Cameco enters deal with Cogema Resources

For $243 million and a pretax gain of about $63 million, Cameco (CCO-T) has sold interests in three uranium projects in northern Saskatchewan to French government-owned Cogema Resources.

Cogema acquired 14% of the McArthur River project and 17% of the Key Lake project, where McArthur River will be milled later this year. In addition, Cogema has gained Cameco’s 20% interest in the Midwest Lake project, subject to the other joint-venture owners’ first refusal rights.

Cameco will use the proceeds from the sales to pay down debt.

After the transaction, Cameco and Cogema will own, respectively: 69.8% and 30.2% of McArthur River; 83.3% and 16.7% of Key Lake; and 0% and 76% of Midwest.

Unchanged will be Cameco and Cogema’s respective 50% and 37.1% ownership of the Cigar Lake project, and Cameco will continue to own a 100% interest in the Rabbit Lake project, where it plans to mill a portion of the ore from Cigar Lake.

In the first quarter of 1999, Cameco posted net earnings of $9 million (15 cents per share) on revenue of $147 million (of which $121 million was derived from the nuclear business), compared with earnings of $18 million (31 cents per share) on revenue of $132 million ($92 million, nuclear) in the corresponding quarter last year. Cameco attributes the lower earnings to a decrease in contributions from its Kumtor gold mine in Kyrgyzstan and an increase in interest expenses.

Production from the 33%-owned Kumtor mine declined by 10% between the first quarters of 1998 and 1999, due to lower head grades. The mine’s total production for 1999 is expected to exceed 600,000 oz. gold.

As of March 31, 1999, Cameco’s total long-term debt was $603 million, compared with $569 million at the end of 1998. During the recent first quarter, the ratio of debt to total capitalization rose nominally to 25%.