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Cameco Corporation (NYSE:CCJ)

Q3 2007 Earnings Call

October 31, 2007 1:00 pm ET

Executives

Bob Lillie - Director, Investor Relations

Gerry Grandey - President and CEO

Kim Goheen - Senior Vice President and CFO

Tim Gitzel - Senior Vice President and COO

Alice Wong – VP, IR

Analysts

Raymond Goldie - Salman Partners

Mark Caruso - Millennium Partners

Brian MacArthur - UBS Securities

Greg Barnes - TD Newcrest

John Redstone - Desjardins Securities

Gene Mueller - private investor

Ralph Sarr - Sarrco Investments

Steve Smith - private investor

Borden Putnam - Eastbourne Capital

Fadi Shadid - Friedman, Billings, Ramsey

Cliff Hale-Sanders - CIBC World Markets

Ian Howat - National Bank Financial

Orest Wowkodaw - Canaccord

Operator

Welcome to the Cameco Corporation third quarter results conference call. I would now like to turn the meeting over to Mr. Bob Lillie, Director, Investor Relations. Please go ahead, Mr. Lillie.

Bob Lillie

Thank you, operator, and good afternoon everyone. Welcome to Cameco’s third quarter conference call to discuss the financial results. Thanks for joining us.

With us today are three of Cameco’s senior executives. They are Gerry Grandey, President and CEO; Kim Goheen, Senior Vice President and CFO; and Tim Gitzel, Senior Vice President and Chief Operating Officer. George Assie, SVP, Marketing and Business Development is traveling and not able to be on the call today.

Also with us today is Alice Wong, Vice President of Investor, Corporate and Government Relations. Gerry will start things off with comments on the highlights of the quarterly financial results, provide an operational update and a few words on Cameco’s strategy and then we will get right to your questions.

Today’s conference call is open to all members of the investment community and the media. During the question-and-answer session we would ask that you ask one question only, followed by one follow-up question. If you have additional questions, please return to the queue until others have had a chance to ask theirs.

Please note that statements made during this call by the company regarding its objectives, projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations.

The company cautions that such statements involve risks and uncertainties and that actual results may differ from those expressed or implied. Important risk factors are outlined in the company’s annual information form dated March 30th, 2007.

With that I’ll turn the things over to Gerry.

Gerald Grandey

Thank you very much and let me add my welcome to everyone on the call. During my remarks today, I’m going to comment briefly on earnings, provide updates on activities at Port Hope and Cigar Lake, as well as how we are responding to both those issues and then comment our strategy and how it is unfolding.

Cameco had another good quarter. We continue to see increasing realized prices for uranium. In fact, we recorded the highest realized price in Cameco’s history even though the spot price of uranium actually fell during the quarter. These higher realized uranium prices generated an outstanding gross profit margin of 67% for uranium in the quarter and made a significant contribution to Cameco’s earnings and cash flow.

The earnings are particularly satisfying. Our adjusted quarterly net earnings after unusual items are more than five times higher than last year and our nine month earnings are more than double last year’s total, coming in at $539 million, another Cameco record.

These strong earnings are driven by our uranium business, anchored by a powerful portfolio of uranium contracts that will continue to deliver superb results year after year, even with market fluctuations. Let me summarize by saying we are in great financial shape and that we are returning value to our shareholders. Over the past couple of years, we have committed to consider buybacks as a way to return excess cash to shareholders if acquisition targets are too richly valued.

In early September, we announced an open market share repurchase program to buy back a maximum of 17.7 million shares and we have followed through. To the end of September, we have purchased almost 40% of this target.

Now to the Port Hope conversion facility. In the MD&A we indicated that we expect to restart production in the latter part of the first quarter of 2008. We have sufficient inventory on hand to meet delivery commitments through that time, assuming deliveries proceed as planned. U02 production is unaffected and continues at the site.

Since discovering contamination at the UF6 facility in July we have drilled numerous test wells to identify the key affected area. We’ve completed a root cause analysis to identity the cause. We’ve began corrective actions and we’ve developed plans for improved monitoring.

It’s important to note that there has been no effect on the safety or health of the employees or the public. We are already taking steps to contain and extract the very low levels of contamination. The staff at Port Hope have worked long hard hours to deal with this situation and keep the local community informed. We look forward to getting the plants running again in the coming months.

Now moving on to Cigar Lake. There too we’re making good progress. We’ve completed the holes necessary for dewatering and reinforced an adjacent tunnel. The concrete barrier plug in the tunnel where the inflow occurred last October is nearing completion. We are now working on sealing the top and bottom of the plug. Once that’s complete, we will finish foreign concrete behind the plug to still avoid and rock pile where the inflow occurred. We expect this to take about six more weeks.

Prior to the watering, there are three more activities to complete: First, we will confirm that the plug works as designed; then we’ll assess if additional measures are required in two other areas of the mine, and we’ll submit an application and receive regulatory approval to dewater the mine. I’d say we’re making good progress on each of these activities.

At the same time, we are carrying out other assessments to develop mine plans for future development and the completion of the second shaft. You will find more detail on these and subsequent steps in the MD&A.

Tomorrow, the Canadian Nuclear Safety Commission will be reviewing our application to renew and amend the Cigar Lake construction license that is scheduled to expire at the end of the year. We anticipate a decision from them in December, and we’ll provide an update on remediation progress at the time.

Production startup remains 2011 at the earliest. Until the mine has been dewatered and the condition of the underground development has been assessed and incorporated into new mine development and production plans we will not able to provide a firmer production startup date.

As a final note on this topic, there is no off-the-shelf manual to guide remediation at Cigar Lake. We know it’s challenging work. A precise process and timeline are difficult to predict. At the same time, I assure you that Cameco has the technical expertise and management systems to meet this challenge.

As I mentioned in our last conference call, the events of Cigar Lake and elsewhere led our management to renew its commitment to excellence and accountability throughout the organization. We continue to put in place the new management structure for all our operations led by Tim Gitzel, as I announced on the last conference call. That structure will provide the foundation for increased focus and accountability across our operations.

Further, I have challenged every Cameco employee to get back to basics in order to focus on our core business and achieve operational excellence. We have worked with our operating sites and divisions to identify key priorities and make sure all of our activities are in line with these priorities. We have deferred or eliminated tasks or projects that are not considered mission critical and asked each of our divisions to continue to evaluate all work with the same lens.

I have also followed up with direct communication to every employee as well as personal visits to the Saskatchewan sites. In the months to come, I will be getting to other sites as well with an aim to meet people, talk to them directly about what excellence and getting back to basics means for them. These visits have given me great confidence in our ability to meet our challenges because of the enthusiasm and dedication I saw in our people and the example of excellence at each site.

Our assets are world-class and our talent is top-notch. I know if we tighten our execution, we will remain a leader in our industry and that’s what our renewed internal focus is all about.

I would now like to discuss our strategy for growth. I will spend a few moments on this topic since we continue to get questions from investors. When I say strategy, those of you familiar with Cameco will know that we have over the many years consistently positioned Cameco for long-term growth. In our pursuit of value, our preference would have been to make a few large acquisitions. However, rocketing uranium prices and a rejuvenated nuclear industry sets valuations far beyond what we consider to be sustainable profitable levels.

So let me be clear. On my watch, we will not heed to public musing of short-term thinkers who want us to grab some headlines with a quick purchase. We will not pay inflated prices just to acquire a company with the word “uranium” in its name. Cameco acquisitions must promise a significant contribution to our bottom line.

While we monitor the industry for larger acquisitions, we have been steadily making strategic alliances and equity investments with uranium companies around the world. These announcements extend Cameco’s reach in Northern Canada, the United States, Australia, Paraguay, Russia, and Kazakhstan. These investments are likely to pay handsome rewards to investors after exploration and development.

We continue to work aggressively behind the scenes to evaluate other opportunities for growth in the nuclear industry. While we don’t issue a news release every time we think of making an acquisition, our uranium conversion and enrichment teams are actively networking around the world in pursuit of growth opportunities. Our network of relationships throughout the industry provides critical market intelligence on opportunities we might pursue, as well as those we would be wise to stay away from.

We are ready to strike when we see the right value, which strengthens Cameco over the long term. As I mentioned at the beginning of the call, we have the financial strength to strike quickly when the right deal comes along.

I thank you for your attention. We will now open the call to questions and either I or other members of the management team will respond.

Question-and-Answer Session

Operator

Our first question is from Raymond Goldie - Salman Partners.

Raymond Goldie - Salman Partners

My question relates to Uranium 1 which talked about their operations in Kazakhstan, because of the shortage of sulfuric acid. I’m not even sure whether your party uses sulfuric acid bur are you affected in any way by the situation?

Gerald Grandey

Ray, it is using sulfuric acid. We too are affected as we’ve said in MD&A. We haven’t been affected to-date through the end of the quarter, but if the acid shortage were to persist, then they would begin to affect us in quarter 4. Kazatomprom, which the government-owned enterprise sees the acid situation coming back into balance sometimes in the first half of the year maybe by March hopefully. In the interim, we and others that affected are looking for alternate supplies of acid and other jurisdictions. But, I think one of the impediments there is transportation. But, not affected yet, but will be if we don’t find alternative sources.

Raymond Goldie - Salman Partners

Well, thanks for your courtesy in taking a question to which the answer was in the MD&A.

Gerald Grandey

It’s a lot in MD&A, right?

Raymond Goldie - Salman Partners

Yes, there is a lot of earnings releases have come out within the last two to four weeks.

Gerald Grandey

Not a problem at all.

Raymond Goldie - Salman Partners

Thank you.

Operator

Your next question comes from Mark Caruso - Millennium Partners.

Mark Caruso - Millennium Partners

In terms of Cigar Lake, is there any potential impact on the review of the application that could push back the timing more as far as is there a chance so they could be little more stringent with the process and way that you’re going about remediation and so on?

Gerald Grandey

Mark, I think in this circumstance, the regulator is paying a lot of attention. That’s been true. Since the event we’re trying to, on a daily basis, work with them and make sure that questions that they have are answered into timely way. So, there is more scrutiny. You’d expect there to be more scrutiny, and we just try to work through it day-by-day.

Mark Caruso - Millennium Partners

As far as kind of expanding the business, was it just grow enrichment or is that something that you are interested in?

Gerald Grandey

We’ve said consistently over the years that we would like to get into enrichment. We look at the available opportunities that are out there and they are few and far between. But in pursuing enrichment as an objective, the guiding principle is that we want to do it, unless we see a way that it makes economic sense for Cameco and its shareholders.

Operator

Your next question comes from Greg Barnes - TD Newcrest.

Greg Barnes - TD Newcrest

You mentioned those two other areas of Cigar Lake that you’re investigating for potential weakness, I guess. Could you give us some idea what those areas are, and what it means?

Gerald Grandey

Greg, there are two other areas that are larger opening that were done in the underground excavation. They’ve got technical names, one of them was established for the installation eventually of the clarifier. The other one was for run-of-mine production and those areas because they are larger openings, when we depressure by dewatering the mine and there’s a pressure differential, we’re just trying to make sure that the support that was put in place and that the geological structure is properly understood before we do it. What we’re doing is just simply doing some geotechnical drilling into that, into the areas just to understand the relative strength, weakness, and reinforcement that’s already there.

Greg Barnes - TD Newcrest

Is there potential for concrete or to pump concrete into those areas as well?

Gerald Grandey

At this stage of the game, we don’t know. I’d say we don’t think so, that’s certainly would be the last thing we would do to reinforce. But at this stage of the game, I think we are optimistic that there are other ways of making sure that it remains okay.

Greg Barnes - TD Newcrest

On that big broader strategy discussion you had, where does Bruce Power fit now?

Gerald Grandey

Bruce Power remains a core holding for Cameco. I think that as we said from the beginning, it adds, from Cameco’s perspective, the ultimate in vertical integration where we take our own uranium and ultimately realize the value of nuclear electricity. It does by virtue of being the only independent nuclear operator in Canada, provide us growth opportunities not just at the Bruce site perhaps elsewhere in Canada where they are looking for additional nuclear as well, that being Ontario and perhaps Alberta.

Greg Barnes - TD Newcrest

Are you still looking at nuclear opportunities in the U.S. or have you backed away from that?

Gerald Grandey

We’ve backed away from it. I’d say we’re always looking, but in terms of active pursuit, recognizing that our cost to capital is a little bit higher than most utilities that are regulated. These things became very expensive. Again when we do something as we try to demonstrate the South Texas project, where we prevailed in the bit, but ultimately had the rights of first refusal will take it away from us and we will only do it in a way where it adds value we think to shareholders.

Operator

Your next question comes from Brian MacArthur - UBS Securities.

Brian MacArthur - UBS Securities

I want to go back to the updated chart here and just clarify exactly what you have done Cigar Lake contracts and I’m talking about the chart on page 21 that shows your realized price at a number of spot prices. I mean, if you look at it, the values are actually using a lower spot price now quarter-over-quarter but your values realized go up in 2010 and 2011. I assume that, because we’ve deferred the Cigar Lake contracts and just put in spot, is that right?

Gerald Grandey

Brian, let me first say there is a lot of information and assumptions behind these tables. So more than anything, I hope people are using and using them more as an indication of a trend that we see and not trying to hang your hat on the last dollar that is there.

It is simply intended to give people of pretty good glimpse of where the realized prices would be trending over time. The further out you go, the less certainly there is as with any forecast. One of things we’re considering is since it becomes so vague way out in the future, is there much utility for going beyond three to five years? But we’ll take a look at that in future quarters, but I wouldn’t get too hung up beyond all this, I think in terms of technical details on your specific question, Alice probably better than anybody can talk about what is the underlying assumption in ‘09,’10 or ‘11 vis-à-vis Cigar Lake.

Alice, can you respond to that?

Alice Wong

Brian, the change in ‘09 to ‘11 is the assumption – while the decision hasn’t been finalized yet -- it is the assumption that we will make some additional deferrals under our supply protection language in our contract.

Brian MacArthur - UBS Securities

Basically we are getting the same affect that you saw in this quarter where you are getting a much higher realized price because we are taking up material under a lower contract and it’s been pushed into 2018 or whatever it is you’re putting in the spot price now of $80 dollars instead of $120 versus last quarter; but the last quarter you basically had the old contract in it, is that correct?

Alice Wong

The last price table would not have assumed any additional deferrals.

Brian MacArthur - UBS Securities

I mean you’re very clearly laid out a lot of, as Gerry says, a lot of assumption on this table but I just want to be clear. You deferred Cigar thorough 2011 now in this table or 12?

Alice Wong

Brian it’s the impact of reduction in production and the largest impact was Cigar, but you do remember that Cigar Lake base load contract is already accounted for, if we think they’ve been impacted, that always has been in the price table. So the new assumption is that under the other contracts where we have right to renew or defer for account deliveries, where we pro rata can reduce some of that and that’s the change; that’s what we’re doing.

Cigar Lake base we’ve always had that into the last couple of tables I believe -- well I know that. The change really is this additional reduction in supply due to the rights that we have under the other contracts.

Operator

Your next question comes from John Redstone - Desjardins Securities.

John Redstone - Desjardins Securities

Yes, I’m sorry to belabor this point about the table with realized prices, so I’ll try to make this as painless as possible. The table shows if you realize a price average of a hundred bucks over the course of this year, your average realized price is around $39, and if you keep that going next year its $46 and change and yet you got $53 in the third quarter, could you give us a little bit more detail as why that was so high?

Gerald Grandey

John, just simply the timing of sales in the particular contracts and we had a certain amount of material of what we were able to sell at the height of the spot market in this quarter. Of course then the spot price came down through the quarter so it’s just simply the way the contract and sales and deliveries have fallen in quarter three.

John Redstone - Desjardins Securities

So can I assume that premium is not sustainable?

Gerald Grandey

Quarter-to-quarter, we’ve always had that you shouldn’t read too much in the results.

John Redstone - Desjardins Securities

The expansion of McArthur River, any news on that?

Gerald Grandey

Still finding and still in the regulatory approval. In past quarters have said that we need to demonstrate that the technology that we’ve developed for reducing the selenium in the effluent stream that technology is successful, and once we demonstrate that, we firmly that we will and that should be starting in early part of ’08. Then we should be able to begin making progress on the environmental permitting and licensing of the expansion. So I think we are still several years away.

Operator

Your next question comes from Borden Putnam - Eastbourne Capital.

Borden Putnam - Eastbourne Capital

Thanks first of all for the increased disclosure on the McArthur expansion plant site. You have done a bunch of work on that and talked about it in previous calls, and it’s good to see you talking about. I appreciate it because it’s kind of murky topic.

I want to go back to the question that Greg Barnes introduced about the two additional areas, and you said that one of them was the clarifier area and the others are run-of-mine storage bin. Looking at some diagrams I have compiled over the years of following this, that zone looks like it be about a 130 meters distance from the area of the rock fall horizontally and at least 15 meters vertically. That’s right at the bottom sort of a number one shaft and I would have thought that was pretty high integrity ground. Is there a falling affect from the loss of the freezing circulation that’s affecting the integrity of that ground?

Gerald Grandey

No, that ground has never been frozen. The freezing that’s been done has been going on in ore body itself.

Borden Putnam - Eastbourne Capital

So why would this ground –

Gerald Grandey

We wanted to make sure that what we are doing is successful here so we’re looking at every eventuality.

Borden Putnam - Eastbourne Capital

No, it’s interesting. I wouldn’t have expected that to have a loss of integrity in that area.

Gerald Grandey

It hasn’t had a loss of integrity; we just want to make sure it doesn’t.

Borden Putnam - Eastbourne Capital

You mentioned in your start that you were going to test the plug before you begin dewatering, how will you do that?

Gerald Grandey

Lower the water level in shaft 1 and begin to watch its rebound.

Borden Putnam - Eastbourne Capital

So that’s not included in the big one?

Gerald Grandey

The other way to do it is to pressure up a little bit on the upstream side of the plug where the fall is because we have got the hole drilled in there and then see what effect from a pressure perspective occurs on the other side.

Borden Putnam - Eastbourne Capital

At the Key Lake there was an issue about the treatment of concrete from backfilled that was getting through the mill. Tim and I talked about that last call, has that issue been resolved or is your progress along that improving?

Gerald Grandey

No, I think that issue is pretty well resolved, we put in a hydrogen peroxide circuit and that seems to be working quite well. Tim I don’t know if you have anything you want to add to it.

Tim Gitzel

You’re right, we pretty well got that cleared up.

Operator

Your next question comes from Gene Mueller - private investor.

Gene Mueller - private investor

My question is about the hexafluoride plant in Ontario, the shut down there is now in its fourth month I believe and it sounds like you are looking at another four. What are you expecting it will cost to fix that problem and are there any circumstances that might take the reopening of that plant beyond the first quarter as you say?

Gerald Grandey

The first quarter is our best estimate from what we know right now. We are now on the road to getting the remediation in place working with a regulator, which is a requirement, it will require regulatory approval before we restart.

In order to understand the extent of the contamination under the building we ended up removing a fair bit of piping and we are looking now at what needs to be done to make sure this situation doesn’t persist.

So best guess of putting all of this back together and getting started on the prevention is by the end of the first quarter of 2008, that’s our best estimate right now.

Gene Mueller - private investor

Is it a big price?

Gerald Grandey

Not so big.

Gene Mueller - private investor

In view of the age of the plant and the expected strong demand internationally for enrichment material, what are your long-term plans for that plant?

Gerald Grandey

Long-term plans are to get it back up and running. We have got something called Vision 2010 that we have been pursuing both describing it locally involving the citizens into a very, very large refurbishment of that plant that would see it upgraded, see it get ready for production for many decades to come.

So we’re committed to remaining in the Port Hope area. We’re committed to getting this plant back up and running. The implementation of 2010 does require regulatory approval, but we hope to begin doing the refurbishment in that timeframe. It will take a few years obviously, but that’s the objective we have.

Operator

Your next question comes from Ralph Sarr - Sarrco Investments.

Ralph Sarr - Sarrco Investments

Good afternoon and thanks for taking my question. It revolves around UEX, which has talked about some significant percentage of uranium find. What is the relationship of Cameco and UEX, and might that be a very good possibility for an acquisition?

Gerald Grandey

Cameco was one of the founding shareholders of UEX. We, my recollection is, have about 20% or 21% ownership in UEX. Yes, they’ve had some very interesting drill results in the western part of the Athabascan Basin, a lot of drilling ahead. While we look at everything we don’t make specific comments on acquisition targets.

Operator

Your next question comes from Steve Smith - private investor.

Steve Smith - private investor

My question is regarding the strategy for growth long-term and more specific to the labor market, as it is the lowest that it’s been in three decades, Saskatchewan is below 4%. And you have referred to your top-notch talent, I am just curious to how you are planning on sourcing that out in future?

Gerald Grandey

It is a challenge for anybody in the mining industry and certainly anybody in the nuclear industry these days. We’re affected like others in terms of the hot market and booming economy. I would say given the vision and the mission we have in Cameco and the asset quality that we have been able and we have been successful in attracting the kind of talent that we need to operate the facilities that we have.

We talk a little bit about it in the terms of trying to achieve a higher level of operational excellence. It does mean more experts and more geologists and more people to look after some of the technical details. Over the last six or seven months, even with the tight labor market, we’ve been remarkably successful in attracting people to come help us do what we do and ultimately that’s to produce uranium to generate clean energy.

So we have another advantage in that we have got 26 or so communities that are in the area of our northern operations where we fly in, fly out people and we have very, very strong relationships with those communities and their inhabitants and of course, it’s seven days on, seven days off.

So there again it’s like growing talent in your backyard, making sure that the benefits that are coming out of business are flowing back into these communities, and if the communities remains supportive. So, it’s not without a struggle, but so far we seemed to be managing throughout.

Steve Smith - private investor

Do you see a push of importing workers from abroad or increasing your foreign talent pool?

Gerald Grandey

We really haven’t seen a need to go down that track. We obviously had been attracting people from abroad over the years. We’ve had a number of nationalities that are working for us. But, we’re not targeting any particular country resource, even though other resource industries might be. We seem to see enough success just drawing on the available talent pool by advertising locally and through North America, when we need to.

Operator

Your next question comes from Cliff Hale-Sanders - CIBC World Markets.

Cliff Hale-Sanders - CIBC World Markets

On Rabbit Lake where you outlined a radon gas problem you’ve encountered over the past while which has resulted in loss production for ‘07. I just wondering if we should be concerned about your production forecast going out, if you’re going to have to essentially go slow on production there just to moderate exposure levels for the employees there?

Tim Gitzel

We’re into that O2 Next area, which is a little deeper, little farther down, and we’ve got water units near the source of the gas. We’re taking steps we need to deal with that which has caused us to reduce a bit our production for 2007 as you see in some of our projections going forward. It won’t be easy down there. It’s a little bit further, little bit deeper. But I think we’re taking the measures we need to make the production levels that we’ve set out in our quarterly report.

Cliff Hale-Sanders - CIBC World Markets

‘08 and beyond, we should still be comfortable going forward with those?

Tim Gitzel

Yes.

Cliff Hale-Sanders - CIBC World Markets

My second question really relates to your various foreign exchange hedging contracts that you have out there. Unfortunately, I don’t have access to some of the technology I would like. Just wondering if you could dumb it down a little bit in the sense of what should we expected to be bringing into your earnings profile over the next couple of years, both from your uranium business and the Bruce Power contract? In effect, what sort of impact should we really be looking for? Obviously, it’s going to move around quite a bit, but a little bit of guidance just to clean it up would be nice.

Gerald Grandey

Yes, we can talk about philosophy. We don’t forecast earnings, but I’ll let Kim address that.

Kim Goheen

Sure. On page 14 and 15 of the MD&A, we show you at the top on page 15, we show you a little table there that as of September 30, how those numbers would flow into earnings That the gain. Page 14 really shows you the balance by year.

Cliff Hale-Sanders - CIBC World Markets

Could you just address what was in the Q3 numbers for me?

Kim Goheen

Well, the Q3 numbers we had year-to-date was $49 million of gains from the derivative contracts themselves, made up of some hedges that were taking out of accounting, accounting qualified hedges, and then some other currency in hedges we hadn’t placed that did not qualify for hedge accounting. The two pieces together, year-to-date about $49 million.

Operator

Your next question comes from Ian Howat - National Bank Financial.

Ian Howat - National Bank Financial

Yes, good afternoon, just in regard to Bruce Power, can you give us some guidance on what the contract price was for power? What it would be going forward next year, and what percentage or how much is actually under contract for 2008?

Gerald Grandey

Ian I don’t have those statistics, may be Kim does, or we might have to deal with that offline, but Kim do you have all it?

Kim Goheen

Ian, realized price here to date is about $52 per megawatt hour and we don’t forecast 2008 material at this stage in time. Through the fourth quarter we will come out with some more information. So far year-to-date we have had roughly a little over one-third of that portfolio has been under contract.

Ian Howat - National Bank Financial

What’s your plan going forward with your percentage of amount being contacted?

Kim Goheen

Same avenue, we look at the opportunities as they come forward but again, we really don’t forecast forward any specific numbers.

Ian Howat - National Bank Financial

And so Bruce Power doesn’t have a set target amount for how much it wants under contract or spot?

Gerald Grandey

Well, there is a philosophy Ian of having a balance, when I say balance its not 50-50, you see it this year at about 30; Kim I don’t know what the discussions have been going forward?

Kim Goheen

Really Ian it’s not something that we disclose in any great depth, we have partners in that business, as Gerry said, we do look for a balance of contracted amounts and spot exposure.

Ian Howat - National Bank Financial

Just in the last quarter obviously, if only a third was contracted the spot price was $47 and you did $53, may be should have more under contract?

Kim Goheen

Well that’s always the debate. If you look at, it was about 50%, if you look at this year I said it will be about 36%, it really does depend on the opportunities that are available.

Operator

Your next question comes from Fadi Shadid - Friedman, Billings, Ramsey.

Fadi Shadid - Friedman, Billings, Ramsey

Your forecast rebounds back to the original 3 million pounds or so in ‘09, does that assume that these shortages go away and we are back to normal?

Gerald Grandey

Fadi, it does. All of the conversations going on to date is the asset supply should become available once again by first or second quarter of next year.

Fadi Shadid - Friedman, Billings, Ramsey

And it’s primarily the fire and that the delay at these new asset facilities, I mean is that why this deferred?

Gerald Grandey

Yes, deferred choice, that’s correct. Yes.

Fadi Shadid - Friedman, Billings, Ramsey

Longer term no reason at this point to think there is not enough sulphuric acid to go around?

Gerald Grandey

No. Longer term there is plenty of sulfur in Kazakhstan and surrounding countries and making sulfuric acid is relatively simple.

Operator

Your next question comes from Greg Barnes - TD Newcrest.

Greg Barnes - TD Newcrest

Levels of freezing at Cigar Lake now that it has effectively been offline for a year, is the freezing disappearing I guess or what is the situation on that?

Tim Gitzel

Well, the freezing obviously will start to dissipate over time and we are anticipating that we will have to go back in and re-establish the freezing and refreeze so, I don’t have the exact time line is to how long it takes for it to dissipate, it’s over years. So we’ve got some time to, we’ll have to go back and freeze these areas and probably freeze more areas than we had anticipated.

Greg Barnes - TD Newcrest

Where was the freezing prior to the flood or how much has been done?

Gerald Grandey

Well the freezing was up in the north and right around the ore body, that’s where we had started the freezing getting prepared. So that’s where we will go back. I think we are relooking at all of the freezing. I think I said in the last quarter or the quarter before as to how much freezing we will do going forward and whether we will freeze more, because it not only stops the water, but provides on ground support, so we are relooking at that.

Greg Barnes - TD Newcrest

I assume that’s all built into the 2011 as the earliest restart date.

Gerald Grandey

Yes.

Tim Gitzel

That’s part of them.

Gerald Grandey

With all the caveats, we’ve got to get the mine dewatered and look at it all including how much of that existing freezing remains. I will say that in the test mining phase, when we froze ground to do the test mining, and then stopped freezing, it remained frozen for quite a long period of time, it measured in years not just one year.

Operator

Your next question comes from Murray Lyons - Saskatoon Star Phoenix.

Murray Lyons - Saskatoon Star Phoenix

Yes gentlemen. Because of the timing of your third quarter results, you follow the financial update from Ottawa. What do you think the eventual corporate tax rate that was proposed yesterday would do to your operations in the future and investment decision say versus investing in Australia or the U.S.?

Gerald Grandey

Tim, can you respond to that the day after was done?

Tim Gitzel

Murray, we are looking at the impact of those rate reductions. We don’t at this point believe it will be as a large one-time impact as we have shown in prior years. As to the decision whether develop here or elsewhere, certainly all such decisions are welcomed and will impact decisions that we make in the economic analysis is done. But too early to describe it is making a seachange in any way.

Murray Lyons - Saskatoon Star Phoenix

Okay. Bob, I was just wondering whether 15% would put Canada on a basis that would be competitive with the other jurisdictions that you’re already operate in.

Tim Gitzel

It’s one factor to consider only, Murray, there are so many others that come into such a decision.

Operator

Your next question comes from Borden Putnam - Eastbourne Capital.

Borden Putnam - Eastbourne Capital

Gerry, on the Cigar Lake license, the original license was issued in 2004 and expires in December of this year. Would a normal renewal also have a three-year term or would it be different?

Gerald Grandey

There is no standard term, Borden. I think, Tim, can you better respond to this?

Tim Gitzel

Yes, in fact, Borden, we are meeting there this afternoon we have hearing tomorrow morning, and that’s part of it. The recommendation I think from staff is for a two-year period going forward. But there is no fixed time limit set out for these. It’s just that they think that’s a reasonable amount of time to come back to the commission with an update us. So that’s why we’re looking at two years.

Borden Putnam - Eastbourne Capital

But you’re asking, if I’ve understood the documents for an indefinite license period, why is that? Do you think it might get done sooner or that some of these, I don’t understand why ?

Tim Gitzel

It was more of an activity based request. We were saying, let us do the remediation plan and the drive the license off our progress on the remediation.

Borden Putnam - Eastbourne Capital

They have come back with a license condition called the license condition 1.5, which they would hope to have risk assessments third-party reviews and so forth, as part of each step in the process. I wonder would any documents like a 43-101 come out of that, that we might have better insight into what’s being found and being recommended by a third-party, if this is agreed by the commission?

Tim Gitzel

Yes, if you look at our submissions to the CNSC, they are really focused on three areas. It’s governance, quality and our safety culture, and the documents that flow around that including our corrective action plan and progress on that.

Operator

Your next question comes from Orest Wowkodaw - Canaccord.

Orest Wowkodaw - Canaccord

You obviously had a pretty low tax rate this year, what can we anticipate next year for overall effective tax? And then of that, what portion you think would be deferred versus cash tax?

Tim Gitzel

Orest, the last question, I’m not going to get into on a forecast basis. Effective rate, what we have said in the past is again we will come out with more specifics in Q4, but at this point, I don’t see any real dramatic change from what we have been telling you for this year.

Orest Wowkodaw - Canaccord

Okay. So next year could be just as low as this year potentially?

Tim Gitzel

That’s a good comment right now.

Operator

This will conclude the questions from the telephone lines. I would now like to turn the meeting back over to Mr. Gerry Grandey for his closing remarks.

Gerald Grandey

Thank you very much. I thank everyone both of those that have asked question and those who have been listening by phone or certainly on the website. We appreciate as always your interest in Cameco.

As I said at the beginning, it’s an exciting time for both the company and industry. We look forward to taking advantage of our financial strength, the opportunities that we see out there to create additional long-term value.

In the coming days, we’re going to be hosting investor luncheons in New York and Toronto and we will be providing more detailed information about the company during those luncheons.

Those events will take place on November 6 and 7 with live webcasts that are available from the Cameco website that’s www.cameco.com and so we encourage everyone to go ahead and get on the website and listen or attend in person.

So again thank you very much for your interest in the company.

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Source: Cameco Q3 2007 Earnings Call Transcript
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