strategic planning process that includes approving the strategic plans and monitoring our performance against those plans
— succession planning and monitoring management’s performance and compensation
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approving policies and procedures to manage our risks and overseeing management’s efforts to mitigate material risks.
The board reviews its mandate annually and updated it in February 2015. Each board committee has a mandate that lists the responsibilities and duties of the committee
and chair (see Board committees beginning on page 35). OVERSEEING
THE CEO The CEO is appointed by the board and is responsible for managing
Cameco’s affairs. This includes articulating our vision, focusing on creating value for shareholders, and developing and implementing a strategic plan that is consistent with the corporate vision.
Our annual objectives become the CEO’s mandate from year to year, and they include specific,
quantifiable goals. The CEO’s objectives are reviewed by the human resources and compensation committee and approved by the board. The CEO is accountable to the board and committees, and the board conducts a formal review of his performance
every year. The human resources and compensation committee reviews and discusses the results of the CEO formal review. Then the board has a discussion of the results and the board chair discusses them with the CEO.
The board has established clear limits of authority for the CEO, and these are described in our
delegation of financial authority policy. |
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2015 MANAGEMENT PROXY CIRCULAR 31
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Our risk policy and associated processes and procedures involve a broad, systematic approach to identifying, assessing, reporting and managing the
significant risks we face in our business and operations. The risk policy has been in place since 2011 and is reviewed annually to ensure it continues to meet our needs. It establishes clear accountabilities for enterprise risk management (ERM). We
use a common risk matrix throughout the company and consider any risk that has the potential to significantly affect our ability to achieve our corporate objectives or strategic plan as an enterprise risk.
As a responsible corporation, we proactively address a range of financial, operational and other
key risks and assess all risks against our four measures of success (see Measuring performance on page 65 for details).
We manage risk in five broad categories: — strategic — financial — operational — human capital — social, governance and compliance.
Each risk is assigned a rating and grouped into one of three tiers based on its severity or level of risk in our risk register. We develop action plans to mitigate
risks as part of our strategic planning and budgeting process. Employees “own” the risks and are responsible for developing and implementing controls to mitigate risk and for ongoing risk assessments.
Risks in the top tier are assigned to the board committees for ongoing oversight. Management makes
regular presentations throughout the year to the committees or, in some cases, the full board to allow a |
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fuller understanding of the enterprise risks and management’s mitigation strategies. Each committee also receives a quarterly written report on
the status of mitigation activities for each risk it has been assigned. Committees receive presentations on additional enterprise risks throughout the year as requested. In addition, management regularly updates the board on our reputational risk
exposure. We conduct a gap analysis between enterprise level and strategic risks to further
embed strategic risk into our management process. As part of the annual risk review process, management votes on the top risks to refine our focus for monitoring and reporting on risk over the next year. Management receives monthly updates on our
progress in managing these top risks. Management has developed a project plan for managing our
risk appetite and risk tolerance across the organization. Management conducted a risk appetite workshop with the board in 2014 and will recommend a risk appetite framework to the board for approval in 2015. The framework will define our risk
appetite and tolerance for each measure of success and will be used as a guideline in prioritizing risk management activities.
Management presents a formal risk report to the board annually.
Regular monitoring and reporting keeps management and the board apprised of our progress in mitigating risk and supports good governance.
The table below shows how the board and committees monitor risk across the organization. You can
read about the board committees beginning on page 35 and compensation risk on page 43. |
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BOARD OF DIRECTORS
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COMMITTEE AREAS OF
RESPONSIBILITY |
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Overall responsibility for risk oversight at Cameco and specific
responsibility for strategic business risks |
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Audit and finance committee
Oversees financial risks, like hedging, tax and capital projects |
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Human resources and compensation committee
Oversees compensation risk, talent management risk, succession risk and cyber-security risk
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Nominating, corporate governance and risk committee
Oversees governance and management to ensure we have a robust risk management process in place
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Reserves oversight committee
Oversees the estimating of our mineral reserves and business-related operational risks |
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Safety, health and environment committee
Oversees safety, health and environmental risks and related operational risks |
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32 CAMECO CORPORATION
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| INTERNAL CONTROLS
The board and board committees are responsible for monitoring the integrity of our internal controls and management information systems.
The audit and finance committee is responsible for overseeing the internal controls, including
controls over accounting and financial reporting systems. The chief internal auditor reports directly to the audit and finance committee chair and updates the committee quarterly, while the CFO makes quarterly presentations on our financial results
and forecasts to the audit and finance committee and the board. Management is responsible for
establishing and maintaining an adequate system of internal control over financial reporting to provide reasonable assurance that public reporting of our financial information is reliable and accurate, our transactions are appropriately accounted
for, and that our assets are adequately safeguarded. Management evaluated the effectiveness of our system of internal control over financial reporting and concluded that the system was effective in providing the reasonable assurance as at
December 31, 2014. SUCCESSION PLANNING AND LEADERSHIP
DEVELOPMENT The board oversees succession planning to ensure we have a pool of
strong, diverse candidates for senior management positions, and that we nurture talent and attract and retain key people for our long-term success. Cameco’s approach to leadership development focuses on building competencies throughout the
organization, identifying high-potential employees and preparing those employees to take on executive officer positions in the future. The composition of our senior management team is the result of this focus.
The human resources and compensation committee reviews the succession plan for senior management
twice a year. The audit and finance committee is responsible for reviewing the succession plan for the CFO, controller and senior finance and audit roles twice a year. The board reviews the succession plans annually, and approves any changes to
senior management. The board has the opportunity to meet high-potential employees through board
presentations and informal social gatherings. |
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Workplace diversity
At Cameco, we appreciate the contributions of every employee. We understand the true value of a diverse workforce, and we embrace, encourage and support workplace
diversity. Members of a diverse workforce bring new ideas, perspectives, experiences and expertise. This allows Cameco to continue to innovate, manage change and grow as a respected industry leader.
Women in leadership
We have one female senior executive officer, representing 16% of the group, and three female vice-presidents, representing 21% of our senior management team. This
closely tracks the proportion of women in Cameco’s overall workforce, which is almost 24%. Our participation rates for women in the overall workforce are significantly higher than the current participation rate in the Canadian mining industry
of approximately 14%. We do not have a formal policy or set targets for the number of women in
executive officer positions, but we are evaluating how to increase the number of women leaders, including whether it would be appropriate to adopt targets. We believe that identifying gaps is a key element of understanding where additional change is
required, and in 2014 participated in a research project designed to increase company and industry knowledge of the barriers facing women in mining. We are analyzing the results of this project to help us find ways to increase the representation of
women in our workforce and on our leadership team. Aboriginal workforce
Cameco is Canada’s largest industrial employer of First Nations and Métis people. Aboriginal employees and contractors constitute 45% of the workforce at
our northern Saskatchewan operations. We also have a dedicated team of employees at our northern affairs office and at our satellite offices throughout northern Saskatchewan specifically working on local workforce development, including leadership
development. |
2015 MANAGEMENT PROXY CIRCULAR 33
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| ASSESSMENT
The performance and effectiveness of the board, committees and individual directors is assessed on an annual basis.
The nominating, corporate governance and risk committee oversees a comprehensive survey process
every year. The committee works with management to ensure the survey questions are structured to receive meaningful feedback from directors. The results are used to assess the board overall, the CEO, the composition of the committees and meeting
effectiveness, identify any gaps in skills and experience and to ensure that the board is making the best use of each director’s expertise.
All responses are confidential and are tallied externally to preserve anonymity and encourage open comments and full disclosure. To ensure anonymity, individual
directors are not identified in the reports, other than the director self-assessments, and only appropriate committee chairs, the board chair and the chair of the nominating, corporate governance and risk committee receive the reports. Board
assessment results are |
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shared with all board members and committee assessment results are shared with all committee members.
Directors complete a self-assessment of their skills, performance and relevant experience. The
board chair also conducts one-on-one interviews annually to allow directors to speak candidly about any issues or concerns relating to their performance, the performance of their peers, or the functioning of the board.
The committee reviews the results of the board assessments, and makes recommendations to the board
about the composition of the board or committees, or changes to the structure, process or other changes to enhance board performance.
The board implemented an independent third-party review of the board, committees and directors to be conducted every three years. Following the intensive review that
was undertaken this year in connection with the comprehensive skills matrix review, the board determined that the next independent third-party assessment would take place in 2017. |
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| SURVEYS
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ACTIONS
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| Board survey |
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and prepares a summary report for the board |
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completed by all directors |
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| Director self-evaluation |
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directors during their personal interviews |
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completed by all directors |
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| Board chair evaluation |
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results and presents them to the board chair |
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completed by all directors |
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| Committee surveys |
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report for the committee and reports to the board |
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each committee chair |
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| CEO evaluation |
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results |
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the board discusses the results and the board chair reviews them with the CEO
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34 CAMECO CORPORATION
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| Board committees
The board carries out its responsibilities directly and through its |
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chair of the nominating, corporate governance and risk committee. |
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MORE ABOUT BOARD COMMITTEES |
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— audit and finance
— human resources and compensation
— nominating, corporate governance and risk
— reserves oversight
— safety, health and environment. |
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Each
committee reviews its mandate annually. Each committee sets aside
time at each meeting to meet in camera
without management present. Each committee reports the business of its meetings to the board in a
timely manner.
You can read about each committee’s responsibilities and highlights of
their 2014 activities in the reports beginning on
page 36. See Appendix B for the board mandate. You can also
access the board
and committee mandates on our website
(cameco.com/about/governance) or by writing to our corporate
secretary. |
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| The committee process ensures directors can devote the requisite
skills, time and attention to specific matters and support the board in effectively overseeing our business and affairs and providing sound governance generally. |
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| Three of the committees – audit and finance, human resources and
compensation and nominating, corporate governance and risk – are 100% independent. |
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| COMMITTEE RESPONSIBILITIES
Each board committee has a mandate outlining the responsibilities and duties of the committee and
its chair. |
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| Each committee was formed based on the need for detailed oversight in
key areas. The nominating, corporate governance and risk committee is responsible for overseeing our risk management process and policies. Each of the other four committees is responsible for overseeing particular risks.
Each committee also fulfills a governance role, overseeing our activities in a specific area. The
committee work also supports our four measures of success: |
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Committee
chair rotation We introduced a committee chair rotation policy in 2014 to rotate the
positions every five years. To align with director retirements, we plan on rotating the
committee chairs in phases over the next three years – one in 2015, two in 2016 and two in 2017.
Changes to the committee chairs and committee memberships must be made in a way that balances continuity and the need for fresh ideas, while recognizing each
director’s particular area of expertise. |
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MEASURE OF SUCCESS |
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COMMITTEE RESPONSIBLE |
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| Outstanding financial performance
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CROSS-COMMITTEE
ATTENDANCE An informal invitation is extended to all directors to attend any board
committee meeting. All directors have a standing invitation to attend the financial oversight portion of each audit and finance committee meeting.
Members of the audit and finance committee attend the portion of the human resources and compensation committee meeting on the finance succession plan, which includes
the CFO and senior finance personnel. The chair of the safety, health and environment committee
attends the portion of the human resources and compensation committee meeting when it reviews that aspect of our annual corporate performance results.
The chair of the reserves oversight committee attends the audit and finance committee meeting to report on annual reserves and resources.
ACCESS TO MANAGEMENT AND OUTSIDE ADVISORS
The board and committees can invite any member of management, outside advisor or other person to
attend their meetings. Committees can engage outside advisors to assist in carrying out their
duties, as authorized by their mandates. Individual directors can also engage outside advisors, as long as they receive approval in advance from the nominating, corporate governance and risk committee. The human resources and compensation committee
and the nominating, corporate governance and risk committee each engaged an independent consultant in 2014. |
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| Supportive communities
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Audit and finance
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| Safe, healthy and rewarding workplace
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Safety, health and environment
Human resources and compensation |
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| Clean environment
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Safety, health and environment
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| We assess corporate performance based on how well we achieve our
objectives, which are tied to our four measures of success (see pages 65, 73 and 78). Each
committee chair is responsible for determining the meeting agenda, how often the committee will meet, and the conduct of each meeting, and for chairing their committee meetings, as set out in each committee mandate.
Each committee conducts a formal self-assessment every year and reviews its performance against the
committee’s mandate. COMMITTEE MEMBERSHIP
Committee membership rotations are reviewed after a new board is elected and changes are desirable.
We strive for periodic rotation of committee members but it is not mandated because there may be reasons to keep an individual director on a certain committee for a longer period. The changes are made based on the recommendations of the chair of the
board and the |
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2015 MANAGEMENT PROXY CIRCULAR 35
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| Audit and finance committee |
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| MEMBERS |
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| John Clappison (chair)
Ian Bruce Daniel Camus
Catherine Gignac (since May 2014) Nancy Hopkins
Neil McMillan (ex-officio)
Anne McLellan left the committee
in May 2014. |
|
John Clappison and Ian Bruce are the audit and finance committee’s financial experts because they have accounting or related
financial expertise and meet the necessary requirements under U.S. securities laws. Daniel
Camus also qualifies as a financial expert given his experience. All members are financially literate. |
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INDEPENDENCE AND
FINANCIAL LITERACY |
|
100% - all members meet the applicable regulatory requirements to be independent and financially literate (see page 24 for details)
|
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| OVERVIEW |
|
Assists the board in fulfilling its oversight responsibilities for our accounting and financial reporting processes, internal controls,
the external auditors (their performance, qualifications, independence and audit of our financial statements), internal audit function, financial matters and management of financial risks, our process for monitoring compliance with laws and
regulations (other than environmental and safety laws) and our code of conduct, and prevention and detection of fraudulent activities |
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The committee mandate and the NYSE corporate governance standards require members who sit on the audit committees of more than two
other public companies to receive the board’s approval. Daniel Camus currently serves on the audit committees of three other public companies and has received the board’s approval. As of May 8, 2015, he will only serve on two other audit
committees. See page 28 for more information. You can find a copy of the mandate on our website
(cameco.com/about/ governance/board-committees) or by writing to the corporate secretary. |
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| KEY RESPONSIBILITIES |
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Financial reporting |
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— |
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overseeing the quality and integrity of our accounting and financial reporting processes |
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— |
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reviewing the annual and quarterly financial statements and MD&A and quarterly press releases and recommending them to the board for approval |
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— |
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overseeing the succession plan for the CFO and controller and consulting with the human resources and compensation committee |
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Internal controls |
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— |
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overseeing the quality, integrity and performance of our internal control systems, our internal audit function and our disclosure controls |
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— |
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assessing the internal auditor, and approving the internal audit mandate and internal audit plan for the year |
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Audit |
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— |
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approving the annual audit plan and the fees of our external auditors, including pre-approving all services to be provided |
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assessing the external auditor before recommending their appointment for the ensuing year |
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recommending the appointment of our external auditor |
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overseeing the audit of our annual financial statements |
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Compliance |
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— |
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overseeing our compliance with laws and regulations that apply to us (other than environment and safety compliance, which is the responsibility of the safety, health and environment committee) |
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— |
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reviewing related-party transactions and political and charitable donations |
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— |
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overseeing compliance with and approving changes to the code of conduct and international business conduct program |
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Risk oversight |
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— |
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overseeing enterprise financial risks |
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monitoring and assessing fraud risk |
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overseeing management’s mitigation of material risks within the committee’s mandate |
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Financial oversight |
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— |
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overseeing certain financial matters, including the preliminary financial review of major transactions, financings and investments prior to review by the full board |
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— |
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reviewing management’s reports on our insurance program, directors’ and officers’ liability insurance and indemnity agreements.
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36 CAMECO CORPORATION
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| 2014 HIGHLIGHTS |
|
In 2014, the committee reviewed and recommended approval by the board of the
following financial transactions: — sale of our interest in Bruce Power LP for $450 million
—
$500 million debenture offering and redemption of a debenture series due in the coming year — $1 billion base shelf prospectus.
The committee met eight times in 2014. It met in camera without management present at every meeting, and separately with the internal auditor and external
auditors at every regular meeting. |
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2015 MANAGEMENT PROXY CIRCULAR 37
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| Human resources and compensation committee |
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| MEMBERS James Curtiss
(chair) Ian Bruce (since May 2014) Daniel Camus
Joe Colvin Anne McLellan
Victor Zaleschuk Neil McMillan (ex-officio)
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Meridian
Compensation Partners (Meridian) has been the committee’s external compensation consultant since December 2011, and has not provided any services to management. |
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| INDEPENDENCE |
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100% |
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| OVERVIEW |
|
Assists the board in fulfilling its oversight responsibilities for human resource policies, executive compensation and executive succession and
development |
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| KEY RESPONSIBILITIES |
|
Compensation governance — overseeing our human resource policies and practices
— reviewing all aspects of our director and
executive share ownership guidelines, including compliance — monitoring compensation trends, emerging issues, and ‘say on pay’
— selecting and managing the committee’s independent compensation consultant, and approving its work plan, qualifications and fees
— considering the independence of its third party
consultants — reviewing the compensation disclosure in this circular
Executive and director compensation — our compensation programs, which cover our compensation philosophy, comparator group and compensation components, including
incentive plans — all aspects of executive compensation, including establishing the overall approach, pay mix, target awards and allocation of
long-term incentive awards — our director compensation program
Succession planning — overseeing the succession planning process, and reviewing the executive talent pool and succession plan twice a year
Risk oversight
—
overseeing compensation risk, third-party compensation risk assessments, talent management risk, succession risk and cyber-security risk
Pension plan governance — overseeing pension plan governance and management’s supervision of our pension plan.
|
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| 2014 HIGHLIGHTS |
|
In 2014, the committee focused on a comparator group analysis for benchmarking
executive compensation and provided confirmation that the group remains valid. Director
compensation and director share ownership guidelines were reviewed and changes were made to both.
As part of the formal review of our leadership development program, the committee considered diversity, and gender specifically, to make sure we are nurturing talent
across a broad spectrum. The committee also reviewed the following annual compensation matters
and recommended them to the board for approval:
— the objectives for the president and CEO
— performance assessments for the senior executive team, including the named executives and the CEO’s self-assessment
— performance measures for the short-term incentive
and performance share unit plans — grants of option and PSU awards — short-term incentive awards for the senior executive team
— vesting and payout of 2012 PSU awards.
Oversight of cyber-security risk was added to the risks for which the committee is responsible and
the committee spent time developing a better understanding of the risk, its oversight responsibilities and management’s mitigating systems.
The committee met six times in 2014. It met in camera without management present at every meeting.
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38 CAMECO CORPORATION
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| Nominating, corporate governance and risk committee
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| MEMBERS
Nancy Hopkins (chair)
John Clappison James Curtiss
Anne McLellan Victor Zaleschuk
Neil McMillan (ex-officio)
There were no changes in membership in 2014.
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| INDEPENDENCE |
|
100% |
| |
| OVERVIEW |
|
Assists the board in fulfilling its oversight responsibilities by developing and
recommending a set of corporate governance principles, identifying and recommending director candidates and overseeing risk management
|
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| KEY RESPONSIBILITIES |
|
Corporate governance principles
—
overseeing our approach to corporate governance, including establishing governance principles and our compliance with Canadian and US governance rules and legislation
— approving our governance guidelines
— reviewing director independence and conflicts of
interest — assessing the size, composition and mandates of the board and board committees:
— establishing the competencies
and skills necessary for the board to function — ongoing development of our competency and attribute matrix
—
maintaining a succession plan for the board that meets our corporate needs and interests of shareholders
—
ensuring that potential board candidates meet all requirements and that any conflicts of interest are disclosed to the board
— monitoring shareholder
engagement activities and governance developments in general — establishing a board succession plan
Risk oversight — overseeing our risk management process and policies
—
overseeing management of our risk profile and risk tolerance associated with strategy and corporate objectives
Board and committee assessments — evaluating the performance and effectiveness of the board and members
— reviewing committee composition and
reconstituting membership as appropriate. |
| |
| 2014 HIGHLIGHTS |
|
In 2014 the committee continued to focus on the risk oversight process, including
the integration of the ERM process with strategic planning. The committee reviewed the
company’s governance practices and implemented changes in several areas. The following were undertaken:
— implementation of a board diversity policy
— comprehensive review and update of the competency
and attribute matrix — implementation of a tenure policy that provides for board refreshment when a director reaches 15 years of service (in addition to
the retirement age of 72 years of age which already existed) — implementation of a rotation policy for committee chairs and members
— implementation of an independent third-party
assessment process. The committee met five times in 2014. It met in camera without
management present at every meeting. |
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2015 MANAGEMENT PROXY CIRCULAR 39
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| Reserves oversight committee
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| MEMBERS
James Gowans (chair) Ian Bruce
Donald Deranger Catherine Gignac (since May 2014)
Victor Zaleschuk Neil McMillan (ex-officio)
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| INDEPENDENCE
|
|
Four of the five members are independent
|
| |
| OVERVIEW |
|
Assists the board in fulfilling its oversight responsibilities for estimating and
disclosing mineral reserves and resources |
| |
| KEY RESPONSIBILITIES |
|
Approving the mineral reserve and resource policy
Estimating mineral reserves and resources
— appointing our designated qualified persons
for estimating our mineral reserves and resources — reviewing management’s annual reserve and resource report and annual reconciliation of reserves to mine production and
recommending them to the board for approval — reviewing material changes to mineral reserve and resource estimates and recommending them to the board for approval before
publication and release — receiving management reports on internal controls and procedures regarding mineral reserve and resource reporting
Disclosing mineral reserves and resources
—
keeping abreast of industry standards and regulations on estimating and publishing mineral reserve and resource information, and related issues and developments through reports from management
— receiving a report from the leading qualified person on the mineral reserve and resource estimates and confirming that the information has not been restricted or unduly influenced
— receiving confirmation from the leading qualified person and COO that the information is reliable and that we will publish mineral reserves and resource estimates according to securities
laws and regulations that apply to us — receiving confirmation from the leading qualified person that our disclosure controls for disclosing mineral reserve and resource
estimates comply with industry standards Risk oversight
— overseeing enterprise risks related to mineral
reserves and resources — oversees certain operational risks. |
| |
| 2014 HIGHLIGHTS |
|
The committee reviewed the results of an external audit of the reserves and resources estimation process at McArthur River.
It reviewed management’s 2014 estimates of 429 million pounds of uranium reserves, 379 million
pounds of measured and indicated uranium resources and 311 million pounds of inferred uranium resources and recommended them to the board for approval prior to publication and release. The committee also appointed new qualified persons.
The committee approved new questions to be asked of the independent expert during the due diligence
process for the year-end reserve and resource reporting. The committee met three times in 2014.
It met in camera without management present and separately with the leading qualified person at every meeting. |
| |
40 CAMECO CORPORATION
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| Safety, health and environment committee
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| |
| MEMBERS
Joe Colvin (chair)
Daniel Camus Donald Deranger
Catherine Gignac (since May 2014) James Gowans
Anne McLellan (since May 2014) Neil McMillan (ex-officio)
Ian Bruce left the committee
in May 2014. |
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| INDEPENDENCE
|
|
Five of the six members are independent
|
| |
| OVERVIEW |
|
Assists the board in fulfilling its oversight responsibilities for safety, health
and environmental matters |
| |
| KEY RESPONSIBILITIES |
|
Overseeing and assessing policies and management systems
— approving the safety, health, environment and
quality (SHEQ) policy and management systems — overseeing our compliance with all relevant SHEQ legislation and our SHEQ policy and programs
— bringing any material non-compliance with SHEQ legislation to the attention of the board on a timely basis
— benchmarking our policies, systems and monitoring
processes against industry best practice Monitoring and assessing performance
—
reviewing the findings of safety, health and environmental audits, action plans and results of investigations into significant events
—
reviewing the annual budget to ensure sufficient funding for safety, health and environmental compliance
— conducting site visits
— determining the SHEQ objectives for executive
compensation and related impact — reviewing environmental and safety performance assessments for the short-term incentive plan
— reviewing our sustainable development report
— keeping abreast of significant issues and monitoring trends and significant events through reports from management
Risk oversight — overseeing enterprise risks related to safety, health and environment
— overseeing risks related to implementation of
collaboration agreements. |
| |
| 2014 HIGHLIGHTS |
|
The committee visited Cigar Lake and met with site management.
The committee reviewed and approved our 2014 sustainable development report.
The committee continued to oversee the application of our SHEQ policy, received performance
reports, and monitored the US Occupational Safety and Health Administration (OSHA) metrics implemented by the company to drive continued improvements to our safety performance.
The committee met five times in 2014. It met in camera without management present at every meeting.
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2015 MANAGEMENT PROXY CIRCULAR 41
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| Compensation |
| We compensate our
directors and executives in a way that is fair, competitive and based on performance.
This section of the board’s report is based on the recommendations of the human resources and compensation committee. It
gives you insight into our compensation process and the components of our program.
We have provided more information than what is required by regulators to give you a more complete understanding of our
decisions. |
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WHERE TO FIND IT
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Compensation governance
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43 |
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• Risk management |
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43 |
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• Independent advice
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44 |
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Director compensation |
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46 |
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• Compensation discussion and
analysis |
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46 |
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- Approach |
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46 |
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- Share ownership |
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46 |
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- Fees and retainers |
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46 |
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- Assessing the program |
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47 |
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• 2014 Details |
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48 |
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- Director compensation
table |
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48 |
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- Incentive plan awards |
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49 |
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-
Loans to directors |
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49 |
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Executive compensation
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50 |
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• Message to shareholders |
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50 |
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• Cameco compensation practices |
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54 |
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• Executive compensation and strategy
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55 |
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- Compensation timeline |
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55 |
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• Share performance and executive compensation
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56 |
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- CEO compensation summary
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59 |
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- CEO’s compensation lookback
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60 |
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• Compensation discussion and analysis
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61 |
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- Approach |
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61 |
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- Annual decision-making process
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64 |
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- Measuring performance |
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65 |
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- Compensation components
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66 |
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- Program changes for 2015
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72 |
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- 2014 Performance and compensation
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73 |
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- 2015 Compensation decisions
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80 |
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• 2014 Details |
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81 |
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- Summary compensation table
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81 |
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- Incentive plan awards |
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84 |
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- Equity compensation plan information
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85 |
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- Pension benefits |
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86 |
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- Loans to executives |
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88 |
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- Termination and change of control benefits
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88
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42 CAMECO CORPORATION
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| The board has ultimate responsibility for Cameco’s compensation.
The human resources and compensation committee assists the board in overseeing our human resources policies, executive compensation, succession planning, pension plans
and director compensation. The committee is qualified and experienced and 100% independent, and has six members of varying tenure. |
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| YEARS ON
COMMITTEE |
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| James Curtiss (chair)
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15 |
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| Ian Bruce
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1 |
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| Daniel Camus
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4 |
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| Joe Colvin
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2 |
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| Anne McLellan
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8 |
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| Vic Zaleschuk*
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13 |
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| * |
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served 10 years as an ex-officio member while serving as board chair, one year prior to assuming that role and two years following that role |
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| NUMBER OF COMMITTEE MEMBERS
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| Business and industry experience
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6 of 6
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| Executive compensation experience (as a senior executive, managing partner or
member of the compensation committee of other public companies) |
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6 of 6 |
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| Governance background
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5 of 6
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| Executive leadership (specifically in mining or energy)
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4 of 6
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| James Curtiss is a lawyer with a strong background in governance and executive compensation. He has 12 years of experience as committee chair and six
years as a member of our nominating, corporate governance and risk committee. Three of the committee members have a strong financial background and two serve as audit committee chair for other public company boards.
You can read more about the committee members in the director profiles starting on page 12.
Risk management
Compensation risk is embedded in our enterprise risk management framework. See page 31 for details.
Our compensation program: |
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| — |
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is designed to encourage the right management behaviours |
| — |
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uses a broad-based approach to assess performance (balanced scorecard) |
| — |
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recognizes appropriate risk taking |
| — |
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avoids excessive payouts to our executives and employees. |
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| The human resources and compensation committee works with management and the safety, health and environment committee to set corporate objectives for all incentive plans. |
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IMPORTANT THINGS TO KNOW |
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We believe in frank and transparent disclosure.
The board oversees our compensation policies and practices and it is able to
use discretion, subject to limits on adjusting compensation upward.
Our culture encourages management to be objective in assessing its own performance and making recommendations to the board to adjust compensation
when appropriate. Management developed six compensation principles
that were adopted by the board (see page 61). These principles guide all executive compensation decisions at Cameco. |
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The committee stress tests different performance scenarios and back
tests previous performance and compensation decisions to make sure decisions and outcomes are appropriate.
CLAWBACK POLICY
We implemented our clawback policy on January 1, 2013 to apply to all executive officers and to compensation received on and after this date. The previous policy,
in effect since 2003, continues to apply to incentive compensation awarded to the CEO and CFO prior to 2013.
The policy covers incentive compensation, including any annual bonus, performance share units, restricted share units and stock options granted or received. It allows
us to recoup the incentive compensation of the executive at fault if all three of the following events occur: |
| |
— |
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we make an accounting restatement if there is a material non-compliance with financial reporting requirements under securities laws |
| |
— |
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an executive engaged in gross negligence, intentional misconduct or fraud which caused or significantly contributed to the restatement |
| |
— |
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the executive was overcompensated as a result of the restatement. |
| |
If these three events occur, the board and the human resources and
compensation committee will decide when and how the policy will apply. During the years subject to the restatement, we may recoup all incentive compensation granted or received by the executive at fault that is in excess of the compensation that
would have been computed based on the restated results. SHARE
OWNERSHIP We have share ownership guidelines that require executives to hold their
current shares, and obtain additional shares with the after-tax proceeds from redeeming or exercising equity awards until they have met their target ownership. |
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2015 MANAGEMENT PROXY CIRCULAR 43
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| PSU PLAN
Performance under the PSU plan is based on both absolute and relative measures over a three-year period – relative average realized uranium price, increased
production and relative TSR. The relative TSR metric has a 40% weighting. LTI awards are allocated 60% to PSUs.
Independent advice
The board and board committees retain independent consultants as appropriate to assist them in carrying out their duties and responsibilities.
Meridian Compensation Partners (Meridian) serves as the human resources and compensation
committee’s independent consultant, while Mercer (Canada) Limited (Mercer) serves as management’s consultant.
COMPENSATION RISK ASSESSMENT
Meridian reviewed our program changes since 2013 and confirmed that these changes are neutral or reduce compensation-related risk.
They also completed a review of our comparator group for benchmarking executive compensation in early 2015. The assessment confirmed that the comparator group is
relevant and an appropriate size and that the selection criteria remains valid. Mercer and
management will conduct a comprehensive review of our compensation program, policies and practices in 2015. The review will include key areas such as:
— comparator groups
— positioning of target compensation
— pay mix
— incentive plan design
— performance measures
— share ownership
— plan governance and risk
mitigation. Meridian will review management’s recommendations and provide advice to the
human resources and compensation committee on the review. The committee will address any opportunities for change with the goal of more closely aligning the interests of management and our shareholders.
Mercer will conduct a full compensation risk assessment on behalf of management following the
compensation review. Meridian will review Mercer’s report in conjunction with the committee and provide any feedback. |
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ABOUT OUR COMPENSATION FRAMEWORK |
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We use a multi-year strategic plan to balance risk and
reward. |
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— |
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We embed our corporate objectives into how we assess performance of our executives. |
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— |
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Compensation is based primarily on performance, not length of service. |
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— |
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We use at-risk compensation to motivate executives because the value depends on performance. |
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Balanced decision-making |
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— |
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Corporate performance is based on absolute and relative measures. |
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— |
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We use a balanced score card to provide a more direct line of sight to specific objectives. |
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Threshold performance |
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— |
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We must deliver a minimum threshold performance in order to receive incentive award payouts. |
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Limits on incentive pay |
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— |
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The STI and PSU plans are designed to pay out at a maximum of 200% of target for exceptional performance and the human resources and compensation committee and board cannot exceed this cap. |
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— |
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We set achievement thresholds and maximums for each objective under the plans to determine the payout and avoid any extremely high payouts from excessive risk-taking. |
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— |
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Potential payouts under the incentive plans are modest as a percentage of revenue and income. |
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Clawback policy |
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— |
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Executives must reimburse their incentive compensation if there was an overpayment because of a restatement of our financial statements due to their misconduct. |
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— |
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The board updated our clawback policy in December 2012 to apply to all executives and to compensation received on and after January 1, 2013. |
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No hedging |
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— |
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Our securities trading and reporting policy prohibits directors, executives and other employees from hedging their shares or equity-based compensation. |
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CCGG pay-for-performance
principles |
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— |
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Our compensation philosophy and practices incorporate the compensation principles that
the Canadian Coalition for Good Governance (CCGG) recommends for Canadian companies. These principles reflect pay for performance and integrate risk management functions into the company’s executive compensation philosophy and
structure. |
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44 CAMECO CORPORATION
COMMITTEE’S CONSULTANT
The committee considers the independence of all advice it receives on compensation matters and reviews all fees and the terms of consulting services
provided by the independent consultant.
It considers more than the information and recommendations provided by its compensation consultant or
management, and is ultimately responsible for its own decisions.
The committee regularly reviews our director and executive compensation
programs as a good compensation practice. A formal review of director compensation was conducted in 2014.
The table below shows the fees paid to
the independent consultant in 2013 and 2014. Meridian did not provide any services to management.
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2014
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2013
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| Meridian Compensation Partners
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| Executive compensation-related fees |
|
$119,500 |
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$128,805 |
| All other fees |
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– |
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– |
| Percent of work provided to the committee |
|
100% |
|
100% |
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Meridian provided a broad range of services in 2014 as part of our comprehensive review of director and executive compensation: |
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Director compensation |
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— |
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reviewed our director share ownership guidelines |
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— |
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conducted an overall review of director compensation, including the committee
retainers |
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Executive compensation |
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— |
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reviewed the comparator group |
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— |
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updated the compensation risk review |
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— |
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gave two updates on governance trends |
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— |
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reviewed our 2014 performance against targets |
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— |
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reviewed the compensation for the CEO and senior vice-presidents |
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— |
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conducted a review of our executive compensation program, plan metrics and STI and PSU plan objectives |
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— |
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completed a pay for performance assessment |
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— |
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reviewed our share ownership and hold requirements |
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— |
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conducted an in-depth review of the compensation discussion and analysis (CD&A) |
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— |
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consulted on numerous compensation governance matters, including clawbacks, proxy advisor positions, realized and realizable pay disclosure and ISS pay-for-performance modeling. |
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The committee reviewed Meridian’s report on independence as contemplated by the NYSE rules, is satisfied with the report and has determined that Meridian is independent. |
2015 MANAGEMENT PROXY CIRCULAR 45
Director compensation
Compensation discussion and analysis
1. Approach
We have three goals:
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| • |
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Recruit and retain qualified individuals to serve as members of our board and contribute to our overall success.
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| • |
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Align the interests of our board and shareholders by requiring directors to own shares or share equivalents, and receive at least 60% of their
annual retainer in deferred share units until they meet our share ownership guidelines. |
| • |
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Pay competitively by positioning compensation at the median of director compensation paid by companies that are similar in nature and scope of operations and comparable in size. |
2. Share ownership
We introduced share ownership guidelines for non-executive directors in 2003 to more closely align their interests with those of our shareholders.
The human resources and compensation committee regularly reviews the share ownership guidelines and compares our director share ownership levels
to our comparator group of companies. We increased the guidelines from three times to four times the annual retainer in 2014 to align more closely with market practices and strengthen the alignment of their interests with those of our shareholders.
Directors must build their ownership of Cameco shares or DSUs and ultimately hold at least four times their annual retainer. A director who:
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| • |
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joined the board before July 1, 2014 has the initial five-year period to meet the previous target (three times the annual retainer) and an
additional two years to meet the new target (four times the annual retainer) |
| • |
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joins after July 1, 2014 has five years to meet the new target
|
| • |
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becomes the board chair has an additional three years to meet the target (due to the higher retainer as board chair).
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| We assess compliance annually, and value shares and DSUs at the price they were acquired or the year-end closing price of Cameco’s
shares on the TSX, whichever is higher. |
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ABOUT DSUs |
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A deferred share unit (DSU) is a notional share that has the
same value as one Cameco common share. DSUs earn additional units as dividend equivalents, at the same rate as dividends paid on our common shares. |
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DSUs are paid out to
directors in cash when they retire from the board. A retiring director can defer the payment and decide to receive all or a portion of the cash payout in the following year.
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As of December 31, 2014, all of the nominated directors are in compliance with the guidelines. They either hold the minimum, or have time remaining to acquire the necessary holdings. See the director profiles
beginning on page 12 for details about each director’s share ownership. |
| |
|
Tim Gitzel has met 105% of his share ownership requirement (see
page 63 for details). |
| |
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The human resources and compensation committee reviews any
situation where a director does not meet the requirement by the required date or maintain the minimum ownership level, and recommends a course of action to the board. The board has the discretion to decide what action, if any, should be
taken. |
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|
As of December 31, 2014, directors held $10,332,546 worth of
DSUs based on $19.05, the year-end closing price of Cameco’s shares on the TSX. |
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NEW SHARE OWNERSHIP REQUIREMENTS |
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In 2014, we
increased our director share ownership guidelines from three times to four times their annual retainer. |
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3. Fees and
retainers |
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Director compensation includes:
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• |
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an annual retainer (higher retainer for the non-executive chair of the board)
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• |
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an annual fee as committee chair or committee member (higher fee for the human resources and compensation and audit and finance committee
chairs) |
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• |
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an attendance fee for each board and committee meeting they attend (higher fee for the human resources and compensation and audit and
finance committee members) |
| |
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• |
|
a travel fee to cover the necessary travel time to attend board and committee meetings. |
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The non-executive chair receives a flat fee retainer, so Neil
McMillan did not receive any committee retainers or attendance fees for the board or committee meetings he attended in 2014. |
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We pay for reasonable travel and out-of-pocket expenses relating
to directors’ duties. |
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46 CAMECO CORPORATION
The table below shows our current director fee schedule, which was last revised on
July 1, 2014. Directors who live outside of Canada receive their compensation in US dollars. Directors who are employees of Cameco or our affiliates (such as Tim Gitzel) do not receive director compensation.
Total compensation for each director in 2014 was at the 53rd percentile of the
S&P/TSX 60.
|
|
|
| ANNUAL
RETAINER |
|
($)
|
| Non-executive chair of the board
|
|
375,000
|
| Other non-executive directors
|
|
160,000
|
| Committee members (per committee)
|
|
5,000
|
| Committee chairs
Audit and finance committee and Human resources and compensation committee
Other committees |
|
20,000
11,000 |
| ATTENDANCE FEES
(PER MEETING) |
|
|
| Board meetings
|
|
1,500
|
| Audit and finance committee meetings and
Human resources and compensation committee meetings |
|
2,000
|
| Other committee meetings
|
|
1,500 |
| TRAVEL FEES (PER
TRIP) |
|
|
| Greater than 1,000 km within Canada
|
|
1,700
|
| From the US
|
|
1,700 (US)
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| From outside North America
|
|
2,700 (US)
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| A director who has not met the share ownership guidelines must receive at least 60% of their annual retainer in DSUs.
A director who has met the guidelines can receive all of the retainer and fees
in cash, or a portion in cash and the balance in DSUs in increments of 25%, which they decide before the beginning of the fiscal year. See the director compensation table on the next page for details.
Directors who elect to receive all of their compensation in cash continue to
increase their share ownership through dividend equivalents paid in DSUs.
Directors must maintain their share ownership once they meet the guidelines, however we value the shares and DSUs on an ongoing basis using the
closing price of our shares on the TSX or the acquisition value, whichever is higher. |
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4. Assessing the program
The human resources and compensation committee periodically reviews director compensation and makes recommendations to the board as appropriate.
The committee conducted a formal review of director compensation in 2014. The board approved
changes, which went into effect on July 1, 2014. Meridian reviewed our total compensation
for non-executive directors compared to companies in our comparator group (see page 62). We increased the annual retainer for the non-executive directors and board chair to stay competitive with the market and maintain our director compensation at
the median of our comparator group. |
2015 MANAGEMENT PROXY CIRCULAR 47
2014 Details
Daniel Camus, Joe Colvin and James Curtiss received their compensation in US dollars because they live outside of Canada. The amounts
relating to their compensation were converted to Canadian dollars at the following exchange rates:
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MARCH 25, 2014
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JUNE 17, 2014
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SEPTEMBER 23, 2014
|
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DECEMBER 16, 2014
|
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|
| $1 (US) |
|
|
$1.1159 (Cdn)
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$1.0864 (Cdn) |
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$1.1069 (Cdn)
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$1.1636 (Cdn)
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Director compensation table
The table below shows fees earned by each non-executive director in 2014, based on the fee schedule, their committee memberships and
the number of meetings attended.
Tim Gitzel does not receive any compensation as a director because he is compensated in his role
as president and CEO (see the summary compensation table on page 81). Neil McMillan is our non-executive chair of the board and his board retainer reflects the fees paid to him in this capacity.
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RETAINER
|
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ATTENDANCE FEES |
|
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| NAME
|
|
BOARD ($)
|
|
COMMITTEE
MEMBER ($) |
|
COMMITTEE
CHAIR ($)
|
|
|
|
BOARD
($) |
|
COMMITTEE
MEETINGS ($)
|
|
TRAVEL FEE
($) |
|
TOTAL
PAID
($) |
|
% OF TOTAL
RETAINER PAID
IN DSUs (%)
|
| Ian Bruce
|
|
150,000
|
|
15,000
|
|
–
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16,500
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29,500
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|
–
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211,000
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|
50
|
| Daniel Camus
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167,901
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16,773
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|
–
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18,467
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36,476
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|
15,218
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|
254,835
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|
100
|
| John Clappison
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|
150,000
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|
5,000
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20,000
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16,500
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23,500
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10,200
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225,200
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60
|
| Joe Colvin
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167,901
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5,591
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12,300
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18,467
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18,626
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9,582
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|
232,467
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0
|
| James Curtiss
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167,901
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5,591
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22,364
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18,467
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18,626
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9,582
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242,531
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0
|
| Donald Deranger
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|
150,000
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10,000
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|
–
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16,500
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12,000
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–
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188,500
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60
|
| Catherine Gignac
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150,000
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8,901
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–
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15,000
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17,000
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10,200
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201,101
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60
|
| James Gowans
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150,676
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5,024
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10,553
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|
15,000
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12,000
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8,500
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201,753
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75
|
| Nancy Hopkins
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150,000
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|
5,000
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11,000
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16,500
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23,500
|
|
–
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206,000
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25
|
| Anne McLellan
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|
150,000
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|
15,000
|
|
–
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16,500
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32,500
|
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–
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214,000
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25
|
| Neil McMillan
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|
357,500
|
|
–
|
|
–
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|
–
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|
–
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|
–
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|
357,500
|
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25
|
| Victor Zaleschuk
|
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150,000
|
|
15,000
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|
–
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16,500
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21,000
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5,100
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207,600
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25
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| Total
|
|
2,061,879
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|
106,880
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|
76,217
|
|
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184,401
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244,728
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68,382
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2,742,487
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|
|
48 CAMECO CORPORATION
Incentive plan awards – DSUs
The next table shows what each non-executive director earned in DSUs in 2014. We have combined information from two mandatory tables:
Incentive plan awards – Value vested or earned during the year and Outstanding share-based and option-based awards, into the table below.
Directors received their retainer and fees in cash and DSUs:
| |
— |
|
Share-based awards – Value vested during the year is the amount of DSUs that the directors received in 2014, valued as of the grant dates. It includes all of the DSUs that vested as of the grant date and
DSUs granted as dividend equivalents in 2014. |
|
| |
— |
|
Share-based awards – Market or payout value of vested share-based awards not paid out or distributed are all of the directors’ DSUs which have vested. They are not paid out until the director resigns or
retires from the board. The DSUs were valued at $19.05, the closing price of a Cameco share on the TSX on December 31, 2014. |
|
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| NAME
|
|
SHARE-BASED AWARDS |
|
VALUE VESTED DURING THE YEAR
($) |
|
|
MARKET OR PAYOUT VALUE OF VESTED SHARE-BASED
AWARDS NOT PAID OUT OR DISTRIBUTED ($)
|
| Ian Bruce
|
|
|
108,980 |
|
|
249,895
|
| Daniel Camus
|
|
|
265,771 |
|
|
743,179
|
| John Clappison
|
|
|
101,583 |
|
|
680,072
|
| Joe Colvin
|
|
|
31,089 |
|
|
1,685,005
|
| James Curtiss
|
|
|
38,684 |
|
|
2,096,622
|
| Donald Deranger
|
|
|
91,692 |
|
|
470,726
|
| Catherine Gignac
|
|
|
84,525 |
|
|
82,260
|
| James Gowans
|
|
|
164,883 |
|
|
823,126
|
| Nancy Hopkins
|
|
|
60,037 |
|
|
492,314
|
| Anne McLellan
|
|
|
62,499 |
|
|
518,613
|
| Neil McMillan
|
|
|
105,989 |
|
|
951,728
|
| Victor Zaleschuk
|
|
|
79,734 |
|
|
1,539,008
|
| Total
|
|
|
1,195,466 |
|
|
10,332,548
|
See the director profiles starting on page 12 for the number of Cameco shares and DSUs held by each
director.
Incentive plan awards – options
We stopped granting options to directors in 2003. None of the directors have options.
VALUE OF OPTIONS EXERCISED (SUPPLEMENTAL TABLE)
We have provided additional information in the table below to show the options exercised by James Curtiss in 2014 and the dollar value
realized. He exercised these options on March 14, 2014, seven months prior to the expiry date of September 20, 2014.
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| NAME
|
|
YEAR
|
|
|
GRANT DATE
VALUE OF THE
OPTIONS ($)
|
|
|
CAMECO COMMON SHARES ACQUIRED ON EXERCISE OF OPTIONS
(#) |
|
|
CAMECO COMMON
SHARES HELD FOLLOWING EXERCISE (#)
|
|
|
CASH REALIZED
(BEFORE TAXES) ON CONCURRENT SALE OF CAMECO COMMON SHARES ($)
|
| James Curtiss
|
|
|
2014 |
|
|
|
$15.80 |
|
|
|
3,300 |
|
|
|
- |
|
|
38,042
|
Loans to directors
As of March 9, 2015, we and our subsidiaries had no loans outstanding to any current or former directors, except routine
indebtedness as defined under Canadian securities laws.
2015 MANAGEMENT PROXY CIRCULAR 49
|
|
|
|
Executive compensation
Cameco is committed to maintaining the transparency of our
executive compensation program. The following
message by the chair of the human resources and compensation committee highlights key aspects of our executive compensation program. A more detailed discussion follows in the compensation discussion and analysis (CD&A) beginning on
page 61. |
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|
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|
|
| Message to shareholders |
|
|
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|
|
|
| Dear Shareholder,
On behalf of the human resources and compensation committee, I am pleased to share with you our approach to executive compensation for 2014. This letter is intended to
provide additional insight into how our executives are paid and the reasons why. COMMITMENT TO PAY FOR PERFORMANCE Your board is committed to
paying executives for performance. Pay is linked to both the execution of Cameco’s business plan and our commitment to deliver strong returns to shareholders. The guiding principle of Cameco’s executive compensation program is that a
proper balance between fixed and variable compensation, short- and long-term incentives, and risk and reward will motivate executives to increase long-term shareholder value.
Most of management’s compensation is incentive-based and dependent on short- and long-term performance. The committee considers many factors in setting total
compensation, including competitive market conditions, internal equity, scope of the role, risk taking, current business challenges, longer-term performance and strategic objectives.
The compensation program and policies discourage excessive risk-taking with an appropriate balance
between base salary and at-risk incentive pay, deferred vesting of equity incentives, share ownership requirements, strict rules prohibiting hedging, clawback provisions, caps on incentive payouts and a balanced scorecard with targets for short-term
incentives, all of which are discussed in more detail in the Compensation discussion and analysis beginning on page 61.
COMPENSATION AND PERFORMANCE PEERS
The committee uses a size-appropriate comparator group of companies to assess compensation levels. Companies in the group are in similar capital intensive, complex and
highly-regulated businesses with head offices in Canada. These are companies that Cameco competes with for executive talent.
These companies are suitable for comparing compensation, but there is some challenge to using them |
|
|
|
|
|
for
comparing total shareholder return (TSR) – a key measure for assessing company performance. This is because Cameco’s share price is highly correlated to the uranium spot price, which is affected by events unique to the nuclear
industry.
2014 COMPANY PERFORMANCE
The committee measures Cameco’s performance in absolute and relative terms (compared to other
companies) as well as in short-term (annual) and long-term accomplishments. Short-term incentive awards are tied to the achievement of annual targets in the balanced scorecard (financial, operational, safety, environment, and community support) that
contribute to long-term sustainable shareholder value (see page 73). Long-term incentive awards
are tied to both absolute and relative share performance, the uranium price achieved relative to prices realized by competitors and the growth in Cameco’s uranium production.
|
50 CAMECO CORPORATION
|
|
|
|
|
| Market conditions remained depressed in 2014, with the spot price declining from $40 (US) per pound to a nine year low of about $28 (US) per pound,
averaging about $33 (US) for the year. The long-term price declined by 14% and averaged about $46 (US) per pound for 2014.
Despite this difficult market environment, Cameco achieved adjusted net earnings1 of $412 million in 2014 compared
to $445 million in 2013. This level of earnings demonstrates the strength of our marketing strategy in providing protection in a declining market. Reaching $412 million in adjusted net earnings is especially notable as 2014 is the first year we did
not have earnings from our interest in Bruce Power, which was sold early in the year. Bruce Power contributed $85 million in after-tax earnings in 2013.
Other accomplishments include:
—
annual gross profit of $638 million, up 5% from 2013
—
record annual uranium revenue of $1,777 million, up 9% from 2013
—
record average realized uranium price of $52.37 per pound ($47.53 (US) per pound) compared to an average spot price of $33.21 (US) per pound
—
started up the Cigar Lake mine and achieved packaged production
—
secured approval to increase production at the McArthur River and Key Lake operation.
We are committed to living a strong safety culture, while looking to continually improve. Our injury rates trended downward across the company and we met our targets
for the year. Our average radiation doses remained low and stable. We are committed to being a
leading environmental performer and had no significant environmental incidents in 2014, for the seventh year in row (see page 76).
Gaining the trust and support of our communities, indigenous people, governments and regulators is necessary to sustain our business. We earn support and trust through
excellent safety and environmental performance, by proactively engaging our stakeholders in an open and transparent way, and by making a difference in the communities in which we operate. In 2014, we received two awards recognizing our efforts in
the area of sustainable development/environmental and social responsibility. Cameco also
continues to build an engaged, qualified and diverse organization capable of implementing its strategic plan in a challenging market. We earned five awards in 2014 that recognize our strengths as an employer.
Despite continued market pressures, we achieved or exceeded most of our short-term incentive plan
targets (see page 73), resulting in an overall performance rating of 119.2%. |
|
|
|
Although our share price declined by about 13% in 2014 our one-year TSR was at the 53rd
percentile of the comparator group, which reflects our strong performance and ability to protect our earnings in a declining market.
2014 CEO COMPENSATION
Corporate performance remains the single biggest factor in the board’s decisions on pay for Cameco’s CEO and other senior officers. 20% of the CEO’s
compensation is base salary and the remaining 80% is at-risk compensation (22% short-term incentive (STI) and 58% long-term incentives (LTI)).
The LTI is awarded 60% as performance share units (PSUs) and 40% as stock options. The heavier weighting on PSUs increases the performance-weighted incentive, reduces
shareholder dilution and provides strong alignment with shareholder interests. Relative TSR is
important to our shareholders, so it is weighted 40% in the PSU plan. The CEO’s base
salary was increased by 2% in 2014, reflective of our modest share performance, rather than our strong operating performance in a challenging nuclear/uranium market environment.
His annual bonus was $1,060,000 reflective of the company’s strong performance (119.2%) on the
STI targets. The 2012 PSUs vested on December 31, 2014 and, based on our performance and
share price, paid out on March 2, 2015 at 106% of their original grant value disclosed in our 2012 circular.
The CEO was granted 155,200 options and 62,900 PSUs in 2014.
The CEO’s total direct compensation in 2014 (see page 59) was $5.1 million, up from 2013. This reflects strong corporate performance as assessed by the committee.
His realized and realizable pay at the end of 2014 was $5 million, close to his reported compensation, reflecting the same factors that drove reported compensation. It also includes 70,000 RSUs which vested and were paid out in shares in 2014. The
RSUs were granted in 2011 on the CEO’s appointment to ensure continued experienced leadership for Cameco during what promised to be extremely challenging times for the industry and company. Without the RSUs, his realized and realizable pay at
the end of 2014 would have been $3.5 million, or 69% of his reported total direct compensation. THREE-YEAR PERFORMANCE In the three-year period (2012 to 2014),
the uranium industry continued to be negatively impacted by events in Japan, which resulted in the entire Japanese reactor fleet being shut down and remaining closed today. The average uranium spot price fell by about 14% from 2011 to 2012, 21% from
2012 to 2013 and 13% from 2013 to 2014, for a total drop of more than 30% for the three-year period. |
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1 |
Adjusted net earnings is a non-IFRS measure as described in our 2014 annual MD&A and excludes the impact of various items as detailed in note 1 on page 76. |
|
2015 MANAGEMENT PROXY CIRCULAR 51
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| While Cameco’s share price is usually highly correlated to the uranium price, our absolute TSR increased by 8.5% from 2011 to 2012, 14.7% from
2012 to 2013 and decreased by 11.9% from 2013 to 2014. Notwithstanding the dramatic decline in
the uranium spot price, Cameco’s adjusted net earnings2 in 2014 were only 5% lower than 2012. The relative stability of earnings over this very challenging three-year period demonstrates the
strength of management’s marketing strategy and focus on cost reduction. CEO COMPENSATION 2012 TO 2014 In July 2011, Tim Gitzel assumed
the position of Cameco president and CEO shortly after the events at Fukushima, which impacted Cameco directly as one of the largest suppliers of uranium to nuclear power plants. The CEO led the company through a market coming to grips with the
implications of the Japanese situation for the global nuclear industry. Several countries announced phase-outs of nuclear reactors, halting growth of their nuclear programs, and the world took a pause to examine the safety of existing reactors to
determine what improvements were needed. In this market environment, the CEO took steps to revise Cameco’s strategy to focus on uranium production flexibility/optimization, streamlining costs, increasing efficiency and enhancing capital
allocation. He continued to focus on operating safely, protecting the environment, attracting/retaining skilled employees and securing community support.
Our share price remained under pressure during this period as uranium prices continued to decline, however, our three-year TSR outperformed our comparator group at the
68th percentile. The committee compared
TSR performance with the CEO’s three-year average reported compensation (includes the value of the equity-based compensation at the time of grant), and three-year average realized and realizable compensation (includes the estimated value of the
equity-based compensation based on actual performance and share price). The graph that follows
shows that realized and realizable compensation is well correlated with Cameco’s share performance. |
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The CEO’s realized and realizable pay in each year is lower
than the grant date value disclosed in the summary compensation table, demonstrating the alignment between our compensation program and performance. Cameco has had strong financial, production and safety results in this three-year period. However,
TSR has been below target two of the three years. Realized and realizable compensation is lower when all performance measures do not show positive results.
Cameco’s performance-based, long-term incentive awards ensure that the actual long-term value received by our executives is well aligned with shareholder
experience because it correlates with both our share price and our performance. LOOK AHEADING AHEAD TO 2015 Challenges in the uranium market
have persisted since early 2011 and the market today remains in a state of oversupply. In addition, market activity is much lighter than it has been in the past. Utilities are well covered in their fuel requirements and are not under pressure to
contract for more. For market conditions to improve, we need to see movement on some key
factors including: — reactor restarts in Japan
—
return of long-term contracting in a significant manner
—
continued progress on new reactor construction. Our strategy remains centered on
taking advantage of the long-term growth we see coming in our industry, while maintaining the ability to respond to market conditions as they evolve. We carry out all of our business with a focus on safety, people and the environment. Our core
business is uranium production, the largest value driver of the nuclear fuel cycle. Our uranium strategy is to profitably produce at a pace aligned with market signals to increase long-term shareholder value.
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2 |
Non-IFRS measure as described in our 2014 annual MD&A. See note 1 on page 76 for more information. |
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52 CAMECO CORPORATION
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| The short-term and long-term incentive-based targets are aligned with our strategy as they focus on:
—
achieving shareholder returns better than our comparator group — delivering net earnings and cash flow in a tough market environment
—
achieving profitable uranium production — effectively managing capital projects — achieving uranium sales prices higher than our competitors
—
maintaining production flexibility — attracting and retaining a skilled workforce — keeping people safe
—
protecting the environment — securing support from our communities.
This strategy will provide Cameco with increased flexibility to deliver the best value through this period of uncertainty, while positioning us to benefit when more
certainty returns to the market, as we expect it will. For 2015, the committee and its
independent consultant determined that the CEO’s salary and target short-term incentive were significantly below market median, resulting in total direct compensation that was also significantly below market median. Accordingly, taking into
account the CEO’s experience in the role, his performance, internal equity and the operational performance of Cameco, the committee recommended and the board approved an increase in the CEO’s salary of 6.8% to $1,000,000, an increase in
the CEO’s target STI award from 95% to 100% of his salary and an increase in the CEO’s LTI to 325% of salary. The resulting changes position the CEO’s salary and target STI slightly below market median and his total target direct
compensation at the median of the market. The other named executives each received salary
increases of 4.0% for 2015, consistent with Cameco’s team approach to executive compensation. The changes position salaries within a competitive range of market median and take into account sustained long-term performance, experience in the
role and internal equity for each of the named executives. |
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These changes in executive base salaries follow a 2% increase in 2014, 0% increase in 2013 and 2% increase in 2012 (other than the 5% increase for the
chief commercial officer in 2012 and 11% in 2014 for alignment purposes). The compensation
timeline on page 55 gives more context to the compensation decisions described above. Page 56 discusses the trend in share performance and total compensation awarded to the named executives over the past five years.
The committee is committed to working hard on behalf of the board and overseeing all compensation
matters in the best interests of Cameco and its shareholders. We introduced ‘say on
pay’ in 2010 and have held an advisory vote every year since. Last year we received over 91% approval for our approach to executive compensation. While this feedback is very positive, we continue to monitor developments in executive
compensation and evolving best practices to make sure our programs and decisions are appropriate. In 2015, we will be conducting our triennial review of executive compensation and will communicate any program changes in next year’s
CD&A. I hope this overview has given you more insight to our approach to executive
compensation and how it is linked to performance and the long-term interests of Cameco and its shareholders.
Sincerely,
James Curtiss
Chair Human resources and compensation committee |
2015 MANAGEMENT PROXY CIRCULAR 53
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Cameco compensation practices
The human resources and compensation committee ensures our executive compensation program is based on sound decision-making processes and is competitive, pays for
performance, motivates and attracts talent, and focuses on creating shareholder value. WHAT WE DO |
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Ö |
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Pay for performance – 80% of the compensation for the CEO is at-risk
pay – variable, contingent on performance and not guaranteed (see page 61) |
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Ö |
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Share ownership – we require all of our executives to own shares in
Cameco and to retain their current shares and obtain additional shares using the proceeds from redeeming or exercising vested equity awards until they have met their target ownership (see page 63)
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Ö |
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Performance based vesting – 60% of the long-term incentive vests at the
end of three years based on our absolute performance, relative TSR and relative average realized uranium price (see page 69) |
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Ö |
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Benchmarking – we benchmark executive compensation against a size and
industry appropriate comparator group and target compensation to the median of the group (see page 62) |
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Ö |
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Caps on incentive payouts – our STI and PSU plans cap payouts at a
maximum of 200% of target for exceptional performance. The human resources and compensation committee and the board cannot exceed this cap (see pages 44 and 66) |
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Ö |
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Stress testing and back testing – we stress test different scenarios to
assess appropriateness of pay and avoid excess risk-taking, and the committee looks back at long-term incentive awards previously granted when granting new awards (see page 43)
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Clawbacks – our clawback policy applies to all executives and all
incentive compensation awarded (see page 43) |
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Ö |
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Anti-hedging – directors, executives and other employees are prohibited
from hedging their shares or equity-based compensation (see page 44) |
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Ö |
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Independent advice – the committee receives compensation advice from an
independent advisor (see page 44) |
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Realized and realizable pay – the value ultimately realized from a
long-term incentive award can be significantly different from the grant value. Share price is only one factor that affects the payout value (see pages 56 and 66) |
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Ö |
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Modest benefits and perquisites – these are a small part of total
compensation and are market competitive (see page 72) |
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Ö |
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Employment agreements – employment agreements with the named executives
protect specialized knowledge, contacts and connections obtained while at Cameco (see page 88) |
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Ö |
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Double trigger – the severance provisions in our executive employment
agreements and our LTI plans have double triggers in the event of a change of control (see page 89) |
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WHAT WE DON’T DO |
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No repricing of stock options
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X |
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No dividend equivalents on PSUs until they vest
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No tax gross-ups
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No excessive severance obligations
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X |
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No bonus amounts or value of equity awards included in pension calculations (see
page 87) |
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See Compensation
governance on page 43 and the CD&A beginning on page 61 for more information. |
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54 CAMECO CORPORATION
Executive compensation and strategy
Cameco’s strategy is to generate long-term shareholder value by aligning our growth with market signals to take advantage of the
growth we see coming in our industry. The board is a strategic asset, working directly with management in the development of the strategic plan. Management’s primary focus is on executing on projects that provide the greatest certainty in the
near term, operating with an optimal asset base and maximizing efficiencies to remain competitive. The board plays a key role in overseeing risk and execution of the corporate strategy and challenging management on their progress.
We establish corporate objectives to achieve our strategic plan and our executive compensation program is directly aligned with the
strategic plan:
| |
— |
|
measures within these objectives form the basis of the compensable targets under the short-term incentive plan |
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— |
|
performance share units (PSUs) measure absolute and relative performance over a three-year period. The value realized is based on share performance and outcomes against targets based on our long-term strategic goals:
relative TSR, relative uranium price and absolute production. |
|
Compensation timeline
The chart below shows the different components that make up total direct compensation for our executives. Our short-term incentive plan
offers the potential for executives to earn a cash bonus based on their success in achieving pre-established corporate and individual performance targets for the year.
Long-term incentives include a PSU plan and stock option plan, which have different terms for vesting and payouts. These incentive
plans focus management on the importance of future value and drive corporate performance over the longer term.
Performance-based
vesting and share price fluctuation can have a dramatic impact on the realized and realizable value of equity-based compensation. The named executives realized 106% of the grant value of the 2012 PSU awards that vested at the end of 2014 (see pages
77 through 79). Option awards granted to the named executives over the past eight years are under water (exercise price is greater than the share price as of December 31, 2014).
2015 MANAGEMENT PROXY CIRCULAR 55
Share performance and executive compensation
The graph below compares our TSR to the S&P/TSX Composite Total Return Index for the past five years, assuming an initial $100
investment at the beginning of 2010 and reinvestment of dividends.
It also compares our TSR to the named executives’
compensation and shows a strong correlation between our share performance and realized and realizable compensation.
| |
— |
|
The three-year average reported compensation is for the named executives during the three-year period ending in the designated year. It reflects the sum of total compensation over the three years from the summary
compensation table in our previous management proxy circulars, divided by three. |
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— |
|
The three-year average estimated realized and realizable compensation is for the named executives during the three-year period ending in the designated year. It reflects the sum of estimated realized and realizable
compensation over the three years, including base salary, short-term incentive bonus, realized or realizable amounts for LTI (PSUs, options and RSUs) and pension value, divided by three. These amounts have been determined in the same manner as the
total realized and realizable compensation in the CEO’s compensation lookback table on page 60. |
|
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— |
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We believe the method of three-year averages provides a reasonable reflection of long-term compensation because PSUs and RSUs pay out after three years and options vest over three years. |
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MARKET CONTEXT
In 2009, share prices of all publicly-traded companies, including Cameco, began to recover following the 2008 global financial crisis,
as confidence in financial markets began to be restored. At the same time, the uranium market entered a period of discretionary purchasing due to the high uranium prices and contracting levels during the 2005 to 2007 time frame, causing the uranium
price to remain relatively stable until mid-2010.
In June 2010, Chinese utilities began to sign long-term uranium contracts for
significant volumes. This became a catalyst for the market as the uranium spot price rose from $40/lb (US) range to over $70/lb (US) by the end of the year.
In March 2011, the events at the Fukushima nuclear power plants in Japan had an immediate and negative effect on share prices of
companies involved in uranium exploration, development and production. As a result, the uranium market entered a period of fundamental over-supply and discretionary purchasing, which initially caused uranium prices to fall, and then remain
relatively stable throughout 2012.
In 2013, a slower than expected pace for reactor restarts in Japan, unexpected reactor
shutdowns in the US and temporary shutdowns in South Korea led to demand erosion. Compounding the issue, the supply side performed well: primary supply remained stable while secondary supply increased modestly, primarily due to enricher underfeeding
– when enrichers use current excess capacity and less uranium feedstock to generate a given volume of enriched uranium.
56 CAMECO CORPORATION
Although there were some positive developments in 2014, there were no fundamental changes
to the uranium market. Supply continued to be readily available in the near term, and despite some volatility in the third and fourth quarters, the spot price ended the year at $35.50 (US) compared to $34.50 (US) at the end of 2013.
Our share price has generally followed a similar pattern to the uranium spot price since 2009. In 2014, we saw volatility in our share
price and the uranium spot price. In addition, since we are classified as an energy company, our share price, like those of other energy-related companies, was impacted by the declining oil prices, which caused a movement out of energy stocks in
2014.
2015 MANAGEMENT PROXY CIRCULAR 57
ABOUT EXECUTIVE COMPENSATION
The graph shows the trend in total compensation awarded to our named executives from 2010 to 2014.
The grant date value of total compensation for the named executives is the total annual compensation for the named executives disclosed in the summary compensation table in our previous management proxy circulars.
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— |
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2010 – total compensation increased in 2010 because of strong performance in virtually all aspects of our business. Our production and financial results exceeded expectations and generally our results in all other
areas of the business met or exceeded expectations. |
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— |
|
2011 – base salaries and incentive awards for the five equivalent executive positions were lower because of changes in the five positions that were partly offset by a retention incentive granted to Tim Gitzel when
he was appointed president and CEO. Total compensation declined in 2011, but was proportionately less than our share performance because we delivered excellent financial and operating results. |
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— |
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2012 – the executive team received modest increases in base salary. Although corporate performance was strong, the short-term incentive bonus was significantly reduced from 2011 because we did not fully meet some
of our compensable targets. The bonuses for the CEO and CFO were slightly higher in 2012 compared to 2011 because they were based on a full year in their new roles, versus only a half year in 2011. |
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— |
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2013 – the executive team received no increases in base salary. Although our corporate performance was solid, we did not fully meet some of our compensable targets and continued to be affected by industry
conditions. The short-term incentive bonuses awarded to our named executives were less than in 2012. |
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— |
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2014 – the executive team received modest increases in base salary in 2014. Total compensation increased as a result of special RSU retention awards made to three named executives in 2014. Bonuses for 2014 were
higher because of our strong corporate performance in 2014 (see pages 73 through 76). |
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THIS YEAR’S NAMED EXECUTIVES
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The next section discusses our executive compensation program and the pay decisions affecting our Chief Executive Officer, Chief
Financial Officer and the three next highest compensated officers (named executives) as of December 31, 2014: |
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— Tim
Gitzel |
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President and Chief Executive Officer (CEO) |
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— Grant Isaac |
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Senior Vice-President and Chief Financial Officer (CFO) |
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— Robert Steane |
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Senior Vice-President and Chief Operating Officer (COO) |
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— Ken Seitz |
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Senior Vice-President and Chief Commercial Officer |
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— Alice Wong |
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Senior Vice-President and Chief Corporate Officer
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58 CAMECO CORPORATION
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| CEO compensation summary |
| |
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Tim Gitzel President and CEO |
|
Tim Gitzel became president and CEO of Cameco Corporation on
July 1, 2011. Tim joined Cameco in January 2007 as senior vice-president and chief
operating officer and was appointed president in May 2010. He has extensive experience in Canadian and international uranium mining through 20 years of senior management experience.
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2014 pay mix
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2014 base salary and short-term incentive
Tim’s total cash compensation in 2014 was $1,996,400, including:
—
base salary of $936,400 — an annual cash bonus of $1,060,000, which was 119% of his target award.
Our STI plan for 2014 was based on 13 objectives which scored 119.2% of target. |
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Long-term (equity-based) incentives
As president and CEO, Tim receives approximately 60% of his compensation on a deferred basis as
long-term incentives. This is at-risk, equity-based compensation – if our share price increases, so will the value Tim receives when the long-term incentives vest in several years. The 70,000 RSUs awarded to him on July 1, 2011 at a grant
price of $25.44 vested on July 1, 2014. Tim received 39,200 Cameco shares instead of cash – the value was calculated net of taxes of 44% and the remaining amount was used to purchase Cameco shares at an average price of $21.14.
The table below shows the grant and current realized and realizable value of long-term incentives
awarded to Tim from 2012 to 2014 and the RSUs that vested in 2014. 2012 PSUs vested on December 31, 2014 with a realized value of $1,168,065. His options have a current value of zero because the exercise prices of all awards granted between
2012 and 2014 are more than our share price on December 31, 2014. The total realized and
realizable value of Tim’s long-term incentive compensation is 39% of the total grant value, highlighting the link to pay for performance.
To quantify the long-term incentives, we are reporting the grant date and current values over the three-year period to provide a reasonable reflection of long-term
compensation because PSUs and RSUs pay out after three years and options vest over three years.
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• |
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PSUs and options (grant value) – see the 2012 PSUs grant value and the total
of 2012 to 2014 options grant value in the summary compensation table on page 81. |
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• |
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PSUs (realized value) – amount Tim received on 52,100 PSUs granted to him in
2012 and paid in early 2015 for the performance period ending December 31, 2014. The PSU amount is based on achieving 118.6% of target and $18.90, the actual average purchase price of Cameco shares on the TSX on March 2, 2015 paid on
behalf of the named executives. PSUs granted in 2013 and 2014 have not been included because they have not vested. |
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• |
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Options (current value) – includes the value of in-the-money options granted
in 2012, 2013 and 2014. The value of the options granted to Tim in this period are based on the closing price of Cameco shares on the TSX on December 31, 2014. The realized and realizable value is zero because none of the options are in the
money. |
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• |
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RSUs (current value) – RSUs were granted to Tim on July 1, 2011 and
vested on July 1, 2014. The grant value is based on 100% of target and the realized value is based on the average purchase price of $21.14. |
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2015 MANAGEMENT PROXY CIRCULAR 59
CEO’s compensation lookback
The information in this section is for the three-year period 2012 to 2014. The table below shows the value of Tim Gitzel’s
three-year average compensation and his compensation disclosed in the summary compensation table in each of the past three years compared to the realized and realizable value of this same compensation.
Tim has been president and CEO throughout this three-year period. His three-year average realized and realizable pay and his realized
and realizable pay in each year is lower than the grant date value disclosed in the summary compensation table, demonstrating the alignment between our compensation program and performance. Cameco has had strong financial, production and safety
results in this three-year period, however, TSR has been below target two of the three years. Realized and realizable compensation is lower when all performance measures do not show positive results.
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| TIM GITZEL’S COMPENSATION (THREE YEARS FROM 2012 TO 2014 AND THREE-YEAR AVERAGE) |
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Three-year
average |
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2014 |
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2013 |
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2012 |
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CEO three-year average
compensation The bar charts below shows the impact of
at-risk pay and the effect that performance and share price have on realized and realizable pay. There is a difference of -66% between the average grant value and the average year-end value.
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Base salary |
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924,133 |
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$ |
936,400 |
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$ |
918,000 |
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$ |
918,000 |
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Annual incentive pay |
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878,333 |
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1,060,000 |
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785,000 |
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790,000 |
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RSUs paid out |
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493,157 |
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1,479,471 |
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– |
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– |
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PSUs awarded and paid out |
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639,122 |
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1,168,065 |
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468,716 |
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280,584 |
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Options exercised |
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– |
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– |
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– |
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– |
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| Realized compensation
subtotal |
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2,934,745 |
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4,643,936 |
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2,171,716 |
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1,988,584 |
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RSUs outstanding |
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– |
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– |
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– |
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– |
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PSUs outstanding |
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– |
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– |
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– |
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– |
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Options granted and outstanding |
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– |
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– |
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– |
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– |
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Pension |
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289,483 |
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292,700 |
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264,500 |
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311,250 |
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| Realizable compensation
subtotal |
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289,483 |
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292,700 |
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264,500 |
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311,250 |
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| TOTAL REALIZED AND REALIZABLE
COMPENSATION (based on 2014 year-end value) |
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3,224,228 |
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4,936,636 |
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2,436,216 |
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2,299,834 |
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| TOTAL COMPENSATION AS REPORTED
IN THE SUMMARY COMPENSATION TABLE (based on grant date values)
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4,863,985 |
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5,099,097 |
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4,720,325 |
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4,772,534 |
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• |
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Base salary – salary amounts paid each year. Tim was awarded an annual base salary of $900,000 when he assumed the position of president and CEO on July 1, 2011. He received a 2% salary increase in
2012, no salary increase in 2013 and a 2% salary increase in 2014. |
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• |
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Annual incentive pay – bonus amounts paid each year. Tim was awarded a bonus of $1,060,000 in 2014, $785,000 in 2013 and $790,000 in 2012. |
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• |
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RSUs paid out – RSUs vested and paid out in July 2014. Tim received one grant of RSUs when he became CEO in July 2011. They were paid out in Cameco common shares in July 2014 (see page 82 for details). |
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• |
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PSUs awarded and paid out – amounts paid out on PSUs awarded in 2010, 2011 and 2012 that vested in 2012, 2013 and 2014. |
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• |
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Options exercised – the amount earned from options exercised from 2012 to 2014. Tim did not exercise any stock options in 2012, 2013 or 2014. |
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• |
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RSUs outstanding – no RSUs were awarded between 2012 and 2014. |
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• |
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PSUs outstanding – the outstanding PSUs granted in 2013 and 2014 have been given a zero value because they are performance-based awards that have not vested and may have a zero payout value when they vest.
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• |
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Options granted and outstanding – the amount that could be earned upon exercise of options that were granted from 2012 to 2014 based on $19.05, the closing share price of Cameco common shares on the TSX on
December 31, 2014. No options granted between 2012 and 2014 are in the money. |
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• |
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Pension – pension values reported for 2012, 2013 and 2014 in the summary compensation table. |
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60 CAMECO CORPORATION
Executive compensation
Compensation discussion and analysis
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| 1. Approach
Our executive compensation program is based on strong principles, a disciplined process and
thorough research and analysis. Our program has three goals: |
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About the compensation mix
We use financial and operational measures to assess performance for short- and long-term
incentives. 60% of the 2014 long-term incentive vests based on performance. |
| 1. |
|
Attract, retain and motivate executives, who are operating in a
highly-demanding, complex and competitive business environment. |
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| 2. |
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Establish a clear link between corporate performance and executive
pay. |
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| 3. |
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Motivate executives to create shareholder value by: |
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— |
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using total shareholder return as a performance measure |
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— |
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rewarding them when they successfully achieve corporate and individual performance objectives over the short and long term |
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— |
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ensuring a significant portion of their total compensation is at risk, reinforcing the importance of strong leadership and their ability to influence business outcomes and financial performance, and is
tied to share value to align the interests of executives and shareholders. |
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| COMPENSATION TARGETS
We target base salaries and total compensation at the median of our comparator group.
The charts below show the 2014 target mix for direct compensation for our senior executives, and
the amount of at-risk compensation.
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2015 MANAGEMENT PROXY CIRCULAR 61
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| RESEARCH AND BENCHMARKING
We use national, provincial and industry compensation forecasts and benchmark our executive
compensation against our comparator group for individual compensation components and total compensation by position. Performance, scope of the role, seniority and internal equity are also considered.
We engage an independent compensation consultant for advice and analysis to make sure our executive
compensation is fair and competitive and we are balanced in our decision-making. As a
publicly-traded, global nuclear energy company based in Canada, we have no peers that are directly comparable, so the human resources and compensation committee, with the support of its independent consultant, established a comparator group of
companies to assess compensation levels. |
|
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|
Comparator group
We use one comparator group to benchmark our director and executive
compensation and to assess relative performance. The comparator group of 21
companies represents a cross-section of Canadian capital intensive companies from different sectors that are similar by size of assets, revenue, enterprise value and market capitalization. These companies were also selected because they are in
regulated or relevant industries and have complex businesses, operations in multiple geographic locations and jurisdictions, and a head office in Canada, which are the same principles and criteria we used to establish the comparator group from 2009
to 2013. We added eight companies for 2014 to maintain a robust comparator
group in light of the acquisition of several of the comparator companies. The new companies added to the group are from the mining and oil and gas industries and meet the established principles and size criteria.
|
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| DIVERSIFIED METALS, MINING
AND GOLD |
|
ENERGY (OIL, GAS AND
METHANOL) |
|
UTILITIES,
ENERGY INFRASTRUCTURE AND POWER
PRODUCERS |
|
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| |
|
|
| Agnico-Eagle Mines Ltd.
Agrium Inc. Eldorado Gold*
First Quantum Minerals Ltd. IAMGold*
Kinross Gold Corp. Lundin Mining Corp.
Potash Corp. of Saskatchewan Sherritt International Corporation
Teck Resources* Yamana Gold, Inc.
|
|
Arc Resources*
Crescent Point Energy* EnCana Corp.*
Enerplus Resources Fund Methanex Corp.
Penn West Petroleum* Talisman Energy Inc.* |
|
Emera Inc.
Fortis Inc. TransAlta Corp. |
|
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| |
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| * New to the comparator group in 2014. |
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62 CAMECO CORPORATION
SHARE OWNERSHIP
We require our executives to own Cameco shares so they have a vested interest in the company aligned with shareholders.
Our share ownership guidelines are a multiple of base salary:
| |
— |
|
senior vice-presidents – 2 x base salary |
|
| |
— |
|
vice-presidents – 1 x base salary. |
|
Executives must meet their ownership targets within five years of being appointed to the
position. Four of our named executives, including the CEO and CFO, were promoted to their positions in 2011 so they have until 2016 to meet their ownership targets. All of our named executives meet their share ownership requirements.
In 2013, we revised the guidelines so that if an executive is promoted to a higher level and it resulted in a higher share ownership
target, they will have an additional three years to meet the increased target. Executives must use the after-tax proceeds from the payout of their PSU awards and the exercise of stock options to purchase additional Cameco shares until they have met
their ownership requirements. In addition, named executives who received special grants of RSU awards receive Cameco shares when the RSUs vest, which they must hold for two years after vesting or until they have met their share ownership target,
whichever is longer.
The table below shows the number of shares held by our named executives at December 31, 2014. We
calculate the target value of share ownership by using their 2014 base salary and the multiplier for their position. Share value is based on $19.05, the closing price of Cameco common shares on the TSX on December 31, 2014 or the
executive’s purchase price, whichever is higher. See the notes to the table below for information about how we determine the PSU and RSU values.
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| NAME |
|
2014 BASE
SALARY ($)
|
|
MULTIPLE
|
|
TARGET
VALUE OF
OWNERSHIP
($)
|
|
CAMECO SHARES
|
|
|
QUALIFYING PSUs
|
|
|
RSUs |
|
VALUE
OF
SHARE
OWNERSHIP ($)
(SHARES, RSUs AND
QUALIFYING
PSUs)
|
|
MEETS SHARE
OWNERSHIP
GUIDELINES
|
| |
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NUMBER
HELD
(#) |
|
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VALUE
($) |
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NUMBER
HELD2
(#) |
|
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VALUE3
($) |
|
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NUMBER HELD4 (#)
|
|
VALUE5
($) |
|
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| |
|
Tim Gitzel1 |
|
936,400 |
|
4 x |
|
3,745,600 |
|
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133,855 |
|
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2,910,164 |
|
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55,200 |
|
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1,051,560 |
|
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– |
|
– |
|
3,961,724 |
|
Has met
105% of the target for the CEO. |
| |
| Grant Isaac |
|
468,200 |
|
2 x |
|
936,400 |
|
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20,140 |
|
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418,683 |
|
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18,400 |
|
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350,520 |
|
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34,240 |
|
326,136 |
|
1,095,339 |
|
Has met
116% of the target for the CFO. |
| |
| Robert
Steane |
|
572,200 |
|
2 x |
|
1,144,400 |
|
|
61,530 |
|
|
|
1,164,912 |
|
|
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28,120 |
|
|
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535,686 |
|
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– |
|
– |
|
1,700,598 |
|
Has met
148% of the target for the COO. |
| |
| Ken Seitz |
|
466,200 |
|
2 x |
|
932,400 |
|
|
17,409 |
|
|
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395,099 |
|
|
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17,409 |
|
|
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331,641 |
|
|
31,330 |
|
298,418 |
|
1,025,158 |
|
Has met
109% of the target for this position. |
| |
| Alice Wong |
|
416,200 |
|
2 x |
|
832,400 |
|
|
27,108 |
|
|
|
577,581 |
|
|
|
12,280 |
|
|
|
233,934 |
|
|
30,440 |
|
289,941 |
|
1,101,456 |
|
Has met
132% of the target for this position. |
| |
| |
1. |
See Tim Gitzel’s profile on page 16 for the total number and value of the CEO’s shares and all PSUs, not just qualifying PSUs. |
|
| |
2. |
This is the lesser of the number of the qualifying PSUs and the number of Cameco common shares, held by the named executive. |
|
| |
3. |
The value of the qualifying PSUs is calculated as 80% of target, net of taxes of 50%, multiplied by $19.05, the closing price of Cameco shares on the TSX on December 31, 2014. |
|
| |
4. |
RSUs were granted on March 3, 2014 based on two times the executive’s 2013 salary. |
|
| |
5. |
The value of the RSUs is calculated net of taxes of 50%, multiplied by $19.05, the closing price of Cameco shares on the TSX on December 31, 2014. |
|
2015 MANAGEMENT PROXY CIRCULAR 63
2. Annual decision-making process
The board, human resources and compensation committee and management are involved in compensation decision-making. The committee is
responsible for making compensation recommendations to the board for its approval.
The illustration below shows our process, the
different inputs we use to determine compensation and the flow of information, recommendations and approval by our board.
ASSESSING THE PROGRAM
The human resources and compensation committee believes that it is good practice to review our compensation programs each year and
continued this practice in 2014 (read about the changes planned for 2015 on page 72).
The committee reviews all policies and
programs relating to executive compensation, which involves:
| |
— |
|
establishing the annual corporate objectives to measure performance |
|
| |
— |
|
determining the proposed base salaries, short-term incentive awards, grants of performance share unit awards and stock options |
|
| |
— |
|
reviewing and recommending executive compensation to the board for review and approval. |
|
The committee retains an external consultant as an independent advisor on compensation matters
who is also involved in the compensation review. Management retains a different external consultant as a general resource on human resources and other matters (see Compensation governance on page 43 for more information).
64 CAMECO CORPORATION
|
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| 3. Measuring performance
|
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| Compensation decisions are based on corporate and individual performance, which drive our strategy to profitably produce at a pace aligned
with market signals to increase long-term shareholder value, and to do that with a focus on safety, people and the environment.
CORPORATE PERFORMANCE
We assess our corporate performance by how well we achieve both financial and operational goals, and group our corporate objectives into our four measures of
success:
—
outstanding financial performance — safe, healthy and rewarding workplace — clean environment
—
supportive communities. The board approves our corporate objectives every year, as
recommended by management and following a review by the human resources and compensation committee. These objectives support our strategic plan. |
|
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|
PSU awards granted in 2012 were measured against four performance targets. They vested on December 31, 2014 and were paid out early
in 2015 based on our performance against those four targets for the three-year performance period (see pages 77 through 79 for the performance assessment and details of the payout).
Performance measures under our STI and PSU plans are linked to our strategic plan to ensure our
long-term growth and focus on creating shareholder value. The better we perform, the greater the potential to realize a higher payout value.
INDIVIDUAL PERFORMANCE The board assesses the
CEO’s individual performance using the annual corporate objectives and recommendations by the human resources and compensation committee, which are based on:
—
overall corporate performance — implementation of the CEO’s strategies to increase shareholder value
—
achievement of the CEO’s individual performance objectives. The committee reviews
reports from management and the CEO’s self-assessment and consults with its compensation consultant before making its recommendation to the board.
At the beginning of the year, the CEO establishes individual performance objectives for each senior vice-president, allocating and weighting the annual corporate
performance objectives by individual based on the executive’s influence in a given area.
At the end of the year, the CEO compares actual performance to the targets and prepares a report on each senior vice-president that summarizes their individual
performance and leadership effectiveness, which is discussed with the committee. The committee then consults with its compensation consultant, and makes its recommendations to the board.
The board approves all final decisions on executive compensation. See page 80 for details
about the compensation decisions in 2015. |
|
|
MEASURING SUCCESS |
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| |
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Our four measures of success allow us to proactively address the financial, social and environmental aspects of our business. We
believe that each is integral to our overall success and that, together, they will ensure our long-term sustainability. |
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| Linking pay to performance
All of the corporate objectives become the CEO’s individual objectives, and are allocated among the senior vice-presidents to form part of their individual
objectives. The CEO’s individual objectives also include leadership expectations established by the board.
A number of corporate objectives were chosen as performance measures under our short-term incentive (STI) plan. The table beginning on page 73 lists our 2014
corporate objectives and weightings, and the threshold, target, maximum and actual performance against these objectives under the STI plan.
Under our PSU plan, we assess performance over a three-year period based on three objectives, including relative TSR. These objectives were recommended by management,
reviewed by the human resources and compensation committee and then recommended to the board for approval. The table on page 69 sets out the measures for PSUs granted in 2014.
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2015 MANAGEMENT PROXY CIRCULAR 65
4. Compensation components
Five components make up total executive compensation:
|
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|
| — Base salary
|
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|
—
Short-term incentive (STI) |
|
at-risk compensation |
|
—
Long-term incentive (LTI) |
|
| — Pension
|
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| — Group benefits |
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| TYPE OF COMPENSATION |
|
FORM |
|
PERFORMANCE
PERIOD |
|
HOW IT IS DETERMINED |
|
RISK MANAGEMENT FEATURES
|
| |
| FIXED COMPENSATION
|
|
Provides market competitive level of fixed compensation
|
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|
| |
| Base salary
(page 67) |
|
Cash |
|
One year |
|
Based on market competitiveness among the comparator group, individual
performance, experience, scope of the role and internal equity. |
|
Fixed pay, paid throughout the year, and provides a certainty at a
base level for fulfilling their responsibilities. Represents 20-28% of target direct compensation of the named executives. |
| |
| VARIABLE (AT-RISK) COMPENSATION
|
|
STI compensation encourages achievement of pre-established corporate
and individual performance objectives. Payout is subject to clawback policy (effective January 1, 2013) |
|
|
| |
| Short-term incentive
(page 67) |
|
Cash |
|
One year |
|
Focuses on specific annual objectives.
Target award based on market competitiveness among the comparator group and other factors.
Actual award based on corporate and individual performance. |
|
Provides a balanced focus on short-term performance based on
pre-determined set of performance metrics weighted and scored in our scorecard. Actual payout on all metrics could be 0-200%. Targets and results are approved by the board. Targets continue to be scrutinized and tested to examine the stretch
component within the plan. Using 13 balanced and diverse performance metrics reduces the risk
associated with emphasizing a single (or limited) performance measures. |
| |
| VARIABLE (AT-RISK) COMPENSATION
|
|
LTI compensation provides incentive to achieve longer-term
performance and opportunity to receive equity-based compensation and align with shareholder interests, including reaching required share ownership levels. Payout is tied to Cameco share performance and subject to clawback policy (effective
January 1, 2013) |
|
|
| |
| Long-term incentive
(page 68) |
|
Performance
share units |
|
Three-year term, with vesting at the end of three years |
|
Focuses on longer-term objectives (three years).
Target award based on market competitiveness of the LTI package among the comparator group and other factors.
Actual payout based on our overall performance, combining a balanced scorecard of:
— average relative realized uranium price — increased production
— three-year
relative total shareholder return. At the board’s discretion, payment is made in Cameco
shares purchased on the open market, or in cash. |
|
Performance is measured on previously established targets. Three-year vesting period maintains longer term focus for decision-making and
management of business. Vesting and payout eligibility capped. Payout on the relative TSR metric could be 0-200% and on the other metrics could be 0-150%.
Stretch targets are based on an improvement over the comparator group and market and historical
performance. |
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|
Stock options |
|
Eight-year term, with one-third vesting each of the first three years starting on
the first anniversary of the grant date |
|
Target award based on market competitiveness of the LTI package among the
comparator group and other factors. The final realized value is based on the appreciation of
Cameco’s share price. |
|
Provides a balanced incentive to take appropriate risks. Three-year
vesting eligibility period and eight-year term maintain longer-term focus for decision-making and management of business. |
|
|
|
|
|
Restricted
share units |
|
Three-year term, with vesting at the end of three years |
|
Mainly used as a targeted retention tool in individual circumstances.
At the board’s discretion, payment is made in Cameco shares purchased on the open market, or
in cash. |
|
Three-year vesting and eligibility period supports retention and
longer-term focus for decision-making. |
| |
66 CAMECO CORPORATION
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|
| TYPE OF
COMPENSATION |
|
FORM |
|
PERFORMANCE
PERIOD |
|
HOW IT IS DETERMINED |
|
RISK MANAGEMENT FEATURES |
| |
| Pension
(page 72) |
|
Defined contribution pension plan
Supplemental executive pension program (defined benefit) |
|
Ongoing |
|
Based on market competitiveness and legislative requirements. |
|
Tax efficient way to provide employment benefits. Provide security for employees
and their families. |
| |
| Group benefits
(page 72) |
|
Group insurances, health and dental, income protection
|
|
Ongoing |
|
Based on market competitiveness. |
|
|
| |
We also have employment agreements with our named executives (see page 88).
BASE SALARY
We benchmark base salaries within a competitive range of the median of the comparator group.
We review base salaries every year, and compare them to similar positions in the comparator group. Then we review our corporate
performance, the individual’s performance, experience and scope of the role and internal equity to make sure any increases are fair and balanced. Salary adjustments for our senior executives go into effect as of January 1.
SHORT-TERM INCENTIVE PLAN
The STI plan gives executives the opportunity to earn a cash bonus based on their success in achieving pre-established corporate and
individual performance targets for the year.
For named executives, corporate performance is weighted higher than individual
performance. Awards range from 0 to 150% of the STI targets (compensable targets) established for the year, based on the level of performance. The company has to meet a minimum level of performance (threshold) for each measure before being eligible
for any payout on that measure. The threshold performance provides a 50% payout on that measure. Achieving 100% of target produces 100% payout on that measure. The maximum payout on any STI target is 150%. There is no payout if performance is below
threshold. The targets are considered challenging or stretch.
The human resources and compensation committee sets the target STI
for each executive based on position, internal equity and market competitiveness. The table below shows the current target levels and weightings used to establish the actual awards. The weighting of corporate and individual performance is the same
for all executives, which promotes executive teamwork and better aligns the interests of executives and shareholders. Actual bonuses are based on performance for the year and paid in the following year after our year-end results are released.
|
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| POSITION |
|
STI TARGET FOR 2014
(% OF BASE SALARY) |
|
CORPORATE PERFORMANCE
WEIGHTING |
|
INDIVIDUAL PERFORMANCE
WEIGHTING |
| |
| CEO
|
|
95%
|
|
80%
|
|
20%
|
| |
| Senior vice-presidents
|
|
50 to 70%
|
|
80%
|
|
20%
|
| |
Determining the payout
We use a balanced scorecard to broadly measure performance and give participants a clearer picture of their potential award. The
scorecard has a number of weighted objectives (compensable targets) aimed at driving annual performance in key areas. The objectives (compensable targets) are tied to our four measures of success and individual performance measures.
We calculate STI as follows:
2015 MANAGEMENT PROXY CIRCULAR 67
Measuring corporate performance
The board establishes the measures and weightings every year based on the recommendation of the committee. These objectives represent
our four measures of success, and are grouped into two sets of measures that each add up to 100%. The product of these two sets of measures is the corporate performance multiplier. See pages 73 through 76 for the objectives and results of each
measure for the 2014 STI.
The human resources and compensation committee consults with the safety, health and environment
committee on our performance related to safety, health and the environment and related corporate results as part of the process in determining the STI awards.
Measuring individual performance
Assessment of individual performance is based on the executive’s contribution to corporate performance and individual performance
measures, and these assessments are approved by the committee.
The committee determines the measures and weightings for assessing
the CEO’s performance, while the CEO establishes the same for the senior executives.
Using discretion
The board can increase or decrease the amount of the STI payment when there are significant external challenges or opportunities that
were not contemplated or reasonably expected when the objectives were set. It cannot exceed the maximum payout of 200%.
LONG-TERM INCENTIVE
LTI provides executives and management employees the opportunity to receive
equity-based compensation to drive longer-term performance. Both the committee and the board confirmed the importance of equity-based compensation to stay competitive, motivate employees to deliver strong longer-term performance and link their
interests with those of shareholders.
In 2014, the LTI was changed so that only executives (vice-presidents and above) receive
stock option grants. Other management employees receive RSU awards rather than options as a more effective retention tool and long-term incentive.
The combination of PSUs, options and RSUs allows us to use different vesting criteria, eligibility and performance measures for at-risk
compensation.
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| AWARD |
|
HOW IT’S
USED |
|
BUSINESS
FOCUS |
|
WHO
PARTICIPATES |
|
VESTING |
|
HOW IT’S
SETTLED |
|
ALIGNED WITH
SHAREHOLDERS |
| |
| PSUs
(page 69) |
|
60% of target LTI award |
|
Performance vesting criteria
Directly linked to long term, absolute and relative performance and share price
Reduces the number of option awards, lessening the dilutive impact to shareholders
|
|
Vice-presidents and above |
|
Based on financial and operating performance and TSR at the end of a three-year
period |
|
Cameco shares purchased on the market or cash |
|
Motivates executives to create shareholder value that can be sustained over a
longer period on both an absolute and relative basis; non-dilutive |
| |
| Stock options
(page 71) |
|
40% of target
LTI award |
|
Ties a portion of future compensation to the long-term performance of our
shares |
|
Vice-presidents and above |
|
Vest over three years, expire after eight years |
|
Option to buy Cameco shares at the exercise price |
|
Motivates executives to increase shareholder value |
| |
| Restricted share units
(page 72) |
|
Mainly for targeted retention |
|
Ties a portion of future compensation to the longer term performance of our
shares |
|
Select executives |
|
At the end of three years |
|
Cameco shares purchased on the market or cash |
|
Motivates executives to increase shareholder value; non-dilutive |
| |
68 CAMECO CORPORATION
Determining the mix
The committee evaluates the mix of options and PSUs every year, and discusses national trends with its compensation consultant,
including the importance of stock options in our industry and the emphasis Canadian public companies continue to place on stock options and other equity-based awards. The committee takes into account previous awards of PSUs, options and RSUs when it
considers new LTI grants.
Governance concerns have been expressed about the use of stock options and the committee regularly
reviews the merits of keeping stock options in our compensation program. Stock options are a tax-efficient incentive focused on share performance that provides a longer-term horizon for at-risk compensation and are a common form of LTI in our
comparator group.
The committee set the 2014 target mix of the expected value of the long-term incentives at 60% PSUs and 40%
options, so a high percentage of LTI has performance-based vesting. Companies in our comparator group typically have a lower portion of LTI allocated to performance-based vesting.
LTI awards are granted every year on March 1 (or the next business day if March 1 falls on a weekend) after we publicly
disclose our results for the previous fiscal year. If we impose a trading blackout period that includes March 1, we will make the grants on the next trading day after the blackout period has ended. The committee takes into account equity awards
previously granted when it determines the PSU and option awards each year.
The board can make special LTI grants at other times
during the year, for retention or other special reasons.
Non-executive employees (union and non-unionized) participate in the
employee share ownership plan (ESOP). We make annual base contributions to the plan, and match 50% of employee contributions up to a maximum of 1.5% of an employee’s base salary. Executives do not participate in ESOP because they participate in
the PSU plan.
Performance share unit plan
The PSU plan design is described in the table on the previous page. The formula below shows how the performance factors determine the
final number of PSUs on vesting.
Each PSU represents an opportunity to receive a Cameco common share purchased on the open market at
the end of the three-year performance period (or cash, at the board’s discretion). PSUs do not earn dividend equivalents until they vest.
We use a scorecard to align senior management’s compensation with their ability to improve corporate performance over the three
years. As of 2014, performance measures are based on a combination of two corporate measures, one absolute and one relative, and relative TSR, which has the highest weighting of the three measures. The PSUs measure absolute and relative performance
so management maintains a balanced, longer-term focus on delivering shareholder value.
The human resources and compensation
committee reviews the performance targets every year and recommends them to the board for approval. They are reasonably challenging stretch targets. The table below shows the targets and weightings for PSUs awarded in 2014.
|
|
|
|
|
|
|
| TARGET
|
|
WEIGHTING
|
|
|
|
|
| |
| Average relative realized uranium price
0 to 150% |
|
30% |
|
Achieve an average realized price for uranium sales for a three-year period that exceeds the weighted average price for sales in two independent
industry benchmarks for the same period:
— EIA (U.S.
energy information administration) price for sales in the US — ESA (Euratom supply agency) price for sales in Europe.
The payout at the end of the three-year period is based on 2013, 2014 and 2015 sales due to timing of when pricing information is available.
|
|
Measures relative performance to our competitors.
Consistently achieving higher prices than our competitors is a stretch target because uranium is a fungible product and we need to be creative in our sales efforts in
order to distinguish our uranium from our competitors and achieve a premium price. We use these
pricing indicators because they are the only ones that are publicly available. |
| |
2015 MANAGEMENT PROXY CIRCULAR 69
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| TARGET
|
|
WEIGHTING
|
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|
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| |
| Increased production
0 to 150% |
|
30% |
|
Increase production of
U308 by 7.8 million pounds over 2013 production of 23.6 million pounds, over the three-year period 2014 to 2016 to a cumulative total of
86.4 million pounds (our share). |
|
Measures absolute performance and ties directly to our strategic
plan. |
| |
| Our three-year average total shareholder return
(TSR) 0 to 200% |
|
40% |
|
Achieve three-year average TSR at the median of the three-year average TSR
achieved by companies in our comparator group. We define TSR as the change in price of a
Cameco common share, including reinvestment of dividends, on the TSX during the three-year period from 2014 to 2016. |
|
Measures performance relative to our comparator group. |
| |
| PERFORMANCE MULTIPLIER |
|
|
|
The overall performance factor is the sum of the three weighted targets
above. |
|
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| |
| INITIAL GRANT OF PSUs |
|
|
|
Notional units awarded at the beginning of the three-year performance period.
|
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| |
| PSU PAYOUT |
|
|
|
Payout amount is the initial number of PSUs granted, multiplied by the PSU
performance multiplier, exchanged for the equivalent number of Cameco common shares. |
|
|
| |
Performance multiplier
The performance multiplier for each measure depends on our performance against each target. The table below shows how we assess
performance against each measure.
Threshold performance for TSR is the 35th
percentile, which is in line with market practice ranging between the 25th and 40th percentiles for threshold performance. TSR is a good
reflection of performance when comparing like companies in a comparable industry and the same commodity. As companies in our comparator group are not affected by the price of uranium like Cameco, we believe that TSR is a challenging performance
target in the current depressed uranium market, and achieving threshold performance of the 35th percentile of our comparator group to trigger at 40% payout on this measure is challenging. This is
the first time since we introduced a balanced scorecard for the PSU plan that we have achieved TSR higher than the 35th percentile.
|
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| PERFORMANCE
MEASURES (AND WEIGHTING)
|
|
THRESHOLD
PERFORMANCE |
|
IF WE ACHIEVE: |
|
THEN THE PERFORMANCE MULTIPLIER IS: |
| |
| Average realized uranium price
(30%) |
|
80% of our target of 100% |
|
Less than 80% of the corresponding target
|
|
0% |
| |
|
|
|
|
80 to 120% of the corresponding target
|
|
50 to 150%
(in a straight-line interpolation) |
|
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|
| Increased production
(30%) |
|
|
|
More than 120% of the corresponding target
|
|
150 to 200%
(in a straight-line interpolation with board discretion) |
| |
| Our three-year average TSR
(40%) |
|
35th percentile
(target is the 50th percentile) |
|
Below the 35th percentile among our comparator group
|
|
0% |
| |
|
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|
|
From the 35th to the
75th percentile |
|
40 to 200% (in a straight-line interpolation with 100% at the 50th
percentile) |
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|
|
Higher than the 75th percentile
|
|
200%
|
| |
70 CAMECO CORPORATION
|
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| Vesting Payout formulas have been established for each
performance measure, taking into account different levels of threshold performance to determine the performance multiplier and to cap payouts to eliminate any excessive risk-taking.
Applying discretion
The committee can make adjustments at its discretion so that payouts appropriately reflect performance and discourage excessive risk-taking. We fully disclose any use
of discretion, together with the rationale and the particular circumstance. Stock option
plan We provide a stock option plan for senior management employees at the vice-president
level and above. The committee takes into account previous equity awards when it considers new grants of options.
The board fixes the exercise price of an option at the time of the grant at the TSX closing price of Cameco common shares on the trading day immediately before the date
of the grant. If an option holder leaves the company, any unvested options will vest during a
specific period of time depending on the reason for leaving. Vested options can be exercised during the same period. See Termination and change of control benefits starting on page 88 for details.
No more than 10% of our total shares issued and outstanding can be issued to insiders in a year
under the stock option plan and any other security-based compensation arrangement. An employee participating in the plan can only hold options exercisable for up to 5% of our total common shares issued and outstanding. Options cannot be transferred
to another person (other than by will or intestate succession). Our securities trading and
reporting policy aligns the interests of our employees and shareholders by prohibiting the securitization of stock options. This means that transactions that could be perceived as speculative or influenced by positive or negative perceptions of
Cameco’s prospects, including through the use of puts, calls, collars, spread bets, contracts for difference and hedging transactions, are prohibited. |
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|
Making changes The board can change, suspend or terminate
the plan subject to the laws that apply, including but not limited to the rules, regulations and policies of any stock exchange where our shares are listed. Some changes may require approval from shareholders or a governmental or regulatory
body. Neither the board, the human resources and compensation committee nor shareholders can
alter or affect the rights of an option holder in a negative way without his or her consent, except as described in the plan. See Appendix C for information about the changes that must be approved by shareholders.
International employees
Our non-North American stock option plan (phantom plan) allows eligible employees of our international subsidiaries to participate in our overall growth and
profitability in permitted jurisdictions. The phantom plan has the same objectives and features
as our stock option plan, except that these option holders have the right to receive cash payments rather than Cameco shares. The cash amount equals the difference between the closing market price of a Cameco share on the day prior to the exercise
date and the exercise price of a phantom stock option. Plan changes
The committee recommended changes to the stock option plan so that if a change of control results in a termination without cause or for good reason within 24 months of
the change of control, all options vest immediately and may be exercised until the original term or within 24 months, whichever is earlier. The board approved the recommendations and changes in 2014. These changes are considered housekeeping in
nature and did not require shareholder approval. |
2015 MANAGEMENT PROXY CIRCULAR 71
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| Restricted share units
The board grants RSUs from time to time to senior management mainly as a targeted retention tool on the recommendation of the committee. RSUs typically vest at the end
of three years. In 2014, we transitioned management employees below the level of vice-president
from the stock option plan to an RSU plan. Annual grants of LTI awards for those employees now consist of RSUs that vest one-third each year over three years.
Each RSU represents one notional common share. The board has discretion to decide whether the payout is in Cameco shares purchased on the open market, or in cash based
on the weighted average closing price of Cameco shares on the TSX for the 20 trading days immediately before the vesting date, after deducting withholding taxes.
The summary compensation table on page 81 gives information about the grant date value of options awarded to the named executives over the past three years. The
Incentive plan awards table on page 84 gives information about the 2014 year-end value of the named executives’ unexercised options and PSUs and RSUs that have not vested.
PENSION
Pensions are an integral part of total compensation and a cost-effective and important benefit for
attracting and retaining executives and other employees. Executives participate in a registered base plan and a supplemental program.
Registered base plan
We have a registered defined contribution plan for eligible employees. All of the named executives participate in our defined contribution plan. We contribute 12% of
the named executive’s pensionable earnings to the defined contribution plan every two weeks up to the annual dollar limit allowed by the Canada Revenue Agency. The maximum dollar amount for 2014 was $24,930.
Supplemental program
This non-contributory supplemental defined benefit program is designed to attract and retain
talented executives over the longer term. It provides a retirement income that is commensurate with the executive’s salary and offsets the strict limits under the Income Tax Act (Canada) relating to registered pension plans.
All of our Canadian-based management at the vice-president level and above participate in the
program (see Pension benefits on page 86 for more information). |
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BENEFITS
Group benefits
We provide group benefits to all our employees. The named executives participate in an enhanced program and receive coverage similar to those offered by companies in
our comparator group. These benefits include life insurance, long-term disability insurance, extended health care, dental care and emergency medical coverage.
Perquisites
Our named executives also receive additional benefits as part of their total compensation, similar to those offered by companies in our comparator group. These include
a financial and tax planning allowance, a vehicle allowance, an executive medical plan and salary protection in the event of short-term disability.
5. Program changes for 2015
INCENTIVE AWARDS
The human resources and compensation committee recommended changes to the target compensation for the CEO to bring it closer to the market median. His STI target
compensation will increase from 95% to 100% of base salary and his LTI target will increase from 300% to 325% of base salary. The board approved the recommendations, and the changes will be implemented in 2015.
COMPENSATION REVIEW
A comprehensive review of our executive compensation program is planned for 2015, consistent with
our policy of reviewing the program every three years. Preliminary work is already underway to
review the pay mix, STI plan (including the metrics, targets and weightings), LTI plans, executive share ownership guidelines and our comparator group. The committee plans to work with Meridian, its independent third-party consultant, as part of the
process. |
72 CAMECO CORPORATION
6. 2014 Performance and compensation
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|
|
|
|
|
|
|
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| BASE SALARY
The named executives received modest salary increases of 2% for 2014, except for Ken Seitz who received an 11% increase in base salary to align his compensation with
our comparator group. SHORT-TERM INCENTIVE PLAN
The STI award is based on targets set for each named executive as a percentage of base salary and
actual corporate and individual performance. These percentages are set slightly below those of our comparator group. The plan design is based 80% on corporate performance and 20% on individual performance for all executives.
STI awards are reported in the summary compensation table on page 81, and you can find a
complete description of the plan design beginning on page 67. Corporate performance
Our compensable targets are a combination of financial and non-financial measures and are directly
linked to our strategy to profitably produce at a pace aligned with market signals so we can take advantage of the world’s increasing demand for energy. The targets represent our four measures of success – measures that highlight the
importance we place on our financial and operational results and the social and environmental aspects of our business as a responsible corporation and global leader in corporate social responsibility.
|
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|
|
Our 2014 STI performance was assessed at 119.2%, compared to 83.7% for 2013, based on 13 specific, compensable targets. The financial performance and
other measures encourage a balanced focus, and are designed to motivate executive behaviour and drive compensation. Detailed STI performance results and weightings are reported in the table below.
2014 results
Cameco’s performance in 2014 was strong, despite continued uncertainty in the uranium market. Our focus on cost management is reflected in our financial results.
We also delivered strong results in terms of our operational, supportive communities, health and safety and clean environment commitments. While we did not achieve all of our targets in 2014, we excelled in other areas as outlined below.
About the payouts
Threshold performance provides a 50% payout on that measure, while performance at 100% of target produces a 100% payout and maximum performance provides a 150% payout
on that measure. There is no payout if performance is below threshold. We have a 200% cap on
payouts for performance above the maximum to mitigate excessive risk-taking. |
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|
|
| 2014 COMPENSABLE TARGETS |
|
|
|
|
|
|
|
|
|
|
| OBJECTIVE/TARGET |
|
|
|
THRESHOLD
|
|
TARGET
|
|
MAXIMUM
|
|
ACTUAL PERFORMANCE
|
|
PERFORMANCE
|
|
WEIGHTING
|
|
PERFORMANCE
RESULT |
|
OUTSTANDING FINANCIAL PERFORMANCE (85% weighting) |
|
Earnings measures Achieve
targeted adjusted net earnings and cash flow from operations (before working capital changes). |
|
|
|
$274
million |
|
$343
million |
|
$412
million |
|
Adjusted net earnings1 were $375 million, 9.3% higher than target. |
|
= 123.3% payout x 22.5% = |
|
|
|
|
$451 million |
|
$564 million |
|
$677 million |
|
Cash flow from
operations (before working capital changes)1 was $710 million, 25.9% higher than target. This results in the maximum achievement of 120% of the target.
|
|
= 150.0% payout x 22.5% = |
|
|
|
Capital management measures Execute
capital projects within scope, on time and on budget (measured by cost and schedule performance indicators). |
|
|
|
0.80
(over budget) |
|
1.0 |
|
1.20
(under budget) |
|
Our cost performance
indicator for 2014 was 1.03 (under budget), resulting in 103% achievement of target. |
|
= 107.5%
payout x 10% = |
|
|
|
|
0.80
(behind schedule)
|
|
1.0 |
|
1.20
(ahead of schedule)
|
|
Our schedule
performance indicator was below our threshold for 2014, resulting in a zero rating. |
|
= 0.0%
payout x 10% = |
|
|
2015 MANAGEMENT PROXY CIRCULAR 73
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|
|
| 2014 COMPENSABLE TARGETS |
|
|
|
|
|
|
|
|
|
|
| OBJECTIVE/TARGET |
|
|
|
THRESHOLD
|
|
TARGET
|
|
MAXIMUM
|
|
ACTUAL PERFORMANCE
|
|
PERFORMANCE
|
|
WEIGHTING
|
|
PERFORMANCE
RESULT |
| Cigar Lake
measure Achieve the jet boring system (JBS) mining cycle times in six consecutive cavities of an average of 12.3 days per cavity with ³ 80% of ore recovered in each of the cavities. |
|
|
|
14.8 days
per cavity |
|
12.3
days per cavity |
|
10.3 days
per cavity |
|
Mining cycle times
averaged 10.2 days per cavity for six consecutive cavities with at least 80% recovery, resulting in maximum achievement of 120% of the target. |
|
= 150.0% payout x 20% = |
|
|
|
|
| SUPPORTIVE
COMMUNITIES (15% weighting) |
| Meet all of our business development obligations
under our Collaboration Agreements based on three focused targets. |
|
|
|
40% |
|
60% |
|
75% |
|
Site utilization of
labour services in our English River First Nation (ERFN) Collaboration Agreement was 50%, compared to our target of 60%. This results in 83.3% achievement of target. |
|
= 75.0%
payout x 5% = |
|
|
|
|
|
40% |
|
60% |
|
75% |
|
Site utilization of
labour services in our Collaboration Agreement with the community of Pinehouse was 52%, compared to our target of 60%. This results in 86.7% achievement of target. |
|
= 80.0%
payout x 5% = |
|
|
|
|
|
– |
|
Completion by
Q2 2014 |
|
Completion
by Q1 2014 |
|
We completed our
environmental waste management scoping study for the community of Pinehouse in the second quarter of 2014, meeting the target. |
|
= 100.0%
payout x 5% = |
|
|
|
|
74 CAMECO CORPORATION
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| 2014 COMPENSABLE TARGETS |
|
|
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|
| OBJECTIVE/TARGET |
|
|
|
THRESHOLD
|
|
TARGET
|
|
MAXIMUM
|
|
ACTUAL PERFORMANCE
|
|
PERFORMANCE
|
|
WEIGHTING
|
|
PERFORMANCE
RESULT |
| SAFE,
HEALTHY AND REWARDING WORKPLACE (70% weighting) |
| Strive for no injuries at all Cameco-operated sites and
maintain a long-term downward trend in combined employee and contractor injury frequency and severity, and radiation doses (measured by TRIR2 and
DART2). |
|
|
|
|
|
Target is 2.02 |
|
|
|
TRIR2 of 1.86 met the target of 2.02, resulting in 102.7% achievement of the target. |
|
= 100.0% payout x 20% = |
|
|
|
|
|
|
|
Target
is 1.05 |
|
|
|
DART2 of 0.75 was better than the target of 1.05, resulting in 112.3% achievement of the target. |
|
=
124.3% payout x 20% = |
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| |
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|
|
Injury rates trended
downward across the company and met the targets for the year and average radiation doses remained low and stable. |
|
|
|
|
| Attract and retain the employees needed to
support operations and growth (measured by turnover rate). |
|
|
|
9.6% |
|
8% |
|
6.4% |
|
Our 2014 overall
turnover rate3 of 7% resulted in 112.5% achievement of target. |
|
= 131.3%
payout x 15% = |
|
|
|
|
14.4% |
|
12% |
|
9.6% |
|
The turnover rate for
new hires within the first year of employment3 was 13.9%, resulting in 84.2% achievement of target. |
|
= 60.5%
payout x 15% = |
|
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| |
|
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|
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|
|
We were listed again as
a Top 100 Employer (for the fifth year in a row), in addition to awards for being one of Saskatchewan’s Top Employers, Canada’s Best Diversity Employers, Top Employer for Canadians Over 40, and a Top Employer for Young People.
|
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2015 MANAGEMENT PROXY CIRCULAR 75
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|
| 2014 COMPENSABLE TARGETS |
|
|
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|
|
|
|
|
| OBJECTIVE/TARGET |
|
|
|
THRESHOLD
|
|
TARGET
|
|
MAXIMUM
|
|
ACTUAL PERFORMANCE
|
|
PERFORMANCE
|
|
WEIGHTING
|
|
PERFORMANCE
RESULT |
| CLEAN
ENVIRONMENT (30% weighting) |
| Do not incur an
incident that results in moderate or significant environmental impacts or current and future remediation costs of greater than or equal to $1 million or which has a reasonable potential to result in significant negative impact on the company’s
reputation with our major stakeholders. Achieve a decreasing trend for environmental incidents, measured as less than the long-term average (measured by reportable incidents and significant environmental incidents).
|
|
|
|
|
|
41 to
23 |
|
|
|
There were 39
reportable incidents, within the target performance range. There were no significant environmental incidents in 2014. |
|
= 100.0% payout x 30% = |
|
|
|
|
| OVERALL 2014 STI
PERFORMANCE Our corporate performance multiplier of 119.2% reflects our solid performance
in 2014, despite challenging market conditions. |
|
|
|
|
| 1 |
We use adjusted net earnings and cash flow from operations (before working capital changes) as a more meaningful way to compare our financial performance from period to period. These measures do not have a
standardized meaning or a consistent basis of calculation under IFRS, and they should not be considered in isolation or as a substitute for financial information prepared in accordance with IFRS. Other companies may calculate these measures
differently. The adjusted net earnings and cash flow from operations amounts in the 2014 compensable targets table are different than what are reported in our 2014 annual management discussion and analysis (2014 MD&A). To calculate
adjusted net earnings for compensation purposes, we start with adjusted net earnings as reported in our 2014 MD&A, then we further adjust for variances in foreign exchange rates as compared to budget. For further details regarding how we
calculate adjusted net earnings in our 2014 MD&A, see page 24 of that document. To calculate cash flow from operations (before working capital changes) for compensation purposes, we start with cash provided by (used in) continuing
operations (after working capital changes) as reported on page 23 of our 2014 MD&A and add back the changes in non-cash working capital of $88 million, then we further adjust for variances in foreign exchange rates and Canada Revenue Agency
income tax reassessment payments as compared to budget. For more information on non-cash working capital changes, see note 25 to our audited 2014 financial statements. |
|
| 2 |
Occupational Safety and Health Administration (OSHA) safety metrics, total recordable incidence rate (TRIR) and days away, restricted or transferred (DART), were adopted by the company to continue to drive improvements
in safety performance. TRIR is a measure of the rate of “recordable” workplace injuries. Examples of “recordable injuries” are a medical treatment (other than first aid), restricted work, lost-time and other specific injuries
such as 10 decibel hearing loss, loss of consciousness and broken bone. DART is a measure of the rate of workplace injuries and illnesses that require employees to miss work, perform restricted work activities or transfer to another job within a
calendar year. |
|
| 3 |
Results exclude the impact of restructuring activities. |
|
76 CAMECO CORPORATION
Individual performance
Individual performance was measured on core measures set for 2014, similar to those set in previous years:
|
|
|
|
|
|
|
| Key
operating results Strategic change initiatives
Leadership effectiveness
|
|
|
|
The committee can also add any other performance measures it deems appropriate |
|
|
The committee used these same measures to assess Tim Gitzel’s performance for 2014, and
reviewed overall corporate performance, implementation of our strategy to achieve shareholder value, the recommendations from the compensation consultant and the CEO’s own self-assessment in developing its recommendation for the board.
The board discussed the results of the CEO assessment and considered the committee’s recommendation during an in camera
session without management present before approving the CEO’s 2014 STI award.
The CEO decides which individual performance
measures will be used for the other executives, sets the weightings for each, and conducts a performance assessment for each senior vice-president. Senior vice-presidents assess the performance of vice-presidents. For each of the senior
vice-presidents, the CEO provided a detailed assessment of their performance, particular achievements and leadership. The committee considered these assessments in light of the key operating results for 2014 and approved the CEO’s recommended
performance assessments for each of the senior vice-presidents.
LONG-TERM INCENTIVE PLAN
Each LTI grant is based on individual performance, the level of the position, internal equity and overall market competitiveness. The
LTI grant to executives in 2014 was benchmarked competitive to the median of the comparator group. LTI awards are reported in the Incentive plan awards table on page 84.
|
|
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|
|
|
|
| POSITION |
|
LTI TARGET
(% OF BASE SALARY) |
|
ACTUAL 2014 LTI GRANTED
(% OF 2014 BASE
SALARY) |
|
ACTUAL % OF PSUs AND OPTIONS
GRANTED IN 2014
(PSUs/OPTIONS) |
| |
| President and CEO
|
|
300 |
|
300 |
|
60/40 |
| |
| Senior Vice-President and Chief Financial Officer
|
|
200 |
|
200 |
|
60/40 |
| |
| Senior Vice-President and Chief Operating Officer
|
|
250 |
|
250 |
|
60/40 |
| |
| Senior Vice-President and Chief Commercial Officer
|
|
200 |
|
200 |
|
60/40 |
| |
| Senior Vice-President and Chief Corporate Officer
|
|
150 |
|
150 |
|
60/40 |
| |
The table on page 69 explains the targets and weightings for PSUs awarded in 2014.
PAYOUT OF 2012 PSU AWARDS
PSUs granted on May 15, 2012 were for the three-year performance period from January 1,
2012 to December 31, 2014.
The calculated payout of the 2012 PSU awards was 118.6% of the number of PSUs granted and the
payout was made in March 2015. The following table shows the threshold performance and our results against the four performance measures under the plan at the end of the performance period.
2015 MANAGEMENT PROXY CIRCULAR 77
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|
|
|
|
|
|
|
THREE-YEAR RESULTS (ENDING DECEMBER 31, 2014)
|
|
|
|
|
|
|
|
PERFORMANCE |
| CORPORATE OBJECTIVE/TARGET
|
|
THRESHOLD
|
|
TARGET
|
|
MAXIMUM
|
|
|
|
ACTUAL PERFORMANCE
|
|
PERFORMANCE WEIGHTING
|
|
MULTIPLIER
|
| Total actual costs for capital projects
0 to 150%
Total actual costs for planned capital projects (approved financial
expenditures) that were completed during the three-year period from 2012 to 2014, not to exceed the budgeted cost by a 20% margin. |
|
20% above
budget |
|
90% to 110% of budget |
|
20% below
budget |
|
|
|
Total actual costs for planned capital projects completed were $891 million:
• exceeded budget by 3.4%
• fell within the range of 90-110% of target
• resulted in 100% payout based on the modified payout formula
|
|
|
|
|
| |
|
$1,001 million |
|
$834 million |
|
$667 million |
|
|
|
96.3%
achievement |
|
= 100.0% payout x 30% = |
|
|
| Average realized uranium price
0 to 150%
Achieve an average realized price for uranium sales for a three-year period
that exceeds the weighted average price for sales in two industry benchmarks for the same period – the EIA price for sales in the US and the ESA price for sales in Europe.
The 2012 grant is based on 2011, 2012 and 2013 sales due to timing of when pricing information is available. |
|
80%
of target |
|
100% of target |
|
At or above
120% of target |
|
|
|
Achieved an average realized price for uranium sales of $48.33, falling 2.9% below the weighted average price for sales in two industry benchmarks for
the same period. |
|
|
|
|
| |
|
$39.82 |
|
$49.77 |
|
$59.72 |
|
|
|
97.1%
achievement |
|
= 92.8% payout x 20% = |
|
|
| Increased production
0 to 150%
Add 3.8 million pounds
U3O8 cumulative incremental production in the three-year period 2012 to 2014, for target actual production of 71 million pounds U3O8 (our share). |
|
80%
of target |
|
100% of target |
|
At or above
120% of target |
|
|
|
Achieved 96.9% of our
production for a total of 68.8 million pounds. |
|
|
|
|
| |
|
56.8 million
pounds |
|
71.0 million
pounds |
|
85.2 million
pounds |
|
|
|
96.9%
achievement |
|
= 92.3% payout x 20% = |
|
|
| Our three-year average total shareholder return
(TSR) 0 to 200%
Achieve three-year average TSR that is the median of the three-year average TSR
achieved by companies in the comparator group in effect at the time. We define TSR as the change in price of a Cameco common share, including
reinvestment of dividends, on the TSX for the three-year period 2012 to 2014. |
|
At the 35th percentile |
|
At the 50th percentile |
|
At or above
the 75th
percentile |
|
|
|
Three-year average TSR
was at the 68th percentile of our performance comparator group for the three-year vesting period from 2012 to 2014. For the first time since we introduced the balanced scorecard for the program,
our three-year average TSR achieved better than threshold performance. |
|
|
|
|
| |
|
P35 |
|
P50 |
|
P75 |
|
|
|
P68
achievement |
|
= 172.0% payout x 30% = |
|
|
| PSU
PERFORMANCE MULTIPLIER Sum of the four weighted factors |
|
|
|
|
|
|
|
|
|
|
|
|
78 CAMECO CORPORATION
Relative performance
We assessed our TSR performance relative to a performance comparator group consisting of 31 companies in place at the time of grant for
the 2012 PSU awards payout, including 21 companies in our compensation comparator group (marked by an asterisk) and 12 global companies that have a larger revenue base and are in gold mining or energy. The performance comparator group is used to
assess TSR performance on the 2012 PSU awards payout, as this comparator group was in place at the time of grant.
Our three-year
average TSR for 2012 to 2014 was at the 68th percentile of companies in the performance comparator group.
|
|
|
|
|
|
|
| DIVERSIFIED METALS, MINING
AND GOLD |
|
ENERGY (OIL, GAS, COAL
AND METHANOL) |
|
UTILITIES,
ENERGY INFRASTRUCTURE AND POWER
PRODUCERS |
|
|
| |
|
|
| Agnico-Eagles Mines Ltd.
Agrium Inc. Barrick Gold Corporation*
First Quantum Minerals Ltd. Goldcorp Inc.*
Kinross Gold Corp. Lundin Mining Corp.*
Potash Corp. of Saskatchewan* Sherritt
International Corporation* Teck Cominco Ltd.*
Yamana Gold, Inc. |
|
Alpha Natural Resources Inc. Arch Coal Inc.
Canadian Natural Resources Ltd. Canadian Oil Sands Trust*
CONSOL Energy Inc. EnCana Corp.
Enerplus Resources Fund* Husky Energy Inc.
Imperial Oil Ltd. Methanex Corp.
Peabody Energy Corp. Penn West Energy Trust*
Suncor Energy Inc. Talisman Energy Inc.*
|
|
Emera Inc.* Fortis Inc.*
SNC Lavalin Group Inc.* Enbridge Inc.
TransAlta Corp.* TransCanada Corp.* |
|
|
| |
|
|
Grant value vs. payout value
The grant value of the PSUs in 2012 was based on $21.14, our closing share price on the TSX on the day prior to the grant (as disclosed
in the summary compensation table of our 2013 proxy circular).
The payout amount is the initial number of PSUs granted, multiplied
by the PSU performance multiplier, resulting in a calculated payout of 118.6% of the number of PSUs granted and 106% of the original grant date value based on performance and share price.
The table below shows the calculation of the payout on March 2, 2015 for each named executive. The value of the payout is based on
$18.90, the actual average purchase price of our common shares purchased on the TSX on behalf of the named executives on March 2, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(MULTIPLIER X
WEIGHTING) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NAME
|
|
TOTAL ACTUAL
CAPITAL COSTS
|
|
|
|
|
|
AVERAGE
REALIZED
URANIUM
PRICE
|
|
|
|
|
|
INCREASED
PRODUCTION
|
|
|
|
|
|
OUR
THREE-YEAR
AVERAGE TSR
|
|
|
|
|
|
2012 PSU AWARD
(# OF UNITS )
|
|
|
VALUE OF
TOTAL
2012 PSU
PAYOUT ($)
|
| Tim Gitzel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,100 |
|
|
1,168,065 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Grant Isaac |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,400
|
|
|
390,111
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Robert Steane |
|
|
(100% x 30% |
|
|
|
+ |
|
|
|
92.8% x 20% |
|
|
|
+ |
|
|
|
92.3% x 20% |
|
|
|
+ |
|
|
|
172.0% x 30%) |
|
|
|
x |
|
|
|
26,500
|
|
|
594,118
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Ken Seitz |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,900
|
|
|
356,482
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Alice Wong |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,600
|
|
|
260,074
|
The next table shows the vesting history of PSUs awarded to our named executives and paid out over the
past three years. Awards have vested below target in two of the last three years and above target this year, highlighting the at-risk structure and link between pay and performance.
|
|
|
|
|
|
|
| PSUs AWARDED IN
|
|
VESTED AS A % OF TARGET (%)
|
|
|
PAID OUT IN SHARES,
AFTER DEDUCTING WITHHOLDING TAXES
|
| 2012
|
|
|
118.6
|
|
|
March 2015
|
| 2011
|
|
|
68.5
|
|
|
March 2014
|
| 2010
|
|
|
64.8
|
|
|
March 2013
|
2015 MANAGEMENT PROXY CIRCULAR 79
PAYOUT OF 2011 RSU AWARD
When Tim Gitzel became president and CEO on July 1, 2011, he was granted 70,000 restricted share units at a grant date value of
$25.44, the closing price of a Cameco share on the TSX the day before the grant. The units vested on July 1, 2014 and shares were purchased on the TSX at an average share price of $21.14 on July 2, 2014. Tim received Cameco shares instead
of cash and he realized 83% of the original grant value, which is aligned with the decrease in Cameco’s share price over this period.
7. 2015 Compensation decisions
BASE SALARY
The named executives received salary increases of 4.0% for 2015, except for Tim Gitzel who received a 6.8% increase. All of the
adjustments position salaries within a competitive range of the market median and consider sustained long-term performance, experience in the role and internal equity.
SHORT-TERM INCENTIVE PLAN
Decisions about the 2015 STI award will be made in February 2016, once our 2015 results are finalized and approved by the board.
LONG-TERM INCENTIVE PLANS
2015 LTI awards
Each LTI award is based on individual performance, the level of the position, internal equity and overall market competitiveness. LTI
awards granted to executives in early 2015 were benchmarked at the median of the comparator group and based on a percentage of base salary (see page 77 for details).
PSUs and options were granted to the named executives on March 2, 2015 as follows:
| |
— |
|
The LTI award is made up of 60% PSUs and 40% options. |
|
| |
— |
|
PSUs vest at the end of a three-year period based on our performance against the following criteria: our average realized uranium price relative to industry benchmarks (30%), increased production (30%) and our
three-year average TSR (40%) relative to our comparator group (see page 62). |
|
RSUs were granted to Robert Steane on March 2, 2015 to recognize his leadership in
bringing Cigar Lake, our most important new asset, into production in 2014. The award has a value approximately equal to his base salary. The RSUs vest after one year and will be exchanged for Cameco common shares purchased on the TSX on the vesting
date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NAME
|
|
SECURITIES
UNDER
OPTIONS
GRANTED (#)
|
|
|
VALUE OF
OPTIONS ON
DATE OF
GRANT1 ($)
|
|
|
EXERCISE
PRICE
($/SECURITY) |
|
|
EXPIRY
DATE |
|
|
PSUs
GRANTED2
(#) |
|
|
VALUE
OF PSUs
GRANTED3 ($)
|
|
|
DATE WHEN
PERFORMANCE
PERIOD MATURES
|
|
|
| Tim Gitzel
|
|
|
284,500
|
|
|
|
1,300,165
|
|
|
|
19.30
|
|
|
|
03/01/2023
|
|
|
|
101,000
|
|
|
|
1,949,300
|
|
|
12/31/2017
|
|
|
| Grant Isaac
|
|
|
85,200
|
|
|
|
389,364
|
|
|
|
19.30
|
|
|
|
03/01/2023
|
|
|
|
30,300
|
|
|
|
584,790
|
|
|
12/31/2017
|
|
|
| Robert Steane
|
|
|
130,200
|
|
|
|
595,014
|
|
|
|
19.30
|
|
|
|
03/01/2023
|
|
|
|
46,300
|
|
|
|
893,590
|
|
|
12/31/2017
|
|
|
| Ken Seitz
|
|
|
84,900
|
|
|
|
387,993
|
|
|
|
19.30
|
|
|
|
03/01/2023
|
|
|
|
30,100
|
|
|
|
580,930
|
|
|
12/31/2017
|
|
|
| Alice Wong
|
|
|
56,800
|
|
|
|
259,576
|
|
|
|
19.30
|
|
|
|
03/01/2023
|
|
|
|
20,200
|
|
|
|
389,860
|
|
|
12/31/2017
|
|
|
Options granted on March 2, 2015 expire on March 1, 2023 and are valued at
approximately $4.57 per option using the Black-Scholes option-pricing model. The compensation consultant used the following key assumptions in the model when comparing companies.
|
|
|
|
|
|
|
|
|
| Dividend yield (%)
|
|
Volatility (%)
|
|
Risk-free rate (%)
|
|
Expected life (years)
|
|
Exercise price ($)
|
| |
| 1.8
|
|
29.2 |
|
1.5 |
|
5.5 |
|
19.30 |
| |
In its analysis for the human resources and compensation committee, the compensation consultant estimated
the expected value of Cameco’s options using the expected life of the option (average of a full term of eight years and a three-year vesting period). This approach is consistent with the majority of companies in our comparator group and is
sensitive to the assumptions used, the figures may not be directly comparable across companies, but for compensation valuation purposes a consistent approach has been used. The exercise price of $19.30 per option is based on the closing price of
Cameco shares on the TSX on the day immediately before the grant.
The number of PSUs reflect 100% of the original number of PSUs awarded and has not been adjusted
to reflect performance. The actual number of PSUs earned can vary from 0 to 200% of the original number granted based on corporate performance.
The values represent the number of PSUs granted to each named executive, multiplied by $19.30,
the closing price of Cameco shares on the TSX on the day immediately before the grant.
The PSUs granted on March 2, 2015 are
for the three-year performance period from January 1, 2015 to December 31, 2017.
80 CAMECO CORPORATION
2014 Details
Summary compensation table
The table below shows the base salary, incentive-based awards, pension value and other compensation awarded to the named executives in
2014 and the previous two years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NAME AND
PRINCIPAL POSITION |
|
YEAR
|
|
|
SALARY1
($)
|
|
|
SHARE-
BASED
AWARDS2
($) |
|
|
OPTION
BASED
AWARDS3 ($)
|
|
|
ANNUAL
INCENTIVE
PLANS4 ($)
|
|
|
PENSION
VALUE5
($)
|
|
|
ALL OTHER
COMPENSATION6
($) |
|
|
TOTAL
COMPENSATION
($)
|
| Tim Gitzel |
|
|
2014 |
|
|
|
936,400 |
|
|
|
1,686,349 |
|
|
|
1,123,648 |
|
|
|
1,060,000 |
|
|
|
292,700 |
|
|
|
– |
|
|
5,099,097 |
| President and Chief |
|
|
2013 |
|
|
|
918,000 |
|
|
|
1,652,200 |
|
|
|
1,100,625 |
|
|
|
785,000 |
|
|
|
264,500 |
|
|
|
– |
|
|
4,720,325 |
| Executive Officer |
|
|
2012 |
|
|
|
918,000 |
|
|
|
1,101,394 |
|
|
|
1,651,890 |
|
|
|
790,000 |
|
|
|
311,250 |
|
|
|
– |
|
|
4,772,534
|
| Grant Isaac |
|
|
2014 |
|
|
|
468,200 |
|
|
|
1,481,010 |
|
|
|
374,308 |
|
|
|
333,000 |
|
|
|
134,900 |
|
|
|
– |
|
|
2,791,418 |
| Senior Vice-President and |
|
|
2013 |
|
|
|
459,000 |
|
|
|
550,000 |
|
|
|
366,875 |
|
|
|
248,000 |
|
|
|
136,200 |
|
|
|
– |
|
|
1,760,075 |
| Chief Financial Officer |
|
|
2012 |
|
|
|
459,000 |
|
|
|
367,836 |
|
|
|
550,425 |
|
|
|
274,000 |
|
|
|
167,250 |
|
|
|
– |
|
|
1,818,511
|
| Robert Steane |
|
|
2014 |
|
|
|
572,200 |
|
|
|
857,290 |
|
|
|
571,960 |
|
|
|
472,000 |
|
|
|
118,400 |
|
|
|
– |
|
|
2,591,850 |
| Senior Vice-President and |
|
|
2013 |
|
|
|
561,000 |
|
|
|
842,600 |
|
|
|
560,585 |
|
|
|
350,000 |
|
|
|
(91,050) |
|
|
|
– |
|
|
2,223,135 |
| Chief Operating Officer |
|
|
2012 |
|
|
|
561,000 |
|
|
|
560,210 |
|
|
|
841,320 |
|
|
|
385,000 |
|
|
|
49,250 |
|
|
|
– |
|
|
2,396,780
|
| Ken Seitz |
|
|
2014 |
|
|
|
466,200 |
|
|
|
1,400,329 |
|
|
|
372,860 |
|
|
|
332,000 |
|
|
|
261,600 |
|
|
|
– |
|
|
2,832,989 |
| Senior Vice-President and |
|
|
2013 |
|
|
|
420,000 |
|
|
|
503,800 |
|
|
|
335,764 |
|
|
|
227,000 |
|
|
|
82,550 |
|
|
|
– |
|
|
1,569,114 |
| Chief Commercial Officer |
|
|
2012 |
|
|
|
420,000 |
|
|
|
336,126 |
|
|
|
503,685 |
|
|
|
274,000 |
|
|
|
177,450 |
|
|
|
– |
|
|
1,711,261
|
| Alice Wong |
|
|
2014 |
|
|
|
416,200 |
|
|
|
1,191,340 |
|
|
|
249,780 |
|
|
|
246,000 |
|
|
|
95,000 |
|
|
|
– |
|
|
2,198,320 |
| Senior Vice-President and |
|
|
2013 |
|
|
|
408,000 |
|
|
|
367,400 |
|
|
|
244,779 |
|
|
|
182,000 |
|
|
|
(29,650) |
|
|
|
– |
|
|
1,172,529 |
| Chief Corporate Officer |
|
|
2012 |
|
|
|
408,000 |
|
|
|
245,224 |
|
|
|
367,155 |
|
|
|
200,000 |
|
|
|
25,800 |
|
|
|
– |
|
|
1,246,179
|
There were no base salary increases for the named executives in 2013.
These amounts reflect the grant date value of the actual number of PSUs originally awarded, using
the closing price of a Cameco share on the TSX on the day before the grant. The number of PSUs that the named executives will actually earn can vary from 0 to 150% of the original number of PSUs granted, depending on performance (the board can pay
up to 200% if performance is exceptional).
Grant Isaac’s grant date value in 2014 includes a PSU value of $563,010 and RSU
value of $918,000. Ken Seitz’s grant date value in 2014 includes a PSU value of $560,329 and RSU value of $840,000. Alice Wong’s grant date value in 2014 includes a PSU value of $375,340 and RSU value of $816,000. We awarded the following
PSUs to the named executives from 2012 to 2014:
|
|
|
|
|
|
|
|
|
|
|
| |
|
March 3, 2014 |
|
March 1, 2013
|
|
May 15, 2012
|
|
|
|
|
| Tim Gitzel |
|
62,900 |
|
75,100 |
|
52,100 |
|
|
|
|
| Grant Isaac |
|
21,000 |
|
25,000 |
|
17,400 |
|
|
|
|
| Robert Steane |
|
32,000 |
|
38,300 |
|
26,500 |
|
|
|
|
| Ken Seitz |
|
20,900 |
|
22,900 |
|
15,900 |
|
|
|
|
| Alice Wong
|
|
14,000 |
|
16,700 |
|
11,600 |
|
|
|
|
|
Grant price |
|
$26.81
|
|
$22.00
|
|
$21.14
|
|
|
|
|
For purposes of financial statement
disclosure, the PSUs were valued at $27.25 per unit for 2014, $21.45 per unit for 2013 and $20.05 per unit for 2012 using a Monte Carlo pricing model and the key assumptions set out in the table below. This model is considered the most appropriate
way to value a plan with a relative market condition like total shareholder return. The total fair value of the PSUs is amortized into income over their three-year vesting period and the weighted average of the expected retirement dates of the named
executives, whichever is lower. The non-market criteria relating to realized selling prices, production targets and cost control have been incorporated into the valuation at grant date by reviewing prior history and corporate budgets.
|
|
|
|
|
|
|
|
|
|
|
| |
|
Expected dividend ($)
|
|
Expected volatility (%) |
|
Risk-free rate (%)
|
|
Expected life (years) |
|
Expected forfeitures (%)
|
| |
| March 2014 |
|
– |
|
33.1 |
|
1.2 |
|
3 |
|
4.6 |
| March 2013 |
|
– |
|
33.5 |
|
1.1 |
|
3 |
|
2.0 |
| May 2012 |
|
– |
|
35.7 |
|
1.4 |
|
3 |
|
– |
| |
The table below shows the difference between the grant date value for compensation purposes and the grant
date fair value used for purposes of financial statement disclosure.
|
|
|
|
|
|
|
| Grant date |
|
Grant date value for
compensation purposes ($) |
|
Grant date fair value for
financial statement disclosure ($)
|
|
Difference per unit ($)
|
| March 3, 2014 |
|
26.81 |
|
27.25 |
|
(0.44) |
| March 1, 2013 |
|
22.00 |
|
21.45 |
|
0.55 |
| May 15, 2012
|
|
21.14 |
|
20.05 |
|
1.09 |
2015 MANAGEMENT PROXY CIRCULAR 81
Grant Isaac, Ken Seitz and Alice Wong each received a retention incentive of restricted
share units (RSUs) that do not vest until March 3, 2017 at a grant date value of $26.81, the closing price of a Cameco share on the TSX the day before the grant:
|
|
|
|
|
|
|
| RSUs awarded on March 3, 2014
|
|
# of units
|
|
Grant date value (per unit)
|
|
Vesting date
|
| |
| Grant Isaac
|
|
34,240
|
|
$26.81
|
|
March 3, 2017
|
| |
| Ken Seitz
|
|
31,330 |
|
$26.81 |
|
March 3, 2017 |
| |
| Alice Wong
|
|
30,440 |
|
$26.81 |
|
March 3, 2017 |
| |
For purposes of financial statement disclosure, the RSUs were valued at $27.21 per unit for 2014 using
the closing price of a Cameco share on the TSX on the date of grant.
These amounts reflect the grant date value of the actual number of options originally granted
using the Black-Scholes option-pricing model and key assumptions determined by the compensation consultants and listed below.
The
table below shows the number of options granted to the named executives over the last three years and the corresponding grant date valuations.
|
|
|
|
|
|
|
|
|
| |
|
March 3, 2014 |
|
March 1, 2013 |
|
May 15, 2012 |
|
|
| |
|
|
| Tim Gitzel |
|
155,200 |
|
187,500 |
|
268,600 |
|
|
| Grant Isaac |
|
51,700 |
|
62,500 |
|
89,500 |
|
|
| Robert Steane |
|
79,000 |
|
95,500 |
|
136,800 |
|
|
| Ken Seitz |
|
51,500 |
|
57,200 |
|
81,900 |
|
|
| Alice Wong |
|
34,500 |
|
41,700 |
|
59,700 |
|
|
| |
|
|
| Grant date valuation (per option)
|
|
$7.24 |
|
$5.87 |
|
$6.15 |
|
|
| |
|
|
The human resources and compensation committee reviewed estimates of the value of the options on the
grant dates that were prepared by Mercer (March 2014, March 2013 and March 2012). It then recommended to the board the number of options to grant, which the board approved. The compensation consultants used the Black-Scholes option-pricing
model and the following key assumptions:
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dividend yield (%)
|
|
Volatility (%)
|
|
Risk-free rate (%)
|
|
Expected life (years)
|
|
Exercise price ($)
|
| |
| March 2014 |
|
1.80 |
|
32.8 |
|
1.7 |
|
5.5 |
|
26.81 |
| March 2013 |
|
1.90 |
|
33.7 |
|
1.3 |
|
5.5 |
|
22.00 |
| May 2012 |
|
1.80 |
|
35.8 |
|
1.6 |
|
5.5 |
|
21.14 |
| |
As this approach may not be identical to that used by other companies and is sensitive to the assumptions
used, the figures may not be directly comparable across companies, however a consistent approach has been used for compensation valuation purposes. For March 2011 and thereafter, the expected life assumption was changed from previous years, and was
based on Mercer’s calculation of the expected life of Cameco options and options issued by companies in the comparator group in effect at the time. They calculated the expected life by adding the actual term (eight years) to the vesting period
(three years), and dividing in half. Hugessen Consulting Inc., the committee’s independent consultant in 2011, confirmed that Mercer’s calculation for 2011 was also consistent with market practice.
For purposes of financial statement disclosure, options were valued at $6.79 (awarded in March 2014), $6.51 (awarded in March 2013) and
$7.21 (awarded in May 2012) each on the date of the grant. We used the Black-Scholes option-pricing model all three years and the following key assumptions:
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dividend yield (%)
|
|
Volatility (%)
|
|
Risk-free rate (%)
|
|
Expected life (years)
|
|
Exercise price ($)
|
| |
| March 2014 |
|
1.49 |
|
32.9 |
|
1.5 |
|
4.4 |
|
26.81 |
| March 2013 |
|
1.82 |
|
40.5 |
|
1.2 |
|
4.4 |
|
22.00 |
| May 2012 |
|
1.89 |
|
47.3 |
|
1.4 |
|
4.3 |
|
21.14 |
| |
These accounting value assumptions are different from the compensation value assumptions in the
calculations above. The human resources and compensation committee uses the compensation valuation method and assumptions used in valuing compensation of companies in the comparator group to allow for a better comparison with market comparators.
The accounting value assumptions are based on our own internal research and past experience of how employees exercise their options.
The difference per option granted between the two models is:
For purposes of financial statement disclosure, the options were amortized over their three-year
vesting period or the weighted average of the years to expected retirement of the named executives, whichever was lower.
| |
4. |
Annual incentive plans |
|
These amounts were earned in the fiscal year shown and were paid in the following fiscal year.
The amounts for the named executives include company contributions under the registered defined
contribution pension plan, plus the projected value of the pension earned in each year for service credited under the supplemental executive pension program.
| |
6. |
All other compensation |
|
This amount does not include perquisites and other personal benefits because they total less than
$50,000 and less than 10% of the annual salary for any of the named executives. Perquisites and benefits are valued at the cost to Cameco and include commissions to buy shares with PSU payouts, premiums on incremental life insurance and long-term
disability, a financial and tax planning allowance, an executive medical plan and a vehicle allowance.
82 CAMECO CORPORATION
VALUE OF OPTIONS EXERCISED (SUPPLEMENTAL TABLE)
The table below is additional information to show the options exercised (if any) by each named executive in each of the last three
years and the dollar value realized.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NAME
|
|
YEAR
|
|
|
CAMECO COMMON
SHARES ACQUIRED ON
EXERCISE OF OPTIONS
(#)
|
|
|
CAMECO COMMON
SHARES HELD
FOLLOWING
EXERCISE
(#) |
|
|
CASH REALIZED
(BEFORE TAXES)
ON CONCURRENT SALE OF
CAMECO COMMON SHARES
($) |
|
|
| Tim Gitzel |
|
|
2014 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
|
|
2013 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
| |
|
|
2012 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
| Grant Isaac |
|
|
2014 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
|
|
2013 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
| |
|
|
2012 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
| Robert Steane |
|
|
2014 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
|
|
2013 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
| |
|
|
2012 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
| Ken Seitz |
|
|
2014 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
|
|
2013 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
| |
|
|
2012 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
| Alice Wong |
|
|
2014 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
|
|
|
2013 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
| |
|
|
2012 |
|
|
|
– |
|
|
|
– |
|
|
– |
|
|
2015 MANAGEMENT PROXY CIRCULAR 83
Incentive plan awards
The table below shows the total unexercised option and share awards granted to the named executives as of December 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
OPTION-BASED AWARDS1
|
|
|
|
|
SHARE-BASED AWARDS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NAME |
|
GRANT
DATE
|
|
|
|
NUMBER
OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS (#) |
|
|
OPTION
EXERCISE
PRICE ($)
|
|
OPTION
EXPIRY
DATE
|
|
VALUE OF
UNEXERCISED
IN-THE-MONEY
OPTIONS($) |
|
|
|
|
NUMBER OF
SHARES OR
UNITS OF
SHARES THAT
HAVE NOT
VESTED (#) |
|
|
MARKET OR
PAYOUT VALUE OF
SHARE-BASED
AWARDS THAT
HAVE NOT
VESTED2 ($) |
|
|
MARKET OR
PAYOUT VALUE OF
VESTED SHARE-
BASED AWARDS
NOT PAID OUT OR
DISTRIBUTED($)
|
| Tim Gitzel
|
|
03/30/2007
|
|
|
|
|
10,000
|
|
|
46.88
|
|
03/29/2015
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/04/2008 |
|
|
|
|
40,000 |
|
|
38.83 |
|
03/03/2016 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/16/2009 |
|
|
|
|
50,000 |
|
|
19.37 |
|
03/15/2017 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2010 |
|
|
|
|
60,000 |
|
|
28.90 |
|
02/28/2018 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2011 |
|
|
|
|
75,000 |
|
|
39.53 |
|
02/28/2019 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
07/01/2011 |
|
|
|
|
50,000 |
|
|
25.44 |
|
06/30/2019 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
1,479,471 |
|
|
05/15/2012 |
|
|
|
|
268,600 |
|
|
21.14 |
|
05/14/2020 |
|
|
– |
|
|
|
|
|
|
|
|
|
– |
|
|
1,168,065 |
|
|
03/01/2013 |
|
|
|
|
187,500 |
|
|
22.00 |
|
02/28/2021 |
|
|
– |
|
|
|
|
|
75,100 |
|
|
|
– |
|
|
|
|
|
03/03/2014 |
|
|
|
|
155,200 |
|
|
26.81 |
|
03/02/2022 |
|
|
– |
|
|
|
|
|
62,900 |
|
|
|
– |
|
|
|
| Total
|
|
|
|
|
|
|
896,300 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
138,000 |
|
|
|
0 |
|
|
2,647,536
|
| Grant Isaac
|
|
09/08/2009
|
|
|
|
|
3,334
|
|
|
29.10
|
|
09/07/2017
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2010 |
|
|
|
|
13,334 |
|
|
28.90 |
|
02/28/2018 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2011 |
|
|
|
|
25,000 |
|
|
39.53 |
|
02/28/2019 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/15/2012 |
|
|
|
|
89,500 |
|
|
21.14 |
|
05/14/2020 |
|
|
– |
|
|
|
|
|
|
|
|
|
– |
|
|
390,111 |
|
|
03/01/2013 |
|
|
|
|
62,500 |
|
|
22.00 |
|
02/28/2021 |
|
|
– |
|
|
|
|
|
25,000 |
|
|
|
– |
|
|
|
| Total |
|
03/03/2014 |
|
|
|
|
51,700 |
|
|
26.81 |
|
03/02/2022 |
|
|
– |
|
|
|
|
|
55,240 |
|
|
|
652,272 |
|
|
|
| |
|
|
|
|
|
|
245,368 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
80,240 |
|
|
|
652,272 |
|
|
390,111
|
| Robert Steane
|
|
03/30/2007 |
|
|
|
|
10,500 |
|
|
46.88 |
|
03/29/2015 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/04/2008 |
|
|
|
|
12,300 |
|
|
38.83 |
|
03/03/2016 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/16/2009 |
|
|
|
|
13,005 |
|
|
19.37 |
|
03/15/2017 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2010 |
|
|
|
|
13,500 |
|
|
28.90 |
|
02/28/2018 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2011 |
|
|
|
|
50,000 |
|
|
39.53 |
|
02/28/2019 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/15/2012 |
|
|
|
|
136,800 |
|
|
21.14 |
|
05/14/2020 |
|
|
– |
|
|
|
|
|
|
|
|
|
– |
|
|
594,118 |
|
|
03/01/2013 |
|
|
|
|
95,500 |
|
|
22.00 |
|
02/28/2021 |
|
|
– |
|
|
|
|
|
38,300 |
|
|
|
– |
|
|
|
|
|
03/03/2014 |
|
|
|
|
79,000 |
|
|
26.81 |
|
03/02/2022 |
|
|
– |
|
|
|
|
|
32,000 |
|
|
|
– |
|
|
|
| Total
|
|
|
|
|
|
|
410,605 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
70,300 |
|
|
|
0 |
|
|
594,118
|
| Ken Seitz
|
|
03/30/2007 |
|
|
|
|
3,600 |
|
|
46.88 |
|
03/29/2015 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/04/2008 |
|
|
|
|
7,995 |
|
|
38.83 |
|
03/03/2016 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/16/2009 |
|
|
|
|
8,600 |
|
|
19.37 |
|
03/15/2017 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2010 |
|
|
|
|
10,575 |
|
|
28.90 |
|
02/28/2018 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2011 |
|
|
|
|
25,000 |
|
|
39.53 |
|
02/28/2019 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/15/2012 |
|
|
|
|
81,900 |
|
|
21.14 |
|
05/14/2020 |
|
|
– |
|
|
|
|
|
|
|
|
|
– |
|
|
356,482 |
|
|
03/01/2013 |
|
|
|
|
57,200 |
|
|
22.00 |
|
02/28/2021 |
|
|
– |
|
|
|
|
|
22,900 |
|
|
|
– |
|
|
|
|
|
03/03/2014 |
|
|
|
|
51,500 |
|
|
26.81 |
|
03/02/2022 |
|
|
– |
|
|
|
|
|
52,230 |
|
|
|
596,837 |
|
|
|
| Total
|
|
|
|
|
|
|
246,370 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
75,130 |
|
|
|
596,837 |
|
|
356,482
|
| Alice Wong
|
|
03/30/2007 |
|
|
|
|
10,500 |
|
|
46.88 |
|
03/29/2015 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/04/2008 |
|
|
|
|
12,300 |
|
|
38.83 |
|
03/03/2016 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/16/2009 |
|
|
|
|
13,005 |
|
|
19.37 |
|
03/15/2017 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2010 |
|
|
|
|
10,575 |
|
|
28.90 |
|
02/28/2018 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/01/2011 |
|
|
|
|
10,275 |
|
|
39.53 |
|
02/28/2019 |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/15/2012 |
|
|
|
|
59,700 |
|
|
21.14 |
|
05/14/2020 |
|
|
– |
|
|
|
|
|
|
|
|
|
– |
|
|
260,074 |
|
|
03/01/2013 |
|
|
|
|
41,700 |
|
|
22.00 |
|
02/28/2021 |
|
|
– |
|
|
|
|
|
16,700 |
|
|
|
– |
|
|
|
|
|
03/03/2014 |
|
|
|
|
34,500 |
|
|
26.81 |
|
03/02/2022 |
|
|
– |
|
|
|
|
|
44,440 |
|
|
|
579,882 |
|
|
|
| Total |
|
|
|
|
|
|
192,555 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
61,140 |
|
|
|
579,882 |
|
|
260,074
|
| |
1. |
The number of options and exercise prices have been adjusted to reflect stock splits of Cameco shares. |
|
84 CAMECO CORPORATION
| |
2. |
The PSU awards are subject to performance conditions and valued at the minimum possible payout of zero. The RSUs awarded to Grant Isaac, Ken Seitz and Alice Wong on March 3, 2014 are not subject to performance
conditions so they are valued at $19.05, the closing price of Cameco shares on the TSX on December 31, 2014. |
|
The next table shows the:
| |
— |
|
total value of the named executive’s options when they vested during 2014 |
|
| |
— |
|
share-based awards that vested at the end of 2014 and were paid out in 2015 |
|
| |
— |
|
short-term incentive award earned in 2014 and paid in 2015. |
|
|
|
|
|
|
|
|
|
|
|
|
| NAME
|
|
OPTION-BASED AWARDS –
VALUE DURING THE
YEAR ON VESTING1 ($)
|
|
|
SHARE-BASED AWARDS –
VALUE VESTED DURING
THE YEAR2 ($) |
|
|
NON-EQUITY INCENTIVE PLAN
COMPENSATION – VALUE EARNED
DURING THE YEAR3 ($)
|
| Tim Gitzel
|
|
|
372,182
|
|
|
|
2,647,536
|
|
|
1,060,000
|
| Grant Isaac
|
|
|
124,053
|
|
|
|
390,111
|
|
|
333,000
|
| Robert Steane
|
|
|
189,562
|
|
|
|
594,118 |
|
|
472,000
|
| Ken Seitz
|
|
|
113,530 |
|
|
|
356,482 |
|
|
332,000
|
| Alice Wong
|
|
|
82,767 |
|
|
|
260,074 |
|
|
246,000
|
The amounts reflect the pre-tax value that the executives would have realized if they had
exercised their options that vested in 2014, on the date they vested. Options that had a positive value at the time of vesting are included in the calculation of these figures.
The amounts are the values of the PSUs that were granted in 2012, vested at December 31,
2014 and paid out to the named executives on March 2, 2015 at $18.90 (the actual average purchase price of our common shares purchased on the TSX on behalf of the named executives on that date). The compensation value we previously disclosed
for these PSUs was based on the target number of PSUs multiplied by the share value on grant date. The named executives realized 106% of the grant date value of the PSUs that were granted as part of their total compensation for 2012.
The amount for Tim Gitzel includes the value of RSUs that were granted on July 1, 2011 upon his appointment to CEO. They vested on
July 1, 2014 and were paid out in Cameco common shares at an average purchase price of $21.14.
| |
3. |
Non-equity incentive plan compensation |
|
The amounts are the STI payments for 2014 that were paid in 2015.
Equity compensation plan information
SECURITIES AUTHORIZED FOR ISSUE UNDER EQUITY COMPENSATION PLANS
(authorized for issue from treasury under our compensation plans at the end of 2014)
|
|
|
|
|
|
|
|
|
|
|
| PLAN CATEGORY
|
|
NUMBER OF SECURITIES TO
BE ISSUED UPON EXERCISE
OF OUTSTANDING OPTIONS,
WARRANTS
AND RIGHTS (A) |
|
|
WEIGHTED-AVERAGE
EXERCISE PRICE OF
OUTSTANDING
OPTIONS, WARRANTS
AND RIGHTS
(B) |
|
|
NUMBER OF SECURITIES REMAINING
AVAILABLE FOR FUTURE ISSUE UNDER
EQUITY COMPENSATION
PLANS (EXCLUDING
SECURITIES REFLECTED IN COLUMN A) (C)
|
| Equity compensation
plans approved by security holders
|
|
|
8,353,006 |
|
|
|
$28.22 |
|
|
6,794,113 |
| Equity compensation
plans not approved by security holders
|
|
|
– |
|
|
|
– |
|
|
– |
| Total
|
|
|
8,353,006 |
|
|
|
$28.22 |
|
|
6,794,113
|
Of the 8,353,006 options outstanding at December 31, 2014, 5,819,252 were exercisable and
2,533,754 were not.
The total number of Cameco shares that can be issued under the option plan and other compensation arrangements
must be less than 43,017,198 (10.9% of our total and outstanding common shares as of March 9, 2015).
2015 MANAGEMENT PROXY CIRCULAR 85
The table below gives details about the number of shares under our stock option plan at
the end of 2014 and as of March 9, 2015. The burn rate is the number of options issued in 2014 (765,146), expressed as a percentage of the 395,792,522 Cameco shares that were issued and outstanding as at December 31, 2014.
|
|
|
| |
|
AS OF DECEMBER 31, 2014
|
| |
| Number of options available for issue under the option plan and other
compensation arrangements |
|
6,794,113
|
| |
| Number of options issued in 2014 under the option plan and other compensation
arrangements |
|
765,146
|
| |
| 2014 Burn rate
|
|
0.19%
|
|
|
|
| |
|
AS OF MARCH 9, 2015
|
| |
| Number (%) of our shares issued and outstanding to be issued when
outstanding options under the option plan are exercised |
|
8,295,001 (2.1%) |
| |
| Number (%) of our issued and outstanding shares still available for issue
under the option plan |
|
6,852,118 (1.7%)
|
| |
| Total dilution rate
|
|
3.8%
|
| |
The table below shows other activity in the option plan since it was introduced in 1992:
|
|
|
| Maximum
initial share reserve (August 15, 1995) |
|
31,460,418 |
| Increase in the reserve (June 12,
2006) |
|
11,556,780
|
| Total shares issued under the plan (as at
business open on March 9, 2015) |
|
27,870,079
|
| Total shares issued under the plan /
total shares issued and outstanding (as at business open on March 9, 2015) |
|
7.0%
|
| Total shares issued and outstanding
(as at business open on March 9, 2015) |
|
395,792,522
|
Pension benefits
DEFINED CONTRIBUTION PLAN
All regular, full-time and part-time employees (including all of the named executives) participate in our registered defined
contribution plan as of December 31, 2014.
Under the Income Tax Act (Canada), the plan had a contribution limit of
$24,930 in 2014, based on a salary of approximately $207,750.
DEFINED BENEFIT PLAN
The last active member retired in 2014 and this plan will only exist for as long as current retirees and their spouses are entitled to
receive benefits. The plan has been closed to new members since 1997.
SUPPLEMENTAL EXECUTIVE PENSION
PROGRAM
The supplemental executive pension program is aimed at attracting and retaining talented executives. It
provides a lump sum retirement benefit that is consistent with the executive’s salary and offsets the strict limits of registered pension plans under the Income Tax Act (Canada).
All Canadian-based executives participate in the program. It had 19 active members as at December 31, 2014, with two inactive
members, 17 retirees and spouses of deceased retirees who were receiving a pension and two former members with deferred entitlements. This includes certain officers of wholly-owned subsidiaries who were previously eligible to participate in the
program.
The supplemental benefit is calculated as follows:
86 CAMECO CORPORATION
The supplemental benefit is based on actual years of service from the participant’s
date of hire with Cameco up to the date of termination, or until the end of the notice period for termination without cause. It is calculated on base salary, and unlike other companies, does not include bonuses as part of the pensionable earnings.
The supplemental program does not allow past service credits or any kind of accelerated service. Full benefits are paid at the normal retirement age of 65, but are also payable starting at 60 years of age if the person has 20 years of service.
Except for benefits for participants who are US taxpayers, the program is funded in part by trust assets and the remainder by a letter
of credit held by the program’s trustees. The liability is approximately $38,235,000 ($14,504,800 for the named executives) as of December 31, 2014. The face amount of the letter of credit will be determined each year based on the wind-up
liabilities of the supplemental program (excluding benefits for US taxpayers), less any trust assets. The face amount of the letter of credit for 2014 was $20,800,000. The trustee would be able to draw on the letter of credit to pay benefits to
members following specified trigger events. Benefits will continue to be paid from the trust assets until the fund is exhausted, at which time Cameco will begin paying benefits from corporate assets.
EARLY RETIREMENT
Under our registered defined contribution plan, members can transfer their account balance or begin receiving a benefit any time after
termination, so early retirement does not apply. All named executives are members of this plan.
Under our supplemental program,
Robert Steane is eligible to retire with full benefits. The other named executives can take early retirement starting at age 55, however, the benefit formula will be reduced by 0.25% for each month before the defined age (at least age 60 with at
least 20 years of continuous employment, or age 65, whichever is earlier).
EXECUTIVE PENSION VALUE
DISCLOSURE
The table below shows the estimated annual pension service costs for the supplemental program and
Cameco’s contribution to the defined contribution plan as the compensatory change. It also shows the accrued pension obligations and annual pension payable under our pension plans for each named executive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
ANNUAL BENEFITS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
NUMBER OF |
|
|
PAYABLE1 |
|
|
PENSION |
|
|
|
|
|
|
|
|
|
|
|
| NAME
|
|
YEARS OF
CREDITED
SERVICE (#)
|
|
|
AT YEAR
END
|
|
|
AT AGE
65 |
|
|
OBLIGATION AT
START OF YEAR2
($) |
|
|
COMPENSATORY
CHANGE2,3 ($) |
|
|
NON-
COMPENSATORY
CHANGE4 ($)
|
|
|
PENSION
OBLIGATION AT
YEAR END5 ($)
|
|
|
|
Tim Gitzel |
|
|
7.98
|
|
|
|
221,200
|
|
|
|
562,200
|
|
|
|
2,262,500
|
|
|
|
292,700
|
|
|
|
709,300
|
|
|
3,264,500
|
|
|
| Grant Isaac |
|
|
5.47 |
|
|
|
75,800 |
|
|
|
380,800 |
|
|
|
666,100 |
|
|
|
134,900 |
|
|
|
284,300 |
|
|
1,085,300
|
|
|
| Robert Steane
|
|
|
31.80 |
|
|
|
438,500 |
|
|
|
446,900 |
|
|
|
5,294,000 |
|
|
|
118,400 |
|
|
|
772,900 |
|
|
6,185,300
|
|
|
| Ken Seitz
|
|
|
11.06 |
|
|
|
144,500 |
|
|
|
396,600 |
|
|
|
1,386,100 |
|
|
|
261,600 |
|
|
|
547,300 |
|
|
2,195,000
|
|
|
| Alice Wong
|
|
|
27.92 |
|
|
|
290,200 |
|
|
|
415,900 |
|
|
|
3,711,600 |
|
|
|
95,000 |
|
|
|
962,500 |
|
|
4,769,100
|
|
|
| |
1. |
Annual benefits payable |
|
The annual benefits payable for all named executives include benefits under the registered
defined contribution pension plan and the supplemental executive pension program. The defined contribution costs are also included in the service cost as described under Compensatory change. The annual benefits payable do not take into
account any early retirement reductions or vesting requirements.
The amounts under at age 65 are based on current
compensation levels and assume accrued years of service to age 65 for each of the named executives. Under our supplemental executive pension program, the named executives are eligible to retire at age 55, which would reduce the pension benefits they
are entitled to receive.
Annual benefits payable at year end and at age 65 are based on final average earnings as at
December 31, 2014.
| |
2. |
Pension obligation at start of year is based on December 31, 2013 accounting assumptions. |
|
Pension obligation at start of year and the compensatory change are estimated
totals that include our registered defined contribution pension plan and supplemental executive pension program. They are based on assumptions representing entitlements in employment agreements that may change over time. The methods we used to
determine these estimates may not be exactly the same as methods other companies use, so the figures may not be directly comparable.
We used the following key assumptions to estimate these benefit obligations:
| |
— |
|
a retirement age of 63 or one year after the valuation date if 63 years of age or older. The assumed retirement age of 63 is management’s best estimate for determining the accrued benefit obligation as at
December 31, 2013, as reported in our financial statements |
|
| |
— |
|
salary increases of 3.0% each year |
|
| |
— |
|
a discount rate of 4.75% each year to determine the benefit obligation |
|
| |
— |
|
a long-term rate of return on defined contribution plan assets of 6.0% |
|
See note 27 to our audited 2014 financial statements (in our 2014 annual report and also on our
website) for more information about our pension plans.
| |
3. |
Compensatory change is the value of the projected pension earned from January 1, 2014 to December 31, 2014 for our registered defined contribution pension plan and supplemental executive pension
program. |
|
2015 MANAGEMENT PROXY CIRCULAR 87
| |
4. |
Non-compensatory change includes changes such as changes in assumptions (other than those used to estimate the compensatory change), employee contributions and interest on the accrued obligation at the start of
the year. |
|
| |
5. |
Pension obligation at year end is the value of the named executive’s projected pension earned for service up to December 31, 2014 under our registered defined contribution pension plan and supplemental
executive pension program. It is based on December 31, 2014 accounting assumptions and includes RRSP balances included in the base plan, if any. |
|
We used the following key assumptions to estimate these benefit obligations:
| |
— |
|
a retirement age of 63 or one year after the valuation date if 63 years of age or older. The assumed retirement age of 63 is management’s best estimate for determining the accrued benefit obligation as at
December 31, 2014, as reported in our financial statements |
|
| |
— |
|
salary increases of 3.0% each year |
|
| |
— |
|
a discount rate of 3.9% each year to determine the benefit obligation |
|
| |
— |
|
a long-term rate of return on defined contribution plan assets of 6.0% |
|
The pension amounts for all of the named executives equal the value of their accumulated
contributions under the registered defined contribution pension plan, supplemented by amounts based on final average earnings and service under the supplemental executive pension program (a defined benefit plan).
Loans to executives
As of March 9, 2015, we and our subsidiaries had no loans outstanding to our current or former named executives, except routine
indebtedness as defined under Canadian securities laws.
Termination and change of control benefits
We have employment agreements with the named executives. They are for an indefinite period and provide for:
| |
— |
|
participation in the short-term incentive plan |
|
| |
— |
|
participation in the long-term incentive plans (including PSUs and options) |
|
| |
— |
|
participation in the employee defined contribution pension plan and the supplemental executive pension program. |
|
The agreements also include post-termination obligations requiring that the named executives do
not:
| |
— |
|
use or disclose specialized knowledge, contracts and connections obtained while at Cameco |
|
| |
— |
|
compete against us in any way for 12 months after leaving the organization |
|
| |
— |
|
solicit any of our customers, suppliers or employees or harm our relationships with any of them for 12 months (18 months for the CEO) after leaving the organization. |
|
The summary on page 91 shows the incremental compensation that would be paid to the named
executives if their employment had been terminated on December 31, 2014. If Robert Steane had resigned, it would have been treated as retirement because he is eligible to retire. None of the named executives receive any incremental benefits if
there is a change of control but no termination of employment.
CEO
Tim Gitzel’s employment agreement provides for:
| |
— |
|
a retention incentive of 50,000 stock options granted on July 1, 2011, which vested over three years in 2012, 2013, and 2014, and 70,000 RSUs, also granted on July 1, 2011, which vested on July 1, 2014
and paid out (less withholding taxes) in Cameco shares purchased on the market on July 2, 2014 |
|
| |
— |
|
a requirement to hold four times his base salary in Cameco shares and qualifying PSUs by December 31, 2016 |
|
| |
— |
|
a severance period of two years if he is terminated without cause |
|
| |
— |
|
a $7,000 annual allowance for tax advice ($14,000 in his retirement year) |
|
| |
— |
|
a requirement to give a minimum notice of six months for resignation or retirement |
|
| |
— |
|
accelerated vesting of certain equity awards if the CEO’s employment is terminated within 24 months following a change of control (see the summary on page 89 for details on compensation upon termination). |
|
OTHER NAMED EXECUTIVES
The employment agreements for the other four named executives provide for:
| |
— |
|
a requirement to hold two times their base salary in Cameco shares and qualifying PSUs by December 31 of the fifth year in their current positions |
|
| |
— |
|
a notice period of 18 months if they are terminated without cause |
|
| |
— |
|
a $5,000 annual allowance for tax advice ($10,000 in their retirement year) |
|
| |
— |
|
a requirement to give a minimum notice of three months for resignation or retirement |
|
| |
— |
|
accelerated vesting of certain equity awards if employment is terminated within 24 months following a change of control (see the summary on page 89 for details on compensation upon termination). |
|
88 CAMECO CORPORATION
The table below is a summary of the compensation that would be paid to the named executives if the
employment of any of them is terminated. We believe the following terms are fair, competitive with the market and based on industry practice.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TYPE OF
TERMINATION
|
|
SEVERANCE |
|
STI BONUS |
|
OPTIONS |
|
PSUs |
|
RSUs |
|
BENEFITS |
|
PENSION
|
| |
| Retirement1 |
|
— none |
|
— none, unless the
executive retires on or near the last day of the year |
|
—
three years to vest
—
must be exercised within three years or the original term, whichever is earlier |
|
—
performance is measured to the end of the year of retirement — awards are pro-rated to completed months of service |
|
— all outstanding RSUs
are cancelled |
|
—
post-retirement benefits continue until age 65 — once the executive turns 65, life insurance, health and dental benefits are reduced and are provided until death
|
|
— credited service no
longer earned |
| |
| Resignation2 |
|
—
executive must give three months’ notice, except for CEO who must give six months’ notice — if we waive the notice, we must pay his base salary for the three or six months
|
|
— none |
|
—
vesting continues for 90 days — must be exercised within 90 days or the original term, whichever is earlier |
|
— all outstanding PSUs
are cancelled |
|
— all outstanding RSUs
are cancelled |
|
— none |
|
— credited service no
longer earned |
| |
| Termination without cause3 |
|
— lump sum equal to
base salary and target bonus for the notice period |
|
— none, unless
committee exercises discretion, usually when executive has worked most of the year |
|
—
options continue to vest for the notice period — must be exercised within the notice period or by the original expiry date, whichever is earlier |
|
—
performance is measured to the end of the year of termination — awards are pro-rated to completed months of service |
|
— a pro-rated number
of awards vest and are valued at the volume-weighted average price of the 20 trading days prior to the termination date |
|
—
employer contributions for health, dental and life insurance benefits continue for the notice period or until executive obtains other employment, whichever is earlier
|
|
— coverage continues
and credited service continues to be earned for the notice period |
| |
| Termination without cause or for good reason within 24 months of a change of control4 |
|
— same as for
termination without cause |
|
— same as for
termination without cause |
|
— all
options vest immediately and may be exercised until the original term or 24 months, whichever is earlier |
|
— all PSUs vest and
are paid at target within 30 days |
|
— all RSUs vest
immediately and are payable in cash within 30 days |
|
— same as for
termination without cause |
|
— same as for
termination without cause |
| |
2015 MANAGEMENT PROXY CIRCULAR 89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TYPE OF
TERMINATION |
|
SEVERANCE |
|
STI BONUS |
|
OPTIONS |
|
PSUs |
|
RSUs |
|
BENEFITS |
|
|
|
PENSION
|
| |
| Termination with cause |
|
— |
|
none |
|
— |
|
all entitlement to the bonus is lost |
|
— |
|
vesting continues for 30 days or the original term, whichever is
earlier |
|
— |
|
all outstanding PSUs are cancelled |
|
— |
|
all outstanding RSUs are cancelled |
|
— |
|
none |
|
|
|
— |
|
credited service no longer earned |
|
|
|
|
|
|
|
|
|
|
— |
|
must be exercised within 30 days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Death |
|
— |
|
none |
|
— |
|
pro-rated to date of death |
|
— — |
|
three years to vest
must be exercised within three years or original term, whichever is earlier |
|
—
— |
|
performance is measured to end of year of death
awards are pro-rated to the completed months of service as of date of death |
|
— |
|
awards are pro-rated to date of death and valued at the volume-weighted average
price of the 20 trading days prior to date of death |
|
— |
|
life insurance is paid on death |
|
|
|
—
— |
|
credited service no longer earned
value of vested pension benefit is paid to the beneficiary |
| |
At the discretion of the CEO and provided that the executive is at least 57 years old with at
least 10 years of services when he or she retires, the executive may be eligible for post-retirement benefits including health, dental, accidental death and dismemberment, and life insurance. Also at the discretion of the CEO, a supplemental amount
of $1,000 per month is paid until age 65, if the executive retires and is at least 57 years old with 10 years of service.
Robert Steane is eligible for early retirement and therefore the compensation that is paid if a
senior executive resigns does not apply.
| |
3. |
Termination without cause |
|
The notice period for Tim Gitzel is two years or the period remaining until age 65, whichever is
earlier. The notice period for the other four named executives is 18 months or the period remaining until age 65, whichever is earlier.
| |
4. |
Termination without cause or good reason within 24 months of a change of control |
|
According to the ENL Reorganization Act, no person, alone or together with associates may hold,
beneficially own or control, directly or indirectly, more than 25% of Cameco’s voting shares that can be cast to elect the directors. Because of the legislated restrictions on share ownership, there would have to be an act of federal parliament
for anyone to hold more than 25% of our voting shares. For Tim Gitzel, change of control is defined as an entity holding 35% or more of our voting shares, transfer or lease of substantially all of the company’s assets, dissolution or
liquidation of the company, or the board deciding that a change of control has occurred. For the other four named executives, change of control is the same except that an entity must hold 50% or more of our voting shares.
90 CAMECO CORPORATION
The table below shows the incremental values that would be paid to the named executives
if any of them had been terminated on December 31, 2014 or terminated without cause following a change of control. Cameco has legislated ownership restrictions under the ENL Reorganization Act. While a change of control is possible, it would
require an act of parliament or one of the activities discussed in note 4 of the previous table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TYPE OF TERMINATION |
|
SEVERANCE
($) |
|
|
STI BONUS1
($) |
|
|
OPTIONS2
($) |
|
|
PSUs AND
RSUs3
($) |
|
|
BENEFITS4
($) |
|
|
PENSION5
($) |
|
|
TOTAL PAYOUT
($) |
| |
| Tim Gitzel |
| |
| Resignation6 |
|
|
– |
|
|
|
(1,060,000) |
|
|
|
– |
|
|
|
(2,595,780) |
|
|
|
– |
|
|
|
– |
|
|
(3,655,780) |
| |
| Termination without cause |
|
|
3,651,960 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
38,300 |
|
|
|
751,900 |
|
|
4,442,160 |
| |
| Termination without cause with a change of control |
|
|
3,651,960 |
|
|
|
– |
|
|
|
– |
|
|
|
2,595,780 |
|
|
|
38,300 |
|
|
|
751,900 |
|
|
7,037,940 |
| |
| Termination with cause |
|
|
– |
|
|
|
(1,060,000) |
|
|
|
– |
|
|
|
(2,595,780) |
|
|
|
– |
|
|
|
– |
|
|
(3,655,780) |
| |
| Death |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
127,200 |
|
|
|
(197,600) |
|
|
(70,400) |
| |
| Grant Isaac |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Resignation6 |
|
|
– |
|
|
|
(333,000) |
|
|
|
– |
|
|
|
(1,509,314) |
|
|
|
– |
|
|
|
– |
|
|
(1,842,314) |
| |
| Termination without cause |
|
|
1,123,680 |
|
|
|
– |
|
|
|
– |
|
|
|
644,054 |
|
|
|
26,500 |
|
|
|
247,200 |
|
|
2,041,434 |
| |
| Termination without cause with a change of control |
|
|
1,123,680 |
|
|
|
– |
|
|
|
– |
|
|
|
1,509,314 |
|
|
|
26,500 |
|
|
|
247,200 |
|
|
2,906,694 |
| |
| Termination with cause |
|
|
– |
|
|
|
(333,000) |
|
|
|
– |
|
|
|
(1,509,314) |
|
|
|
– |
|
|
|
– |
|
|
(1,842,314) |
| |
| Death |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
179,047 |
|
|
|
468,200 |
|
|
|
335,300 |
|
|
982,547 |
| |
| Robert Steane |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Retirement7 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
14,300 |
|
|
|
– |
|
|
14,300 |
| |
| Termination without cause |
|
|
1,459,110 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
14,400 |
|
|
|
225,700 |
|
|
1,699,210 |
| |
| Termination without cause with a change of control |
|
|
1,459,110 |
|
|
|
– |
|
|
|
– |
|
|
|
1,322,343 |
|
|
|
14,400 |
|
|
|
225,700 |
|
|
3,021,553 |
| |
| Termination with cause |
|
|
– |
|
|
|
(472,000) |
|
|
|
– |
|
|
|
(1,322,343) |
|
|
|
– |
|
|
|
– |
|
|
(1,794,343) |
| |
| Death |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(5,332,100) |
|
|
(5,332,100) |
| |
| Ken Seitz |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Resignation6 |
|
|
– |
|
|
|
(332,000) |
|
|
|
– |
|
|
|
(1,413,195) |
|
|
|
– |
|
|
|
– |
|
|
(1,745,195) |
| |
| Termination without cause |
|
|
1,118,880 |
|
|
|
– |
|
|
|
– |
|
|
|
589,317 |
|
|
|
26,500 |
|
|
|
254,500 |
|
|
1,989,197 |
| |
| Termination without cause with a change of control |
|
|
1,118,880 |
|
|
|
– |
|
|
|
– |
|
|
|
1,413,195 |
|
|
|
26,500 |
|
|
|
254,500 |
|
|
2,813,075 |
| |
| Termination with cause |
|
|
– |
|
|
|
(332,000) |
|
|
|
– |
|
|
|
(1,413,195) |
|
|
|
– |
|
|
|
– |
|
|
(1,745,195) |
| |
| Death |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
163,830 |
|
|
|
466,200 |
|
|
|
455,600 |
|
|
1,085,630 |
| |
| Alice Wong |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Resignation6 |
|
|
– |
|
|
|
(246,000) |
|
|
|
– |
|
|
|
(1,150,043) |
|
|
|
– |
|
|
|
– |
|
|
(1,396,043) |
| |
| Termination without cause |
|
|
1,248,600 |
|
|
|
– |
|
|
|
– |
|
|
|
572,576 |
|
|
|
26,000 |
|
|
|
211,700 |
|
|
2,058,876 |
| |
| Termination without cause with a change of control |
|
|
1,248,600 |
|
|
|
– |
|
|
|
– |
|
|
|
1,150,043 |
|
|
|
26,000 |
|
|
|
211,700 |
|
|
2,636,343 |
| |
| Termination with cause |
|
|
– |
|
|
|
(246,000) |
|
|
|
– |
|
|
|
(1,150,043) |
|
|
|
– |
|
|
|
– |
|
|
(1,396,043) |
| |
| Death |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
159,176 |
|
|
|
416,200 |
|
|
|
(1,392,700) |
|
|
(817,324) |
| |
If the executive resigns or is terminated for cause, he forfeits any outstanding STI bonus
payment. We calculated the payment being forfeited based on the STI bonus determined in 2015 for 2014 performance.
The named executives only receive an incremental benefit on their options when there is a
termination without cause with a change of control. Currently under the ENL Reorganization Act, a change of control for Cameco is not permitted. The amount shown is the in-the-money value at December 31, 2014 of the unvested options which would
vest upon a termination without cause with a change of control at December 31, 2014. There is no incremental benefit as none of the options are in the money.
If there is a retirement, termination without cause or death, the named executives may receive an
incremental benefit for any outstanding PSUs, to account for the fact that our corporate performance may be better at the end of the year of termination, than it turns out to be at the end of the original three-year vesting period. In the table, we
have assumed that the performance multiplier at the end of the assumed year of termination
2015 MANAGEMENT PROXY CIRCULAR 91
and at the end of the original three-year vesting period are the same so there is no incremental benefit at retirement, termination without cause or death.
If the executive resigns or is terminated for cause, he forfeits any PSU payment. To determine the amount forfeited, we calculated the
payout of the outstanding PSUs based on a 100% performance multiplier and the volume-weighted average price of a Cameco common share on the TSX over the last 20 trading days of 2014 of $18.81.
If the executive is terminated without cause with a change of control, all outstanding PSUs vest immediately at target and are paid out
in the first quarter of 2015. The calculation of the PSUs in this situation is based on a share price of $18.81, the volume-weighted average price of a Cameco common share on the TSX over the last 20 trading days of 2014, as required under the PSU
plan.
Grant Isaac, Ken Seitz and Alice Wong have RSUs. If any of them resign or are terminated for cause, they forfeit any RSU
payment. To determine the amount forfeited, we calculated the payout of the outstanding RSUs in accordance with the RSU plan based on a share price of $18.81, the volume-weighted average price of a Cameco common share on the TSX for the 20 trading
days up to December 31, 2014. If they are terminated without cause with a change of control, all outstanding RSUs vest immediately, and are paid out within 30 days of December 31, 2014. The calculation of the RSUs in this situation is
based on the volume-weighted average price of a Cameco common share on the TSX for the 20 trading days up to December 31, 2014, as required under the RSU plan. If any of them die, the outstanding RSUs are paid out pro-rated to the date of
death. The calculation of the RSUs in this situation is based on the volume-weighted average price of a Cameco common share on the TSX for the 20 trading days up to December 31, 2014, as required under the RSU plan, multiplied by 10 months,
which is the period from the grant date to December 31, 2014.
Determined using a discount rate of 3.9% at December 31, 2014. At the discretion of the CEO,
the executive may be eligible for post-retirement benefits including health, dental, accidental death and dismemberment, and life insurance provided that the executive is at least 57 years old with at least 10 years of service when he or she
retires. Tim Gitzel, Grant Isaac, Ken Seitz and Alice Wong are not eligible for post-retirement benefits because they had not reached the age of 57 on December 31, 2014.
The incremental pension benefit on termination without cause, with or without a change of
control, is equal to the value of benefits to be credited according to the notice period for each executive and calculated using the December 31, 2014 accounting assumptions (same as the key assumptions set out in note 2 on page 87). The
incremental pension benefit on death is the difference between the commuted value on resignation or retirement, if eligible, and the commuted value on death at December 31, 2014. If the commuted value on death is less than the commuted value on
resignation (or retirement, in the case of Robert Steane), the pension benefit is negative.
The table below shows the commuted
values for resignation (retirement in the case of Robert Steane). We estimated these values using the Canadian Institute of Actuaries’ Standard Practice for Determining Pension Commuted Values, and assumed:
| |
— |
|
the executive’s age or age 55, whichever is later |
| |
— |
|
no salary increase after December 31, 2014 |
| |
— |
|
a discount rate of 2.50% each of the next 10 years and 3.80% each year thereafter for Canadian and US liabilities |
|
|
|
|
|
|
|
| Commuted value |
|
|
|
For retirement
|
|
On December 31, 2014
|
| |
| The commuted values are based on assumptions representing entitlements in the employment agreements, and these may change over time. The methods we use may not be exactly the same as those used by other companies, so you
may not be able to compare our figures directly with those of other companies. |
|
|
|
Robert Steane
|
|
$6,732,400 |
|
|
For resignation
|
|
|
|
|
Tim Gitzel |
|
$3,078,500 |
|
|
Grant Isaac |
|
$782,400 |
|
|
Ken Seitz |
|
$1,632,900 |
|
|
|
|
Alice Wong |
|
$5,209,200 |
| |
Based on their terms of employment in effect on December 31, 2014, if Tim Gitzel, Grant
Isaac, Ken Seitz or Alice Wong had voluntarily ended their employment on December 31, 2014, it would have been regarded as a resignation because of their age. They would not receive a severance and would have been required to give six
months’ notice (CEO) or three months’ notice prior to resignation. We can waive this notice if we pay six/three months’ base salary. The table assumes that we did not waive the notice period.
The termination on resignation estimate does not apply to Robert Steane because he is eligible to
retire, and his resignation would be treated as a retirement.
92 CAMECO CORPORATION
Other information
Shareholder proposals
Shareholders who meet eligibility requirements under the CBCA can submit a shareholder proposal as an item of business for our annual
shareholder meeting in 2016.
Proposals must be submitted to our corporate secretary by January 11, 2016 for next year’s
annual meeting. Only shareholder proposals that comply with the CBCA requirements received by that date, and our responses, will be printed in the management proxy circular we send to shareholders next spring.
Advanced notice for director nominations
Our bylaws require advance notice for nominating directors at an annual meeting so there is a transparent, structured and fair process
and all shareholders can be made aware of the nomination prior to a shareholder meeting in the event of a potential proxy contest, regardless of whether shareholders are planning to vote by proxy or attend the meeting. The notice must include the
name, address, age, citizenship and certain other information about the nominees. See section 6.2(d) of our bylaws on our website (cameco.com/about/governance/governance-guidelines).
You must send your nomination to our corporate secretary 30 to 65 days before the date of our annual shareholder meeting and it must
comply with the bylaw requirements to be eligible for presentation at the meeting.
Information available online
A number of our documents are available on our website (cameco.com), SEDAR (sedar.com) and EDGAR (sec.gov/edgar.shtml), including:
| |
— |
|
2014 annual report, which includes financial information about us, as provided in the audited financial statements and MD&A for our most recently completed financial year |
|
| |
— |
|
our most recent annual information form, which has additional information about our audit and finance committee (pages 123 and 125), the audit and finance committee mandate in Appendix A, and other information required
by Canadian securities regulators |
|
| |
— |
|
our code of conduct and ethics, articles of incorporation and the bylaws, and the board committee mandates |
|
| |
— |
|
our voting results following the annual meeting of shareholders. |
|
Filings with the US Securities and Exchange Commission (SEC) can be accessed under Company
filings on the SEC website (sec.gov).
Documents available in print
You can request a printed copy of the following documents at no charge:
| |
— |
|
our 2014 annual report which includes the audited financial statements and MD&A for the most recently completed financial year |
|
| |
— |
|
any subsequent quarterly reports |
|
| |
— |
|
our most recent annual information form |
|
| |
— |
|
our code of conduct and ethics. |
|
Send a note to the corporate secretary at Cameco, at 2121 – 11th Street West, Saskatoon,
SK S7M 1J3.
2015 MANAGEMENT PROXY CIRCULAR 93
Appendix A
Interpretation
For the purposes of this Circular:
a person is an
“associate” of another person if:
| |
i. |
one is a corporation of which the other is an officer or director; |
|
| |
ii. |
one is a corporation that is controlled by the other or by a group of persons of which the other is a member; |
|
| |
iii. |
one is a partnership of which the other is a partner; |
|
| |
iv. |
one is a trust of which the other is a trustee; |
|
| |
v. |
both are corporations controlled by the same person; |
|
| |
vi. |
both are members of a voting trust or parties to an arrangement that relates to voting securities of the Corporation; or |
|
| |
vii. |
both are at the same time associates, within the meaning of any of (i) to (vi) above, of the same person; |
|
provided that:
| |
viii. |
if a resident associated with a non-resident submits to the Board of Directors of the Corporation a statutory declaration stating that no voting shares of the Corporation are held, directly or indirectly, for a
non-resident, that resident and non-resident are not associates of each other, provided the statutory declaration is not false; |
|
| |
ix. |
two corporations are not associates pursuant to (vii) above by reason only that each is an associate of the same person pursuant to (i) above; |
|
| |
x. |
if any person appears to the Board to hold voting shares to which are attached not more than the lesser of four one-hundredths of 1% of the votes that may be cast to elect Directors of the Corporation and 10,000 such
votes, that person is not an associate of any other person and no other person is an associate of that person in relation to those voting shares. |
|
“beneficial ownership” includes ownership through a trustee, legal representative, agent
or other intermediary.
“control” means control in any manner that results in control in fact, whether directly through
ownership of securities or indirectly through a trust, an agreement, the ownership of any body corporate or otherwise.
“non-resident” means:
| |
i. |
an individual, other than a Canadian citizen, who is not ordinarily resident in Canada; |
|
| |
ii. |
a corporation incorporated, formed or otherwise organized outside Canada; |
|
| |
iii. |
a foreign government or agency thereof; |
|
| |
iv. |
a corporation that is controlled by non-residents, directly or indirectly, as defined in any of (i) to (iii) above; |
|
| |
a. |
established by a non-resident as defined in any of (ii) to (iv) above, other than a trust for the administration of a pension fund for the benefit of individuals, a majority of whom are residents; or |
|
| |
b. |
in which non-residents as defined in any of (i) to (iv) above have more than 50% of the beneficial interest; or |
|
| |
vi. |
a corporation that is controlled by a trust described in (v) above. |
|
“person” includes an individual, corporation, government or agency thereof, trustee,
executor, administrator, or other legal representative.
“resident” means an individual, corporation, government or agency
thereof or trust that is not a non-resident.
The foregoing definitions are summaries only and are defined in their entirety by the provisions of the
Eldorado Nuclear Limited Reorganization and Divestiture Act (Canada) and the Articles of the Corporation.
94 CAMECO CORPORATION
Appendix B
Board mandate
PURPOSE
The purpose of the
board of directors (“board”) is to supervise the management of the business and affairs of the corporation. The board of directors will discharge this responsibility by developing and determining policy by which the business and affairs of
the corporation are to be managed and by overseeing the management of the corporation.
COMPOSITION
The board is elected by the shareholders at the annual meeting of the shareholders of the corporation. The board shall appoint the chair annually from
among its non-executive independent members. As fixed by the articles of the corporation, the board shall consist of at least three and not more than fifteen members. A majority of the directors shall be resident Canadians.
A majority of the directors shall be independent pursuant to standards for independence adopted by the board. The standards for independence are available
on our website.
MEETINGS
The board will
schedule at least six regular meetings annually and as many additional meetings as necessary to carry out its duties effectively. The board will hold special meetings at least once a year to specifically discuss strategic planning and strategic
issues.
A meeting of the board may be called by the chair, the chief executive officer or any two directors. The corporate secretary shall, upon the
direction of any of the foregoing, arrange a meeting of the board. Notice of the time and place of each meeting of the board must be given to each director either by personal delivery, electronic mail, facsimile or other electronic means not less
than 48 hours before the time of the meeting or by mail not less than 96 hours before the date of the meeting. Board meetings may be held at any time without notice if all of the directors have waived or are deemed to have waived notice of the
meeting.
A majority of the members of the board shall constitute a quorum. No business may be transacted by the board except at a meeting of its
members at which a quorum of the board is present. Each director is expected to attend all meetings of the board. A director who is unable to attend a board meeting in person may participate by telephone or teleconference.
At board meetings, each director is entitled to one vote and questions are decided by a majority of votes of the directors present. In case of an equality
of votes, the chair of the meeting does not have a second or casting vote.
The corporate secretary acts as secretary to the board. In the absence of
the corporate secretary, the board may appoint any other person to act as secretary.
The board may invite such officers and employees of the
corporation as it may see fit from time to time to attend at meetings of the board and assist thereat in the discussion and consideration of any matter.
DUTIES AND RESPONSIBILITIES
| |
1. |
The board of directors has specific responsibilities for the following, which do not, in any way, limit or comprehensively define its overall responsibility for the stewardship of the corporation: |
|
| |
a. |
selection, appointment, evaluation and if necessary the termination of the chief executive officer; |
|
| |
b. |
satisfying itself as to the integrity of the senior executives of the corporation and as to the culture of integrity throughout the corporation; |
|
| |
c. |
succession planning, including appointing, counselling and monitoring the performance of executive officers; |
|
| |
d. |
oversight of the human resources policies of the corporation and while taking into account the views and recommendations of the human resources and compensation committee, approval of the compensation of the chief
executive officer and the other executive officers; |
|
| |
e. |
adoption of an annual strategic planning process, approval of annual strategic plans and monitoring corporate performance against those plans; |
|
| |
f. |
approval of periodic capital and operating plans and monitoring corporate performance against those plans; |
|
| |
g. |
oversight of the policies and processes to manage risks of the corporation, and oversight of management’s mitigation of the material risks; |
|
| |
h. |
policies to require ethical behaviour of the corporation and its directors and employees, and compliance with laws and regulations; |
|
| |
i. |
oversight of the policies and processes for the implementation and integrity of the corporation’s internal control and management information systems and its financial reporting; |
|
| |
j. |
assessment of the effectiveness of the board and its committees and overseeing the establishment of an appropriate orientation program for new directors and an education program for all directors; |
|
2015 MANAGEMENT PROXY CIRCULAR 95
| |
k. |
definition of the duties and the limits of authority of senior management, including approving a position statement for the chief executive officer; |
|
| |
l. |
policies for disclosure of corporate information to facilitate effective communications with shareholders, other stakeholders and the public; |
|
| |
m. |
health and safety and environmental policies and oversight of systems to enable compliance with these policies and all relevant laws and regulations; |
|
| |
n. |
oversight of the policies and processes for estimating and disclosing the corporation’s mineral reserves; |
|
| |
o. |
corporate governance including the relationship of the board of directors to management and shareholders and taking reasonable steps to ensure the corporation has appropriate structures and procedures in place to permit
the board of directors to effectively discharge its duties and responsibilities; |
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calling meetings of shareholders and submission to the shareholders of any question or matter requiring approval of the shareholders; |
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approval of directors for nomination and election, and recommendation of the auditors to be appointed at shareholders’ meetings, and filling a vacancy among the directors or in the office of the auditor; |
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issuance of securities of the corporation; |
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declaration of dividends and establishment of the dividend policy for the corporation; |
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approval of the annual audited financial statements and related management discussion and analysis, and the interim unaudited financial statements and related interim management discussion and analysis, management proxy
circulars, takeover bid circulars, directors’ circulars, prospectuses, annual information forms and other disclosure documents required to be approved by the directors of a corporation under securities laws, regulations or rules of any
applicable stock exchange; |
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adoption, amendment or repeal of bylaws of the corporation; |
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review and approval of material transactions not in the ordinary course of business; and |
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other corporate decisions required to be made by the board of directors, or as may be reserved by the board of directors, to be made by itself, from time to time and not otherwise delegated to a committee of the board
of directors or to the management of the corporation. |
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Subject to the provisions of applicable law and the bylaws of the corporation, the responsibilities of the board of directors may be delegated, from time to time, to committees of the board of directors on such terms as
the board of directors may consider appropriate. |
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ORGANIZATIONAL MATTERS
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The procedures governing the board shall be those in Parts 6 and 7 of the General Bylaws of the corporation. |
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The board shall annually review and assess the adequacy of its mandate. |
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The board shall participate in an annual performance evaluation. |
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96 CAMECO CORPORATION
Appendix C
Stock option plan
The following kinds of changes must be approved by shareholders according to the terms of our stock plan:
General
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any change to the number of common shares that can be issued under the plan, including increasing the fixed maximum number of common shares, or changing from a fixed maximum number to a fixed maximum percentage of
common shares |
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any change to extend the period after a trading blackout when options can be exercised |
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any change to extend the expiry date of an option unless it would otherwise expire during a trading blackout period |
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any change that requires shareholder approval under applicable law such as those described in the rules, regulations and policies of any stock exchange that we are listed on. |
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Exercise price
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any change that would cause the exercise price of an option to be lower than the fair market value of the common shares at the time the option is granted. This does not include standard adjustment provisions relating to
dividends or stock splits, recapitalizations, consolidations or other fundamental corporate changes, or provisions for the treatment of options if there is a change of control or other similar transaction that affects the powers of the board to make
certain changes to the option plan |
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any other change that would cause the exercise or purchase price of an option to be lower (other than the standard adjustment provisions or if there is a change of control or other similar transaction as described in
the item above). Cancelling an option and reissuing it at a lower price is considered a reduction in the exercise price. |
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Eligibility
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any change that increases the number of categories of people who are eligible to receive options, if it could increase the participation of insiders |
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any change allowing options to be transferred other than by will or intestate succession. |
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Securities
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adding deferred or restricted share units or other share awards that would not involve an actual cash payment |
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any change that allows adding a cashless exercise feature, unless it reduces the number of underlying shares in the option plan reserve. |
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2015 MANAGEMENT PROXY CIRCULAR 97
Cameco is a lean, value-focused producer of the uranium needed for safe, clean, reliable nuclear power
Cameco
cameco.com
Exhibit 99.3
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Cameco Corporation
Use this proxy form to vote by proxy at our 2015 annual meeting of
shareholders |
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This proxy is solicited by management. Throughout this document, we, us, our and Cameco mean Cameco Corporation and you and your mean the person completing this form. |
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When Friday, May 22, 2015
10 a.m. CST
Where Cameco Corporation
2121 - 11th Street West Saskatoon, Saskatchewan |
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Declare your residency
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If you do not provide this information, we will consider the shares represented by this proxy to be owned and controlled by a non- resident, which means the vote may have less impact. |
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You declare that the shares represented by this proxy are held, beneficially owned or controlled, either directly or indirectly, by a resident of Canada
as defined below. If the shares are held in the names of two or more people, you declare that all
of these people are residents of Canada. |
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¨ Yes
¨ No When you sign this form,
you are certifying that you have done whatever is reasonably possible to confirm residential status. |
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What do we mean by residency?
Cameco shares have restrictions on ownership and voting for residents and non-residents of Canada.
You can read about residency and voting starting on page 7 of the accompanying management proxy circular.
The definitions here are summaries only. The complete definitions are in the Eldorado Nuclear Limited Reorganization and Divestiture Act (Canada) and in our
articles. |
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A non-resident is: |
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a trust |
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an individual, other than a Canadian citizen, who is not
ordinarily resident in Canada |
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• that was established by a non-resident, other than a trust
for the administration of a pension fund for individuals where the majority of the individuals are residents, or
• where non-residents have more than 50% of the beneficial interest |
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a corporation |
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• that was incorporated, formed or otherwise organized outside
Canada, or • that is controlled by non-residents, either directly or indirectly |
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a foreign government or foreign government agency |
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Anyone not included in the above description of
non-resident is considered a resident. Residents can be individuals, corporations, trusts and governments or government agencies. |
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| Two ways to vote: in person or by proxy
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| Our annual meeting gives you the opportunity to vote on several items of Cameco business. It is also
an opportunity to get an update on our business, meet face to face with management and interact with the board of directors. |
| Your vote is important, regardless of the number of shares you hold. |
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Vote in person
Come to our annual meeting and vote your shares in person. Do not complete this form. |
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Vote by proxy
This is the easiest way to vote. It means you give someone else — called your proxyholder — the authority to attend the meeting and vote for
you. |
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You can vote by proxy in four ways: |
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• On the internet — Go to www.cstvotemyproxy.com and follow the instructions on screen.
You will need your control number, which appears below your name and address on this form. • By fax
— Complete, date and sign this form and fax both pages to our transfer agent, CST Trust Company.
• By mail — Complete, date and sign this form and mail it to CST Trust Company. |
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• By appointing someone else to attend the meeting for you
— This person does not need to be a shareholder (see section 2). Make sure your appointee is aware of it and attends the meeting for you. Your proxyholder will need to see a representative of CST Trust Company when they arrive at the
meeting. If you are voting by proxy, please complete all five sections of this form, date and
sign it, and return it right away. |
Your control number:
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Appoint a proxyholder
You can appoint Tim Gitzel or Sean Quinn to be your proxyholder,
or choose someone else to
represent you and vote your shares at the meeting. |
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This person does not need to be a shareholder.
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You appoint Tim Gitzel, or in his absence, Sean Quinn. |
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You appoint the following person to attend the meeting and vote on
your behalf: |
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If you do not check one of the boxes, we will assume you have
appointed Tim Gitzel, or in his absence, Sean Quinn as your proxyholder. |
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Tell us your voting instructions
When you complete this section, you are directing your proxyholder to follow these instructions when voting.
Our board of
directors and management recommend that shareholders vote For these items. |
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If you do not specify how you want to vote your
shares: |
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the Cameco officer you appointed as your proxyholder in section 2 will vote For each of the items below |
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the other proxyholder you appointed in section 2 can vote as he or she sees fit. |
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If there are amendments or other items of business that properly come
before the meeting, your proxyholder can vote on each matter as he or she sees fit, as permitted by law, whether or not it is a routine matter, an amendment or contested item of business.
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Elect the directors |
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(see page 5 of the management proxy circular) |
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For |
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Withhold |
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For |
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Withhold |
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1. Ian Bruce |
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7. Tim Gitzel |
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2. Daniel Camus |
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8. James Gowans |
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3. John Clappison |
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9. Nancy Hopkins |
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4. James Curtiss |
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10. Anne McLellan |
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5. Donald Deranger |
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11. Neil McMillan |
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6. Catherine Gignac |
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Appoint the auditors |
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(see page 5 of the management proxy circular) |
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Withhold |
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Appoint KPMG LLP as auditors |
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Have a say on our approach to executive
compensation |
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(see page 6 of the management proxy circular) |
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As this is an advisory vote, the results will not be binding on the board. |
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Resolved, on an advisory basis and not to diminish the role and
responsibilities of the board of directors, that the shareholders accept the approach to executive compensation disclosed in Cameco’s management proxy circular delivered in advance of the 2015 annual meeting of shareholders. |
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For
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Against
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Sign and date
When you sign here, you are: |
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authorizing your proxyholder to vote according to your voting instructions at Cameco’s 2015 annual meeting of shareholders, or any meeting that is reconvened if it was postponed or adjourned |
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revoking any proxy that you previously gave for this meeting. |
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For shares registered in the name of a corporation, estate, trust or
minor, an authorized officer or attorney must sign this form and state his or her position. This person may also have to provide proof that he or she is authorized to sign. |
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Signature |
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(if your shares are held in more than one name, either person can sign this form) |
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Date |
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(if you leave this blank, we will consider the date to be the day this form was received by or on behalf of us) |
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Position |
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(complete this if you are a guardian, or signing by power of attorney or on behalf of a corporation, estate or trust) |
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Vote by fax or mail
We must receive your completed form before 10 a.m. CST on Wednesday, May 20, 2015. If
the meeting is postponed or adjourned, we must receive the form at least 48 hours (excluding Saturdays, Sundays and holidays) before the meeting is reconvened. |
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The chair of the meeting has the discretion to accept or reject any
late proxies, and can waive or extend the deadline for receiving proxy voting instructions without notice. |
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By fax |
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By mail |
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Toll free from anywhere in North America: |
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Use the envelope provided or mail to: |
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1.866.781.3111 |
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CST Trust Company
Attn: Proxy department P.O. Box 721
Agincourt, Ontario M1S 0A1 |
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From outside North America: |
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1.416.368.2502 |
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Remember to fax both pages of this form. |
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Vote by internet |
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If you prefer to vote on the internet, we must receive your internet voting instructions
before 10 a.m. CST on Wednesday, May 20, 2015. Go to www.cstvotemyproxy.com and follow the instructions on screen. |
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Exhibit 99.4
clean
Cameco is a lean, value-focused producer of the uranium needed
for safe, clean, reliable nuclear power
Cameco
2014 ANNUAL REPORT
The nuclear fuel cycle
CANDU Cycle
Light Water Cycle
1 2 3 4 5 5 6 6
1
Mining
Once an orebody is discovered and defined by exploration, there are three common ways to mine uranium, depending on the depth of the orebody and the deposit’s
geological characteristics:
Open pit mining is used if the ore is near the surface. The ore is usually mined using drilling and blasting.
Underground mining is used if the ore is too deep to make open pit mining economical.
Tunnels and shafts provide
access to the ore.
In situ recovery (ISR) does not require large scale excavation. Instead, holes are drilled into the ore and a solution is used to dissolve the uranium.
The solution is pumped to the surface where the uranium is recovered.
1 Milling
Ore from open pit and underground mines is processed to extract the uranium and package it as a powder typically referred to as uranium concentrates (U3O8) or yellowcake. The leftover
processed rock and other solid waste (tailings) is placed in an engineered tailings facility.
2 Refining
Refining removes the impurities from the uranium concentrate and changes its chemical form to uranium trioxide (UO3).
3 Conversion
For light water reactors, the UO3 is converted to uranium hexafluoride (UF6) gas to prepare it for
enrichment. For heavy water reactors like the CANDU reactor, the UO3 is converted into powdered uranium dioxide (UO2).
4 Enrichment
Uranium is made up of two main isotopes: U-238 and U-235. Only U-235 atoms, which make up
0.7% of natural uranium,
are involved in the nuclear reaction (fission). Most of the world’s commercial nuclear reactors require uranium that has an enriched level of U-235 atoms.
The
enrichment process increases the concentration of U-235 to between 3% and 5% by separating U-235 atoms from the U-238. Enriched UF6 gas is then converted to powdered UO2.
5
Fuel manufacturing
Natural or enriched UO2 is pressed into pellets, which are baked at a high temperature. These are packed into zircaloy or stainless steel tubes, sealed
and then assembled into fuel bundles.
6 Generation
Nuclear reactors are used to generate
electricity. U-235 atoms in the reactor fuel fission, creating heat that generates steam to drive turbines. The fuel bundles in the reactor need to be replaced as the U-235 atoms are depleted, typically after one or two years depending upon the
reactor type. The used – or spent – fuel is stored or reprocessed.
Spent fuel management
The majority of spent fuel is safely stored at the reactor site. A small amount of spent fuel is reprocessed. The reprocessed fuel is used in some European and Japanese
reactors.
Message from the Chair
Dear Shareholder,
Over the past year, the board has worked diligently to oversee
Cameco’s affairs and work with management on the company’s strategic direction, with a focus on achieving steady progress on our four measures of success. Our priorities included strategic focus and value creation, risk oversight and board
governance, which we believe are fundamental to Cameco’s future growth and success.
Corporate strategy is addressed at every regular board meeting, and we work with the management team to ensure our strategy
addresses the near- and medium-term challenges in the nuclear industry, while also positioning Cameco to benefit from the strong uranium demand we anticipate over the long term. This focus has resulted in an adjustment to Cameco’s growth plans
to better match market opportunities, which we believe will position Cameco to deliver the best value to shareholders.
Strong risk oversight at the board level is
another key area of importance. Management regularly presents to the board and its committees on our top-tier risks, allowing a deeper analysis of our significant risks. We also dedicated time this past year to a board workshop that focused on
evaluating our risk appetite and tolerance. All of this work has helped the board develop a solid understanding of the company’s key risks, and we plan to continue our emphasis on risk oversight into 2015.
In 2014, we also devoted considerable time to ensuring we have a strong and diverse board to carry out our duties and responsibilities. We implemented a board diversity
policy and undertook a rigorous review of our skills matrix to ensure we assemble the right mix of skills, experience and qualities, and achieve gender balance. We implemented a tenure policy that includes term limits to support ongoing refreshment
and renewal of the board, as well as a rotation policy for committee chair and member assignments. Our goal in implementing these new policies is to balance the need for board renewal with continuity of knowledge and experience.
For many years, we have conducted annual board assessments that facilitate feedback from board
members to increase the effectiveness of the board and individual members. In 2014, we implemented an independent third-party director assessment process to augment these annual assessments.
All members of the board are Cameco shareholders, and we continue to build our equity ownership. In 2014, we increased the share ownership requirements for directors to
highlight its importance and reinforce our commitment to our role as directors.
Finally, on behalf of the board, I want to thank Victor Zaleschuk and Joe Colvin for
their wisdom, judgment and contributions over many years of service, as both are retiring from the board this year. Victor served as our board chair for 10 of his 14 years as a director, and the board benefited greatly from his vast experience in
the resource sector. Joe completes 15 years on the board, during which he brought extensive knowledge and understanding of the nuclear industry. He served as chair of
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For more information on Cameco’s governance and board of directors, please see our Management Proxy Circular, which also provides instructions on how to vote your
shares. Your vote is important. The board and management thank you for your continued confidence,
and we look forward to seeing you at our annual general meeting on May 22, 2015.
Neil McMillan Chair of the board
March 11, 2015 |
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Cameco Board of Directors Our directors as at December 31, 2014 are listed below. |
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More information is available in our proxy circular. |
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Ian Bruce |
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Joe Colvin |
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Catherine Gignac |
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Anne McLellan |
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Former co-chairman of the |
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Past president of the |
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Principal of Catherine |
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Former Deputy Prime |
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board of Peters & Co. Limited |
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American Nuclear Society, |
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Gignac & Associates |
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Minister of Canada, |
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and president emeritus of |
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currently counsel in Bennett |
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Daniel Camus |
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the Nuclear Energy Institute |
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Tim Gitzel |
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Jones LLP |
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Former group CFO and head |
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President and CEO of |
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of strategy and international |
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James Curtiss |
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Cameco |
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Neil McMillan |
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activities of Electricité de |
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Principal of Curtiss Law |
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Former President and CEO |
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France SA |
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James Gowans |
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of Claude Resources Inc. |
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Donald Deranger |
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Executive vice president and |
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John Clappison |
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Advisor to the Athabasca Basin
Development Corporation and non- executive chair of the
board of Points Athabasca Contracting Limited
Partnership |
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COO of Barrick Gold Corp. |
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Victor Zaleschuk |
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Former managing |
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Former president and CEO |
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partner of the Greater |
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Nancy Hopkins |
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of Nexen Inc. |
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Toronto Area office of |
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Partner with the law firm |
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PricewaterhouseCoopers |
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McDougall Gauley LLP |
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LLP |
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Message from the CEO
Dear Shareholder,
In 2014, Cameco continued to demonstrate strength, despite
persistent challenging market conditions. In a year when the uranium spot price hit a nine-year low, we achieved record average realized uranium price and record revenue from our uranium business. Those results are no accident. Over the past 26
years, we’ve focused on being a leading low-cost uranium producer—putting together a world-class portfolio of assets, running our operations as efficiently as possible, and keeping a close eye on market developments so we can respond
appropriately. That’s why, today, you see us as committed as ever to our strategy of producing safely, profitably and responsibly according to market conditions. It’s a strategy that works.
That isn’t to say we haven’t struggled. Like other producers, we have had to delay some projects, reduce our
workforce, and, this year, write down some investments as a result of a persistently low uranium price, lack of long-term contracting and a supply overhang in our industry. Our advantage is we have the ability and the experience to weather the
current conditions and be able to benefit when brighter days return for the industry.
Our 2014 results demonstrate what I mean. In addition to record realized price
and record revenue from our uranium business, we achieved strong annual revenue, almost matching our 2013 record, increased gross profit, and beat our production forecast.
We did all of this without compromising on our commitment to sustainability. I firmly believe this is something that is not an add-on for our business, but is at the
core of our success. Over our many years in business, we’ve learned that this focus on safety, the environment and people is not only the right thing to do, but is one of our primary business advantages. It helps us build trust and credibility,
foster community support, attract and retain employees, manage risk, and drive innovation and continual improvement. As a result of that continued focus, in 2014, our injury rates continued to trend downward, our environmental performance in many
areas improved, and we received a number of Top Employer awards, including being named one of Canada’s Top Employers and a Top Diversity Employer, both for a fifth year in a row.
2014 was also a special year for Cameco as we saw first production from the long-awaited Cigar Lake mine and first packaged pounds from the McClean Lake mill. I was
there to celebrate the first pounds being shipped to the mill, and I can tell you it was a momentous day and a career highlight for many at the site, myself included. This is a long lead time industry, so mine startups don’t happen
every day, and certainly not of the calibre of Cigar Lake—the second largest, high-grade orebody in the world.
Of course, there is still work to be done at Cigar Lake as we continue to ramp up production there over the next few years. And that’s important because it will be
a source of low-cost pounds for us at a time when we believe more uranium will be needed.
There is no doubt that more uranium will be needed; it’s just a
question of when. We live in a world facing considerable challenges: a global population of about 7 billion people, of which 2 billion have little or no access to electricity, plus another two billion expected by 2050. There is a real and growing
need for electricity, which makes things like health care, education, communication and transportation systems possible. Within that context, nuclear power is an option that provides safe, clean, reliable and affordable baseload electricity.
That’s why we see countries such as China, India, Russia, and some in the
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| Middle East pursuing significant nuclear growth plans, and other countries adding nuclear for the first time. The dark clouds overhanging our industry
won’t last forever. So, as we enter 2015, we will continue to do the things we know work:
operate safely and efficiently, remain flexible and adaptive to changing market conditions, always look for ways to return shareholder value, and prepare for the bright future we know is on the horizon.
Tim Gitzel
President and CEO March 12, 2015 |
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Senior Management Team You can read more about our senior executive team |
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on our website, at cameco.com |
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Tim Gitzel |
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Sean Quinn |
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Robert Steane |
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President and |
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Senior Vice-President, Chief Legal |
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Senior Vice-President and |
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Chief Executive Officer |
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Officer and Corporate Secretary |
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Chief Operating Officer |
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Grant Isaac |
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Ken Seitz |
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Alice Wong |
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Senior Vice-President and |
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Senior Vice-President and |
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Senior Vice-President and |
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Chief Financial Officer |
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Chief Commercial Officer |
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Chief Corporate Officer |
Management’s discussion and analysis
February 9, 2015
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| 6 |
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2014 PERFORMANCE HIGHLIGHTS |
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| 9 |
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MARKET OVERVIEW |
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| 12 |
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2014 MARKET DEVELOPMENTS |
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| 14 |
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OUR STRATEGY |
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| 18 |
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SUSTAINABLE DEVELOPMENT |
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| 22 |
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FINANCIAL RESULTS |
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| 50 |
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OUR OPERATIONS AND PROJECTS |
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| 79 |
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MINERAL RESERVES AND RESOURCES |
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| 84 |
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ADDITIONAL INFORMATION |
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| 87 |
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2014 CONSOLIDATED FINANCIAL STATEMENTS |
This management’s discussion and analysis (MD&A) includes information that will help you understand management’s
perspective of our audited consolidated financial statements (financial statements) and notes for the year ended December 31, 2014. The information is based on what we knew as of February 5, 2015.
We encourage you to read our audited consolidated financial statements and notes as you review this MD&A. You can find more information about Cameco,
including our financial statements and our most recent annual information form, on our website at cameco.com, on SEDAR at sedar.com or on EDGAR at sec.gov. You should also read our annual information form before making an investment decision about
our securities.
The financial information in this MD&A and in our financial statements and notes are prepared according to International Financial
Reporting Standards (IFRS), unless otherwise indicated.
Unless we have specified otherwise, all dollar amounts are in Canadian dollars.
Throughout this document, the terms we, us, our, the Company and Cameco mean Cameco Corporation and its subsidiaries, including NUKEM Energy GmbH (NUKEM),
unless otherwise indicated.
Caution about forward-looking information
Our MD&A includes statements and information about our expectations for the future. When we discuss our strategy, plans, future financial and
operating performance, or other things that have not yet taken place, we are making statements considered to be forward-looking information or forward-looking statements under Canadian and United States securities laws. We refer to
them in this MD&A as forward-looking information.
Key things to understand about the forward-looking information in this MD&A:
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It typically includes words and phrases about the future, such as: anticipate, believe, estimate, expect, plan, will, intend, goal, target, forecast, project, strategy and outlook (see examples below).
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It represents our current views, and can change significantly. |
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It is based on a number of material assumptions, including those we have listed on page 3, which may prove to be incorrect. |
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Actual results and events may be significantly different from what we currently expect, due to the risks associated with our business. We list a number of these material risks on pages 2 and 3. We recommend you
also review our annual information form, which includes a discussion of other material risks that could cause actual results to differ significantly from our current expectations. |
| • |
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Forward-looking information is designed to help you understand management’s current views of our near and longer term prospects, and it may not be appropriate for other purposes. We will not necessarily update this
information unless we are required to by securities laws. |
Examples of forward-looking information in this MD&A
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our expectations about 2015 and future global uranium supply, consumption, demand, contracting volumes, number of reactors and nuclear generating capacity, including the discussion under the headings Market overview and
2014 market developments |
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the discussion under the heading Our strategy |
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our expectations for uranium deliveries in the first quarter and for the balance of 2015 |
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the discussion of our expectations relating to our transfer pricing disputes including our estimate of the amount and timing of expected cash taxes and transfer pricing penalties |
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our consolidated outlook for the year and the outlook for our uranium, fuel services and NUKEM segments for 2015 |
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future tax payments and rates |
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our price sensitivity analysis for our uranium segment |
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our expectation that existing cash balances and operating cash flows will meet our anticipated 2015 capital requirements without the need for any significant additional funding |
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our expectations for 2015, 2016 and 2017 capital expenditures |
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our expectation that in 2015 we will continue to comply with all the covenants in our unsecured revolving credit facility |
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our future plans and expectations for each of our uranium operating properties and projects under evaluation, and fuel services operating sites |
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our mineral reserve and resource estimates |
Material risks
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• |
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actual sales volumes or market prices for any of our products or services are lower than we expect for any reason, including changes in market prices or loss of market share to a competitor |
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we are adversely affected by changes in foreign currency exchange rates, interest rates or tax rates |
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our production costs are higher than planned, or necessary supplies are not available, or not available on commercially reasonable terms |
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our estimates of production, purchases, costs, decommissioning or reclamation expenses, or our tax expense estimates, prove to be inaccurate |
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we are unable to enforce our legal rights under our existing agreements, permits or licences |
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we are subject to litigation or arbitration that has an adverse outcome, including lack of success in our disputes with tax authorities |
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we are unsuccessful in our dispute with CRA and this results in significantly higher cash taxes, interest charges and penalties than the amount of our cumulative tax provision
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there are defects in, or challenges to, title to our properties |
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our mineral reserve and resource estimates are not reliable, or we face unexpected or challenging geological, hydrological or mining conditions |
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we are affected by environmental, safety and regulatory risks, including increased regulatory burdens or delays |
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we cannot obtain or maintain necessary permits or approvals from government authorities |
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we are affected by political risks |
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we are affected by terrorism, sabotage, blockades, civil unrest, social or political activism, accident or a deterioration in political support for, or demand for, nuclear energy |
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we are impacted by changes in the regulation or public perception of the safety of nuclear power plants, which adversely affect the construction of new plants, the relicensing of existing plants and the demand for
uranium |
2 CAMECO
CORPORATION
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there are changes to government regulations or policies that adversely affect us, including tax and trade laws and policies |
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our uranium suppliers fail to fulfil delivery commitments |
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our McArthur River development, mining or production plans are delayed or do not succeed for any reason |
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our Cigar Lake development, mining or production plans are delayed or do not succeed, including as a result of any difficulties with the jet boring mining method or freezing the deposit to meet production targets, the
third jet boring machine does not go into operation on schedule in 2015 or operate as expected, or any difficulties with the McClean Lake mill modifications or expansion or milling of Cigar Lake ore |
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we are unable to obtain an extension to the term of Inkai’s block 3 exploration licence, which expires in July 2015 |
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we are affected by natural phenomena, including inclement weather, fire, flood and earthquakes |
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our operations are disrupted due to problems with our own or our customers’ facilities, the unavailability of reagents, equipment, operating parts and supplies critical to production, equipment failure, lack of
tailings capacity, labour shortages, labour relations issues, strikes or lockouts, underground floods, cave-ins, ground movements, tailings dam failures, transportation disruptions or accidents, or other development and operating risks
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Material assumptions
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our expectations regarding sales and purchase volumes and prices for uranium and fuel services |
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our expectations regarding the demand for uranium, the construction of new nuclear power plants and the relicensing of existing nuclear power plants not being more adversely affected than expected by changes in
regulation or in the public perception of the safety of nuclear power plants |
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our expected production level and production costs |
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the assumptions regarding market conditions upon which we have based our capital expenditures expectations |
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our expectations regarding spot prices and realized prices for uranium, and other factors discussed on page 33, Price sensitivity analysis: uranium segment |
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our expectations regarding tax rates and payments, foreign currency exchange rates and interest rates |
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our expectations about the outcome of disputes with tax authorities |
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our decommissioning and reclamation expenses |
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our mineral reserve and resource estimates, and the assumptions upon which they are based, are reliable |
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the geological, hydrological and other conditions at our mines |
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our McArthur River development, mining and production plans succeed |
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our Cigar Lake development, mining and production plans succeed, including the third jet boring machine goes into operation on schedule in 2015 and operates as expected, the jet boring mining method works as
anticipated, and the deposit freezes as planned |
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modification and expansion of the McClean Lake mill are completed as planned and the mill is able to process Cigar Lake ore as expected |
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the term of Inkai’s block 3 exploration licence does not expire in July 2015 and is instead extended |
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our ability to continue to supply our products and services in the expected quantities and at the expected times |
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our ability to comply with current and future environmental, safety and other regulatory requirements, and to obtain and maintain required regulatory approvals |
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our operations are not significantly disrupted as a result of political instability, nationalization, terrorism, sabotage, blockades, civil unrest, breakdown, natural disasters, governmental or political actions,
litigation or arbitration proceedings, the unavailability of reagents, equipment, operating parts and supplies critical to production, labour shortages, labour relations issues, strikes or lockouts, underground floods, cave-ins, ground movements,
tailings dam failure, lack of tailings capacity, transportation disruptions or accidents or other development or operating risks
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2014 ANNUAL
REPORT 3
4 CAMECO
CORPORATION
2014 ANNUAL
REPORT 5
2014 performance highlights
Market conditions remained challenging in 2014, with little change from the previous year. However, Cameco performed well, navigating the near term challenges,
while continuing to prepare for the positive long-term growth we see coming in the industry. We exceeded our production guidance, delivered on our financial guidance, and achieved record annual revenue from our uranium segment with a record annual
realized price.
Strong financial performance
Our
financial results remained strong in 2014:
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annual revenue of $2.4 billion |
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annual gross profit of $638 million |
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record annual revenue of $1.8 billion from our uranium segment based on sales of 32.5 million pounds |
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record annual average realized price of $52.37 (Cdn) per pound in our uranium segment |
Net earnings
attributable to our equity holders (net earnings) in 2014 were $185 million compared to $318 million in 2013. This $133 million decrease in net earnings was the result of:
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write-downs totalling $327 million of our investments in Eagle Point mine assets at Rabbit Lake – $126 million, GE-Hitachi Global Laser Enrichment (GLE) – $184 million, and GoviEx Uranium Inc. (Goviex) –
$17 million |
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no earnings from Bruce Power Limited Partnership (BPLP), which we divested in the first quarter of 2014 |
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the write-off of $41 million of assets under construction as a result of changes made to the scope of a number of projects |
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an early termination fee of $18 million incurred as a result of the cancellation of our toll conversion agreement with Springfields Fuels Ltd. (SFL), which was to expire in 2016 |
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settlement costs of $12 million with respect to the early redemption of our Series C debentures |
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lower earnings in our fuel services segment as a result of a decrease in sales volumes and higher unit cost of sales |
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higher losses on foreign exchange derivatives due to the weakening of the Canadian dollar |
partially offset
by:
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a $127 million gain on the sale of our interest in BPLP |
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higher earnings in our uranium segment due to higher average realized prices |
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a favourable settlement of $66 million in a dispute regarding a long-term supply contract with a utility customer |
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lower exploration costs due to a more focused effort on our core projects in Saskatchewan, with decreases in activity elsewhere, particularly in Australia and at Inkai |
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higher tax recoveries resulting from pre-tax losses in Canada, see Income taxes on page 27 for details |
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| HIGHLIGHTS
DECEMBER 31 ($ MILLIONS EXCEPT WHERE INDICATED) |
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2014 |
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2013 |
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CHANGE |
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| Revenue |
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2,398 |
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2,439 |
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(2 |
)% |
| Gross profit |
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638 |
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607 |
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5 |
% |
| Net earnings attributable to equity holders |
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185 |
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318 |
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(42 |
)% |
| $ per common share (diluted) |
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0.47 |
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0.81 |
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(42 |
)% |
| Adjusted net earnings (non-IFRS, see page 24) |
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412 |
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445 |
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(7 |
)% |
| $ per common share (adjusted and diluted) |
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1.04 |
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1.12 |
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(7 |
)% |
| Cash provided by continuing operations (after working capital changes) |
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480 |
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524 |
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(8 |
)% |
6 CAMECO
CORPORATION
Solid progress in our uranium segment this year
In our uranium segment, we exceeded our annual production expectations, and realized a number of successes at our mining operations. Key highlights:
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annual production of 23.3 million pounds—2% higher than the guidance we provided in our 2014 third quarter MD&A |
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record quarterly production of 8.2 million pounds in the fourth quarter—9% higher than in 2013, largely due to record quarterly production from the Key Lake mill |
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produced the first packaged uranium concentrate from the Cigar Lake mine and AREVA’s McClean Lake mill |
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the Canadian Nuclear Safety Commission (CNSC) approved the Environmental Assessment (EA) for the Key Lake extension project, which includes permission to produce up to 25 million pounds (100%) per year at Key
Lake mill. The CNSC also granted an annual production limit increase at McArthur River, allowing the mine to produce up to 21 million pounds (100%) per year. |
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in October, unionized employees at McArthur River and Key Lake accepted a new four-year contract, ending a labour dispute that resulted in an 18-day shutdown of the operations |
We also continued to advance our exploration activities, spending $4 million on six brownfield exploration projects, $6 million on our projects under
evaluation in Australia, and $5 million for resource definition at Inkai and at our US operations. We spent about $32 million on regional exploration programs, mostly in Saskatchewan and Australia.
Updates on our other segments and investments
In
response to weak market conditions for UF6, we decided to reduce our planned 2014 production at Port Hope and terminate our toll-conversion agreement with SFL. As a result, production in our
fuel services segment was lower than our plan at the beginning of the year, and 22% lower than in 2013.
We sold our 31.6% limited partnership interest in
BPLP and related entities to BPC Generation Infrastructure Trust, one of the limited partners in BPLP, for $450 million. The sale closed on March 27, 2014, and we began accounting for the sale as of January 1, 2014.
In 2014, the majority partner of GLE decided to significantly reduce funding to GLE, which required us to review the value of our 24% interest in the asset.
As a result, we wrote-down the full value of our investment and recorded a charge of $184 million in the third quarter. GLE is continuing its testing activities and engineering design work for a commercial facility, though at a slower pace.
Negotiations are ongoing with the US Department of Energy (DOE) for the sale of its depleted uranium hexafluoride inventory. If negotiations are successful, we expect that definitive agreements with GLE would follow.
2014 ANNUAL
REPORT 7
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| HIGHLIGHTS |
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2014 |
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2013 |
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CHANGE |
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| Uranium |
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Production volume (million lbs) |
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23.3 |
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23.6 |
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(1 |
)% |
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Sales volume (million lbs) 1 |
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33.9 |
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32.8 |
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3 |
% |
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Average realized price ($US/lb) |
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47.53 |
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48.35 |
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(2 |
)% |
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($Cdn/lb) |
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52.37 |
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49.81 |
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5 |
% |
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Revenue ($ millions) 1 |
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1,777 |
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1,633 |
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|
9 |
% |
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Gross profit ($ millions) |
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602 |
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550 |
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9 |
% |
| Fuel services |
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Production volume (million kgU) |
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11.6 |
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14.9 |
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(22 |
)% |
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Sales volume (million kgU)2 |
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15.5 |
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17.6 |
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(12 |
)% |
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Average realized price ($Cdn/kgU) |
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19.70 |
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18.12 |
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|
9 |
% |
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Revenue ($ millions) 2 |
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306 |
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319 |
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(4 |
)% |
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Gross profit ($ millions) |
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38 |
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52 |
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(27 |
)% |
| NUKEM |
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Sales volume U3O8
(million lbs) 3 |
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8.1 |
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8.9 |
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(9 |
)% |
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Average realized price ($Cdn/lb) |
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44.90 |
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42.26 |
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6 |
% |
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Revenue ($ millions) 3 |
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349 |
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465 |
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(25 |
)% |
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Gross profit ($ millions) |
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22 |
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20 |
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10 |
% |
| 1 |
Includes sales of 1.4 million pounds and revenue of $48 million between our uranium, fuel services and NUKEM segments in 2014. |
| 2 |
Includes sales and revenue between our uranium, fuel services and NUKEM segments (0.5 million kgU in sales and revenue of $4 million in 2014, 0.7 million kgU in sales and revenue of $6 million in 2013).
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| 3 |
Includes sales and revenue between our uranium, fuel services and NUKEM segments (1.1 million pounds in sales and revenue of $43 million in 2014, 0.6 million pounds in sales and revenue of $23 million in 2013).
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SHARES AND STOCK OPTIONS OUTSTANDING
At February 5, 2015, we had:
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395,792,522 common shares and one Class B share outstanding |
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8,313,451 stock options outstanding, with exercise prices ranging from $19.37 to $54.38 |
DIVIDEND POLICY
Our board of directors has established a policy of paying a quarterly dividend of $0.10 ($0.40 per year) per common share. This policy will be reviewed from
time to time based on our cash flow, earnings, financial position, strategy and other relevant factors.
8 CAMECO
CORPORATION
Market overview
The world needs energy
The nuclear story is a growth
story. Today, there are 2 billion people on the planet without access to electricity, or only limited access, and world population is expected to increase by another 2 billion by 2050. This is driving a continued and substantial increase in global
energy demand. Electricity is one of the greatest contributors to quality of life, and countries with rapidly expanding population and economies, like China, India, and those in the Middle East, are trying to catch up. They’re adding capacity
to their grids to provide the electricity needed to support their growth.
Nuclear – an integral part of the energy mix
Nuclear power is a safe, clean, reliable, affordable and, most importantly, baseload energy source. The areas of the world where we’re seeing the most
growth in new nuclear construction are in regions where baseload power is needed—that fundamental, 24-hour power that is required to have healthcare, education, transportation and communications systems.
But it’s also important to provide that energy reliably and affordably. Nuclear reactors can run on a single load of fuel for about 18 months, helping to
shield utilities from possible fuel cost swings and supply interruptions.
Reactors – gigawatt growth
That’s why, today, we see billions of dollars being invested in nuclear around the world: about 70 reactors are under construction right now, and some
existing plants are adding capacity through uprates. By 2024, we expect over 100 gigawatts of nuclear power, or about 80 net new reactors, to be added to the world’s grids, with even more growth expected outside that timeframe.
2014 ANNUAL
REPORT 9
China continues to lead the way with 26 reactors under construction. India, Russia, South Korea and the United
States are also building new reactors. Of the reactors under construction today, if startups occur as planned, 45 of those units (about 46 gigawatts) could be online over the next three years.
Elsewhere, the United Kingdom (UK) government is maintaining its commitment to nuclear energy as a source of emissions-free energy. Critical milestones have
been reached, allowing new build plans to move forward. In addition, several previously non-nuclear countries are moving ahead with their reactor construction programs or considering adding nuclear to their energy mix in the future. Construction
continues on three of four planned units in the United Arab Emirates (UAE). Turkey is also moving forward with plans to build eight new reactors. Belarus, Saudi Arabia, Vietnam, Bangladesh, Poland and Jordan are continuing their plans to proceed
with nuclear power development.
More reactors means more demand for uranium
Today, annual uranium consumption sits at around 155 million pounds. With the growth in reactor construction, we expect that to grow to around
230 million pounds per year by 2024—an average annual growth of 4%. This does not include the strategic inventory building that usually occurs with new reactor construction, which would suggest further growth in demand. So, over the long
term, we see very strong growth in the demand for the products that we supply.
Can supply keep up?
Over the long term, while demand is increasing, supply, without new investment, is expected to decrease, resulting in the possibility of a widening gap between
supply and demand.
10 CAMECO
CORPORATION
There is already a gap between the uranium consumed by reactors and the uranium produced from the
world’s mines, which has been the case for many years. That gap has been bridged by secondary supplies—uranium in various forms that is already out of the ground and sitting in stockpiles around the world. Today, about 20% of global supply
comes from secondary sources, but those stockpiles are being drawn down, and are expected to contribute less and less over time. This means that more primary production will be needed from uranium mines—in fact, we estimate about 15% of total
supply required over the next decade will need to come from new mines that are not yet in development.
But that could be difficult. In general, new mines are difficult to bring on in a timely manner. The long lead nature of
mine development means our industry is not able to respond quickly to sudden increases in demand or significant supply interruptions. Bringing on and ramping up a significant new production centre can take between seven and 10 years.
Adding to the challenge are the number of new projects being cancelled or delayed, and the existing production being shelved due to the low uranium prices
that have persisted since the 2011 events at the Fukushima-Daiichi nuclear power plant in Japan. Today’s spot and term uranium prices are not high enough to incent new mine production and, in some cases, not high enough to keep current mines in
operation. While some new mines may be brought on regardless of price as a result of sovereign interests, overall, we expect supply to decrease over time due to the global lack of investment.
Today – little demand, a lot of supply
Today, the
uranium market is in a state of oversupply, and there are a number of factors contributing: primary supply continues to perform relatively well; enrichers are underfeeding their plants in reaction to excess enrichment capacity, which creates another
source of uranium that’s being put onto the spot market; and Japanese reactors remain idled, meaning their inventories continue to grow. We do not believe those inventories are coming to market, but it removes Japanese utilities from the market
as buyers for the time being.
In addition, market activity is much lighter than it has been in the past. Utilities are well covered in their fuel
requirements and are not under pressure to contract for more. They have time to wait it out to see if uranium prices continue to decrease. So far, this strategy has paid off for them. Similarly, existing suppliers appear reluctant to enter into
meaningful contract volumes at current prices. The result has been very low levels of contracting over the past two years. For example, in a typical year, we’d expect to see an average of 175 million pounds per year committed under
long-term contracts; in 2013 Ux estimated just 20 million pounds were contracted, and in 2014, about 82 million pounds. However, consumption is a fairly simple and constant equation based on the fuel needs of operating reactors. So, if
contracting is not happening now, it will have to later; the demand has just been pushed further out in time.
2014 ANNUAL
REPORT 11
2014 market developments
SUPPLY AND DEMAND
Market conditions remained depressed in
2014. In particular, the slower than expected pace of Japanese reactor restarts and generally sluggish reactor construction and start-ups globally led to demand erosion. Unlike 2013, we did observe supply contraction during the year as several
existing production centres were shut down and some uranium projects were delayed or cancelled in response to poor market conditions. However, this was more than offset by demand erosion and steady flows of secondary supply. The impact of these
conditions was the continuation of the inventory overhang and depressed prices resulting from the 2011 events at the Fukushima-Daiichi nuclear power plant in Japan.
CONTRACTING
Market contracting activity was modest. Spot
volumes were normal, but long-term contracting was well below historical averages and current consumption levels—about half of current annual reactor consumption estimates, albeit higher than in 2013. Long-term contracting is a key factor in
the timing of market recovery, and its pace will depend on the respective coverage levels, market views and risk appetite of both buyers and sellers.
JAPAN
There were
several positive indications for the long term in 2014. Japanese utilities and the Nuclear Regulatory Authority (NRA) began implementing the regulatory process required for reactor restarts; currently, 11 restart applications have been submitted by
11 utilities covering 21 reactors. The frontrunners are the two Sendai reactors, which appear poised for restart in the first half of 2015 following a few final regulatory confirmations and safety checks. Beyond Sendai, two Takahama units were
granted preliminary safety approval from the NRA in late-2014, moving these reactors into the final regulatory approval stages. More broadly, we continue to see a high degree of confidence from Japanese utilities who are spending billions of dollars
on plant upgrades in anticipation of a positive restart environment.
OTHER REGIONS
China’s remarkable nuclear growth program remains on track and the UK continues to be a bright spot for the industry as plans for new reactor construction
move forward. India, Russia and South Korea are also among several key regions growing their nuclear generation fleet.
In 2014, growth was tangible as
five reactors came online: three in China, one in Argentina, and one in Russia. It was also exciting to see two emerging nuclear countries start construction on reactors: one in the UAE and one in Belarus.
12 CAMECO
CORPORATION
Industry prices
In 2014, the spot price declined from $40 (US) per pound to a nine-year low of about $28 (US) per pound, but managed to average around $33 (US) for the year.
Utilities continue to be well covered under existing contracts, and given the current uncertainties in the market, we expect they and other market participants will continue to be opportunistic in their buying. As a result, contracting over the next
12 months should remain somewhat discretionary.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
|
CHANGE |
|
| Uranium ($US/lb
U3O8) 1 |
|
|
|
|
|
|
|
|
|
|
|
|
| Average spot market price |
|
|
33.21 |
|
|
|
38.17 |
|
|
|
(13 |
)% |
| Average long-term price |
|
|
46.46 |
|
|
|
54.13 |
|
|
|
(14 |
)% |
| Fuel services ($US/kgU as UF6)1 |
|
|
|
|
|
|
|
|
|
|
|
|
| Average spot market price |
|
|
|
|
|
|
|
|
|
|
|
|
| North America |
|
|
7.63 |
|
|
|
9.60 |
|
|
|
(21 |
)% |
| Europe |
|
|
7.97 |
|
|
|
10.07 |
|
|
|
(21 |
)% |
| Average long-term price |
|
|
|
|
|
|
|
|
|
|
|
|
| North America |
|
|
16.00 |
|
|
|
16.50 |
|
|
|
(3 |
)% |
| Europe |
|
|
17.00 |
|
|
|
17.17 |
|
|
|
(1 |
)% |
| Note: the industry does not publish UO2 prices. |
|
|
|
|
|
|
|
|
|
|
|
|
| 1 |
Average of prices reported by TradeTech and Ux Consulting (Ux) |
2014 ANNUAL
REPORT 13
Our strategy
Positioned for success
Our strategy is set within the
context of a challenging market environment, which we expect to give way to strong long-term fundamentals driven by increasing population and electricity demand.
We are a pure play nuclear fuel producer, focused on taking advantage of the long-term growth we see coming in our industry, while maintaining the ability to
respond to market conditions as they evolve. Our strategy is to profitably produce at a pace aligned with market signals in order to increase long-term shareholder value, and to do that with a focus on safety, people and the environment.
URANIUM
Our primary focus is on uranium
production. It is the biggest value driver of the nuclear fuel cycle and our business. We have the ability to flex our production according to market conditions in order to return the best value possible. See Uranium – production
overview on page 53 for additional details.
FUEL SERVICES
Our fuel services division is a source of profit and supports our uranium segment while allowing us to vertically integrate across the fuel cycle. Our focus is
on maintaining and optimizing profitability.
ENRICHMENT
We continue to explore opportunities in the second largest value driver of the fuel cycle.
NUKEM
NUKEM’s activities provide a source of profit
and give us insight into market dynamics.
Our mission is to energize
Our purpose is to bring the multiple benefits of nuclear energy to the world. We want to be the supplier, partner, investment and employer of choice in the
nuclear industry.
14 CAMECO
CORPORATION
Capital allocation – focus on value
Delivering returns to our long-term shareholders is a top priority. We continually evaluate our investment options to ensure we allocate our capital in a way
that we believe will:
| • |
|
create the greatest long-term value for our shareholders |
| • |
|
allow us to maintain our investment grade rating |
| • |
|
ensure we execute on our dividend policy |
We start by determining how much cash we have to invest (investable
capital), which is based on our expected cash flow from operations minus expenses we consider to be a higher priority, such as dividends and financing costs, and could include others. This investable capital can be reinvested in the company or
returned to shareholders.
REINVESTMENT
Before
investable capital is reinvested in sustaining, capacity replacement or growth, each investment must demonstrate it can meet the required risk-adjusted return criteria, and we must identify at the corporate level the expected impact on cash flow,
earnings and the balance sheet. All project risks must be identified, including the risks of not investing. Allocation of capital only occurs once an investment has cleared these hurdles.
This may result in some opportunities being held back in favour of higher return investments, and should allow us to generate the best return on investment
decisions when faced with multiple prospects, while also controlling our costs. If there are not enough good growth prospects internally or externally, this may also result in residual investable capital, which we would then consider returning
directly to shareholders.
RETURN
If we determine
the best use of cash is to return it to shareholders, we can do that through a share repurchase or dividend—either a one-time special dividend or a dividend growth policy. When deciding between these options, we consider a number of factors,
including generation of excess cash, growth prospects for the company, growth prospects for the industry, and the nature of the excess cash.
Share
buyback: If we were generating excess cash while there were little or no growth prospects for the company or the industry, then a share buyback might make sense. However, our current view is that the long-term fundamentals for Cameco and the
industry remain strong.
Dividend: We view our dividend as a priority. Therefore, any change to our dividend policy must be carefully considered
with a view to long-term sustainability. Currently, the conditions in the uranium market do not provide us with the level of certainty we require to implement changes to our dividend policy.
Marketing strategy – balanced contract portfolio
As
with our corporate strategy and approach to capital allocation, the purpose of our marketing strategy is to deliver value. Our approach is to secure a solid base of earnings and cash flow by maintaining a balanced contract portfolio that optimizes
our realized price.
Uranium is not traded in meaningful quantities on a commodity exchange. Utilities buy the majority of their uranium and fuel services
products under long-term contracts with suppliers, and meet the rest of their needs on the spot market. We sell uranium and fuel services directly to nuclear utilities around the world as uranium concentrates, UO2, UF6, conversion services or fuel fabrication. We have an extensive portfolio of long-term sales contracts which reflects the long-term,
trusting relationships we have with our customers.
In addition, we are active in the spot market, buying and selling uranium when it is beneficial for
us. Our NUKEM business segment enhances our ability to participate, as they are one of the world’s leading traders of uranium and uranium-related products. We undertake activity in the spot market prudently, looking at the spot price and other
business factors to decide whether it is appropriate to purchase or sell into the spot market. Not only is this activity a source of profit, it gives us insight into underlying market fundamentals.
2014 ANNUAL
REPORT 15
OPTIMIZING REALIZED PRICE
We try to maximize our realized price by signing contracts with terms between five and 10 years (on average) that include mechanisms to protect us when market
prices decline and allow us to benefit when market prices go up.
Because we deliver large volumes of uranium every year, our net earnings and operating
cash flows are affected by changes in the uranium price. Market prices are influenced by the fundamentals of supply and demand, geopolitical events, disruptions in planned supply and other market factors.
LONG-TERM CONTRACTING
We target a ratio of 40%
fixed-pricing and 60% market-related pricing in our portfolio of long-term contracts. This is a balanced and flexible approach that allows us to adapt to market conditions and put a floor on our average realized price, reduce the volatility of our
future earnings and cash flow, and deliver the best value to shareholders over the long term. The ratio is also consistent with the contracting strategy of our customers.
Over time, this strategy has allowed us to add increasingly favourable contracts to our portfolio that will enable us to participate in increases in market
prices in the future.
Fixed price contracts: are typically based on the industry long-term price indicator at the time the contract is accepted
and escalated over the term of the contract.
Market-related contracts: are different from fixed-price contracts in that they may be based
on either the spot price or the long-term price, and that price is as quoted at the time of delivery rather than at the time the contract is accepted. These contracts also often include floor prices and some include ceiling prices, both of which are
also escalated over the term of the contract.
Fuel services contracts: the majority of our fuel services contracts are at a fixed price per
kgU, escalated over the term of the contract, and reflect the market at the time the contract is accepted.
CONTRACT PORTFOLIO STATUS
Currently, we are heavily committed under long-term uranium contracts through 2018, so we are being selective when considering new commitments. We have
commitments to sell approximately 200 million pounds of U3O8 with 43 customers worldwide in our uranium segment, and commitments to
sell approximately 70 million kilograms as UF6 conversion with 36 customers worldwide in our fuel services segment.
Customers – U3O8:
Five largest customers account for 50% of commitments
16 CAMECO
CORPORATION
Customers – UF6 conversion:
| • |
|
Five largest customers account for 56% of commitments |
MANAGING OUR CONTRACT COMMITMENTS
We deliver more uranium than we produce every year. To meet our delivery commitments, we use uranium obtained:
| • |
|
from our existing production |
| • |
|
through purchases under long-term agreements and in the spot market |
| • |
|
from our existing inventory |
We allow sales volume to vary year-to-year depending on:
| • |
|
the level of sales commitments in our long-term contract portfolio (the annual average sales commitments over the next five years in our uranium segment is 27 million pounds, with commitment levels through 2018
higher than in 2019) |
| • |
|
our production volumes, including from the rampup of Cigar Lake and from planned increases at McArthur River/Key Lake |
| • |
|
purchases under existing and/or new arrangements |
| • |
|
discretionary use of inventories |
Focusing on cost efficiency
PRODUCTION COSTS
In order to operate efficiently and
cost-effectively, we manage operating costs and improve plant reliability by prudently investing in production infrastructure, new technology and business process improvements. Like all mining companies, our uranium segment is affected by the rising
cost of inputs such as labour and fuel.
As we ramp up to full production at Cigar Lake, we expect the initial cash costs to be higher, which is expected to
increase our average unit cost of sales.
2014 ANNUAL
REPORT 17
Operating costs in our fuel services segment are mainly fixed. In 2014, labour accounted for about 54% of the
total. The largest variable operating cost is for zirconium, followed by energy (natural gas and electricity), and anhydrous hydrogen fluoride.
PURCHASES AND INVENTORY COSTS
Our costs are also
affected by the purchases of uranium and conversion services we make under long-term contracts and on the spot market.
Previously, our most significant
long-term purchase contract was the Russian Highly Enriched Uranium commercial agreement, which ended in 2013. With that source of supply no longer available, and until Cigar Lake ramps up to full production, to meet our delivery commitments, we
will make use of our inventories and we may purchase material where it is beneficial to do so. We expect our purchases will result in profitable sales; however, the cost of purchased material may be higher or lower than our other sources of supply,
depending on market conditions.
To determine our cost of sales, we calculate the average of all our sources of supply, including opening inventory,
production and purchases. Therefore, to the extent the cost of our purchases are higher than the cost of our other sources of supply, we would expect our unit cost of sales to increase.
FINANCIAL IMPACT
The impact of these increased unit
costs on our financial results is expected to be temporary. As greater certainty returns to the uranium market, based on our view that the market will transition from being supply-driven to being demand-driven, we expect uranium prices will rise to
reflect the cost of bringing on new production to meet growing demand, which should have a positive impact on our average realized price.
In addition, as
Cigar Lake reaches full production and the expansion at McArthur River/Key Lake is complete, our production will increase, which we expect will create more stability in the unit cost of sales for our uranium segment.
Sustainable development: A key part of our strategy
Social responsibility and environmental protection are top priorities for us, so much so that we have built them into our corporate objectives as measures of
success: a safe, healthy and rewarding workplace, a clean environment, supportive communities, and outstanding financial performance. For us, sustainability isn’t an add-on for our company; it’s at the core of our company culture. It helps
us:
| • |
|
build trust, credibility and corporate reputation |
| • |
|
gain and enhance community support for our operations and plans |
| • |
|
attract and retain employees |
| • |
|
drive innovation and continual improvement to build competitive advantage |
Because they are so important, we
aim to integrate sustainable development principles and practices at each level of our organization, from our overall corporate strategy to every aspect of our day-to-day operations.
SAFE, HEALTHY, REWARDING WORKPLACE
We are committed to
living a strong safety culture, while looking to continually improve. As a result of this commitment, we have a long history of strong safety performance at our operations and across the organization.
2014 Highlights:
| • |
|
our total annual recordable injury rate decreased by 19% in 2014 |
| • |
|
continued low average dose of radiation to workers |
| • |
|
won John T Ryan National Safety award for McArthur River mine |
A CLEAN ENVIRONMENT
We are committed to being a leading environmental performer. We strive to be a leader not only by complying with legal requirements, but by keeping risks as
low as reasonably achievable, including taking steps to prevent pollution.
18 CAMECO
CORPORATION
We track our progress by monitoring our impacts on air, water and land near our operations, and by measuring the
amount of energy we use and the amount of waste generated. We use this information to help identify opportunities to improve.
2014 Highlights:
| • |
|
decrease in treated water discharged to surface water |
| • |
|
continued focus on maintaining excellent water discharge quality, with an effort to minimize increases to water withdrawal while increasing production at our facilities |
SUPPORTIVE COMMUNITIES
Gaining the trust and support of
our communities, indigenous people, governments and regulators is necessary to sustain our business. We earn support and trust through excellent safety and environmental performance, by proactively engaging our stakeholders in an open and
transparent way, and by making a difference in communities wherever we operate.
2014 Highlights:
| • |
|
over $300 million in procurement from locally owned northern Saskatchewan companies |
| • |
|
794 local employees from northern Saskatchewan |
| • |
|
no significant disputes related to land use or customary rights |
| • |
|
community engagement activities at 100% of our operations |
OUTSTANDING FINANCIAL PERFORMANCE
Long-term financial stability and profitability are essential to our sustainability as a company. We firmly believe that sound governance is the foundation for
strong corporate performance.
2014 Highlights:
| • |
|
continue to achieve an average realized price that outperforms the market |
| • |
|
ranked 25th out of 232 Canadian companies by Globe and Mail in governance practices |
MONITORING AND MEASUREMENT
We take integration and
measurement seriously. We have been producing a Sustainable Development Report since 2005, using the Global Reporting Initiative’s Sustainability Framework (GRI). It is our report card to our stakeholders. It tells them how we’re
performing against globally recognized key indicators that measure our social, environmental and economic impacts in the areas that matter most to them. It provides information about our goals, where we’ve met, exceeded or struggled with them,
and how we plan to do better. And in 2014 we also conducted a limited assurance of the report, carried out by Ernst & Young.
Aside from our
commitment to the GRI, we manage and report on our sustainability initiatives in a number of ways:
| • |
|
all of our operating sites are ISO 14001 compliant, with the exception of the Cigar Lake mine, where we plan to seek compliance after we have achieved commercial production. Further, we have secured a corporate ISO
14001 registration and we are going to be taking steps to roll all of our sites under this registration; |
| • |
|
we have participated in the Carbon Disclosure Project since 2006 |
Achievements
We are a four-time Gold award winner through the Progressive Aboriginal Relations program given out by the Canadian Council for Aboriginal Business. Also, in
2014, we secured approval to increase production at the McArthur River and Key Lake operation as a result of earning the confidence of our regulators, which includes their regard for the positive relationships we have with neighbouring communities
in northern Saskatchewan. We are a leading employer of Indigenous peoples in Canada, and have procured over $3 billion in services from local suppliers in the region since 2004. And, we are proud to have been named one of Canada’s Best
Diversity Employers, Top 100 Employers, and Saskatchewan’s Top Employers for five consecutive years.
We encourage you to review our SD report at
cameco.com/about/sustainability which outlines our commitment to people and the environment in more detail.
2014 ANNUAL
REPORT 19
Measuring our results
There is no finish line when it comes to delivering on our strategic goals. We have a long-term commitment to constantly measure, evaluate and improve.
Each year, we set corporate objectives that are aligned with our strategic plan. These objectives fall under our four measures of success, and performance
against specific targets under these objectives forms the foundation for a portion of annual employee and executive compensation. See our most recent management proxy circular for more information on how executive compensation is determined.
|
|
|
|
|
|
|
|
|
| 2014 OBJECTIVES1 |
|
TARGET |
|
RESULTS |
|
|
|
|
| OUTSTANDING FINANCIAL PERFORMANCE |
|
|
|
|
|
| Earnings measures |
|
Achieve targeted adjusted net earnings and cash flow from operations. |
|
Exceeded |
|
• |
|
adjusted net earnings was higher than the target |
|
|
|
|
|
|
|
|
|
|
|
• |
|
cash flow from operations was higher than the target |
|
|
|
|
|
| Capital management measures |
|
Execute capital projects within scope, on time and on budget. |
|
Substantially Achieved |
|
• |
|
the cost performance indicator was above the target level (under budget) |
|
|
|
|
|
|
|
|
|
|
|
• |
|
the schedule performance indicator was below the threshold (behind schedule) |
|
|
|
|
|
| Cigar Lake |
|
Achieve Jet Boring System (JBS) mining cycle times at Cigar Lake. |
|
Exceeded |
|
• |
|
average JBS cycle times were better than targeted |
|
| SAFE, HEALTHY AND REWARDING WORKPLACE |
|
|
|
|
|
| Workplace safety |
|
Strive for no injuries at all Cameco-operated sites and maintain a long-term downward trend in combined employee and contractor injury frequency and severity, and radiation doses. |
|
Achieved |
|
• |
|
met our targeted safety measures |
|
|
|
|
|
• |
|
injury rates trended downward across the company and met targets for the
year |
|
|
|
|
|
• |
|
average radiation doses remained low and stable |
|
|
|
|
|
| Rewarding workplace |
|
Attract and retain the employees. |
|
Substantially Achieved |
|
• |
|
overall turnover rate was better than target (lower turnover) |
|
|
|
|
|
|
|
|
|
|
|
• |
|
turnover rate for new hires during the first year of employment was higher than the target (higher turnover) |
|
| CLEAN ENVIRONMENT |
|
|
|
|
|
| Improve environmental performance |
|
Achieve a decreasing trend for environmental incidents. |
|
Achieved |
|
• |
|
there were no significant environmental incidents in 2014 |
|
|
|
|
|
|
|
|
|
|
|
• |
|
reportable environmental incidents were within the range of targeted performance |
|
| SUPPORTIVE COMMUNITIES |
|
|
|
|
|
| Build stakeholder support |
|
Meet our business development obligations under our Collaboration Agreements. |
|
Substantially Achieved |
|
• |
|
site utilization of labour services in our Collaboration Agreements with stakeholder communities was below the target |
|
|
|
|
|
|
|
|
|
|
|
• |
|
our environmental waste management scoping study was completed by the target date |
| 1 |
Detailed results for our 2014 corporate objectives and the related targets will be provided in our 2015 management proxy circular prior to our Annual Meeting of Shareholders on May 22, 2015. |
20 CAMECO
CORPORATION
2015 objectives
OUTSTANDING FINANCIAL PERFORMANCE
| |
• |
|
Achieve targeted adjusted net earnings and cash flow from operations. |
| |
• |
|
Achieve capital project management targets and continue to ramp up production at Cigar Lake. |
SAFE, HEALTHY
AND REWARDING WORKPLACE
| |
• |
|
Improve workplace safety performance at all sites. |
| |
• |
|
Attract and retain the employees needed to support operations and growth. |
CLEAN ENVIRONMENT
| |
• |
|
Improve environmental performance at all sites. |
SUPPORTIVE COMMUNITIES
| |
• |
|
Build and sustain strong stakeholder support for our activities. |
2014 ANNUAL
REPORT 21
Financial results
This section of our MD&A discusses our performance, financial condition and outlook for the future.
|
|
|
| 23 |
|
2014 CONSOLIDATED FINANCIAL RESULTS |
|
|
| 26 |
|
OUTLOOK FOR 2015 |
|
|
| 34 |
|
LIQUIDITY AND CAPITAL RESOURCES |
|
|
| 39 |
|
BALANCE SHEET |
|
|
| 40 |
|
2014 FINANCIAL RESULTS BY SEGMENT |
|
|
| 40 |
|
URANIUM |
|
|
| 42 |
|
FUEL SERVICES |
|
|
| 42 |
|
NUKEM |
|
|
| 44 |
|
FOURTH QUARTER FINANCIAL RESULTS |
|
|
| 44 |
|
CONSOLIDATED RESULTS |
|
|
| 47 |
|
URANIUM |
|
|
| 49 |
|
FUEL SERVICES |
|
|
| 49 |
|
NUKEM |
2014 consolidated financial results
On January 31, 2014, we announced the sale of our 31.6% limited partnership interest in BPLP and related entities for $450 million. The sale closed on
March 27, 2014 and has been accounted for as being completed effective January 1, 2014.
Under IFRS, we are required to report the results from
discontinued operations separately from continuing operations. We have included our operating earnings from BPLP, and the financial impact of the sale, in discontinued operations.
Throughout this document, for comparison purposes, all results for “earnings from continuing operations” and “cash from continuing
operations” have been revised to exclude BPLP. The impact of BPLP is shown separately as a discontinued operation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| HIGHLIGHTS
DECEMBER 31 ($ MILLIONS EXCEPT WHERE INDICATED) |
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
CHANGE FROM
2013 TO 2014 |
|
| Revenue |
|
|
2,398 |
|
|
|
2,439 |
|
|
|
1,891 |
|
|
|
(2 |
)% |
| Gross profit |
|
|
638 |
|
|
|
607 |
|
|
|
540 |
|
|
|
5 |
% |
| Net earnings attributable to equity holders |
|
|
185 |
|
|
|
318 |
|
|
|
253 |
|
|
|
(42 |
)% |
| $ per common share (basic) |
|
|
0.47 |
|
|
|
0.81 |
|
|
|
0.64 |
|
|
|
(42 |
)% |
| $ per common share (diluted) |
|
|
0.47 |
|
|
|
0.81 |
|
|
|
0.64 |
|
|
|
(42 |
)% |
| Adjusted net earnings (non-IFRS, see page 24) |
|
|
412 |
|
|
|
445 |
|
|
|
434 |
|
|
|
(7 |
)% |
| $ per common share (adjusted and diluted) |
|
|
1.04 |
|
|
|
1.12 |
|
|
|
1.10 |
|
|
|
(7 |
)% |
| Cash provided by (used in) continuing operations (after working capital changes) |
|
|
480 |
|
|
|
524 |
|
|
|
584 |
|
|
|
(8 |
)% |
Net earnings
Our net
earnings attributed to equity holders (net earnings) were $185 million ($0.47 per share diluted) compared to $318 million ($0.81 per share diluted) in 2013, mainly due to:
| • |
|
write-downs totalling $327 million of our investments in Eagle Point mine assets at Rabbit Lake – $126 million, GLE – $184 million, and Goviex – $17 million |
| • |
|
no earnings from BPLP, which we divested in the first quarter of 2014 |
| • |
|
the write-off of $41 million of assets under construction as a result of changes made to the scope of a number of projects |
| • |
|
an early termination fee of $18 million incurred as a result of the cancellation of our toll conversion agreement with SFL, which was to expire in 2016 |
| • |
|
settlement costs of $12 million with respect to the early redemption of our Series C debentures |
| • |
|
lower earnings in our fuel services segment as a result of a decrease in sales volumes and higher unit cost of sales |
| • |
|
higher losses on foreign exchange derivatives due to the weakening of the Canadian dollar |
partially offset
by:
| • |
|
a $127 million gain on the sale of our interest in BPLP |
| • |
|
higher earnings in our uranium segment due to higher average realized prices |
| • |
|
a favourable settlement of $66 million in a dispute regarding a long-term supply contract with a utility customer |
| • |
|
lower exploration costs due to a more focused effort on our core projects in Saskatchewan, with decreases in activity elsewhere, particularly in Australia and at Inkai |
| • |
|
higher tax recoveries resulting from pre-tax losses in Canada, see Income taxes on page 27 for details |
THREE-YEAR TREND
Our net earnings normally trend with
revenue, but, in recent years, have been significantly influenced by unusual items.
2014 ANNUAL
REPORT 23
In 2013, our net earnings were $65 million higher than in 2012 primarily due a decrease in impairment charges
(the Kintyre project in 2012 - $168 million, the Talvivaara asset in 2013 - $70 million), as well as higher earnings from our fuel services business as a result of an increase in sales volumes and realized prices, lower exploration expenditures, and
higher tax recoveries in 2013. This was partially offset by lower earnings from our electricity business and higher losses on foreign exchange derivatives.
Impairment charge on producing assets
During the fourth
quarter of 2014, we recognized a $126 million impairment charge related to our Rabbit Lake operation. The impairment was due to the deferral of various projects that were related to planned production over the remaining life of the Eagle Point mine.
The amount of the charge was determined as the excess of the carrying value over the recoverable amount. The recoverable amount of the mine was determined to be $29 million. See note 10 to the financial statements.
Non-IFRS measures
ADJUSTED NET EARNINGS
Adjusted net earnings is a measure that does not have a standardized meaning or a consistent basis of calculation under IFRS (non-IFRS measure). We use this
measure as a more meaningful way to compare our financial performance from period to period. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance.
Adjusted net earnings is our net earnings attributable to equity holders, adjusted to better reflect the underlying financial performance for the reporting period. The adjusted earnings measure reflects the matching of the net benefits of our
hedging program with the inflows of foreign currencies in the applicable reporting period, and adjusted for impairment charges, the write-off of assets, NUKEM inventory write-down, loss on exploration properties, gain on interest in BPLP (after
tax), and income taxes on adjustments.
Adjusted net earnings is non-standard supplemental information and should not be considered in isolation or as a
substitute for financial information prepared according to accounting standards. Other companies may calculate this measure differently, so you may not be able to make a direct comparison to similar measures presented by other companies.
To facilitate a better understanding of these measures, the table below reconciles adjusted net earnings with our net earnings for the years ended 2014, 2013
and 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
| ($ MILLIONS) |
|
2014 |
|
|
2013 |
|
|
2012 |
|
| Net earnings attributable to equity holders |
|
|
185 |
|
|
|
318 |
|
|
|
253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments on derivatives1 |
|
|
47 |
|
|
|
56 |
|
|
|
17 |
|
| Impairment charges |
|
|
327 |
|
|
|
70 |
|
|
|
168 |
|
| Write-off of assets |
|
|
41 |
|
|
|
— |
|
|
|
— |
|
| NUKEM inventory write-down (recovery) |
|
|
(5 |
) |
|
|
14 |
|
|
|
— |
|
| Loss on exploration properties |
|
|
— |
|
|
|
15 |
|
|
|
— |
|
| Gain on interest in BPLP (after tax) |
|
|
(127 |
) |
|
|
— |
|
|
|
— |
|
| Income taxes on adjustments |
|
|
(56 |
) |
|
|
(28 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted net earnings |
|
|
412 |
|
|
|
445 |
|
|
|
434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1 |
We do not apply hedge accounting for our portfolio of foreign currency forward sales contracts. However, we have adjusted our gains or losses on derivatives to reflect what our earnings would have been had hedge
accounting been in place. |
24 CAMECO
CORPORATION
The following table shows what contributed to the change in adjusted net earnings for 2014.
|
|
|
|
|
|
|
| ($ MILLIONS) |
|
| Adjusted net earnings – 2013 |
|
|
445 |
|
|
|
|
|
|
|
|
| Change in gross profit by segment
(we calculate gross profit by deducting from revenue the cost of products and
services sold, and depreciation and amortization (D&A), net of hedging benefits) |
|
|
|
|
| Uranium |
|
Higher sales volume |
|
|
19 |
|
|
|
Lower realized prices ($US) |
|
|
(28 |
) |
|
|
Foreign exchange impact on realized prices |
|
|
115 |
|
|
|
Higher costs |
|
|
(55 |
) |
|
|
Hedging benefits |
|
|
(67 |
) |
|
|
|
|
|
|
|
|
|
change – uranium |
|
|
(16 |
) |
|
|
|
|
|
|
|
| Fuel services |
|
Lower sales volume |
|
|
(6 |
) |
|
|
Higher realized prices ($Cdn) |
|
|
25 |
|
|
|
Higher costs |
|
|
(32 |
) |
|
|
Hedging benefits |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
change – fuel services |
|
|
(19 |
) |
|
|
|
|
|
|
|
| NUKEM |
|
Gross profit, net of pre-tax inventory adjustment |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
change – NUKEM |
|
|
(17 |
) |
|
|
|
|
|
|
|
| Other changes |
|
|
|
|
| No earnings from equity investment in BPLP |
|
|
(85 |
) |
| Contract termination fee (SFL) |
|
|
(18 |
) |
| Lower administration expenditures |
|
|
9 |
|
| Lower exploration expenditures |
|
|
26 |
|
| Debenture redemption premium |
|
|
(12 |
) |
| Loss on equity-accounted investments |
|
|
(3 |
) |
| Contract settlement |
|
|
66 |
|
| Lower income taxes |
|
|
32 |
|
| Other |
|
|
4 |
|
|
|
|
|
|
|
|
| Adjusted net earnings – 2014 |
|
|
412 |
|
|
|
|
|
|
|
|
THREE-YEAR TREND
Our
adjusted net earnings increased from 2012 to 2013, but decreased in 2014.
The 3% increase from 2012 to 2013 resulted from:
| • |
|
addition of gross profit from NUKEM |
| • |
|
lower exploration costs due to a decrease in activity at our Kintyre project in Australia |
partially offset by:
| • |
|
lower earnings from our electricity business due to lower generation, a lower average realized price and higher costs |
The 7% decrease from 2013 to 2014 resulted from:
| • |
|
no earnings from BPLP due to divestiture of our interest in the first quarter of 2014 |
| • |
|
an early termination fee of $18 million incurred as a result of the cancellation of our toll conversion agreement with SFL, which was to expire in 2016 |
| • |
|
settlement costs of $12 million with respect to the early redemption of our Series C debentures |
| • |
|
lower earnings from our fuel services business as a result of lower sales volumes and higher unit cost of sales |
| • |
|
higher losses on foreign exchange derivatives due to the weakening of the Canadian dollar |
partially offset by:
| • |
|
higher earnings in our uranium segment due to higher average realized prices |
| • |
|
a favourable settlement of $66 million with respect to a dispute regarding a long-term supply contract with a utility customer |
| • |
|
lower exploration costs due to a more focused effort on our core projects in Saskatchewan, with decreases in activity elsewhere, particularly at our Kintyre project in Australia and at Inkai |
2014 ANNUAL
REPORT 25
Revenue
The
table below shows what contributed to the change in revenue this year.
|
|
|
|
|
| ($ MILLIONS) |
|
|
|
| Revenue – 2013 |
|
|
2,439 |
|
|
|
|
|
|
| Uranium |
|
|
|
|
| Higher sales volume |
|
|
58 |
|
| Higher realized prices ($Cdn) |
|
|
87 |
|
| Change in intersegment sales |
|
|
(48 |
) |
|
|
|
|
|
| Fuel services |
|
|
|
|
| Lower sales volume |
|
|
(38 |
) |
| Higher realized prices ($Cdn) |
|
|
25 |
|
| Change in intersegment sales |
|
|
2 |
|
|
|
|
|
|
| NUKEM |
|
|
(115 |
) |
| Change in intersegment sales |
|
|
(24 |
) |
|
|
|
|
|
| Other |
|
|
12 |
|
|
|
|
|
|
| Revenue – 2014 |
|
|
2,398 |
|
|
|
|
|
|
See 2014 Financial results by segment on page 40 for more detailed discussion.
THREE-YEAR TREND
In 2013, revenue increased by 29%
compared to 2012 due to the addition of NUKEM, as well as a higher realized price for uranium.
In 2014, revenue decreased by 2% compared to 2013 due to
lower sales revenues in our NUKEM and fuel services segments as we reduced sales volume in response to market conditions. This was partially offset by higher revenues in our uranium business due to higher realized price for uranium resulting from
the weakening of the Canadian dollar compared to 2013. The realized foreign exchange rate was 1.10 compared to 1.03 in 2013.
OUTLOOK FOR 2015
We expect consolidated revenue to decrease up to 5% in 2015 due to an expected decrease in uranium and fuel services sales volumes.
In our uranium and fuel services segments, our customers choose when in the year to receive deliveries, so our quarterly delivery patterns and, therefore, our
sales volumes and revenue, can vary significantly. We expect the quarterly distribution of uranium deliveries to be relatively balanced in 2015. However, not all delivery notices have been received to date, which could alter the delivery pattern.
Typically, we receive notices six months in advance of the requested delivery date.
Average realized prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
CHANGE FROM
2013 TO 2014 |
|
| Uranium1 |
|
$US/lb |
|
|
47.53 |
|
|
|
48.35 |
|
|
|
47.72 |
|
|
|
(2 |
)% |
|
|
$Cdn/lb |
|
|
52.37 |
|
|
|
49.81 |
|
|
|
47.72 |
|
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fuel services |
|
$Cdn/kgU |
|
|
19.70 |
|
|
|
18.12 |
|
|
|
17.75 |
|
|
|
9 |
% |
| NUKEM |
|
$Cdn/lb |
|
|
44.90 |
|
|
|
42.26 |
|
|
|
— |
|
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1 |
Average realized foreign exchange rate ($US/$Cdn): 2014 – $1.10, 2013 – $1.03, and 2012 – $1.00 |
Discontinued operation
On March 27, 2014, we
completed the sale of our 31.6% limited partnership interest in BPLP. The aggregate sale price for our interest in BPLP and certain related entities was $450 million. The sale has been accounted for effective January 1, 2014. We realized an
after tax gain of $127 million on this divestiture. See note 6 to the financial statements for more information.
26 CAMECO
CORPORATION
|
|
|
|
|
|
|
|
|
| ($ MILLIONS) |
|
2014 |
|
|
2013 |
|
| Share of earnings from BPLP and related entities |
|
|
— |
|
|
|
113 |
|
| Tax expense |
|
|
— |
|
|
|
(28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85 |
|
| Gain on disposal of BPLP and related entities |
|
|
145 |
|
|
|
— |
|
| Tax expense on disposal |
|
|
(18 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
127 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
| Net earnings from discontinued operations |
|
|
127 |
|
|
|
85 |
|
|
|
|
|
|
|
|
|
|
Corporate expenses
ADMINISTRATION
|
|
|
|
|
|
|
|
|
|
|
|
|
| ($ MILLIONS) |
|
2014 |
|
|
2013 |
|
|
CHANGE |
|
| Direct administration |
|
|
163 |
|
|
|
160 |
|
|
|
2 |
% |
| Restructuring |
|
|
— |
|
|
|
5 |
|
|
|
(100 |
)% |
| Stock-based compensation |
|
|
13 |
|
|
|
20 |
|
|
|
(35 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total administration |
|
|
176 |
|
|
|
185 |
|
|
|
(5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct administration costs in 2014 were $3 million higher than in 2013.
We recorded $13 million in stock-based compensation expenses this year under our stock option, restricted share unit, deferred share unit, performance share
unit and phantom stock option plans, compared to $20 million in 2013 due to a change in the compensation program. See note 26 to the financial statements.
Outlook for 2015
We expect administration costs (not
including stock-based compensation) to be up to 5% higher compared to 2014.
EXPLORATION
Our 2014 exploration activities remained focused on Canada and Australia. As we continued to focus more on our core projects in Saskatchewan, and reduced our
activities elsewhere, we decreased our spending from $73 million in 2013 to $47 million in 2014.
Outlook for 2015
We expect exploration expenses to be about 5% to 10% lower than they were in 2014 due to decreased spending at Inkai.
FINANCE COSTS
Finance costs were $77 million compared to
$62 million in 2013. The increase from last year largely reflects higher interest on short-term and long-term debt, higher charges with respect to our reclamation provisions and settlement costs of $12 million with respect to the early redemption of
our Series C debentures, partially offset by higher foreign exchange gains on intercompany balances. See note 21 to the financial statements.
FINANCE
INCOME
Finance income remained stable compared to 2013 at $7 million.
GAINS AND LOSSES ON DERIVATIVES
In 2014, we recorded
$121 million in losses on our derivatives compared to losses of $62 million in 2013. The losses reflect the continued weakening of the Canadian dollar compared to the US dollar in 2014. See note 28 to the financial statements.
INCOME TAXES
We recorded an income tax recovery of $175
million in 2014 compared to a recovery of $117 million in 2013. The increase was primarily due to a change in the distribution of earnings between jurisdictions compared to 2013. In 2014, we recorded losses of $841 million in Canada compared to $715
million in 2013, whereas earnings in foreign jurisdictions decreased to $722 million from $830 million. The tax rate in Canada is higher than the average of the rates in the foreign jurisdictions in which our subsidiaries operate. See note 23 to the
financial statements.
2014 ANNUAL
REPORT 27
On an adjusted earnings basis, we recognized a tax recovery of $120 million in 2014 compared to a recovery of $61
million in 2013. The increase was related to the items noted above. Our effective tax rate was a recovery of 41% in 2014 compared to 16% in 2013. The table below presents our adjusted earnings and adjusted income tax expenses attributable to
Canadian and foreign jurisdictions.
|
|
|
|
|
|
|
|
|
| ($ MILLIONS) |
|
2014 |
|
|
2013 |
|
| Pre-tax adjusted earnings1 |
|
|
|
|
|
|
|
|
| Canada2 |
|
|
(611 |
) |
|
|
(466 |
) |
| Foreign2 |
|
|
901 |
|
|
|
849 |
|
|
|
|
|
|
|
|
|
|
| Total pre-tax adjusted earnings |
|
|
290 |
|
|
|
383 |
|
|
|
|
|
|
|
|
|
|
| Adjusted income taxes1 |
|
|
|
|
|
|
|
|
| Canada2 |
|
|
(156 |
) |
|
|
(94 |
) |
| Foreign |
|
|
36 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
| Adjusted income tax expense (recovery) |
|
|
(120 |
) |
|
|
(61 |
) |
|
|
|
|
|
|
|
|
|
| Effective tax rate |
|
|
(41 |
)% |
|
|
(16 |
)% |
|
|
|
|
|
|
|
|
|
| 1 |
Pre-tax adjusted earnings and adjusted income taxes are non-IFRS measures. |
| 2 |
Our IFRS-based measures have been adjusted by the amounts reflected in the table in adjusted net earnings (non-IFRS measure on page 24). |
TRANSFER PRICING DISPUTES
We have been reporting on our
transfer pricing dispute with Canada Revenue Agency (CRA) since 2008, when it originated. As well, we recently received a Notice of Proposed Adjustment (NOPA) from the United States Internal Revenue Service (IRS) challenging the transfer pricing
used under certain intercompany transactions including uranium purchase and sales arrangements relating to 2009. Below, we discuss the general nature of transfer pricing disputes and, more specifically, the ongoing disputes we have.
Transfer pricing is a complex area of tax law, and it is difficult to predict the outcome of cases like ours. However, tax authorities generally test two
things:
| • |
|
the governance (structure) of the corporate entities involved in the transactions |
| • |
|
the price at which goods and services are sold by one member of a corporate group to another |
We have a global
customer base and we established a marketing and trading structure involving foreign subsidiaries, including Cameco Europe Limited (CEL), which entered into various intercompany arrangements, including purchase and sale agreements, as well as
uranium purchase and sale agreements with third parties. Cameco and its subsidiaries made reasonable efforts to put arm’s length transfer pricing arrangements in place, and these arrangements expose the parties to the risks and rewards accruing
to them under these contracts. The intercompany contract prices are generally comparable to those established in comparable contracts between arm’s-length parties entered into at that time.
For the years 2003 to 2009, CRA has shifted CEL’s income (as re-calculated by CRA) back to Canada and applied statutory tax rates, interest and
instalment penalties, and, from 2007 to 2009, transfer pricing penalties. The IRS is also proposing to allocate a portion of CEL’s income for 2009 to the US, resulting in such income being taxed in multiple jurisdictions. Taxes of approximately
$290 million for the 2003 – 2014 years have already been paid in a jurisdiction outside Canada and the US. Bilateral international tax treaties contain provisions that generally seek to prevent taxation of the same income in both countries. As
such, in connection with these disputes, we are considering our options including remedies under international tax treaties that would limit double taxation; however, it is unclear whether we will be successful in eliminating all potential double
taxation. The expected income adjustments under our tax disputes are represented by the amounts claimed by CRA and IRS and are described below.
28 CAMECO
CORPORATION
CRA dispute
Since 2008, CRA has disputed our corporate structure and the related transfer pricing methodology we used for certain intercompany uranium sale and purchase
agreements, and issued notices of reassessment for our 2003 through 2009 tax returns. We have recorded a cumulative tax provision of $85 million, where an argument could be made that our transfer price may have fallen outside of an appropriate range
of pricing in uranium contracts for the period from 2003 through 2014. We continue to believe the ultimate resolution of this matter will not be material to our financial position, results of operations and cash flows in the year(s) of resolution.
We are confident that we will be successful in our case; however, for the years 2003 through 2009, CRA issued notices of reassessment for approximately
$2.8 billion of additional income for Canadian tax purposes, which would result in a related tax expense of about $820 million. CRA has also issued notices of reassessment for transfer pricing penalties for the years 2007 through 2009 in the amount
of $229 million, including notices of reassessment recently received for transfer pricing penalties of an aggregate of $156 million for the 2008 and 2009 tax years. We have not yet made any remittance related to the 2008 and 2009 transfer pricing
penalties. The Canadian income tax rules include provisions that require larger companies like us to remit 50% of the cash tax plus related interest and penalties at the time of reassessment. To date, under these provisions, after applying elective
deductions and tax loss carryovers, we have paid a net amount of $212 million cash to the Government of Canada, which includes the amounts shown in the table below. As an alternative to paying cash, we are exploring the possibility of providing
security in the form of letters of credit to satisfy our requirements under these provisions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| YEAR PAID ($ MILLIONS) |
|
CASH TAXES |
|
|
INTEREST AND
INSTALMENT PENALTIES |
|
|
TRANSFER PRICING
PENALTIES |
|
|
TOTAL |
|
| Prior to 2013 |
|
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
| 2013 |
|
|
1 |
|
|
|
9 |
|
|
|
36 |
|
|
|
46 |
|
| 2014 |
|
|
106 |
|
|
|
47 |
|
|
|
— |
|
|
|
153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
107 |
|
|
|
69 |
|
|
|
36 |
|
|
|
212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Using the methodology we believe CRA will continue to apply, and including the $2.8 billion already reassessed, we expect to
receive notices of reassessment for a total of approximately $6.6 billion of additional income taxable in Canada for the years 2003 through 2014, which would result in a related tax expense of approximately $1.9 billion. As well, CRA may continue to
apply transfer pricing penalties to taxation years subsequent to 2009. As a result, we estimate that cash taxes and transfer pricing penalties for these years would be between $1.45 billion and $1.5 billion. In addition, we estimate there would be
interest and instalment penalties applied that would be material to us. While in dispute, we would be responsible for remitting or otherwise providing security for 50% of the cash taxes and transfer pricing penalties (between $725 million and $750
million), plus related interest and instalment penalties assessed, which would be material to us.
Under the Canadian federal and provincial tax rules,
the amount required to be paid or secured each year will depend on the amount of income reassessed in that year and the availability of elective deductions and tax loss carryovers. The estimated amounts summarized in the table below reflect actual
amounts paid and estimated future amounts owing based on the actual and expected reassessments for the years 2003 through 2014. We will update this table annually to include the estimated impact of reassessments expected for completed years
subsequent to 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ MILLIONS |
|
2003 - 2014 |
|
|
2015 |
|
|
2016 - 2017 |
|
|
2018 - 2023 |
|
|
TOTAL |
|
| 50% of cash taxes and transfer pricing penalties paid or owing in the
period1 |
|
|
143 |
|
|
|
165 - 190 |
|
|
|
320 - 345 |
|
|
|
80 - 105 |
|
|
|
725 - 750 |
|
| 1 |
These amounts do not include interest and instalment penalties, which totalled approximately $69 million to December 31, 2014. |
In light of our view of the likely outcome of the case as described above, we expect to recover the amounts remitted to the Government of Canada, including
the $212 million already paid to date.
Due to the time it is taking to work through the pre-trial process, we now expect our appeal of the 2003
reassessment to be heard in the Tax Court of Canada in 2016. If this timing is adhered to, we expect to have a Tax Court decision within six to 18 months after the trial is complete.
2014 ANNUAL
REPORT 29
IRS dispute
As noted above, we received a NOPA from the IRS pertaining to the 2009 tax year for certain of our US subsidiaries.
In general, a NOPA is used by the IRS to communicate a proposed adjustment to income and provides the basis upon which the IRS will issue a Revenue
Agent’s Report (RAR), which lists the adjustments proposed by the IRS and calculates the tax and any penalties owing based on the proposed adjustments. We currently anticipate receiving a RAR in the first quarter of 2015.
The current position of the IRS is that a portion of the non-US income reported under our corporate structure and taxed in non-US jurisdictions should be
recognized and taxed in the US on the basis that:
| • |
|
the prices received by our US mining subsidiaries for the sale of uranium to CEL are too low |
| • |
|
the compensation being earned by Cameco Inc., one of our US subsidiaries, is inadequate |
The proposed
adjustment results in an increase in taxable income in the US of approximately $108 million (US) and a corresponding increased income tax expense of approximately $32 million (US) for the 2009 taxation year, with interest being charged thereon. In
addition, the IRS may apply penalties in respect of the adjustment.
At present, the NOPA pertains only to the 2009 tax year, however, the IRS is also
auditing our tax returns for 2010 through 2012 on a similar basis and we expect adjustments in these years to be similar to those we expect to be made for 2009. If the IRS audits years subsequent to 2012 on a similar basis, we expect these
adjustments would also be similar to those proposed for 2009.
We believe that the conclusions of the IRS in the NOPA are incorrect and we plan to contest
them in an administrative appeal, during which we are not required to make any cash payments. At present, this matter is still at an early stage and, until this matter progresses further, we cannot provide an estimation of the likely timeline for a
resolution of the dispute.
We believe that the ultimate resolution of this matter will not be material to our financial position, results of operations
and cash flows in the year(s) of resolution.
Overview of disputes
The table below provides an overview of some of the key points with respect to our CRA and IRS tax disputes.
|
|
|
|
|
|
|
|
|
| |
|
|
|
CRA |
|
|
|
IRS |
| Basis for dispute |
|
• |
|
Corporate structure/governance |
|
• |
|
Income earned on sales of uranium by the US mines to CEL is inadequate |
|
|
|
|
|
|
|
• |
|
Transfer pricing methodology used for certain intercompany uranium sale and purchase agreements |
|
• |
|
Compensation earned by Cameco Inc., one of our US subsidiaries, is inadequate |
|
|
|
|
|
|
|
• |
|
Allocates Cameco Europe Ltd. (CEL) income (as adjusted) for 2003 through 2009 to Canada (same income we paid tax on in foreign jurisdictions and includes income that IRS is proposing to tax) |
|
• |
|
Allocates a portion of CEL’s 2009 income to the US (a portion of the same income we paid tax on in foreign jurisdictions and which the CRA is proposing to tax) |
|
|
|
|
|
| Years under consideration |
|
• |
|
CRA reassessed 2003 to 2009 |
|
• |
|
IRS issued Notice of Proposed Adjustment (NOPA) for 2009 |
|
|
|
|
|
|
|
• |
|
Auditing 2010 to 2012 |
|
• |
|
Auditing 2010 to 2012 |
|
|
|
|
|
| Timing of resolution |
|
• |
|
Expect our appeal of the 2003 reassessment to be heard in the Tax Court in 2016 |
|
• |
|
Expect Revenue Agent’s Report (follows NOPA) in Q1 2015 |
|
|
|
|
|
|
|
• |
|
Expect Tax Court decision six to 18 months after completion of trial |
|
• |
|
Plan to contest proposed adjustments in an administrative appeal |
|
|
|
|
|
|
|
|
|
|
|
• |
|
This dispute is at an early stage, and we cannot yet provide an estimate as to the timeline for resolution |
30 CAMECO
CORPORATION
|
|
|
|
|
|
|
|
|
| |
|
|
|
CRA |
|
|
|
IRS |
| Required payments |
|
• |
|
Expect to remit 50% of cash taxes, interest and penalties as reassessed |
|
• |
|
No payments required while under administrative appeal |
|
|
|
|
|
|
|
• |
|
Paid $212 million in cash to date |
|
|
|
|
|
|
|
|
|
|
|
• |
|
Exploring possibility of providing security in the form of letters of credit to satisfy required remittances |
|
|
|
|
Caution about forward-looking information relating to our CRA and IRS tax dispute
This discussion of our expectations relating to our tax disputes with CRA and IRS and future tax reassessments by CRA and IRS is forward-looking information
that is based upon the assumptions and subject to the material risks discussed under the heading Caution about forward-looking information beginning on page 2 and also on the more specific assumptions and risks listed below. Actual outcomes
may vary significantly.
Assumptions
| • |
|
CRA will reassess us for the years 2010 through 2014 using a similar methodology as for the years 2003 through 2009, and the reassessments will be issued on the basis we expect |
| • |
|
we will be able to apply elective deductions and tax loss carryovers to the extent anticipated |
| • |
|
CRA will seek to impose transfer pricing penalties (in a manner consistent with penalties charged in the years 2007 through 2009) in addition to interest charges and instalment penalties |
| • |
|
we will be substantially successful in our dispute with CRA and the cumulative tax provision of $85 million to date will be adequate to satisfy any tax liability resulting from the outcome of the dispute to date
|
| • |
|
IRS will continue to propose adjustments for the years 2010 through 2012 and may propose adjustments for later years |
| • |
|
we will be substantially successful in our dispute with IRS
|
Material risks that could cause actual results to differ materially
| • |
|
CRA reassesses us for years 2010 through 2014 using a different methodology than for years 2003 through 2009, or we are unable to utilize elective deductions and loss carryovers to the same extent as anticipated,
resulting in the required cash payments to CRA pending the outcome of the dispute being higher than expected |
| • |
|
the time lag for the reassessments for each year is different than we currently expect |
| • |
|
we are unsuccessful and the outcomes of our dispute with CRA and/or IRS result in significantly higher cash taxes, interest charges and penalties than the amount of our cumulative tax provision, which could have a
material adverse effect on our liquidity, financial position, results of operations and cash flows |
| • |
|
cash tax payable increases due to unanticipated adjustments by CRA or IRS not related to transfer pricing |
| • |
|
IRS proposes adjustments for years 2010 through 2014 using a different methodology than for 2009 |
| • |
|
we are unable to effectively eliminate all double taxation |
OUTLOOK FOR 2015
We have contractual arrangements to sell uranium produced at our Canadian mining operations to a trading and marketing company located in a foreign
jurisdiction. These arrangements reflect the uranium markets at the time they were signed, with the risk and benefit of subsequent movements in uranium prices accruing to the foreign trading and marketing company.
On an adjusted net earnings basis, we expect a tax recovery of 60% to 65% in 2015 from our uranium, fuel services and NUKEM segments, as taxable income in
Canada is expected to decline. In 2016, the older contractual arrangements under our portfolio of intercompany sale and purchase arrangements largely expire, and we expect our portfolio to be increasingly reflective of the market at the time
transactions occur under the contracts. As this transition occurs, we expect our consolidated tax rate to increase from a recovery to an expense, however the rate of change will depend on market conditions at the time new contracts are put in place
and when transactions occur under the contracts.
FOREIGN EXCHANGE
The exchange rate between the Canadian dollar and US dollar affects the financial results of our uranium and fuel services segments.
Sales of uranium and fuel services are routinely denominated in US dollars, while production costs are largely denominated in Canadian dollars. We use planned
hedging to try to protect net inflows (total sales less US dollar cash expenses and product purchases) against declines in the US dollar in the shorter term. Our strategy is to hedge net inflows over a rolling 60-month period. Our policy is to hedge
35% to 100% of net inflows in the first 12 months. The range declines every year until it reaches 0% to 10% of our net inflows (from 49 and 60 months).
2014 ANNUAL
REPORT 31
At December 31, 2014:
| • |
|
The value of the US dollar relative to the Canadian dollar was $1.00 (US) for $1.16 (Cdn), up from $1.00 (US) for $1.06 (Cdn) at December 31, 2013. The exchange rate averaged $1.00 (US) for $1.10 (Cdn) over the
year. |
| • |
|
We had foreign currency forward contracts of $1.6 billion (US), EUR 5 million and foreign currency options of $100 million (US) at December 31, 2014. The US currency forward contracts had an average exchange
rate of $1.00 (US) for $1.12 (Cdn) and US currency option contracts had an average exchange rate range of $1.00 (US) for $1.13 to $1.21 (Cdn). |
| • |
|
The mark-to-market loss on all foreign exchange contracts was $67 million compared to a $27 million loss at December 31, 2013. |
We manage counterparty risk associated with hedging by dealing with highly rated counterparties and limiting our exposure. At December 31, 2014, all
counterparties to foreign exchange hedging contracts had a Standard & Poor’s (S&P) credit rating of A or better.
SENSITIVITY
ANALYSIS
At December 31, 2014, every one-cent change in the value of the Canadian dollar versus the US dollar would change our 2015 net earnings
by about $7 million (Cdn), with a decrease in the value of the Canadian dollar versus the US dollar having a positive impact. This sensitivity is based on an exchange rate of $1.00 (US) for $1.00 (Cdn).
Outlook for 2015
Our strategy is to profitably produce
at a pace aligned with market signals, while maintaining the ability to respond to conditions as they evolve.
Our outlook for 2015 reflects the
expenditures necessary to help us achieve our strategy. We do not provide an outlook for the items in the table that are marked with a dash.
See 2014
Financial results by segment on page 40 for details.
2015 FINANCIAL OUTLOOK
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
CONSOLIDATED |
|
|
URANIUM1 |
|
|
FUEL SERVICES |
|
|
NUKEM1 |
|
| Production |
|
|
— |
|
|
|
25.3 to 26.3
million lbs |
|
|
|
9 to 10
million kgU |
|
|
|
— |
|
| Sales volume1 |
|
|
— |
|
|
|
31 to 33
million lbs |
|
|
|
Decrease
5% to 10% |
|
|
|
7 to 8
million lbs U3O8 |
|
| Revenue compared to 20142 |
|
|
Decrease
0% to 5% |
|
|
|
Decrease
5% to 10% |
3 |
|
|
Decrease
0% to 5% |
|
|
|
Increase
5% to 10% |
|
| Average unit cost of sales (including D&A) |
|
|
— |
|
|
|
Increase
5% to 10% |
4 |
|
|
Increase
5% to 10% |
|
|
|
Increase
0% to 5% |
|
| Direct administration costs compared to 20145 |
|
|
Increase
0% to 5% |
|
|
|
— |
|
|
|
— |
|
|
|
Decrease
0% to 5% |
|
| Exploration costs compared to 2014 |
|
|
— |
|
|
|
Decrease
5% to 10% |
|
|
|
— |
|
|
|
— |
|
| Tax rate |
|
|
Recovery of
60% to 65% |
|
|
|
— |
|
|
|
— |
|
|
|
Expense of
30% to 35% |
|
| Capital expenditures |
|
|
$370 million |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| 1 |
Our 2015 outlook for sales volume in our uranium and NUKEM segments does not include sales between our uranium, fuel services and NUKEM segments. |
| 2 |
For comparison of our 2015 outlook and 2014 results for revenue in our uranium and NUKEM segments, we do not include sales between our uranium, fuel services and NUKEM segments. |
| 3 |
Based on a uranium spot price of $37.50 (US) per pound (the Ux spot price as of February 2, 2015), a long-term price indicator of $49.00 (US) per pound (the Ux long-term indicator on January 26, 2015) and an
exchange rate of $1.00 (US) for $1.10 (Cdn). |
| 4 |
This increase is based on the unit cost of sale for produced material and committed long-term purchases. If we make discretionary purchases in 2015, then we expect the overall unit cost of sales may be affected.
|
| 5 |
Direct administration costs do not include stock-based compensation expenses. See page 27 for more information. |
32 CAMECO
CORPORATION
REVENUE AND EARNINGS SENSITIVITY ANALYSIS
For 2015, a change of $5 (US) per pound in each of the Ux spot price ($37.50 (US) per pound on February 2, 2015) and the Ux long-term price indicator
($49.00 (US) per pound on January 26, 2015) would change revenue by $93 million and net earnings by $55 million.
PRICE SENSITIVITY ANALYSIS:
URANIUM SEGMENT
The table below and graph on the following page are not forecasts of prices we expect to receive. The prices we actually realize will
be different from the prices shown in the table and graph. They are designed to indicate how the portfolio of long-term contracts we had in place on December 31, 2014 would respond to different spot prices. In other words, we would realize
these prices only if the contract portfolio remained the same as it was on December 31, 2014, and none of the assumptions we list below change.
We
intend to update this table and graph each quarter in our MD&A to reflect deliveries made and changes to our contract portfolio. As a result, we expect the table and graph to change from quarter to quarter.
Expected realized uranium price sensitivity under various spot price assumptions
(rounded to the nearest $1.00)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| SPOT PRICES
($US/lb U3O8) |
|
$20 |
|
|
$40 |
|
|
$60 |
|
|
$80 |
|
|
$100 |
|
|
$120 |
|
|
$140 |
|
| 2015 |
|
|
41 |
|
|
|
46 |
|
|
|
55 |
|
|
|
63 |
|
|
|
72 |
|
|
|
80 |
|
|
|
87 |
|
| 2016 |
|
|
41 |
|
|
|
47 |
|
|
|
57 |
|
|
|
68 |
|
|
|
78 |
|
|
|
87 |
|
|
|
95 |
|
| 2017 |
|
|
41 |
|
|
|
46 |
|
|
|
57 |
|
|
|
67 |
|
|
|
78 |
|
|
|
87 |
|
|
|
94 |
|
| 2018 |
|
|
42 |
|
|
|
48 |
|
|
|
58 |
|
|
|
69 |
|
|
|
79 |
|
|
|
87 |
|
|
|
93 |
|
| 2019 |
|
|
43 |
|
|
|
49 |
|
|
|
59 |
|
|
|
69 |
|
|
|
78 |
|
|
|
85 |
|
|
|
91 |
|
The table and graph illustrate the mix of long-term contracts in our December 31, 2014 portfolio, and are consistent
with our marketing strategy. Both have been updated to reflect deliveries made and contracts entered into up to December 31, 2014.
Our portfolio
includes a mix of fixed-price and market-related contracts, which we target at a 40:60 ratio. Those that are fixed at lower prices or have low ceiling prices will yield prices that are lower than current market prices.
Our portfolio is affected by more than just
the spot price. We made the following assumptions (which are not forecasts) to create the table:
Sales
| • |
|
sales volumes on average of 27 million pounds per year, with commitment levels in 2015 through 2018 higher than in 2019
|
| • |
|
excludes sales between our uranium, fuel services and NUKEM segments |
2014 ANNUAL
REPORT 33
Deliveries
| • |
|
deliveries include best estimates of requirements contracts and contracts with volume flex provisions |
| • |
|
we defer a portion of deliveries under existing contracts for 2015 |
Annual inflation
Prices
| • |
|
the average long-term price indicator is the same as the average spot price for the entire year (a simplified approach for this purpose only). Since 1996, the long-term price indicator has averaged 18% higher than the
spot price. This differential has varied significantly. Assuming the long-term price is at a premium to spot, the prices in the table and graph will be higher.
|
Liquidity and capital resources
At the end of 2014, we had cash and short-term investments of $567 million in a mix of short-term deposits and treasury bills, while our total debt
amounted to $1.5 billion.
We have large, creditworthy customers that continue to need uranium even during weak economic conditions, and we expect the
uranium contract portfolio we have built to provide a solid revenue stream for years to come.
We expect to continue investing in maintaining and
prudently expanding our production capacity over the next several years. We have a number of alternatives to fund future capital requirements, including using our current cash balances, drawing on our existing credit facilities, entering new credit
facilities, using our operating cash flow, and raising additional capital through debt or equity financings. We are always considering our financing options so we can take advantage of favourable market conditions when they arise. However, we expect
our cash balances and operating cash flows will meet our anticipated 2015 capital requirements without the need for significant additional funding.
We
have an ongoing dispute with CRA regarding our offshore marketing company structure and related transfer pricing arrangements. See page 27 for more information. Until this dispute is settled, we expect to make remittances for future amounts owing to
the Government of Canada for 50% of the cash taxes payable and the related interest and penalties. We have provided an estimate of the amount and timing of the expected cash taxes and transfer pricing penalties paid or owing in the table on page 27.
FINANCIAL CONDITION
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Cash position ($ millions)
(cash, cash equivalents, short-term investments, less bank overdraft) |
|
|
567 |
|
|
|
188 |
|
| Cash provided by continuing operations ($ millions)
(net cash flow generated by our operating activities after changes in
working capital) |
|
|
480 |
|
|
|
524 |
|
| Cash provided by operations/net debt
(net debt is total consolidated debt, less cash position) |
|
|
52 |
% |
|
|
45 |
% |
| Net debt/total capitalization
(total capitalization is total long-term debt and equity) |
|
|
13 |
% |
|
|
17 |
% |
CREDIT RATINGS
The
credit ratings assigned to our securities by external ratings agencies are important to our ability to raise capital at competitive pricing to support our business operations. Our investment grade credit ratings reflect the current financial
strength of our company.
Third-party ratings for our commercial paper and senior debt as of December 31, 2014:
|
|
|
|
|
|
|
| SECURITY |
|
DBRS |
|
S&P |
|
| Commercial paper |
|
R-1 (low) |
|
|
A-1 (low)1 |
|
| Senior unsecured debentures |
|
A (low) |
|
|
BBB+ |
|
| Rating trend / rating outlook |
|
Stable |
|
|
Negative |
|
| 1 |
Canadian National Scale Rating. The Global Scale Rating is A-2. |
34 CAMECO
CORPORATION
DBRS provides guidance for the outlook of the assigned rating using the rating trend. The rating trend represents
their assessment of the likelihood and direction that the rating could change in the future, should present tendencies continue, or in some cases, if challenges are not overcome.
S&P uses rating outlooks to assess the potential direction of a long-term credit rating over the intermediate term. Their outlook indicates the likelihood
that the rating could change in the future.
The rating agencies may revise or withdraw these ratings if they believe circumstances warrant. A change in
our credit ratings could affect our cost of funding and our access to capital through the capital markets.
Liquidity
|
|
|
|
|
|
|
|
|
| ($ MILLIONS) |
|
2014 |
|
|
2013 |
|
| Cash, cash equivalents and short-term investments at beginning of year |
|
|
188 |
|
|
|
799 |
|
|
|
|
|
|
|
|
|
|
| Cash from operations |
|
|
480 |
|
|
|
530 |
|
|
|
|
|
|
|
|
|
|
| Investment activities |
|
|
|
|
|
|
|
|
| Additions to property, plant and equipment and acquisitions |
|
|
(480 |
) |
|
|
(898 |
) |
| Discontinued operation |
|
|
447 |
|
|
|
— |
|
| Other investing activities |
|
|
12 |
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
| Financing activities |
|
|
|
|
|
|
|
|
| Change in debt |
|
|
146 |
|
|
|
(18 |
) |
| Interest paid |
|
|
(78 |
) |
|
|
(66 |
) |
|
|
|
|
|
|
|
|
|
| Contributions from non-controlling interest |
|
|
1 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
| Issue of shares |
|
|
6 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
| Dividends |
|
|
(158 |
) |
|
|
(158 |
) |
|
|
|
|
|
|
|
|
|
| Exchange rate on changes on foreign currency cash balances |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
| Cash, cash equivalents and short-term investments, less bank overdraft at end of year |
|
|
567 |
|
|
|
188 |
|
|
|
|
|
|
|
|
|
|
CASH FROM CONTINUING OPERATIONS
Cash from continuing operations was 8% lower than in 2013 mainly due to higher payments related to our CRA litigation, offset by working capital requirements
and higher profits in the uranium business. Not including working capital requirements, our operating cash flows in the year were down $96 million. See note 25 to the financial statements.
INVESTING ACTIVITIES
Cash used in investing includes
acquisitions and capital spending.
Acquisitions and divestitures
On January 30, 2014, we signed an agreement with BPC Generation Infrastructure Trust to sell our 31.6% limited partnership interest in BPLP and related
entities for $450 million. The effective date for the sale is January 1, 2014. We have realized an after tax gain of $127 million on this divestiture.
Capital spending
We classify capital spending as
sustaining, capacity replacement or growth. As a mining company, sustaining capital is the money we spend to keep our facilities running in their present state, which would follow a gradually decreasing production curve, while capacity replacement
capital is spent to maintain current production levels at those operations. Growth capital is money we invest to generate incremental production, and for business development.
2014 ANNUAL
REPORT 35
|
|
|
|
|
|
|
|
|
|
|
|
|
| CAMECO’S SHARE ($ MILLIONS) |
|
2014 PLAN |
|
|
2014 ACTUAL |
|
|
2015 PLAN |
|
| Sustaining capital |
|
|
|
|
|
|
|
|
|
|
|
|
| McArthur River/Key Lake |
|
|
25 |
|
|
|
22 |
|
|
|
25 |
|
| Cigar Lake |
|
|
25 |
|
|
|
14 |
|
|
|
15 |
|
| Rabbit Lake |
|
|
45 |
|
|
|
33 |
|
|
|
35 |
|
| US ISR |
|
|
5 |
|
|
|
3 |
|
|
|
5 |
|
| Inkai |
|
|
10 |
|
|
|
9 |
|
|
|
5 |
|
| Fuel services |
|
|
10 |
|
|
|
8 |
|
|
|
15 |
|
| Other |
|
|
15 |
|
|
|
6 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total sustaining capital |
|
|
135 |
|
|
|
95 |
|
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capacity replacement capital |
|
|
|
|
|
|
|
|
|
|
|
|
| McArthur River/Key Lake |
|
|
55 |
|
|
|
57 |
|
|
|
85 |
|
| Cigar Lake |
|
|
35 |
|
|
|
38 |
|
|
|
35 |
|
| Rabbit Lake |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| US ISR |
|
|
20 |
|
|
|
23 |
|
|
|
20 |
|
| Inkai |
|
|
15 |
|
|
|
10 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total capacity replacement capital |
|
|
125 |
|
|
|
128 |
|
|
|
155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Growth capital |
|
|
|
|
|
|
|
|
|
|
|
|
| McArthur River/Key Lake |
|
|
60 |
|
|
|
51 |
|
|
|
25 |
|
| Cigar Lake |
|
|
155 |
|
|
|
186 |
|
|
|
70 |
|
| US ISR |
|
|
5 |
|
|
|
2 |
|
|
|
— |
|
| Inkai |
|
|
5 |
|
|
|
10 |
|
|
|
5 |
|
| Fuel services |
|
|
5 |
|
|
|
6 |
|
|
|
5 |
|
| Other |
|
|
— |
|
|
|
2 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total growth capital |
|
|
230 |
|
|
|
257 |
|
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total uranium & fuel services |
|
|
490 |
1 |
|
|
480 |
|
|
|
370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1 |
Capital spending outlook was updated to $490 million in our third quarter MD&A. |
Outlook for investing
activities
|
|
|
|
|
| (CAMECO’S SHARE IN $ MILLIONS) |
|
2016 PLAN |
|
2017 PLAN |
| Total uranium & fuel services |
|
300-350 |
|
350-400 |
|
|
|
|
|
| Sustaining capital |
|
125-140 |
|
155-170 |
| Capacity replacement capital |
|
100-115 |
|
125-140 |
| Growth capital |
|
75-95 |
|
70-90 |
We expect total capital expenditures for uranium and fuel services to decrease by about 23% in 2015.
Major sustaining, capacity replacement and growth expenditures in 2015 include:
| • |
|
McArthur River/Key Lake – At McArthur River, the largest projects are the upgrade of the electrical infrastructure, the expansion of freeze capacity and mine development. Other projects include site facility and
equipment purchases. At Key Lake, work will be completed on the calciner. |
| • |
|
US in situ recovery (ISR) – wellfield construction represents the largest portion of our expenditures in the US. |
| • |
|
Rabbit Lake – At Eagle Point, the largest component is mine development, along with mine equipment upgrades and purchases. Work on various mill facility and equipment replacements will also continue.
|
| • |
|
Cigar Lake – Underground mine development makes up the largest portion of capital at the Cigar Lake site. We are also paying our share of the costs to modify and expand the McClean Lake mill. |
We previously expected to spend between $400 million and $450 million in 2015, and between $500 million and $550 million in 2016. We now expect to spend $370
million in 2015 and between $300 million and $350 million in 2016. The change is due to the removal of our fixed production target and the decrease in spending on the related projects. As the market begins to signal new production is needed, we plan
to increase our capital expenditures to allow us to be among the first to respond to the growth we see coming.
This information regarding currently
expected capital expenditures for future periods is forward-looking information, and is based upon the assumptions and subject to the material risks discussed on pages 2 and 3. Our actual capital expenditures for future periods may be significantly
different.
36 CAMECO
CORPORATION
FINANCING ACTIVITIES
Cash from financing includes borrowing and repaying debt, and other financial transactions including paying dividends and providing financial assurance.
Long-term contractual obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| DECEMBER 31 ($ MILLIONS) |
|
2015 |
|
|
2016 AND
2017 |
|
|
2018 AND
2019 |
|
|
2020 AND
BEYOND |
|
|
TOTAL |
|
| Long-term debt |
|
|
— |
|
|
|
— |
|
|
|
500 |
|
|
|
1,000 |
|
|
|
1,500 |
|
| Interest on long-term debt |
|
|
69 |
|
|
|
139 |
|
|
|
139 |
|
|
|
267 |
|
|
|
614 |
|
| Provision for reclamation |
|
|
19 |
|
|
|
60 |
|
|
|
75 |
|
|
|
720 |
|
|
|
874 |
|
| Provision for waste disposal |
|
|
2 |
|
|
|
9 |
|
|
|
5 |
|
|
|
2 |
|
|
|
18 |
|
| Other liabilities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
62 |
|
|
|
62 |
|
| Capital commitments |
|
|
99 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
189 |
|
|
|
208 |
|
|
|
719 |
|
|
|
2,051 |
|
|
|
3,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have contractual capital commitments of approximately $99 million at December 31, 2014. Certain of the contractual
commitments may contain cancellation clauses; however, we disclose the commitments based on management’s intent to fulfill the contracts. The majority of the $99 million is expected to be incurred in 2015.
We have unsecured lines of credit of about $2.4 billion, which include the following:
| • |
|
A $1.25 billion unsecured revolving credit facility that matures November 1, 2018. Each year on the anniversary date, and upon mutual agreement, the facility can be extended for an additional year. In addition to
borrowing directly from this facility, we can use up to $100 million of it to issue letters of credit and we may use it to provide liquidity for our commercial paper program, as necessary. We may increase the revolving credit facility above $1.25
billion, by increments of no less than $50 million, up to a total of $1.75 billion. The facility ranks equally with all of our other senior debt. At December 31, 2014, there were no amounts outstanding under this facility. |
| • |
|
Approximately $951 million in short-term borrowing and letters of credit provided by various financial institutions. We use these facilities mainly to provide financial assurance for future decommissioning and
reclamation of our operating sites, and as overdraft protection. At December 31, 2014, we had approximately $942 million outstanding in letters of credit. |
In the second quarter of 2014, we issued $500 million in Series G debentures bearing interest at 4.19% per year, maturing on June 24, 2024. On
July 16, 2014, we redeemed Series C debentures in aggregate principal amount of $300 million.
In total, considering the early redemption of the
Series C debentures, we have $1.5 billion in senior unsecured debentures outstanding:
| • |
|
$500 million bearing interest at 5.67% per year, maturing on September 2, 2019 |
| • |
|
$400 million bearing interest at 3.75% per year, maturing on November 14, 2022 |
| • |
|
$500 million bearing interest at 4.19% per year, maturing on June 24, 2024 |
| • |
|
$100 million bearing interest at 5.09% per year, maturing on November 14, 2042 |
The $73 million (US)
promissory note we issued to GLE to support future development of its business has been fully drawn and no obligation is outstanding.
Debt covenants
Our revolving credit facility includes the following financial covenants:
| • |
|
our funded debt to tangible net worth ratio must be 1:1 or less |
| • |
|
other customary covenants and events of default |
Funded debt is total consolidated debt less the following:
non-recourse debt, $100 million in letters of credit, cash and short-term investments.
2014 ANNUAL
REPORT 37
Not complying with any of these covenants could result in accelerated payment and termination of our revolving
credit facility. At December 31, 2014, we complied with all covenants, and we expect to continue to comply in 2015.
Nukem financing arrangement
NUKEM enters into financing arrangements with third parties where future receivables arising from certain sales contracts are sold to financial
institutions in exchange for cash. These arrangements require NUKEM to satisfy its delivery obligations under the sales contracts, which are recognized as deferred sales (see notes 9 and 17 to the financial statements for more information). In some
of the arrangements, NUKEM is also required to pledge the underlying inventory as security against these performance obligations. As of December 31, 2014, NUKEM had $64.7 million (US) of inventory pledged as security under financing
arrangements, compared with $31.8 million (US) at December 31, 2013.
OFF-BALANCE SHEET ARRANGEMENTS
We had two kinds of off-balance sheet arrangements at the end of 2014:
Purchase commitments
The table below is based on our purchase commitments at December 31, 2014. These commitments include a mix of fixed price and market-related contracts.
Actual payments will be different as a result of changes to our purchase commitments and, in the case of contracts with market-related pricing, the market prices in effect at the time of purchase. We will update this table as required in our
MD&A to reflect changes to our purchase commitments and changes in the prices used to estimate our commitments under market-related contracts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| DECEMBER 31 ($ MILLIONS) |
|
2015 |
|
|
2016 AND
2017 |
|
|
2018 AND
2019 |
|
|
2020 AND
BEYOND |
|
|
TOTAL |
|
| Purchase commitments1 |
|
|
733 |
|
|
|
648 |
|
|
|
285 |
|
|
|
502 |
|
|
|
2,168 |
|
| 1 |
Denominated in US dollars, converted to Canadian dollars as of December 31, 2014 at the rate of $1.16. |
At the end of 2014, we had committed to $2.2 billion (Cdn) for the following:
| • |
|
approximately 35 million pounds of U3O8 equivalent from 2015 to 2028 |
| • |
|
approximately 4 million kgU as UF6 in conversion services from 2015 to 2018 |
| • |
|
about 1 million Separative Work Units (SWU) of enrichment services to meet existing forward sales commitments under agreements with a non-Western supplier |
The suppliers do not have the right to terminate agreements other than pursuant to customary events of default provisions.
Financial assurances
Standby letters of credit mainly
provide financial assurance for the decommissioning and reclamation of our mining and conversion facilities. We are required to provide letters of credit to various regulatory agencies until decommissioning and reclamation activities are complete.
Letters of credit are issued by financial institutions for a one-year term. At December 31, 2014 our financial assurances totaled $942 million compared to $849 million at December 31, 2013. The increase is mainly due to increased
requirements for decommissioning letters of credit for Rabbit Lake and McArthur River, and exchange rate fluctuations. The increases were partially offset by the sale of BPLP, which eliminated our commitment for financial guarantees on its behalf.
These guarantees were estimated at $58 million at the end of 2013.
38 CAMECO
CORPORATION
BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| DECEMBER 31
($ MILLIONS EXCEPT PER SHARE AMOUNTS) |
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
CHANGE
2013 TO 2014 |
|
| Inventory |
|
|
902 |
|
|
|
913 |
|
|
|
564 |
|
|
|
(1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
|
8,473 |
|
|
|
8,039 |
|
|
|
7,431 |
|
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Long-term financial liabilities |
|
|
2,448 |
|
|
|
1,915 |
|
|
|
1,903 |
|
|
|
28 |
% |
| Dividends per common share |
|
|
0.40 |
|
|
|
0.40 |
|
|
|
0.40 |
|
|
|
— |
|
Total product inventories decreased by 1% to $902 million this year due to lower levels of inventory for uranium and fuel
services, where the quantities sold were higher than the quantities produced and purchased for the year, partially offset by higher inventories in our NUKEM segment. In 2014, total volume of product inventories decreased by 24%; however, the average
cost of uranium was higher as the cost of material produced and purchased during the year was higher than the average cost of inventory at the beginning of the year. At December 31, 2014, our average cost for uranium was $32.00 per pound, up
from $29.15 per pound at December 31, 2013.
At the end of 2014, our total assets amounted to $8.5 billion, an increase of $0.5 billion compared to
2013 primarily due to higher deferred tax assets and an increase in long term receivables related to our CRA litigation. In 2013, the total asset balance increased by $0.6 billion compared to 2012 primarily due to the acquisition of NUKEM in
that year.
The major components of long-term financial liabilities are long-term debt, the provision for reclamation, deferred sales and financial
derivatives. In 2014, our balance increased by $0.5 billion due to the early redemption of our Series C debentures and the issuance of the Series G debentures, as well as an increase in deferred sales. In 2013, our balance did not change
significantly.
2014 ANNUAL
REPORT 39
2014 financial results by segment
Uranium
|
|
|
|
|
|
|
|
|
|
|
|
|
| HIGHLIGHTS |
|
2014 |
|
|
2013 |
|
|
CHANGE |
|
| Production volume (million lbs) |
|
|
23.3 |
|
|
|
23.6 |
|
|
|
(1 |
)% |
| Sales volume (million lbs) |
|
|
33.9 |
1 |
|
|
32.8 |
|
|
|
3 |
% |
| Average spot price ($US/lb) |
|
|
33.21 |
|
|
|
38.17 |
|
|
|
(13 |
)% |
| Average long-term price ($US/lb) |
|
|
46.46 |
|
|
|
54.13 |
|
|
|
(14 |
)% |
| Average realized price |
|
|
|
|
|
|
|
|
|
|
|
|
| ($US/lb) |
|
|
47.53 |
|
|
|
48.35 |
|
|
|
(2 |
)% |
| ($Cdn/lb) |
|
|
52.37 |
|
|
|
49.81 |
|
|
|
5 |
% |
| Average unit cost of sales ($Cdn/lb) (including D&A) |
|
|
34.64 |
|
|
|
33.01 |
|
|
|
5 |
% |
| Revenue ($ millions) |
|
|
1,777 |
1 |
|
|
1,633 |
|
|
|
9 |
% |
| Gross profit ($ millions) |
|
|
602 |
|
|
|
550 |
|
|
|
9 |
% |
| Gross profit (%) |
|
|
34 |
|
|
|
34 |
|
|
|
— |
|
| 1 |
Includes sales of 1.4 million pounds and revenue of $48 million between our uranium, fuel services and NUKEM segments. |
Production volumes in 2014 did not vary significantly from 2013. Lower production at McArthur River/Key Lake was offset by higher production at other
sites. See Uranium – production overview on page 53 for more information.
Uranium revenues this year were up 9% compared to 2013 due
to an increase in sales volumes of 3% and an increase of 5% in the Canadian dollar average realized price. Although the spot and term prices were lower than 2013, our average realized prices remained fairly constant compared to 2013, as lower
market-related prices were largely offset by higher US dollar prices under fixed price contracts. The effect of foreign exchange resulted in a higher Canadian dollar average realized price than in the prior year. The realized foreign exchange rate
was $1.10 compared to $1.03 in 2013. The spot price for uranium averaged $33.21 (US) per pound in 2014, a decline of 13% compared to the 2013 average price of $38.17 (US) per pound.
Total cost of sales (including D&A) also increased by 9% ($1.18 billion compared to $1.08 billion in 2013) mainly due to slightly higher sales volumes and
an increase in the average unit cost of sales resulting from an increase in non-cash costs. Total non-cash costs were $273 million compared to $213 million in 2013 as a result of an increase in the average non-cash unit cost of inventory.
The net effect was a $52 million increase in gross profit for the year.
The following table shows the costs of produced and purchased uranium incurred in the reporting periods (non-IFRS measures, see below). These costs do not
include selling costs such as royalties, transportation and commissions, nor do they reflect the impact of opening inventories on our reported cost of sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
| ($CDN/LB) |
|
2014 |
|
|
2013 |
|
|
CHANGE |
|
| Produced |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash cost |
|
|
18.66 |
|
|
|
18.37 |
|
|
|
2 |
% |
| Non-cash cost |
|
|
9.30 |
|
|
|
9.46 |
|
|
|
(2 |
)% |
| Total production cost |
|
|
27.96 |
|
|
|
27.83 |
|
|
|
— |
|
| Quantity produced (million lbs) |
|
|
23.3 |
|
|
|
23.6 |
|
|
|
(1 |
)% |
| Purchased |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash cost |
|
|
38.17 |
|
|
|
27.95 |
|
|
|
37 |
% |
| Quantity purchased (million lbs) |
|
|
7.1 |
|
|
|
13.2 |
|
|
|
(46 |
)% |
| Totals |
|
|
|
|
|
|
|
|
|
|
|
|
| Produced and purchased costs |
|
|
30.34 |
|
|
|
27.87 |
|
|
|
9 |
% |
| Quantities produced and purchased (million lbs) |
|
|
30.4 |
|
|
|
36.8 |
|
|
|
(17 |
)% |
Cash cost per pound, non-cash cost per pound and total cost per pound for produced and purchased uranium presented in the
above table are non-IFRS measures. These measures do not have a standardized meaning or a consistent basis of calculation under IFRS. We use these measures in our assessment of the performance of our uranium business. We believe that, in addition to
conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance and ability to generate cash flow.
40 CAMECO
CORPORATION
These measures are non-standard supplemental information and should not be considered in isolation or as a
substitute for measures of performance prepared according to accounting standards. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures
differently, so you may not be able to make a direct comparison to similar measures presented by other companies.
To facilitate a better understanding of
these measures, the following table presents a reconciliation of these measures to our unit cost of sales for the years ended 2014 and 2013 as reported in our financial statements.
CASH AND TOTAL COST PER POUND RECONCILIATION
|
|
|
|
|
|
|
|
|
| ($ MILLIONS) |
|
2014 |
|
|
2013 |
|
| Cost of product sold |
|
|
902.8 |
|
|
|
869.1 |
|
| Add / (subtract) |
|
|
|
|
|
|
|
|
| Royalties |
|
|
(91.2 |
) |
|
|
(90.8 |
) |
| Standby charges |
|
|
(24.8 |
) |
|
|
(37.4 |
) |
| Other selling costs |
|
|
(9.0 |
) |
|
|
(1.4 |
) |
| Change in inventories |
|
|
(71.9 |
) |
|
|
63.1 |
|
|
|
|
|
|
|
|
|
|
| Cash operating costs (a) |
|
|
705.9 |
|
|
|
802.6 |
|
| Add / (subtract) |
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
272.6 |
|
|
|
212.9 |
|
| Change in inventories |
|
|
(56.2 |
) |
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
| Total operating costs (b) |
|
|
922.3 |
|
|
|
1,025.6 |
|
|
|
|
|
|
|
|
|
|
| Uranium produced and purchased (million lbs) (c) |
|
|
30.4 |
|
|
|
36.8 |
|
|
|
|
|
|
|
|
|
|
| Cash costs per pound (a ÷ c) |
|
|
23.22 |
|
|
|
21.81 |
|
|
|
|
|
|
|
|
|
|
| Total costs per pound (b ÷ c) |
|
|
30.34 |
|
|
|
27.87 |
|
|
|
|
|
|
|
|
|
|
OUTLOOK FOR 2015
We
expect to produce 25.3 million to 26.3 million pounds in 2015 and have commitments under long-term contracts to purchase approximately 2 million pounds.
Based on the contracts we have in place and not including sales between our segments, we expect to deliver between 31 million and 33 million pounds
of U3O8 in 2015. We expect the unit cost of sales to be 5% to 10% higher than in 2014, primarily due to higher costs for produced
material. As Cigar Lake ramps up to full production, the cash cost of material produced from the mine will initially be higher. If we make additional discretionary purchases in 2015 at a cost different than our other sources of supply, then we
expect the overall unit cost of sales to be affected.
We expect revenue to be 5% to 10% lower than it was in 2014 as a result of an expected decrease in
deliveries, not including sales between our segments, and a lower average realized price.
ROYALTIES
We pay royalties on the sale of all uranium extracted at our mines in the province of Saskatchewan. Two types of royalties are paid:
| • |
|
Basic royalty: calculated as 5% of gross sales of uranium, less the Saskatchewan resource credit of 0.75%. |
| • |
|
Profit royalty: a 10% royalty is charged on profit up to and including $22.28/kg U3O8 ($10.11/lb)
and a 15% royalty is charged on profit in excess of $22.28/kg U3O8. Profit is determined as revenue less certain operating, exploration,
reclamation and capital costs. Both exploration and capital costs are deductible at the discretion of the producer. |
2014 ANNUAL
REPORT 41
During the period from 2013 to 2015, transitional rules apply whereby only 50% of capital costs are deductible.
The remaining 50% is accumulated and deductible beginning in 2016. In addition, the capital allowance related to Cigar Lake under the previous system is grandfathered and deductible in 2016.
As a resource corporation in Saskatchewan, we also pay a corporate resource surcharge of 3.0% of the value of resource sales.
Fuel services
(includes results for UF6, UO2 and fuel fabrication)
|
|
|
|
|
|
|
|
|
|
|
|
|
| HIGHLIGHTS |
|
2014 |
|
|
2013 |
|
|
CHANGE |
|
| Production volume (million kgU) |
|
|
11.6 |
|
|
|
14.9 |
|
|
|
(22 |
)% |
| Sales volume (million kgU) |
|
|
15.5 |
1 |
|
|
17.6 |
2 |
|
|
(12 |
)% |
| Realized price ($Cdn/kgU) |
|
|
19.70 |
|
|
|
18.12 |
|
|
|
9 |
% |
| Average unit cost of sales ($Cdn/kgU) (including D&A) |
|
|
17.24 |
|
|
|
15.16 |
|
|
|
14 |
% |
| Revenue ($ millions) |
|
|
306 |
1 |
|
|
319 |
2 |
|
|
(4 |
)% |
| Gross profit ($ millions) |
|
|
38 |
|
|
|
52 |
|
|
|
(27 |
)% |
| Gross profit (%) |
|
|
12 |
|
|
|
16 |
|
|
|
(25 |
)% |
| 1 |
Includes sales of 0.5 million kgU and revenue of $4 million between our uranium, fuel services and NUKEM segments. |
| 2 |
Includes sales of 0.7 million kgU and revenue of $6 million between our uranium, fuel services and NUKEM segments. |
Total revenue decreased by 4% due to a 12% decrease in sales volumes, partially offset by a 9% increase in the realized price.
The total cost of products and services sold (including D&A) remained relatively stable compared to 2013 at $268 million, as a 12% decrease in sales
volume was offset by a 14% increase in the average unit cost of sales (including D&A).
The net effect was a $14 million decrease in gross profit.
OUTLOOK FOR 2015
In 2015, we plan to produce
9 million to 10 million kgU, and we expect sales volumes not including intersegment sales to be 5% to 10% lower than in 2014. Overall revenue is expected to decrease by up to 5% as lower sales volumes will be partially offset by an
increase in the average realized price. We expect the average unit cost of sales (including D&A) to increase by 5% to 10%; therefore, overall gross profit will decrease as a result.
NUKEM
|
|
|
|
|
|
|
|
|
|
|
|
|
| HIGHLIGHTS |
|
2014 |
|
|
2013 |
|
|
CHANGE |
|
| Uranium sales (million lbs) |
|
|
8.1 |
1 |
|
|
8.9 |
2 |
|
|
(9 |
)% |
| Average realized price ($Cdn/lb) |
|
|
44.90 |
|
|
|
42.26 |
|
|
|
6 |
% |
| Cost of product sold (including D&A) |
|
|
327 |
|
|
|
445 |
|
|
|
(27 |
)% |
| Revenue |
|
|
349 |
1 |
|
|
465 |
2 |
|
|
(25 |
)% |
| Gross profit |
|
|
22 |
|
|
|
20 |
|
|
|
10 |
% |
| Net earnings |
|
|
(3 |
) |
|
|
7 |
|
|
|
(143 |
)% |
| Adjustments on derivatives3 |
|
|
2 |
|
|
|
(3 |
) |
|
|
167 |
% |
| NUKEM inventory write-down (reversal) (net of tax) |
|
|
(4 |
) |
|
|
10 |
|
|
|
(140 |
)% |
| Adjusted net earnings (loss)3 |
|
|
(5 |
) |
|
|
14 |
|
|
|
(136 |
)% |
| 1 |
Includes sales of 1.1 million pounds and revenue of $43 million between our uranium, fuel services and NUKEM segments. |
| 2 |
Includes sales of 0.6 million pounds and revenue of $23 million between our uranium, fuel services and NUKEM segments. |
| 3 |
Adjustments relate to unrealized gains and losses on foreign currency forward sales contracts (non-IFRS measure, see page 24). |
During 2014, NUKEM delivered 8.1 million pounds of uranium, a decrease of 0.8 million pounds compared to the previous year due to weak market
conditions. Revenues from NUKEM amounted to $349 million, 25% lower than in 2013 as a result of lower sales volume and a decline in the realized price amid lower market prices.
Gross profit amounted to $22 million, an increase of $2 million compared to 2013. Although sales volumes decreased, NUKEM’s gross margin increased by 10%
compared to 2013 due to generally higher margin sales and a $14 million inventory write-down in 2013. On a percentage basis, gross profits were 6% in 2014 compared to 4% in the prior year.
42 CAMECO
CORPORATION
After administration costs, interest and income taxes, adjusted net earnings amounted to a loss of $5 million
compared to earnings of $14 million in 2013 (non-IFRS measure, see page 29).
OUTLOOK FOR 2015
For 2015, NUKEM expects to deliver between 7 million and 8 million pounds of uranium, resulting in an increase in revenues not including intersegment
sales, of 5% to 10% compared to 2014. NUKEM expects to incur administration costs up to 5% lower than in 2014. The effective income tax rate is expected to remain in the range of 30% to 35%.
2014 ANNUAL
REPORT 43
Fourth quarter financial results
Consolidated results
|
|
|
|
|
|
|
|
|
|
|
|
|
| HIGHLIGHTS |
|
THREE MONTHS ENDED
DECEMBER 31 |
|
|
CHANGE |
|
| ($ MILLIONS EXCEPT WHERE INDICATED) |
|
2014 |
|
|
2013 |
|
|
| Revenue |
|
|
889 |
|
|
|
977 |
|
|
|
(9 |
)% |
| Gross profit |
|
|
251 |
|
|
|
185 |
|
|
|
36 |
% |
| Net earnings attributable to equity holders |
|
|
73 |
|
|
|
64 |
|
|
|
14 |
% |
| $ per common share (basic) |
|
|
0.18 |
|
|
|
0.16 |
|
|
|
13 |
% |
| $ per common share (diluted) |
|
|
0.18 |
|
|
|
0.16 |
|
|
|
13 |
% |
| Adjusted net earnings (non-IFRS, see page 24) |
|
|
205 |
|
|
|
150 |
|
|
|
37 |
% |
| $ per common share (adjusted and diluted) |
|
|
0.52 |
|
|
|
0.38 |
|
|
|
37 |
% |
| Cash provided by continuing operations (after working capital changes) |
|
|
236 |
|
|
|
163 |
|
|
|
45 |
% |
NET EARNINGS
In the
fourth quarter of 2014, our net earnings were $73 million ($0.18 per share diluted), an increase of $9 million compared to $64 million ($0.16 per share diluted) in 2013, mainly due to:
| • |
|
higher uranium gross profits resulting from higher average realized prices and lower average unit cost of sales |
| • |
|
a favourable settlement of $37 million with respect to a dispute regarding a long-term supply contract with a utility customer |
| • |
|
lower exploration expenditures |
| • |
|
higher income tax recovery |
partially offset by:
| • |
|
the impact of a $126 million write-down of our investments in the Eagle Point mine assets at Rabbit Lake |
| • |
|
the write-off of $41 million of assets under construction as a result of changes made to the scope of a number of projects |
| • |
|
no earnings from BPLP due to divestiture of our interest in the first quarter of 2014 |
| • |
|
higher losses on foreign exchange derivatives resulting from the weakening of the Canadian dollar |
On an
adjusted basis, our earnings this quarter were $205 million ($0.52 per share diluted) compared to $150 million ($0.38 per share diluted) (non-IFRS measure, see below) in the fourth quarter of 2013, mainly due to:
| • |
|
higher uranium gross profits due to a higher average realized price and lower average unit cost of sales |
| • |
|
a favourable settlement of $37 million with respect to a dispute regarding a long-term supply contract with a utility customer |
| • |
|
lower exploration expenditures |
partially offset by:
| • |
|
no earnings from BPLP due to divestiture of our interest in the first quarter of 2014 |
44 CAMECO
CORPORATION
We use adjusted net earnings, a non-IFRS measure, as a more meaningful way to compare our financial performance
from period to period. See page 24 for more information. The following table reconciles adjusted net earnings with our net earnings.
|
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED
DECEMBER 31 |
|
| ($ MILLIONS) |
|
2014 |
|
|
2013 |
|
| Net earnings attributable to equity holders |
|
|
73 |
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
| Adjustments |
|
|
|
|
|
|
|
|
| Adjustments on derivatives1 |
|
|
10 |
|
|
|
36 |
|
| NUKEM inventory write-down (recovery) |
|
|
(4 |
) |
|
|
(3 |
) |
| Impairment charges |
|
|
131 |
|
|
|
70 |
|
| Write-off of assets |
|
|
41 |
|
|
|
— |
|
| Income taxes on adjustments |
|
|
(46 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
| Adjusted net earnings |
|
|
205 |
|
|
|
150 |
|
|
|
|
|
|
|
|
|
|
| 1 |
We do not apply hedge accounting for our portfolio of foreign currency forward sales contracts. However, we have adjusted our gains or losses on derivatives to reflect what our earnings would have been had hedge
accounting been in place. |
ADMINISTRATION
Direct administration costs were $51 million in the quarter, $6 million higher than the same period last year due to the timing of expenditures. Stock-based
compensation expenses were $3 million lower than the fourth quarter of 2013 due to a change in the compensation program. See note 26 to the financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED
DECEMBER 31 |
|
|
CHANGE |
|
| ($ MILLIONS) |
|
2014 |
|
|
2013 |
|
|
| Direct administration |
|
|
51 |
|
|
|
45 |
|
|
|
13 |
% |
| Stock-based compensation |
|
|
3 |
|
|
|
6 |
|
|
|
(50 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total administration |
|
|
54 |
|
|
|
51 |
|
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
QUARTERLY TRENDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| HIGHLIGHTS |
|
2014 |
|
|
2013 |
|
| ($ MILLIONS EXCEPT PER SHARE AMOUNTS) |
|
Q4 |
|
|
Q3 |
|
|
Q2 |
|
|
Q1 |
|
|
Q4 |
|
|
Q3 |
|
|
Q2 |
|
|
Q1 |
|
| Revenue |
|
|
889 |
|
|
|
587 |
|
|
|
502 |
|
|
|
419 |
|
|
|
977 |
|
|
|
597 |
|
|
|
421 |
|
|
|
444 |
|
| Net earnings (losses) attributable to equity holders |
|
|
73 |
|
|
|
(146 |
) |
|
|
127 |
|
|
|
131 |
|
|
|
64 |
|
|
|
211 |
|
|
|
34 |
|
|
|
9 |
|
| $ per common share (basic) |
|
|
0.18 |
|
|
|
(0.37 |
) |
|
|
0.32 |
|
|
|
0.33 |
|
|
|
0.16 |
|
|
|
0.53 |
|
|
|
0.09 |
|
|
|
0.02 |
|
| $ per common share (diluted) |
|
|
0.18 |
|
|
|
(0.37 |
) |
|
|
0.32 |
|
|
|
0.33 |
|
|
|
0.16 |
|
|
|
0.53 |
|
|
|
0.09 |
|
|
|
0.02 |
|
| Adjusted net earnings (non-IFRS, see page 24) |
|
|
205 |
|
|
|
93 |
|
|
|
79 |
|
|
|
36 |
|
|
|
150 |
|
|
|
208 |
|
|
|
61 |
|
|
|
27 |
|
| $ per common share (adjusted and diluted) |
|
|
0.52 |
|
|
|
0.23 |
|
|
|
0.20 |
|
|
|
0.09 |
|
|
|
0.38 |
|
|
|
0.53 |
|
|
|
0.15 |
|
|
|
0.07 |
|
| Earnings (losses) from continuing operations |
|
|
72 |
|
|
|
(146 |
) |
|
|
127 |
|
|
|
4 |
|
|
|
28 |
|
|
|
163 |
|
|
|
33 |
|
|
|
8 |
|
| $ per common share (basic) |
|
|
0.18 |
|
|
|
(0.37 |
) |
|
|
0.32 |
|
|
|
0.01 |
|
|
|
0.07 |
|
|
|
0.41 |
|
|
|
0.08 |
|
|
|
0.02 |
|
| $ per common share (diluted) |
|
|
0.18 |
|
|
|
(0.37 |
) |
|
|
0.32 |
|
|
|
0.01 |
|
|
|
0.07 |
|
|
|
0.41 |
|
|
|
0.08 |
|
|
|
0.02 |
|
| Cash provided by (used in) continuing operations (after working capital changes) |
|
|
236 |
|
|
|
263 |
|
|
|
(25 |
) |
|
|
7 |
|
|
|
163 |
|
|
|
154 |
|
|
|
(33 |
) |
|
|
241 |
|
Key things to note:
| • |
|
Our financial results are strongly influenced by the performance of our uranium segment, which accounted for 68% of consolidated revenues in the fourth quarter of 2014 and 65% of consolidated revenues in the fourth
quarter of 2013. |
| • |
|
The timing of customer requirements, which tends to vary from quarter to quarter, drives revenue in the uranium and fuel services segments. |
| • |
|
Net earnings do not trend directly with revenue due to unusual items and transactions that occur from time to time. We use adjusted net earnings, a non-IFRS measure, as a more meaningful way to compare our results from
period to period (see page 24 for more information). |
| • |
|
Cash from operations tends to fluctuate as a result of the timing of deliveries and product purchases in our uranium and fuel services segments. |
| • |
|
Quarterly results are not necessarily a good indication of annual results due to the variability in customer requirements noted above. |
2014 ANNUAL
REPORT 45
DISCONTINUED OPERATION
On March 27, 2014, we completed the sale of our 31.6% limited partnership interest in BPLP.
|
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS
ENDED DECEMBER 31 |
|
| ($ MILLIONS) |
|
2014 |
|
|
2013 |
|
| Share of earnings from BPLP and related entities |
|
|
— |
|
|
|
48 |
|
| Tax expense |
|
|
— |
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
| Net earnings from discontinued operations |
|
|
— |
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
46 CAMECO
CORPORATION
Fourth quarter results by segment
Uranium
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED
DECEMBER 31 |
|
|
CHANGE |
|
| HIGHLIGHTS |
|
2014 |
|
|
2013 |
|
|
| Production volume (million lbs) |
|
|
8.2 |
|
|
|
7.5 |
|
|
|
9 |
% |
| Sales volume (million lbs) |
|
|
10.7 |
1 |
|
|
12.7 |
|
|
|
(16 |
)% |
| Average spot price ($US/lb) |
|
|
37.13 |
|
|
|
35.03 |
|
|
|
6 |
% |
| Average long-term price ($US/lb) |
|
|
48.00 |
|
|
|
50.00 |
|
|
|
(4 |
)% |
| Average realized price |
|
|
|
|
|
|
|
|
|
|
|
|
| ($US/lb) |
|
|
50.57 |
|
|
|
47.76 |
|
|
|
6 |
% |
| ($Cdn/lb) |
|
|
56.78 |
|
|
|
49.80 |
|
|
|
14 |
% |
| Average unit cost of sales ($Cdn/lb) (including D&A) |
|
|
34.27 |
|
|
|
37.94 |
|
|
|
(10 |
)% |
| Revenue ($ millions) |
|
|
606 |
1 |
|
|
631 |
|
|
|
(4 |
)% |
| Gross profit ($ millions) |
|
|
240 |
|
|
|
150 |
|
|
|
60 |
% |
| Gross profit (%) |
|
|
40 |
|
|
|
24 |
|
|
|
67 |
% |
| 1 |
Includes sales of 0.4 million pounds and revenue of $15 million between our uranium, fuel services and NUKEM segments. |
Production volumes this quarter were 9% higher compared to the fourth quarter of 2013, mainly as a result of higher production at McArthur River/Key
Lake, in addition to the first production from Cigar Lake/McClean Lake. See Our operations and projects starting on page 50 for more information.
Uranium revenues were down 4% due to a 16% decrease in sales volumes, which represents normal quarterly variance in our delivery schedule, offset by a 14%
increase in average realized price.
The average realized price increased by 14% compared to 2013 due to higher US dollar prices under fixed price
contracts, and the effect of foreign exchange. In the fourth quarter of 2014, our realized foreign exchange rate was $1.12 compared to $1.04 in the prior year.
Total cost of sales (including D&A) decreased by 24% ($366 million compared to $481 million in 2013). This was the result of a 10% decrease in the average
unit cost of sales and a 16% decrease in sales volumes.
The unit cost of sales decreased due to a decrease in the cash costs of produced material in the
fourth quarter compared to the same period in 2013, as a result of increased production and timing of royalties. In addition, standby charges for the McClean Lake mill ceased in the fourth quarter, as production from Cigar Lake commenced.
The net effect was a $90 million increase in gross profit for the quarter.
2014 ANNUAL
REPORT 47
The following table shows the costs of produced and purchased uranium incurred in the reporting periods (which
are non-IFRS measures, see the paragraphs below the table). These costs do not include selling costs such as royalties, transportation and commissions, nor do they reflect the impact of opening inventories on our reported cost of sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED
DECEMBER 31 |
|
|
CHANGE |
|
| ($/LB) |
|
2014 |
|
|
2013 |
|
|
| Produced |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash cost |
|
|
14.19 |
|
|
|
15.61 |
|
|
|
(9 |
)% |
| Non-cash cost |
|
|
7.15 |
|
|
|
9.42 |
|
|
|
(24 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total production cost |
|
|
21.34 |
|
|
|
25.03 |
|
|
|
(15 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quantity produced (million lbs) |
|
|
8.2 |
|
|
|
7.5 |
|
|
|
9 |
% |
| Purchased |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash cost |
|
|
39.03 |
|
|
|
37.26 |
|
|
|
5 |
% |
| Quantity purchased (million lbs) |
|
|
3.7 |
|
|
|
4.4 |
|
|
|
(16 |
)% |
| Totals |
|
|
|
|
|
|
|
|
|
|
|
|
| Produced and purchased costs |
|
|
26.84 |
|
|
|
29.55 |
|
|
|
(9 |
)% |
| Quantities produced and purchased (million lbs) |
|
|
11.9 |
|
|
|
11.9 |
|
|
|
— |
|
Cash cost per pound, non-cash cost per pound and total cost per pound for produced and purchased uranium presented in the
above table are non-IFRS measures. These measures do not have a standardized meaning or a consistent basis of calculation under IFRS. We use these measures in our assessment of the performance of our uranium business. We believe that, in addition to
conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance and ability to generate cash flow.
These measures are non-standard supplemental information and should not be considered in isolation or as a substitute for measures of performance prepared
according to accounting standards. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently, so you may not be able to make a
direct comparison to similar measures presented by other companies.
To facilitate a better understanding of these measures, the following table presents
a reconciliation of these measures to our unit cost of sales for the fourth quarters of 2014 and 2013.
CASH AND TOTAL COST PER POUND RECONCILIATION
|
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED
DECEMBER 31 |
|
| ($ MILLIONS) |
|
2014 |
|
|
2013 |
|
| Cost of product sold |
|
|
269.0 |
|
|
|
359.8 |
|
| Add / (subtract) |
|
|
|
|
|
|
|
|
| Royalties |
|
|
(34.5 |
) |
|
|
(52.5 |
) |
| Standby charges |
|
|
— |
|
|
|
(11.1 |
) |
| Other selling costs |
|
|
(2.3 |
) |
|
|
(4.8 |
) |
| Change in inventories |
|
|
28.5 |
|
|
|
(10.3 |
) |
|
|
|
|
|
|
|
|
|
| Cash operating costs (a) |
|
|
260.7 |
|
|
|
281.1 |
|
| Add / (subtract) |
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
96.7 |
|
|
|
121.2 |
|
| Change in inventories |
|
|
(38.0 |
) |
|
|
(50.7 |
) |
|
|
|
|
|
|
|
|
|
| Total operating costs (b) |
|
|
319.4 |
|
|
|
351.6 |
|
|
|
|
|
|
|
|
|
|
| Uranium produced & purchased (million lbs) (c) |
|
|
11.9 |
|
|
|
11.9 |
|
|
|
|
|
|
|
|
|
|
| Cash costs ($/lb) (a ÷ c) |
|
|
21.91 |
|
|
|
23.62 |
|
|
|
|
|
|
|
|
|
|
| Total costs ($/lb) (b ÷ c) |
|
|
26.84 |
|
|
|
29.55 |
|
|
|
|
|
|
|
|
|
|
48 CAMECO
CORPORATION
Fuel services
(includes results for UF6, UO2 and fuel
fabrication)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED
DECEMBER 31 |
|
|
CHANGE |
|
| HIGHLIGHTS |
|
2014 |
|
|
2013 |
|
|
| Production volume (million kgU) |
|
|
2.7 |
|
|
|
2.7 |
|
|
|
— |
|
| Sales volume (million kgU) |
|
|
7.4 |
1 |
|
|
6.5 |
|
|
|
14 |
% |
| Average realized price ($Cdn/kgU) |
|
|
16.92 |
|
|
|
17.24 |
|
|
|
(2 |
)% |
| Average unit cost of sales ($Cdn/kgU) (including D&A) |
|
|
14.78 |
|
|
|
14.42 |
|
|
|
2 |
% |
| Revenue ($ millions) |
|
|
125 |
1 |
|
|
112 |
|
|
|
12 |
% |
| Gross profit ($ millions) |
|
|
16 |
|
|
|
18 |
|
|
|
(11 |
)% |
| Gross profit (%) |
|
|
13 |
|
|
|
16 |
|
|
|
(19 |
)% |
| 1 |
Includes sales of 0.5 million kgU and revenue of $4 million between our uranium, fuel services and NUKEM segments. |
Total revenue increased by 12% due to a 14% increase in sales volumes, partially offset by a 2% decrease in average realized price.
The total cost of sales (including D&A) increased by 17% ($109 million compared to $93 million in the fourth quarter of 2013) mainly due to a 14% increase
in sales volumes and a 2% increase in the average unit cost of sales.
The net effect was a $2 million decrease in gross profit.
NUKEM
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED
DECEMBER 31 |
|
|
CHANGE |
|
| HIGHLIGHTS |
|
2014 |
|
|
2013 |
|
|
| Uranium sales (million lbs) |
|
|
3.4 |
1 |
|
|
3.3 |
|
|
|
3 |
% |
| Average realized price ($Cdn/lb) |
|
|
52.12 |
|
|
|
41.84 |
|
|
|
25 |
% |
| Cost of product sold (including D&A) |
|
|
156 |
|
|
|
169 |
|
|
|
(8 |
)% |
| Revenue |
|
|
159 |
1 |
|
|
188 |
|
|
|
(15 |
)% |
| Gross profit |
|
|
3 |
|
|
|
19 |
|
|
|
(84 |
)% |
| Net earnings |
|
|
(6 |
) |
|
|
13 |
|
|
|
(146 |
)% |
| Adjustments on derivatives2 |
|
|
— |
|
|
|
(1 |
) |
|
|
100 |
% |
| NUKEM inventory write-down (reversal) (net of tax) |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(100 |
)% |
| Adjusted net earnings (loss)2 |
|
|
(8 |
) |
|
|
11 |
|
|
|
(173 |
)% |
| 1 |
Includes sales of 1.1 million pounds and revenue of $43 million between our uranium, fuel services and NUKEM segments. |
| 2 |
Adjustments relate to unrealized gains and losses on foreign currency forward sales contracts (non-IFRS measure, see page 24). |
During the three months ended December 31, 2014, NUKEM delivered 3.4 million pounds of uranium, an increase of 0.1 million pounds compared to
2013 due to timing of customer requirements. NUKEM revenues amounted to $159 million compared to $188 million in 2013 due to a decline in the uranium spot price relative to the previous year.
The unit cost of uranium sold was lower in 2014 as a result of the decline in the spot price.
The net effect was a $16 million decrease in gross profit. On a percentage basis, gross profits were 2% in the fourth quarter of 2014 compared to 10% in the
same period in 2013.
Administration costs were higher in the fourth quarter due to the timing of expenditures. In addition, the sale of inventory on hand
at the time of the acquisition of NUKEM resulted in an allocation of the historic purchase price to the sale of uranium in the quarter. This resulted in an adjusted net loss for the fourth quarter of 2014 of $8 million, compared to earnings of $11
million (non-IFRS measure, see page 24) in 2013.
2014 ANNUAL
REPORT 49
Our operations and projects
This section of our MD&A is an overview of each of our operations, what we accomplished this year, our plans for the future and how we manage risk.
|
|
|
| 53 |
|
URANIUM – PRODUCTION OVERVIEW |
|
|
| 53 |
|
PRODUCTION OUTLOOK |
|
|
| 54 |
|
URANIUM – OPERATING PROPERTIES |
|
|
| 54 |
|
MCARTHUR RIVER MINE / KEY LAKE MILL |
|
|
| 59 |
|
CIGAR LAKE |
|
|
| 64 |
|
INKAI |
|
|
| 67 |
|
RABBIT LAKE |
|
|
| 69 |
|
SMITH RANCH-HIGHLAND |
|
|
| 70 |
|
CROW BUTTE |
|
|
| 71 |
|
URANIUM – PROJECTS UNDER EVALUATION |
|
|
| 71 |
|
MILLENNIUM |
|
|
| 71 |
|
YEELIRRIE |
|
|
| 72 |
|
KINTYRE |
|
|
| 73 |
|
URANIUM – EXPLORATION AND CORPORATE DEVELOPMENT |
|
|
| 75 |
|
FUEL SERVICES |
|
|
| 75 |
|
BLIND RIVER REFINERY |
|
|
| 76 |
|
PORT HOPE CONVERSION SERVICES |
|
|
| 76 |
|
CAMECO FUEL MANUFACTURING INC. (CFM) |
|
|
| 78 |
|
NUKEM GMBH |
Managing the risks
The nature of our operations means we face many potential risks and hazards that could have a significant impact on our business. Our risk policy and process
involves a broad, systematic approach to identifying, assessing, reporting and managing the significant risks we face in our business and operations. The policy establishes clear accountabilities for enterprise risk management. We use a common risk
matrix throughout the company and consider any risk that has the potential to significantly affect our ability to achieve our corporate objectives or strategic plan as an enterprise risk. However, there is no assurance we will be successful in
preventing the harm any of these risks and hazards could cause. We recommend you read our most recent management proxy circular for more information about our risk oversight.
Below we list the regulatory, environmental and operational risks that generally apply to all of our operations and projects under evaluation. We also talk
about how we manage specific risks in each operation or project update. These risks could have a material impact on our business in the near term.
We
recommend you also review our annual information form, which includes a discussion of other material risks that could have an impact on our business.
Regulatory risks
A significant part of our economic
value depends on our ability to:
| • |
|
obtain and renew the licences and other approvals we need to operate, to increase production at our mines and to develop new mines. If we do not receive the regulatory approvals we need, or do not receive them at the
right time, then we may have to delay, modify or cancel a project, which could increase our costs and delay or prevent us from generating revenue from the project. Regulatory review, including the review of environmental matters, is a long and
complex process. |
| • |
|
comply with the conditions in these licences and approvals. In a number of instances, our right to continue operating facilities, increase production at our mines and develop new mines depends on our compliance with
these conditions. |
| • |
|
comply with the extensive and complex laws and regulations that govern our activities, including our growth plans. Environmental legislation imposes strict standards and controls on almost every aspect of our operations
and the mines we plan to develop, and is not only introducing new requirements, but also becoming more stringent. For example: |
| |
• |
|
we must complete the environmental assessment process before we can begin developing a new mine or make any significant change to our operations |
| |
• |
|
we may need regulatory approval to make changes to our operational processes, which can take a significant amount of time because it may require an extensive review of supporting technical information. The complexity of
this process can be further compounded when regulatory approvals are required from multiple agencies. |
| |
• |
|
Environment Canada has brought forward a national recovery plan for woodland caribou that has the potential to impact economic and social development in northern Saskatchewan. Additional research work is being conducted
so that a determination can be made on the sustainability of the species within the region. The research could result in measures being taken to further limit habitat disturbance in order to improve the health of the woodland caribou population in
northern Saskatchewan, and it could have an impact on our Saskatchewan operations and projects under evaluation. |
We use significant
management and financial resources to manage our regulatory risks.
Environmental risks
We have the safety, health and environmental risks associated with any mining and chemical processing company. Our uranium and fuel services segments also face
unique risks associated with radiation.
Laws to protect the environment are becoming more stringent for members of the nuclear energy industry and have
inter-jurisdictional aspects (both federal and provincial/state regimes are applicable). Once we have permanently stopped mining and processing activities at an operating site, we are required to decommission the site to the satisfaction of the
regulators. We have developed conceptual decommissioning plans for our operating sites and use them to estimate our decommissioning costs. Regulators review our conceptual decommissioning plans on a regular basis. As the site approaches or goes into
decommissioning, regulators review the detailed decommissioning plans. This can result in further regulatory process, as well as additional requirements, costs and financial assurances.
2014 ANNUAL
REPORT 51
At the end of 2014, our estimate of total decommissioning and reclamation costs was $874 million. This is the
undiscounted value of the obligation and is based on our current operations. We had accounting provisions of $828 million at the end of 2014 (the present value of the $874 million). Since we expect to incur most of these expenditures at the end of
the useful lives of the operations they relate to, our expected costs for decommissioning and reclamation for the next five years are not material.
We
provide financial assurances for decommissioning and reclamation such as letters of credit to regulatory authorities, as required. We had a total of $911 million in letters of credit supporting our reclamation liabilities at the end of 2014. All of
our North American operations have letters of credit in place that provide financial assurance in connection with our preliminary plans for decommissioning for the sites.
Some of the sites we own or operate have been under ongoing investigation and/or remediation and planning as a result of historic soil and groundwater
conditions. For example, we are addressing issues related to historic soil and groundwater contamination at Port Hope.
We use significant management and
financial resources to manage our environmental risks.
We manage environmental risks through our safety, health, environment and quality (SHEQ)
management system. Our chief executive officer is responsible for ensuring that our SHEQ management system is implemented. Our board’s safety, health and environment committee also oversees how we manage our environmental risks.
In 2014, we invested:
| • |
|
$78 million in environmental protection, monitoring and assessment programs, or 26% less than 2013 as a result of large capital projects nearing completion |
| • |
|
$24 million in health and safety programs, or 22% more than 2013 |
Spending on both environmental and safety
programs is expected to increase slightly in 2015, as a result of specific capital projects that are expected to begin during the year.
Operational
risks
Other operational risks and hazards include:
| • |
|
industrial and transportation accidents |
| • |
|
labour shortages, disputes or strikes |
| • |
|
cost increases for labour, contracted or purchased materials, supplies and services |
| • |
|
shortages of required materials, supplies and equipment |
| • |
|
transportation disruptions |
| • |
|
electrical power interruptions |
| • |
|
non-compliance with laws and licences |
| • |
|
blockades or other acts of social or political activism |
| • |
|
natural phenomena, such as inclement weather conditions, floods and earthquakes |
| • |
|
unusual, unexpected or adverse mining or geological conditions |
| • |
|
ground movement or cave-ins |
| • |
|
tailings pipeline or dam failures |
| • |
|
technological failure of mining methods |
We have insurance to cover some of these
risks and hazards, but not all of them, and not to the full amount of losses or liabilities that could potentially arise.
52 CAMECO
CORPORATION
Uranium – production overview
Production in our uranium segment this quarter was 0.7 million pounds higher compared to the fourth quarter of 2013. Production for the year was 0.3 million
pounds lower than in 2013. See Uranium operating properties starting on page 54 for more information.
Uranium production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| CAMECO’S SHARE |
|
THREE MONTHS ENDED
DECEMBER 31 |
|
|
YEAR ENDED
DECEMBER 31 |
|
|
|
|
|
| (MILLION LBS) |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
2014 PLAN1 |
|
2015 PLAN |
| McArthur River/Key Lake |
|
|
4.4 |
|
|
|
4.0 |
|
|
|
13.3 |
|
|
|
14.1 |
|
|
12.8 |
|
13.7 |
| Rabbit Lake |
|
|
2.1 |
|
|
|
2.1 |
|
|
|
4.2 |
|
|
|
4.1 |
|
|
4.1 |
|
3.9 |
| Smith Ranch-Highland |
|
|
0.6 |
|
|
|
0.5 |
|
|
|
2.1 |
|
|
|
1.7 |
|
|
2.0 |
|
1.4 |
| Crow Butte |
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.6 |
|
|
|
0.7 |
|
|
0.6 |
|
0.3 |
| Inkai |
|
|
0.7 |
|
|
|
0.7 |
|
|
|
2.9 |
|
|
|
3.0 |
|
|
3.0 |
|
3.0 |
| Cigar Lake |
|
|
0.2 |
|
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
0.1 - 0.3 |
|
3.0 – 4.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
8.2 |
|
|
|
7.5 |
|
|
|
23.3 |
|
|
|
23.6 |
|
|
22.6 – 22.8 |
|
25.3 – 26.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1 |
We updated our initial 2014 plan for McArthur River/Key Lake (to 12.8 from 13.1 million pounds) and Cigar Lake (to between 0.1 and 0.3 from between 1.0 and 1.5 million pounds) in our Q3 MD&A.
|
Production Outlook
We remain focused
on taking advantage of the long-term growth we see coming in our industry, while maintaining the ability to respond to market conditions as they evolve. Our strategy is to profitably produce at a pace aligned with market signals to increase
long-term shareholder value.
We plan to:
| • |
|
ensure continued reliable, low-cost production from our flagship operation, McArthur River/Key Lake and seek to expand that production |
| • |
|
ensure continued reliable, low-cost production at Inkai |
| • |
|
successfully ramp up production at Cigar Lake |
| • |
|
manage the rest of our production facilities and other sources of supply in a manner that retains the flexibility to respond to market signals and take advantage of value adding opportunities within our own portfolio
and the uranium market |
| • |
|
maintain our low-cost advantage by focusing on execution and operational excellence |
2014 ANNUAL
REPORT 53
Uranium – operating properties
McArthur River mine / Key Lake mill
|
|
|
|
|
|
|
2014 Production (our share) |
|
Proportion of 2014 U production
|
|
13.3M lbs |
|
|
2015 Production Outlook (our share) |
|
|
13.7M lbs |
|
|
Estimated Reserves (our share) |
|
|
241.0M lbs |
|
|
Estimated Mine Life |
|
|
2033 |
|
McArthur River is the world’s largest, high-grade uranium mine, and Key Lake is the world’s largest uranium mill.
Ore grades at the McArthur River mine are 100 times the world average, which means it can produce more than 18 million pounds per year by mining
only 150 to 200 tonnes of ore per day. We are the operator of both the mine and mill.
McArthur River is one of our three material uranium properties.
|
|
|
| Location |
|
Saskatchewan, Canada |
| Ownership |
|
69.805% – McArthur River
83.33% – Key Lake |
| End product |
|
Uranium concentrates |
| ISO certification |
|
ISO 14001 certified |
| Mine type |
|
Underground |
| Estimated reserves (our share) |
|
241.0 million pounds (proven and probable), average grade U3O8: 14.87% |
| Estimated resources (our share) |
|
7.4 million pounds (measured and indicated), average grade U3O8: 4.24%
39.9 million pounds (inferred), average grade U3O8: 7.38% |
| Mining methods |
|
Primary: raiseboring
Secondary: blasthole stoping, boxhole boring |
| Licensed capacity |
|
Mine: 21.0 million pounds per year
Mill: 25.0 million pounds per year |
| Licence term |
|
Through October, 2023 |
| Total production: 2000 to 2014
(100% basis) 1983 to 2002 |
|
269.7 million pounds (McArthur River/Key Lake)
209.8 million pounds (Key Lake) |
| 2014 production (our share) |
|
13.3 million pounds (19.1 million pounds on 100% basis) |
| 2015 production outlook (our share) |
|
13.7 million pounds (19.6 million pounds on 100% basis) |
| Estimated decommissioning cost
(100% basis) |
|
$48 million – McArthur River
$218 million – Key Lake |
BACKGROUND
Mining
methods and techniques
We use a number of innovative methods to mine the McArthur River deposit:
Ground freezing
The sandstone that overlays the deposit
and basement rocks is water-bearing, with large volumes of water under significant pressure. We use ground freezing to form an impermeable wall around the area being mined. This prevents water from entering the mine, and helps stabilize weak rock
formations. To date, we have isolated six mining areas with freezewalls.
54 CAMECO
CORPORATION
Raisebore mining
Raisebore mining is an innovative non-entry approach that we adapted to meet the unique challenges at McArthur River. It involves:
| • |
|
drilling a series of overlapping holes through the ore zone from a raisebore chamber in waste rock above the mineralization |
| • |
|
collecting the broken ore at the bottom of the raises using line-of-sight remote-controlled scoop trams, and transporting it to a grinding circuit |
| • |
|
once mining is complete, filling each raisebore hole with concrete |
| • |
|
when all the rows of raises in a chamber are complete, removing the equipment and filling the entire chamber with concrete |
| • |
|
starting the process again with the next raisebore chamber |
McArthur River currently has six areas with delineated mineral reserves and delineated mineral resources (zones 1 to 4,
zone 4 south and zone B) and two additional areas with delineated mineral resources (zone A, McArthur north). We are currently mining zone 2 and zone 4.
Zone 2 has been actively mined since production began. It is divided into four panels (panels 1, 2, 3 and 5) based on the configuration of the freezewall
around the ore. As the freezewall is expanded, the inner connecting freezewalls are decommissioned in order to recover the uranium that was inaccessible around the active freeze pipes. Panel 5 represents the upper portion of zone 2, overlying part
of the other panels. Mining is nearing completion in panels 1, 2 and 3, and the majority of the remaining zone 2 proven mineral reserves are in panel 5.
Zone 4 is divided into three mining areas: central, north and south. We are actively mining the central area and began mining zone 4 north in the fourth
quarter of 2014.
The CNSC has granted approval for the use of two secondary extraction methods: blasthole stoping and boxhole boring.
We have used the approved mining methods to successfully extract about 272 million pounds (100% basis) since we began mining in 1999. Raisebore mining is
scheduled to remain the primary extraction method over the life of mine.
Boxhole boring
Boxhole boring is similar to the raisebore method, but the drilling machine is located below the mineralization, so development is not required above the
mineralization. This method is currently being used at a few mines around the world, but had not been used for uranium mining prior to testing at McArthur River.
2014 ANNUAL
REPORT 55
Test mining to date has identified this as a viable mining option; however, only a minor amount of ore is
scheduled to be extracted using this method.
Blasthole stoping
Blasthole stoping involves establishing drill access above the mineralization and extraction access below the mineralization. The area between the upper and
lower access levels (the stope) is then drilled off and blasted. The broken rock is collected on the lower level and removed by line-of-sight remote-controlled scoop trams, then transported to a grinding circuit. Once a stope is mined out, it is
backfilled with concrete to maintain ground stability and allow the next stope in sequence to be mined. This mining method has been used extensively in the mining industry, including uranium mining.
Blasthole stoping is planned in areas where blast holes can be accurately drilled and small stable stopes excavated without jeopardizing the freezewall
integrity. We expect this method to allow for more economic recovery of ore on the periphery of the orebody, as well as smaller, lower grade areas, and we continue to study opportunities to increase the use of blasthole stoping, which would improve
cost efficiency and productivity.
Initial processing
We carry out initial processing of the extracted ore at McArthur River:
| • |
|
the underground circuit grinds the ore and mixes it with water to form a slurry |
| • |
|
the slurry is pumped 680 metres to the surface and stored in one of four ore slurry holding tanks |
| • |
|
it is blended and thickened, removing excess water |
| • |
|
the final slurry, at an average grade of 15% U3O8, is pumped into transport truck containers and shipped to
Key Lake mill on an 80 kilometre all-weather road |
Water from this process, including water from underground operations, is treated on the
surface. Any excess treated water is released into the environment.
2014 UPDATE
Production
Production from McArthur River/Key Lake was
19.1 million pounds; our share was 13.3 million pounds. This was 4% higher than our forecast for the year as a result of a record month of production at Key Lake in December. However, annual production was 6% lower than in 2013 due to a
labour disruption that resulted in an unplanned shutdown of the operations for approximately 18 days during the third quarter of 2014.
Licensing and
production capacity
In 2014, the CNSC approved the EA for the Key Lake extension, a project which involves increasing our tailings capacity and Key
Lake’s nominal annual production rate. We also received approval to increase the production limit at McArthur River. The licence conditions handbooks for these operations now allow:
| • |
|
the Key Lake mill to produce up to 25 million pounds (100% basis) per year |
| • |
|
the McArthur River mine to produce up to 21 million pounds (100% basis) per year |
With the approved EA,
and once the Key Lake extension project is complete, mill production can be increased to closely follow production from the McArthur River mine.
McArthur River production expansion
We have been working
to increase our annual production rate at McArthur River to 22 million pounds (100% basis). Since, in 2014, we received approval to produce up to 21 million pounds (100% basis) per year, we decided to file an application with the CNSC to
increase licensed annual production up to 25 million pounds (100% basis) to allow flexibility to match the approved Key Lake mill capacity. The application was filed in January 2015.
56 CAMECO
CORPORATION
In order to sustain or increase production, we must continue to successfully transition into new mine areas
through mine development and investment in support infrastructure. We plan to:
| • |
|
obtain all the necessary regulatory approvals |
| • |
|
expand the freeze plant and electrical distribution systems |
| • |
|
optimize the mine ventilation system |
| • |
|
improve our dewatering system and expand our water treatment capacity as required to mitigate capacity losses should mine development increase background water volumes |
| • |
|
expand the concrete distribution systems and batch plant capacity |
New mining areas
New mining zones and increased mine production require increased ventilation and freeze capacity. In 2014, we continued to upgrade our electrical
infrastructure on surface as part of our plan to address these future needs.
Underground, we began mining in zone 4 north during the fourth quarter of
2014.
Key Lake extension project and mill revitalization
The Key Lake mill began operating in 1983 and we continue to upgrade circuits with new technology to simplify operations and improve environmental performance.
As part of the upgrades, we continued to construct a new calciner circuit, and expect to begin operating with the new calciner in 2015.
The
revitalization plan is expected to allow the mill to increase its annual uranium production capability to closely follow annual production rates from the McArthur River mine.
Tailings capacity
This year, the CNSC approved the Key
Lake extension EA, allowing us to deposit tailings to a higher level in the Deilmann tailing management facility. We now expect to have sufficient tailings capacity to mill all the known McArthur River mineral reserves and resources, should they be
converted to reserves, with additional capacity to toll mill ore from other regional deposits.
Labour relations
The mine and mill experienced a labour disruption that resulted in an unplanned shutdown of the operations for approximately 18 days during the third quarter
of 2014. On October 6, 2014, unionized employees at McArthur River and Key Lake accepted a new four-year contract that includes a 12% wage increase over the term of the agreement. The previous contract expired on December 31, 2013.
Exploration
In 2014, we completed the planned
development advance of the underground exploration drifts and underground delineation drilling.
PLANNING FOR THE FUTURE
Production
We plan to produce 19.6 million pounds in
2015; our share is 13.7 million pounds.
Mill revitalization
In 2015, we expect to complete installation and commissioning of the new calciner.
Exploration
In 2015, we plan to continue advancing the
underground exploration drifts to the southwest and northeast directions. Additional drilling is planned underground to delineate zone A and zone B, and from surface to identify additional mineral resources in the deposit.
2014 ANNUAL
REPORT 57
MANAGING OUR RISKS
Production at McArthur River/Key Lake poses many challenges: control of groundwater, weak rock formations, radiation protection, water inflow, mine area
transitioning, and regulatory approvals. Operational experience gained since the start of production has resulted in a significant reduction in risk.
Transition to new mining areas
In order to successfully
achieve the planned production schedule, we must continue to successfully transition into new mining areas, which includes mine development and investment in critical support infrastructure.
Water inflow risk
The greatest risk is production
interruption from water inflows. A 2003 water inflow resulted in a three-month suspension of production. We also had a small water inflow in 2008 that did not impact production.
The consequences of another water inflow at McArthur River would depend on its magnitude, location and timing, but could include a significant interruption or
reduction in production, a material increase in costs or a loss of mineral reserves.
We take the following steps to reduce the risk of inflows, but there
is no guarantee that these will be successful:
| • |
|
Ground freezing: Before mining, we drill freezeholes and freeze the ground to form an impermeable freezewall around the area being mined. Ground freezing reduces but does not eliminate the risk of water inflows.
|
| • |
|
Mine development: We plan for our mine development to take place away from known groundwater sources whenever possible. In addition, we assess all planned mine development for relative risk and apply extensive
additional technical and operating controls for all higher risk development. |
| • |
|
Pumping capacity and treatment limits: Our standard for this project is to secure pumping capacity of at least one and a half times the estimated maximum sustained inflow. We review our dewatering system and
requirements at least once a year and before beginning work on any new zone. |
We believe we have sufficient pumping, water treatment and
surface storage capacity to handle the estimated maximum sustained inflow.
We also manage the risks listed on pages 51 to 52.
58 CAMECO
CORPORATION
Uranium – operating properties
Cigar Lake
|
|
|
|
|
|
|
2014 Production (our share) |
|
Proportion of 2014 U production
|
|
170,000 lbs |
|
|
2015 Production Outlook (our share) |
|
|
3.0 – 4.0M lbs |
|
|
Estimated Reserves (our share) |
|
|
117.5M lbs |
|
|
Estimated Mine Life |
|
|
2028 |
|
Cigar Lake is the world’s second largest high-grade uranium deposit, with grades that are 100 times the world average. We
are a 50% owner and the mine operator.
Cigar Lake is one of our three material uranium properties.
|
|
|
| Location |
|
Saskatchewan, Canada |
| Ownership |
|
50.025% |
| End product |
|
Uranium concentrates |
| Mine type |
|
Underground |
| Estimated reserves (our share) |
|
117.5 million pounds (proven and probable), average grade U3O8: 17.84% |
| Estimated resources (our share) |
|
2.3 million pounds (measured and indicated), average grade U3O8: 8.84%
52.5 million pounds (inferred), average grade U3O8: 16.22% |
| Mining methods |
|
Jet boring |
| Planned capacity |
|
18.0 million pounds per year (our share 9.0 million pounds per year) |
| Licence term |
|
Through June, 2021 |
| Total production (our share) |
|
0.2 million pounds |
| 2014 production (our share) |
|
0.2 million pounds (0.4 million pounds on 100% basis) |
| 2015 production outlook (our share) |
|
3.0 – 4.0 million pounds (6.0 – 8.0 million pounds on 100% basis) |
| Estimated decommissioning cost
(100% basis ) |
|
$49 million |
BACKGROUND
Development
We began developing the Cigar Lake
underground mine in 2005, but development was delayed due to water inflows. In 2014, we started producing from the mine and processing of the ore began at AREVA’s McClean Lake mill. In October, 2014, the mill produced the first uranium
concentrate from ore mined at the Cigar Lake operation.
Mining method and techniques
We will use a number of innovative methods and techniques to mine the Cigar Lake deposit:
Bulk freezing
The sandstone that overlays the deposit
and basement rocks is water-bearing, with large volumes of water under significant pressure. We will freeze the ore zone and surrounding ground in the area to be mined to prevent water from entering the mine and to help stabilize weak rock
formations.
2014 ANNUAL
REPORT 59
We are using a hybrid freezing approach with a combination of underground and surface freezing, and are
continuing to advance our surface freeze program to support future production. Through 2014, we continued to drill freezeholes from surface, expand the surface freezing infrastructure and put the new freezeholes into operation. To manage our risks
and meet our production schedule, the area being mined must meet specific ground freezing requirements before we begin jet boring.
Jet boring
After many
years of test mining, we selected jet boring, a non-entry mining method, which we have developed and adapted specifically for this deposit. This method involves:
| • |
|
drilling a pilot hole into the frozen orebody, inserting a high pressure water jet and cutting a cavity out of the frozen ore |
| • |
|
collecting the ore and water mixture (slurry) from the cavity and pumping it to storage (sump storage), allowing it to settle |
| • |
|
using a clamshell, transporting the ore from the sump storage to a grinding and processing circuit, eventually loading a tanker truck with ore slurry for transport to the mill |
| • |
|
once mining is complete, filling each cavity in the orebody with concrete |
| • |
|
starting the process again with the next cavity |
Jet boring system (JBS) process
60 CAMECO
CORPORATION
We have divided the orebody into production panels, and will have one jet boring machine operating in a panel; at
least three production panels need to be frozen at one time to achieve the full production rate of 18 million pounds per year by 2018. In order to achieve our 2015 production target and continue ramping up the operation, three jet boring
machines are required; all three are now on site. Later in the mine plan, we may require a fourth jet boring machine to sustain annual production of 18 million pounds.
Milling
All of Cigar Lake’s ore slurry will be
processed at the McClean Lake mill, operated by AREVA. The McClean Lake mill is undergoing modifications and expansion in order to:
| • |
|
operate at Cigar Lake’s targeted annual production level of 18 million pounds U3O8
|
| • |
|
process and package all of Cigar Lake’s current mineral reserves |
The Cigar Lake joint venture is paying
for the capital costs for the modification and expansion.
2014 UPDATE
Production
Total production from Cigar Lake was 340,000
pounds; our share was 170,000 pounds.
During the year, we:
| • |
|
brought the Cigar Lake mine into production |
| • |
|
began processing the ore at AREVA’s McClean Lake mill, which, in the fourth quarter, produced the first uranium concentrate from the Cigar Lake operation |
| • |
|
continued freezing the ground from surface to ensure frozen ore is available for future production years |
Costs (all showing our share)
At the time of first
production in March, 2014, we had:
| • |
|
invested about $1.2 billion for our share of the construction costs to develop Cigar Lake |
| • |
|
expensed about $91 million in remediation expenses |
| • |
|
expensed about $111 million in standby costs |
After production began in March, and to December 31, 2014,
we spent:
| • |
|
$83 million on the McClean Lake mill |
| • |
|
$16 million on standby costs, which were expensed, and ceased August 31, 2014 |
Additional expenditures of
about $60 to $70 million will be required at McClean Lake mill in 2015 in order to continue ramping up to full production.
In addition, during the year,
we spent:
| • |
|
$57 million on operating costs |
| • |
|
$21 million to complete various capital projects at site |
| • |
|
$39 million on underground development |
Some of the costs were capitalized, while others were charged to
inventory, depending on the nature of the activity.
We will continue to capitalize some of the costs at Cigar Lake until such time that commercial
production is reached. Commercial production is reached when management determines that the mine is able to produce at a consistent or sustainably increasing level.
PLANNING FOR THE FUTURE
Production
In 2015, we expect to:
| • |
|
begin commercial production |
| • |
|
have three jet boring machines operating underground |
| • |
|
continue ramping up towards the planned full production rate of 18 million pounds (100% basis) by 2018 |
2014 ANNUAL
REPORT 61
Rampup schedule
We expect Cigar Lake to produce between 6 million and 8 million packaged pounds in 2015; our share is 3 million to 4 million pounds. Based
on our operating experience and productivity during rampup, we will adjust our annual production plans as necessary to allow us to reach our full annual production rate of 18 million pounds (100% basis) by 2018.
Caution regarding forward-looking information
Our
expectations and plans regarding Cigar Lake, including our expected share of 2015 production, achievement of the full annual production rate of 18 million pounds by 2018, and capital costs, are forward-looking information. They are based on the
assumptions and subject to the material risks discussed on pages 2 and 3, and specifically on these assumptions and risks:
Assumptions
| |
• |
|
our Cigar Lake development, mining and production plans succeed |
| |
• |
|
there is no material delay or disruption in our plans as a result of ground movements, cave-ins, additional water inflows, a failure of seals or plugs used for previous water inflows, natural phenomena, delay in
acquiring critical equipment, equipment failure or other causes |
| |
• |
|
there are no labour disputes or shortages |
| |
• |
|
our bulk ground freezing program progresses fast enough to deliver sufficient frozen ore to meet production targets |
| |
• |
|
our expectation that the jet boring mining method will be successful and that we will be able to solve technical challenges as they arise in a timely manner |
| |
• |
|
our expectation that the third jet boring machine will be operational on schedule in 2015 and operate as expected |
| |
• |
|
we obtain contractors, equipment, operating parts, supplies, regulatory permits and approvals when we need them |
| |
• |
|
modification and expansion of the McClean Lake mill is completed as planned and the mill is able to process Cigar Lake ore as expected, AREVA will be able to solve technical challenges as they arise in a timely manner,
and sufficient tailings facility capacity is available
|
| |
• |
|
our mineral reserves estimate and the assumptions it is based on are reliable |
Material risks
| |
• |
|
an unexpected geological, hydrological or underground condition or an additional water inflow, further delays our progress |
| |
• |
|
ground movements or cave-ins |
| |
• |
|
we cannot obtain or maintain the necessary regulatory permits or approvals |
| |
• |
|
natural phenomena, labour disputes, equipment failure, delay in obtaining the required contractors, equipment, operating parts and supplies or other reasons cause a material delay or disruption in our plans
|
| |
• |
|
sufficient tailings facility capacity is not available |
| |
• |
|
our mineral reserves estimate is not reliable |
| |
• |
|
our development, mining or production plans for Cigar Lake are delayed or do not succeed for any reason, including technical difficulties with the jet boring mining method or freezing the deposit to meet production
targets, the third jet boring machine does not go into operation on schedule in 2015 or operate as expected, technical difficulties with the McClean Lake mill modifications or expansion or milling Cigar Lake ore
|
MANAGING OUR RISKS
Cigar Lake is a challenging deposit to develop and mine. These challenges include control of groundwater, weak rock formations, radiation protection, water
inflow, mining method uncertainty, regulatory approvals, tailings capacity, surface and underground fires and other mining-related challenges. To reduce this risk, we are applying our operational experience and the lessons we have learned about
water inflows at McArthur River and Cigar Lake.
Jet boring mining method
Although we have successfully demonstrated the jet boring mining method in trials and initial mining to date, this method has not been proven at full
production and we continue with commissioning work to determine if the method is capable of achieving the designed annual production rate. Mining has been completed on a limited number of cavities that may not be representative of the deposit as a
whole. As we ramp up production, there may be some technical challenges, which could affect our production plans including, but not limited to, variable or unanticipated ground conditions, ground movement and cave-ins, water inflows and variable
dilution, recovery values and mining productivity. There is a risk that the rampup to full production may take longer than planned and that the full production rate may not be achieved on a sustained and consistent basis. We are confident we will be
able to solve challenges that may arise, but failure to do so would have a significant impact on our business.
62 CAMECO
CORPORATION
We brought the mine into production using one jet boring machine. To reach our 2015 production target and the
full production rate of 18 million pounds per year by 2018 (100% basis), our mine plan requires three jet boring machines. We currently have all three machines on site, with two in operation underground and the third expected to be in operation
underground in 2015. We are assessing whether a fourth jet boring machine will be required to sustain annual production of 18 million pounds, later in the mine life.
Ground freezing
To manage our risks and meet our
production schedule, the areas being mined must meet specific ground freezing requirements before we begin jet boring. We have identified greater variation of the freeze rates of different geological formations encountered in the mine, based on new
information obtained through surface freeze drilling. As a mitigation measure, we have increased the site freeze capacity to facilitate the extraction of ore cavities as planned.
Mill modifications
There is a risk to our plan to
achieve the full production rate of 18 million pounds per year by 2018 if AREVA is unable to complete and commission the required mill modification and expansion on schedule. We are working closely with AREVA to understand and help mitigate the
risks to ensure that mine and mill production schedules are aligned.
Water inflow risk
A significant risk to development and production is from water inflows. The 2006 and 2008 water inflows were significant setbacks.
The consequences of another water inflow at Cigar Lake would depend on its magnitude, location and timing, but could include a significant delay or disruption
in Cigar Lake production, a material increase in costs or a loss of mineral reserves.
We take the following steps to reduce the risk of inflows, but
there is no guarantee that these will be successful:
| • |
|
Bulk freezing: Two of the primary challenges in mining the deposit are control of groundwater and ground support. Bulk freezing reduces but does not completely eliminate the risk of water inflows. |
| • |
|
Mine development: We plan for our mine development to take place away from known groundwater sources whenever possible. In addition, we assess all planned mine development for relative risk and apply extensive
additional technical and operating controls for all higher risk development. |
| • |
|
Pumping capacity and treatment limits: We have pumping capacity to meet our standard for this project of at least one and a half times the estimated maximum inflow. |
We believe we have sufficient pumping, water treatment and surface storage capacity to handle the estimated maximum inflow.
We also manage the risks listed on pages 51 to 52.
2014 ANNUAL
REPORT 63
Uranium – operating properties
Inkai
|
|
|
|
|
|
|
2014 Production (our share) |
|
Proportion of 2014 U production
|
|
2.9M lbs |
|
|
2015 Production Outlook (our share) |
|
|
3.0M lbs |
|
|
Estimated Reserves (our share) |
|
|
45.6M lbs |
|
|
Estimated Mine Life |
|
|
2030 *(based on licence term) |
|
Inkai is a very significant uranium deposit, located in Kazakhstan. There are two production areas (blocks 1 and 2) and an
exploration area (block 3). The operator is joint venture Inkai limited liability partnership, which we jointly own (60%) with Kazatomprom (40%).
Inkai is one of our three material uranium properties.
|
|
|
| Location |
|
South Kazakhstan |
| Ownership |
|
60% |
| End product |
|
Uranium concentrates |
| Certifications |
|
BSI OHSAS 18001
ISO 14001 certified |
| Estimated reserves (our share) |
|
45.6 million pounds (proven and probable), average grade U3O8: 0.07% |
| Estimated resources (our share) |
|
30.0 million pounds (indicated), average grade
U3O8: 0.08%
145.9 million pounds (inferred), average grade U3O8: 0.05% |
| Mining methods |
|
In situ recovery (ISR) |
| Licensed capacity (wellfields) |
|
5.2 million pounds per year (our share 3.0 million pounds per year) |
| Licence term |
|
Block 1: 2024, Block 2: 2030 |
| Total production: 2008 to 2014 (our share) |
|
14.9 million pounds |
| 2014 production (our share) |
|
2.9 million pounds (5.1 million pounds on 100% basis) |
| 2015 production outlook (our share) |
|
3.0 million pounds (5.2 million pounds on 100% basis) |
| Estimated decommissioning cost
(100% basis ) |
|
$9 million (US) |
2014 UPDATE
Production
Total production from Inkai was
5.1 million pounds; our share was 2.9 million pounds. Production was 3% lower than both our forecast for the year and our production in 2013. Inkai experienced delays in bringing on new wellfields as a result of abnormally heavy snowfall
and a rapid spring melt in 2014.
Project funding
We
have a loan agreement with Inkai whereby we funded Inkai’s project development costs. As of December 31, 2014, there was $55 million (US) of principal outstanding on the loan. In 2014, Inkai paid $1.8 million (US) in interest on the loan
and repaid $48 million (US) of principal.
Under the loan agreement, Inkai first uses cash available every year to pay accrued interest, then uses 80% of
the remaining cash available for distribution to repay principal outstanding on the loan. The remaining 20% is distributed as dividends to the owners.
64 CAMECO
CORPORATION
We are also currently advancing funds for Inkai’s work on block 3. As of December 31, 2014, the block 3
loan principal amounted to $136 million (US).
Production expansion
In 2012, we entered into a binding memorandum of agreement (2012 MOA) with our joint venture partner, Kazatomprom, setting out a framework to:
| • |
|
increase Inkai’s annual production from blocks 1 and 2 to 10.4 million pounds (our share 5.2 million pounds) and sustain it at that level |
| • |
|
extend the term of Inkai’s resource use contract through 2045 |
Kazatomprom is pursuing a strategic
objective to develop uranium processing capacity in Kazakhstan to complement its leading uranium mining operations. Their primary focus is now on uranium refining, which is an intermediate step in the uranium conversion process. A Nuclear
Cooperation Agreement between Canada and Kazakhstan is in place, providing the international framework necessary for applying to the two governments for the required licences and permits. We expect to pursue further expansion of production at Inkai
at a pace measured to market opportunities. Discussions continue with Kazatomprom.
Block 3 exploration
In 2014, Inkai continued construction of the test leach facility and test wellfields, and advanced work on a preliminary appraisal of the mineral potential
according to Kazakhstan standards.
PLANNING FOR THE FUTURE
Production
We expect total production from blocks 1 and 2
to be 5.2 million pounds in 2015; our share is 3.0 million pounds. We expect to maintain production at this level until the potential expansion under the 2012 MOA proceeds.
Block 3 exploration
In 2015, Inkai expects to complete
construction of the test leach facility and continue working on a final appraisal of the mineral potential according to Kazakhstan standards.
MANAGING
OUR RISKS
Supply of sulphuric acid
There were
minor weather-related interruptions to sulphuric acid supply during 2014. Given the importance of sulphuric acid to Inkai’s mining operations and shortages in previous years, we closely monitor its availability. Our production may be less than
forecast if there is a shortage.
Block 3 Licence Extension
Inkai is working to extend the term of its current exploration licence, which expires in July, 2015. Although a number of extensions of the licence term have
been granted by Kazakh regulatory authorities in the past, there is no assurance that a further extension will be granted. Without such extension, there is a risk we could lose our rights to block 3, and a risk we will not be compensated for the
funds we advanced to Inkai to fund block 3 activities.
Political risk
Kazakhstan declared itself independent in 1991 after the dissolution of the Soviet Union. Our Inkai investment and plans to increase production are subject to
the risks associated with doing business in developing countries, which have significant potential for social, economic, political, legal and fiscal instability. Kazakh laws and regulations are complex and still developing and their application can
be difficult to predict. To maintain and increase Inkai production, we need ongoing support, agreement and co-operation from our partner and the government.
2014 ANNUAL
REPORT 65
The principal legislation governing subsoil exploration and mining activity in Kazakhstan is the Subsoil Use Law
dated June 24, 2010, and amended on December 29, 2014 (new subsoil law). It replaces the Law on the Subsoil and Subsoil Use, dated January 27, 1996.
In general, Inkai’s licences are governed by the version of the subsoil law that was in effect when the licences were issued in April 1999, and new
legislation applies to Inkai only if it does not worsen Inkai’s position. Changes to legislation related to national security, among other criteria, however, are exempt from the stabilization clause in the resource use contract. The Kazakh
government interprets the national security exemption broadly.
With the new subsoil law, the government continues to weaken its stabilization guarantee.
The government is broadly applying the national security exception to encompass security over strategic national resources.
The resource use contract
contains significantly broader stabilization provisions than the new subsoil law, and these contract provisions currently apply to us.
To date, the new
subsoil law has not had a significant impact on Inkai. We continue to assess the impact. See our annual information form for an overview of this change in law.
We also manage the risks listed on pages 51 to 52.
66 CAMECO
CORPORATION
Uranium – operating properties
Rabbit Lake
|
|
|
|
|
|
|
2014 Production
4.2M lbs
2015 Production Outlook
3.9M lbs
Estimated Reserves
15.2M lbs |
|
Proportion of 2014 U production
|
|
|
|
|
|
|
|
|
|
|
The Rabbit Lake operation, which opened in 1975, is the longest operating uranium production facility in North America, and
the second largest uranium mill in the world.
|
|
|
| Location |
|
Saskatchewan, Canada |
| Ownership |
|
100% |
| End product |
|
Uranium concentrates |
| ISO certification |
|
ISO 14001 certified |
| Mine type |
|
Underground |
| Estimated reserves |
|
15.2 million pounds (proven and probable), average grade U3O8: 0.61% |
| Estimated resources |
|
22.2 million pounds (indicated), average grade
U3O8: 0.75%
25.9 million pounds (inferred), average grade U3O8: 0.58% |
| Mining methods |
|
Vertical blasthole stoping |
| Licensed capacity |
|
Mill: maximum 16.9 million pounds per year; currently 11 million |
| Licence term |
|
Through October, 2023 |
| Total production: 1975 to 2014 |
|
198.4 million pounds |
| 2014 production |
|
4.2 million pounds |
| 2015 production outlook |
|
3.9 million pounds |
| Estimated decommissioning cost |
|
$203 million |
2014 UPDATE
Production
Production this year was 2% higher than both
our forecast and our 2013 production as a result of planned timing of production stopes, coupled with slightly improved ore grades.
Development and
production continued at Eagle Point mine. At the mill, we continued to improve performance by replacing key pieces of mill infrastructure and improving the efficiency of the mill operation schedule. The mill ran continuously for eight months and
maintenance work was completed during an extended four-month summer shutdown period.
Impairment
In 2014, we recognized a $126 million impairment charge related to our Rabbit Lake operation. The impairment was due to the deferral of various projects that
were related to planned production over the remaining life of the Eagle Point mine. The amount of the charge was determined as the excess of the carrying value over the recoverable amount. The recoverable amount of the mine was determined to be $29
million. See note 10 to the financial statements.
2014 ANNUAL
REPORT 67
Exploration
We continued our underground drilling program to delineate resources northeast of the current mine workings, and below active mining areas. As a result,
we added additional resources at Rabbit Lake. See Mineral reserves and resources on page 79 for more information.
PLANNING FOR THE
FUTURE
Production
We expect to produce
3.9 million pounds in 2015.
Tailings capacity
We expect to have sufficient tailings capacity to support milling of Eagle Point ore until about 2018 (based upon expected ore tonnage and milling rates).
In 2015, we are continuing to evaluate options, including expansion of the existing Rabbit Lake In-pit Tailings Management Facility, or a possible north pit
expansion to allow for tailings deposition into the future. An expansion of existing tailings capacity is required to support future mining at Eagle Point, and provide additional tailings capacity to process ore from other potential sources.
Depending upon the chosen option, we may need an environmental assessment and regulatory approval to proceed with any increase in capacity.
Exploration
We plan to continue our underground drilling
reserve replacement program in areas of interest east and northeast of the mine in 2015. The drilling will be carried out from underground locations.
Reclamation
As part of our multi-year site-wide
reclamation plan, we spent over $0.9 million in 2014 to reclaim facilities that are no longer in use and plan to spend over $0.5 million in 2015.
MANAGING OUR RISKS
We manage the risks listed on pages
51 to 52.
68 CAMECO
CORPORATION
Uranium – operating properties
Smith Ranch-Highland & Satellite Facilities
|
|
|
|
|
|
|
2014 Production
2.1M lbs
2015 Production Outlook
1.4M lbs
Estimated Reserves
7.7M lbs |
|
Proportion of 2014 U production
|
|
|
|
|
|
|
|
|
|
|
We operate Smith Ranch and Highland as a combined operation. Each has its own processing facility, but the Smith Ranch central
plant currently processes all the uranium, including uranium from satellite facilities. The Highland plant is currently idle. Together, they form the largest uranium production facility in the United States.
|
|
|
| Location |
|
Wyoming, US |
| Ownership |
|
100% |
| End product |
|
Uranium concentrates |
| ISO certification |
|
ISO 14001 certified |
| Estimated reserves |
|
Smith Ranch-Highland:
4.8 million pounds (proven and probable), average grade U3O8: 0.09% North Butte-Brown Ranch:
2.9 million pounds (proven and probable), average grade U3O8: 0.08% |
| Estimated resources |
|
Smith Ranch-Highland:
21.6 million pounds (measured and indicated), average grade
U3O8: 0.06%
7.9 million pounds (inferred), average grade U3O8: 0.05% North Butte-Brown Ranch
8.8 million pounds (measured and indicated), average grade U3O8: 0.07% 0.4 million pounds (inferred), average grade U3O8: 0.07% |
| Mining methods |
|
In situ recovery (ISR) |
| Licensed capacity |
|
Wellfields: 3 million pounds per year
Processing plants: 5.5 million pounds per year, including Highland mill |
| Licence term |
|
Pending renewal – see Production below |
| Total production: 2002 to 2014 |
|
19.7 million pounds |
| 2014 production |
|
2.1 million pounds |
| 2015 production outlook |
|
1.4 million pounds |
| Estimated decommissioning cost |
|
Smith Ranch-Highland: $198 million (US)
North Butte: $22 million (US) |
2014 UPDATE
Production
Production this year was 5% higher than our
forecast and 24% higher than 2013 production, with new mine units and the North Butte satellite contributing to production at Smith Ranch-Highland in 2014.
The regulators continue to review our licence renewal application. We are allowed to continue with all previously approved activities during the licence
renewal process.
PLANNING FOR THE FUTURE
Production
In 2015, we expect to produce 1.4 million
pounds. The decrease is a result of market conditions, which led us to defer some wellfield development.
MANAGING OUR RISKS
We manage the risks listed on pages 51 to 52.
2014 ANNUAL
REPORT 69
Uranium – operating properties
Crow Butte
|
|
|
|
|
|
|
2014 Production
0.6M lbs
2015 Production Outlook
0.3M lbs
Estimated Reserves
1.7M lbs |
|
Proportion of 2014 U production
|
|
|
|
|
|
|
|
|
|
|
Crow Butte was discovered in 1980 and began production in 1991. It is the first uranium mine in Nebraska, and is a significant
contributor to the economy of northwest Nebraska.
|
|
|
| Location |
|
Nebraska, US |
| Ownership |
|
100% |
| End product |
|
Uranium concentrates |
| ISO certification |
|
ISO 14001 certified |
| Estimated reserves |
|
1.7 million pounds (proven), average grade U3O8: 0.10% |
| Estimated resources |
|
14.6 million pounds (indicated), average grade
U3O8: 0.27%
2.9 million pounds (inferred), average grade U3O8: 0.12% |
| Mining methods |
|
In situ recovery (ISR) |
| Licensed capacity (processing plants and
wellfields) |
|
2.0 million pounds per year |
| Licence term |
|
Through October, 2024 |
| Total production: 2002 to 2014 |
|
9.7 million pounds |
| 2014 production |
|
0.6 million pounds |
| 2015 production outlook |
|
0.3 million pounds |
| Estimated decommissioning cost |
|
$45 million (US) |
2014 UPDATE
Production
Production this year was as forecast, but 14%
lower than 2013 production due to declining head grade.
The US Nuclear Regulatory Commission renewed our operating licence for Crow Butte during the
fourth quarter of 2014. The new licence is valid for ten years, through October, 2024.
PLANNING FOR THE FUTURE
Production
In 2015, we expect to produce 0.3 million
pounds. The head grade and overall production at Crow Butte is expected to continue to decline, as there are no new wellfields being developed under the current mine plan.
MANAGING OUR RISKS
We manage the risks listed on pages
51 to 52.
70 CAMECO
CORPORATION
Uranium – projects under evaluation
We continue to advance our projects under evaluation toward development decisions at a pace aligned with market opportunities in order to respond should the
market signal a need for more uranium.
The process includes several defined decision points in the assessment and development stages. At each point, we
re-evaluate the project based on current economic, competitive, social, legal, political and environmental considerations. If it continues to meet our criteria, we proceed to the next stage. This process allows us to build a pipeline of projects
ready for a production decision and minimize expenditures on projects whose feasibility has not yet been determined.
Millennium
|
|
|
| Location |
|
Saskatchewan, Canada |
| Ownership |
|
69.9% |
| End product |
|
Uranium concentrates |
| Potential mine type |
|
Underground |
| Estimated resources (our share) |
|
53.0 million pounds (indicated), average grade U3O8: 2.39% 20.2 million pounds (inferred), average grade
U3O8: 3.19% |
BACKGROUND
The
Millennium deposit was discovered in 2000, and was delineated through geophysical survey and drilling work between 2000 and 2013. In 2012, we paid $150 million to acquire AREVA’s 27.94% interest in the project, bringing our interest in the
project to 69.9%. We are the operator.
2014 UPDATE
We have submitted the final environmental impact statement to regulators, and in 2014, we were expecting a decision from the CNSC on a construction and
operating licence for Millennium. However, we requested an adjournment of the public hearing, as moving the process forward at this time is not justified in the current uranium price environment. Based on our current assessment of the uranium
market, we do not expect the deferral of the CNSC hearing will impair our ability to quickly advance Millennium to a development decision when the market signals the need for additional production.
Yeelirrie
|
|
|
| Location |
|
Western Australia |
| Ownership |
|
100% |
| End product |
|
Uranium concentrates |
| Potential mine type |
|
Open pit |
| Estimated resources |
|
127.3 million pounds (measured and indicated), average grade U3O8: 0.16% |
BACKGROUND
In 2012, we
paid $430 million (US) (as well as $22 million (US) in stamp duty) to acquire the Yeelirrie uranium deposit. The deposit was discovered in 1972 and is a near-surface calcrete-style deposit that is amenable to open pit mining techniques. It is one of
Australia’s largest undeveloped uranium deposits.
2014 ANNUAL
REPORT 71
2014 UPDATE
This year, we:
| • |
|
continued studies to assess the technical, environmental and financial aspects of the project |
| • |
|
commenced environmental approvals during the fourth quarter to ensure we are able to advance the project quickly, should the market signal a need for more uranium |
Kintyre
|
|
|
| Location |
|
Western Australia |
| Ownership |
|
70% |
| End product |
|
Uranium concentrates |
| Potential mine type |
|
Open pit |
| Estimated resources (our share) |
|
38.7 million pounds (indicated), average grade U3O8: 0.58% 6.7 million pounds (inferred), average grade
U3O8: 0.46% |
BACKGROUND
In 2008, we
paid $346 million (US) to acquire a 70% interest in Kintyre. The Kintyre deposit is amenable to open pit mining techniques. In 2012, we recorded a $168 million write-down of the carrying value of our interest, due to a weakened uranium market. We
are the operator.
2014 UPDATE
This year:
| • |
|
we carried out further exploration to test for potential satellite deposits at Kintyre and other regional exploration projects close to Kintyre, which did not produce any significant results |
| • |
|
Western Australia’s Environmental Protection Authority recommended conditional approval of the project’s Environmental Review and Management Program; state and federal ministerial approvals are pending
|
MANAGING THE RISKS
For all of our
projects under evaluation, we manage the risks listed on pages 51 to 52.
72 CAMECO
CORPORATION
Uranium – exploration and corporate development
Our exploration program is directed at replacing mineral reserves as they are depleted by our production, and ensuring our future growth. We have maintained an
active program even during periods of weak uranium prices, which has helped us secure land with exploration and development prospects that are among the best in the world, mainly in Canada, Australia, Kazakhstan and the US. Globally, our land
holdings total 1.7 million hectares (4.2 million acres). In northern Saskatchewan alone, we have direct interests in 584,000 hectares (1.4 million acres) of land covering many of the most prospective exploration areas of the Athabasca Basin.
Many of our prospects are located close to our existing operations where we have established infrastructure and capacity to expand.
For properties that
meet our investment criteria, we may partner with other companies through strategic alliances, equity holdings and traditional joint venture arrangements. Our leadership position and industry expertise in both exploration and corporate social
responsibility make us a partner of choice.
In 2014, we continued our exploration strategy of focusing on the most prospective Canadian and Australian
projects in our portfolio. Exploration is key to ensuring our long-term growth, and since 2008, we have continued to invest in exploring the land we hold.
2014 UPDATE
Brownfield exploration
Brownfield exploration is uranium
exploration near our existing operations, and includes expenses for advanced exploration projects where uranium mineralization is being defined.
This
year we spent $4.1 million on six brownfield exploration projects, $5.5 million on our projects under evaluation in Australia, and $5.0 million for resource definition at Inkai and at our US operations.
Regional exploration
We spent about $32 million on
regional exploration programs (including support costs), primarily in Saskatchewan and Australia.
PLANNING FOR THE FUTURE
We plan to maintain an active uranium exploration program and continue to focus on our core projects in Saskatchewan under our long-term exploration strategy.
Brownfield exploration
In 2015, we plan to spend
approximately $2.8 million on brownfield exploration in Saskatchewan and Australia. Our expenditures on projects under evaluation are expected to total $5 million.
2014 ANNUAL
REPORT 73
Regional exploration
We plan to spend about $25.6 million on 23 projects in Canada and Australia, the majority of which are at drill target stage. Among the larger expenditures
planned is $6.9 million on the Read Lake project, which is adjacent to McArthur River in Saskatchewan.
ACQUISITION PROGRAM
We have a dedicated team looking for acquisition opportunities within the nuclear fuel cycle that could further add to our supply, support our sales
activities, and complement and enhance our business in the nuclear industry. We will invest when an opportunity is available at the right time and the right price. We strive to pursue corporate development initiatives that will leave us and our
shareholders in a fundamentally stronger position.
An acquisition opportunity is never assessed in isolation. Acquisitions must compete for investment
capital with our own internal growth opportunities. They are subject to our capital allocation process described on page 15. Currently, given the conditions in the uranium market, and our extensive portfolio of reserves and resources, our focus is
on those projects in our portfolio that provide us with the greatest certainty in the near term.
74 CAMECO
CORPORATION
Fuel services
Refining, conversion and fuel manufacturing
We control
about 20% of world UF6 conversion capacity and are a supplier of natural UO2. Our focus is on cost-competitiveness and operational
efficiency.
Our fuel services segment is strategically important because it helps support the growth of the uranium segment. Offering a range of products
and services to customers helps us broaden our business relationships and expand our uranium market share.
Blind River Refinery
|
|
|
|
|
Licensed Capacity
24.0M kgU of UO3 |
Blind River is the world’s largest commercial uranium refinery, refining uranium concentrates from mines around the world
into UO3.
|
|
|
| Location |
|
Ontario, Canada |
| Ownership |
|
100% |
| End product |
|
UO3 |
| ISO certification |
|
ISO 14001 certified |
| Licensed capacity |
|
24.0 million kgU as UO3 per year (subject to the completion of certain equipment upgrades) |
| Licence term |
|
Through February, 2022 |
| Estimated decommissioning cost |
|
$39 million |
2014 UPDATE
Production
Our Blind River refinery produced
8.9 million kgU of UO3 this year, enabling our conversion business to achieve its production targets.
MANAGING OUR RISKS
We manage the risks listed on pages
51 to 52.
2014 ANNUAL
REPORT 75
Port Hope Conversion Services
|
|
|
|
|
Licensed Capacity
12.5M kgU of UF6
2.8M kgU of UO2 |
Port Hope is the only uranium conversion facility in Canada and a supplier of UO2 for Canadian-made CANDU reactors.
|
|
|
| Location |
|
Ontario, Canada |
| Ownership |
|
100% |
| End product |
|
UF6, UO2 |
| ISO certification |
|
ISO 14001 certified |
| Licensed capacity |
|
12.5 million kgU as UF6 per year
2.8 million kgU as UO2 per year |
| Licence term |
|
Through February, 2017 |
| Estimated decommissioning cost |
|
$102 million |
Cameco Fuel Manufacturing Inc. (CFM)
CFM produces fuel bundles and reactor components for CANDU reactors.
|
|
|
| Location |
|
Ontario, Canada |
| Ownership |
|
100% |
| End product |
|
CANDU fuel bundles and components |
| ISO certification |
|
ISO 9001 certified, ISO 14001 certified |
| Licensed capacity |
|
1.2 million kgU as UO2 as finished bundles |
| Licence term |
|
Through February, 2022 |
| Estimated decommissioning cost |
|
$20 million |
2014 UPDATE
Production
Fuel services produced 11.6 million kgU,
lower than our plan at the beginning of the year and 22% lower than 2013. This was a result of a decision to decrease production in response to weak market conditions.
Port Hope conversion facility cleanup and modernization (Vision in Motion)
The Vision in Motion project entered the feasibility stage in late 2014. We will continue with the CNSC licensing process in 2015, which is required to advance
the project.
Springfields toll milling agreement
In
2014, amid the continued weak market for UF6 conversion, we paid $18 million to SFL to permit early termination of our toll-conversion agreement. Production for Cameco at the Springfields
facility in the United Kingdom ceased on August 31, 2014, and the agreement ended December 31, 2014.
76 CAMECO
CORPORATION
PLANNING FOR THE FUTURE
Production
We have decreased our production target for
2015 to between 9 million and 10 million kgU in response to weak market conditions.
Labour Relations
The current collective bargaining agreement for our unionized employees at CFM expires on June 1, 2015. We will commence the bargaining process in early
2015.
MANAGING OUR RISKS
We also manage the risks
listed on pages 51 to 52.
2014 ANNUAL
REPORT 77
NUKEM GmbH
|
|
|
| Offices |
|
Alzenau, Germany (Headquarters, NUKEM GmbH)
Connecticut, US (Subsidiary, NUKEM Inc.) |
| Ownership |
|
100% |
| Activity |
|
Trading of uranium and uranium-related products |
| 2014 sales |
|
8.11 million pounds U3O8 |
| 2015 forecast sales |
|
7 to 8 million pounds U3O8 |
| 1 |
Includes sales of 1.1 million pounds and revenue of $43 million between our uranium, fuel services and NUKEM segments. |
BACKGROUND
In 2013, we acquired NUKEM, one of the
world’s leading traders of uranium and uranium-related products. On closing, we paid €107 million ($140 million (US)) and assumed NUKEM’s net debt of about €84 million ($111 million (US)).
NUKEM has access to contracted volumes and inventories in diverse geographic locations as well as scope for opportunistic trading of uranium and
uranium-related products. This enables NUKEM to provide a wide range of solutions to its customers that may fall outside the scope of typical uranium sourcing and selling arrangements. Its trading strategy is non-speculative and seeks to match
quantities and pricing structures of its long-term supply and delivery contracts, minimizing exposure to commodity price fluctuations and locking in profit margins.
NUKEM’s main customers are commercial nuclear power plants using enriched uranium fuel, typically large utilities that are either government owned, or
large-scale utilities with multibillion-dollar market capitalizations and strong credit ratings. NUKEM also trades with converters, enrichers, other traders and investors.
NUKEM’s business model
NUKEM’s purchase
contracts are with long-standing supply partners and its sales contracts are with blue-chip utilities which have strong credit ratings.
MANAGING OUR
RISKS
NUKEM manages the risks associated with trading and brokering nuclear fuels and services. It participates in the uranium spot market, making
purchases to place material in higher price contracts. There are risks associated with these spot market purchases including the risk of losses. NUKEM is also subject to counterparty risk of suppliers not meeting their delivery commitments and
purchasers not paying for the product delivered. If a counterparty defaults on a payment or other obligation or becomes insolvent, this could significantly affect NUKEM’s contribution to our earnings, cash flows, financial condition or results
of operations.
78 CAMECO
CORPORATION
Mineral reserves and resources
Our mineral reserves and resources are the foundation of our company and fundamental to our success.
We have interests in a number of uranium properties. The tables in this section show our estimates of the proven and probable reserves, measured, indicated,
and inferred resources at those properties. However, only three of the properties listed in those tables are material uranium properties for us: McArthur River, Cigar Lake and Inkai.
We estimate and disclose mineral reserves and resources in five categories, using the definitions adopted by the Canadian Institute of Mining,
Metallurgy and Petroleum, and in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (NI 43-101), developed by the Canadian Securities Administrators. You can find out more about these
categories at www.cim.org.
About mineral resources
Mineral resources do not have demonstrated economic viability, but have reasonable prospects for eventual economic extraction. They fall into three categories:
measured, indicated and inferred. Our reported mineral resources are exclusive of mineral reserves.
| • |
|
Measured and indicated mineral resources can be estimated with sufficient confidence to allow the appropriate application of technical, economic, marketing, legal, environmental, social and governmental factors to
support evaluation of the economic viability of the deposit. |
| • |
|
measured resources: we can confirm both geological and grade continuity to support detailed mine planning. |
| • |
|
indicated resources: we can reasonably assume geological and grade continuity to support mine planning. |
| • |
|
Inferred mineral resources are estimated using limited information. We do not have enough confidence to evaluate their economic viability in a meaningful way. You should not assume that all or any part of an inferred
mineral resource will be upgraded to an indicated or measured mineral resource but it is reasonably expected that the majority of inferred mineral resources could be upgraded to indicated mineral resources with continued exploration.
|
Our share of uranium in the following mineral resource tables is based on our respective ownership interests, except for Inkai which is
based on our interest in potential production (57.5%), which differs from our ownership interest (60%). Mineral resources that are not mineral reserves have no demonstrated economic viability.
About mineral reserves
Mineral reserves are the
economically mineable part of measured and/or indicated mineral resources demonstrated by at least a preliminary feasibility study. The reference point at which mineral reserves are defined is the point where the ore is delivered to the processing
plant. Mineral reserves fall into two categories:
| • |
|
proven reserves: the economically mineable part of a measured resource for which at least a preliminary feasibility study demonstrates that economic extraction is justified |
| • |
|
probable reserves: the economically mineable part of a measured and/or indicated resource for which at least a preliminary feasibility study demonstrates that economic extraction is justified |
We use current geological models, an average uranium price of $70 (US) per pound U3O8, and current or projected operating costs and mine plans to estimate our mineral reserves, allowing for dilution and mining losses. We apply our standard data verification process for every
estimate.
Our share of uranium in the mineral reserves table below is based on our respective ownership interests, except for Inkai which is based on our
interest in planned production (57.5%) assuming an annual production rate of 5.2 million pounds, which differs from our ownership interest (60%).
2014 ANNUAL
REPORT 79
RESERVES, MEASURED AND INDICATED (M+I) RESOURCES, INFERRED RESOURCES (WITH CHANGE
FROM 2013)
at December 31, 2014
Changes this year
Our
share of proven and probable mineral reserves went from 443 million pounds U3O8 at the end of 2013 to 429 million pounds at the
end of 2014. The change in reserves was mainly the result of:
| • |
|
production, which removed 24.5 million pounds from our mineral inventory, including first production from Cigar Lake |
| • |
|
additional drilling information at Cigar Lake from surface freezeholes |
Measured and indicated mineral
resources decreased from 391 million pounds U3O8 at the end of 2013 to 379 million pounds at the end of 2014. Our share of
inferred mineral resources is 311 million pounds U3O8, an increase of 22 million pounds from the end of 2013
The variance in mineral resources was mainly the result of:
| • |
|
the addition of 1.9 million pounds of indicated resources and 16.8 million pounds of inferred resources at Rabbit Lake, primarily from delineation drilling |
| • |
|
the removal of Dawn Lake mineral resources of 7.4 million pounds from our inventory due to uncertainty with the historical drilling data |
| • |
|
the re-interpretation, estimate and categorization of Gas Hills/Peach resources |
Qualified persons
The technical and scientific information discussed in this MD&A for our material properties (McArthur River/Key Lake, Inkai and Cigar Lake) was approved by
the following individuals who are qualified persons for the purposes of NI 43-101:
MCARTHUR RIVER/KEY LAKE
| • |
|
Alain G. Mainville, director, mineral resources management, Cameco |
| • |
|
David Bronkhorst, vice-president, mining and technology, Cameco |
| • |
|
Les Yesnik, general manager, Cigar Lake, Cameco |
| • |
|
Baoyao Tang, technical superintendent, McArthur River, Cameco
|
CIGAR LAKE
| • |
|
Alain G. Mainville, director, mineral resources management, Cameco |
| • |
|
Scott Bishop, manager, technical services, Cameco |
| • |
|
Eric Paulsen, chief metallurgist, technical services, Cameco |
INKAI
| • |
|
Alain G. Mainville, director, mineral resources management, Cameco |
| • |
|
Darryl Clark, general manager, JV Inkai |
| • |
|
Lawrence Reimann, manager, technical services, Cameco Resources |
| • |
|
Bryan Soliz, principal geologist, mineral resources management, Cameco |
80 CAMECO
CORPORATION
Important information about mineral reserve and resource estimates
Although we have carefully prepared and verified the mineral reserve and resource figures in this document, the figures are estimates, based in part on
forward-looking information.
Estimates are based on our knowledge, mining experience, analysis of drilling results, the quality of available data and
management’s best judgment. They are, however, imprecise by nature, may change over time, and include many variables and assumptions, including:
| • |
|
geological interpretation |
| • |
|
commodity prices and currency exchange rates |
| • |
|
operating and capital costs |
There is no assurance that the indicated levels of uranium will be produced, and
we may have to re-estimate our mineral reserves based on actual production experience. Changes in the price of uranium, production costs or recovery rates could make it unprofitable for us to operate or develop a particular site or sites for a
period of time. See page 2 for information about forward-looking information.
Please see our mineral reserves and resources section of our annual
information form for the specific assumptions, parameters and methods used for McArthur River, Inkai and Cigar Lake mineral reserve and resource estimates.
Important information for US investors
While the terms
measured, indicated and inferred mineral resources are recognized and required by Canadian securities regulatory authorities, the US Securities and Exchange Commission (SEC) does not recognize them. Under US standards, mineralization may not be
classified as a ‘reserve’ unless it has been determined at the time of reporting that the mineralization could be economically and legally produced or extracted. US investors should not assume that:
| • |
|
any or all of a measured or indicated mineral resource will ever be converted into proven or probable mineral reserves |
| • |
|
any or all of an inferred mineral resource exists or is economically or legally mineable, or will ever be upgraded to a higher category. Under Canadian securities regulations, estimates of inferred resources may not
form the basis of feasibility or pre-feasibility studies. Inferred resources have a great amount of uncertainty as to their existence and economic and legal feasibility. |
The requirements of Canadian securities regulators for identification of ‘reserves’ are also not the same as those of the SEC, and mineral reserves
reported by us in accordance with Canadian requirements may not qualify as reserves under SEC standards.
Other information concerning descriptions of
mineralization, mineral reserves and resources may not be comparable to information made public by companies that comply with the SEC’s reporting and disclosure requirements for US domestic mining companies, including Industry Guide 7.
2014 ANNUAL
REPORT 81
Mineral reserves
As at December 31, 2014 (100% basis – only the second last column shows our share)
PROVEN AND PROBABLE
(tonnes in thousands; pounds in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
PROVEN |
|
|
PROBABLE |
|
|
TOTAL MINERAL RESERVES |
|
|
OUR
SHARE OF
CONTENT
(LBS U3O8) |
|
|
METALLURGICAL
RECOVERY (%) |
|
| PROPERTY |
|
MINING
METHOD |
|
TONNES |
|
|
GRADE
% U3O8 |
|
|
CONTENT
(LBS U3O8) |
|
|
TONNES |
|
|
GRADE
% U3O8 |
|
|
CONTENT
(LBS U3O8) |
|
|
TONNES |
|
|
GRADE
% U3O8 |
|
|
CONTENT
(LBS U3O8) |
|
|
|
| McArthur River |
|
UG |
|
|
497.8 |
|
|
|
18.71 |
|
|
|
205.3 |
|
|
|
555.2 |
|
|
|
11.43 |
|
|
|
139.9 |
|
|
|
1,053.0 |
|
|
|
14.87 |
|
|
|
345.2 |
|
|
|
241.0 |
|
|
|
98.7 |
|
| Cigar Lake |
|
UG |
|
|
205.6 |
|
|
|
24.00 |
|
|
|
108.8 |
|
|
|
391.6 |
|
|
|
14.60 |
|
|
|
126.1 |
|
|
|
597.2 |
|
|
|
17.84 |
|
|
|
234.9 |
|
|
|
117.5 |
|
|
|
98.5 |
|
| Rabbit Lake |
|
UG |
|
|
32.7 |
|
|
|
0.26 |
|
|
|
0.2 |
|
|
|
1,093.7 |
|
|
|
0.62 |
|
|
|
15.0 |
|
|
|
1,126.4 |
|
|
|
0.61 |
|
|
|
15.2 |
|
|
|
15.2 |
|
|
|
97.0 |
|
| Key Lake |
|
OP |
|
|
67.5 |
|
|
|
0.50 |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67.5 |
|
|
|
0.50 |
|
|
|
0.7 |
|
|
|
0.6 |
|
|
|
98.7 |
|
| Inkai |
|
ISR |
|
|
1,420.5 |
|
|
|
0.08 |
|
|
|
2.6 |
|
|
|
52,999.2 |
|
|
|
0.07 |
|
|
|
76.8 |
|
|
|
54,419.7 |
|
|
|
0.07 |
|
|
|
79.4 |
|
|
|
45.6 |
|
|
|
85.0 |
|
| Smith Ranch-Highland |
|
ISR |
|
|
1,145.5 |
|
|
|
0.10 |
|
|
|
2.4 |
|
|
|
1,241.1 |
|
|
|
0.09 |
|
|
|
2.4 |
|
|
|
2,386.6 |
|
|
|
0.09 |
|
|
|
4.8 |
|
|
|
4.8 |
|
|
|
80.0 |
|
| North Butte-Brown Ranch |
|
ISR |
|
|
753.4 |
|
|
|
0.08 |
|
|
|
1.4 |
|
|
|
875.2 |
|
|
|
0.08 |
|
|
|
1.5 |
|
|
|
1,628.6 |
|
|
|
0.08 |
|
|
|
2.9 |
|
|
|
2.9 |
|
|
|
60.0 |
|
| Crow Butte |
|
ISR |
|
|
801.4 |
|
|
|
0.10 |
|
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
801.4 |
|
|
|
0.10 |
|
|
|
1.7 |
|
|
|
1.7 |
|
|
|
85.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
4,924.4 |
|
|
|
— |
|
|
|
323.1 |
|
|
|
57,155.9 |
|
|
|
— |
|
|
|
361.6 |
|
|
|
62,080.3 |
|
|
|
— |
|
|
|
684.6 |
|
|
|
429.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
UG – underground
OP – open pit
ISR – in situ recovery
Estimates in the above table:
| |
• |
|
use an average uranium price of $70 (US)/lb U3O8 |
| |
• |
|
are based on an average exchange rate of $1.00 US=$1.05-$1.10 Cdn |
| |
• |
|
Totals may not add up due to rounding |
We do not expect these mineral reserve estimates to be materially
affected by metallurgical, environmental, permitting, legal, taxation, socio-economic, political, marketing or other relevant issues.
Metallurgical
recovery
We report mineral reserves as the quantity of contained ore supporting our mining plans, and provide an estimate of the metallurgical
recovery for each uranium property. The estimate of the amount of valuable product that can be physically recovered by the metallurgical extraction process is obtained by multiplying quantity of contained metal (content) by the planned metallurgical
recovery percentage. The content and our share of uranium in the table above are before accounting for estimated metallurgical recovery.
82 CAMECO
CORPORATION
Mineral resources
As at December 31, 2014 (100% – only the shaded columns show our share)
MEASURED, INDICATED AND INFERRED
(tonnes in thousands;
pounds in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
MEASURED RESOURCES (M) |
|
|
INDICATED RESOURCES (I) |
|
|
TOTAL M+I
CONTENT
(LBS
U3O8) |
|
|
OUR SHARE
TOTAL M + I
CONTENT
(LBS U3O8) |
|
|
INFERRED RESOURCES |
|
|
OUR SHARE
INFERRED
CONTENT
(LBS U3O8) |
|
| PROPERTY |
|
TONNES |
|
|
GRADE
% U3O8 |
|
|
CONTENT
(LBS U3O8) |
|
|
TONNES |
|
|
GRADE
% U3O8 |
|
|
CONTENT
(LBS U3O8) |
|
|
|
|
TONNES |
|
|
GRADE
% U3O8 |
|
|
CONTENT
(LBS U3O8) |
|
|
| McArthur River |
|
|
100.8 |
|
|
|
3.55 |
|
|
|
7.9 |
|
|
|
12.0 |
|
|
|
10.03 |
|
|
|
2.7 |
|
|
|
10.6 |
|
|
|
7.4 |
|
|
|
350.9 |
|
|
|
7.38 |
|
|
|
57.1 |
|
|
|
39.9 |
|
| Cigar Lake |
|
|
4.7 |
|
|
|
12.00 |
|
|
|
1.2 |
|
|
|
19.6 |
|
|
|
8.09 |
|
|
|
3.4 |
|
|
|
4.7 |
|
|
|
2.3 |
|
|
|
293.7 |
|
|
|
16.22 |
|
|
|
105.0 |
|
|
|
52.5 |
|
| Rabbit Lake |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,338.3 |
|
|
|
0.75 |
|
|
|
22.2 |
|
|
|
22.2 |
|
|
|
22.2 |
|
|
|
2,030.6 |
|
|
|
0.58 |
|
|
|
25.9 |
|
|
|
25.9 |
|
| Millennium |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,442.6 |
|
|
|
2.39 |
|
|
|
75.9 |
|
|
|
75.9 |
|
|
|
53.0 |
|
|
|
412.4 |
|
|
|
3.19 |
|
|
|
29.0 |
|
|
|
20.2 |
|
| Phoenix |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166.4 |
|
|
|
19.13 |
|
|
|
70.2 |
|
|
|
70.2 |
|
|
|
21.1 |
|
|
|
8.6 |
|
|
|
5.80 |
|
|
|
1.1 |
|
|
|
0.3 |
|
| Tamarack |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
183.8 |
|
|
|
4.42 |
|
|
|
17.9 |
|
|
|
17.9 |
|
|
|
10.3 |
|
|
|
45.6 |
|
|
|
1.02 |
|
|
|
1.0 |
|
|
|
0.6 |
|
| Kintyre |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,315.4 |
|
|
|
0.58 |
|
|
|
55.2 |
|
|
|
55.2 |
|
|
|
38.7 |
|
|
|
950.2 |
|
|
|
0.46 |
|
|
|
9.6 |
|
|
|
6.7 |
|
| Yeelirrie |
|
|
24,013.5 |
|
|
|
0.17 |
|
|
|
92.4 |
|
|
|
12,626.5 |
|
|
|
0.13 |
|
|
|
34.9 |
|
|
|
127.3 |
|
|
|
127.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Inkai |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,091.1 |
|
|
|
0.08 |
|
|
|
52.2 |
|
|
|
52.2 |
|
|
|
30.0 |
|
|
|
253,720.2 |
|
|
|
0.05 |
|
|
|
253.8 |
|
|
|
145.9 |
|
| Smith Ranch-Highland |
|
|
1,792.1 |
|
|
|
0.11 |
|
|
|
4.5 |
|
|
|
14,378.4 |
|
|
|
0.05 |
|
|
|
17.1 |
|
|
|
21.6 |
|
|
|
21.6 |
|
|
|
6,989.4 |
|
|
|
0.05 |
|
|
|
7.9 |
|
|
|
7.9 |
|
| North Butte-Brown Ranch |
|
|
232.6 |
|
|
|
0.08 |
|
|
|
0.4 |
|
|
|
5,530.3 |
|
|
|
0.07 |
|
|
|
8.4 |
|
|
|
8.8 |
|
|
|
8.8 |
|
|
|
294.5 |
|
|
|
0.07 |
|
|
|
0.4 |
|
|
|
0.4 |
|
| Gas Hills-Peach |
|
|
687.2 |
|
|
|
0.11 |
|
|
|
1.7 |
|
|
|
3,626.1 |
|
|
|
0.15 |
|
|
|
11.6 |
|
|
|
13.3 |
|
|
|
13.3 |
|
|
|
3,307.5 |
|
|
|
0.08 |
|
|
|
6.0 |
|
|
|
6.0 |
|
| Crow Butte |
|
|
1,133.1 |
|
|
|
0.24 |
|
|
|
6.0 |
|
|
|
1,354.9 |
|
|
|
0.29 |
|
|
|
8.6 |
|
|
|
14.6 |
|
|
|
14.6 |
|
|
|
1,135.2 |
|
|
|
0.12 |
|
|
|
2.9 |
|
|
|
2.9 |
|
| Ruby Ranch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,215.3 |
|
|
|
0.08 |
|
|
|
4.1 |
|
|
|
4.1 |
|
|
|
4.1 |
|
|
|
56.2 |
|
|
|
0.14 |
|
|
|
0.2 |
|
|
|
0.2 |
|
| Shirley Basin |
|
|
89.2 |
|
|
|
0.16 |
|
|
|
0.3 |
|
|
|
1,638.2 |
|
|
|
0.11 |
|
|
|
4.1 |
|
|
|
4.4 |
|
|
|
4.4 |
|
|
|
508.0 |
|
|
|
0.10 |
|
|
|
1.1 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
28,053.2 |
|
|
|
— |
|
|
|
114.4 |
|
|
|
79,938.9 |
|
|
|
— |
|
|
|
388.4 |
|
|
|
502.8 |
|
|
|
379.0 |
|
|
|
270,103.0 |
|
|
|
— |
|
|
|
501.0 |
|
|
|
310.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
Mineral resources do not
include amounts that have been identified as mineral reserves.
Mineral resources do not have demonstrated economic viability. Totals may not add up due
to rounding.
2014 ANNUAL
REPORT 83
Additional information
Due to the nature of our business, we are required to make estimates that affect the amount of assets and liabilities, revenues and expenses, commitments and
contingencies we report. We base our estimates on our experience, our best judgment, guidelines established by the Canadian Institute of Mining, Metallurgy and Petroleum and on assumptions we believe are reasonable.
We believe the following critical accounting estimates reflect the more significant judgments used in the preparation of our financial statements. These
estimates affect all of our segments, unless otherwise noted.
Decommissioning and reclamation
In our uranium and fuel services segments, we are required to estimate the cost of decommissioning and reclamation for each operation, but we normally do not
incur these costs until an asset is nearing the end of its useful life. Regulatory requirements and decommissioning methods could change during that time, making our actual costs different from our estimates. A significant change in these costs or
in our mineral reserves could have a material impact on our net earnings and financial position. See Note 18 to the financial statements.
Property, plant and equipment
We depreciate property,
plant and equipment primarily using the unit-of-production method, where the carrying value is reduced as resources are depleted. A change in our mineral reserves would change our depreciation expenses, and such a change could have a material impact
on amounts charged to earnings.
We assess the carrying values of property, plant and equipment and goodwill every year, or more often if necessary. If we
determine that we cannot recover the carrying value of an asset or goodwill, we write off the unrecoverable amount against current earnings. We base our assessment of recoverability on assumptions and judgments we make about future prices,
production costs, our requirements for sustaining capital and our ability to economically recover mineral reserves. A material change in any of these assumptions could have a significant impact on the potential impairment of these assets.
In performing impairment assessments of long-lived assets, assets that cannot be assessed individually are grouped together into the smallest group of assets
that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Management is required to exercise judgment in identifying these cash generating units.
Taxes
When we are preparing our financial statements, we
estimate taxes in each jurisdiction we operate in, taking into consideration different tax rates, non-deductible expenses, valuation of deferred tax assets, changes in tax laws and our expectations for future results.
We base our estimates of deferred income taxes on temporary differences between the assets and liabilities we report in our financial statements, and the
assets and liabilities determined by the tax laws in the various countries we operate in. We record deferred income taxes in our financial statements based on our estimated future cash flows, which includes estimates of non-deductible expenses. If
these estimates are not accurate, there could be a material impact on our net earnings and financial position.
Commencement of production stage
When we determine that a mining property has reached the production stage, capitalization of development ceases, and depreciation of the mining
property begins and is charged to earnings. Production is reached when management determines that the mine is able to produce at a consistent or sustainably increasing level. This determination is a matter of judgment. See note 2 to the financial
statements for further information on the criteria that we used to make this assessment.
84 CAMECO
CORPORATION
Purchase price allocations
The purchase price related to a business combination or asset acquisition is allocated to the underlying acquired assets and liabilities based on their
estimated fair values at the time of acquisition. The determination of fair value requires us to make assumptions, estimates and judgments regarding future events. The allocation process is inherently subjective and impacts the amounts assigned to
individually identifiable assets and liabilities. As a result, the purchase price allocation impacts our reported assets and liabilities and future net earnings due to the impact on future depreciation and amortization expense and impairment tests.
Determination of joint control
We conduct certain
operations through joint ownership interests. Judgment is required in assessing whether we have joint control over the investee, which involves determining the relevant activities of the arrangement and whether decisions around relevant activities
require unanimous consent. Judgment is also required to determine whether a joint arrangement should be classified as a joint venture or joint operation. Classifying the arrangement requires us to assess our rights and obligations arising from the
arrangement. Specifically, management considers the structure of the joint arrangement and whether it is structured through a separate vehicle. When structured through a separate vehicle, we also consider the rights and obligations arising from the
legal form of the separate vehicle, the terms of the contractual arrangements and other facts and circumstances, when relevant. This judgment influences whether we equity account or proportionately consolidate our interest in the arrangement.
Controls and procedures
We have evaluated the
effectiveness of our disclosure controls and procedures and internal control over financial reporting as of December 31, 2014, as required by the rules of the US Securities and Exchange Commission and the Canadian Securities Administrators.
Management, including our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), supervised and participated in the evaluation, and
concluded that our disclosure controls and procedures are effective to provide a reasonable level of assurance that the information we are required to disclose in reports we file or submit under securities laws is recorded, processed, summarized and
reported accurately, and within the time periods specified. It should be noted that, while the CEO and CFO believe that our disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect the
disclosure controls and procedures or internal control over financial reporting to be capable of preventing all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met.
Management, including our CEO and our CFO, is responsible for establishing and maintaining internal control
over financial reporting and conducted an evaluation of the effectiveness of our internal control over financial reporting based on the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2014. In 2014, we updated our control framework to COSO 2013 as required;
however, we have not made any change to our internal control over financial reporting during the 2014 fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
New standards and interpretations not yet adopted
A
number of new standards and amendments to existing standards are not yet effective for the year ended December 31, 2014, and have not been applied in preparing the consolidated financial statements. The following standards and amendments to
existing standards have been published and are mandatory for our accounting periods beginning on or after January 1, 2016, unless otherwise noted. We do not intend to early adopt any of the following amendments to existing standards and we do
not expect the amendments to have a material impact on our financial statements.
2014 ANNUAL
REPORT 85
IAS16, Property, Plant and Equipment (IAS 16) and IAS 38, Intangible Assets (IAS 38) – In May
2014, the IASB issued amendments to IAS16 and IAS 38. The amendments are to be applied prospectively. The amendments clarify the factors to be considered in assessing the technical or commercial obsolescence and the resulting depreciation period of
an asset and state that a depreciation method based on revenue, is not appropriate.
IFRS 11, Joint Arrangements (IFRS 11) – In May 2014, the
IASB issued amendments to IFRS 11. The amendments in IFRS 11 are to be applied prospectively. The amendments clarify the accounting for the acquisition of interests in joint operations and require the acquirer to apply the principles of business
combinations accounting in IFRS 3 Business Combinations.
IFRS 10, Consolidated Financial Statements (IFRS 10) and IAS 28, Investments in
Associate and Joint Ventures (IAS 28) – In September 2014, the IASB issued amendments to IFRS 10 and IAS 28. The amendments provide clarification on the recognition of gains or losses upon the sale or contribution of assets between an
investor and its associate or joint venture.
IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations (IFRS 5) – In September
2014, the IASB issued amendments to IFRS 5. The amendments are to be applied prospectively, with earlier application permitted. Assets are generally disposed of either through sale or through distribution to owners. The amendments clarify the
application of IFRS 5 when changing from one of these disposal methods to the other.
IFRS 7, Financial Instruments: Disclosures (IFRS 7) – In
September 2014, the IASB issued amendments to IFRS 7. The amendments in IFRS 7 are to be applied retrospectively, with earlier application permitted. The amendments clarify the disclosure required for any continuing involvement in a transferred
asset that has been derecognized. The amendments also provide guidance on disclosures regarding the offsetting of financial assets and financial liabilities in interim financial reports.
IAS 34 Interim Financial Reporting (IAS 34) – In September 2014, the IASB issued amendments to IAS 34. The amendments are to be applied
retrospectively, with earlier application permitted. The amendments provide additional guidance on interim disclosures and whether they are provided in the interim financial statements or incorporated by cross-reference between the interim financial
statements and other financial disclosures.
IFRS 15, Revenue from Contracts with Customers (IFRS 15) – In May 2014, the IASB issued
IFRS 15. IFRS 15 is effective for periods beginning on or after January 1, 2017 and is to be applied retrospectively. IFRS 15 clarifies the principles for recognizing revenue from contracts with customers. The extent of the impact of adoption
of IFRS 15 has not yet been determined.
IFRS 9, Financial Instruments (IFRS 9) – In July, 2014, the International Accounting Standards Board
(IASB) issued IFRS 9. IFRS 9 replaces the current multiple classification and measurement models for financial assets and liabilities with a single model that has only two classification categories: amortized cost and fair value. The basis of
classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset or liability. It also introduces additional changes relating to financial liabilities and aligns hedge accounting more
closely with risk management.
IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early adoption of the new standard
permitted. We do not intend to early adopt IFRS 9. The extent of the impact of adoption of IFRS 9 has not yet been determined.
86 CAMECO
CORPORATION
Cameco Corporation
2014 consolidated financial statements
February 5,
2015
2014 ANNUAL
REPORT 87
Report of management’s accountability
The accompanying consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board. Management is responsible for ensuring that these statements, which include amounts based upon estimates and judgments, are consistent with other information and operating data contained in the annual
financial review and reflect the corporation’s business transactions and financial position.
Management is also responsible for the information
disclosed in the management’s discussion and analysis including responsibility for the existence of appropriate information systems, procedures and controls to ensure that the information used internally by management and disclosed externally
is complete and reliable in all material respects.
In addition, management is responsible for establishing and maintaining an adequate system of internal
control over financial reporting. The internal control system includes an internal audit function and a code of conduct and ethics, which is communicated to all levels in the organization and requires all employees to maintain high standards in
their conduct of the corporation’s affairs. Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the Company’s assets are appropriately accounted for and
adequately safeguarded. Management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the criteria established in “Internal Control – Integrated Framework (2013)” issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s system of internal control over financial reporting was effective as at December 31, 2014.
KPMG LLP has audited the consolidated financial statements in accordance with Canadian generally accepted auditing standards and the standards of the Public
Company Accounting Oversight Board (United States).
The board of directors annually appoints an audit and finance committee comprised of directors who
are not employees of the corporation. This committee meets regularly with management, the internal auditor and the shareholders’ auditors to review significant accounting, reporting and internal control matters. Both the internal and
shareholders’ auditors have unrestricted access to the audit and finance committee. The audit and finance committee reviews the consolidated financial statements, the report of the shareholders’ auditors, and management’s discussion
and analysis and submits its report to the board of directors for formal approval.
|
|
|
| Original signed by Tim S. Gitzel |
|
Original signed by Grant E. Isaac |
| President and Chief Executive Officer |
|
Senior Vice-President and Chief Financial Officer |
| February 5, 2015 |
|
February 5, 2015 |
88 CAMECO
CORPORATION
Independent auditors’ report
To the Shareholders and Board of Directors of Cameco Corporation:
We have audited the accompanying consolidated financial statements of Cameco Corporation, which comprise the consolidated statements of financial position as
at December 31, 2014 and December 31, 2013, the consolidated statements of earnings, statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting
policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian
generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider
internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial
statements present fairly, in all material respects, the consolidated financial position of Cameco Corporation as at December 31, 2014 and December 31, 2013 and its consolidated financial performance and its consolidated cash flows for the
years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Original
signed by KPMG LLP
Chartered Accountants
February 5, 2015
Saskatoon, Canada
2014 ANNUAL
REPORT 89
Consolidated statements of earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the years ended December 31 |
|
|
|
|
|
|
|
(Revised -
note 6) |
|
| ($Cdn thousands, except per share amounts) |
|
Note |
|
|
2014 |
|
|
2013 |
|
| Revenue from products and services |
|
|
|
|
|
$ |
2,397,532 |
|
|
$ |
2,438,723 |
|
| Cost of products and services sold |
|
|
|
|
|
|
1,420,768 |
|
|
|
1,549,238 |
|
| Depreciation and amortization |
|
|
|
|
|
|
338,983 |
|
|
|
282,756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of sales |
|
|
|
|
|
|
1,759,751 |
|
|
|
1,831,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
|
|
|
|
|
637,781 |
|
|
|
606,729 |
|
| Administration |
|
|
|
|
|
|
176,385 |
|
|
|
184,976 |
|
| Impairment charges |
|
|
10, 12, 13 |
|
|
|
326,693 |
|
|
|
70,159 |
|
| Exploration |
|
|
|
|
|
|
46,565 |
|
|
|
72,833 |
|
| Research and development |
|
|
|
|
|
|
5,044 |
|
|
|
7,302 |
|
| Loss on disposal of assets |
|
|
10 |
|
|
|
44,762 |
|
|
|
6,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings from operations |
|
|
|
|
|
|
38,332 |
|
|
|
264,693 |
|
| Finance costs |
|
|
21 |
|
|
|
(77,122 |
) |
|
|
(62,121 |
) |
| Losses on derivatives |
|
|
28 |
|
|
|
(121,160 |
) |
|
|
(61,970 |
) |
| Finance income |
|
|
|
|
|
|
7,402 |
|
|
|
6,967 |
|
| Share of loss from equity-accounted investees |
|
|
13 |
|
|
|
(17,141 |
) |
|
|
(14,107 |
) |
| Other income (expense) |
|
|
22 |
|
|
|
50,591 |
|
|
|
(18,326 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss) before income taxes |
|
|
|
|
|
|
(119,098 |
) |
|
|
115,136 |
|
| Income tax recovery |
|
|
23 |
|
|
|
(175,268 |
) |
|
|
(117,230 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net earnings from continuing operations |
|
|
|
|
|
|
56,170 |
|
|
|
232,366 |
|
| Net earnings from discontinued operation |
|
|
6 |
|
|
|
127,243 |
|
|
|
85,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net earnings |
|
|
|
|
|
$ |
183,413 |
|
|
$ |
317,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net earnings (loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
| Equity holders |
|
|
|
|
|
$ |
185,234 |
|
|
$ |
318,495 |
|
| Non-controlling interest |
|
|
|
|
|
|
(1,821 |
) |
|
|
(808 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net earnings |
|
|
|
|
|
$ |
183,413 |
|
|
$ |
317,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings per common share attributable to equity holders |
|
|
|
|
|
|
|
|
|
|
|
|
| Continuing operations |
|
|
|
|
|
|
0.15 |
|
|
|
0.59 |
|
| Discontinued operation |
|
|
|
|
|
|
0.32 |
|
|
|
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total basic earnings per share |
|
|
24 |
|
|
$ |
0.47 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Continuing operations |
|
|
|
|
|
|
0.15 |
|
|
|
0.59 |
|
| Discontinued operation |
|
|
|
|
|
|
0.32 |
|
|
|
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total diluted earnings per share |
|
|
24 |
|
|
$ |
0.47 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
90 CAMECO
CORPORATION
Consolidated statements of comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the years ended December 31 |
|
|
|
|
|
|
|
(Revised -
note 6) |
|
| ($Cdn thousands) |
|
Note |
|
|
2014 |
|
|
2013 |
|
| Net earnings |
|
|
|
|
|
$ |
183,413 |
|
|
$ |
317,687 |
|
| Other comprehensive income (loss), net of taxes |
|
|
23 |
|
|
|
|
|
|
|
|
|
| Items that will not be reclassified to net earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
| Remeasurements of defined benefit liability |
|
|
|
|
|
|
(7,952 |
) |
|
|
1,870 |
|
| Remeasurements of defined benefit liability—discontinued operation |
|
|
|
|
|
|
— |
|
|
|
239,915 |
|
| Items that are or may be reclassified to net earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
| Exchange differences on translation of foreign operations |
|
|
|
|
|
|
58,890 |
|
|
|
(10,792 |
) |
| Gains on derivatives designated as cash flow hedges—discontinued operation |
|
|
|
|
|
|
— |
|
|
|
190 |
|
| Gains on derivatives designated as cash flow hedges transferred to net earnings—discontinued operation |
|
|
|
|
|
|
(300 |
) |
|
|
(3,982 |
) |
| Unrealized gains (losses) on available-for-sale assets |
|
|
|
|
|
|
(613 |
) |
|
|
28 |
|
| Losses on available-for-sale assets transferred to net earnings |
|
|
|
|
|
|
2 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income, net of taxes |
|
|
|
|
|
|
50,027 |
|
|
|
227,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income |
|
|
|
|
|
$ |
233,440 |
|
|
$ |
544,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income from continuing operations |
|
|
|
|
|
$ |
106,497 |
|
|
$ |
223,472 |
|
| Comprehensive income from discontinued operation |
|
|
|
|
|
|
126,943 |
|
|
|
321,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income |
|
|
|
|
|
$ |
233,440 |
|
|
$ |
544,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
| Equity holders |
|
|
|
|
|
$ |
49,969 |
|
|
$ |
227,157 |
|
| Non-controlling interest |
|
|
|
|
|
|
58 |
|
|
|
72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income for the period |
|
|
|
|
|
$ |
50,027 |
|
|
$ |
227,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income (loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
| Equity holders |
|
|
|
|
|
$ |
235,203 |
|
|
$ |
545,652 |
|
| Non-controlling interest |
|
|
|
|
|
|
(1,763 |
) |
|
|
(736 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the period |
|
|
|
|
|
$ |
233,440 |
|
|
$ |
544,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
2014 ANNUAL
REPORT 91
Consolidated statements of financial position
|
|
|
|
|
|
|
|
|
|
|
|
|
| As at December 31 |
|
Note |
|
|
2014 |
|
|
2013 |
|
| ($Cdn thousands) |
|
|
|
|
|
|
|
|
|
| Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
|
|
|
|
$ |
566,583 |
|
|
$ |
229,135 |
|
| Accounts receivable |
|
|
8 |
|
|
|
455,002 |
|
|
|
431,375 |
|
| Current tax assets |
|
|
|
|
|
|
3,096 |
|
|
|
2,598 |
|
| Inventories |
|
|
9 |
|
|
|
902,278 |
|
|
|
913,315 |
|
| Supplies and prepaid expenses |
|
|
|
|
|
|
130,406 |
|
|
|
177,632 |
|
| Current portion of long-term receivables, investments and other |
|
|
12 |
|
|
|
10,341 |
|
|
|
3,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total current assets |
|
|
|
|
|
|
2,067,706 |
|
|
|
1,757,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Property, plant and equipment |
|
|
10 |
|
|
|
5,291,021 |
|
|
|
5,040,993 |
|
| Goodwill and intangible assets |
|
|
11 |
|
|
|
201,102 |
|
|
|
194,031 |
|
| Long-term receivables, investments and other |
|
|
12 |
|
|
|
423,280 |
|
|
|
287,548 |
|
| Investments in equity-accounted investees |
|
|
13 |
|
|
|
3,230 |
|
|
|
492,712 |
|
| Deferred tax assets |
|
|
23 |
|
|
|
486,328 |
|
|
|
266,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total non-current assets |
|
|
|
|
|
|
6,404,961 |
|
|
|
6,281,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
|
|
|
|
$ |
8,472,667 |
|
|
$ |
8,039,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| Bank overdraft |
|
|
15 |
|
|
$ |
— |
|
|
$ |
41,226 |
|
| Accounts payable and accrued liabilities |
|
|
14 |
|
|
|
316,258 |
|
|
|
437,941 |
|
| Current tax liabilities |
|
|
|
|
|
|
51,719 |
|
|
|
54,708 |
|
| Short-term debt |
|
|
15 |
|
|
|
— |
|
|
|
50,230 |
|
| Dividends payable |
|
|
|
|
|
|
39,579 |
|
|
|
39,548 |
|
| Current portion of other liabilities |
|
|
17 |
|
|
|
87,883 |
|
|
|
60,685 |
|
| Current portion of provisions |
|
|
18 |
|
|
|
20,375 |
|
|
|
20,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
|
|
|
|
515,814 |
|
|
|
704,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Long-term debt |
|
|
16 |
|
|
|
1,491,198 |
|
|
|
1,293,383 |
|
| Other liabilities |
|
|
17 |
|
|
|
172,034 |
|
|
|
79,380 |
|
| Provisions |
|
|
18 |
|
|
|
825,935 |
|
|
|
570,700 |
|
| Deferred tax liabilities |
|
|
23 |
|
|
|
23,882 |
|
|
|
41,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total non-current liabilities |
|
|
|
|
|
|
2,513,049 |
|
|
|
1,985,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
| Share capital |
|
|
|
|
|
|
1,862,646 |
|
|
|
1,854,671 |
|
| Contributed surplus |
|
|
|
|
|
|
196,815 |
|
|
|
186,382 |
|
| Retained earnings |
|
|
|
|
|
|
3,333,099 |
|
|
|
3,314,049 |
|
| Other components of equity |
|
|
|
|
|
|
51,084 |
|
|
|
(6,837 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total shareholders’ equity attributable to equity holders |
|
|
|
|
|
|
5,443,644 |
|
|
|
5,348,265 |
|
| Non-controlling interest |
|
|
|
|
|
|
160 |
|
|
|
1,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total shareholders’ equity |
|
|
|
|
|
|
5,443,804 |
|
|
|
5,349,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities and shareholders’ equity |
|
|
|
|
|
$ |
8,472,667 |
|
|
$ |
8,039,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies [notes 10,18, 23]
See accompanying notes to consolidated financial statements.
Approved by the board of directors
Original signed by
Tim S. Gitzel and John H. Clappison
92 CAMECO
CORPORATION
Consolidated statements of changes in equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Attributable to equity holders |
|
|
|
|
|
|
|
| ($Cdn thousands) |
|
Share
capital |
|
|
Contributed
surplus |
|
|
Retained
earnings |
|
|
Foreign
currency
translation |
|
|
Cash
flow
hedges |
|
|
Available-
for-sale
assets |
|
|
Total |
|
|
Non-
controlling
interest |
|
|
Total
equity |
|
| Balance at January 1, 2014 |
|
$ |
1,854,671 |
|
|
$ |
186,382 |
|
|
$ |
3,314,049 |
|
|
$ |
(7,165 |
) |
|
$ |
300 |
|
|
$ |
28 |
|
|
$ |
5,348,265 |
|
|
$ |
1,129 |
|
|
$ |
5,349,394 |
|
| Net earnings |
|
|
— |
|
|
|
— |
|
|
|
185,234 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
185,234 |
|
|
|
(1,821 |
) |
|
|
183,413 |
|
| Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
(7,952 |
) |
|
|
58,832 |
|
|
|
(300 |
) |
|
|
(611 |
) |
|
|
49,969 |
|
|
|
58 |
|
|
|
50,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year |
|
|
— |
|
|
|
— |
|
|
|
177,282 |
|
|
|
58,832 |
|
|
|
(300 |
) |
|
|
(611 |
) |
|
|
235,203 |
|
|
|
(1,763 |
) |
|
|
233,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share-based compensation |
|
|
— |
|
|
|
15,808 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,808 |
|
|
|
— |
|
|
|
15,808 |
|
| Share options exercised |
|
|
7,975 |
|
|
|
(5,375 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,600 |
|
|
|
— |
|
|
|
2,600 |
|
| Dividends |
|
|
— |
|
|
|
— |
|
|
|
(158,232 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(158,232 |
) |
|
|
— |
|
|
|
(158,232 |
) |
| Transactions with owners-contributed equity |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
794 |
|
|
|
794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at December 31, 2014 |
|
$ |
1,862,646 |
|
|
$ |
196,815 |
|
|
$ |
3,333,099 |
|
|
$ |
51,667 |
|
|
$ |
— |
|
|
$ |
(583 |
) |
|
$ |
5,443,644 |
|
|
$ |
160 |
|
|
$ |
5,443,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at January 1, 2013 |
|
$ |
1,851,507 |
|
|
$ |
168,952 |
|
|
$ |
2,913,134 |
|
|
$ |
3,699 |
|
|
$ |
4,092 |
|
|
$ |
— |
|
|
$ |
4,941,384 |
|
|
$ |
580 |
|
|
$ |
4,941,964 |
|
| Net earnings |
|
|
— |
|
|
|
— |
|
|
|
318,495 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
318,495 |
|
|
|
(808 |
) |
|
|
317,687 |
|
| Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
241,785 |
|
|
|
(10,864 |
) |
|
|
(3,792 |
) |
|
|
28 |
|
|
|
227,157 |
|
|
|
72 |
|
|
|
227,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year |
|
|
— |
|
|
|
— |
|
|
|
560,280 |
|
|
|
(10,864 |
) |
|
|
(3,792 |
) |
|
|
28 |
|
|
|
545,652 |
|
|
|
(736 |
) |
|
|
544,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share-based compensation |
|
|
— |
|
|
|
19,008 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
19,008 |
|
|
|
— |
|
|
|
19,008 |
|
| Share options exercised |
|
|
3,164 |
|
|
|
(1,578 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,586 |
|
|
|
— |
|
|
|
1,586 |
|
| Dividends |
|
|
— |
|
|
|
— |
|
|
|
(158,177 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(158,177 |
) |
|
|
— |
|
|
|
(158,177 |
) |
| Acquisition of non-controlling interest in subsidiary |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
97 |
|
|
|
97 |
|
| Change in ownership interest in subsidiary |
|
|
— |
|
|
|
— |
|
|
|
(1,188 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,188 |
) |
|
|
1,188 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at December 31, 2013 |
|
$ |
1,854,671 |
|
|
$ |
186,382 |
|
|
$ |
3,314,049 |
|
|
$ |
(7,165 |
) |
|
$ |
300 |
|
|
$ |
28 |
|
|
$ |
5,348,265 |
|
|
$ |
1,129 |
|
|
$ |
5,349,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
2014 ANNUAL
REPORT 93
Consolidated statements of cash flows
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the years ended December 31 |
|
|
|
|
|
|
|
(Revised -
note 6) |
|
| ($Cdn thousands) |
|
Note |
|
|
2014 |
|
|
2013 |
|
| Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
| Net earnings |
|
|
|
|
|
$ |
183,413 |
|
|
$ |
317,687 |
|
| Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
|
|
|
|
338,983 |
|
|
|
282,756 |
|
| Deferred charges |
|
|
|
|
|
|
61,869 |
|
|
|
48,041 |
|
| Unrealized losses on derivatives |
|
|
|
|
|
|
40,569 |
|
|
|
39,059 |
|
| Share-based compensation |
|
|
26 |
|
|
|
15,808 |
|
|
|
19,008 |
|
| Loss on disposal of assets |
|
|
|
|
|
|
44,762 |
|
|
|
6,766 |
|
| Finance costs |
|
|
21 |
|
|
|
77,122 |
|
|
|
62,121 |
|
| Finance income |
|
|
|
|
|
|
(7,402 |
) |
|
|
(6,967 |
) |
| Share of loss from equity-accounted investees |
|
|
13 |
|
|
|
17,141 |
|
|
|
14,107 |
|
| Impairment charges |
|
|
10, 12, 13 |
|
|
|
326,693 |
|
|
|
70,159 |
|
| Other expense (income) |
|
|
22 |
|
|
|
(622 |
) |
|
|
18,326 |
|
| Discontinued operation |
|
|
6 |
|
|
|
(127,243 |
) |
|
|
— |
|
| Income tax recovery |
|
|
23 |
|
|
|
(175,268 |
) |
|
|
(117,230 |
) |
| Interest received |
|
|
|
|
|
|
5,935 |
|
|
|
6,089 |
|
| Income taxes paid |
|
|
|
|
|
|
(233,716 |
) |
|
|
(107,350 |
) |
| Income taxes refunded |
|
|
|
|
|
|
— |
|
|
|
10,993 |
|
| Other operating items |
|
|
25 |
|
|
|
(87,862 |
) |
|
|
(139,526 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net cash provided by continuing operations |
|
|
|
|
|
|
480,182 |
|
|
|
524,039 |
|
| Net cash provided by discontinued operation |
|
|
6 |
|
|
|
— |
|
|
|
5,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net cash provided by operations |
|
|
|
|
|
|
480,182 |
|
|
|
529,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
| Additions to property, plant and equipment |
|
|
10 |
|
|
|
(480,108 |
) |
|
|
(645,651 |
) |
| Acquisitions, net of cash |
|
|
7 |
|
|
|
— |
|
|
|
(133,924 |
) |
| Repayment of debt acquired on acquisition of business |
|
|
7 |
|
|
|
— |
|
|
|
(118,068 |
) |
| Decrease in short-term investments |
|
|
|
|
|
|
— |
|
|
|
49,535 |
|
| Decrease (increase) in long-term receivables, investments and other |
|
|
|
|
|
|
11,569 |
|
|
|
(6,373 |
) |
| Proceeds from sale of property, plant and equipment |
|
|
|
|
|
|
701 |
|
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net cash used in investing (continuing operations) |
|
|
|
|
|
|
(467,838 |
) |
|
|
(854,414 |
) |
| Net cash provided by investing (discontinued operation) |
|
|
6 |
|
|
|
447,096 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net cash used in investing |
|
|
|
|
|
|
(20,742 |
) |
|
|
(854,414 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
| Increase in debt |
|
|
16 |
|
|
|
496,476 |
|
|
|
14,655 |
|
| Decrease in debt |
|
|
15, 16 |
|
|
|
(351,046 |
) |
|
|
(33,114 |
) |
| Interest paid |
|
|
|
|
|
|
(78,144 |
) |
|
|
(65,908 |
) |
| Contributions from non-controlling interest |
|
|
|
|
|
|
794 |
|
|
|
— |
|
| Proceeds from issuance of shares, stock option plan |
|
|
|
|
|
|
6,228 |
|
|
|
2,475 |
|
| Dividends paid |
|
|
|
|
|
|
(158,200 |
) |
|
|
(158,165 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net cash used in financing |
|
|
|
|
|
|
(83,892 |
) |
|
|
(240,057 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Increase (decrease) in cash and cash equivalents net of bank overdraft, during the year |
|
|
|
|
|
|
375,548 |
|
|
|
(564,587 |
) |
| Exchange rate changes on foreign currency cash balances |
|
|
|
|
|
|
3,126 |
|
|
|
2,997 |
|
| Cash and cash equivalents, net of bank overdraft, beginning of year |
|
|
|
|
|
|
187,909 |
|
|
|
749,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents, net of bank overdraft, end of year |
|
|
|
|
|
$ |
566,583 |
|
|
$ |
187,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents is comprised of: |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash |
|
|
|
|
|
$ |
86,664 |
|
|
$ |
59,183 |
|
| Cash equivalents |
|
|
|
|
|
|
479,919 |
|
|
|
169,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
|
|
|
|
$ |
566,583 |
|
|
$ |
229,135 |
|
| Bank overdraft |
|
|
|
|
|
|
— |
|
|
|
(41,226 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents and bank overdraft |
|
|
|
|
|
$ |
566,583 |
|
|
$ |
187,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
94 CAMECO
CORPORATION
Notes to consolidated financial statements
For the years ended December 31, 2014 and 2013
1.
Cameco Corporation
Cameco Corporation is incorporated under the Canada Business Corporations Act. The address of its registered office is 2121 11th
Street West, Saskatoon, Saskatchewan, S7M 1J3. The consolidated financial statements as at and for the year ended December 31, 2014 comprise Cameco Corporation and its subsidiaries (collectively, the Company or Cameco) and the Company’s
interests in associates and joint arrangements. The Company is primarily engaged in the exploration for and the development, mining, refining, conversion, fabrication and trading of uranium for sale as fuel for generating electricity in nuclear
power reactors in Canada and other countries.
2. Significant accounting policies
A. Statement of compliance
These consolidated financial
statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
These consolidated financial statements were authorized for issuance by the Company’s board of directors on February 5, 2015.
B. Basis of presentation
These consolidated financial
statements are presented in Canadian dollars, which is the Company’s functional currency. All financial information is presented in Canadian dollars, unless otherwise noted. Amounts presented in tabular format have been rounded to the nearest
thousand except per share amounts and where otherwise noted.
The consolidated financial statements have been prepared on the historical cost basis except
for the following material items which are measured on an alternative basis at each reporting date:
|
|
|
| Derivative financial instruments at fair value through profit and loss |
|
Fair value |
| Non-derivative financial instruments at fair value through profit and loss |
|
Fair value |
| Available-for-sale financial assets |
|
Fair value |
| Liabilities for cash-settled share-based payment arrangements |
|
Fair value |
| Net defined benefit liability |
|
Fair value of plan assets less the present value of the defined benefit
obligation |
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may vary from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates
are revised and in any future periods affected. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 5.
This summary of significant accounting policies is a description of the accounting methods and practices that have been used in the preparation of these
consolidated financial statements and is presented to assist the reader in interpreting the statements contained herein. These accounting policies have been applied consistently to all entities within the consolidated group.
2014 ANNUAL
REPORT 95
C. Consolidation principles
i. Business combinations
The acquisition method of
accounting is used to account for the acquisition of subsidiaries by the Company. The Company measures goodwill at the acquisition date as the fair value of the consideration transferred, including the recognized amount of any non-controlling
interests in the acquiree, less the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. When the excess is negative, a bargain purchase gain is recognized
immediately in earnings. In a business combination achieved in stages, the acquisition date fair value of the Company’s previously held equity interest in the acquiree is also considered in computing goodwill.
Consideration transferred includes the fair values of the assets transferred, liabilities incurred and equity interests issued by the Company. Consideration
also includes the fair value of any contingent consideration and share-based compensation awards that are replaced mandatorily in a business combination.
The Company elects on a transaction-by-transaction basis whether to measure any non-controlling interest at fair value, or at their proportionate share of the
recognized amount of the identifiable net assets of the acquiree, at the acquisition date.
Acquisition-related costs are expensed as incurred, except for
those costs related to the issue of debt or equity instruments. Transaction costs arising on the issue of equity instruments are recognized directly in equity. Transaction costs that are directly related to the probable issuance of a security that
is classified as a financial liability is deducted from the amount of the financial liability when it is initially recognized, or recognized in earnings when the issuance is no longer probable.
ii. Subsidiaries
The consolidated financial statements
include the accounts of Cameco and its subsidiaries. Subsidiaries are entities over which the Company has control. Subsidiaries are fully consolidated from the date on which control is transferred to the Company and are deconsolidated from the date
that control ceases.
iii. Investments in equity-accounted investees
Cameco’s investments in equity-accounted investees include investments in associates and joint ventures.
Associates are those entities over which the Company has significant influence, but not control or joint control, over the financial and operating policies.
Significant influence is presumed to exist when the Company holds between 20% and 50% of the voting power of another entity, but can also arise where the Company holds less than 20% if it has the power to be actively involved and influential in
policy decisions affecting the entity.
Investments in associates are accounted for using the equity method. The equity method involves the recording of
the initial investment at cost and the subsequent adjusting of the carrying value of the investment for Cameco’s proportionate share of the earnings or loss and any other changes in the associates’ net assets, such as dividends. The cost
of the investment includes transaction costs.
Adjustments are made to align the accounting policies of the associate with those of the Company before
applying the equity method. When the Company’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest is reduced to zero, and the recognition of further losses is discontinued except to the
extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits, Cameco resumes recognizing its share of those profits only after its share of the
profits equals the share of losses not recognized.
iv. Joint arrangements
A joint arrangement can take the form of a joint operation or joint venture. All joint arrangements involve a contractual arrangement that establishes joint
control.
96 CAMECO
CORPORATION
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have
rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint operation may or may not be structured through a separate vehicle. These arrangements involve joint control of one or more of the assets acquired or
contributed for the purpose of the joint operation. The consolidated financial statements of the Company include its share of the assets in such joint operations, together with its share of the liabilities, revenues and expenses arising jointly or
otherwise from those operations. All such amounts are measured in accordance with the terms of each arrangement.
A joint venture is a joint arrangement
whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint venture is always structured through a separate vehicle. It operates in the same way as other entities, controlling the assets
of the joint venture, earning its own revenue and incurring its own liabilities and expenses. Interests in joint ventures are accounted for using the equity method of accounting, whereby the Company’s proportionate interest in the assets,
liabilities, revenues and expenses of jointly controlled entities are recognized on a single line in the consolidated statements of financial position and consolidated statements of earnings. The share of joint ventures results is recognized in the
Company’s consolidated financial statements from the date that joint control commences until the date at which it ceases.
v. Transactions
eliminated on consolidation
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Company’s interest in the investee. Unrealized
losses are eliminated in the same manner as unrealized gains, but only to the extent that there is no evidence of impairment.
D. Foreign currency
translation
Items included in the financial statements of each of Cameco’s subsidiaries, associates and joint arrangements are measured using
their functional currency, which is the currency of the primary economic environment in which the entity operates. The consolidated financial statements are presented in Canadian dollars, which is Cameco’s functional and presentation currency.
i. Foreign currency transactions
Foreign currency
transactions are translated into the respective functional currency of the Company and its entities using the exchange rates prevailing at the dates of the transactions. At the reporting date, monetary assets and liabilities denominated in foreign
currencies are translated to the functional currency at the exchange rate at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. The
applicable exchange gains and losses arising on these transactions are reflected in earnings with the exception of foreign exchange gains or losses on provisions for decommissioning and reclamation activities that are in a foreign currency, which
are capitalized in property, plant and equipment.
ii. Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Canadian dollars at
exchange rates at the reporting dates. The revenues and expenses of foreign operations are translated to Canadian dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognized in other comprehensive income. When a foreign operation is disposed of, in whole or in part, the relevant amount
in the foreign currency translation account is transferred to earnings as part of the gain or loss on disposal.
When the settlement of a monetary item
receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of the net investment in a foreign operation,
and are recognized in other comprehensive income and presented within equity in the foreign currency translation account.
2014 ANNUAL
REPORT 97
E. Cash and cash equivalents
Cash and cash equivalents consists of balances with financial institutions and investments in money market instruments, which have a term to maturity of three
months or less at the time of purchase.
F. Short-term investments
Short-term investments are comprised of money market instruments with terms to maturity between three and 12 months.
G. Inventories
Inventories of broken ore, uranium
concentrates, and refined and converted products are measured at the lower of cost and net realizable value.
Cost includes direct materials, direct
labour, operational overhead expenses and depreciation. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
Consumable supplies and spares are valued at the lower of cost or replacement value.
H. Property, plant and equipment
i. Buildings, plant
and equipment and other
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment charges. The cost of
self-constructed assets includes the cost of materials and direct labour, borrowing costs and any other costs directly attributable to bringing the assets to the location and condition necessary for them to be capable of operating in the manner
intended by management, including the initial estimate of the cost of dismantling and removing the items and restoring the site on which they are located.
When components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and
equipment and depreciated separately.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds
from disposal with the carrying amount of property, plant and equipment, and are recognized in earnings.
ii. Mineral properties and mine development
costs
The decision to develop a mine property within a project area is based on an assessment of the commercial viability of the property, the
availability of financing and the existence of markets for the product. Once the decision to proceed to development is made, development and other expenditures relating to the project area are deferred as part of assets under construction and
disclosed as a component of property, plant and equipment with the intention that these will be depreciated by charges against earnings from future mining operations. No depreciation is charged against the property until the production stage
commences. After a mine property has been brought into the production stage, costs of any additional work on that property are expensed as incurred, except for large development programs, which will be deferred and depreciated over the remaining
life of the related assets.
The production stage is reached when a mine property is in the condition necessary for it to be capable of operating in the
manner intended by management. The criteria used to assess the start date of the production stage are determined based on the nature of each mine construction project, including the complexity of a mine site. A range of factors is considered when
determining whether the production stage has been reached, which includes, but is not limited to, the demonstration of sustainable production at or near the level intended (such as the demonstration of continuous throughput levels at or above a
target percentage of the design capacity).
98 CAMECO
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iii. Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of the asset less its residual value. Assets which are unrelated to production are
depreciated according to the straight-line method based on estimated useful lives as follows:
|
|
|
|
|
| Land |
|
|
Not depreciated |
|
| Buildings |
|
|
15 - 25 years |
|
| Plant and equipment |
|
|
3 - 15 years |
|
| Furniture and fixtures |
|
|
3 - 10 years |
|
| Other |
|
|
3 - 5 y ears |
|
Mining properties and certain mining and conversion assets for which the economic benefits from the asset are consumed in a
pattern which is linked to the production level are depreciated according to the unit-of-production method. For conversion assets, the amount of depreciation is measured by the portion of the facilities’ total estimated lifetime production that
is produced in that period. For mining assets and properties, the amount of depreciation or depletion is measured by the portion of the mines’ proven and probable mineral reserves recovered during the period.
Depreciation methods, useful lives and residual values are reviewed at each reporting period and are adjusted if appropriate.
iv. Borrowing costs
Borrowing costs on funds directly
attributable to finance the acquisition, production or construction of a qualifying asset are capitalized until such time as substantially all the activities necessary to prepare the qualifying asset for its intended use are complete. A qualifying
asset is one that takes a substantial period of time to prepare for its intended use. Capitalization is discontinued when the asset enters the production stage or development ceases. Where the funds used to finance a project form part of general
borrowings, interest is capitalized based on the weighted average interest rate applicable to the general borrowings outstanding during the period of construction.
v. Repairs and maintenance
The cost of replacing a
component of property, plant and equipment is capitalized if it is probable that future economic benefits embodied within the component will flow to the Company. The carrying amount of the replaced component is derecognized. Costs of routine
maintenance and repair are charged to products and services sold.
I. Goodwill and intangible assets
Goodwill arising from the acquisition of subsidiaries is initially recognized at cost, measured as the excess of the fair value of the consideration paid over
the fair value of the identifiable net assets acquired. At the date of acquisition, goodwill is allocated to the cash generating unit (CGU), or group of CGUs that is expected to receive the economic benefits of the business combination. Goodwill is
subsequently measured at cost, less accumulated impairment losses.
Intangible assets acquired individually or as part of a group of assets are initially
recognized at cost and measured subsequently at cost less accumulated amortization and impairment losses. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates.
The cost of a group of intangible assets acquired in a transaction, including those acquired in a business combination that meet the specified criteria for recognition apart from goodwill, is allocated to the individual assets acquired based on
their relative fair values.
Intangible assets that have finite useful lives are amortized over their estimated remaining useful lives. Amortization
methods and useful lives are reviewed at each reporting period and are adjusted if appropriate.
J. Leased assets
Leases which result in the Company receiving substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition,
the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the
2014 ANNUAL
REPORT 99
accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between finance cost and the reduction of the outstanding liability. The finance cost
is allocated to each period of the lease term to produce a constant periodic rate of interest on the remaining balance of the liability.
Lease agreements
that do not meet the recognition criteria of a finance lease are classified and recognized as operating leases and are not recognized in the Company’s consolidated statements of financial position. Payments made under operating leases are
charged to income on a straight-line basis over the lease term.
K. Finance income and finance costs
Finance income comprises interest income on funds invested, gains on the disposal of available-for-sale financial assets, and changes in the fair value of
non-derivative financial instruments. Interest income is recognized in earnings as it accrues, using the effective interest method. Finance costs comprise interest and fees on borrowings, unwinding of the discount on provisions and changes in the
fair value of non-derivative financial instruments.
Borrowing costs that are not directly attributable to the acquisition, construction or production of
a qualifying asset are expensed in the period incurred.
Foreign currency gains and losses are reported on a net basis as part of finance costs.
L. Research and development costs
Expenditures on
research are charged against earnings when incurred. Development costs are recognized as assets when the Company can demonstrate technical feasibility and that the asset will generate probable future economic benefits.
M. Impairment
i. Non-derivative financial assets
Financial assets not classified as fair value through profit and loss are assessed at each reporting date to determine whether there is objective
evidence of impairment. Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider
otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost
is objective evidence of impairment.
Impairment losses on available-for-sale financial assets are recognized by transferring the cumulative loss that has
been recognized in other comprehensive income, and presented in equity, to earnings. The cumulative loss that is removed from other comprehensive income and recognized in earnings is the difference between the acquisition cost, net of any principal
payment and amortization, and the current fair value, less any impairment loss previously recognized in earnings.
If, in a subsequent period, the fair
value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognized in earnings, then the impairment loss is reversed through earnings, otherwise,
it is reversed through other comprehensive income. Impairment losses on available-for-sale equity securities that are recognized in earnings are never reversed through earnings.
ii. Non-financial assets
The carrying amounts of
Cameco’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for
impairment.
For impairment testing, assets are grouped together into CGUs which are the smallest group of assets that generate cash inflows from
continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.
100 CAMECO
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The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to
sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. Fair
value is determined as the amount that would be obtained from the sale of the asset or CGU in an arm’s-length transaction between knowledgeable and willing parties. For exploration properties, fair value is based on the implied fair value of
the resources in place using comparable market transaction metrics.
An impairment loss is recognized if the carrying amount of an asset or its CGU
exceeds its recoverable amount. Impairment losses are recognized in earnings. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying
amounts of the other assets in the CGU on a pro rata basis.
Impairment losses recognized in prior periods are assessed at each reporting date whenever
events or changes in circumstances indicate that the impairment may have reversed. If the impairment has reversed, the carrying amount of the asset is increased to its recoverable amount. An impairment loss is reversed only to the extent that the
asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. A reversal of an impairment loss is recognized immediately in earnings.
An impairment loss in respect of goodwill is not reversed.
N. Exploration and evaluation expenditures
Exploration and evaluation expenditures are those expenditures incurred by the Company in connection with the exploration for and evaluation of mineral
resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. These expenditures include researching and analyzing existing exploration data, conducting geological studies, exploratory
drilling and sampling, and compiling prefeasibility and feasibility studies. Exploration and evaluation expenditures are charged against earnings as incurred, except when there is a high degree of confidence in the viability of the project and it is
probable that these costs will be recovered through future development and exploitation.
The technical feasibility and commercial viability of extracting
a resource is considered to be determinable based on several factors, including the existence of proven and probable reserves and the demonstration that future economic benefits are probable. When an area is determined to be technically feasible and
commercially viable, the exploration and evaluation assets attributable to that area are first tested for impairment and then transferred to property, plant and equipment.
Exploration and evaluation costs that have been acquired in a business combination or asset acquisition are capitalized under the scope of IFRS 6,
Exploration for and Evaluation of Mineral Resources, and are reported as part of property, plant and equipment.
O. Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is
probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the risk-adjusted expected future cash flows at a pre-tax risk-free rate that reflects current market assessments of
the time value of money. The unwinding of the discount is recognized as a finance cost.
i. Environmental restoration
The mining, extraction and processing activities of the Company normally give rise to obligations for site closure and environmental restoration. Closure and
restoration can include facility decommissioning and dismantling, removal or treatment of waste materials, as well as site and land restoration. The Company provides for the closure, reclamation and decommissioning of its operating sites in the
financial period when the related environmental disturbance occurs, based on the estimated future costs using information available at the reporting date. Costs included in the provision comprise all closure and restoration activity expected to
occur gradually over the life of the operation and at the time of closure. Routine operating
2014 ANNUAL
REPORT 101
costs that may impact the ultimate closure and restoration activities, such as waste material handling conducted as a normal part of a mining or production process, are not included in the
provision.
The timing of the actual closure and restoration expenditure is dependent upon a number of factors such as the life and nature of the asset,
the operating licence conditions and the environment in which the mine operates. Closure and restoration provisions are measured at the expected value of future cash flows, discounted to their present value using a current pre-tax risk-free rate.
Significant judgments and estimates are involved in deriving the expectations of future activities and the amount and timing of the associated cash flows.
At the time a provision is initially recognized, to the extent that it is probable that future economic benefits associated with the reclamation,
decommissioning and restoration expenditure will flow to the Company, the corresponding cost is capitalized as an asset. The capitalized cost of closure and restoration activities is recognized in property, plant and equipment and depreciated on a
unit-of-production basis. The value of the provision is gradually increased over time as the effect of discounting unwinds. The unwinding of the discount is an expense recognized in finance costs.
Closure and rehabilitation provisions are also adjusted for changes in estimates. The provision is reviewed at each reporting date for changes to obligations,
legislation or discount rates that effect change in cost estimates or life of operations. The cost of the related asset is adjusted for changes in the provision resulting from changes in estimated cash flows or discount rates, and the adjusted cost
of the asset is depreciated prospectively.
ii. Waste disposal
The refining, conversion and manufacturing processes generate certain uranium-contaminated waste. The Company has established strict procedures to ensure this
waste is disposed of safely. A provision for waste disposal costs in respect of these materials is recognized when they are generated. Costs associated with the disposal, the timing of cash flows and discount rates are estimated both at initial
recognition and subsequent measurement.
P. Employee future benefits
i. Pension obligations
The Company accrues its
obligations under employee benefit plans. The Company has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no
legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan
other than a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognized in the consolidated statements of financial position in respect of defined benefit pension plans is the present value of the defined
benefit obligation at the reporting date less the fair value of plan assets. The defined benefit obligation is calculated annually, by qualified independent actuaries using the projected unit credit method prorated on service and management’s
best estimate of expected plan investment performance, salary escalation, retirement ages of employees and expected health care costs. The present value of the defined benefit obligation is determined by discounting the estimated future cash
outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.
The Company recognizes all actuarial gains and losses arising from defined benefit plans in other comprehensive income, and reports them in retained earnings.
When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized immediately in earnings.
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For defined contribution plans, the contributions are recognized as employee benefit expense in earnings in the
periods during which services are rendered by employees. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.
ii. Other post-retirement benefit plans
The Company
provides certain post-retirement health care benefits to its retirees. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected
costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. Actuarial gains and losses are recognized in other comprehensive income in the period in which they
arise. These obligations are valued annually by independent qualified actuaries.
iii. Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized
for the amount expected to be paid under short-term cash bonus plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be measured reliably.
iv. Termination benefits
Termination benefits are
payable when employment is terminated by the Company before the normal retirement date, or whenever an employee accepts an entity’s offer of benefits in exchange for termination of employment. Cameco recognizes termination benefits as an
expense at the earlier of when the Company can no longer withdraw the offer of those benefits and when the Company recognizes costs for a restructuring. If benefits are payable more than 12 months after the reporting period, they are discounted to
their present value.
v. Share-based compensation
For equity-settled plans, the grant date fair value of share-based compensation awards granted to employees is recognized as an employee benefit expense, with
a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and vesting
conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
For cash-settled plans, the fair value of the amount payable to employees is recognized as an expense, with a corresponding increase in liabilities, over the
period that the employees unconditionally become entitled to payment. The liability is re-measured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized as employee benefit expense in earnings.
Cameco’s contributions under the employee share ownership plan are expensed during the year of contribution. Shares purchased with Company
contributions and with dividends paid on such shares become unrestricted on January 1 of the second plan year following the date on which such shares were purchased.
Q. Revenue recognition
Cameco supplies uranium
concentrates and uranium conversion services to utility customers.
Cameco recognizes revenue on the sale of its nuclear products when the risks and
rewards of ownership pass to the customer and collection is reasonably assured. Cameco’s sales are pursuant to an enforceable contract that indicates the type of sales arrangement, pricing and delivery terms, as well as details related to the
transfer of title.
Cameco has three types of sales arrangements with its customers in its uranium and fuel services businesses. These arrangements
include uranium supply, toll conversion services and conversion supply (converted uranium), which is a combination of uranium supply and toll conversion services.
2014 ANNUAL
REPORT 103
Uranium supply
In a uranium supply arrangement, Cameco is contractually obligated to provide uranium concentrates to its customers. Cameco-owned uranium is physically
delivered to conversion facilities (Converters) where the Converter will credit Cameco’s account for the volume of accepted uranium. Based on delivery terms in a sales contract with its customer, Cameco instructs the Converter to transfer title
of a contractually specified quantity of uranium to the customer’s account at the Converter’s facility. At this point, the risks and rewards of ownership have been transferred and Cameco invoices the customer and recognizes revenue for the
uranium supply.
Toll conversion services
In a toll
conversion arrangement, Cameco is contractually obligated to convert customer-owned uranium to a chemical state suitable for enrichment. Based on delivery terms in a sales contract with its customer, Cameco either (i) physically delivers
converted uranium to enrichment facilities (Enrichers) where it instructs the Enricher to transfer title of a contractually specified quantity of converted uranium to the customer’s account at the Enricher’s facility, or
(ii) transfers title of a contractually specified quantity of converted uranium to either an Enricher’s account or the customer’s account. At this point, the risks and rewards of ownership have been transferred and Cameco invoices the
customer and recognizes revenue for the toll conversion services.
Conversion supply
In a conversion supply arrangement, Cameco is contractually obligated to provide converted uranium of acceptable origins to its customers. Based on delivery
terms in a sales contract with its customer, Cameco either (i) physically delivers converted uranium to the Enricher where it instructs the Enricher to transfer title of a contractually specified quantity of converted uranium to the
customer’s account at the Enricher’s facility, or (ii) transfers title of a contractually specified quantity of converted uranium to either an Enricher’s account or a customer’s account at Cameco’s Port Hope conversion
facility. At this point, the risks and rewards of ownership have been transferred and Cameco invoices the customer and recognizes revenue for both the uranium supplied and the conversion service provided.
R. Financial instruments
A financial instrument is any
contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another.
i. Non-derivative financial
assets and financial liabilities
At initial recognition, Cameco classifies each of its financial assets and financial liabilities into one of the
following categories:
Fair value through profit or loss
A financial asset or liability is classified as at fair value through profit or loss if it is classified as held-for-trading or is designated as such on
initial recognition. Cameco classifies a financial instrument as held-for-trading if it was acquired principally for the purpose of selling or repurchasing in the near term, or if it is part of a portfolio with evidence of a recent pattern of
short-term profit taking. Directly attributable transaction costs are recognized in earnings as incurred. These financial assets and financial liabilities are measured at fair value, with any gains or losses on revaluation being recognized in
earnings.
Held-to-maturity
Held-to-maturity
investments are financial assets that an entity has the intention and ability to hold until maturity, provide fixed or determinable payments and contain a fixed maturity date. Assets in this category are initially measured at fair value and
subsequently measured at amortized cost using the effective interest method.
Loans and receivables
Loans and receivables are financial assets that provide fixed or determinable payments and are not quoted in an active market. Assets in this category are
initially measured at fair value and subsequently measured at amortized cost using the effective interest method.
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Available-for-sale assets
Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified into any of the other
categories. These assets are measured at fair value plus any directly attributable transaction costs with any gains or losses on re-measurement recognized in other comprehensive income. Accumulated changes in fair value are recorded as a separate
component of equity until the asset is derecognized or impaired, then the cumulative gain or loss in other comprehensive income is transferred to earnings.
Other financial liabilities
This category consists of
all non-derivative financial liabilities that do not meet the definition of held-for-trading liabilities, and that have not been designated as liabilities at fair value through profit or loss. These liabilities are initially recognized at fair value
less any directly attributable transaction costs and are subsequently measured at amortized cost using the effective interest method.
ii. Derivative
financial instruments
The Company holds derivative financial instruments to reduce exposure to fluctuations in foreign currency exchange rates and
interest rates. Except for those designated as hedging instruments, all derivative financial instruments are recorded at fair value in the consolidated statements of financial position, with any directly attributable transaction costs recognized in
earnings as incurred. Subsequent to initial recognition, changes in fair value are recognized in earnings.
The purpose of hedging transactions is to
modify the Company’s exposure to one or more risks by creating an offset between changes in the fair value of, or the cash inflows attributable to, the hedged item and the hedging item. When hedge accounting is appropriate, the hedging
relationship is designated as a fair value hedge, a cash flow hedge, or a foreign currency risk hedge related to a net investment in a foreign operation. The Company does not have any instruments that have been designated as hedge transactions at
December 31, 2014.
Separable embedded derivatives
Derivatives may be embedded in other financial instruments (the “host instrument”). Embedded derivatives are treated as separate derivatives when
their economic characteristics and risks are not clearly and closely related to those of the host instrument, the terms of the embedded derivative are the same as those of a stand-alone derivative, and the combined contract is not designated at fair
value. These embedded derivatives are measured at fair value with subsequent changes recognized in gains or losses on derivatives.
S. Income tax
Income tax expense is comprised of current and deferred taxes. Current tax and deferred tax are recognized in earnings except to the extent that it
relates to a business combination, or items recognized directly in equity or in other comprehensive income.
Current tax is the expected tax payable or
receivable on the taxable income or loss for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustments to tax payable in respect of previous years. Current tax assets and liabilities are measured at the
amount expected to be paid or recovered from the taxation authorities.
Deferred tax is recognized in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are
offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current
tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
2014 ANNUAL
REPORT 105
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to
the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax
benefit will be realized.
The Company’s exposure to uncertain tax positions is evaluated and a provision is made where it is probable that this
exposure will materialize.
T. Share capital
Common
shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a reduction of equity, net of any tax effects.
U. Earnings per share
The Company presents basic and
diluted earnings per share data for its common shares. Earnings per share is calculated by dividing the net earnings attributable to equity holders of the Company by the weighted average number of common shares outstanding.
Diluted earnings per share is determined by adjusting the net earnings attributable to equity holders of the Company and the weighted average number of common
shares outstanding, for the effects of all dilutive potential common shares. The calculation of diluted earnings per share assumes that outstanding options which are dilutive to earnings per share are exercised and the proceeds are used to
repurchase shares of the Company at the average market price of the shares for the period. The effect is to increase the number of shares used to calculate diluted earnings per share.
V. Segment reporting
An operating segment is a component
of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other segments. To be classified as a segment, discrete
financial information must be available and operating results must be regularly reviewed by the Company’s Chief Executive Officer.
Segment capital
expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill.
W.
Discontinued operations
A discontinued operation is a component of the Company that has either been disposed of or that is classified as held for
sale. A component of the Company is comprised of operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company. Net earnings of a discontinued operation and any gain or
loss on disposal are combined and presented as net earnings from discontinued operations in the consolidated statements of earnings.
3. Accounting
standards
A. Changes in accounting policy
On January 1, 2014, Cameco adopted the following new standards and amendments to existing standards as issued by the IASB: IAS 32, Financial
Instruments: Presentation (IAS 32), International Financial Reporting Interpretations Committee 21, Levies (IFRIC 21) and IAS 36, Impairment of Assets (IAS 36).
i. Financial assets and financial liabilities
Amendments
to IAS 32 clarify matters regarding offsetting financial assets and financial liabilities as well as related disclosure requirements. As Cameco does not have a practice of offsetting its financial instruments, the adoption of IAS 32 has had no
effect on the financial reporting of Cameco.
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ii. Levies
IFRIC 21 provides guidance on accounting for levies in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets. The
interpretation defines a levy as an outflow from an entity imposed by a government in accordance with legislation and confirms that an entity recognizes a liability for a levy only when the triggering event specified in the legislation occurs.
Cameco’s current accounting treatment for levies is consistent with the requirements of IFRIC 21, such that the adoption of IFRIC 21 has had no material impact on the financial reporting of Cameco.
iii. Disclosure of recoverable amounts
The amendments in
IAS 36 reverse the unintended requirement in IFRS 13 to disclose the recoverable amount of every cash generating unit to which significant goodwill or indefinite-lived intangible assets have been allocated. Under these amendments, the recoverable
amount is required to be disclosed only when an impairment loss has been recognized or reversed. As a result, the adoption of IAS 36 has had no effect on the financial reporting of Cameco.
B. New standards and interpretations not yet adopted
A
number of new standards and amendments to existing standards are not yet effective for the year ended December 31, 2014, and have not been applied in preparing these consolidated financial statements. The following standards and amendments to
existing standards have been published and are mandatory for Cameco’s accounting periods beginning on or after January 1, 2016, unless otherwise noted. Cameco does not intend to early adopt any of the following amendments to existing
standards and does not expect the amendments to have a material impact on the financial statements, unless otherwise noted.
i. Property, plant and
equipment and intangible assets
In May 2014, the IASB issued amendments to IAS 16, Property, Plant and Equipment and IAS 38,
Intangible Assets. The amendments are to be applied prospectively. The amendments clarify the factors to be considered in assessing the technical or commercial obsolescence and the resulting depreciation period of an asset and state that a
depreciation method based on revenue is not appropriate.
ii. Joint arrangements
In May 2014, the IASB issued amendments to IFRS 11, Joint Arrangements (IFRS 11). The amendments in IFRS 11 are to be applied prospectively. The
amendments clarify the accounting for the acquisition of interests in joint operations and require the acquirer to apply the principles of business combinations accounting in IFRS 3, Business Combinations.
iii. Sale or contribution of assets
In September
2014, the IASB issued amendments to IFRS 10, Consolidated Financial Statements and IAS 28, Investments in Associates and Joint Ventures. The amendments provide clarification on the recognition of gains or losses upon the sale or
contribution of assets between an investor and its associate or joint venture.
iv. Noncurrent assets held for sale and discontinued operations
In September 2014, the IASB issued amendments to IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations (IFRS 5).
The amendments are to be applied prospectively, with earlier application permitted. Assets are generally disposed of either through sale or through distribution to owners. The amendments to IFRS 5 clarify the application of IFRS 5 when changing from
one of these disposal methods to the other.
v. Financial instruments disclosures
In September 2014, the IASB issued amendments to IFRS 7, Financial Instruments: Disclosures (IFRS 7). The amendments in IFRS 7 are to be applied
retrospectively, with earlier application permitted. The amendments to IFRS 7 clarify the disclosure required for any continuing involvement in a transferred asset that has been derecognized. The amendments also provide guidance on disclosures
regarding the offsetting of financial assets and financial liabilities in interim financial reports.
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vi. Interim financial reporting
In September 2014, the IASB issued amendments to IAS 34, Interim Financial Reporting (IAS 34). The amendments to IAS 34 are to be applied retrospectively, with
earlier application permitted. The amendments provide additional guidance on interim disclosures and whether they are provided in the interim financial statements or incorporated by cross-reference between the interim financial statements and other
financial disclosures.
vii. Revenue
In May
2014, the IASB issued IFRS 15, Revenue from Contracts with Customers (IFRS 15). IFRS 15 is effective for periods beginning on or after January 1, 2017 and is to be applied retrospectively. IFRS 15 clarifies the principles for recognizing
revenue from contracts with customers. The extent of the impact of adoption of IFRS 15 has not yet been determined.
viii. Financial instruments
In July 2014, the IASB issued IFRS 9, Financial Instruments (IFRS 9). IFRS 9 replaces the current multiple classification and
measurement models for financial assets and liabilities with a single model that has only two classification categories: amortized cost and fair value. The basis of classification depends on the entity’s business model and the contractual cash
flow characteristics of the financial asset or liability. It also introduces additional changes relating to financial liabilities and aligns hedge accounting more closely with risk management.
IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early adoption of the new standard permitted. Cameco does not intend
to early adopt IFRS 9. The extent of the impact of adoption of IFRS 9 has not yet been determined.
4. Determination of fair values
A number of the Company’s accounting policies and disclosures require the measurement of fair value, for both financial and non-financial assets and
liabilities.
The fair value of an asset or liability is generally estimated as the amount that would be received on sale of an asset, or paid to transfer
a liability in an orderly transaction between market participants at the reporting date. Fair values of assets and liabilities traded in an active market are determined by reference to last quoted prices, in the principal market for the asset or
liability. In the absence of an active market for an asset or liability, fair values are determined based on market quotes for assets or liabilities with similar characteristics and risk profiles, or through other valuation techniques. Fair values
determined using valuation techniques require the use of inputs, which are obtained from external, readily observable market data when available. In some circumstances, inputs that are not based on observable data must be used. In these cases, the
estimated fair values may be adjusted in order to account for valuation uncertainty, or to reflect the assumptions that market participants would use in pricing the asset or liability.
All fair value measurements are categorized into one of three hierarchy levels, described below, for disclosure purposes. Each level is based on the
transparency of the inputs used to measure the fair values of assets and liabilities:
Level 1 – Values based on unadjusted quoted prices in active
markets that are accessible at the reporting date for identical assets or liabilities.
Level 2 – Values based on quoted prices in markets that are
not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.
Level 3 –
Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.
When
the inputs used to measure fair value fall within more than one level of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its
entirety.
108 CAMECO
CORPORATION
Transfers between levels of the fair value hierarchy are recognized at the end of the reporting period during
which the transfer occurred. There were no transfers between level 1, level 2, or level 3 during the period. Cameco does not have any recurring fair value measurements that are categorized as level 3 as of the reporting date.
Further information about the techniques and assumptions used to measure fair values is included in the following notes:
Note 10 – Property, plant and equipment
Note 11 –
Goodwill and intangible assets
Note 13 – Equity-accounted investees
Note 26 – Share-based compensation plans
Note 28 –
Financial instruments and risk management
5. Use of estimates and judgments
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates
are revised and in any future period affected.
Information about critical judgments in applying the accounting policies that have the most significant
effect on the amounts recognized in the consolidated financial statements is discussed below. Further details of the nature of these judgments, estimates and assumptions may be found in the relevant notes to the consolidated financial statements.
A. Recoverability of long-lived and intangible assets
Cameco assesses the carrying values of property, plant and equipment, and intangible assets when there is an indication of possible impairment. Goodwill and
intangible assets not yet available for use or with indefinite useful lives are tested for impairment annually. If it is determined that carrying values of assets or goodwill cannot be recovered, the unrecoverable amounts are charged against current
earnings. Recoverability is dependent upon assumptions and judgments regarding market conditions, costs of production, sustaining capital requirements and mineral reserves. Other assumptions used in the calculation of recoverable amounts are
discount rates, future cash flows and profit margins. A material change in assumptions may significantly impact the potential impairment of these assets.
B. Cash generating units
In performing impairment
assessments of long-lived assets, assets that cannot be assessed individually are grouped together into the smallest group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
Management is required to exercise judgment in identifying these CGUs.
C. Provisions for decommissioning and reclamation of assets
Significant decommissioning and reclamation activities are often not undertaken until near the end of the useful lives of the productive assets. Regulatory
requirements and alternatives with respect to these activities are subject to change over time. A significant change to either the estimated costs or mineral reserves may result in a material change in the amount charged to earnings.
D. Income taxes
Cameco operates in a number of tax
jurisdictions and is, therefore, required to estimate its income taxes in each of these tax jurisdictions in preparing its consolidated financial statements. In calculating income taxes, consideration is given to factors such as tax rates in the
different jurisdictions, non-deductible expenses, valuation allowances, changes in tax law and
2014 ANNUAL
REPORT 109
management’s expectations of future operating results. Cameco estimates deferred income taxes based on temporary differences between the income and losses reported in its consolidated
financial statements and its taxable income and losses as determined under the applicable tax laws. The tax effect of these temporary differences is recorded as deferred tax assets or liabilities in the consolidated financial statements. The
calculation of income taxes requires the use of judgment and estimates. If these judgments and estimates prove to be inaccurate, future earnings may be materially impacted.
E. Commencement of production stage
Until a mining
property is declared as being in the production stage, all costs related to its development are capitalized. The determination of the date on which a mine enters the production stage is a matter of judgment that impacts when capitalization of
development costs ceases and depreciation of the mining property commences and is charged to earnings. Refer to note 2 (h)(ii) for further information on the criteria used to make this assessment.
F. Mineral reserves
Depreciation on property, plant and
equipment is primarily calculated using the unit-of-production method. This method allocates the cost of an asset to each period based on current period production as a portion of total lifetime production or a portion of estimated mineral reserves.
Estimates of life-of-mine and amounts of mineral reserves are updated annually and are subject to judgment and significant change over time. If actual mineral reserves prove to be significantly different than the estimates, there could be a material
impact on the amounts of depreciation charged to earnings.
G. Purchase price allocations
The purchase price related to a business combination or asset acquisition is allocated to the underlying acquired assets and liabilities based on their
estimated fair values at the time of acquisition. The determination of fair value requires Cameco to make assumptions, estimates and judgments regarding future events. The allocation process is inherently subjective and impacts the amounts assigned
to individually identifiable assets and liabilities. As a result, the purchase price allocation impacts Cameco’s reported assets and liabilities and future net earnings due to the impact on future depreciation and amortization expense and
impairment tests.
H. Determination of joint control
Cameco conducts certain operations through joint ownership interests. Judgment is required in assessing whether Cameco has joint control over the investee,
which involves determining the relevant activities of the arrangement and whether decisions around relevant activities require unanimous consent. Judgment is also required to determine whether a joint arrangement should be classified as a joint
venture or joint operation. Classifying the arrangement requires us to assess our rights and obligations arising from the arrangement. Specifically, management considers the structure of the joint arrangement and whether it is structured through a
separate vehicle and when the arrangement is structured through a separate vehicle, we also consider the rights and obligations arising from the legal form of the separate vehicle, the terms of the contractual arrangements and other facts and
circumstances, when relevant. This judgment influences whether we equity account or proportionately consolidate our interest in the arrangement.
6.
Discontinued operation
On March 27, 2014, Cameco completed the sale of its 31.6% limited partnership interest in Bruce Power L.P. (BPLP) which
operates the four Bruce B nuclear reactors in Ontario. The aggregate sale price for Cameco’s interest in BPLP and certain related entities was $450,000,000. The sale has been accounted for effective January 1, 2014. Cameco received net
proceeds of approximately $447,096,000 and realized an after tax gain of $127,243,000 on this divestiture.
110 CAMECO
CORPORATION
As a result of the transaction, Cameco presented the results of BPLP as a discontinued operation and revised its
statement of earnings, statement of comprehensive income and statement of cash flows to reflect this change in presentation. Net earnings from this discontinued operation are as follows:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Share of earnings from BPLP and related entities |
|
$ |
— |
|
|
$ |
112,793 |
|
| Tax expense |
|
|
— |
|
|
|
27,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
85,321 |
|
| Gain on disposal of BPLP and related entities |
|
|
144,912 |
|
|
|
— |
|
| Tax expense on disposal |
|
|
17,669 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
127,243 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
| Net earnings from discontinued operation |
|
$ |
127,243 |
|
|
$ |
85,321 |
|
|
|
|
|
|
|
|
|
|
7. Acquisitions
NUKEM
Energy GmbH (NUKEM)
On January 9, 2013, Cameco completed the acquisition of NUKEM from Advent International and other shareholders, through the
purchase of all the outstanding shares for cash consideration of $148,302,000 (US).
While Cameco received the economic benefit of owning NUKEM as of
January 1, 2012, the results of NUKEM have been consolidated with the results of Cameco commencing on January 9, 2013. NUKEM is one of the world’s leading traders and brokers of nuclear fuel products and services. The acquisition
complements Cameco’s business by strengthening our position in nuclear fuel markets and improving our access to unconventional and secondary sources of supply.
In accordance with the acquisition method of accounting, the purchase price was allocated to the underlying assets and liabilities assumed based on their fair
values at the date of acquisition. Fair values were determined based on discounted cash flows and quoted market prices. The values assigned to the net assets acquired were as follows:
|
|
|
|
|
| Net assets acquired (USD) |
|
|
|
| Cash and cash equivalents |
|
$ |
12,974 |
|
| Accounts receivable |
|
|
43,529 |
|
| Other working capital |
|
|
5,172 |
|
| Inventories |
|
|
165,280 |
|
| Intangible assets |
|
|
87,535 |
|
| Accounts payable and accrued liabilities |
|
|
(68,464 |
) |
| Long-term debt |
|
|
(116,922 |
) |
| Provisions |
|
|
(15,514 |
) |
| Deferred tax liabilities |
|
|
(53,665 |
) |
| Goodwill |
|
|
88,377 |
|
|
|
|
|
|
| Total |
|
$ |
148,302 |
|
|
|
|
|
|
An advisory fee of $2,980,000 has been included in administration expense in the consolidated statement of earnings for the
year ended December 31, 2013.
2014 ANNUAL
REPORT 111
8. Accounts receivable
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Trade receivables |
|
$ |
428,850 |
|
|
$ |
391,749 |
|
| Receivables due from related parties |
|
|
— |
|
|
|
13,400 |
|
| HST/VAT receivables |
|
|
19,523 |
|
|
|
15,344 |
|
| Other receivables |
|
|
6,629 |
|
|
|
10,882 |
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
455,002 |
|
|
$ |
431,375 |
|
|
|
|
|
|
|
|
|
|
The Company’s exposure to credit and currency risks as well as impairment loss related to trade and other receivables,
excluding harmonized sales tax (HST)/value added tax (VAT) receivables is disclosed in note 28.
9. Inventories
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Uranium |
|
|
|
|
|
|
|
|
| Concentrate |
|
$ |
500,342 |
|
|
$ |
550,305 |
|
| Broken ore |
|
|
21,289 |
|
|
|
4,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
521,631 |
|
|
|
554,877 |
|
| NUKEM |
|
|
251,942 |
|
|
|
208,217 |
|
| Fuel services |
|
|
128,705 |
|
|
|
150,221 |
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
902,278 |
|
|
$ |
913,315 |
|
|
|
|
|
|
|
|
|
|
Cameco expensed $1,698,000,000 of inventory as cost of sales during 2014 (2013 - $1,690,000,000). Included in cost of
sales is a $4,300,000 net recovery, resulting from the reversal of previous NUKEM inventory write-downs to reflect net realizable value (2013 - $14,000,000 write-down).
NUKEM enters into financing arrangements where future receivables arising from certain sales contracts are sold to financial institutions in exchange for
cash. These arrangements require NUKEM to satisfy its delivery obligations under the sales contracts, which are recognized as deferred sales (note 17). In some of the arrangements, NUKEM is also required to pledge the underlying inventory as
security against these performance obligations. As of December 31, 2014, NUKEM had $64,687,000 (US) (2013 -$31,763,000 (US)) of inventory pledged as security under financing arrangements.
112 CAMECO
CORPORATION
10. Property, plant and equipment
At December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Land and
buildings |
|
|
Plant and
equipment |
|
|
Furniture
and
fixtures |
|
|
Under
construction |
|
|
Exploration
and
evaluation |
|
|
Total |
|
| Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beginning of year |
|
$ |
2,971,894 |
|
|
$ |
1,819,611 |
|
|
$ |
97,220 |
|
|
$ |
1,904,400 |
|
|
$ |
1,072,242 |
|
|
$ |
7,865,367 |
|
| Additions |
|
|
26,688 |
|
|
|
18,288 |
|
|
|
5,716 |
|
|
|
407,492 |
|
|
|
14,640 |
|
|
|
472,824 |
|
| Transfers |
|
|
143,639 |
|
|
|
152,564 |
|
|
|
17,171 |
|
|
|
(313,374 |
) |
|
|
— |
|
|
|
— |
|
| Change in reclamation provision |
|
|
228,223 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
228,223 |
|
| Disposals (b) |
|
|
(902 |
) |
|
|
(24,463 |
) |
|
|
(1,111 |
) |
|
|
(40,664 |
) |
|
|
(10,984 |
) |
|
|
(78,124 |
) |
| Effect of movements in exchange rates |
|
|
54,194 |
|
|
|
18,721 |
|
|
|
1,076 |
|
|
|
4,646 |
|
|
|
8,817 |
|
|
|
87,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| End of year |
|
|
3,423,736 |
|
|
|
1,984,721 |
|
|
|
120,072 |
|
|
|
1,962,500 |
|
|
|
1,084,715 |
|
|
|
8,575,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated depreciation and impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beginning of year |
|
|
1,491,681 |
|
|
|
1,019,529 |
|
|
|
81,216 |
|
|
|
70,159 |
|
|
|
161,789 |
|
|
|
2,824,374 |
|
| Depreciation charge |
|
|
185,238 |
|
|
|
111,980 |
|
|
|
23,574 |
|
|
|
94 |
|
|
|
161 |
|
|
|
321,047 |
|
| Transfers |
|
|
(4,190 |
) |
|
|
4,190 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Disposals |
|
|
(678 |
) |
|
|
(16,736 |
) |
|
|
(336 |
) |
|
|
— |
|
|
|
(7,160 |
) |
|
|
(24,910 |
) |
| Impairment charge (a) |
|
|
66,084 |
|
|
|
38,968 |
|
|
|
— |
|
|
|
21,368 |
|
|
|
— |
|
|
|
126,420 |
|
| Effect of movements in exchange rates |
|
|
31,391 |
|
|
|
7,038 |
|
|
|
(353 |
) |
|
|
— |
|
|
|
(284 |
) |
|
|
37,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| End of year |
|
|
1,769,526 |
|
|
|
1,164,969 |
|
|
|
104,101 |
|
|
|
91,621 |
|
|
|
154,506 |
|
|
|
3,284,723 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net book value at December 31, 2014 |
|
$ |
1,654,210 |
|
|
$ |
819,752 |
|
|
$ |
15,971 |
|
|
$ |
1,870,879 |
|
|
$ |
930,209 |
|
|
$ |
5,291,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Land and
buildings |
|
|
Plant and
equipment |
|
|
Furniture
and
fixtures |
|
|
Under
construction |
|
|
Exploration
and
evaluation |
|
|
Total |
|
| Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beginning of year |
|
$ |
2,722,059 |
|
|
$ |
1,663,769 |
|
|
$ |
89,868 |
|
|
$ |
1,679,571 |
|
|
$ |
1,126,254 |
|
|
$ |
7,281,521 |
|
| Acquisitions [note 7] |
|
|
— |
|
|
|
1,070 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,070 |
|
| Additions |
|
|
54,899 |
|
|
|
18,299 |
|
|
|
485 |
|
|
|
528,547 |
|
|
|
9,131 |
|
|
|
611,361 |
|
| Change in reclamation provision |
|
|
1,958 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,958 |
|
| Transfers |
|
|
161,042 |
|
|
|
141,018 |
|
|
|
6,929 |
|
|
|
(308,989 |
) |
|
|
— |
|
|
|
— |
|
| Disposals |
|
|
(1,467 |
) |
|
|
(14,294 |
) |
|
|
(578 |
) |
|
|
— |
|
|
|
(131 |
) |
|
|
(16,470 |
) |
| Effect of movements in exchange rates |
|
|
33,403 |
|
|
|
9,749 |
|
|
|
516 |
|
|
|
5,271 |
|
|
|
(63,012 |
) |
|
|
(14,073 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| End of year |
|
|
2,971,894 |
|
|
|
1,819,611 |
|
|
|
97,220 |
|
|
|
1,904,400 |
|
|
|
1,072,242 |
|
|
|
7,865,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated depreciation and impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beginning of year |
|
|
1,305,639 |
|
|
|
918,829 |
|
|
|
71,903 |
|
|
|
— |
|
|
|
168,000 |
|
|
|
2,464,371 |
|
| Depreciation charge |
|
|
169,561 |
|
|
|
105,101 |
|
|
|
9,531 |
|
|
|
— |
|
|
|
258 |
|
|
|
284,451 |
|
| Transfers |
|
|
(185 |
) |
|
|
692 |
|
|
|
(507 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Disposals |
|
|
(378 |
) |
|
|
(9,104 |
) |
|
|
(155 |
) |
|
|
— |
|
|
|
— |
|
|
|
(9,637 |
) |
| Impairment charges (c) |
|
|
28 |
|
|
|
344 |
|
|
|
— |
|
|
|
70,159 |
|
|
|
7,160 |
|
|
|
77,691 |
|
| Effect of movements in exchange rates |
|
|
17,016 |
|
|
|
3,667 |
|
|
|
444 |
|
|
|
— |
|
|
|
(13,629 |
) |
|
|
7,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| End of year |
|
|
1,491,681 |
|
|
|
1,019,529 |
|
|
|
81,216 |
|
|
|
70,159 |
|
|
|
161,789 |
|
|
|
2,824,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net book value at December 31, 2013 |
|
$ |
1,480,213 |
|
|
$ |
800,082 |
|
|
$ |
16,004 |
|
|
$ |
1,834,241 |
|
|
$ |
910,453 |
|
|
$ |
5,040,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 ANNUAL
REPORT 113
Cameco has contractual capital commitments of approximately $99,000,000 at December 31, 2014. Certain of the
contractual commitments may contain cancellation clauses, however the Company discloses the commitments based on management’s intent to fulfill the contract. The majority of this amount is expected to be incurred in 2015.
(a) During 2014, Cameco recognized a $126,420,000 impairment charge relating to its Rabbit Lake operation in northern Saskatchewan, which is part of its
uranium segment. Due to the deferral of various projects that were related to planned production over the remaining life of the Eagle Point mine, the Company concluded it was appropriate to recognize an impairment charge. The amount of the charge
was determined as the excess of the carrying value over the recoverable amount. The recoverable amount of the mine was determined to be $28,570,000 based on a fair value less costs to sell model, which incorporated the future cash flows expected to
be derived from the mine. It is categorized as a non-recurring level 3 fair value measurement.
The discount rate used in the fair value less costs to
sell calculation was 8% and was determined based on a market participant’s incremental borrowing cost, adjusted for the marginal return that the participant would expect to use on an investment in the mine. The recoverable amount is not
sensitive to changes in the discount rate. Other key assumptions include uranium price forecasts and operating and capital cost forecasts. Uranium prices applied in the calculation were based on approved internal price forecasts, which reflect
management’s expectation of prices that a market participant would use. Operating and capital cost forecasts have been determined based on management’s internal cost estimates. A $1/lb decrease in the uranium price assumption decreases the
recoverable amount by $17,600,000.
(b) Due to extended low market conditions and continued efforts to reduce costs, certain projects were re-evaluated.
As a result, the Company wrote off $40,664,000 of assets under construction on these projects.
(c) In 2013, Cameco recognized a $70,159,000 impairment
charge relating to its agreement with Talvivaara Mining Company Plc. to purchase uranium produced at the Sotkamo nickel-zinc mine in Finland. The impairment charge represents the full amount of Cameco’s investment which was used to cover
construction costs with the amount to be repaid through deliveries of uranium concentrate. The amount of the charge was determined as the excess of the carrying value over the fair value less costs to sell. Due to Talvivaara’s weak financial
position and application to the Finnish government to undergo a corporate restructuring, as an unsecured creditor, Cameco determined the fair value less costs to sell to be nil and, as such, recognized an impairment charge for the full amount of the
asset.
11. Goodwill and intangible assets
A.
Reconciliation of carrying amount
At December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Goodwill |
|
|
Contracts |
|
|
Intellectual
property |
|
|
Patents |
|
|
Total |
|
| Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beginning of year |
|
$ |
93,998 |
|
|
$ |
93,102 |
|
|
$ |
118,819 |
|
|
$ |
9,298 |
|
|
$ |
315,217 |
|
| Effect of movements in exchange rates |
|
|
8,528 |
|
|
|
8,447 |
|
|
|
— |
|
|
|
843 |
|
|
|
17,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| End of year |
|
|
102,526 |
|
|
|
101,549 |
|
|
|
118,819 |
|
|
|
10,141 |
|
|
|
333,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beginning of year |
|
|
— |
|
|
|
82,960 |
|
|
|
36,940 |
|
|
|
1,286 |
|
|
|
121,186 |
|
| Amortization charge |
|
|
— |
|
|
|
(1,438 |
) |
|
|
4,052 |
|
|
|
531 |
|
|
|
3,145 |
|
| Effect of movements in exchange rates |
|
|
— |
|
|
|
7,456 |
|
|
|
— |
|
|
|
146 |
|
|
|
7,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| End of year |
|
|
— |
|
|
|
88,978 |
|
|
|
40,992 |
|
|
|
1,963 |
|
|
|
131,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net book value at December 31, 2014 |
|
$ |
102,526 |
|
|
$ |
12,571 |
|
|
$ |
77,827 |
|
|
$ |
8,178 |
|
|
$ |
201,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114 CAMECO
CORPORATION
At December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Goodwill |
|
|
Contracts |
|
|
Intellectual
property |
|
|
Patents |
|
|
Total |
|
| Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beginning of year |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
118,819 |
|
|
$ |
8,697 |
|
|
$ |
127,516 |
|
| Additions [note 7] |
|
|
87,460 |
|
|
|
86,627 |
|
|
|
— |
|
|
|
— |
|
|
|
174,087 |
|
| Effect of movements in exchange rates |
|
|
6,538 |
|
|
|
6,475 |
|
|
|
— |
|
|
|
601 |
|
|
|
13,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| End of year |
|
|
93,998 |
|
|
|
93,102 |
|
|
|
118,819 |
|
|
|
9,298 |
|
|
|
315,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated amortization |
|
|
— |
|
|
|
— |
|
|
|
33,694 |
|
|
|
721 |
|
|
|
34,415 |
|
| Amortization charge |
|
|
— |
|
|
|
79,609 |
|
|
|
3,246 |
|
|
|
494 |
|
|
|
83,349 |
|
| Effect of movements in exchange rates |
|
|
— |
|
|
|
3,351 |
|
|
|
— |
|
|
|
71 |
|
|
|
3,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| End of year |
|
|
— |
|
|
|
82,960 |
|
|
|
36,940 |
|
|
|
1,286 |
|
|
|
121,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net book value at December 31, 2013 |
|
$ |
93,998 |
|
|
$ |
10,142 |
|
|
$ |
81,879 |
|
|
$ |
8,012 |
|
|
$ |
194,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Amortization
The
intangible asset values relate to intellectual property acquired with Cameco Fuel Manufacturing (CFM), patents acquired with UFP Investments LLC (UFP) and purchase and sales contracts acquired with NUKEM. The CFM intellectual property is being
amortized on a unit-of-production basis over its remaining life. Amortization is allocated to the cost of inventory and is recognized in cost of products and services sold as inventory is sold. The patents acquired with UFP are being amortized to
cost of products and services sold on a straight-line basis over their remaining life which expires in July 2029. The NUKEM purchase and sales contracts will be amortized to earnings over the remaining terms of the underlying contracts, which
extend to 2022. Amortization of the purchase contracts is allocated to the cost of inventory and is included in cost of products and services sold as inventory is sold. Sales contracts are amortized to revenue. The approximate amount of pre-tax
earnings (in USD) relating to the amortization of the fair value allocated to the NUKEM contracts is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2015 |
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|
2022 |
|
|
Total |
|
| |
$2,540 |
|
|
|
2,897 |
|
|
|
994 |
|
|
|
1,091 |
|
|
|
975 |
|
|
|
871 |
|
|
|
777 |
|
|
|
692 |
|
|
$ |
10,837 |
|
C. Impairment test
For
the purpose of impairment testing, goodwill is attributable to NUKEM, which is considered a CGU.
The recoverable amount of NUKEM was estimated based on a
value in use calculation, which involved discounting the future cash flows expected to be generated from the continuing use of the CGU. The estimated recoverable amount of NUKEM exceeded its carrying amount by approximately $73,500,000 (US) and
therefore no impairment loss was recognized.
Five years of cash flows were included in the discounted cash flow model. Any cash flows expected to be
generated beyond the initial five-year period were extrapolated using a terminal value growth rate. The projected cash flows included in the calculation were based upon NUKEM’s approved financial forecasts and strategic plan, which incorporate
NUKEM’s current contract portfolio as well as management’s expectations regarding future business activity. The key assumptions used in the estimation of the value in use were as follows:
2014 ANNUAL
REPORT 115
|
|
|
|
|
| |
|
2014 |
|
| Discount rate (pre-tax) |
|
|
12.8 |
% |
| Discount rate (post-tax) |
|
|
8.8 |
% |
| Terminal value growth rate |
|
|
2.4 |
% |
The discount rate was determined based on NUKEM’s internal weighted average cost of capital, adjusted for the marginal
return a market participant would expect to earn on an investment in the entity. It represents a nominal, post-tax figure. The terminal value growth rate was determined based on management’s expected average annual long-term growth in the
uranium industry. The rate represents a nominal figure and is consistent with forecast economic growth rates observed in the market.
Other key
assumptions include uranium price forecasts and perpetual cash flows. Uranium prices applied in the calculation were based on approved internal price forecasts, which reflect management’s experience and industry expertise. These prices are
consistent with expected long-term prices observed in the market. Perpetual cash flows have been determined based on management’s expectation of future business activity.
Cameco has validated the results of the value in use calculation by performing sensitivity tests on its key assumptions. Holding all other variables constant,
the decreases in recoverable amount created by marginal changes in each of the key assumptions are as follows:
|
|
|
|
|
|
|
| |
|
Change in assumption |
|
Amount of decrease |
|
| Discount rate |
|
1% increase |
|
$ |
31,215 |
|
| Terminal value growth rate |
|
1% decrease |
|
|
25,642 |
|
| Uranium prices |
|
$1/lb decrease |
|
|
5,829 |
|
| Perpetual annual cash flow |
|
$1 million (US) decrease |
|
|
10,947 |
|
As a result of these tests, the Company believes that any reasonably possible changes in the key assumptions would not result
in NUKEM’s carrying amount exceeding its recoverable amount.
12. Long-term receivables, investments and other
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Investments in equity securities [note 28] |
|
$ |
6,601 |
|
|
$ |
22,805 |
|
| Derivatives [note 28] |
|
|
3,889 |
|
|
|
7,391 |
|
| Advances receivable from JV Inkai LLP [note 33] |
|
|
91,672 |
|
|
|
95,319 |
|
| Investment tax credits |
|
|
90,658 |
|
|
|
82,177 |
|
| Amounts receivable related to tax dispute [note 23] |
|
|
211,604 |
|
|
|
59,475 |
|
| Other |
|
|
29,197 |
|
|
|
24,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
433,621 |
|
|
|
291,323 |
|
| Less current portion |
|
|
(10,341 |
) |
|
|
(3,775 |
) |
|
|
|
|
|
|
|
|
|
| Net |
|
$ |
423,280 |
|
|
$ |
287,548 |
|
|
|
|
|
|
|
|
|
|
During 2014, GoviEx Uranium (GoviEx) became listed on the Canadian Securities Exchange. With the availability of a quoted
market price, Cameco determined that there was a significant decline in the fair value of its investment in GoviEx and as a result, an impairment charge of $16,658,000 was recorded.
116 CAMECO
CORPORATION
13. Equity-accounted investees
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Interest in BPLP [note 6] |
|
$ |
— |
|
|
$ |
294,537 |
|
| Interest in GE-Hitachi Global Laser Enrichment LLC (GLE) |
|
|
— |
|
|
|
185,162 |
|
| Interests in other associates |
|
|
3,230 |
|
|
|
7,104 |
|
| Interests in other joint ventures |
|
|
— |
|
|
|
5,909 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,230 |
|
|
$ |
492,712 |
|
|
|
|
|
|
|
|
|
|
Associates
i. GLE
Cameco owns a 24% interest in GLE and accounts for it under the equity method of accounting. During the year, a decision was made by the majority
partner of GLE to significantly reduce funding of the project. As a result, Cameco recognized an impairment charge of $183,615,000, which represented the full amount of Cameco’s investment.
GLE primarily operates in North Carolina and is testing a third-generation technology that, if successful, will use lasers to commercially enrich uranium. The
technology is unique to the industry, is inherently risky and the significant reduction of funding introduces a further level of risk to this project. Because the funding reduction significantly jeopardizes the viability of the project, Cameco
determined the fair value less costs to sell to be nil and as such recognized an impairment charge for the full amount of the asset. Future contributions to the project will be reflected in net earnings.
The following table summarizes the financial information of GLE:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Current assets |
|
$ |
— |
|
|
$ |
526 |
|
| Non-current assets |
|
|
— |
|
|
|
206,107 |
|
| Current liabilities |
|
|
— |
|
|
|
(5,280 |
) |
|
|
|
|
|
|
|
|
|
| Net assets (100%) |
|
$ |
— |
|
|
$ |
201,353 |
|
|
|
|
|
|
|
|
|
|
| Cameco’s share of net assets (24%) |
|
$ |
— |
|
|
$ |
48,325 |
|
| Acquisition fair value and other adjustments |
|
|
— |
|
|
|
136,837 |
|
|
|
|
|
|
|
|
|
|
| Carrying amount in the statement of financial position |
|
$ |
— |
|
|
$ |
185,162 |
|
|
|
|
|
|
|
|
|
|
| Loss from operations and comprehensive loss |
|
$ |
(55,279 |
) |
|
$ |
(54,477 |
) |
|
|
|
|
|
|
|
|
|
| Cameco’s share of loss from operations and comprehensive loss (24%) |
|
$ |
(13,267 |
) |
|
$ |
(13,074 |
) |
|
|
|
|
|
|
|
|
|
ii. Other associate
Cameco has one other associate. The following table summarizes the carrying amount and share of loss and other comprehensive income of this associate:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Carrying amount of associate |
|
$ |
3,230 |
|
|
$ |
7,104 |
|
| Share of loss from operations and comprehensive loss |
|
$ |
(3,874 |
) |
|
$ |
(1,033 |
) |
At December 31, 2014, the quoted value of the Company’s share in this associate that has shares listed on a
recognized stock exchange was $14,256,000 (2013 - $19,758,000).
2014 ANNUAL
REPORT 117
14. Accounts payable and accrued liabilities
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Trade payables |
|
$ |
183,120 |
|
|
$ |
346,390 |
|
| Non-trade payables |
|
|
114,174 |
|
|
|
72,857 |
|
| Payables due to related parties |
|
|
18,964 |
|
|
|
18,694 |
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
316,258 |
|
|
$ |
437,941 |
|
|
|
|
|
|
|
|
|
|
The Company’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 28.
15. Short-term debt
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Promissory note payable |
|
$ |
— |
|
|
$ |
10,601 |
|
| Commercial paper |
|
|
— |
|
|
|
24,974 |
|
| NUKEM short-term loans |
|
|
— |
|
|
|
14,655 |
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
— |
|
|
$ |
50,230 |
|
|
|
|
|
|
|
|
|
|
In 2008, a promissory note in the amount of $73,344,000 (US) was issued to finance the acquisition of GLE. No balance was
outstanding under this promissory note at December 31, 2014. At December 31, 2013, $9,967,000 (US) of principal was outstanding.
Cameco borrows
directly in the commercial paper market. At December 31, 2014, there was no commercial paper outstanding (2013 - $24,974,000).
JV Inkai LLP
(Inkai) has a $20,000,000 (US) revolving credit facility that is available until August 11, 2015. While Cameco’s share of this facility is $12,000,000 (US), it acts as a guarantor for the full amount of the facility. No balance was
outstanding under this facility at December 31, 2014 or December 31, 2013.
NUKEM has a multicurrency revolving loan facility that is available
until February 15, 2018. Total funds of €100,000,000 are available under the facility, which can be drawn in either Euros or US dollars in the form of bank overdrafts, letters of credit, short-term loans or foreign exchange facilities. Any
amounts drawn in Euros bear interest at a rate equal to the comparable EURIBOR on the draw date plus 0.9%, while amounts drawn in US dollars bear interest at a rate equal to the comparable LIBOR on the draw date plus 1.3%.
As of December 31, 2014, there were no amounts withdrawn against the facility. At December 31, 2013 NUKEM had drawn a total of €38,130,000 on
the facility, of which €28,130,000 was drawn in the form of bank overdrafts and €10,000,000 in the form of short-term loans. As of December 31, 2014, NUKEM has $356,000 (US) in letters of credit outstanding against the facility in
support of performance obligations under outstanding delivery contracts (2013 - $693,000 (US)).
The terms of
the facility contain a financial covenant that requires NUKEM to maintain a minimum working capital to debt ratio of 1.35. The facility also stipulates Cameco as a guarantor for NUKEM’s withdrawals and requires the Company to maintain a credit
rating of at least BBB-. Failure to comply with these covenants could result in cancellation of the facility and accelerated payment of any outstanding amounts. As of December 31, 2014, NUKEM and Cameco were in compliance with the covenants and
the Company does not expect its operating and investing activities in 2015 to be constrained by them.
118 CAMECO
CORPORATION
16. Long-term debt
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Unsecured debentures |
|
|
|
|
|
|
|
|
| Series C - 4.70% debentures redeemed July 16, 2014 |
|
$ |
— |
|
|
$ |
299,537 |
|
| Series D - 5.67% debentures due September 2, 2019 |
|
|
497,465 |
|
|
|
497,003 |
|
| Series E - 3.75% debentures due November 14, 2022 |
|
|
397,857 |
|
|
|
397,626 |
|
| Series F - 5.09% debentures due November 14, 2042 |
|
|
99,230 |
|
|
|
99,217 |
|
| Series G - 4.19% debentures due June 24, 2024 |
|
|
496,646 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
1,491,198 |
|
|
$ |
1,293,383 |
|
|
|
|
|
|
|
|
|
|
On June 24, 2014, Cameco issued $500,000,000 of Series G debentures and announced the early redemption of the outstanding
Series C debentures. The Series G debentures bear interest at a rate of 4.19% per annum. The net proceeds of the issue after deducting expenses were approximately $496,400,000. The debentures mature on June 24, 2024 and are being amortized
at an effective interest rate of 4.28%. The $300,000,000 principal amount of the Series C debentures was redeemed on July 16, 2014. The company incurred total charges of $12,135,000 in relation to the early redemption of these debentures (note
21).
Cameco has a $1,250,000,000 unsecured revolving credit facility that is available until November 1, 2018. Upon mutual agreement, the facility
can be extended for an additional year on the anniversary date. In addition to direct borrowings under the facility, up to $100,000,000 can be used for the issuance of letters of credit and, to the extent necessary, it may be used to provide
liquidity support for the Company’s commercial paper program. The agreement also provides the ability to increase the revolving credit facility above $1,250,000,000 by increments no less than $50,000,000, to a total of $1,750,000,000. The
facility ranks equally with all of Cameco’s other senior debt. As of December 31, 2014, there were no amounts outstanding under this facility.
Cameco has $1,068,420,000 (2013—$824,745,000) in letter of credit facilities. Outstanding and committed letters of credit at December 31, 2014
amounted to $950,716,000 (2013—$798,774,000), the majority of which relate to future decommissioning and reclamation liabilities (note 18).
Cameco
is bound by a covenant in its revolving credit facility. The covenant requires a funded debt to tangible net worth ratio equal to or less than 1:1. Non-compliance with this covenant could result in accelerated payment and termination of the
revolving credit facility. At December 31, 2014, Cameco was in compliance with the covenant and does not expect its operating and investing activities in 2015 to be constrained by it.
The table below represents currently scheduled maturities of long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2015 |
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
2019 |
|
|
Thereafter |
|
|
Total |
|
| $— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
497,465 |
|
|
|
993,733 |
|
|
$ |
1,491,198 |
|
2014 ANNUAL
REPORT 119
17. Other liabilities
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Deferred sales |
|
$ |
123,298 |
|
|
$ |
55,126 |
|
| Derivatives [note 28] |
|
|
67,916 |
|
|
|
30,923 |
|
| Accrued pension and post-retirement benefit liability [note 27] |
|
|
61,670 |
|
|
|
45,931 |
|
| Other |
|
|
7,033 |
|
|
|
8,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
259,917 |
|
|
|
140,065 |
|
| Less current portion |
|
|
(87,883 |
) |
|
|
(60,685 |
) |
|
|
|
|
|
|
|
|
|
| Net |
|
$ |
172,034 |
|
|
$ |
79,380 |
|
|
|
|
|
|
|
|
|
|
Deferred sales includes $92,299,000 (US) (2013—$36,725,000 (US)) of performance obligations relating to financing
arrangements entered into by NUKEM (note 9).
18. Provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Reclamation |
|
|
Waste disposal |
|
|
Total |
|
| Beginning of year |
|
$ |
573,942 |
|
|
$ |
16,971 |
|
|
$ |
590,913 |
|
| Changes in estimates and discount rates |
|
|
227,206 |
|
|
|
2,574 |
|
|
|
229,780 |
|
| Provisions used during the period |
|
|
(13,746 |
) |
|
|
(1,679 |
) |
|
|
(15,425 |
) |
| Unwinding of discount |
|
|
20,242 |
|
|
|
429 |
|
|
|
20,671 |
|
| Impact of foreign exchange |
|
|
20,371 |
|
|
|
— |
|
|
|
20,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| End of year |
|
$ |
828,015 |
|
|
$ |
18,295 |
|
|
$ |
846,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current |
|
$ |
18,703 |
|
|
$ |
1,672 |
|
|
$ |
20,375 |
|
| Non-current |
|
|
809,312 |
|
|
|
16,623 |
|
|
|
825,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
828,015 |
|
|
$ |
18,295 |
|
|
$ |
846,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. Reclamation provision
Cameco’s estimates of future decommissioning obligations are based on reclamation standards that satisfy regulatory requirements. Elements of uncertainty
in estimating these amounts include potential changes in regulatory requirements, decommissioning and reclamation alternatives and amounts to be recovered from other parties.
Cameco estimates total future decommissioning and reclamation costs for its existing operating assets to be $874,314,000 (2013—$823,493,000). The
expected timing of these outflows is based on life-of-mine plans with the majority of expenditures expected to occur after 2021. These estimates are reviewed by Cameco technical personnel as required by regulatory agencies or more frequently as
circumstances warrant. In connection with future decommissioning and reclamation costs, Cameco has provided financial assurances of $910,902,000 (2013—$767,635,000) in the form of letters of credit to satisfy current regulatory requirements.
The reclamation provision relates to the following segments:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Uranium |
|
$ |
682,769 |
|
|
$ |
468,546 |
|
| Fuel Services |
|
|
145,246 |
|
|
|
105,396 |
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
828,015 |
|
|
$ |
573,942 |
|
|
|
|
|
|
|
|
|
|
120 CAMECO
CORPORATION
B. Waste disposal
The Fuel Services division consists of the Blind River refinery, Port Hope conversion facility and Cameco Fuel Manufacturing. The refining, conversion and
manufacturing processes generate certain uranium contaminated waste. These include contaminated combustible material (paper, rags, gloves, etc.) and contaminated non-combustible material (metal parts, soil from excavations, building and roofing
materials, spent uranium concentrate drums, etc.). These materials can in some instances be recycled or reprocessed. A provision for waste disposal costs in respect of these materials is recognized when they are generated.
Cameco estimates total future costs related to existing waste disposal to be $18,100,000 (2013—$18,250,000). These outflows are expected to occur within
the next eight years.
19. Share capital
Authorized
share capital:
| |
• |
|
Unlimited number of first preferred shares |
| |
• |
|
Unlimited number of second preferred shares |
| |
• |
|
Unlimited number of voting common shares, no stated par value, and |
A. Common shares
|
|
|
|
|
|
|
|
|
| Number issued (number of shares) |
|
2014 |
|
|
2013 |
|
| Beginning of year |
|
|
395,477,230 |
|
|
|
395,350,394 |
|
| Issued: |
|
|
|
|
|
|
|
|
| Stock option plan [note 26] |
|
|
315,292 |
|
|
|
126,836 |
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
395,792,522 |
|
|
|
395,477,230 |
|
|
|
|
|
|
|
|
|
|
All issued shares are fully paid.
B. Class B share
One Class B share issued during 1988
and assigned $1 of share capital entitles the shareholder to vote separately as a class in respect of any proposal to locate the head office of Cameco to a place not in the province of Saskatchewan.
C. Dividends
Dividends on Cameco Corporation common
shares are declared in Canadian dollars. For the year ended December 31, 2014, the dividend declared per share was $0.40 (December 31, 2013—$0.40).
2014 ANNUAL
REPORT 121
20. Employee benefit expense
The following employee benefit expenses are included in cost of products and services sold, administration, exploration, research and development and property,
plant and equipment:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Wages and salaries |
|
$ |
353,254 |
|
|
$ |
353,772 |
|
| Statutory and company benefits |
|
|
66,456 |
|
|
|
62,287 |
|
| Equity-settled share-based compensation [note 26] |
|
|
21,048 |
|
|
|
24,289 |
|
| Expenses related to defined benefit plans [note 27] |
|
|
7,605 |
|
|
|
4,103 |
|
| Contributions to defined contribution plans [note 27] |
|
|
17,274 |
|
|
|
16,441 |
|
| Cash-settled share-based compensation [note 26] |
|
|
(1,616 |
) |
|
|
1,272 |
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
464,021 |
|
|
$ |
462,164 |
|
|
|
|
|
|
|
|
|
|
21. Finance costs
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Interest on long-term debt |
|
$ |
67,614 |
|
|
$ |
66,273 |
|
| Unwinding of discount on provisions |
|
|
20,671 |
|
|
|
16,391 |
|
| Other charges |
|
|
6,531 |
|
|
|
6,286 |
|
| Loss on redemption of Series C debentures [note 16] |
|
|
12,135 |
|
|
|
— |
|
| Foreign exchange gains |
|
|
(34,731 |
) |
|
|
(27,378 |
) |
| Interest on short-term debt |
|
|
4,902 |
|
|
|
549 |
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
77,122 |
|
|
$ |
62,121 |
|
|
|
|
|
|
|
|
|
|
No borrowing costs were determined to be eligible for capitalization during the year.
22. Other income (expense)
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Contract settlement |
|
$ |
65,557 |
|
|
$ |
— |
|
| Contract termination fee |
|
|
(18,304 |
) |
|
|
— |
|
| Loss on sale of investments |
|
|
— |
|
|
|
(14,952 |
) |
| Other |
|
|
3,338 |
|
|
|
(3,374 |
) |
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
50,591 |
|
|
$ |
(18,326 |
) |
|
|
|
|
|
|
|
|
|
During the year, Cameco recorded an early termination fee of $18,304,000, incurred as a result of the cancellation of our toll
conversion agreement with Springfields Fuels Ltd., which was to expire in 2016.
In addition, Cameco recorded a gain with respect to a long-term supply
contract with one of its utility customers. The $65,557,000 reflected as income from contract settlement relates to deliveries that the customer refused to take in the years 2012 through 2017. This represents the full amount to be received in
relation to this contract dispute.
122 CAMECO
CORPORATION
23. Income taxes
A. Significant components of deferred tax assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Recognized in earnings |
|
|
As at December 31 |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Inventories |
|
$ |
— |
|
|
$ |
(3,250 |
) |
|
$ |
— |
|
|
$ |
— |
|
| Provision for reclamation |
|
|
75,732 |
|
|
|
9,084 |
|
|
|
251,045 |
|
|
|
174,708 |
|
| Foreign exploration and development |
|
|
(807 |
) |
|
|
(2,711 |
) |
|
|
6,103 |
|
|
|
6,910 |
|
| Income tax losses |
|
|
136,294 |
|
|
|
73,412 |
|
|
|
335,856 |
|
|
|
199,412 |
|
| Defined benefit plan actuarial losses |
|
|
— |
|
|
|
— |
|
|
|
5,813 |
|
|
|
8,807 |
|
| Long-term investments and other |
|
|
1,424 |
|
|
|
8,672 |
|
|
|
67,060 |
|
|
|
59,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Deferred tax assets |
|
|
212,643 |
|
|
|
85,207 |
|
|
|
665,877 |
|
|
|
449,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Property, plant and equipment |
|
|
(1,334 |
) |
|
|
(42,994 |
) |
|
|
182,841 |
|
|
|
184,930 |
|
| Inventories |
|
|
(15,719 |
) |
|
|
(15,825 |
) |
|
|
20,590 |
|
|
|
37,139 |
|
| Other |
|
|
(3,102 |
) |
|
|
(24,918 |
) |
|
|
— |
|
|
|
3,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Deferred tax liabilities |
|
|
(20,155 |
) |
|
|
(83,737 |
) |
|
|
203,431 |
|
|
|
225,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net deferred tax asset |
|
$ |
232,798 |
|
|
$ |
168,944 |
|
|
$ |
462,446 |
|
|
$ |
224,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Deferred tax allocated as |
|
2014 |
|
|
2013 |
|
| Deferred tax assets |
|
$ |
486,328 |
|
|
$ |
266,203 |
|
| Deferred tax liabilities |
|
|
(23,882 |
) |
|
|
(41,909 |
) |
|
|
|
|
|
|
|
|
|
| Net deferred tax asset |
|
$ |
462,446 |
|
|
$ |
224,294 |
|
|
|
|
|
|
|
|
|
|
Based on projections of future income, realization of these deferred tax assets is probable and consequently a deferred tax
asset has been recorded.
B. Movement in net deferred tax assets and liabilities
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Net deferred tax asset at beginning of year |
|
$ |
224,294 |
|
|
$ |
188,143 |
|
| Deferred tax liability on acquisition of NUKEM |
|
|
— |
|
|
|
(52,964 |
) |
| Recovery for the year in net earnings |
|
|
246,558 |
|
|
|
185,830 |
|
| Expense on discontinued operations |
|
|
(13,761 |
) |
|
|
(16,886 |
) |
| Recovery (expense) for the year in other comprehensive income |
|
|
3,171 |
|
|
|
(79,427 |
) |
| Foreign exchange adjustments |
|
|
2,184 |
|
|
|
(402 |
) |
|
|
|
|
|
|
|
|
|
| End of year |
|
$ |
462,446 |
|
|
$ |
224,294 |
|
|
|
|
|
|
|
|
|
|
2014 ANNUAL
REPORT 123
C. Significant components of unrecognized deferred tax assets
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Income tax losses |
|
$ |
130,300 |
|
|
$ |
72,656 |
|
| Property, plant and equipment |
|
|
1,404 |
|
|
|
54,759 |
|
| Long-term investments and other |
|
|
85,927 |
|
|
|
12,539 |
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
217,631 |
|
|
$ |
139,954 |
|
|
|
|
|
|
|
|
|
|
D. Tax rate reconciliation
The provision for income taxes differs from the amount computed by applying the combined expected federal and provincial income tax rate to earnings before
income taxes. The reasons for these differences are as follows:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Earnings from continuing operations before income taxes and non-controlling interest |
|
$ |
(119,098 |
) |
|
$ |
115,136 |
|
| Combined federal and provincial tax rate |
|
|
26.9 |
% |
|
|
26.9 |
% |
|
|
|
|
|
|
|
|
|
| Computed income tax expense |
|
|
(32,037 |
) |
|
|
30,972 |
|
| Increase (decrease) in taxes resulting from: |
|
|
|
|
|
|
|
|
| Difference between Canadian rates and rates applicable to subsidiaries in other countries |
|
|
(225,368 |
) |
|
|
(200,877 |
) |
| Change in unrecognized deferred tax assets |
|
|
76,009 |
|
|
|
11,297 |
|
| Other taxes |
|
|
3,430 |
|
|
|
3,332 |
|
| Share-based compensation plans |
|
|
2,094 |
|
|
|
3,580 |
|
| Change in tax provision related to transfer pricing |
|
|
12,000 |
|
|
|
10,000 |
|
| Non-deductible (non-taxable) capital amounts |
|
|
(8,108 |
) |
|
|
18,328 |
|
| Other permanent differences |
|
|
(3,288 |
) |
|
|
6,138 |
|
|
|
|
|
|
|
|
|
|
| Income tax recovery |
|
$ |
(175,268 |
) |
|
$ |
(117,230 |
) |
|
|
|
|
|
|
|
|
|
E. Reassessments
In
2008, as part of the ongoing annual audits of Cameco’s Canadian tax returns, Canada Revenue Agency (CRA) disputed the transfer pricing structure and methodology used by Cameco and its wholly owned Swiss subsidiary, Cameco Europe Ltd., in
respect of sale and purchase agreements for uranium products. From December 2008 to date, CRA issued notices of reassessment for the taxation years 2003 through 2009, which in aggregate have increased Cameco’s income for Canadian tax purposes
by approximately $2,795,000,000. CRA has also issued notices of reassessment for transfer pricing penalties for the years 2007 through 2009 in the amount of $229,300,000. Cameco believes it is likely that CRA will reassess Cameco’s tax returns
for subsequent years on a similar basis and that these will require Cameco to make future remittances on receipt of the reassessments.
Using the
methodology we believe that CRA will continue to apply and including the $2,795,000,000 already reassessed, we expect to receive notices of reassessment for a total of approximately $6,600,000,000 for the years 2003 through 2014, which would
increase Cameco’s income for Canadian tax purposes and result in a related tax expense of approximately $1,900,000,000. In addition to penalties already imposed, CRA may continue to apply penalties to taxation years subsequent to 2009. As a
result, we estimate that cash taxes and transfer pricing penalties would be between $1,450,000,000 and $1,500,000,000. In addition, we estimate there would be interest and instalment penalties applied that would be material to Cameco. While in
dispute, we would be responsible for remitting 50% of the cash taxes and transfer pricing penalties (between $725,000,000 and $750,000,000), plus related interest and instalment penalties assessed, which would be material to Cameco.
124 CAMECO
CORPORATION
Under Canadian federal and provincial tax rules, the amount required to be remitted each year will depend on the
amount of income reassessed in that year and the availability of elective deductions and tax loss carryovers. In light of our view of the likely outcome of the case, we expect to recover the amounts remitted to CRA, including cash taxes, interest
and penalties totalling $211,604,000 already paid as at December 31, 2014 (December 31, 2013—$59,475,000) (note 12).
The case on the 2003
reassessment is expected to go to trial in 2016. If this timing is adhered to, we expect to have a Tax Court decision within six to 18 months after the trial is complete.
Having regard to advice from its external advisors, Cameco’s opinion is that CRA’s position is incorrect and Cameco is contesting CRA’s
position and expects to recover any amounts remitted as a result of the reassessments. However, to reflect the uncertainties of CRA’s appeals process and litigation, Cameco has recorded a cumulative tax provision related to this matter for the
years 2003 through the current period in the amount of $85,000,000. While the resolution of this matter may result in liabilities that are higher or lower than the reserve, management believes that the ultimate resolution will not be material to
Cameco’s financial position, results of operations or liquidity in the year(s) of resolution. Resolution of this matter as stipulated by CRA would be material to Cameco’s financial position, results of operations or liquidity in the
year(s) of resolution and other unfavourable outcomes for the years 2003 to date could be material to Cameco’s financial position, results of operations and cash flows in the year(s) of resolution.
Further to Cameco’s decision to contest CRA’s reassessments, Cameco is pursuing its appeal rights under Canadian federal and provincial tax rules.
F. Earnings and income taxes by jurisdiction
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Earnings (loss) from continuing operations before income taxes |
|
|
|
|
|
|
|
|
| Canada |
|
$ |
(840,705 |
) |
|
$ |
(715,361 |
) |
| Foreign |
|
|
721,607 |
|
|
|
830,497 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(119,098 |
) |
|
$ |
115,136 |
|
|
|
|
|
|
|
|
|
|
| Current income taxes |
|
|
|
|
|
|
|
|
| Canada |
|
$ |
(2,944 |
) |
|
$ |
3,087 |
|
| Foreign |
|
|
74,234 |
|
|
|
65,513 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
71,290 |
|
|
$ |
68,600 |
|
|
|
|
|
|
|
|
|
|
| Deferred income tax recovery |
|
|
|
|
|
|
|
|
| Canada |
|
$ |
(209,255 |
) |
|
$ |
(150,474 |
) |
| Foreign |
|
|
(37,303 |
) |
|
|
(35,356 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
(246,558 |
) |
|
$ |
(185,830 |
) |
|
|
|
|
|
|
|
|
|
| Income tax recovery |
|
$ |
(175,268 |
) |
|
$ |
(117,230 |
) |
|
|
|
|
|
|
|
|
|
G. Income tax losses
At
December 31, 2014, income tax losses carried forward of $1,632,194,000 (2013—$968,347,000) are available to reduce taxable income. These losses expire as follows:
2014 ANNUAL
REPORT 125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Date of expiry |
|
Canada |
|
|
US |
|
|
Other |
|
|
Total |
|
| 2019 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
4,686 |
|
|
$ |
4,686 |
|
| 2020 |
|
|
— |
|
|
|
— |
|
|
|
2,637 |
|
|
|
2,637 |
|
| 2029 |
|
|
— |
|
|
|
23,839 |
|
|
|
— |
|
|
|
23,839 |
|
| 2030 |
|
|
— |
|
|
|
1,393 |
|
|
|
— |
|
|
|
1,393 |
|
| 2031 |
|
|
94,257 |
|
|
|
20,332 |
|
|
|
— |
|
|
|
114,589 |
|
| 2032 |
|
|
213,871 |
|
|
|
20,065 |
|
|
|
— |
|
|
|
233,936 |
|
| 2033 |
|
|
252,781 |
|
|
|
34,206 |
|
|
|
— |
|
|
|
286,987 |
|
| 2034 |
|
|
300,182 |
|
|
|
24,029 |
|
|
|
— |
|
|
|
324,211 |
|
| No expiry |
|
|
— |
|
|
|
— |
|
|
|
639,916 |
|
|
|
639,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
861,091 |
|
|
$ |
123,864 |
|
|
$ |
647,239 |
|
|
$ |
1,632,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the table above is $434,051,000 (2013 - $244,845,000) of temporary differences related to loss carry forwards
where no future benefit is realized.
H. Other comprehensive income
Other comprehensive income included on the consolidated statements of comprehensive income and the consolidated statements of changes in equity is presented
net of income taxes. The following income tax amounts are included in each component of other comprehensive income:
For the year ended
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Before tax |
|
|
Income tax
recovery
(expense) |
|
|
Net of
tax |
|
| Remeasurements of defined benefit liability |
|
$ |
(10,930 |
) |
|
$ |
2,978 |
|
|
$ |
(7,952 |
) |
| Exchange differences on translation of foreign operations |
|
|
58,890 |
|
|
|
— |
|
|
|
58,890 |
|
| Gains on derivatives designated as cash flow hedges transferred to net earnings—discontinued operation |
|
|
(400 |
) |
|
|
100 |
|
|
|
(300 |
) |
| Unrealized losses on available-for-sale assets |
|
|
(707 |
) |
|
|
94 |
|
|
|
(613 |
) |
| Losses on available-for-sale assets transferred to net earnings |
|
|
3 |
|
|
|
(1 |
) |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
46,856 |
|
|
$ |
3,171 |
|
|
$ |
50,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Before tax |
|
|
Income
tax
recovery
(expense) |
|
|
Net of tax |
|
| Remeasurements of defined benefit liability |
|
$ |
2,585 |
|
|
$ |
(715 |
) |
|
$ |
1,870 |
|
| Remeasurements of defined benefit liability—discontinued operation |
|
|
319,887 |
|
|
|
(79,972 |
) |
|
|
239,915 |
|
| Exchange differences on translation of foreign operations |
|
|
(10,792 |
) |
|
|
— |
|
|
|
(10,792 |
) |
| Gains on derivatives designated as cash flow hedges—discontinued operation |
|
|
253 |
|
|
|
(63 |
) |
|
|
190 |
|
| Gains on derivatives designated as cash flow hedges transferred to net earnings—discontinued operation |
|
|
(5,309 |
) |
|
|
1,327 |
|
|
|
(3,982 |
) |
| Unrealized gains on available-for-sale assets |
|
|
32 |
|
|
|
(4 |
) |
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
306,656 |
|
|
$ |
(79,427 |
) |
|
$ |
227,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126 CAMECO
CORPORATION
24. Per share amounts
Per share amounts have been calculated based on the weighted average number of common shares outstanding during the period. The weighted average number of paid
shares outstanding in 2014 was 395,740,117 (2013—395,427,548).
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Basic earnings per share computation |
|
|
|
|
|
|
|
|
| Net earnings attributable to equity holders |
|
$ |
185,234 |
|
|
$ |
318,495 |
|
| Weighted average common shares outstanding |
|
|
395,740 |
|
|
|
395,428 |
|
|
|
|
|
|
|
|
|
|
| Basic earnings per common share |
|
$ |
0.47 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
| Diluted earnings per share computation |
|
|
|
|
|
|
|
|
| Net earnings attributable to equity holders |
|
$ |
185,234 |
|
|
$ |
318,495 |
|
| Weighted average common shares outstanding |
|
|
395,740 |
|
|
|
395,428 |
|
| Dilutive effect of stock options |
|
|
315 |
|
|
|
126 |
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares outstanding, assuming dilution |
|
|
396,055 |
|
|
|
395,554 |
|
|
|
|
|
|
|
|
|
|
| Diluted earnings per common share |
|
$ |
0.47 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
25. Statements of cash flows
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Changes in non-cash working capital: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
$ |
(18,063 |
) |
|
$ |
26,972 |
|
| Inventories |
|
|
12,690 |
|
|
|
(107,221 |
) |
| Supplies and prepaid expenses |
|
|
50,522 |
|
|
|
(60,738 |
) |
| Accounts payable and accrued liabilities |
|
|
(141,905 |
) |
|
|
(21,999 |
) |
| Reclamation payments |
|
|
(15,425 |
) |
|
|
(10,051 |
) |
| Amortization of purchase price allocation [note 7] |
|
|
23,339 |
|
|
|
38,181 |
|
| Other |
|
|
980 |
|
|
|
(4,670 |
) |
|
|
|
|
|
|
|
|
|
| Other operating items |
|
$ |
(87,862 |
) |
|
$ |
(139,526 |
) |
|
|
|
|
|
|
|
|
|
26. Share-based compensation plans
The Company has the following equity-settled plans:
A. Stock
option plan
The Company has established a stock option plan under which options to purchase common shares may be granted to employees of Cameco.
Options granted under the stock option plan have an exercise price of not less than the closing price quoted on the Toronto Stock Exchange (TSX) for the common shares of Cameco on the trading day prior to the date on which the option is granted. The
options carry vesting periods of one to three years, and expire eight years from the date granted.
The aggregate number of common shares that may be
issued pursuant to the Cameco stock option plan shall not exceed 43,017,198 of which 27,870,079 shares have been issued.
Stock option transactions for
the respective years were as follows:
2014 ANNUAL
REPORT 127
|
|
|
|
|
|
|
|
|
| (Number of options) |
|
2014 |
|
|
2013 |
|
| Beginning of year |
|
|
9,817,443 |
|
|
|
9,517,840 |
|
| Options granted |
|
|
765,146 |
|
|
|
1,840,932 |
|
| Options forfeited |
|
|
(218,102 |
) |
|
|
(587,653 |
) |
| Options expired |
|
|
(1,696,189 |
) |
|
|
(826,840 |
) |
| Options exercised [note 19] |
|
|
(315,292 |
) |
|
|
(126,836 |
) |
|
|
|
|
|
|
|
|
|
| End of year |
|
|
8,353,006 |
|
|
|
9,817,443 |
|
|
|
|
|
|
|
|
|
|
| Exercisable |
|
|
5,819,252 |
|
|
|
6,279,629 |
|
|
|
|
|
|
|
|
|
|
Weighted average exercise prices were as follows:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Beginning of year |
|
$ |
29.95 |
|
|
$ |
31.20 |
|
| Options granted |
|
|
26.81 |
|
|
|
22.00 |
|
| Options forfeited |
|
|
30.69 |
|
|
|
31.61 |
|
| Options expired |
|
|
38.93 |
|
|
|
27.04 |
|
| Options exercised |
|
|
19.75 |
|
|
|
19.52 |
|
|
|
|
|
|
|
|
|
|
| End of year |
|
$ |
28.22 |
|
|
$ |
29.95 |
|
|
|
|
|
|
|
|
|
|
| Exercisable |
|
$ |
30.39 |
|
|
$ |
33.30 |
|
|
|
|
|
|
|
|
|
|
Total options outstanding and exercisable at December 31, 2014 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Options outstanding |
|
|
Options exercisable |
|
| Option price per share |
|
Number |
|
|
Weighted
average
remaining life |
|
|
Weighted
average
exercisable price |
|
|
Number |
|
|
Weighted
average
exercisable price |
|
| $19.37 - 34.99 |
|
|
5,987,570 |
|
|
|
5.1 |
|
|
$ |
23.20 |
|
|
|
3,453,816 |
|
|
$ |
23.17 |
|
| $35.00 - 54.38 |
|
|
2,365,436 |
|
|
|
2.5 |
|
|
|
40.93 |
|
|
|
2,365,436 |
|
|
|
40.93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,353,006 |
|
|
|
|
|
|
|
|
|
|
|
5,819,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The foregoing options have expiry dates ranging from March 29, 2015 to March 2, 2022.
Non-vested stock option transactions for the respective years were as follows:
|
|
|
|
|
|
|
|
|
| (Number of options) |
|
2014 |
|
|
2013 |
|
| Beginning of year |
|
|
3,537,814 |
|
|
|
3,553,639 |
|
| Options granted |
|
|
765,146 |
|
|
|
1,840,932 |
|
| Options forfeited |
|
|
(58,686 |
) |
|
|
(200,546 |
) |
| Options vested |
|
|
(1,710,520 |
) |
|
|
(1,656,211 |
) |
|
|
|
|
|
|
|
|
|
| End of year |
|
|
2,533,754 |
|
|
|
3,537,814 |
|
|
|
|
|
|
|
|
|
|
B. Executive performance share unit (PSU)
The Company has established a PSU plan whereby it provides each plan participant an annual grant of PSUs in an amount determined by the board. Each PSU
represents one phantom common share that entitles the participant to a payment of one
128 CAMECO
CORPORATION
Cameco common share purchased on the open market, or cash at the board’s discretion, at the end of each three-year period if certain performance and vesting criteria have been met. The final
value of the PSUs will be based on the value of Cameco common shares at the end of the three-year period and the number of PSUs that ultimately vest. Vesting of PSUs at the end of the three-year period will be based on total shareholder return over
the three years, Cameco’s ability to meet its annual cash flow from operations targets and whether the participating executive remains employed by Cameco at the end of the three-year vesting period. As of December 31, 2014, the total
number of PSUs held by the participants, after adjusting for forfeitures on retirement, was 620,654 (2013 - 559,401).
C. Restricted share unit
(RSU)
In 2011, the Company established an RSU plan whereby it provides each plan participant an annual grant of RSUs in an amount determined by the
board. In 2014, Cameco expanded the scope of the RSU plan to include additional employees of the Company. Each RSU represents one phantom common share that entitles the participant to a payment of one Cameco common share purchased on the open
market, or cash, at the board’s discretion. The RSUs carry vesting periods of one to three years, and the final value of the units will be based on the value of Cameco common shares at the end of the vesting periods. As of December 31,
2014, the total number of RSUs held by the participants was 246,394 (2013 - 70,000).
D. Employee share ownership plan
Cameco also has an employee share ownership plan, whereby both employee and Company contributions are used to purchase shares on the open market for employees.
The Company’s contributions are expensed during the year of contribution. Under the plan, employees have the opportunity to participate in the program to a maximum of 6% of eligible earnings each year with Cameco matching the first 3% of
employee-paid shares by 50%. Cameco contributes $1,000 of shares annually to each employee that is enrolled in the plan. Shares purchased with Company contributions and with dividends paid on such shares become unrestricted 12 months from the date
on which such shares were purchased. At December 31, 2014, there were 3,704 participants in the plan (2013 - 3,718). The total number of shares purchased in 2014 with Company contributions was 280,765 (2013 - 278,349). In 2014, the
Company’s contributions totalled $5,240,000 (2013 - $5,281,000).
Cameco records compensation expense under its equity-settled plans with an
offsetting credit to contributed surplus, to reflect the estimated fair value of units granted to employees. During the year, the Company recognized the following expenses under these plans:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Stock option plan |
|
$ |
7,802 |
|
|
$ |
13,322 |
|
| Performance share unit plan |
|
|
5,199 |
|
|
|
5,092 |
|
| Restricted share unit plan |
|
|
2,807 |
|
|
|
594 |
|
| Employee share ownership plan |
|
|
5,240 |
|
|
|
5,281 |
|
|
|
|
|
|
|
|
|
|
| End of year |
|
$ |
21,048 |
|
|
$ |
24,289 |
|
|
|
|
|
|
|
|
|
|
Fair value measurement of equity-settled plans
The fair value of the units granted through the PSU plan was determined based on Monte Carlo simulation and the fair value of options granted under the stock
option plan was measured based on the Black-Scholes option-pricing model. The fair value of RSUs granted was determined based on their intrinsic value on the date of grant. Expected volatility was estimated by considering historic average share
price volatility.
The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as follows:
2014 ANNUAL
REPORT 129
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Stock option plan |
|
|
RSUs |
|
|
PSUs |
|
| Number of options granted |
|
|
765,146 |
|
|
|
260,583 |
|
|
|
230,200 |
|
| Average strike price |
|
$ |
26.81 |
|
|
$ |
27.21 |
|
|
|
— |
|
| Expected dividend |
|
$ |
0.40 |
|
|
|
— |
|
|
|
— |
|
| Expected volatility |
|
|
33 |
% |
|
|
— |
|
|
|
33 |
% |
| Risk-free interest rate |
|
|
1.5 |
% |
|
|
— |
|
|
|
1.2 |
% |
| Expected life of option |
|
|
4.4 years |
|
|
|
— |
|
|
|
3 years |
|
| Expected forfeitures |
|
|
8 |
% |
|
|
5 |
% |
|
|
5 |
% |
| Weighted average grant date fair values |
|
$ |
6.79 |
|
|
$ |
27.21 |
|
|
$ |
27.25 |
|
In addition to these inputs, other features of the PSU grant were incorporated into the measurement of fair value. The market
condition based on total shareholder return was incorporated by utilizing a Monte Carlo simulation. The non-market criteria relating to realized selling prices, production targets and cost control have been incorporated into the valuation at grant
date by reviewing prior history and corporate budgets.
The Company has the following cash-settled plans:
A. Deferred share unit (DSU)
Cameco offers a DSU plan to
non-employee directors. A DSU is a notional unit that reflects the market value of a single common share of Cameco. 60% of each director’s annual retainer is paid in DSUs. In addition, on an annual basis, directors can elect to receive 25%,
50%, 75% or 100% of the remaining 40% of their annual retainer and any additional fees in the form of DSUs. If a director meets their ownership requirements, the director may elect to take 25%, 50%, 75% or 100% of their annual retainer and any fees
in cash, with the balance, if any, to be paid in DSUs. Each DSU fully vests upon award. The DSUs will be redeemed for cash upon a director leaving the board. The redemption amount will be based upon the weighted average of the closing prices of the
common shares of Cameco on the TSX for the last 20 trading days prior to the redemption date multiplied by the number of DSUs held by the director. As of December 31, 2014, the total number of DSUs held by participating directors was 542,391
(2013 - 523,855).
B. Phantom stock option
Cameco makes annual grants of bonuses to eligible non-North American employees in the form of phantom stock options. Employees receive the equivalent value of
shares in cash when exercised. Options granted under the phantom stock option plan have an award value equal to the closing price quoted on the TSX for the common shares of Cameco on the trading day prior to the date on which the option is granted.
The options vest over three years and expire eight years from the date granted. As of December 31, 2014, the number of options held by participating employees was 223,053 (2013 - 239,885) with exercise prices ranging from $19.37 to $46.88
per share (2013 - $19.37 to $46.88) and a weighted average exercise price of $28.81 (2013 - $31.22).
Cameco has recognized the following
expenses under its cash-settled plans:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Deferred share unit plan |
|
$ |
(1,493 |
) |
|
$ |
1,192 |
|
| Phantom stock option plan |
|
|
(123 |
) |
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,616 |
) |
|
$ |
1,272 |
|
|
|
|
|
|
|
|
|
|
At December 31, 2014, a liability of $10,675,000 (2013 - $12,112,000) was included in the consolidated statements of
financial position to recognize accrued but unpaid expenses for cash-settled plans.
130 CAMECO
CORPORATION
Fair value measurement of cash-settled plans
The fair value of the phantom stock option plan was measured based on the Black-Scholes option-pricing model. Expected volatility is estimated by considering
historic average share price volatility. The inputs used in the measurement of the fair values of the phantom stock option plan at the grant and reporting dates were as follows:
|
|
|
|
|
|
|
|
|
| |
|
Grant date
March 3, 2014 |
|
|
Reporting date
December 31, 2014 |
|
| Number of units |
|
|
52,270 |
|
|
|
223,053 |
|
| Average strike price |
|
$ |
26.81 |
|
|
$ |
28.81 |
|
| Expected dividend |
|
$ |
0.40 |
|
|
$ |
0.40 |
|
| Expected volatility |
|
|
32 |
% |
|
|
32 |
% |
| Risk-free interest rate |
|
|
1.5 |
% |
|
|
1.1 |
% |
| Expected life of option |
|
|
3.5 years |
|
|
|
3.3 years |
|
| Expected forfeitures |
|
|
8 |
% |
|
|
8 |
% |
| Weighted average measurement date fair values |
|
$ |
5.10 |
|
|
$ |
2.01 |
|
27. Pension and other post-retirement benefits
Cameco maintains both defined benefit and defined contribution plans providing pension benefits to substantially all of its employees. All regular and
temporary employees participate in a registered defined contribution plan. This plan is registered under the Pension Benefits Standard Act, 1985. In addition, all Canadian-based executives participate in a non-registered supplemental executive
pension plan which is also a defined benefit plan.
Under the supplemental executive pension plan, Cameco provides a lump sum benefit equal to the present
value of a lifetime pension benefit based on the executive’s length of service and final average earnings. The plan provides for unreduced benefits to be paid at the normal retirement age of 65, however unreduced benefits could be paid if the
executive was at least 60 years of age and had 20 years of service at retirement. This program provides for a benefit determined by a formula based on earnings and service, reduced by the benefits payable under the registered base plan. In
2013, there was a plan amendment wherein Cameco’s funding to the supplemental plan was replaced by a letter of credit held by the plan’s trustee. The face amount of the letter of credit will be determined each year based on the wind-up
liabilities of the supplemental plan, less any plan assets currently held with the trustee. A valuation will be required annually to determine the letter of credit amount. Benefits will continue to be paid from plan assets until the fund is
exhausted, at which time Cameco will begin paying benefits from corporate assets.
Cameco also maintains non-pension post-retirement plans (“other
benefit plans”) which are defined benefit plans that cover such benefits as group life insurance and supplemental health and dental coverage to eligible employees and their dependants. The costs related to these plans are charged to earnings in
the period during which the employment services are rendered. These plans are funded by Cameco as benefit claims are made.
The board of directors of
Cameco has final responsibility and accountability for the Cameco retirement programs. The board is ultimately responsible for managing the programs to comply with applicable legislation, providing oversight over the general functions and setting
certain policies.
Cameco expects to pay $537,000 in contributions and letter of credit fees to its defined benefit plans in 2015.
The post-retirement plans expose Cameco to actuarial risks, such as longevity risk, market risk, interest rate risk, liquidity risk and foreign currency risk.
The other benefit plans expose Cameco to risks of higher supplemental health and dental utilization than expected. However, the other benefit plans have limits on Cameco’s annual benefits payable.
2014 ANNUAL
REPORT 131
The effective date of the most recent valuations for funding purposes on the registered defined benefit pension
plans is January 1, 2012. The next planned effective date for valuations is January 1, 2015.
Cameco has more than one defined benefit plan and
has generally provided aggregated disclosures in respect of these plans, on the basis that these plans are not exposed to materially different risks. Information relating to Cameco’s defined benefit plans is shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Pension benefit plans |
|
|
Other benefit plans |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Fair value of plan assets, beginning of year |
|
$ |
15,402 |
|
|
$ |
20,167 |
|
|
$ |
— |
|
|
$ |
— |
|
| Interest income on plan assets |
|
|
717 |
|
|
|
791 |
|
|
|
— |
|
|
|
— |
|
| Return on assets excluding interest income |
|
|
188 |
|
|
|
(640 |
) |
|
|
— |
|
|
|
— |
|
| Employer contributions |
|
|
10 |
|
|
|
123 |
|
|
|
— |
|
|
|
— |
|
| Benefits paid |
|
|
(5,420 |
) |
|
|
(5,024 |
) |
|
|
— |
|
|
|
— |
|
| Administrative costs paid |
|
|
(20 |
) |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value of plan assets, end of year |
|
$ |
10,877 |
|
|
$ |
15,402 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Defined benefit obligation, beginning of year |
|
$ |
44,386 |
|
|
$ |
37,497 |
|
|
$ |
16,947 |
|
|
$ |
15,317 |
|
| Acquisition [note 7] |
|
|
— |
|
|
|
11,560 |
|
|
|
— |
|
|
|
— |
|
| Current service cost |
|
|
2,203 |
|
|
|
1,809 |
|
|
|
960 |
|
|
|
1,016 |
|
| Interest cost |
|
|
1,940 |
|
|
|
1,926 |
|
|
|
825 |
|
|
|
733 |
|
| Actuarial loss (gain) arising from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - demographic assumptions |
|
|
971 |
|
|
|
1,752 |
|
|
|
106 |
|
|
|
558 |
|
| - financial assumptions |
|
|
5,992 |
|
|
|
(3,705 |
) |
|
|
2,037 |
|
|
|
(1,474 |
) |
| - experience adjustment |
|
|
2,192 |
|
|
|
(1,827 |
) |
|
|
(180 |
) |
|
|
1,471 |
|
| Past service cost |
|
|
2,374 |
|
|
|
(605 |
) |
|
|
— |
|
|
|
— |
|
| Benefits paid |
|
|
(6,674 |
) |
|
|
(5,558 |
) |
|
|
(588 |
) |
|
|
(674 |
) |
| Foreign exchange |
|
|
(944 |
) |
|
|
1,537 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Defined benefit obligation, end of year |
|
$ |
52,440 |
|
|
$ |
44,386 |
|
|
$ |
20,107 |
|
|
$ |
16,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Defined benefit liability [note 17] |
|
$ |
(41,563 |
) |
|
$ |
(28,984 |
) |
|
$ |
(20,107 |
) |
|
$ |
(16,947 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The percentages of the total fair value of assets in the pension plans for each asset category at December 31 were as
follows:
|
|
|
|
|
|
|
|
|
| |
|
Pension benefit plans |
|
| |
|
2014 |
|
|
2013 |
|
| Asset category (a) |
|
|
|
|
|
|
|
|
| Canadian equity securities |
|
|
7 |
% |
|
|
8 |
% |
| Global equity securities |
|
|
13 |
% |
|
|
15 |
% |
| Canadian fixed income |
|
|
21 |
% |
|
|
21 |
% |
| Other (b) |
|
|
59 |
% |
|
|
56 |
% |
|
|
|
|
|
|
|
|
|
| Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
| (a) |
The defined benefit plan assets contain no material amounts of related party assets at December 31, 2014 and 2013 respectively. |
| (b) |
Relates to the value of the refundable tax account held by the Canada Revenue Agency. The refundable total is approximately equal to half of the sum of the realized investment income plus employer contributions less
half of the benefits paid by the plan. |
132 CAMECO
CORPORATION
The following represents the components of net pension and other benefit expense included primarily as part of
administration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Pension benefit plans |
|
|
Other benefit plans |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Current service cost |
|
$ |
2,203 |
|
|
$ |
1,809 |
|
|
$ |
960 |
|
|
$ |
1,016 |
|
| Net interest cost |
|
|
1,223 |
|
|
|
1,135 |
|
|
|
825 |
|
|
|
733 |
|
| Past service cost |
|
|
2,374 |
|
|
|
(605 |
) |
|
|
— |
|
|
|
— |
|
| Administration cost |
|
|
20 |
|
|
|
15 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Defined benefit expense [note 20] |
|
|
5,820 |
|
|
|
2,354 |
|
|
|
1,785 |
|
|
|
1,749 |
|
| Defined contribution pension expense [note 20] |
|
|
17,274 |
|
|
|
16,441 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net pension and other benefit expense |
|
$ |
23,094 |
|
|
$ |
18,795 |
|
|
$ |
1,785 |
|
|
$ |
1,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total amount of actuarial losses (gains) recognized in other comprehensive income is:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Pension benefit plans |
|
|
Other benefit
plans |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Actuarial loss (gain) |
|
$ |
9,155 |
|
|
$ |
(3,780 |
) |
|
$ |
1,963 |
|
|
$ |
555 |
|
| Return on plan assets excluding interest income |
|
|
(188 |
) |
|
|
640 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
8,967 |
|
|
$ |
(3,140 |
) |
|
$ |
1,963 |
|
|
$ |
555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The assumptions used to determine the Company’s defined benefit obligation and net pension and other benefit expense were
as follows at December 31 (expressed as weighted averages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Pension benefit plans |
|
|
Other benefit plans |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Discount rate—obligation |
|
|
3.4 |
% |
|
|
4.4 |
% |
|
|
3.9 |
% |
|
|
4.8 |
% |
| Discount rate—expense |
|
|
4.4 |
% |
|
|
3.8 |
% |
|
|
4.8 |
% |
|
|
4.0 |
% |
| Rate of compensation increase |
|
|
3.0 |
% |
|
|
3.3 |
% |
|
|
— |
|
|
|
— |
|
| Initial health care cost trend rate |
|
|
— |
|
|
|
— |
|
|
|
7.0 |
% |
|
|
7.0 |
% |
| Cost trend rate declines to |
|
|
— |
|
|
|
— |
|
|
|
5.0 |
% |
|
|
5.0 |
% |
| Year the rate reaches its final level |
|
|
— |
|
|
|
— |
|
|
|
2018 |
|
|
|
2018 |
|
| Dental care cost trend rate |
|
|
— |
|
|
|
— |
|
|
|
5.0 |
% |
|
|
5.0 |
% |
At December 31, 2014, the weighted average duration of the defined benefit obligation for the pension plans was 20.3
years (2013—16.6 years) and for the other benefit plans was 14.0 years (2013—13.2 years).
A 1% change at the reporting date to one of the
relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Pension benefit plans |
|
|
Other benefit plans |
|
| |
|
Increase |
|
|
Decrease |
|
|
Increase |
|
|
Decrease |
|
| Discount rate |
|
$ |
(6,708 |
) |
|
$ |
8,848 |
|
|
$ |
(2,124 |
) |
|
$ |
2,610 |
|
| Rate of compensation increase |
|
|
2,889 |
|
|
|
(2,589 |
) |
|
|
n/a |
|
|
|
n/a |
|
A 1% change in any of the other assumptions would not have a significant impact on the defined benefit obligation.
2014 ANNUAL
REPORT 133
The methods and assumptions used in preparing the sensitivity analyses are the same as the methods and
assumptions used in determining the financial position of Cameco’s plans as at December 31, 2014. The sensitivity analyses are determined by varying the sensitivity assumption and leaving all other assumptions unchanged. Therefore, the
sensitivity analyses do not recognize any interdependence in the assumptions. The methods and assumptions used in determining the above sensitivity are consistent with the methods and assumptions used in the previous year.
In addition, an increase of one year in the expected lifetime of plan participants in the pension benefit plans would increase the defined benefit obligation
by $1,183,000.
To measure the longevity risk for these plans, the mortality rates were reduced such that the average life expectancy for all members
increased by one year. The reduced mortality rates were subsequently used to re-measure the defined benefit obligation of the entire plan.
28.
Financial instruments and related risk management
Cameco is exposed in varying degrees to a variety of risks from its use of financial instruments.
Management and the board of directors, both separately and together, discuss the principal risks of our businesses. The board sets policies for the implementation of systems to manage, monitor and mitigate identifiable risks. Cameco’s risk
management objective in relation to these instruments is to protect and minimize volatility in cash flow. The types of risks Cameco is exposed to, the source of risk exposure and how each is managed is outlined below.
Market risk
Market risk is the risk that changes in
market prices, such as commodity prices, foreign currency exchange rates and interest rates, will affect the Company’s earnings or the fair value of its financial instruments. Cameco engages in various business activities which expose the
Company to market risk. As part of its overall risk management strategy, Cameco uses derivatives to manage some of its exposures to market risk that result from these activities.
Derivative instruments may include financial and physical forward contracts. Such contracts may be used to establish a fixed price for a commodity, an
interest-bearing obligation or a cash flow denominated in a foreign currency. Market risks are monitored regularly against defined risk limits and tolerances.
Cameco’s actual exposure to these market risks is constantly changing as the Company’s portfolios of foreign currency and commodity contracts
change. Changes in fair value or cash flows based on market variable fluctuations cannot be extrapolated as the relationship between the change in the market variable and the change in fair value or cash flow may not be linear.
The types of market risk exposure and the way in which such exposure is managed are as follows:
A. Commodity price risk
As a significant producer and
supplier of uranium and nuclear fuel processing services, Cameco bears significant exposure to changes in prices for these products. A substantial change in prices will affect the Company’s net earnings and operating cash flows. Prices for
Cameco’s products are volatile and are influenced by numerous factors beyond the Company’s control, such as supply and demand fundamentals and geopolitical events.
Cameco’s sales contracting strategy focuses on reducing the volatility in future earnings and cash flow, while providing both protection against
decreases in market price and retention of exposure to future market price increases. To mitigate the risks associated with the fluctuations in the market price for uranium products, Cameco seeks to maintain a portfolio of uranium product sales
contracts with a variety of delivery dates and pricing mechanisms that provide a degree of protection from pricing volatility.
134 CAMECO
CORPORATION
Cameco does not hold any significant financial instruments that expose the Company to material commodity price
risk as of the reporting date.
B. Foreign exchange risk
The relationship between the Canadian and US dollar affects financial results of the uranium business as well as the fuel services business. Sales of uranium
product, conversion and fuel manufacturing services are routinely denominated in US dollars while production costs are largely denominated in Canadian dollars.
Cameco attempts to provide some protection against exchange rate fluctuations by planned hedging activity designed to smooth volatility. To mitigate risks
associated with foreign currency, Cameco enters into forward sales and option contracts to establish a price for future delivery of the foreign currency. These foreign currency contracts are not designated as hedges and are recorded at fair value
with changes in fair value recognized in earnings. Cameco also has a natural hedge against US currency fluctuations because a portion of its annual cash outlays, including purchases of uranium and conversion services, is denominated in US dollars.
Cameco holds a number of financial instruments denominated in foreign currencies that expose the Company to foreign exchange risk. Cameco measures its
exposure to foreign exchange risk on financial instruments as the change in carrying values that would occur as a result of reasonably possible changes in foreign exchange rates, holding all other variables constant. As of the reporting date, the
Company has determined its pre-tax exposure to foreign currency exchange risk on financial instruments to be as follows based on a 5% weakening of the Canadian dollar:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Currency |
|
|
Carrying value
(Cdn) |
|
|
Gain (loss) |
|
| Cash and cash equivalents |
|
|
EUR |
|
|
$ |
13,537 |
|
|
$ |
677 |
|
| Cash and cash equivalents |
|
|
USD |
|
|
|
46,958 |
|
|
|
2,348 |
|
| Accounts receivable |
|
|
USD |
|
|
|
346,331 |
|
|
|
17,317 |
|
| Accounts receivable |
|
|
EUR |
|
|
|
14,798 |
|
|
|
740 |
|
| Long-term receivables, investments and other |
|
|
USD |
|
|
|
91,672 |
|
|
|
4,584 |
|
| Accounts payable and accrued liabilities |
|
|
USD |
|
|
|
(97,508 |
) |
|
|
(4,875 |
) |
| Accounts payable and accrued liabilities |
|
|
GBP |
|
|
|
(18,999 |
) |
|
|
(950 |
) |
| Net foreign currency derivatives |
|
|
USD |
|
|
|
(67,005 |
) |
|
|
(104,479 |
) |
A 5% strengthening of the Canadian dollar against the currencies above at December 31, 2014 would have had an equal but
opposite effect on the amounts shown above, assuming all other variables remained constant.
C. Interest rate risk
The Company has a strategy of minimizing its exposure to interest rate risk by maintaining target levels of fixed and variable rate borrowings. The proportions
of outstanding debt carrying fixed and variable interest rates are reviewed by senior management to ensure that these levels are within approved policy limits. At December 31, 2014, the proportion of Cameco’s outstanding debt that carries
fixed interest rates is 80% (2013—84%).
Cameco is exposed to interest rate risk through its interest rate swap contracts whereby fixed rate payments
on a notional amount of $300,000,000 of the Series D senior unsecured debentures were swapped for variable rate payments. The swaps terminate on September 2, 2019. Under the terms of the swaps, Cameco makes interest payments based on the
three-month Canada Dealer Offered Rate plus an average margin of 3.7% and receives fixed interest payments of 5.67%. To mitigate this risk, Cameco entered into interest rate cap arrangements, effective March 18, 2013, whereby the three-month
Canada Dealer Offered Rate was capped at 5.0% such that total variable payments will not exceed, on average, 8.7%. At December 31, 2014, the fair value of Cameco’s interest rate swaps and caps was $2,978,000 (2013—$3,616,000).
2014 ANNUAL
REPORT 135
Cameco is also exposed to interest rate risk on its loan facility with Inkai and on NUKEM’s multicurrency
revolving loan facility due to the variable nature of the interest rates contained in the terms therein.
Cameco measures its exposure to interest rate
risk as the change in cash flows that would occur as a result of reasonably possible changes in interest rates, holding all other variables constant. As of the reporting date, the Company has determined the impact on earnings of a 1% increase in
interest rate on variable rate financial instruments to be as follows:
|
|
|
|
|
| |
|
Gain (loss) |
|
| Interest rate contracts |
|
$ |
(4,028 |
) |
| Advances receivable from Inkai |
|
|
867 |
|
No amounts were withdrawn against NUKEM’s revolving loan facility as of December 31, 2014.
Counterparty credit risk
Counterparty credit risk is
associated with the ability of counterparties to satisfy their contractual obligations to Cameco, including both payment and performance. Cameco’s sales of uranium product, conversion and fuel manufacturing services expose the Company to the
risk of non-payment.
Cameco manages the risk of non-payment by monitoring the credit worthiness of its customers and seeking pre-payment or other forms
of payment security from customers with an unacceptable level of credit risk. To mitigate risks associated with certain financial assets, Cameco will hold positions with a variety of large creditworthy institutions.
The maximum exposure to credit risk, as represented by the carrying amount of the financial assets, at December 31 was:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Cash and cash equivalents |
|
$ |
566,583 |
|
|
$ |
229,135 |
|
| Accounts receivable |
|
|
435,479 |
|
|
|
416,031 |
|
| Advances receivable from Inkai [note 33] |
|
|
91,672 |
|
|
|
95,319 |
|
| Derivative assets |
|
|
3,889 |
|
|
|
7,391 |
|
At December 31, 2014, there were no significant concentrations of credit risk and no amounts were held as collateral.
Historically, Cameco has experienced minimal customer defaults and, as a result, considers the credit quality of its accounts receivable to be high. All accounts receivable at the reporting date are neither past due nor impaired.
Liquidity risk
Financial liquidity represents
Cameco’s ability to fund future operating activities and investments. Cameco ensures that there is sufficient capital in order to meet short-term business requirements, after taking into account cash flows from operations and the Company’s
holdings of cash and cash equivalents. The Company believes that these sources will be sufficient to cover the likely short-term and long-term cash requirements.
The table below outlines the Company’s available debt facilities at December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total
amount |
|
|
Outstanding
and
committed |
|
|
Amount
available |
|
| Unsecured revolving credit facility |
|
$ |
1,250,000 |
|
|
$ |
— |
|
|
$ |
1,250,000 |
|
| Letter of credit facility |
|
|
1,068,420 |
|
|
|
950,716 |
|
|
|
117,704 |
|
| Inkai revolving credit facility (Cameco’s share) |
|
|
13,921 |
|
|
|
— |
|
|
|
13,921 |
|
| NUKEM multicurrency revolving loan facility |
|
|
140,380 |
|
|
|
413 |
|
|
|
139,967 |
|
136 CAMECO
CORPORATION
The tables below present a maturity analysis of Cameco’s financial liabilities, including principal and
interest, based on the expected cash flows from the reporting date to the contractual maturity date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Carrying
amount |
|
|
Contractual
cash flows |
|
|
Due in less
than
1 year |
|
|
Due in
1-3 years |
|
|
Due in
3-5 years |
|
|
Due after
5 years |
|
| Accounts payable and accrued liabilities |
|
$ |
316,258 |
|
|
$ |
316,258 |
|
|
$ |
316,258 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| Long-term debt |
|
|
1,491,198 |
|
|
|
1,500,000 |
|
|
|
— |
|
|
|
— |
|
|
|
500,000 |
|
|
|
1,000,000 |
|
| Foreign currency contracts |
|
|
67,916 |
|
|
|
67,916 |
|
|
|
53,873 |
|
|
|
14,043 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total contractual repayments |
|
$ |
1,875,372 |
|
|
$ |
1,884,174 |
|
|
$ |
370,131 |
|
|
$ |
14,043 |
|
|
$ |
500,000 |
|
|
$ |
1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total |
|
|
Due in
less than
1 year |
|
|
Due in
1-3 years |
|
|
Due in
3-5 years |
|
|
Due after
5 years |
|
| Total interest payments on long-term debt |
|
$ |
613,770 |
|
|
$ |
69,390 |
|
|
$ |
138,780 |
|
|
$ |
138,780 |
|
|
$ |
266,820 |
|
Measurement of fair values
A. Accounting classifications and fair values
The
following tables summarize the carrying amounts and accounting classifications of Cameco’s financial instruments at the reporting date:
As at
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fair value
through
profit or loss |
|
|
Loans and
receivables |
|
|
Available
for sale |
|
|
Other
financial
liabilities |
|
|
Total |
|
| Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
— |
|
|
$ |
566,583 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
566,583 |
|
| Accounts receivable [note 8] |
|
|
— |
|
|
|
455,002 |
|
|
|
— |
|
|
|
— |
|
|
|
455,002 |
|
| Derivative assets [note 12] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency contracts |
|
|
911 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
911 |
|
| Interest rate contracts |
|
|
2,978 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,978 |
|
| Investments in equity securities [note 12] |
|
|
— |
|
|
|
— |
|
|
|
6,601 |
|
|
|
— |
|
|
|
6,601 |
|
| Advances receivable from Inkai [note 33] |
|
|
— |
|
|
|
91,672 |
|
|
|
— |
|
|
|
— |
|
|
|
91,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,889 |
|
|
|
1,113,257 |
|
|
|
6,601 |
|
|
|
— |
|
|
|
1,123,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts payable and accrued liabilities [note 14] |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
316,258 |
|
|
|
316,258 |
|
| Derivative liabilities [note 17] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency contracts |
|
|
67,916 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
67,916 |
|
| Long-term debt [note 16] |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,491,198 |
|
|
|
1,491,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,916 |
|
|
|
— |
|
|
|
— |
|
|
|
1,807,456 |
|
|
|
1,875,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net |
|
$ |
(64,027 |
) |
|
$ |
1,113,257 |
|
|
$ |
6,601 |
|
|
$ |
(1,807,456 |
) |
|
$ |
(751,625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 ANNUAL
REPORT 137
As at December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fair value
through
profit or
loss |
|
|
Loans and
receivables |
|
|
Available
for sale |
|
|
Other
financial
liabilities |
|
|
Total |
|
| Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
— |
|
|
$ |
229,135 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
229,135 |
|
| Accounts receivable [note 8] |
|
|
— |
|
|
|
431,375 |
|
|
|
— |
|
|
|
— |
|
|
|
431,375 |
|
| Derivative assets [note 12] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency contracts |
|
|
3,775 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,775 |
|
| Interest rate contracts |
|
|
3,616 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,616 |
|
| Investments in equity securities [note 12] |
|
|
— |
|
|
|
— |
|
|
|
22,805 |
|
|
|
— |
|
|
|
22,805 |
|
| Advances receivable from Inkai [note 33] |
|
|
— |
|
|
|
95,319 |
|
|
|
— |
|
|
|
— |
|
|
|
95,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,391 |
|
|
|
755,829 |
|
|
|
22,805 |
|
|
|
— |
|
|
|
786,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Bank overdraft |
|
|
41,226 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
41,226 |
|
| Accounts payable and accrued liabilities [note 14] |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
437,941 |
|
|
|
437,941 |
|
| Short-term debt [note 15] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial paper |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
24,974 |
|
|
|
24,974 |
|
| Promissory note |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,601 |
|
|
|
10,601 |
|
| NUKEM short-term loan |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,655 |
|
|
|
14,655 |
|
| Derivative liabilities [note 17] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency contracts |
|
|
30,907 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,907 |
|
| Share purchase options |
|
|
16 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16 |
|
| Long-term debt [note 16] |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,293,383 |
|
|
|
1,293,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,149 |
|
|
|
— |
|
|
|
— |
|
|
|
1,781,554 |
|
|
|
1,853,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net |
|
$ |
(64,758 |
) |
|
$ |
755,829 |
|
|
$ |
22,805 |
|
|
$ |
(1,781,554 |
) |
|
$ |
(1,067,678 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cameco does not have any financial instruments classified as held-for-trading, or held-to-maturity as of the reporting date.
The following tables summarize the carrying amounts and fair values of Cameco’s financial instruments that are measured at fair value, including
their levels in the fair value hierarchy:
As at December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Fair value |
|
| |
|
Carrying
value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
| Derivative assets [note 12] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency contracts |
|
$ |
911 |
|
|
$ |
— |
|
|
$ |
911 |
|
|
$ |
911 |
|
| Interest rate contracts |
|
|
2,978 |
|
|
|
— |
|
|
|
2,978 |
|
|
|
2,978 |
|
| Investments in equity securities [note 12] |
|
|
6,601 |
|
|
|
6,601 |
|
|
|
— |
|
|
|
6,601 |
|
| Derivative liabilities [note 17] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency contracts |
|
|
(67,916 |
) |
|
|
— |
|
|
|
(67,916 |
) |
|
|
(67,916 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net |
|
$ |
(57,426 |
) |
|
$ |
6,601 |
|
|
$ |
(64,027 |
) |
|
$ |
(57,426 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138 CAMECO
CORPORATION
As at December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Fair value |
|
| |
|
Carrying
value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
| Derivative assets [note 12] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency contracts |
|
$ |
3,775 |
|
|
$ |
— |
|
|
$ |
3,775 |
|
|
$ |
3,775 |
|
| Interest rate contracts |
|
|
3,616 |
|
|
|
— |
|
|
|
3,616 |
|
|
|
3,616 |
|
| Derivative liabilities [note 17] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency contracts |
|
|
(30,907 |
) |
|
|
— |
|
|
|
(30,907 |
) |
|
|
(30,907 |
) |
| Share purchase options |
|
|
(16 |
) |
|
|
(16 |
) |
|
|
— |
|
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net |
|
$ |
(23,532 |
) |
|
$ |
(16 |
) |
|
$ |
(23,516 |
) |
|
$ |
(23,532 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The preceding tables exclude fair value information for financial instruments whose carrying amounts are a reasonable
approximation of fair value.
There were no transfers between level 1 and level 2 during the period. Cameco does not have any financial instruments that
are classified as level 3 as of the reporting date.
B. Financial instruments measured at fair value
Cameco measures its short-term investments, derivative financial instruments and material investments in equity securities at fair value. Short-term
investments and investments in publicly held equity securities are classified as a recurring level 1 fair value measurement and derivative financial instruments are classified as a recurring level 2 fair value measurement.
Short-term investments represent available-for-sale money market instruments. The fair value of these instruments is determined using quoted market yields as
of the reporting date. The fair value of investments in equity securities is determined using quoted share prices observed in the principal market for the securities as of the reporting date.
Foreign currency derivatives consist of foreign currency forward contracts, options and swaps. The fair value of foreign currency options is measured based on
the Black Scholes option-pricing model. The fair value of foreign currency forward contracts and swaps is measured using a market approach, based on the difference between contracted foreign exchange rates and quoted forward exchange rates as of the
reporting date.
Interest rate derivatives consist of interest rate swap contracts and interest rate caps. The fair value of interest rate swaps is
determined by discounting expected future cash flows from the contracts. The future cash flows are determined by measuring the difference between fixed interest payments to be received and floating interest payments to be made to the counterparty
based on Canada Dealer Offer Rate forward interest rate curves. The fair value of interest rate caps is determined based on broker quotes observed in active markets at the reporting date.
Where applicable, the fair value of the derivatives reflects the credit risk of the instrument and includes adjustments to take into account the credit risk
of the Company and counterparty. These adjustments are based on credit ratings and yield curves observed in active markets at the reporting date.
Cameco
previously measured its investment in GoviEx at cost due to the unavailability of a quoted price in an active market. GoviEx is now listed on the Canadian Securities Exchange and as a result the Company has measured its investment at fair value as
of the reporting date.
2014 ANNUAL
REPORT 139
C. Financial instruments not measured at fair value
The carrying value of Cameco’s cash and cash equivalents, receivables, payables and accrued liabilities is assumed to approximate the fair value as a
result of the short-term nature of the instruments. The carrying value of Cameco’s short-term debt (commercial paper and promissory notes) and long-term debt (debentures) is assumed to approximate the fair value as a result of the variable
interest rate associated with the instruments or the fixed interest rate of the instruments being similar to market rates.
Derivatives
The following table summarizes the fair value of derivatives and classification on the consolidated statements of financial position:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Non-hedge derivatives: |
|
|
|
|
|
|
|
|
| Foreign currency contracts |
|
$ |
(67,005 |
) |
|
$ |
(27,132 |
) |
| Interest rate contracts |
|
|
2,978 |
|
|
|
3,616 |
|
| Share purchase options |
|
|
— |
|
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
| Net |
|
$ |
(64,027 |
) |
|
$ |
(23,532 |
) |
|
|
|
|
|
|
|
|
|
| Classification: |
|
|
|
|
|
|
|
|
| Current portion of long-term receivables, investmentsand other [note 12] |
|
$ |
500 |
|
|
$ |
3,775 |
|
| Long-term receivables, investments and other [note 12] |
|
|
3,389 |
|
|
|
3,616 |
|
| Current portion of other liabilities [note 17] |
|
|
(53,873 |
) |
|
|
(30,923 |
) |
| Other liabilities [note 17] |
|
|
(14,043 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
| Net |
|
$ |
(64,027 |
) |
|
$ |
(23,532 |
) |
|
|
|
|
|
|
|
|
|
The following table summarizes the different components of the losses on derivatives included in net earnings:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Non-hedge derivatives: |
|
|
|
|
|
|
|
|
| Foreign currency contracts |
|
$ |
(126,069 |
) |
|
$ |
(62,578 |
) |
| Interest rate contracts |
|
|
4,893 |
|
|
|
624 |
|
| Share purchase options |
|
|
16 |
|
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
| Net |
|
$ |
(121,160 |
) |
|
$ |
(61,970 |
) |
|
|
|
|
|
|
|
|
|
140 CAMECO
CORPORATION
29. Capital management
Cameco’s capital structure reflects our vision and the environment in which we operate. We seek growth through development and expansion of existing
assets by acquisition. Our capital resources are managed to support achievement of our goals. The overall objectives for managing capital in 2014 remained unchanged from the prior comparative period.
Cameco’s management considers its capital structure to consist of bank overdrafts, long-term debt, short-term debt (net of cash and cash equivalents and
short-term investments), non-controlling interest and shareholders’ equity.
The capital structure at December 31 was as follows:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Bank overdraft |
|
$ |
— |
|
|
$ |
41,226 |
|
| Long-term debt [note 16] |
|
|
1,491,198 |
|
|
|
1,293,383 |
|
| Short-term debt [note 15] |
|
|
— |
|
|
|
50,230 |
|
| Cash and cash equivalents |
|
|
(566,583 |
) |
|
|
(229,135 |
) |
|
|
|
|
|
|
|
|
|
| Net debt |
|
|
924,615 |
|
|
|
1,155,704 |
|
|
|
|
|
|
|
|
|
|
| Non-controlling interest |
|
|
160 |
|
|
|
1,129 |
|
| Shareholders’ equity |
|
|
5,443,644 |
|
|
|
5,348,265 |
|
|
|
|
|
|
|
|
|
|
| Total equity |
|
|
5,443,804 |
|
|
|
5,349,394 |
|
|
|
|
|
|
|
|
|
|
| Total capital |
|
$ |
6,368,419 |
|
|
$ |
6,505,098 |
|
|
|
|
|
|
|
|
|
|
Cameco is bound by certain covenants in its general credit facilities. These covenants place restrictions on total debt,
including guarantees and set minimum levels for net worth. As of December 31, 2014, Cameco met these requirements.
The terms of NUKEM’s
revolving loan facility contain a financial covenant that places restrictions on total debt and working capital balances. The facility also requires Cameco, as guarantor, to maintain a minimum credit rating. As of December 31, 2014 the Company
is in compliance with all requirements under this facility.
| 30. |
Segmented information |
Cameco has three reportable segments: uranium, fuel services and NUKEM. The
uranium segment involves the exploration for, mining, milling, purchase and sale of uranium concentrate. The fuel services segment involves the refining, conversion and fabrication of uranium concentrate and the purchase and sale of conversion
services. The NUKEM segment acts as a market intermediary between uranium producers and nuclear-electric utilities.
Cameco’s reportable segments are
strategic business units with different products, processes and marketing strategies.
Accounting policies used in each segment are consistent with the
policies outlined in the summary of significant accounting policies. Segment revenues, expenses and results include transactions between segments incurred in the ordinary course of business. These transactions are priced on an arm’s length
basis, are eliminated on consolidation and are reflected in the “other” column.
2014 ANNUAL
REPORT 141
A. Business segments
For the year ended December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Uranium |
|
|
Fuel
services |
|
|
NUKEM |
|
|
Other |
|
|
Total |
|
| Revenue |
|
$ |
1,777,180 |
|
|
$ |
306,235 |
|
|
$ |
349,245 |
|
|
$ |
(35,128 |
) |
|
$ |
2,397,532 |
|
| Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of products and services sold |
|
|
902,813 |
|
|
|
237,872 |
|
|
|
319,369 |
|
|
|
(39,286 |
) |
|
|
1,420,768 |
|
| Depreciation and amortization |
|
|
272,632 |
|
|
|
30,038 |
|
|
|
7,584 |
|
|
|
28,729 |
|
|
|
338,983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of sales |
|
|
1,175,445 |
|
|
|
267,910 |
|
|
|
326,953 |
|
|
|
(10,557 |
) |
|
|
1,759,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit (loss) |
|
|
601,735 |
|
|
|
38,325 |
|
|
|
22,292 |
|
|
|
(24,571 |
) |
|
|
637,781 |
|
| Administration |
|
|
— |
|
|
|
— |
|
|
|
16,591 |
|
|
|
159,794 |
|
|
|
176,385 |
|
| Impairment charges |
|
|
143,078 |
|
|
|
183,615 |
|
|
|
— |
|
|
|
— |
|
|
|
326,693 |
|
| Exploration |
|
|
46,565 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
46,565 |
|
| Research and development |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,044 |
|
|
|
5,044 |
|
| Loss (gain) on disposal of assets |
|
|
32,959 |
|
|
|
11,808 |
|
|
|
(5 |
) |
|
|
— |
|
|
|
44,762 |
|
| Finance costs |
|
|
— |
|
|
|
— |
|
|
|
3,769 |
|
|
|
73,353 |
|
|
|
77,122 |
|
| Losses on derivatives |
|
|
— |
|
|
|
— |
|
|
|
1,799 |
|
|
|
119,361 |
|
|
|
121,160 |
|
| Finance income |
|
|
— |
|
|
|
— |
|
|
|
(14 |
) |
|
|
(7,388 |
) |
|
|
(7,402 |
) |
| Share of loss from equity-accounted investees |
|
|
3,874 |
|
|
|
13,267 |
|
|
|
— |
|
|
|
— |
|
|
|
17,141 |
|
| Other expense (income) |
|
|
(68,626 |
) |
|
|
18,035 |
|
|
|
— |
|
|
|
— |
|
|
|
(50,591 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss) before income taxes |
|
|
443,885 |
|
|
|
(188,400 |
) |
|
|
152 |
|
|
|
(374,735 |
) |
|
|
(119,098 |
) |
| Income tax recovery |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(175,268 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net earnings from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
56,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capital expenditures for the year |
|
$ |
466,332 |
|
|
$ |
13,776 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
480,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142 CAMECO
CORPORATION
For the year ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Uranium |
|
|
Fuel
services |
|
|
NUKEM |
|
|
Other |
|
|
Total |
|
| Revenue |
|
$ |
1,632,508 |
|
|
$ |
319,157 |
|
|
$ |
464,592 |
|
|
$ |
22,466 |
|
|
$ |
2,438,723 |
|
| Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of products and services sold |
|
|
869,137 |
|
|
|
240,746 |
|
|
|
419,771 |
|
|
|
19,584 |
|
|
|
1,549,238 |
|
| Depreciation and amortization |
|
|
212,881 |
|
|
|
26,241 |
|
|
|
25,459 |
|
|
|
18,175 |
|
|
|
282,756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of sales |
|
|
1,082,018 |
|
|
|
266,987 |
|
|
|
445,230 |
|
|
|
37,759 |
|
|
|
1,831,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit (loss) |
|
|
550,490 |
|
|
|
52,170 |
|
|
|
19,362 |
|
|
|
(15,293 |
) |
|
|
606,729 |
|
| Administration |
|
|
— |
|
|
|
— |
|
|
|
15,240 |
|
|
|
169,736 |
|
|
|
184,976 |
|
| Impairment charge |
|
|
70,159 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
70,159 |
|
| Exploration |
|
|
72,833 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
72,833 |
|
| Research and development |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,302 |
|
|
|
7,302 |
|
| Loss on disposal of assets |
|
|
6,766 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,766 |
|
| Finance costs |
|
|
— |
|
|
|
— |
|
|
|
7,936 |
|
|
|
54,185 |
|
|
|
62,121 |
|
| Losses (gains) on derivatives |
|
|
— |
|
|
|
— |
|
|
|
(10,215 |
) |
|
|
72,185 |
|
|
|
61,970 |
|
| Finance income |
|
|
— |
|
|
|
— |
|
|
|
(69 |
) |
|
|
(6,898 |
) |
|
|
(6,967 |
) |
| Share of loss from equity-accounted investees |
|
|
1,033 |
|
|
|
13,074 |
|
|
|
— |
|
|
|
— |
|
|
|
14,107 |
|
| Other expense |
|
|
16,587 |
|
|
|
— |
|
|
|
— |
|
|
|
1,739 |
|
|
|
18,326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss) before income taxes |
|
|
383,112 |
|
|
|
39,096 |
|
|
|
6,470 |
|
|
|
(313,542 |
) |
|
|
115,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income tax recovery |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(117,230 |
) |
| Net earnings from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
232,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capital expenditures for the year |
|
$ |
635,152 |
|
|
$ |
10,499 |
|
|
$ |
133,924 |
|
|
$ |
— |
|
|
$ |
779,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Geographic segments
Revenue is attributed to the geographic location based on the location of the entity providing the services. The Company’s revenue from external customers
is as follows:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Canada |
|
$ |
308,327 |
|
|
$ |
230,505 |
|
| Germany |
|
|
174,622 |
|
|
|
232,296 |
|
| United States |
|
|
1,914,583 |
|
|
|
1,975,922 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,397,532 |
|
|
$ |
2,438,723 |
|
|
|
|
|
|
|
|
|
|
2014 ANNUAL
REPORT 143
The Company’s non-current assets, excluding deferred tax assets and financial instruments, by geographic
location are as follows:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Canada |
|
$ |
4,048,009 |
|
|
$ |
3,868,871 |
|
| United States |
|
|
409,495 |
|
|
|
371,705 |
|
| Germany |
|
|
116,106 |
|
|
|
105,293 |
|
| Australia |
|
|
643,986 |
|
|
|
645,952 |
|
| Other |
|
|
274,527 |
|
|
|
243,203 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,492,123 |
|
|
$ |
5,235,024 |
|
|
|
|
|
|
|
|
|
|
31. Group entities
The
following are the principal subsidiaries and associates of the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Principal place |
|
|
Ownership interest |
|
| |
|
of business |
|
|
2014 |
|
|
2013 |
|
| Subsidiaries: |
|
|
|
|
|
|
|
|
|
|
|
|
| Cameco Bruce Holdings Inc. |
|
|
Canada |
|
|
|
— |
|
|
|
100 |
% |
| Cameco Bruce Holdings II Inc. |
|
|
Canada |
|
|
|
— |
|
|
|
100 |
% |
| Cameco Fuel Manufacturing Inc. |
|
|
Canada |
|
|
|
100 |
% |
|
|
100 |
% |
| Cameco Inc. |
|
|
US |
|
|
|
100 |
% |
|
|
100 |
% |
| Power Resources, Inc. |
|
|
US |
|
|
|
100 |
% |
|
|
100 |
% |
| Crow Butte Resources, Inc. |
|
|
US |
|
|
|
100 |
% |
|
|
100 |
% |
| Urtek LLC |
|
|
US |
|
|
|
73 |
% |
|
|
73 |
% |
| NUKEM Investments GmbH |
|
|
Germany |
|
|
|
100 |
% |
|
|
100 |
% |
| Cameco Australia Pty. Ltd. |
|
|
Australia |
|
|
|
100 |
% |
|
|
100 |
% |
| Cameco Europe Ltd. |
|
|
Switzerland |
|
|
|
100 |
% |
|
|
100 |
% |
| Associates |
|
|
|
|
|
|
|
|
|
|
|
|
| GE-Hitachi Global Laser Enrichment LLC |
|
|
US |
|
|
|
24.00 |
% |
|
|
24.00 |
% |
| UEX Corporation |
|
|
Canada |
|
|
|
21.28 |
% |
|
|
21.95 |
% |
32. Joint operations
Cameco conducts a portion of its exploration, development, mining and milling activities through joint operations located around the world. Operations are
governed by agreements that provide for joint control of the strategic operating, investing and financing activities among the partners. These agreements were considered in the determination of joint control. Cameco’s significant Canadian
uranium joint operation interests are McArthur River, Key Lake and Cigar Lake. The Canadian uranium joint operations allocate uranium production to each joint operation participant and the joint operation participant derives revenue directly from
the sale of such product. The participants in the Inkai joint operation purchase uranium from Inkai and, in turn, derive revenue directly from the sale of such product to third-party customers. Mining and milling expenses incurred by joint
operations are included in the cost of inventory.
144 CAMECO
CORPORATION
Cameco reflects its proportionate interest in these assets and liabilities as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Principle place
of business |
|
|
Ownership |
|
|
2014 |
|
|
2013 |
|
| Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| McArthur River |
|
|
Canada |
|
|
|
69.81 |
% |
|
$ |
1,074,501 |
|
|
$ |
1,034,095 |
|
| Key Lake |
|
|
Canada |
|
|
|
83.33 |
% |
|
|
645,186 |
|
|
|
626,090 |
|
| Cigar Lake |
|
|
Canada |
|
|
|
50.03 |
% |
|
|
1,617,101 |
|
|
|
1,370,476 |
|
| Inkai |
|
|
Kazakhstan |
|
|
|
60.00 |
% |
|
|
359,554 |
|
|
|
323,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,696,342 |
|
|
$ |
3,354,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| McArthur River |
|
|
|
|
|
|
69.81 |
% |
|
$ |
54,170 |
|
|
$ |
51,094 |
|
| Key Lake |
|
|
|
|
|
|
83.33 |
% |
|
|
181,443 |
|
|
|
149,263 |
|
| Cigar Lake |
|
|
|
|
|
|
50.03 |
% |
|
|
52,580 |
|
|
|
55,718 |
|
| Inkai |
|
|
|
|
|
|
60.00 |
% |
|
|
171,198 |
|
|
|
170,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
459,391 |
|
|
$ |
426,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Through unsecured shareholder loans, Cameco has agreed to fund the development of the Inkai project. Cameco eliminates the
loan balances recorded by Inkai and records advances receivable (notes 12 and 33) representing its 40% ownership interest.
33. Related parties
The shares of Cameco are widely held and no shareholder, resident in Canada, is allowed to own more than 25% of the Company’s outstanding common
shares, either individually or together with associates. A non-resident of Canada is not allowed to own more than 15%.
Transactions with key
management personnel
Key management personnel are those persons that have the authority and responsibility for planning, directing and controlling the
activities of the Company, directly or indirectly. Key management personnel of the Company include executive officers, vice-presidents, other senior managers and members of the board of directors.
In addition to their salaries, Cameco also provides non-cash benefits to executive officers and vice-presidents and contributes to pension plans on their
behalf (note 27). Senior management and directors also participate in the Company’s share-based compensation plans (note 26).
Executive
officers are subject to terms of notice ranging from three to six months. Upon resignation at the Company’s request, they are entitled to termination benefits up to the lesser of 24 months or the period remaining until age 65. The
termination benefits include gross salary plus the target short-term incentive bonus for the year in which termination occurs.
2014 ANNUAL
REPORT 145
Compensation for key management personnel was comprised of:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Short-term employee benefits |
|
$ |
19,922 |
|
|
$ |
21,276 |
|
| Post-employment benefits |
|
|
8,395 |
|
|
|
4,415 |
|
| Share-based compensation (a) |
|
|
11,306 |
|
|
|
11,864 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
39,623 |
|
|
$ |
37,555 |
|
|
|
|
|
|
|
|
|
|
| (a) |
Excludes deferred share units held by directors (see note 26). |
Other related party transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Transaction value
year ended |
|
|
Balance outstanding
as at |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Joint arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest income (Inkai)(a) |
|
$ |
2,038 |
|
|
$ |
2,053 |
|
|
$ |
91,672 |
|
|
$ |
95,319 |
|
| Associates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expense |
|
|
(5 |
) |
|
|
(220 |
) |
|
|
— |
|
|
|
(10,647 |
) |
| (a) |
Disclosures in respect of transactions with joint arrangements represent the amount of such transactions which do not eliminate on proportionate consolidation. |
Through unsecured shareholder loans, Cameco has agreed to fund Inkai’s project development costs as well as further evaluation on block 3. The limits of
the loan facilities are $244,650,000 (US) and advances under these facilities bear interest at a rate of LIBOR plus 2%. At December 31, 2014, $197,551,000 (US) of principal and interest was outstanding (2013 - $224,047,000 (US)).
In 2008, a promissory note in the amount of $73,344,000 (US) was issued to finance the acquisition of GLE. No balance was outstanding under this promissory
note at December 31, 2014. At December 31, 2013, $10,010,000 (US) of principal and interest was outstanding.
34. Subsequent event
On January 21, 2015, Cameco received a Notice of Proposed Assessment (NOPA) from the United States Internal Revenue Service (IRS) pertaining to its 2009
taxation year. A NOPA is used by the IRS to communicate a proposed adjustment to income and is subject to negotiation and change; it is not the final tax assessment. The NOPA provides the basis for the IRS to issue a Revenue Agent Report (RAR),
which lists the proposed adjustments and calculates tax and any penalties owing based on the proposed adjustments. We currently anticipate receiving a final RAR in the first quarter of 2015.
The NOPA we received is focused on the transfer pricing used for certain intercompany transactions within our corporate structure. The IRS has proposed that a
portion of the non-US income reported under our corporate structure and taxed in non-US jurisdictions should be recognized and taxed in the US. We believe that the conclusions of the IRS in the NOPA are incorrect and are contesting them. We believe
that the ultimate resolution of this matter will not be material to our financial position, results of operations and cash flows in the year(s) of resolution.
146 CAMECO
CORPORATION
Investor information
Common Shares
Toronto (CCO) | New York (CCJ)
Transfer Agents and Registrars
The registrar and transfer agent for Cameco’s common shares is CST Trust Company. For information on common shareholdings, dividend cheques, lost share certificates and
address changes, contact:
In Canada
In the United States
CST Trust Company
American Stock Transfer
P.O. Box 700, Station B
& Trust Company, LLC
Montreal, Quebec
Attention: General Counsel
H3B 3K3
6201 15th Avenue
Brooklyn, NY
11219
Telephone
1-800-387-0825 OR
1-416-682-3860 outside of North America www.canstockta.com
Annual Meeting
The annual meeting of shareholders of Cameco
Corporation is scheduled to be held on Wednesday,
May 28, 2014 at 1:30 p.m. at Cameco’s head office in Saskatoon, Saskatchewan.
Dividend Policy
The board of directors has established a policy of paying a quarterly dividend of $0.10 ($0.40 per year) per common share. This policy will be reviewed from time to time in light
of the company’s cash flow, earnings, financial position and other relevant factors.
Inquiries
Cameco Corporation 2121 – 11th Street West
Saskatoon, Saskatchewan S7M 1J3 Phone:
306-956-6200 Fax: 306-956-6201
For comprehensive financial information visit:
cameco.com
Our vision:
Cameco will energize the world as the
global leader of fuel supply for clean-air nuclear power.
cameco.com
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