CCJ

Cameco Corporation: Q3 2005 Financial Summary

Business Context and Reporting Period

This Form 6-K filing reports the unaudited financial results for Cameco Corporation for the third quarter and nine months ended September 30, 2005. Cameco is the world's largest uranium producer and a significant supplier of conversion services. The company also holds a 31.6% interest in Bruce Power (nuclear electricity generation) and a 53% interest in Centerra Gold Inc. (gold mining). All financial figures are presented in Canadian dollars unless otherwise noted.

Key Financial Metrics

Balance Sheet Highlights (as of Sept 30, 2005):

• Total Debt: $654 million (up $135 million from year-end 2004).
• Net Debt to Capitalization: 14% (up from 13% at year-end 2004).
• Cash Balance: $295 million.
• Working Capital: $561 million.

Material Changes vs. Prior Period

Third Quarter Performance: Net earnings increased 50% to $78 million compared to $52 million in Q3 2004. This growth was driven by significantly higher earnings from Bruce Power ($97 million vs. $28 million) due to elevated Ontario electricity prices, and improved uranium business results from higher realized selling prices. These gains were partially offset by lower gold business profits and increased administrative and exploration costs. Revenue declined 8% to $287 million due to lower uranium sales volumes.

Year-to-Date Performance: Net earnings decreased 44% to $136 million compared to $242 million in the prior year. The decline is largely attributed to a one-time $94 million gain recorded in 2004 related to Centerra restructuring transactions, which is excluded from the 2005 adjusted comparison. On an adjusted basis, net earnings declined 8% to $136 million due to higher administration and exploration expenditures. Revenue increased 15% to $790 million.

Segment Drivers:

• Uranium: Realized selling price increased 26% (USD) to $15.46/lb, offsetting a 21% decline in sales volume.
• Bruce Power: Pre-tax earnings surged to $97 million (Q3) due to higher electricity spot prices ($86/MWh vs. $46/MWh).
• Gold: Revenue declined in Q3 due to lower production at the Kumtor mine, despite higher gold prices.

Guidance, Outlook, and Risks

Accounting Change: Effective November 1, 2005, Cameco will proportionately consolidate Bruce Power's financial results, moving from the equity method. This is expected to add approximately $60 million to Q4 revenue.

Fourth Quarter Outlook: Consolidated revenue is expected to be approximately 89% higher than Q3 due to higher uranium/conversion deliveries and the new consolidation of Bruce Power. Consolidated earnings are expected to be moderately higher than Q3, as reduced earnings from Bruce Power (due to lower realized prices and loss of Bruce A unit results) will largely offset improved uranium results.

Full Year 2005 Outlook: Consolidated revenue is projected to grow more than 20% over 2004. Gross profit margin is expected to improve from the 23% reported in 2004. The effective tax rate is expected to be approximately 20%.

Unusual Items and Contingencies:

• Bruce A Restructuring: Completion of the restructuring triggered an approximate $63 million loss (Cameco's share after-tax), to be recorded in Q4 2005.
• ERA Sale: An expected gain from the sale of Cameco's share in Energy Resources of Australia Ltd (ERA) is excluded from the Q4 outlook.
• Legal: Ongoing tax and customs audits in the Kyrgyz Republic regarding Centerra Gold; management does not expect a material impact.
• Acquisition: Cameco is negotiating to acquire Zircatec Precision Industries, Inc.

Investor Verification Checklist

• Adjusted Earnings: Verify the exclusion of the 2004 Centerra restructuring gain ($94 million) when comparing year-over-year net earnings.
• Bruce Power Accounting: Confirm the impact of the shift from equity method to proportionate consolidation on Q4 and full-year 2005 revenue and earnings.
• Restructuring Loss: Monitor the Q4 2005 financial statements for the recognition of the ~$63 million loss related to the Bruce A restructuring.
• Uranium Pricing: Assess the sensitivity of future revenues to uranium spot prices, noting that 96% of 2005 sales targets are currently price-insensitive (fixed-price contracts).
• Gold Production: Review production volumes at Kumtor and Boroo, as lower ore grades are expected to reduce 2005 gold results despite higher revenues.
• Debt Levels: Note the increase in total debt to $654 million and the downgrade of Moody's rating to Baa2.