Interim Unaudited Financial Statements

EX-99.3 4 d386617dex993.htm INTERIM UNAUDITED FINANCIAL STATEMENTS Interim Unaudited Financial Statements

Exhibit 99.3

CAMECO CORPORATION

2012 CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(unaudited)

July 26, 2012

Cameco Corporation

Consolidated Statements of Earnings

(Unaudited)

($Cdn Thousands, except per share amounts)


						(Recast -						(Recast -
						note 3(b))						note 3(b))
			Three Months Ended						Six Months Ended
	Note		Jun 30/12			Jun 30/11			Jun 30/12			Jun 30/11
Revenue from products and services			$	391,424		$	425,705		$	954,682		$	886,806

Cost of products and services sold				226,193			268,059			552,539			543,624
Depreciation and amortization				61,835			49,716			120,830			98,787

Cost of sales				288,028			317,775			673,369			642,411

Gross profit				103,396			107,930			281,313			244,395

Administration				46,408			34,214			85,429			67,981
Exploration				17,888			14,647			40,857			30,486
Research and development				853			732			3,978			1,727
Loss (gain) on sale of assets				913			719			(2,149	)		695

Earnings from operations				37,334			57,618			153,198			143,506
Finance costs		8		(12,750	)		(19,704	)		(35,018	)		(39,562	)
Gains (losses) on derivatives		13		(22,880	)		11,859			1,574			35,588
Finance income				5,808			6,463			11,788			13,116
Share of loss from equity-accounted investees				(1,959	)		(2,324	)		(2,771	)		(5,016	)
Other income (expense)				(26,506	)		(133	)		(25,745	)		1,439

Earnings (loss) before income taxes				(20,953	)		53,779			103,026			149,071
Income tax expense (recovery)		9		(28,241	)		(873	)		(35,809	)		2,934

Net earnings			$	7,288		$	54,652		$	138,835		$	146,137

Net earnings (loss) attributable to:
Equity holders			$	7,877		$	54,652		$	139,615		$	146,137
Non-controlling interest				(589	)		—			(780	)		—

Net earnings			$	7,288		$	54,652		$	138,835		$	146,137

Earnings per common share attributable to equity holders
Basic		14	$	0.02		$	0.14		$	0.35		$	0.37

Diluted		14	$	0.02		$	0.14		$	0.35		$	0.37

See accompanying notes to condensed consolidated interim financial statements.

Cameco Corporation

Consolidated Statements of Comprehensive Income

(Unaudited)

($Cdn Thousands)


						(Recast - note 3(b))						(Recast - note 3(b))
			Three Months Ended						Six Months Ended
	Note		Jun 30/12			Jun 30/11			Jun 30/12			Jun 30/11
Net earnings			$	7,288		$	54,652		$	138,835		$	146,137

Other comprehensive income (loss), net of taxes		9
Exchange differences on translation of foreign operations				15,718			6,997			(3,106	)		(14,382	)
Gains (losses) on derivatives designated as cash flow hedges				(1,375	)		1,511			5,688			3,122
Gains on derivatives designated as cash flow hedges transferred to net earnings				(6,298	)		(5,102	)		(11,833	)		(11,232	)
Unrealized gains (losses) on available-for-sale assets				185			217			(90	)		684
Losses (gains) on available-for-sale assets transferred to net earnings				8			(5	)		(39	)		(1,840	)

Other comprehensive income (loss), net of taxes				8,238			3,618			(9,380	)		(23,648	)

Total comprehensive income			$	15,526		$	58,270		$	129,455		$	122,489

Other comprehensive income (loss) attributable to:

Equity holders			$	8,209		$	3,618		$	(9,290	)	$	(23,648	)
Non-controlling interest				29			—			(90	)		—

Other comprehensive income (loss) for the period			$	8,238		$	3,618		$	(9,380	)	$	(23,648	)

Total comprehensive income (loss) attributable to:

Equity holders			$	16,086		$	58,270		$	130,325		$	122,489
Non-controlling interest				(560	)		—			(870	)		—

Total comprehensive income for the period			$	15,526		$	58,270		$	129,455		$	122,489

See accompanying notes to condensed consolidated interim financial statements.

Cameco Corporation

Consolidated Statements of Financial Position

(Unaudited)

($Cdn Thousands)


					(Recast -
					note 3(b))
			As At
	Note		Jun 30/12		Dec 31/11
Assets
Current assets
Cash and cash equivalents			$	313,628	$	398,084
Short-term investments				581,222		804,141
Accounts receivable				320,821		611,815
Current tax assets				33,048		31,388
Inventories		4		577,251		493,875
Supplies and prepaid expenses				198,286		182,037
Current portion of long-term receivables, investments and other		5		75,101		62,433

Total current assets				2,099,357		2,583,773

Property, plant and equipment				4,666,684		4,349,492
Intangible assets				96,564		98,954
Long-term receivables, investments and other		5		308,374		283,818
Investments in equity-accounted investees				220,822		220,226
Deferred tax assets				134,791		81,392

Total non-current assets				5,427,235		5,033,882

Total assets			$	7,526,592	$	7,617,655

Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued liabilities			$	385,104	$	455,499
Current tax liabilities				16,663		39,330
Short-term debt				58,360		97,830
Dividends payable				39,531		39,475
Current portion of finance lease obligation				15,579		14,852
Current portion of other liabilities		6		40,279		50,495
Current portion of provisions				15,936		14,857

Total current liabilities				571,452		712,338

Long-term debt				795,484		795,144
Finance lease obligation				122,987		130,982
Other liabilities		6		523,856		528,264
Provisions				516,948		519,625
Deferred tax liabilities				9,550		8,165

Total non-current liabilities				1,968,825		1,982,180

Shareholders’ equity
Share capital				1,850,598		1,842,289
Contributed surplus				161,518		155,757
Retained earnings				2,935,531		2,874,973
Other components of equity				37,285		46,575

Total shareholders’ equity attributable to equity holders				4,984,932		4,919,594
Non-controlling interest				1,383		3,543

Total shareholders’ equity				4,986,315		4,923,137

Total liabilities and shareholders’ equity			$	7,526,592	$	7,617,655

Commitments and contingencies [notes 9,12]

See accompanying notes to condensed consolidated interim financial statements.

Cameco Corporation

Consolidated Statements of Changes in Equity

(Unaudited)

($Cdn Thousands)


																					(Recast -
																					note 3(b))
	Attributable to equity holders
	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, 2012	$	1,842,289	$	155,757		$	2,874,973		$	26,867		$	19,560		$	148			4,919,594		$	3,543		$	4,923,137
Net earnings		—		—			139,615			—			—			—			139,615			(780	)		138,835
Total other comprehensive loss		—		—			—			(3,016	)		(6,145	)		(129	)		(9,290	)		(90	)		(9,380	)

Total comprehensive income for the period		—		—			139,615			(3,016	)		(6,145	)		(129	)		130,325			(870	)		129,455

Share-based compensation		—		9,926			—			—			—			—			9,926			—			9,926
Share options exercised		8,309		(4,165	)		—			—			—			—			4,144			—			4,144
Dividends		—		—			(79,057	)		—			—			—			(79,057	)		—			(79,057	)
Change in ownership interests in subsidiary		—		—			—			—			—			—			—			(1,290	)		(1,290	)

Balance at June 30, 2012	$	1,850,598	$	161,518		$	2,935,531		$	23,851		$	13,415		$	19		$	4,984,932		$	1,383		$	4,986,315

Balance at January 1, 2011		1,833,257		142,376			2,690,184			(7,276	)		30,306			1,793			4,690,640			—			4,690,640
Net earnings		—		—			146,137			—			—			—			146,137			—			146,137
Total other comprehensive loss		—		—			—			(14,382	)		(8,110	)		(1,156	)		(23,648	)		—			(23,648	)

Total comprehensive income for the period		—		—			146,137			(14,382	)		(8,110	)		(1,156	)		122,489			—			122,489

Share-based compensation		—		11,320			—			—			—			—			11,320			—			11,320
Share options exercised		8,508		(5,988	)		—			—			—			—			2,520			—			2,520
Dividends		—		—			(78,942	)		—			—			—			(78,942	)		—			(78,942	)
Transactions with owners—contributed equity		—		—						—			—			—			—			3,376			3,376

Balance at June 30, 2011	$	1,841,765	$	147,708		$	2,757,379		$	(21,658	)	$	22,196		$	637		$	4,748,027		$	3,376		$	4,751,403

See accompanying notes to condensed consolidated interim financial statements.

Cameco Corporation

Consolidated Statements of Cash Flows

(Unaudited)

($Cdn Thousands)


						(Recast - note 3(b))						(Recast - note 3(b))
			Three Months Ended						Six Months Ended
	Note		Jun 30/12			Jun 30/11			Jun 30/12			Jun 30/11
Operating activities
Net earnings			$	7,288		$	54,652		$	138,835		$	146,137
Adjustments for:
Depreciation and amortization				61,835			49,716			120,830			98,787
Deferred charges				(15,568	)		(4,460	)		(15,640	)		(8,186	)
Unrealized losses (gains) on derivatives				16,000			15,490			(3,276	)		9,856
Share-based compensation		11		7,706			3,225			9,926			11,320
Loss (gain) on sale of assets				913			719			(2,149	)		695
Finance costs		8		12,750			19,704			35,018			39,562
Finance income				(5,808	)		(6,463	)		(11,788	)		(13,116	)
Share of loss from equity-accounted investees				1,959			2,324			2,771			5,016
Other income				(3,796	)		(352	)		(3,796	)		(4,975	)
Income tax expense (recovery)		9		(28,241	)		(873	)		(35,809	)		2,934
Interest received				5,288			5,714			12,230			9,689
Income taxes paid				(6,809	)		(9,209	)		(53,329	)		(47,883	)
Income taxes refunded				13,163			—			13,163			—
Other operating items		10		(160,625	)		(107,191	)		110,687			44,386

Net cash provided by (used in) operations				(93,945	)		22,996			317,673			294,222

Investing activities
Additions to property, plant and equipment				(315,427	)		(140,019	)		(451,501	)		(263,839	)
Decrease in short-term investments				328,227			142,719			222,770			10,746
Decrease (increase) in long-term receivables, investments and other				(4,360	)		(341	)		(29,952	)		27,494
Proceeds from sale of property, plant and equipment				3,066			7			3,099			32

Net cash provided by (used in) investing				11,506			2,366			(255,584	)		(225,567	)

Financing activities
Decrease in debt				(11,041	)		(7,046	)		(46,636	)		(10,870	)
Interest paid				(2,644	)		(2,893	)		(26,982	)		(27,088	)
Proceeds from issuance of shares, stock option plan				727			159			6,304			6,938
Dividends paid				(39,525	)		(39,470	)		(79,000	)		(67,075	)

Net cash used in financing				(52,483	)		(49,250	)		(146,314	)		(98,095	)

Decrease in cash during the period				(134,922	)		(23,888	)		(84,225	)		(29,440	)
Exchange rate changes on foreign currency cash balances				503			1,938			(231	)		(449	)
Cash and cash equivalents at beginning of period				448,047			367,441			398,084			375,380

Cash and cash equivalents at end of period			$	313,628		$	345,491		$	313,628		$	345,491

Cash and cash equivalents is comprised of:
Cash									$	63,762		$	100,684
Cash equivalents										249,866			244,807

									$	313,628		$	345,491

See accompanying notes to condensed consolidated interim financial statements.

Cameco Corporation

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

($Cdn thousands except per share amounts and as noted)

1.	Cameco Corporation

Cameco Corporation is incorporated under the Canada Business Corporations Act. The address of its registered office is 2121 11^th Street West, Saskatoon, Saskatchewan, S7M 1J3. The condensed consolidated interim financial statements as at and for the period ended June 30, 2012 comprise Cameco Corporation and its subsidiaries (collectively, the “Company” or “Cameco”) and the Company’s interest in associates and joint ventures. The Company is primarily engaged in the exploration for and the development, mining, refining, conversion and fabrication of uranium for sale as fuel for generating electricity in nuclear power reactors in Canada and other countries. Cameco has a 31.6% interest in Bruce Power L.P. (“BPLP”), which operates the four Bruce B nuclear reactors in Ontario.

2.	Significant Accounting Policies

(a)

Statement of Compliance

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting. The condensed consolidated interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with Cameco’s annual consolidated financial statements as at and for the year ended December 31, 2011.

These condensed consolidated interim financial statements were authorized for issuance by the Company’s board of directors on July 26, 2012.

(b)

Basis of Presentation

These condensed consolidated interim financial statements are presented in Canadian dollars, which is the Company’s functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand except where otherwise noted.

The condensed consolidated interim financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position: derivative financial instruments, available-for-sale financial assets and liabilities for cash-settled share-based payment arrangements are measured at fair value and the defined benefit asset is recognized as plan assets, plus unrecognized past service cost, less the present value of the defined benefit obligation.

The preparation of the condensed consolidated interim 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, income and expenses. Actual results may vary from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2011.

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 6 of the December 31, 2011 consolidated financial statements.

3.	Accounting Changes

(a)

New Standards and Interpretations not yet Adopted

The Company has not yet adopted the standards and amendments to existing standards that have been issued. The standards and amendments, unless otherwise stated, are effective for periods beginning on or after January 1, 2013. Cameco is assessing the impact of the following standards and amendments on its financial statements:

(i)

Financial Instruments

In October 2010, the International Accounting tandards Board (“IASB”) issued IFRS 9, Financial Instruments (“IFRS 9”). This standard is part of a wider project to replace IAS 39, Financial Instruments: Recognition and Measurement (“IAS 39”). 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. The guidance in IAS 39 on impairment of financial assets and hedge accounting continues to apply.

(ii)

Consolidated Financial Statements

In May 2011, the IASB issued IFRS 10, Consolidated Financial Statements (“IFRS 10”). This standard establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. IFRS 10 defines the principle of control and establishes control as the basis for determining which entities are consolidated in the consolidated financial statements.

(iii)

Joint Arrangements

In May 2011, the IASB issued IFRS 11, Joint Arrangements (“IFRS 11”). This standard establishes principles for financial reporting by parties to a joint arrangement. IFRS 11 requires a party to assess the rights and obligations arising from an arrangement in determining whether an arrangement is either a joint venture or a joint operation. Joint ventures are to be accounted for using the equity method while joint operations will continue to be accounted for using proportionate consolidation.

(iv)

Disclosure of Interests in Other Entities

In May 2011, the IASB issued IFRS 12, Disclosure of Interests in Other Entities (“IFRS 12”). This standard applies to entities that have an interest in a subsidiary, a joint arrangement, an associate or an unconsolidated structured entity. IFRS 12 integrates and makes consistent the disclosure requirements for a reporting entity’s interest in other entities and presents those requirements in a single standard.

(v)

Fair Value Measurement

In May 2011, the IASB issued IFRS 13, Fair Value Measurement (“IFRS 13”). This standard provides additional guidance where IFRS requires fair value to be used. IFRS 13 defines fair value, sets out in a single standard a framework for measuring fair value and establishes the required disclosures about fair value measurements.

(vi)

Employee Benefits

In June 2011, the IASB issued an amended version of IAS 19, Employee Benefits (“IAS 19”). This amendment eliminates the ‘corridor method’ of accounting for defined benefit plans. Revised IAS 19 also streamlines the presentation of changes in assets and liabilities arising from defined benefit plans, and enhances the disclosure requirements for defined benefit plans.

(vii)

Presentation of Other Comprehensive Income (“OCI”)

In June 2011, the IASB issued an amended version of IAS 1, Presentation of Financial Statements (“IAS 1”). This amendment is effective for annual periods beginning on or after July 1, 2012 and requires companies preparing financial statements in accordance with IFRS to group together items within OCI that may be reclassified to the profit or loss section of the statement of earnings. Revised IAS 1 also reaffirms existing requirements that items in OCI and profit or loss should be presented as either a single statement or two consecutive statements.

(viii)

Financial Assets and Financial Liabilities

In December 2011, the IASB issued amendments to IAS 32, Financial Instruments: Presentation (“IAS 32”) and IFRS 7, Financial Instruments: Disclosures (“IFRS 7”). The amendments are effective for periods beginning on or after January 1, 2013 for IFRS 7 and January 1, 2014 for IAS 32 and are to be applied retrospectively. These amendments clarify matters regarding offsetting financial assets and financial liabilities as well as related disclosure requirements.

(b)

Accounting for Kintyre

In August 2008, Cameco acquired a 70% interest in the Kintyre exploration project in Australia. The Company previously consolidated its investment in Kintyre on the basis that it was able to exercise control over the asset. In the second quarter of 2012, the Company reconsidered the accounting treatment applied to Kintyre and concluded that consolidation of the investment was not appropriate and only Cameco’s interest in the assets and liabilities of Kintyre should be recognized. Accordingly, the non-controlling interest in the assets, liabilities and expenses has been removed from the financial statements. The change in accounting has been applied retrospectively and the comparative statements for 2011 have been recast. There was no impact on retained earnings or net earnings attributable to equity holders for any of the recast periods. The most significant changes relate to a reduction of property, plant and equipment of $182,615,000 and a reduction of the non-controlling interest on the balance sheet of $182,395,000.

4.	Inventories


	Jun 30/12		Dec 31/11
Uranium
Concentrate	$	413,241	$	361,481
Broken ore		16,113		14,310

		429,354		375,791

Fuel Services		147,897		118,084

Total	$	577,251	$	493,875

5.	Long-Term Receivables, Investments and Other


	Jun 30/12			Dec 31/11
BPLP
Capital lease receivable from Bruce A Limited Partnership (“BALP”) ^(a)	$	84,688		$	87,785
Derivatives [note 13]		46,045			54,010
Available-for-sale securities
GoviEx Uranium (privately held)		21,100			21,057
Derivatives [note 13]		14,032			17,392
Advances receivable from Inkai JV LLP [note 16]		98,064			78,058
Investment tax credits		63,440			54,038
Other		56,106			33,911

		383,475			346,251
Less current portion		(75,101	)		(62,433	)

Net	$	308,374		$	283,818

^(a)	BPLP leases the Bruce A nuclear generating plants and other property, plant and equipment to BALP under a sublease agreement. Future minimum base rent sublease payments under the capital lease receivable are imputed using a 7.5% discount rate.

6.	Other Liabilities


	Jun 30/12			Dec 31/11
Deferred sales	$	10,318		$	13,739
Derivatives [note 13]		22,241			28,499
Accrued pension and post-retirement benefit liability		29,493			38,050
BPLP
Accrued pension and post-retirement benefit liability		474,317			468,363
Derivatives [note 13]		19,247			19,439
Ontario Power Generation (“OPG”) loan		3,476			4,045
Other		5,043			6,624

		564,135			578,759
Less current portion		(40,279	)		(50,495	)

Total	$	523,856		$	528,264

7.	Share Capital

(a)

At June 30, 2012, there were 395,313,278 common shares outstanding.

(b)

Options in respect of 9,896,605 shares are outstanding under the stock option plan and are exercisable up to 2019. For the quarter ended June 30, 2012, 60,880 options were exercised resulting in the issuance of shares (2011 –11,488). For the six months ended June 30, 2012, 567,855 options were exercised resulting in the issuance of shares (2011 – 360,040).

8.	Finance Costs


	Three Months Ended					Six Months Ended
	Jun 30/12			Jun 30/11		Jun 30/12			Jun 30/11
Interest on long-term debt	$	13,443		$	14,171	$	26,835		$	28,143
Unwinding of discount on provisions		3,413			3,447		6,776			6,738
Other charges		1,652			981		4,043			2,141
Foreign exchange losses (gains)		(5,182	)		576		(2,746	)		1,317
Interest on short-term debt		425			529		1,111			1,223
Capitalized interest		(1,001	)		—		(1,001	)		—

Total	$	12,750		$	19,704	$	35,018		$	39,562

9.	Income Taxes


	Three Months Ended						Six Months Ended
	Jun 30/12			Jun 30/11			Jun 30/12			Jun 30/11
Earnings (loss) before income taxes
Canada	$	(84,999	)	$	(54,606	)	$	(164,344	)	$	(74,619	)
Foreign		64,046			108,385			267,370			223,690

	$	(20,953	)	$	53,779		$	103,026		$	149,071

Current income taxes (recovery)
Canada	$	(880	)	$	6,266		$	534		$	(425	)
Foreign		3,331			5,556			14,224			17,136

	$	2,451		$	11,822		$	14,758		$	16,711
Deferred income taxes (recovery)
Canada	$	(27,023	)	$	(20,273	)	$	(45,408	)	$	(16,756	)
Foreign		(3,669	)		7,578			(5,159	)		2,979

	$	(30,692	)	$	(12,695	)	$	(50,567	)	$	(13,777	)

Income tax expense (recovery)	$	(28,241	)	$	(873	)	$	(35,809	)	$	2,934

In 2008, as part of the ongoing annual audits of Cameco’s Canadian tax returns, Canada Revenue Agency (“CRA”) disputed the transfer pricing methodology used by Cameco and its wholly owned Swiss subsidiary, Cameco Europe Ltd. (“CEL”), 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, 2004, 2005 and 2006, which have increased Cameco’s income for Canadian income tax purposes by approximately $43,000,000, $108,000,000, $197,000,000 and $243,000,000 respectively. No reassessment received to date has resulted in more than a nominal amount of cash taxes becoming payable due to the availability of elective deductions and tax loss carrybacks. Cameco believes it is likely that CRA will reassess Cameco’s tax returns for subsequent years on a similar basis.

CRA’s Transfer Pricing Review Committee has not imposed a transfer pricing penalty for any year reassessed to date.

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. 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 $58,000,000. No provisions for penalties or interest have been recorded. Cameco does not expect more than a nominal amount of cash taxes to be payable due to the availability of elective deductions and tax loss carryovers. 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 over the period. However, an unfavourable outcome for the years 2003 to 2011 could be material to Cameco’s financial position, results of operations or 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 the Income Tax Act.

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 three months ended June 30, 2012


	Before tax			Income tax recovery (expense)			Net of tax
Exchange differences on translation of foreign operations	$	15,718		$	—		$	15,718
Losses on derivatives designated as cash flow hedges		(1,833	)		458			(1,375	)
Gains on derivatives designated as cash flow hedges transferred to net earnings		(8,397	)		2,099			(6,298	)
Unrealized gains on available-for-sale assets		213			(28	)		185
Losses on available-for-sale assets transferred to net earnings		9			(1	)		8

	$	5,710		$	2,528		$	8,238

For the three months ended June 30, 2011


	Before tax			Income tax recovery (expense)			Net of tax
Exchange differences on translation of foreign operations	$	6,997		$	—		$	6,997
Gains on derivatives designated as cash flow hedges		2,023			(512	)		1,511
Gains on derivatives designated as cash flow hedges transferred to net earnings		(6,977	)		1,875			(5,102	)
Unrealized gains on available-for-sale assets		253			(36	)		217
Gains on available-for-sale assets transferred to net earnings		(6	)		1			(5	)

	$	2,290		$	1,328		$	3,618

For the six months ended June 30, 2012


	Before tax			Income tax recovery (expense)			Net of tax
Exchange differences on translation of foreign operations	$	(3,106	)	$	—		$	(3,106	)
Gains on derivatives designated as cash flow hedges		7,584			(1,896	)		5,688
Gains on derivatives designated as cash flow hedges transferred to net earnings		(15,777	)		3,944			(11,833	)
Unrealized losses on available-for-sale assets		(105	)		15			(90	)
Gains on available-for-sale assets transferred to net earnings		(45	)		6			(39	)

	$	(11,449	)	$	2,069		$	(9,380	)

For the six months ended June 30, 2011


	Before tax			Income tax recovery (expense)			Net of tax
Exchange differences on translation of foreign operations	$	(14,382	)	$	—		$	(14,382	)
Gains on derivatives designated as cash flow hedges		4,273			(1,151	)		3,122
Gains on derivatives designated as cash flow hedges transferred to net earnings		(15,341	)		4,109			(11,232	)
Unrealized gains on available-for-sale assets		791			(107	)		684
Gains on available-for-sale assets transferred to net earnings		(2,120	)		280			(1,840	)

	$	(26,779	)	$	3,131		$	(23,648	)

10.

Statements of Cash Flows

Other Operating Items


	Three Months Ended						Six Months Ended
	Jun 30/12			Jun 30/11			Jun 30/12			Jun 30/11
Changes in non-cash working capital:
Accounts receivable	$	(34,449	)	$	(18,978	)	$	295,102		$	229,650
Inventories		(66,050	)		(57,381	)		(63,038	)		(116,579	)
Supplies and prepaid expenses		(23,014	)		(9,317	)		(16,195	)		(4,040	)
Accounts payable and accrued liabilities		(23,961	)		(15,681	)		(70,470	)		(39,865	)
Other		(13,151	)		(5,834	)		(34,712	)		(24,780	)

Total	$	(160,625	)	$	(107,191	)	$	110,687		$	44,386

11.

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 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.

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 27,054,674 shares have been issued.

(b)

Executive Performance Share Unit (“PSU”)

The Company has established a PSU plan whereby it provides each plan participant an annual grant of PSUs in an amount determined by the board. Each PSU represents one phantom common share that entitles the participant to a payment of one Cameco common share purchased on the open market, or cash 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.

(c)

Executive Restricted Share Unit (“RSU”)

In 2011, the Company established an RSU plan whereby it provides each plan participant a grant of RSUs in an amount determined by the board. Each RSU represents one phantom common share that entitles the participant to a payment of one Cameco common share purchased on the open market, or cash at the board’s discretion. The final value of the RSUs will be based on the value of Cameco common shares at the end of the three year vesting period.

Cameco records compensation expense with an offsetting credit to contributed surplus to reflect the estimated fair value of the equity-settled share-based compensation plans granted to employees.


	Three Months Ended				Six Months Ended
	Jun 30/12		Jun 30/11		Jun 30/12		Jun 30/11
Stock option plan	$	6,072	$	2,375	$	9,056	$	9,620
Performance share unit		1,486		850		573		1,700
Restricted share unit		148		—		297		—

Total	$	7,706	$	3,225	$	9,926	$	11,320

The fair value of the units granted through the PSU plan was determined based on Monte Carlo simulation. The fair value of all other share-based payment plans 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 at grant date were as follows:


	Stock Option
	Plan			PSUs
Number of options granted		2,097,573			178,640
Average strike price	$	21.14			—
Expected dividend	$	0.40		$	0.40
Expected volatility		47	%		36	%
Risk-free interest rate		1.4	%		1.4	%
Expected life of option		4.3 years			3 years
Expected forfeitures		10	%		0	%
Weighted average grant date fair values	$	7.21		$	20.05

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.

12.

Commitments and Contingencies

(a)

On May 16, 2012, Cameco, Cameco Bruce Holdings II Inc., BPC Generation Infrastructure Trust (“BPC”) and TransCanada Pipelines Limited (“TransCanada”) (collectively, the “Consortium”) received an arbitration award in their favour against British Energy Limited and British Energy International Holdings Limited (collectively, “BE”) ruling in favour of the Consortium on the issues of repair costs and lost revenue for breach of a representation and warranty contained in the February 14, 2003 Amended and Restated Master Purchase Agreement under which the Consortium acquired BE’s interest in BPLP. The Consortium and BE are in discussions over the quantification of the damages under the arbitrators award. If these issues are not resolved, they will be referred back to the arbitrator for a final decision. The Company recorded an estimate of the expected net proceeds.

In connection with this arbitration, BE issued on February 10, 2006, and then served on OPG and BPLP a Statement of Claim. This Statement of Claim seeks damages for any amounts that BE is found liable to pay to the Consortium in connection with the Unit 8 steam generator arbitration described above, damages in the amount of $500,000,000, costs and pre and post judgment interest amongst other things. Further proceedings in this action are on hold pending final disposition of the arbitration award.

(b)

Annual supplemental rents of $30,000,000 (subject to CPI) per operating reactor are payable by BPLP to OPG. Should the hourly annual average price of electricity in Ontario fall below $30 per megawatt hour for any calendar year, the supplemental rent reduces to $12,000,000 per operating reactor. In accordance with the Sublease Agreement, BALP will participate in its share of any adjustments to the supplemental rent.

(c)

Cameco, TransCanada and BPC have assumed the obligations to provide financial guarantees on behalf of BPLP. Cameco has provided the following financial assurances, with varying terms that range from 2012 to 2018:

Guarantees to customers under power sales agreements of up to $19,000,000. At June 30, 2012, Cameco’s actual exposure under these agreements was $6,500,000.

ii)

Termination payments to OPG pursuant to the lease agreement of $58,300,000. The fair value of these guarantees is nominal.

(d)

Under a supply contract with the Ontario Power Authority (“OPA”), BPLP is entitled to receive payments from the OPA during periods when the market price for electricity in Ontario is lower than the floor price defined under the agreement during a calendar year. On July 6, 2009, BPLP and the OPA amended the supply contract such that beginning in 2009, the annual payments received will not be subject to repayment in future years. Previously, the payments received under the agreement were subject to repayment during the entire term of the contract, dependent on the spot price in future periods. BPLP’s entitlement to receive these payments remains in effect until December 31, 2019 but the generation that is subject to these payments starts to decrease in 2016, reflecting the original estimated lives for the Bruce B units. During 2012, BPLP recorded $409,400,000 under this agreement which was recognized as revenue with Cameco’s share being $129,400,000.

13.

Derivatives

The following tables summarize the fair value of derivatives and classification on the statements of financial position:

As at June 30, 2012


	Cameco			BPLP			Total
Non-hedge derivatives:
Embedded derivatives—sales contracts	$	74		$	7,443		$	7,517
Foreign currency contracts		(13,811	)		—			(13,811	)
Interest rate contracts		5,528			—			5,528
Cash flow hedges:
Energy and sales contracts		—			19,355			19,355

Net	$	(8,209	)	$	26,798		$	18,589

Classification:
Current portion of long-term receivables, investments and other [note 5]	$	7,110		$	37,166		$	44,276
Long-term receivables, investments and other [note 5]		6,922			8,879			15,801
Current portion of other liabilities [note 6]		(18,826	)		(17,097	)		(35,923	)
Other liabilities [note 6]		(3,415	)		(2,150	)		(5,565	)

Net	$	(8,209	)	$	26,798		$	18,589

As at December 31, 2011


	Cameco			BPLP			Total
Non-hedge derivatives:
Embedded derivatives—sales contracts	$	(639	)	$	8,033		$	7,394
Foreign currency contracts		(17,633	)		—			(17,633	)
Interest rate contracts		7,165			—			7,165
Cash flow hedges:
Energy and sales contracts		—			26,538			26,538

Net	$	(11,107	)	$	34,571		$	23,464

Classification:
Current portion of long-term receivables, investments and other [note 5]	$	8,922		$	42,088		$	51,010
Long-term receivables, investments and other [note 5]		8,470			11,922			20,392
Current portion of other liabilities [note 6]		(26,555	)		(16,913	)		(43,468	)
Other liabilities [note 6]		(1,944	)		(2,526	)		(4,470	)

Net	$	(11,107	)	$	34,571		$	23,464

The following tables summarize different components of the gains (losses) on derivatives:

For the three months ended June 30, 2012


	Cameco			BPLP			Total
Non-hedge derivatives:
Embedded derivatives—sales contracts	$	(205	)	$	(492	)	$	(697	)
Foreign currency contracts		(22,454	)		—			(22,454	)
Interest rate contracts		1,272			—			1,272
Cash flow hedges:
Energy and sales contracts		—			(1,001	)		(1,001	)

Net	$	(21,387	)	$	(1,493	)	$	(22,880	)

For the three months ended June 30, 2011


	Cameco			BPLP			Total
Non-hedge derivatives:
Embedded derivatives—sales contracts	$	(101	)	$	464		$	363
Foreign currency contracts		10,223			—			10,223
Interest rate contracts		2,642			—			2,642
Cash flow hedges:
Energy and sales contracts		—			(1,369	)		(1,369	)

Net	$	12,764		$	(905	)	$	11,859

For the six months ended June 30, 2012


	Cameco			BPLP			Total
Non-hedge derivatives:
Embedded derivatives—sales contracts	$	125		$	1,593		$	1,718
Foreign currency contracts		1,433			—			1,433
Interest rate contracts		(403	)		—			(403	)
Cash flow hedges:
Energy and sales contracts		—			(1,174	)		(1,174	)

Net	$	1,155		$	419		$	1,574

For the six months ended June 30, 2011


	Cameco		BPLP			Total
Non-hedge derivatives:
Embedded derivatives—sales contracts	$	1,372	$	138		$	1,510
Foreign currency contracts		33,660		—			33,660
Interest rate contracts		1,873		—			1,873
Cash flow hedges:
Energy and sales contracts		—		(1,455	)		(1,455	)

Net	$	36,905	$	(1,317	)	$	35,588

Over the next 12 months, based on current exchange rates, Cameco expects an estimated $15,110,000 of pre-tax gains from BPLP’s various energy and sales related cash flow hedges to be reclassified through other comprehensive income to net earnings. The maximum length of time BPLP is hedging its exposure to the variability in future cash flows related to electricity prices on future transactions is six years.

14.

Earnings Per Share

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 2012 was 395,121,999 (2011 – 394,607,145).


	Three Months Ended				Six Months Ended
	Jun 30/12		Jun 30/11		Jun 30/12		Jun 30/11
Basic earnings per share computation
Net earnings attributable to equity holders	$	7,877	$	54,652	$	139,615	$	146,137
Weighted average common shares outstanding		395,277		394,706		395,122		394,607

Basic earnings per common share	$	0.02	$	0.14	$	0.35	$	0.37

Diluted earnings per share computation
Net earnings attributable to equity holders	$	7,877	$	54,652	$	139,615	$	146,137
Weighted average common shares outstanding		395,277		394,706		395,122		394,607
Dilutive effect of stock options		94		667		568		1,335

Weighted average common shares outstanding, assuming dilution		395,371		395,373		395,690		395,942

Diluted earnings per common share	$	0.02	$	0.14	$	0.35	$	0.37

15.

Segmented Information

Cameco has three reportable segments: uranium, fuel services and electricity. 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 electricity segment involves the generation and sale of electricity.

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 most recent annual consolidated financial statements. 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 and are eliminated on consolidation.

(a) Business Segments

For the three months ended June 30, 2012


	Uranium			Fuel Services		Electricity		Other			Total
Revenue	$	205,503		$	66,207	$	119,132	$	582		$	391,424

Expenses
Cost of products and services sold		130,673			51,169		44,273		78			226,193
Depreciation and amortization		32,373			5,870		19,748		3,844			61,835

Cost of sales		163,046			57,039		64,021		3,922			288,028

Gross profit (loss)		42,457			9,168		55,111		(3,340	)		103,396

Exploration		17,888			—		—		—			17,888
Loss on sale of assets		913			—		—		—			913
Share of loss from equity-accounted investees		1,253			706		—		—			1,959
Other expense		36,507			—		—		—			36,507
Non-segmented expenses												67,082

Earnings (loss) before income taxes		(14,104	)		8,462		55,111		(3,340	)		(20,953	)
Income tax recovery												(28,241	)

Net earnings											$	7,288

For the three months ended June 30, 2011


	Uranium			Fuel Services		Electricity		Other			Total
Revenue	$	256,261		$	69,606	$	99,224	$	614		$	425,705

Expenses
Cost of products and services sold		148,139			51,094		68,752		74			268,059
Depreciation and amortization		22,449			5,947		16,845		4,475			49,716

Cost of sales		170,588			57,041		85,597		4,549			317,775

Gross profit (loss)		85,673			12,565		13,627		(3,935	)		107,930
Exploration		14,647			—		—		—			14,647
Loss on sale of assets		719			—		—		—			719
Share of loss from equity-accounted investees		1,951			373		—		—			2,324
Other expense		133			—		—		—			133
Non-segmented expenses												36,328

Earnings (loss) before income taxes		68,223			12,192		13,627		(3,935	)		53,779
Income tax recovery												(873	)

Net earnings											$	54,652


For the six months ended June 30, 2012

				Fuel
	Uranium			Services		Electricity		Other			Total
Revenue	$	606,581		$	122,452	$	224,518	$	1,131		$	954,682

Expenses
Cost of products and services sold		358,818			92,237		101,338		146			552,539
Depreciation and amortization		63,816			10,108		38,948		7,958			120,830

Cost of sales		422,634			102,345		140,286		8,104			673,369

Gross profit (loss)		183,947			20,107		84,232		(6,973	)		281,313
Exploration		40,857			—		—		—			40,857
Gain on sale of assets		(2,149	)		—		—		—			(2,149	)
Share of loss from equity-accounted investees		1,277			1,494		—		—			2,771
Other expense		35,744			—		—		—			35,744
Non-segmented expenses												101,064

Earnings (loss) before income taxes		108,218			18,613		84,232		(6,973	)		103,026
Income tax recovery												(35,809	)

Net earnings											$	138,835

For the six months ended June 30, 2011


	Uranium			Fuel Services		Electricity		Other			Total
Revenue	$	553,569		$	118,855	$	206,632	$	7,750		$	886,806

Expenses
Cost of products and services sold		322,792			89,089		124,828		6,915			543,624
Depreciation and amortization		44,798			10,439		34,558		8,992			98,787

Cost of sales		367,590			99,528		159,386		15,907			642,411

Gross profit (loss)		185,979			19,327		47,246		(8,157	)		244,395

Exploration		30,486			—		—		—			30,486
Loss on sale of assets		695			—		—		—			695
Share of loss from equity-accounted investees		3,866			1,150		—		—			5,016
Other income		(1,439	)		—		—		—			(1,439	)
Non-segmented expenses												60,566

Earnings (loss) before income taxes		152,371			18,177		47,246		(8,157	)		149,071
Income tax expense												2,934

Net earnings											$	146,137

16.

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.

Certain key management personnel, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities. As noted below, one of these entities transacted with the Company in the reporting period. The terms and conditions of the transactions were on an arm’s length basis.

Cameco purchases a significant amount of goods and services for its Saskatchewan mining operations from northern Saskatchewan suppliers to support economic development in the region. One such supplier is Points Athabasca Contracting Ltd. and the president of the company became a member of the board of directors of Cameco during 2009. In 2012, Cameco paid Points Athabasca Contracting Ltd. $22,000,000 (2011—$32,900,000) for construction and contracting services. The transactions were conducted in the normal course of business and were accounted for at the exchange amount. Accounts payable include a balance of $1,560,000 (2011—$6,840,000).

Other Related Party Transactions


	Transaction Value						Transaction Value						Balance Outstanding
	Three Months Ended						Six Months Ended						As at
	Jun 30/12			Jun 30/11			Jun 30/12			Jun 30/11			Jun 30/12			Jun 30/11
Sale of goods and services
Jointly Controlled Entities
BPLP ^(a)	$	22,057		$	6,726		$	38,853		$	22,217		$	29,376		$	7,806

Other
Jointly Controlled Entities
Interest income (Inkai)		562			567			1,071			1,203			98,064			97,136
Associates
Interest expense		(274	)		(509	)		(671	)		(1,035	)		(58,647	)		(76,790	)

(a)

Disclosures in respect of transactions with jointly controlled entities represent the amount of such transactions which do not eliminate on proportionate consolidation.

Cameco has entered into fuel supply agreements with BPLP for the procurement of fabricated fuel. Under these agreements, Cameco will supply uranium, conversion services and fabrication services. Contract terms are at market rates and on normal trade terms.

Through an unsecured shareholder loan, Cameco has agreed to fund the development of the Inkai project. The limit of the advances of the loan facility is currently $263,150,000 (US) and bear interest at a rate of LIBOR plus 2%. At June 30, 2012, $240,600,000 (US) of principal and interest was outstanding (December 31, 2011—$191,900,000 (US)). At June 30, 2012 the remaining funds available for advance under the facility was $23,000,000 (US) (December 31, 2011—$14,200,000 (US)).

In 2008, a promissory note in the amount of $73,344,000 (US) was issued to finance the acquisition of GE-Hitachi Global Laser Enrichment LLC (GLE). The promissory note is payable on demand and bears interest at market rates. At June 30, 2012, $57,500,000,000 (US) of principal and interest was outstanding (December 31, 2011—$72,200,000 (US)).

17.

NUKEM Energy GmbH (“NUKEM”)

On May 14, 2012, Cameco entered into an agreement with Advent International (“Advent”) to purchase NUKEM, one of the world’s leading traders and brokers of nuclear fuel products and services, for cash proceeds of $136,000,000 (US) and the assumption of their debt. The agreement provides that Cameco will receive the benefits of owning NUKEM as of January 1, 2012. It also includes provisions that would provide Advent with a share of NUKEM’s future earnings under certain conditions until the end of 2014. The agreement is subject to regulatory approvals and is expected to close in the third quarter of 2012.

18.

Millennium Project Agreement

On June 11, 2012, Cameco acquired a 27.94% interest in the Millennium project from AREVA Resources Canada Inc. (“AREVA”) for $150,000,000, increasing its ownership to 69.9%. The remaining 30.1% is owned by JCU (Canada) Exploration Co. The Millennium project is a proposed uranium mine located in the Athabasca Basin of northern Saskatchewan consisting of 590 hectares of land. Exploration on the Millennium project area has identified indicated resources of 50,900,000 pounds of U₃O₈ and inferred resources of 16,700,000 pounds of U₃O₈. The terms of the purchase agreement provides AREVA with a 4% royalty on revenue from 27.94% of any production that exceeds 63,000,000 pounds U₃O₈ from this project.

19.

Comparative Figures

Certain prior period balances have been reclassified to conform to the current financial statement presentation.