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Cameco swings to C$78M Q1 profit, cuts FY'16 CapEx guidance

Cameco Corp.on April 29 reported first-quarter net income attributable to shareholders of C$78million, or 20 Canadian cents per share, swinging from a year-ago of C$9 million, or 2 cents per share.

The company benefited from C$116 million in mark-to-market gainson foreign exchange derivatives in the first quarter, compared to C$101 millionin losses in the corresponding period of 2015, as well as a higher gross profitin its fuel services segment.

These gains were partly offset by lower gross profit from uraniumand NUKEM segments, as well as a 24% year over year increase in administrative expendituresand higher foreign exchange losses. Adjustedfor these items, the company booked a net loss of C$7 million in the period underreview, compared to a year-ago profit of C$69 million.

Meanwhile, Cameco's revenue dropped year over year to C$408 millioncompared to 2015 first-quarter revenue of C$566 million.

At the company's uranium segment — which accounted for 85% ofCameco's consolidated revenue — production volumes jumped 37% on a yearly basisto 7 million pounds, mainly due to higher production from Cigar Lake, Inkai and McArthurRiver/Key Lake mines while quarterly sales fell 16% to 5.9 million pounds.The company received average realized price of US$42.22 per pound, down 3% yearover year.

Production at fuel services also jumped 27% to 3.3 million kilogramsof uranium because of operational maintenance in 2015 that resulted in lower outputa year ago. Despite higher production, sales dropped 23% to 2.3 million kilogramsof uranium despite average realized prices improving 18% to C$26.18 per kilogramof uranium.

Sales at the company's NUKEM division witnessed a 98% drop yearover year to some 50,000 pounds while prices improved 3% to C$39.32 per pound. Thecompany recorded zero gross profit this quarter at NUKEM, compared to C$11 millionin the same quarter of 2015.

Due to depressed market conditions for uranium and changes inthe global fuel market, the company is downsizing the NUKEM Germany unit and transferringessential support functions to NUKEM's U.S. division, resulting in about 15 layoffs.

For 2016, the company expects to produce 25.7 million poundsof U3O8, compared to previous target of 30 million pounds of U3O8 after at in northern Saskatchewanand U.S. operations while lowered production target for the McArthur River/Key Lakeoperation.

"In the context of continued depressed market conditionsin the near term, these decisions will position our production to come from ourlower-cost operations. In addition, we have continued to secure uranium at favorablemarket prices for delivery into our contract portfolio. As a result, at this time,it does not make economic sense to run our higher-cost operations purely to meetour sales commitments," the company said.

In 2016, the company will book about C$19 million in severancecosts, which will be reflected in the second-quarter results, as well as annualcare and maintenance costs of between C$40 million and C$45 million for the nextfew years.

The company reduced 2016 CapEx to C$275 million from C$320 millionpreviously forecast.Projected spending in 2018 was also cut to between C$200 million and C$250 million.