##### 



EXHIBIT 2







Cameco Corporation

2003 Consolidated Audited Financial Statements





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(CIRCLE LOGO)  STILL GROWING STRONG Cameco continues to demonstrate financial strength.  index
  
  Report of Managements Accountability
    
    
    2Auditors Report
    
    
    2Consolidated Balance Sheets
    
    
    3Consolidated Statements of Earnings
    
    
    4Consolidated Statements of Retained Earnings
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to Consolidated Financial Statements
    
    
    61.  Cameco Corporation
    
    
    62.  Accounting Policies
    
    
    63.  Inventories
    
    
    74.  Property, Plant and Equipment
    
    
    75.  Long-Term Receivables, Investments and Other
    
    
    86.  Long-Term Debt
    
    
    87.  Provision for Reclamation
    
    
    98.  Other Liabilities
    
    
    109.  Preferred Securities
    
    
    1010.  Convertible Debentures
    
    
    1011.  Share Capital
    
    
    1112.  Cumulative Translation Account
    
    
    1113.  Interest and Other
    
    
    1114.  Other Income (Expenses)
    
    
    1215.  Income Taxes
    
    
    12
 16.  Other Operating Items
    
    
    1317.  Joint Ventures
    
    
    1318.  Kumtor Gold Company (KGC) Joint Venture
    
    
    1419.  Investment in Bruce Power L.P. (Bruce Power)
    
    
    1520.  Stock Option Plan
    
    
    1721.  Stock-Based Compensation
    
    
    1822.  Pension and Other Post-Retirement Benefits
    
    
    1923.  Property and Business Acquisitions
    
    
    2024.  Commitments and Contingencies
    
    
    2125.  Financial Instruments
    
    
    2226.  Per Share Amounts
    
    
    2427.  Segmented Information
    
    
    2428.  Subsequent Event
    
    
    2729.  Comparative Figures
    
    
    2730.  Generally Accepted Accounting Principles in
        Canada and the United States
    
    
    27Summary of Significant Accounting Policies
    
    
    32




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FINANCIAL INFORMATION
  Report of Managements
Accountability  The accompanying consolidated financial
statements have been prepared by management
in accordance with Canadian generally
accepted accounting principles. Management
is responsible for ensuring that these
statements, which include amounts based upon
estimates and judgment, are consistent with
other information and operating data
contained in the annual report and reflect
the corporations business transactions and
financial position. Management is also responsible for the
information disclosed in the managements
discussion and analysis including
responsibility for the existence of
appropriate information systems, procedures
and controls to ensure that the information
used internally by management and disclosed
externally is complete and reliable in all
material respects. The integrity and reliability of Camecos
reporting systems are achieved through the
use of formal policies and procedures, the
careful selection of employees and
appropriate delegation of authority and
division of responsibilities. Internal
accounting controls are monitored by the
internal auditor. Camecos code of ethics,
which is communicated to all levels in the
organization, requires employees to maintain
high standards in their conduct of the
corporations affairs. Our shareholders independent auditors, KPMG
LLP, whose report on their examination
follows, have audited the consolidated
financial statements in accordance with
Canadian generally accepted auditing
standards. The board of directors annually appoints an
audit committee comprised of directors who
are not employees of the corporation. This
committee meets regularly with management,
the internal auditor and the shareholders
auditors to review significant accounting,
reporting and internal control matters. Both
the internal and shareholders auditors have
unrestricted access to the audit committee.
The audit committee reviews the financial
statements, the report of the shareholders
auditors, and managements discussion and
analysis and submits its report to the board
of directors for formal approval.  Original signed by David M. Petroff Senior Vice-President, Finance and Administration
and Chief Financial Officer January 26, 2004, except as to note 28(b) which is as of
February 27, 2004
 Auditors Report  To the Shareholders of Cameco Corporation We have audited the consolidated balance
sheets of Cameco Corporation as at December
31, 2003 and 2002 and the consolidated
statements of earnings, retained earnings
and cash flows for each of the years in the
three-year period ended December 31, 2003.
These financial statements are the
responsibility of the corporations
management. Our responsibility is to
express an opinion on these financial
statements based on our audits. We conducted our audits in accordance with
Canadian generally accepted auditing
standards. Those standards require that we
plan and perform an audit to obtain
reasonable assurance whether the financial
statements are free of material misstatement.
An audit includes examining, on a test basis,
evidence supporting the amounts and
disclosures in the financial statements. An
audit also includes assessing the accounting
principles used and significant estimates
made by management, as well as evaluating the
overall financial statement presentation. In our opinion, these consolidated financial
statements present fairly, in all material
respects, the financial position of the
corporation as at December 31, 2003 and 2002
and the results of its operations and its
cash flows for each of the years in the
three-year period ended December 31, 2003 in
accordance with Canadian generally accepted
accounting principles. Original signed by
KPMGLLP Chartered Accountants
Saskatoon, Canada January 26, 2004, except as to note 28(b) which is as of
February 27, 2004
   2




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FINANCIAL INFORMATION
 
 Consolidated Balance Sheets  (Restated)As at December 31
    
    2003
    
    2002(Thousands)AssetsCurrent assetsCash
    
    $
    84,069
    
    
    $
    58,096Accounts receivable
    
    
    181,337
    
    
    
    186,369Inventories [note 3]
    
    
    316,435
    
    
    
    339,684Supplies and prepaid expenses
    
    
    41,571
    
    
    
    45,731Current portion of long-term receivables, investments and other [note 5]
    
    
    54,866
    
    
    
    20,163678,278
    
    
    
    650,043Property, plant and equipment [note 4]
    
    
    2,072,156
    
    
    
    2,060,250Long-term receivables, investments and other [note 5]
    
    
    608,977
    
    
    
    257,523Total assets
    
    $
    3,359,411
    
    
    $
    2,967,816Liabilities and Shareholders EquityCurrent liabilitiesAccounts payable and accrued liabilities
    
    $
    156,112
    
    
    $
    131,932Dividends payable
    
    
    11,598
    
    
    
    6,998Current portion of long-term debt [note 6]
    
    
    4,331
    
    
    
    6,318Current portion of other liabilities [note 8]
    
    
    1,563
    
    
    
    16,931Future income taxes [note 15]
    
    
    24,237
    
    
    
    9,198197,841
    
    
    
    171,377Long-term debt [note 6]
    
    
    238,707
    
    
    
    218,290Provision for reclamation [note 7]
    
    
    150,444
    
    
    
    159,344Other liabilities [note 8]
    
    
    36,196
    
    
    
    9,523Future income taxes [note 15]
    
    
    501,674
    
    
    
    530,6251,124,862
    
    
    
    1,089,159Minority interest
    
    
    14,690
    
    
    
    18,078Shareholders equityPreferred securities [note 9]
    
    
    158,022
    
    
    
    193,763Convertible debentures [note 10]
    
    
    226,444
    
    
    
    Share capital [note 11]
    
    
    708,345
    
    
    
    680,934Contributed surplus
    
    
    474,927
    
    
    
    472,488Retained earnings
    
    
    665,377
    
    
    
    494,341Cumulative translation account [note 12]
    
    
    (13,256
    )
    
    
    19,0532,219,859
    
    
    
    1,860,579Total liabilities and shareholders equity
    
    $
    3,359,411
    
    
    $
    2,967,816
 Commitments and contingencies [notes 6,7,18,19,24,25]
See accompanying notes to consolidated financial statements.Approved by the board of directors 3




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FINANCIAL INFORMATION
 
 Consolidated Statements of Earnings  (Restated)
    
    (Restated)For the year ended December 31
    
    2003
    
    2002
    
    2001(Thousands)Revenue fromProducts and services
    
    $
    826,946
    
    
    $
    748,334
    
    
    $
    700,839ExpensesProducts and services sold
    
    
    538,823
    
    
    
    486,155
    
    
    
    422,067Depreciation, depletion and reclamation
    
    
    124,489
    
    
    
    116,958
    
    
    
    129,298Administration
    
    
    47,011
    
    
    
    41,693
    
    
    
    36,644Exploration
    
    
    21,923
    
    
    
    21,532
    
    
    
    18,203Research and development
    
    
    1,717
    
    
    
    2,257
    
    
    
    2,097Interest and other [note 13]
    
    
    4,737
    
    
    
    (1,957
    )
    
    
    (2,366
    )Gain on property interests [note 23]
    
    
    
    
    
    
    (2,670
    )
    
    
    738,700
    
    
    
    663,968
    
    
    
    605,943Earnings from operations
    
    
    88,246
    
    
    
    84,366
    
    
    
    94,896Earnings from Bruce Power [note 19]
    
    
    107,921
    
    
    
    15,769
    
    
    
    12,167Other income (expenses) [note 14]
    
    
    429
    
    
    
    (878
    )
    
    
    590Earnings before income taxes and minority interest
    
    
    196,596
    
    
    
    99,257
    
    
    
    107,653Income tax expense (recovery) [note 15]
    
    
    (15,994
    )
    
    
    47,265
    
    
    
    42,241Minority interest
    
    
    (3,416
    )
    
    
    (871
    )
    
    
    Net earnings
    
    
    216,006
    
    
    
    52,863
    
    
    
    65,412Preferred securities charges, net of tax [note 9]
    
    
    9,030
    
    
    
    9,340
    
    
    
    9,325Convertible debenture charges, net of tax [note 10]
    
    
    2,290
    
    
    
    
    
    
    
    Net earnings attributable to common shares
    
    $
    204,686
    
    
    $
    43,523
    
    
    $
    56,087Basic earnings per common share [note 26]
    
    $
    3.65
    
    
    $
    0.78
    
    
    $
    1.01Diluted earnings per common share [note 26 ]
    
    $
    3.58
    
    
    $
    0.78
    
    
    $
    1.01
 
 Consolidated Statements of Retained Earnings  (Restated)
    
    (Restated)For the year ended December 31
    
    2003
    
    2002
    
    2001(Thousands)Retained earnings at beginning of year,
As previously reported
    
    $
    483,658
    
    
    $
    465,420
    
    
    $
    437,328Change in accounting policy for reclamation [note 2]
    
    
    10,683
    
    
    
    13,280
    
    
    
    13,089As restated
    
    $
    494,341
    
    
    $
    478,700
    
    
    $
    450,417Net earnings
    
    
    216,006
    
    
    
    52,863
    
    
    
    65,412Dividends on common shares
    
    
    (33,650
    )
    
    
    (27,882
    )
    
    
    (27,804
    )Preferred securities charges, net of tax [note 9]
    
    
    (9,030
    )
    
    
    (9,340
    )
    
    
    (9,325
    )Convertible debenture charges, net of tax [note 10]
    
    
    (2,290
    )
    
    
    
    
    
    
    Retained earnings at end of year
    
    $
    665,377
    
    
    $
    494,341
    
    
    $
    478,700
 See accompanying notes to consolidated financial statements. 4




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FINANCIAL INFORMATION
 
 Consolidated Statements of Cash Flows  (Restated)
    
    (Restated)For the year ended December 31
    
    2003
    
    2002
    
    2001(Thousands)Operating activitiesNet earnings
    
    $
    216,006
    
    
    $
    52,863
    
    
    $
    65,412Items not requiring (providing) cash:Depreciation, depletion and reclamation
    
    
    124,489
    
    
    
    116,958
    
    
    
    129,298Provision for future taxes [note 15]
    
    
    (26,213
    )
    
    
    36,996
    
    
    
    32,655Deferred charges (revenue) recognized
    
    
    9,331
    
    
    
    1,375
    
    
    
    (10,373
    )Earnings from Bruce Power [note 19 ]
    
    
    (107,921
    )
    
    
    (15,769
    )
    
    
    (12,167
    )Equity in (earnings) loss from associated
companies [note 14]
    
    
    1,494
    
    
    
    1,083
    
    
    
    Minority interest
    
    
    (3,416
    )
    
    
    (871
    )
    
    
    Gain on property interests [note 23]
    
    
    
    
    
    
    (2,670
    )
    
    
    Other operating items [note 16]
    
    
    32,123
    
    
    
    60,877
    
    
    
    (88,578
    )Cash provided by operations
    
    
    245,893
    
    
    
    250,842
    
    
    
    116,247Investing activitiesAdditions to property, plant and equipment
    
    
    (159,570
    )
    
    
    (90,226
    )
    
    
    (58,275
    )Increase in long-term receivables, investments and other
    
    
    (288,259
    )
    
    
    (42,597
    )
    
    
    (94,808
    )Decrease in long-term receivables, investments and other
    
    
    
    
    
    
    58,296
    
    
    
    21,963Proceeds on sale of property, plant and equipment
    
    
    242
    
    
    
    101
    
    
    
    403Cash used in investing
    
    
    (447,587
    )
    
    
    (74,426
    )
    
    
    (130,717
    )Financing activitiesDecrease in debt
    
    
    (25,848
    )
    
    
    (130,295
    )
    
    
    (25,485
    )Increase in debt
    
    
    50,311
    
    
    
    1,379
    
    
    
    79,932Restricted cash
    
    
    342
    
    
    
    11,138
    
    
    
    409Issue of convertible debentures, net of issue costs
    
    
    223,032
    
    
    
    
    
    
    
    Issue of shares
    
    
    27,411
    
    
    
    10,903
    
    
    
    5,208Preferred securities charges
    
    
    (15,306
    )
    
    
    (17,238
    )
    
    
    (17,268
    )Dividends
    
    
    (32,275
    )
    
    
    (27,944
    )
    
    
    (27,720
    )Cash provided by (used in) financing
    
    
    227,667
    
    
    
    (152,057
    )
    
    
    15,076Increase in cash during the year
    
    
    25,973
    
    
    
    24,359
    
    
    
    606Cash at beginning of year
    
    
    58,096
    
    
    
    33,737
    
    
    
    33,131Cash at end of year
    
    $
    84,069
    
    
    $
    58,096
    
    
    $
    33,737Supplemental cash flow disclosureInterest paid
    
    $
    20,675
    
    
    $
    16,572
    
    
    $
    22,860Income taxes paid
    
    $
    11,537
    
    
    $
    5,309
    
    
    $
    3,916
 See accompanying notes to consolidated financial statements. 5




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FINANCIAL INFORMATION
 
 Notes to Consolidated Financial Statements   For the years ended December 31, 2003, 2002 and 2001 
  1.
    
    Cameco Corporation  Cameco Corporation is incorporated under the Canada Business Corporations
Act. Cameco Corporation and its subsidiaries (collectively, Cameco or the
company) are primarily engaged in the exploration for and the development,
mining, refining and conversion of uranium for sale as fuel for generating
electricity in nuclear power reactors in Canada and other countries. The
company has an interest in the Bruce Power electrical generation plant in
Ontario. Cameco is also involved in the exploration for and the development,
mining and sale of gold. 
  2.
    
    Accounting Policies  (a)
    
    Significant Accounting PoliciesA summary of significant accounting policies follows the notes to the
consolidated financial statements.(b)
    
    Changes in Accounting Policies(i) Stock-Based Compensation (note 21)Cameco has adopted the fair value method of accounting for employee stock
options with retroactive effect to January 1, 2003. Pursuant to new
transitional rules related to accounting for stock-based compensation,
Cameco chose to record compensation expense for all employee stock options
granted on or after January 1, 2003 with a corresponding increase to
contributed surplus. Compensation expense for options granted during 2003
is determined based on the estimated fair values at the time of grant, the
cost of which is recognized over the vesting periods of the respective
options. This change in accounting policy has increased expenses by
$2,439,000 in 2003.(ii) Asset Retirement Obligations (note 7)In March 2003, the CICA issued new accounting rules dealing with asset
retirement obligations which come into effect for fiscal years beginning
on or after January 1, 2004. Cameco chose to adopt the rules in 2003. This
change in accounting policy was applied retroactively and, accordingly,
the consolidated financial statements of prior periods were restated. This
section addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The standard applies to legal
obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and use of the
asset. The new rules require that the estimated cost of an asset
retirement obligation be recognized as a liability in the period incurred.
A corresponding amount is added to the carrying amount of the associated
asset and depreciated over the assets useful life. The liability is
accreted over time through charges to earnings. This differs from the
current practice which involves accruing for the estimated reclamation and
closure liability through annual charges to earnings over the estimated
life of the asset.The cumulative effect of the change in policy on the balance sheet at
December 31, 2002 is to increase property, plant and equipment by $23
million, future income taxes by $8 million, liabilities by $4 million and
opening retained earnings by $13 million. The effect of the change in
policy on
the statement of earnings for December 31, 2002 was a $3 million ($0.05
per share) reduction in earnings. For 2001, earnings were virtually
unchanged.(c)
    
    New Accounting PronouncementsHedging RelationshipsEffective January 1, 2004, Cameco will be required to adopt the new
Canadian Accounting Guideline, Hedging Relationships that establishes new
criteria for hedging relationships in effect on or after January 1, 2004.
To qualify for hedge accounting, the hedging relationship must be
appropriately documented and there must be reasonable assurance, both at
the inception and throughout the term of the hedge, that the hedging
relationship will be effective. Effectiveness requires a high degree of
correlation of changes in fair values or cash flows between the hedged
item and the hedge. Cameco does not anticipate that the adoption of this
accounting guideline will have a material impact on its consolidated
financial statements. 6




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FINANCIAL INFORMATION
 
  3.
    
    Inventories   2003
    
    2002(Thousands)UraniumConcentrate
    
    $
    260,211
    
    
    $
    284,052Broken ore
    
    
    9,680
    
    
    
    8,586269,891
    
    
    
    292,638Conversion
    
    
    44,472
    
    
    
    39,097GoldFinished
    
    
    297
    
    
    
    4,189Broken ore
    
    
    1,775
    
    
    
    3,7602,072
    
    
    
    7,949Total
    
    $
    316,435
    
    
    $
    339,684
   
  4.
    
    Property, Plant and Equipment  
 Accumulated
    
    
    
    
    
    (Restated)Depreciation
    
    2003
    
    2002Cost
    
    and Depletion
    
    Net
    
    Net(Thousands)UraniumMining
    
    $
    2,216,216
    
    
    $
    831,526
    
    
    $
    1,384,690
    
    
    $
    1,421,598Development
    
    
    355,806
    
    
    
    
    
    
    
    355,806
    
    
    
    349,281Conversion
    
    
    274,025
    
    
    
    147,054
    
    
    
    126,971
    
    
    
    130,246GoldMining
    
    
    222,285
    
    
    
    164,754
    
    
    
    57,531
    
    
    
    85,832Development
    
    
    127,682
    
    
    
    
    
    
    
    127,682
    
    
    
    57,919Other
    
    
    34,624
    
    
    
    15,148
    
    
    
    19,476
    
    
    
    15,374Total
    
    $
    3,230,638
    
    
    $
    1,158,482
    
    
    $
    2,072,156
    
    
    $
    2,060,250
   7




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FINANCIAL INFORMATION
 
  5.
    
    Long-Term Receivables, Investments and Other   2003
    
    2002(Thousands)Bruce Power L.P. [note 19]Interest in Bruce Power L.P.
    
    $
    456,520
    
    
    $
    130,218Loan receivable
    
    
    77,028
    
    
    
    Kumtor Gold CompanySubordinated loan  principal [note 18]
    
    
    52,590
    
    
    
    64,276Subordinated loan  interest
    
    
    2,261
    
    
    
    292Restricted cash  debt reserve
    
    
    75
    
    
    
    489Investments in associated companiesInvestment in Technology Commercialization International, Inc.
    
    
    4,889
    
    
    
    4,017Investment in UEX Corporation
    
    
    3,791
    
    
    
    3,455Portfolio investmentsEnergy Resources of Australia Ltd (market $40,676)
    
    
    18,208
    
    
    
    17,564General Hydrogen Corporation
    
    
    6,323
    
    
    
    6,323Deferred charges
    
    
    5,958
    
    
    
    17,808Investment in Huron Wind L.P.
    
    
    2,725
    
    
    
    Advances receivable
    
    
    16,693
    
    
    
    22,704Accrued pension benefit asset [note 22]
    
    
    10,630
    
    
    
    1,817Other
    
    
    6,152
    
    
    
    8,723663,843
    
    
    
    277,686Less current portion
    
    
    (54,866
    )
    
    
    (20,163
    )Net
    
    $
    608,977
    
    
    $
    257,523
    The security agreement between Kumtor Gold Company (KGC) and its senior debt
lenders requires that in order to make certain payments to shareholders and
subordinated lenders, funds sufficient to meet those senior debt principal
and interest payments scheduled to occur over the ensuing six months to be
held in a debt reserve account until paid. 
  6.
    
    Long-Term Debt   2003
    
    2002(Thousands)Debentures
    
    $
    149,329
    
    
    $
    149,079Commercial paper
    
    
    65,934
    
    
    
    24,455Kumtor Gold Company [ note 18]Senior debt
    
    
    7,324
    
    
    
    40,543Subordinated debt
    
    
    8,616
    
    
    
    10,531Equipment loan
    
    
    11,835
    
    
    
    243,038
    
    
    
    224,608Less current portion
    
    
    (4,331
    )
    
    
    (6,318
    )Net
    
    $
    238,707
    
    
    $
    218,290
 Cameco has $50,000,000 outstanding in senior unsecured debentures that bear
interest at a rate of 7.0% per annum and will mature July 6, 2006. Cameco also
has $100,000,000 outstanding in senior unsecured debentures that bear interest
at a rate of 6.9% per annum and will mature July 12, 2006. Cameco has a $196,500,000 three-year unsecured revolving credit facility that
is available until December 4, 2006 and a $221,000,000 364-day unsecured
revolving credit facility with a two-year term-out option. Cameco may also
borrow directly from investors by issuing commercial paper. Commercial paper
outstanding at December 31, 2003 was $61,419,000 (Cdn) and $3,493,000 (US)
(2002  $15,482,000 (US)) and bears interest at an average rate of 2.6% (2002 
1.4%). These amounts are classified as long-term debt.
   8




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##### 





FINANCIAL INFORMATION
   Cameco has $11,835,000 ($9,158,000 (US)) outstanding under an equipment loan
which is repayable in 17 remaining quarterly installments of $421,000 (US) with
a final payment of $2,000,000 (US) in 2008. Cameco has $294,100,000 ($168,800,000 (Cdn) and $96,951,000 (US)) in letter of
credit facilities. Outstanding letters of credit at December 31, 2003 amounted
to $202,745,000 (2002  $208,975,000). The majority of the letters of credit
relate to future decommissioning and reclamation liabilities [note 7]. The table below represents currently scheduled maturities of long-term debt
over the next five years including Camecos one-third share of Kumtor Gold
Company principal repayments on debt. (Thousands)2004
    
    $
    4,3312005
    
    
    9,5022006
    
    
    221,7492007
    
    
    4,3312008
    
    
    3,125Total
    
    $
    243,038
 Cameco has guaranteed the repayment of KGC senior debt [note 18]. Camecos
contingent obligation under this guarantee exceeds the amount included in
the Cameco long-term debt as at December 31, 2003 by $14,647,000 (2002 
$81,086,000).
   
  7.
    
    Provision for Reclamation   Camecos estimates of future asset retirement obligations are based on
reclamation standards that meet or exceed regulatory requirements. Elements
of uncertainty in estimating these amounts include potential changes in
regulatory requirements, decommissioning and reclamation alternatives and
amounts to be recovered from other parties. Cameco estimates total future decommissioning and reclamation costs for its
operating assets to be $234,000,000. These estimates are formally reviewed
by Cameco technical personnel at least every two years or more frequently as
required by regulatory agencies. In connection with future decommissioning
and reclamation costs, Cameco has provided financial assurances of
$198,674,000 in the form of letters of credit to satisfy current regulatory
requirements. Following is a reconciliation of the total liability for asset retirement
obligations: (Restated)2003
    
    2002(Thousands)Balance, beginning of year
    
    $
    159,344
    
    
    $
    138,445Additions to liabilities
    
    
    
    
    
    
    19,600Liabilities settled
    
    
    (13,214
    )
    
    
    (6,878
    )Accretion expense
    
    
    8,757
    
    
    
    8,077Remeasurement of non-Canadian liabilities
    
    
    (4,443
    )
    
    
    100Balance, end of year
    
    $
    150,444
    
    
    $
    159,344
 Following is a summary of the key assumptions on which the carrying amount of
the asset retirement obligations is based:
    (i)
    
    Total undiscounted amount of the estimated cash flows  $234,000,000.(ii)
    
    Expected timing of payment of the cash flows  timing is based on life of
mine plans. The majority of expenditures are expected to occur after 2013.(iii)
    
    Discount rates  7.5% for operations in North America; 8.5% for
operations in Central Asia. 9




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##### 





FINANCIAL INFORMATION
   The asset retirement obligations liability is comprised of: (Restated)2003
    
    2002(Thousands)Uranium
    
    $
    92,279
    
    
    $
    96,463Conversion
    
    
    48,706
    
    
    
    47,286Gold
    
    
    9,459
    
    
    
    15,595Total
    
    $
    150,444
    
    
    $
    159,344
   
  8.
    
    Other Liabilities   2003
    
    2002(Thousands)Deferred revenue
    
    $
    28,099
    
    
    $
    2,102Accrued post-retirement benefit liability [note 22]
    
    
    3,389
    
    
    
    4,092Borrowed product
    
    
    
    
    
    
    12,952Other
    
    
    6,271
    
    
    
    7,30837,759
    
    
    
    26,454Less current portion
    
    
    (1,563
    )
    
    
    (16,931
    )Net
    
    $
    36,196
    
    
    $
    9,523
   
  9.
    
    Preferred Securities  Cameco issued $125,000,000 (US), 8.75% preferred securities in denominations
of $25 (US) each due September 30, 2047 accruing interest from the date of
issuance payable quarterly commencing December 31, 1998.The preferred securities are redeemable, at the option of Cameco, in whole
or in part at any time on or after October 14, 2003 at a redemption price
equal to 100% of the principal amount of the preferred securities to be
redeemed plus any accrued and unpaid interest thereon to the date of
redemption.The principal amounts of the preferred securities, net of after-tax issue
costs of $4,330,000 (Cdn) have been classified as equity, and interest
payments on an after-tax basis are classified as distributions of equity, as
Cameco has the unrestricted ability to settle its obligations by delivering
common shares of Cameco.The fair value of the preferred securities approximates the carrying value.  10.
    
    Convertible Debentures  On September 25, 2003 the company issued unsecured convertible debentures in
the amount of $230 million. The debentures bear interest at 5% per annum,
mature on October 1, 2013, and at the holders option are convertible into
common shares of Cameco. The conversion price is $65 per share, a rate of
approximately 15.4 common shares per $1,000 of convertible debentures.
Interest is payable semi-annually in arrears on April 1 and October 1. The
debentures are redeemable by the company beginning October 1, 2008 at a
redemption price of par plus accrued and unpaid interest.The convertible debentures are being accounted for in accordance with their
substance and the principal amounts, net of after-tax issue costs, have been
classified as equity. The interest payments, on
an after-tax basis, will be classified as distributions of equity, as Cameco
has the unrestricted ability to settle its obligations by delivering common
shares of Cameco.The fair value of the outstanding convertible debentures is based on the
quoted market price of the debentures at December 31, 2003 and was
approximately $308,200,000. 10




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##### 





FINANCIAL INFORMATION
 
  11.
    
    Share CapitalAuthorized share capital:Unlimited number of first preferred
shares
   Unlimited number of second preferred
shares
   Unlimited number of
voting common shares, and
   One Class B share  (a) Common Shares   Number Issued
    
    2003
    
    2002(Number of Shares)Beginning of year
    
    
    55,985,873
    
    
    
    55,671,440Issued:Stock option plan [note 20]
    
    
    783,550
    
    
    
    314,433Issued share capital
    
    
    56,769,423
    
    
    
    55,985,873
 Amount
    
    2003
    
    2002(Thousands)Beginning of year
    
    $
    685,491
    
    
    $
    676,404Issued:Stock option plan [note 20]
    
    
    25,572
    
    
    
    9,087Issued share capital
    
    
    711,063
    
    
    
    685,491Less loans receivable [note 20]
    
    
    (2,718
    )
    
    
    (4,557
    )End of year
    
    $
    708,345
    
    
    $
    680,934
 (b) Class B Share One Class B share issued during 1988 and assigned $1 of share capital,
entitles the shareholder to vote separately as a class in respect of any
proposal to locate the head office of Cameco to a place not in the province
of Saskatchewan. (c) Contributed Surplus The increase in contributed surplus of $2,439,000 is the result of expensing
stock-based compensation (note 21).
   
  12.
    
    Cumulative Translation AccountThe balance of $(13,256,000) (2002  $19,053,000) represents the cumulative
unrealized net exchange gain (loss) on Camecos net investments in foreign operations, and on the foreign currency
debt and preferred securities designated as hedges of the net investments. 
  13.
    
    Interest and Other   2003
    
    2002
    
    2001(Thousands)Interest on long-term debt
    
    $
    19,715
    
    
    $
    14,478
    
    
    $
    20,116Other interest and financing charges
    
    
    2,221
    
    
    
    2,039
    
    
    
    1,616Interest income
    
    
    (6,776
    )
    
    
    (6,842
    )
    
    
    (10,773
    )Foreign exchange (gains) losses
    
    
    3,620
    
    
    
    (1,648
    )
    
    
    (791
    )Mark-to-market loss
    
    
    
    
    
    
    1,811
    
    
    
    Capitalized interest
    
    
    (14,043
    )
    
    
    (11,795
    )
    
    
    (12,534
    )Net
    
    $
    4,737
    
    
    $
    (1,957
    )
    
    $
    (2,366
    )
 As a result of the Kumtor pit wall failure in 2002, certain gold contracts
designated as hedges of Kumtors gold production were no longer effective.
Mark-to-market losses on these contracts were expensed.
   11




---



##### 





FINANCIAL INFORMATION
 
  14.
    
    Other Income (Expenses)   2003
    
    2002
    
    2001(Thousands)Dividends on portfolio investments
    
    $
    1,923
    
    
    $
    205
    
    
    $
    590Equity in earnings (loss) of associated companies
    
    
    (1,494
    )
    
    
    (1,083
    )
    
    
    Net
    
    $
    429
    
    
    $
    (878
    )
    
    $
    590
   
  15.
    
    Income TaxesThe significant components of future income tax assets and liabilities at
December 31 are as follows:   (Restated)2003
    
    2002(Thousands)AssetsProperty, plant and equipment
    
    $
    38,409
    
    
    $
    52,638Provision for reclamation
    
    
    44,129
    
    
    
    44,818Foreign exploration and development
    
    
    37,566
    
    
    
    27,771Other
    
    
    743
    
    
    
    4,634Future income tax assets before valuation allowance
    
    
    120,847
    
    
    
    129,861Valuation allowance
    
    
    (67,499
    )
    
    
    (69,505
    )Future income tax assets, net of valuation allowance
    
    $
    53,348
    
    
    $
    60,356LiabilitiesProperty, plant and equipment
    
    $
    531,295
    
    
    $
    584,321Inventories
    
    
    5,060
    
    
    
    9,198Long-term investments
    
    
    42,904
    
    
    
    6,660Future income tax liabilities
    
    $
    579,259
    
    
    $
    600,179Net future income tax liabilities
    
    $
    525,911
    
    
    $
    539,823Less current portion
    
    
    (24,237
    )
    
    
    (9,198
    )$
    501,674
    
    
    $
    530,625
 The provision for income taxes differs from the amount computed by applying the
combined expected federal and provincial income tax rate to earnings before
income taxes. The reasons for these differences are as follows: 2003
    
    2002
    
    2001(Thousands)Earnings before income taxes and minority interest
    
    $
    196,596
    
    
    $
    99,257
    
    
    $
    107,653Combined federal and provincial tax rate
    
    
    44.1
    %
    
    
    45.4
    %
    
    
    45.5
    %Computed income tax expense
    
    
    86,699
    
    
    
    45,063
    
    
    
    48,982Increase (decrease) in taxes resulting from:Change in tax legislation
    
    
    (81,300
    )
    
    
    
    
    
    
    Provincial royalties and other taxes
    
    
    7,380
    
    
    
    8,883
    
    
    
    10,212Federal resource allowance
    
    
    (1,506
    )
    
    
    (5,918
    )
    
    
    (6,710
    )Manufacturing and processing deduction
    
    
    (8,443
    )
    
    
    (283
    )
    
    
    (791
    )Difference between Canadian rate and rates
applicable to subsidiaries in other countries
    
    
    (18,968
    )
    
    
    (7,379
    )
    
    
    (12,895
    )Large corporations and other taxes
    
    
    4,988
    
    
    
    4,521
    
    
    
    4,558Other
    
    
    (4,844
    )
    
    
    2,378
    
    
    
    (1,115
    )Income tax expense (recovery)
    
    $
    (15,994
    )
    
    $
    47,265
    
    
    $
    42,241
   12




---



##### 





FINANCIAL INFORMATION
   In 2003, the federal government introduced amendments to the Canadian Income
Tax Act which provide for a reduction in the corporate tax rate on income from
resource activities. The cumulative effect of the change in income tax
legislation on Camecos future income tax liability was $86,200,000. In 2003, the Ontario government introduced amendments to the Corporations Tax
Act which provide for an increase in the corporate tax rate on all income. The
cumulative effect of the change in income tax legislation on Camecos future
income tax liability was $4,900,000. 2003
    
    2002
    
    2001(Thousands)Current income taxesCanada
    
    $
    6,984
    
    
    $
    7,895
    
    
    $
    7,704Other
    
    
    3,235
    
    
    
    2,374
    
    
    
    1,882$
    10,219
    
    
    $
    10,269
    
    
    $
    9,586Future income taxes (recovery)Canada
    
    $
    (25,337
    )
    
    $
    37,813
    
    
    $
    30,945Other
    
    
    (876
    )
    
    
    (817
    )
    
    
    1,710$
    (26,213
    )
    
    $
    36,996
    
    
    $
    32,655Net
    
    $
    (15,994
    )
    
    $
    47,265
    
    
    $
    42,241
   
  16.
    
    Other Operating Items   2003
    
    2002
    
    2001(Thousands)Changes in non-cash working capital:Accounts receivable
    
    $
    10,351
    
    
    $
    27,396
    
    
    $
    (82,094
    )Interest receivable
    
    
    (2,022
    )
    
    
    205
    
    
    
    515Inventories
    
    
    (11,590
    )
    
    
    10,932
    
    
    
    7,469Supplies and prepaid expenses
    
    
    4,160
    
    
    
    (1,157
    )
    
    
    (24
    )Accounts payable and accrued liabilities
    
    
    24,180
    
    
    
    18,342
    
    
    
    5,992Other liabilities
    
    
    (2,860
    )
    
    
    279
    
    
    
    (2,117
    )Hedge position settlements
    
    
    30,852
    
    
    
    14,794
    
    
    
    (11,328
    )Reclamation payments
    
    
    (9,903
    )
    
    
    (6,878
    )
    
    
    (5,655
    )Other
    
    
    (11,045
    )
    
    
    (3,036
    )
    
    
    (1,336
    )Total
    
    $
    32,123
    
    
    $
    60,877
    
    
    $
    (88,578
    )
   
  17.
    
    Joint VenturesCameco conducts a portion of its exploration, development, mining and
milling activities through joint ventures. Camecos significant uranium
joint venture interests are comprised of:   Producing:McArthur River
    
    
    69.81
    %Key Lake
    
    
    83.33
    %Non-producing:Cigar Lake
    
    
    50.03
    %Inkai
    
    
    60.00
    %
   13




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##### 





FINANCIAL INFORMATION
   Uranium joint ventures allocate uranium production to each joint venture
participant and the joint venture participant derives revenue directly from the
sale of such product. Mining and milling expenses incurred by the joint venture
are included in the cost of inventory. The majority of the uranium mining and
development property, plant and equipment as disclosed in note 4 are held in
joint ventures. Camecos gold joint venture interests are comprised of a 33.33% participation
interest in Kumtor Gold Company. Kumtor Gold Company obtains revenue directly
from the sale of products. Camecos share of the assets and liabilities,
revenue and expenses, and cash flows relating to the Kumtor joint venture is as
follows: (Restated)2003
    
    2002(Thousands)Current assets
    
    $
    27,795
    
    
    $
    28,933Property, plant and equipment
    
    
    61,771
    
    
    
    91,969$
    89,566
    
    
    $
    120,902Current liabilities
    
    $
    7,458
    
    
    $
    6,772Long-term liabilities
    
    
    51,305
    
    
    
    86,301Equity
    
    
    30,803
    
    
    
    27,829$
    89,566
    
    
    $
    120,902
 (Restated)
    
    (Restated)2003
    
    2002
    
    2001(Thousands)Revenues
    
    $
    109,287
    
    
    $
    82,361
    
    
    $
    110,225Expenses
    
    
    (99,863
    )
    
    
    (92,036
    )
    
    
    (81,180
    )Net earnings (loss)
    
    $
    9,424
    
    
    $
    (9,675
    )
    
    $
    29,045Cash provided by (used in)Operating activities
    
    $
    36,810
    
    
    $
    13,142
    
    
    $
    39,804Investing activities
    
    
    (4,112
    )
    
    
    (4,716
    )
    
    
    (2,492
    )Financing activities
    
    
    (29,033
    )
    
    
    (16,013
    )
    
    
    (44,517
    )Increase (decrease) in cash during the year
    
    $
    3,665
    
    
    $
    (7,587
    )
    
    $
    (7,205
    )
   
  18.
    
    Kumtor Gold Company (KGC) Joint VentureOn May 26, 1994, Cameco, the Republic of Kyrgyzstan and Kyrgyzaltyn, an
instrumentality of the Republic, signed an amended joint venture master
agreement that provided for the exploration, development, operation and
arrangement of financing, of the Kumtor gold project by Cameco. KGC was
formed in the Republic of Kyrgyzstan as a joint stock company to hold the
assets of the Kumtor gold project pursuant to a master agreement among the
parties. Kyrgyzaltyn holds a two-thirds interest in KGC and Cameco holds a
one-third interest.Cameco has guaranteed the repayment of KGC senior debt and has purchased
political risk insurance to support the guarantee.Cameco has proportionately consolidated its one-third interest in KGC. 14




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##### 





FINANCIAL INFORMATION
   KGCs long-term debt at December 31, is as follows: 2003
    
    2002(Thousands)Senior debt (US dollar denominated): Commercial banks $17,000,000 (2002  $77,000,000) (US) repayable
in two remaining installments on December 1, 2004 $5,000,000 (US)
and June 1, 2005 $12,000,000 (US). Interest is based on LIBOR plus
an applicable percentage based on credit rating ranging from 0.8% to 1.55%.
    
    $
    21,971
    
    
    $
    121,629Subordinated debt (US dollar denominated): Shareholder loan from Cameco $61,037,000
(2002  $61,037,000) (US)
with interest based on LIBOR plus 6%, repayable in 12 equal semi-annual
installments of $8,953,000 (US) commencing on December 2, 1999. In
accordance with the terms of the loan agreement, certain installments have
been deferred amounting to $34,178,000 (2002  $16,272,000) (US)
    
    
    78,884
    
    
    
    96,414 EBRD $10,000,000 (2002  $10,000,000) (US)
    
    
    12,924
    
    
    
    15,796 IFC $10,000,000 (2002  $10,000,000) (US)
    
    
    12,924
    
    
    
    15,796The IFC and EBRD subordinated debt is repayable in four equal semi-annual
installments commencing on December 2, 2005, extendable at the option of
EBRD or IFC to commence no later than December 2, 2013. The interest rate
applicable to the EBRD and IFC subordinated debt is based on the cash generated
by the project subject to a minimum interest rate. The annualized rate for 2003
was approximately 16.8% (2002  4.6%).Total KGC debt
    
    $
    126,703
    
    
    $
    249,635
 Camecos one-third proportionate share of KGC senior debt is $7,324,000
(2002  $40,543,000) and of KGCs third party subordinated debt is
$8,616,000 (2002  $10,531,000) [note 6].
   
  19.
    
    Investment in Bruce Power L.P. (Bruce Power)  (a)
    
    InvestmentOn February 14, 2003, Cameco, TransCanada PipeLines Limited (TransCanada)
and BPC Generation Infrastructure Trust (BPC), amongst others, purchased a
79.8% interest in Bruce Power from British Energy plc (British Energy).
Upon closing, Cameco increased its ownership interest in Bruce Power from
15% to 31.6%. TransCanada and BPC each hold, directly or indirectly, a
31.6% interest in Bruce Power with the Power Workers Union Trust holding
a 4% interest and the Society of Energy Professionals Trust holding a 1.2%
interest. Cameco is using the equity method to account for this
investment.Camecos purchase price for the additional interest in Bruce
Power was approximately $204,466,000 including final closing adjustments.
The purchase price was initially financed with cash and debt. The purchase
price of Camecos incremental 16.6% has been allocated as follows:   (Thousands)Net book value of assets acquired
    
    $
    149,056Excess of fair value over book value of assets acquired
    
    
    144,545Valuation of Bruce Power sales agreements
    
    
    (68,593
    )Pension liability
    
    
    (20,542
    )$
    204,466
   15




---



##### 





FINANCIAL INFORMATION
   The amount allocated to the investment in Bruce Power includes an excess
purchase price of approximately $144,545,000 over Camecos incremental share of
the book value of the underlying net assets. This amount will be amortized to
income based on the expected useful life of the Bruce Power assets which
extends to 2018. The valuation of Bruce Power sales contracts will be amortized
to income over the remaining term of the underlying sales contracts, which
extend to 2007. The approximate amount of pre-tax income relating to the
amortization of the fair value allocated to these contracts is as follows: (Thousands)2003
    
    $
    20,0712004
    
    
    19,3412005
    
    
    13,1332006
    
    
    15,1922007
    
    
    856Total
    
    $
    68,593
 The amount allocated to the pension liability will be amortized to income
over the 11-year expected average remaining service life of Bruce Power
employees, resulting in an annual pre-tax amortization to income of
$1,867,000. In addition, Cameco, TransCanada and BPC loaned Bruce Power funds to repay
$225,000,000, plus accrued interest, in deferred lease payments to Ontario
Power Generation Inc. (OPG). Camecos share was $75,000,000 plus accrued
interest. This loan is due February 14, 2008 and bears interest at 10.5% per
annum. Bruce Power holds a long-term lease with OPG to operate the Bruce nuclear
power facility. The term of the lease, which expires in 2018 is 18 years with
an option to extend the lease for up to an additional 25 years. Cameco, TransCanada and BPC have assumed the obligations to provide financial
guarantees on behalf of the partnership. Cameco has provided the following
financial assurances, with varying terms that range from 2003 to 2018:  (i)
    
    Licensing assurances to Canadian Nuclear Safety Commission of
$88,000,000.(ii)
    
    Guarantees to customers under power sale agreements of up to
$127,171,000. At December 31, 2003, Camecos actual exposure under these
guarantees was $44,291,000.(iii)
    
    Termination payments to OPG pursuant to the lease agreement of
$58,333,000. Under the lease agreement, OPG, as the owner of the Bruce nuclear plants, is
responsible to decommission the Bruce facility and to provide funding and
meet other requirements that the Canadian Nuclear Safety Commission (CNSC)
may require of Bruce Power as licensed operator of the Bruce facility. OPG is
also responsible to manage radioactive waste associated with decommissioning
of the Bruce nuclear plants.
    (b)
    
    Fuel Supply AgreementsCameco has entered into fuel supply agreements with Bruce Power for the
procurement of fabricated fuel. Under these agreements, Cameco will supply
uranium and conversion services and finance the purchase of fabrication
services. Contract terms are at market rates and on normal trade terms.
During 2003, sales of uranium and conversion services to Bruce Power amounted
to approximately 3% of Camecos total revenue. At December 31, 2003, amounts
receivable under these agreements totalled $30,193,000 (2002  $18,349,000). 16




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##### 





FINANCIAL INFORMATION
  (c)
    
    Supplementary Information  Bruce Power L.P. (100%)Balance Sheets   2003
    
    2002(Millions)AssetsCurrent assets
    
    $
    290
    
    
    $
    232Property, plant and equipment
    
    
    2,032
    
    
    
    1,623Long-term receivables, and investments
    
    
    201
    
    
    
    214$
    2,523
    
    
    $
    2,069Liabilities and Partners CapitalCurrent liabilities
    
    $
    194
    
    
    $
    154Long-term debt
    
    
    1,244
    
    
    
    1,1151,438
    
    
    
    1,269Partners capital
    
    
    1,085
    
    
    
    800$
    2,523
    
    
    $
    2,069
 Statements of Earnings 2003
    
    2002
    
    2001(Millions)Revenue
    
    $
    1,208
    
    
    $
    919
    
    
    $
    599Operating costs
    
    
    853
    
    
    
    750
    
    
    
    471Earnings before interest and taxes
    
    
    355
    
    
    
    169
    
    
    
    128Interest
    
    
    69
    
    
    
    63
    
    
    
    41Earnings before taxes
    
    
    286
    
    
    
    106
    
    
    
    87Camecos share (i)
    
    
    77
    
    
    
    16
    
    
    
    13Adjustments (ii)
    
    
    31
    
    
    
    
    
    
    
    (1
    )Camecos share of earnings before taxes
    
    $
    108
    
    
    $
    16
    
    
    $
    12
  (i)
    
    Camecos interest in Bruce Power earnings prior to February 14, 2003 was
15%. Subsequent to the acquisition of an additional 16.6% interest on February
14, 2003, Camecos share is 31.6%.(ii)
    
    In addition to its proportionate share of earnings from Bruce Power,
Cameco records certain adjustments to account for any differences in accounting
policy and to amortize fair values assigned to assets and liabilities at the
time of acquisition.(iii)
    
    The comparative data for 2001 is for a 7.5-month period from May 12 to
December 31. Statements of Cash Flows 2003
    
    2002
    
    2001(Millions)Cash provided by operations
    
    $
    387
    
    
    $
    185
    
    
    $
    140Cash used in investing
    
    
    (528
    )
    
    
    (432
    )
    
    
    (445
    )Cash provided by financing
    
    
    131
    
    
    
    220
    
    
    
    370
   
  20.
    
    Stock Option PlanCameco has established a stock option plan under which options to purchase
common shares may be
granted to directors, officers and other employees of Cameco. Options
granted under the stock option plan have an exercise price of not less than
the closing price quoted on the Toronto Stock Exchange 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. Options granted prior to 1999 expire 10 years from the date of
the grant of the option. 17




---



##### 





FINANCIAL INFORMATION
   Prior to 1999, participants were eligible to receive loans from Cameco to
assist in the purchase of common shares pursuant to the exercise of options.
The maximum term of the loans was 10 years from the date of the grant of the
related option. The loans bear interest at a rate equivalent to the regular
dividends paid on the common shares to which the loans were provided. Common
shares purchased by way of a company loan are held in escrow in the account of
the option holder and are pledged as security for the respective loan until the
loan has been repaid in full. Outstanding loans are shown as a reduction of
share capital. The aggregate number of common shares that may be issued pursuant to the Cameco
stock option plan shall not exceed 5,243,403, of which 1,779,279 shares have
been issued. Stock option transactions for the respective years were as follows: 2003
    
    2002
    
    2001(Number of Shares)Beginning of year
    
    
    2,223,750
    
    
    
    2,195,783
    
    
    
    1,987,883Options granted
    
    
    706,350
    
    
    
    489,050
    
    
    
    482,850Options exercised [note 11]
    
    
    (783,550
    )
    
    
    (314,433
    )
    
    
    (159,000
    )Options cancelled
    
    
    (106,550
    )
    
    
    (146,650
    )
    
    
    (115,950
    )End of year
    
    
    2,040,000
    
    
    
    2,223,750
    
    
    
    2,195,783Exercisable
    
    
    954,100
    
    
    
    1,331,550
    
    
    
    1,362,983
 Upon exercise of certain existing options, additional options in respect of
184,550 shares would be granted. Weighted average exercise prices were as follows: 2003
    
    2002
    
    2001Beginning of year
    
    $
    38.98
    
    
    $
    37.34
    
    
    $
    38.72Options granted
    
    
    38.57
    
    
    
    43.88
    
    
    
    28.98Options exercised
    
    
    32.64
    
    
    
    28.90
    
    
    
    24.64Options cancelled
    
    
    58.06
    
    
    
    52.33
    
    
    
    43.52End of year
    
    $
    40.22
    
    
    $
    38.98
    
    
    $
    37.34Exercisable
    
    $
    43.80
    
    
    $
    41.41
    
    
    $
    44.09
 Total options outstanding and exercisable at December 31, 2003 were as follows: 2003
    
    
    
    
    
    Options Outstanding
    
    Options ExercisableWeighted
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    Average
    
    
    
    
    
    AverageOption Price
    
    
    
    
    
    Remaining
    
    Exercisable
    
    
    
    
    
    ExercisablePer Share
    
    Number
    
    Life
    
    Price
    
    Number
    
    Price$15.00-35.00
    
    
    538,400
    
    
    
    5
    
    
    $
    27.39
    
    
    
    387,300
    
    
    $
    26.8335.01-55.00
    
    
    1,311,000
    
    
    
    7
    
    
    
    40.59
    
    
    
    377,450
    
    
    
    46.0455.01-75.50
    
    
    190,600
    
    
    
    3
    
    
    
    73.93
    
    
    
    189,350
    
    
    
    74.04
   
  21.
    
    Stock-Based CompensationCICA Handbook Section 3870 establishes a fair-value based method of
accounting for stock-based compensation plans which Cameco has adopted with
retroactive effect to January 1, 2003.For the year ended December 31, 2003, Cameco has recorded compensation
expense of $2,439,000 with an offsetting credit to contributed surplus to
reflect the estimated fair value of stock options granted to employees in 2003. 18




---



##### 





FINANCIAL INFORMATION
   Cameco has applied the pro forma disclosure provisions of the standard to
awards granted on or after January 1, 2002 but prior to January 1, 2003. The
pro forma effect of awards granted prior to January 1, 2002 has not been
included. The pro forma net earnings attributable to common shares, basic and
diluted earnings per share after giving effect to the grant of these options in
2002 are: 2003
    
    2002Pro forma net earnings attributable to
common shares
    
    $
    203,233
    
    
    $
    41,303Pro forma basic earnings per share
    
    $
    3.62
    
    
    $
    0.74Pro forma diluted earnings per share
    
    $
    3.56
    
    
    $
    0.74
 The fair value of the options issued was determined using the Black-Scholes
option pricing model with the following assumptions: 2003
    
    2002Number of options granted
    
    
    706,350
    
    
    
    489,050Average strike price
    
    $
    38.62
    
    
    $
    43.84Dividend
    
    $
    0.60
    
    
    $
    0.50Expected volatility
    
    
    20%
    
    
    
    20%Risk-free interest rate
    
    
    4.1%
    
    
    
    5.0%Expected life of option
    
    5 years
    
    
    5 yearsExpected forfeitures
    
    
    10%
    
    
    
    17%Weighted average grant date fair values
    
    $
    8.14
    
    
    $
    10.83
   
  22.
    
    Pension and Other Post-Retirement BenefitsCameco maintains both defined benefit and defined contribution plans
providing pension and post-retirement benefits to substantially all of its
employees.Pension PlansThe pension expense for Camecos defined contribution plans was $5,348,000
(2002  $4,989,000; 2001  $4,411,000). The status of defined benefit
pensions plans are as follows:   2003
    
    2002(Thousands)Accrued Benefit ObligationBalance at beginning of year
    
    
    $14,595
    
    
    $
    13,330Current service cost
    
    
    806
    
    
    
    743Interest cost
    
    
    984
    
    
    
    835Actuarial gain
    
    
    (483
    )
    
    
    Benefits paid
    
    
    (522
    )
    
    
    (313
    )Balance at end of year
    
    $
    15,380
    
    
    $
    14,595Plan AssetsFair value at beginning of year
    
    $
    10,684
    
    
    $
    10,915Actual return on plan assets
    
    
    711
    
    
    
    (528
    )Employer contributions
    
    
    10,885
    
    
    
    610Benefits paid
    
    
    (522
    )
    
    
    (313
    )Fair value at end of year
    
    $
    21,758
    
    
    $
    10,684Funded status
    
    $
    6,378
    
    
    $
    (3,911
    )Unamortized net actuarial loss
    
    
    1,887
    
    
    
    2,670Unamortized transitional obligation
    
    
    2,365
    
    
    
    3,058Accrued pension benefit asset
    
    $
    10,630
    
    
    $
    1,817
   19




---



##### 





FINANCIAL INFORMATION
   Significant actuarial assumptions used in calculating the net pension expense
for Camecos funded plans were as follows: 2003
    
    2002Discount rate
    
    
    6.5
    %
    
    
    6.0
    %Long-term rate of return on assets
    
    
    7.0
    %
    
    
    8.0
    %Rate of increase in compensation levels
    
    
    4.5
    %
    
    
    4.5
    %
 Net pension expense for the defined benefit pension plans has been determined
as follows: 2003
    
    2002
    
    2001(Thousands)Cost of benefits earned by employees
    
    $
    806
    
    
    $
    743
    
    
    $
    743Interest cost on benefits earned
    
    
    984
    
    
    
    835
    
    
    
    998Expected return on pension plan
assets, net
    
    
    (601
    )
    
    
    (443
    )
    
    
    (885
    )Net amortization
    
    
    883
    
    
    
    752
    
    
    
    694Net pension expense
    
    
    $2,072
    
    
    $
    1,887
    
    
    $
    1,550
 Other Post-Retirement Benefits Cameco provides post-retirement benefits to substantially all employees. The
costs are accrued over the expected service lives of employees. No funding is
provided. The status of the plan is as follows: 2003
    
    2002(Thousands)Accrued Benefit ObligationBalance at beginning of year
    
    $
    4,092
    
    
    $
    3,809Current service cost
    
    
    129
    
    
    
    147Interest cost
    
    
    206
    
    
    
    230Actuarial gain
    
    
    (952
    )
    
    
    Benefits paid
    
    
    (86
    )
    
    
    (94
    )Accrued post-retirement benefit
liability
    
    $
    3,389
    
    
    $
    4,092
   
  23.
    
    Property and Business Acquisitions  (a)
    
    AGR LimitedOn March 5, 2002, Cameco acquired a 52% interest in AGR Limited (AGR). AGR
is an Australia-based exploration company whose principal asset is a 95%
interest in the Boroo gold deposit located in Mongolia. The purchase price
was financed with $12,000,000 (US) in cash and the contribution of a
neighboring property. In exchange, AGR issued 240 million shares to
Cameco. The acquisition was accounted for using the purchase method and
the results of operations are included in Camecos consolidated financial
statements from the effective date of the purchase.The values assigned to the net assets acquired are as follows:   (Thousands)Cash and other working capital
    
    $
    13,845Property, plant and equipment
    
    
    27,054Minority interest
    
    
    (18,981
    )Net assets acquired
    
    $
    21,918Financed by:Cash
    
    $
    19,562Property, at carrying value
    
    
    2,356$
    21,918
 Subsequent to the acquisition, Cameco provided an additional $3,000,000 (US) of
further exploration in the area in exchange for an incremental 4% interest in
AGR (43 million shares), increasing its total interest to 56% at December 31,
2002.
   20




---



##### 



FINANCIAL INFORMATION




| | (b) |  | Smith Ranch                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | On July 22, 2002, Cameco acquired the assets comprising the Smith Ranch in
situ leach (ISL) operation and various other ISL properties from Rio Algom
Mining LLC. In exchange for these assets, Cameco assumed the
decommissioning liabilities associated with the Smith Ranch operation. At
the acquisition date, the value of the liabilities was estimated to be
$9,157,000 (US). Cameco also secured forward sales commitments for more
than 900,000 pounds of uranium concentrates. The acquisition was accounted
for using the purchase method and the results of operations are included
in Camecos consolidated financial statements from the effective date of
the purchase.
|
| | (c) |  | UEX Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |     |  | On July 18, 2002, Cameco acquired a 35.3% ownership interest in UEX
Corporation (UEX); a company traded on the Toronto Stock Exchange (TSX).
The principal assets of UEX consist of several uranium exploration
properties located in the Athabasca region of Northern Saskatchewan. In
acquiring this interest, Cameco transferred its Hidden Bay exploration
properties to UEX in exchange for approximately 31 million shares. In
addition, Cameco purchased another 2 million shares at a price of $0.25
per share.                                                                                                                                                               
|
| |     |  | In 2002, Cameco recorded a gain of $2,670,000 on the transfer of its
Hidden Bay properties to UEX. The equity method is being used to account
for this investment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    






|24. |  | Commitments and Contingencies
|--- |  | -----------------------------
|   




| | (a) |  | An action against Cameco, Cameco Gold Inc., Kumtor Operating Company and
certain other parties commenced in a Canadian court by certain dependants of
nine persons seeking damages, in the amount of $20,700,000 plus interest and
costs, and punitive damages, in connection with the death of the said nine
persons in a helicopter accident in Kyrgyzstan on October 4, 1995, is
continuing. This action is being defended by the insurers of Cameco.
Management is of the opinion, after review of the facts with counsel, that
the outcome of this action will not have a material financial impact on
Camecos financial position, results of operations or liquidity.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | An action against Cameco was filed by Oren Benton on November 28, 2000
in the State of Colorado, U.S.A.. The action alleges breach of contract and
tortious interference and sets forth a claim for purported damages in excess
of $200,000,000 (US). Camecos motion to dismiss was granted by order filed
November 15, 2002 and Mr. Bentons claim was
dismissed. Mr. Benton has appealed this decision. The appeal was heard on November
20, 2003 and judgment was reserved.                                                                                                                                                                                             
|
| |     |  | Management is of the opinion, after
review of the facts with counsel, that the claim is completely without
merit and that the outcome of this action will not have a material
financial impact on Camecos financial position, results of operations or
liquidity.                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | (c) |  | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |  |  | At December 31, 2003, Camecos purchase commitments, the majority of which
are fixed-price uranium and conversion purchase arrangements, were as
follows:
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

(Millions (US))2004
    
    $
    1132005
    
    
    1282006
    
    
    1452007
    
    
    1442008
    
    
    131Thereafter
    
    
    454Total
    
    $
    1,115


21



---



##### 





FINANCIAL INFORMATION
 
 
  25.
    
    Financial Instruments The majority of revenues are derived from the sale of uranium products.
Camecos financial results are closely related to the long- and short-term
market price of uranium sales and conversion services. Prices fluctuate and
can be affected by demand for nuclear power, worldwide production and
uranium inventory levels, and political and economic conditions in uranium
producing and consuming countries. Revenue from gold operations is largely
dependent on the market price of gold, which can be affected by political
and economic factors, industry activity and the policies of central banks
with respect to their levels of gold held as reserves. Financial results are
also impacted by changes in foreign currency exchange rates, interest rates
and other operating risks.To hedge risks associated with fluctuations in the market price for uranium,
Cameco seeks to maintain a portfolio of uranium sales contracts with a
variety of delivery dates and pricing mechanisms that provide a degree of
protection from price volatility. Cameco employs a number of financial
instruments to hedge risks associated with gold prices and foreign currency
exchange rates. Put and call options are used to establish a minimum and
maximum price range for gold sales and exchange rates for cash flows
denominated in a foreign currency. Cameco also enters into forward sales
contracts to establish a price for future deliveries of gold and US dollars.
Net realized gains (losses) on contracts designated as hedges are recorded
as deferred revenues (deferred charges) and recognized in earnings when the
related hedged transactions occur.Cameco also uses instruments such as swaps, puts and calls and forward rate
agreements to manage funding costs and reduce the impact of interest rate
volatility.Financial assets that are subject to credit risks include cash and
securities, accounts receivable and commodity and currency instruments.
Cameco mitigates credit risk on these financial assets by holding positions
with a variety of large creditworthy institutions. Sales of uranium, with
short payment terms, are made to customers that management believes are
creditworthy.Except as disclosed below, the fair market value of Camecos
financial assets and financial liabilities approximates net book value as a
result of the short-term nature of the instrument or the variable interest
rate associated with the instrument.Currency 
  At December 31, 2003, Cameco had hedged $457,300,000 (US) at an average spot
exchange rate of $1.41 designated to various dates through 2008 as follows: (Thousands)2004
    
    $
    257,3002005
    
    
    190,0002006
    
    
    60,0002007
    
    
    10,0002008
    
    
    (60,000
    )Total
    
    $
    457,300
    These hedge positions consist entirely of spot-deferred forward contracts. The
average exchange rate reflects contract prices as at December 31, 2003 to their
initial maturity date which is earlier than the designation date in many cases.
The realized exchange rate will depend on the forward premium (discount) that
is earned (paid) as hedge contracts are extended to their final designation
date.At December 31, 2003, Camecos net mark-to-market gain on these foreign
currency instruments was $51,060,000 (Cdn).Timing differences between the
usage and designation of hedge contracts may result in deferred revenue or
deferred charges. At December 31, 2003, deferred revenue to be recognized
totalled $24,487,000. 22




---



##### 





FINANCIAL INFORMATION
  Interest 
 At December 31, 2003, Cameco had in place $85,000,000 (Cdn) of interest rate
swaps whereby Cameco receives fixed interest rates ranging from 3.0% to 6.1%.
These positions are designated over various dates maturing as follows:  (Thousands)2005
    
    $
    32,5002006
    
    
    22,5002007
    
    
    2008
    
    
    30,000Total
    
    $
    85,000
   At December 31, 2003, Camecos net mark-to-market gain on these interest rate
swaps was $1,964,000 (Cdn).Commodity 
 At December 31, 2003, Camecos share of gold hedging positions have been
designated against deliveries as follows:  ForwardsAverage PriceOunces
    
    (US$/oz)2004
    
    
    134,000
    
    
    $
    3202005
    
    
    91,000
    
    
    
    3122006
    
    
    59,000
    
    
    
    3112007
    
    
    9,000
    
    
    
    309293,000
    
    
    $
    315
   Average prices reflect contract prices as at December 31, 2003 to their initial
maturity date which is earlier than the designation date in many cases.Timing differences between the usage and designation of hedge contracts may
result in deferred revenue or deferred charges. At the end of 2003, Camecos
share of deferred charges to be recognized totalled $1,816,000 (US).From the initial maturity date to the designation date contract prices are
expected to accrue contango. The rate of contango earned will depend on the
difference between future US interest rates and gold lease rates.At December 31, 2003, the net mark-to-market loss on the above instruments was
$20,199,000 (US).Gold Commitment 
 As of December 31, 2003, Cameco agreed to provide credit support to a maximum
of $130 (US) per ounce to the counterparties of KGC and AGR. At December 31,
2003, Camecos maximum financial exposure under these arrangements based on
outstanding commitments was $56,613,000 (US) (2002  $60,724,000 (US)).At December 31, 2003, Camecos actual exposure under these arrangements,
including its share of the net mark-to-market losses mentioned above, was
$45,938,000 (US) (2002  $37,838,000). 23




---



##### 





FINANCIAL INFORMATION
 
  26.
    
    Per Share Amounts 
 Per share amounts have been calculated based on the weighted average number
of common shares outstanding during the year net of shares held as security
for employee loans to purchase such shares. The weighted average number of
paid shares outstanding in 2003 was 56,119,557 (2002  55,780,978; 2001 
55,398,552).  (Restated)
    
    (Restated)2003
    
    2002
    
    2001(Thousands)Basic earnings per share computationEarnings available to common shareholders
    
    $
    204,686
    
    
    $
    43,523
    
    
    $
    56,087Weighted average common shares outstanding
    
    
    56,120
    
    
    
    55,781
    
    
    
    55,399Basic earnings per common share
    
    $
    3.65
    
    
    $
    0.78
    
    
    $
    1.01Diluted earnings per share computationEarnings available to common shareholders
    
    $
    204,686
    
    
    $
    43,523
    
    
    $
    56,087Dilutive effect of:Convertible debentures
    
    
    2,290
    
    
    
    
    
    
    
    Earnings available to common shareholders, assuming dilution
    
    $
    206,976
    
    
    $
    43,523
    
    
    $
    56,087Weighted average common shares outstanding
    
    
    56,120
    
    
    
    55,781
    
    
    
    55,399Dilutive effect of:Convertible debentures
    
    
    950
    
    
    
    
    
    
    
    Stock options
    
    
    649
    
    
    
    35
    
    
    
    203Other stock-based arrangements
    
    
    34
    
    
    
    24
    
    
    
    16Weighted average common shares outstanding, assuming
dilution
    
    
    57,753
    
    
    
    55,840
    
    
    
    55,618Diluted earnings per common share
    
    $
    3.58
    
    
    $
    0.78
    
    
    $
    1.01
    Options whose exercise price was greater than the average market price were
excluded from the calculation. 
  27.
    
    Segmented Information 
 Cameco has four reportable segments: uranium, conversion, gold and power.
The uranium segment involves the exploration for, mining, milling, purchase
and sale of uranium concentrate. The conversion segment involves the
refining and conversion of uranium concentrate and the purchase and sale of
conversion services. The gold segment involves the exploration for, mining,
milling and sale of gold. The power 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 summary of
significant accounting policies. 24




---



##### 





FINANCIAL INFORMATION
   (a) Business Segments (i)
    
    
    
    
    
    (i)2003
    
    Uranium
    
    Conversion
    
    Gold
    
    Power
    
    Subtotal
    
    Adjustments
    
    Total(millions)Revenue
    
    $
    570.3
    
    
    $
    142.4
    
    
    $
    114.2
    
    
    $
    371.9
    
    
    $
    1,198.8
    
    
    $
    (371.9
    )
    
    $
    826.9ExpensesProducts and services sold
    
    
    394.6
    
    
    
    92.0
    
    
    
    52.2
    
    
    
    228.2
    
    
    
    767.0
    
    
    
    (228.2
    )
    
    
    538.8Depreciation, depletion
and reclamation
    
    
    92.1
    
    
    
    10.9
    
    
    
    21.5
    
    
    
    34.6
    
    
    
    159.1
    
    
    
    (34.6
    )
    
    
    124.5Exploration
    
    
    13.3
    
    
    
    
    
    
    
    8.7
    
    
    
    
    
    
    
    22.0
    
    
    
    
    
    
    
    22.0Research & development
    
    


    
    
    
    1.7
    
    
    


    
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    1.7Other
    
    
    (0.4
    )
    
    
    
    
    
    


    
    
    
    1.2
    
    
    
    0.8
    
    
    
    (1.2
    )
    
    
    (0.4
    )Earnings from Bruce Power
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107.9
    )
    
    
    (107.9
    )Non-segmented expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51.6Earnings before income taxes
    
    
    70.7
    
    
    
    37.8
    
    
    
    31.8
    
    
    
    107.9
    
    
    
    248.2
    
    
    
    
    
    
    
    196.6Income tax expense (recovery)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16.0
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3.4
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    216.0Preferred securities charges,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.0Convertible debenture charges,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.3Net earnings attributable to
common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    204.7Assets
    
    $
    2,294.8
    
    
    $
    180.3
    
    
    $
    346.1
    
    
    $
    992.3
    
    
    $
    3,813.5
    
    
    $
    (454.1
    )
    
    $
    3,359.4Capital expenditures for the year
    
    $
    65.2
    
    
    $
    6.0
    
    
    $
    87.1
    
    
    $
    156.5
    
    
    $
    314.8
    
    
    $
    (156.5
    )
    
    $
    158.3
 (i)
    
    
    
    
    
    (i)2002(restated)
    
    Uranium
    
    Conversion
    
    Gold
    
    Power
    
    Subtotal
    
    Adjustments
    
    Total(millions)Revenue
    
    $
    523.7
    
    
    $
    137.4
    
    
    $
    87.2
    
    
    $
    137.8
    
    
    $
    886.1
    
    
    $
    (137.8
    )
    
    $
    748.3ExpensesProducts and services sold
    
    
    345.1
    
    
    
    82.7
    
    
    
    58.3
    
    
    
    100.7
    
    
    
    586.8
    
    
    
    (100.7
    )
    
    
    486.2Depreciation, depletion
and reclamation
    
    
    85.6
    
    
    
    11.1
    
    
    
    20.2
    
    
    
    13.8
    
    
    
    130.7
    
    
    
    (13.8
    )
    
    
    116.9Exploration
    
    
    11.8
    
    
    
    
    
    
    
    9.7
    
    
    
    
    
    
    
    21.5
    
    
    
    
    
    
    
    21.5Research & development
    
    


    
    
    
    2.3
    
    
    


    
    
    
    
    
    
    
    2.3
    
    
    
    
    
    
    
    2.3Other
    
    
    (0.2
    )
    
    
    
    
    
    
    1.8
    
    
    
    7.5
    
    
    
    9.1
    
    
    
    (7.5
    )
    
    
    1.6Gain on property interests
    
    
    (2.7
    )
    
    
    
    
    
    


    
    
    
    
    
    
    
    (2.7
    )
    
    
    
    
    
    
    (2.7
    )Earnings from Bruce Power
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15.8
    )
    
    
    (15.8
    )Non-segmented expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39.2Earnings before income taxes
    
    
    84.1
    
    
    
    41.3
    
    
    
    (2.8
    )
    
    
    15.8
    
    
    
    138.4
    
    
    
    
    
    
    
    99.2Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47.3Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.9
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52.8Preferred securities charges,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.3Net earnings attributable to
common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    43.5Assets
    
    $
    2,309.8
    
    
    $
    177.6
    
    
    $
    349.2
    
    
    $
    321.6
    
    
    $
    3,158.2
    
    
    $
    (190.4
    )
    
    $
    2,967.8Capital expenditures for the year
    
    $
    55.5
    
    
    $
    6.9
    
    
    $
    27.8
    
    
    $
    64.8
    
    
    $
    123.1
    
    
    $
    (64.8
    )
    
    $
    90.2
   25




---



##### 





FINANCIAL INFORMATION
   (i)
    
    
    
    
    
    (i)2001(restated)
    
    Uranium
    
    Conversion
    
    Gold
    
    Power
    
    Subtotal
    
    Adjustments
    
    Total(millions)Revenue
    
    $
    471.4
    
    
    $
    114.4
    
    
    $
    115.0
    
    
    $
    89.9
    
    
    $
    790.7
    
    
    $
    (89.9
    )
    
    $
    700.8ExpensesProducts and services sold
    
    
    298.0
    
    
    
    72.0
    
    
    
    52.1
    
    
    
    63.9
    
    
    
    486.0
    
    
    
    (63.9
    )
    
    
    422.1Depreciation, depletion
and reclamation
    
    
    87.7
    
    
    
    12.8
    
    
    
    28.9
    
    
    
    7.7
    
    
    
    137.1
    
    
    
    (7.7
    )
    
    
    129.3Exploration
    
    
    10.1
    
    
    
    
    
    
    
    8.1
    
    
    
    
    
    
    
    18.2
    
    
    
    
    
    
    
    18.2Research & development
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    2.1Other
    
    
    (0.6
    )
    
    
    
    
    
    


    
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    (0.6
    )Earnings from Bruce Power
    
    


    
    
    
    
    
    
    


    
    
    
    6.1
    
    
    
    6.1
    
    
    
    (6.1
    )
    
    
    (12.2
    )Non-segmented expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34.2Earnings before income taxes
    
    
    76.2
    
    
    
    27.5
    
    
    
    25.9
    
    
    
    12.2
    
    
    
    141.9
    
    
    
    
    
    
    
    107.6Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42.2Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65.4Preferred securities charges,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.3Net earnings attributable to
common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    56.1Assets
    
    $
    2,389.2
    
    
    $
    171.0
    
    
    $
    326.5
    
    
    $
    262.6
    
    
    $
    3,149.3
    
    
    $
    (180.6
    )
    
    $
    2,968.7Capital expenditures for the year
    
    $
    51.1
    
    
    $
    4.8
    
    
    $
    2.4
    
    
    $
    17.0
    
    
    $
    75.3
    
    
    $
    (17.0
    )
    
    $
    58.3
 (i) Consistent with the presentation of financial information for internal
management purposes, Camecos pro rata share of Bruce Powers financial results
have been presented as a separate segment. In accordance with GAAP, this
investment is accounted for by the equity method of accounting in these
consolidated financial statements and the associated revenues and expenses are
eliminated in the adjustments column.
    (b)
    
    Geographic Segments   (Restated)
    
    (Restated)2003
    
    2002
    
    2001(Millions)Revenue from products and
servicesCanada   domestic
    
    $
    40.2
    
    
    $
    62.8
    
    
    $
    50.1 export
    
    
    337.5
    
    
    
    381.6
    
    
    
    413.3United States
    
    
    335.0
    
    
    
    216.7
    
    
    
    122.4Central Asia
    
    
    114.2
    
    
    
    87.2
    
    
    
    115.0$
    826.9
    
    
    $
    748.3
    
    
    $
    700.8AssetsCanada
    
    $
    2,833.0
    
    
    $
    2,436.1
    
    
    $
    2,486.8United States
    
    
    180.3
    
    
    
    191.6
    
    
    
    182.2Central Asia
    
    
    346.1
    
    
    
    340.1
    
    
    
    299.7$
    3,359.4
    
    
    $
    2,967.8
    
    
    $
    2,968.7
    (c)
    
    Major CustomersCameco relies on a small number of customers to purchase a significant
portion of its uranium concentrates and uranium conversion services. During
2003, revenues from one customer of Camecos
uranium and conversion segments represented approximately $97,000,000 (14%)
of Camecos total revenues. In 2002, revenues from one customer of Camecos
uranium and conversion segments represented approximately $92,000,000 (14%)
of Camecos total revenues. In 2001, revenues from one customer of Camecos
uranium and conversion segments represented approximately $84,000,000 (12%)
of total revenue. As customers are relatively few in number, accounts
receivable from any individual customer may periodically exceed 10% of
accounts receivable depending on delivery schedules. 26




---



##### 





FINANCIAL INFORMATION
   
  28.
    
    Subsequent Event  (a)
    
    On January 5, 2004 Cameco Corporation and the Kyrgyz government
announced an agreement to transfer all of Kumtor Gold Company (KGC), the
owner of the Kumtor gold mine in the Kyrgyz Republic, to a new jointly owned
Canadian company called Centerra Gold Inc. (Centerra). In conjunction with
its acquisition of KGC and Camecos other gold assets, Centerra intends to
undertake a public offering (IPO) in Canada. Cameco expects to hold a
majority interest in Centerra following the IPO.(b)
    
    On February 27, 2004, Cameco, through one of its wholly owned US
subsidiaries, signed an agreement to purchase a 25.2% interest in assets
comprising the South Texas Project (STP) from a wholly owned subsidiary of
American Electric Power (AEP) for $333 million (US). STP consists primarily
of two 1,250 megawatt (MW) nuclear power plants located in Texas. These two
units were commissioned in 1988 and 1999 and are licensed until 2027 and
2028. The interest which Cameco intends to purchase is subject to a right of
first refusal in favour of the current participants for a period of 90 days.
The transaction is expected to close in the second half of 2004 and, based
on current operating performance and market conditions, would have a
positive impact on net earnings and for 2004. Cameco does not expect to
finance the acquisition with debt and is looking at various options,
including issuing equity. 
  29.
    
    Comparative FiguresCertain prior year balances have been reclassified to conform to the current
financial statement presentation. 
  30.
    
    Generally Accepted Accounting Principles in Canada and the United StatesThe consolidated financial statements of Cameco are expressed in Canadian
dollars in accordance with Canadian generally accepted accounting principles
(Canadian GAAP). The following adjustments and disclosures would be required
in order to present these consolidated financial statements in accordance
with accounting principles generally accepted in the United States (US
GAAP).  (a)
    
    Reconciliation of earnings in accordance with Canadian GAAP to earnings
determined in accordance with US GAAP:   2003
    
    2002
    
    2001(Thousands)Net earnings under Canadian GAAP
    
    $
    216,006
    
    
    $
    52,863
    
    
    $
    65,412Adjustment to reverse Canadian GAAP restatement (viii)
    
    
    
    
    
    
    2,597
    
    
    
    (191
    )Net earnings applicable to US GAAP
    
    $
    216,006
    
    
    $
    55,460
    
    
    $
    65,221Add (deduct) adjustments for:Interest on preferred securities and convertible debentures (i)
    
    
    (19,186
    )
    
    
    (17,238
    )
    
    
    (17,268
    )Capitalized interest (ii)
    
    
    
    
    
    
    3,768
    
    
    
    Depreciation and depletion (iii)
    
    
    2,579
    
    
    
    2,579
    
    
    
    2,895Mineral property costs (iv)
    
    
    (6,047
    )
    
    
    (6,188
    )
    
    
    (6,806
    )Pre-operating costs (v)
    
    
    (200
    )
    
    
    (2,578
    )
    
    
    (6,232
    )Hedges and derivative instruments (vi)
    
    
    12,304
    
    
    
    1,928
    
    
    
    1,810Realization of cumulative translation account (vii)
    
    
    
    
    
    
    (1,585
    )
    
    
    (3,273
    )Earnings from Bruce Power (v) (vi)
    
    
    (13,938
    )
    
    
    (12,481
    )
    
    
    Income tax effect of adjustments
    
    
    10,121
    
    
    
    14,116
    
    
    
    14,542Net earnings before cumulative effect of a change in
accounting principle
    
    
    201,640
    
    
    
    37,781
    
    
    
    50,889Cumulative effect of a change in accounting principle (viii)
    
    
    10,683
    
    
    
    
    
    
    
    Net earnings under US GAAP
    
    
    212,323
    
    
    
    37,781
    
    
    
    50,889Hedges and derivative instruments (vi)
    
    
    29,508
    
    
    
    (6,203
    )
    
    
    (22,253
    )Foreign currency translation adjustments
    
    
    (32,309
    )
    
    
    859
    
    
    
    1,509Unrealized loss on available-for-sale securities (ix)
    
    
    (1,058
    )
    
    
    (334
    )
    
    
    (8,300
    )Comprehensive income under US GAAP
    
    $
    230,932
    
    
    $
    32,103
    
    
    $
    21,845Basic net earnings per share under US GAAP
    
    $
    3.78
    
    
    $
    0.68
    
    
    $
    0.92Diluted earnings per share under US GAAP
    
    $
    3.72
    
    
    $
    0.68
    
    
    $
    0.92
   27




---



##### 





FINANCIAL INFORMATION
  (b)
    
    Comparison of balance sheet items determined in accordance with
Canadian GAAP to balance sheet items determined in accordance with US GAAP:(i) Balance Sheets   2003
    
    (Restated)
    2002Canadian
    
    US
    
    Canadian
    
    USGAAP
    
    GAAP
    
    GAAP
    
    GAAP(Thousands)
    
    (Thousands)Current assets
    
    $
    678,278
    
    
    $
    672,340
    
    
    $
    650,043
    
    
    $
    644,105Property, plant and equipment
    
    
    2,072,156
    
    
    
    808,483
    
    
    
    2,060,250
    
    
    
    750,628Mineral interests and other intangibles (x)
    
    
    
    
    
    
    1,225,804
    
    
    
    
    
    
    
    1,250,365Long-term receivables, investments and other
    
    
    608,977
    
    
    
    593,520
    
    
    
    257,523
    
    
    
    237,013Total assets
    
    $
    3,359,411
    
    
    $
    3,300,147
    
    
    $
    2,967,816
    
    
    $
    2,882,111Current liabilities
    
    $
    197,841
    
    
    $
    188,983
    
    
    $
    171,377
    
    
    $
    167,258Long-term debt
    
    
    238,707
    
    
    
    623,173
    
    
    
    218,290
    
    
    
    412,053Provision for reclamation
    
    
    150,444
    
    
    
    150,444
    
    
    
    159,344
    
    
    
    155,036Other liabilities (vi)
    
    
    36,196
    
    
    
    22,097
    
    
    
    9,523
    
    
    
    57,999Deferred income taxes
    
    
    501,674
    
    
    
    487,388
    
    
    
    530,625
    
    
    
    485,4471,124,862
    
    
    
    1,472,085
    
    
    
    1,089,159
    
    
    
    1,277,793Minority interest
    
    
    14,690
    
    
    
    14,690
    
    
    
    18,078
    
    
    
    18,078Shareholders equityPreferred securities
    
    
    158,022
    
    
    
    
    
    
    
    193,763
    
    
    
    Convertible debentures
    
    
    226,444
    
    
    
    
    
    
    


    
    
    
    Share capital
    
    
    708,345
    
    
    
    708,345
    
    
    
    680,934
    
    
    
    680,934Contributed surplus
    
    
    474,927
    
    
    
    474,927
    
    
    
    472,488
    
    
    
    472,488Retained earnings
    
    
    665,377
    
    
    
    597,219
    
    
    
    494,341
    
    
    
    418,546Accumulated other comprehensive income cumulative translation account
    
    
    (13,256
    )
    
    
    7,966
    
    
    
    19,053
    
    
    
    40,275 available-for-sale securities (ix)
    
    
    
    
    
    
    23,864
    
    
    
    
    
    
    
    2,454 hedges and derivative instruments (vi)
    
    


    
    
    
    1,051
    
    
    


    
    
    
    (28,457
    )2,219,859
    
    
    
    1,813,372
    
    
    
    1,860,579
    
    
    
    1,586,240Total liabilities and shareholders equity
    
    $
    3,359,411
    
    
    $
    3,300,147
    
    
    $
    2,967,816
    
    
    $
    2,882,111
  (ii) Components of accounts payable and accrued liabilities are as follows: 2003
    
    2002Canadian
    
    US
    
    Canadian
    
    USGAAP
    
    GAAP
    
    GAAP
    
    GAAP(Thousands)
    
    (Thousands)Accounts payable
    
    $
    120,436
    
    
    $
    120,436
    
    
    $
    84,906
    
    
    $
    84,906Taxes and royalties payable
    
    
    29,444
    
    
    
    29,444
    
    
    
    26,340
    
    
    
    22,221Accrued liabilities
    
    
    7,650
    
    
    
    7,650
    
    
    
    20,686
    
    
    
    20,686Total accounts payable and
accrued liabilities
    
    $
    157,530
    
    
    $
    157,530
    
    
    $
    131,932
    
    
    $
    127,813
   28




---



##### 





FINANCIAL INFORMATION
  (c)
    
    The effects of these adjustments would result in the consolidated
statements of cash flows reporting the following under US GAAP:   2003
    
    2002
    
    2001(Thousands)Cash provided by operations
    
    $
    224,540
    
    
    $
    231,184
    
    
    $
    95,568Cash used in investing
    
    $
    (441,540
    )
    
    $
    (72,006
    )
    
    $
    (127,306
    )Cash provided by (used in)
financing
    
    $
    242,973
    
    
    $
    (134,819
    )
    
    $
    32,344
    (d)
    
    A description of certain significant differences between Canadian GAAP and
US GAAP follows:(i) Preferred Securities and Convertible DebenturesThese instruments are classified as equity under Canadian GAAP and interest
payments, on an after-tax basis, are classified as distributions of equity.
Under US GAAP, they are classified as debt and interest payments are included
in interest expense.(ii) Capitalized InterestCamecos policy under both Canadian GAAP and US GAAP is to capitalize
interest on expenditures related to construction of development projects
actively being prepared for their intended use. Under US GAAP, a portion of
the interest on the preferred securities, classified as debt under US GAAP,
would be capitalized to development properties.(iii) Writedown of Mineral PropertiesUnder both Canadian and US GAAP, property, plant and equipment must be
assessed for potential impairment. In 2003 there is no longer any difference
in the calculation of an impairment loss between Canadian and US GAAP.
However, as a result of previous differences in the amounts of impairment
losses recognized under US and Canadian GAAP, there is a difference in the
amount of depreciation and depletion charged to earnings.(iv) Mineral Property CostsConsistent with Canadian GAAP, Cameco defers costs related to mineral
properties once the decision to proceed to development has been made. Under
US GAAP, these costs are expensed until such time as a final feasibility
study has confirmed the existence of a commercially mineable deposit.(v) Pre-Operating CostsUnder Canadian GAAP, pre-operating costs incurred during the commissioning
phase of a new project are deferred until commercial production levels are
achieved. After such time, those costs are amortized over the estimated life
of the project. Under US GAAP, such costs are expensed as incurred as
required by AICPA Statement of Position 98-5, Reporting on the Cost of
Start-Up Activities. In 2000, these costs related to the production of
uranium concentrates at the McArthur River mine and were charged to product
inventory. Portions of this product inventory were sold in each of the years.During 2003, $17,917,000 (2002  $8,628,000) of costs related to the restart
of two nuclear reactors at Bruce Power were considered to be startup costs
required to be expensed under US GAAP.(vi) Hedges and Derivative InstrumentsDuring 2003, $12,304,000 was excluded from the assessment of hedge
effectiveness. For amounts included in the balance sheet as accumulated other
comprehensive income as at December 31, 2003, a gain of $250,000 (after tax)
relates to the hedging of interest rate risk, a loss of $18,971,000 (after
tax) relates to the hedging of gold price risk, and a gain of $38,625,000
(after tax) relates to the hedging of foreign exchange rate risk. Of these
amounts, $14,890,000 (after tax) would be recorded in earnings during 2004 if
market conditions remained unchanged. The impact on other comprehensive
income for 2003 is $26,107,000 after consideration of the reversal of the
2002 amounts described below. During 2003, no net gains or losses from the
hedging of net investments were realized.During 2002, $1,928,000 was excluded from the assessment of hedge
effectiveness. For amounts included in other comprehensive income as at
December 31, 2002, a gain of $277,000 (after tax) relates to the hedging of
interest rate risk, 29




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FINANCIAL INFORMATION
  a loss of $18,076,000 (after tax) relates to the hedging of gold price risk,
and a loss of $10,658,000 (after tax) relates to the hedging of foreign
exchange rate risk. During 2002, no net gains or losses from the hedging of
net investments were realized.Prior to July, 2003, $3,979,000 of gains related to Bruce Power energy
contracts did not qualify for hedge accounting under US GAAP as the
documentation required for hedge accounting was not contemplated at the time
of entering into the contracts. The impact on other comprehensive income for
2003 is $3,401,000.(vii) Realization of Cumulative Translation AccountUnder Canadian GAAP, a proportionate amount of the cumulative translation
account is recognized in earnings when a portion of the net investment in a
subsidiary is realized. US GAAP does not allow for any of the cumulative
translation account to be taken to earnings unless a portion of the
investment has been sold or substantially liquidated.(viii) Cumulative Effect of a Change in Accounting PolicyIn 2001, the FASB issued Statement 143, Accounting for Asset Retirement
Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. The standard applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and use of the asset.
Statement 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if
a reasonable estimate of fair value can be made. The fair value is added to
the carrying amount of the associated asset. The liability is accreted at the
end of each period through charges to operating expenses.For Canadian GAAP, the cumulative effect of the change in policy on the
balance sheet at December 31, 2002 is to increase property, plant and
equipment by $23 million, future income taxes by $8 million, liabilities by
$4 million and opening retained earnings by $11 million. Under US GAAP no
restatement is required.(ix) Available-for-Sale SecuritiesUnder Canadian GAAP, portfolio investments are accounted for using the cost
method. Under US GAAP, portfolio investments classified as available-for-sale
securities are carried at market values with unrealized gains or losses
reflected as a separate component of shareholders equity and included in
comprehensive income. Camecos investments in Energy Resources of Australia
Ltd., Batavia Mining Ltd. (formerly Menzies Gold NL) and Tenke Mining Corp.
are classified as available-for-sale. The fair market value of these
investments at December 31, 2003 was $41,428,000 (2002  $20,018,000). The
cumulative unrealized gain at December 31, 2003 was $23,864,000.(x) Mineral Interests and Other Intangible AssetsUnder US GAAP, acquisition costs associated with mining interests are
classified according to the land tenure position. Costs associated with owned
mineral claims and mining leases where the company does not own the
underlying land are classified as definite life intangible assets and
amortized over the period of intended use.For mineral claims with proven and probable reserves, amortization is taken
on a unit of production basis resulting in no charge during the exploration
and development phases.(e)
    
    Stock-Based CompensationStatement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation establishes financial accounting and reporting
standards for stock-based employee compensation plans. This statement defines
a fair-value based method of accounting for employee stock options. However,
it also allows an entity to continue to measure compensation cost for those
plans using the intrinsic value based method of accounting prescribed by APB
Opinion No. 25, which is similar to the method applied under Canadian GAAP
and followed by Cameco prior to 2003. For periods prior to adoption,
companies that continue to follow the intrinsic value based method must
disclose pro-forma earnings and earnings per share information under the
fair-value method. 30




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FINANCIAL INFORMATION
  Cameco has adopted the fair-value method of accounting for employee stock
options with retroactive effect to January 1, 2003. Pursuant to new
transitional rules related to accounting for stock-based compensation under
Canadian GAAP, Cameco chose to record compensation expense for all employee
stock options granted on or after January 1, 2003 with a corresponding increase
to contributed surplus. Compensation expense for options granted during 2003 is
determined based on the estimated fair values at the time of grant, the cost of
which is recognized over the vesting periods of the respective options. This
change in accounting policy has increased expenses by $2,439,000 in 2003.Cameco has applied the pro forma disclosure provisions of the standard to
awards granted prior to January 1, 2003. The pro forma net earnings
attributable to common shares, basic and diluted earnings per share after
giving effect to the grant of these options are:   2003
    
    2002
    
    2001(Thousands)Net earnings for the year in accordance
with US GAAP as calculated above
    
    $
    212,323
    
    
    $
    37,781
    
    
    $
    50,889Effect of recording compensation
expense under stock options plans
    
    
    (2,027
    )
    
    
    (3,991
    )
    
    
    (4,168
    )Pro-forma net earnings after application
of SFAS 123
    
    $
    210,296
    
    
    $
    33,790
    
    
    $
    46,721Pro-forma basic net earnings per common
share after application of SFAS 123
    
    $
    3.75
    
    
    $
    0.61
    
    
    $
    0.84Pro-forma diluted net earnings per common
share after application of SFAS 123
    
    $
    3.68
    
    
    $
    0.61
    
    
    $
    0.84
 In calculating the foregoing pro-forma amounts, the fair value of each option
grant was estimated as of the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions: 2002
    
    2001Dividend
    
    $
    0.50
    
    
    $
    0.50Expected volatility
    
    
    20.0%
    
    
    
    39.6%Risk-free interest rate
    
    
    5.0%
    
    
    
    5.5%Expected life of option
    
    5 years
    
    
    8 yearsExpected forfeitures
    
    
    17.0%
    
    
    
    20.0%
    (f)
    
    New Accounting PronouncementsIn 2002, the FASB issued Financial Interpretation 45 (FIN 45) that requires
the recognition of a liability for the fair value of certain guarantees that
require payments contingent on specified types of future events. The
measurement standards of FIN 45 are applicable to guarantees entered into
after January 1, 2003. For guarantees that existed at December 31, 2003, FIN
45 requires additional disclosures which have been included in these
financial statements to the extent applicable to Cameco.During 2003, the
FASB issued Financial Interpretation 46 Revised (FIN 46 Revised) that
requires the consolidation of certain entities that are controlled through
financial interests that indicate control (referred to as variable
interests). Variable interests are the rights or obligations that convey
economic gains or losses from changes in the values of the entitys assets
and liabilities. The holder of the majority of an entitys variable interests
will be required to consolidate the variable interest entity. This change has
not had any impact on these consolidated financial statements. 31




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FINANCIAL INFORMATION
 
 Summary of Significant Accounting Policies   The consolidated financial statements are prepared by management in accordance
with Canadian generally accepted accounting principles and, except as described
in note 30, conform in all material respects with accounting principles
generally accepted in the United States. Management makes various estimates and
assumptions in determining the reported amounts of assets and liabilities,
revenues and expenses for each year presented, and in the disclosure of
commitments and contingencies. The most significant estimates are related to
the lives and recoverability of mineral properties, provisions for
decommissioning and reclamation of assets, future income taxes, financial
instruments and mineral reserves. Actual results could differ from these
estimates. This summary of significant accounting policies is a description of
the accounting methods and practices that have been used in the preparation of
these consolidated financial statements and is presented to assist the reader
in interpreting the statements contained herein. Consolidation Principles The consolidated financial statements include the accounts of Cameco and its
subsidiaries. Interests in joint ventures are accounted for by the
proportionate consolidation method. Under this method, Cameco includes in its
accounts its proportionate share of assets, liabilities, revenues and expenses. Cash Cash consists of balances with financial institutions and investments in money
market instruments which have a term to maturity of three months or less. Inventories Inventories of broken ore, uranium concentrates and refined and converted
products are valued at the lower of average cost and net realizable value. Supplies Consumable supplies and spares are valued at the lower of cost or replacement
value. Investments Investments in associated companies over which Cameco has the ability to
exercise significant influence are accounted for by the equity method. Under
this method, Cameco includes in earnings its share of earnings or losses of the
associated company. Portfolio investments are carried at cost or at cost
 less amounts written off to reflect a decline in value that is other than
temporary. Property, Plant and Equipment Assets are carried at cost. Costs of additions and improvements are
capitalized. When assets are retired or sold, the resulting gains or losses are
reflected in current earnings. Maintenance and repair expenditures are charged
to cost of production. The carrying values of property, plant and equipment are
periodically assessed by management and if management determines that the
carrying values cannot be recovered, the unrecoverable amounts are written off
against current earnings. Non-Producing Properties The decision to develop a mine property within a project area is based on an
assessment of the commercial
viability of the property, the availability of financing and the existence of
markets for the product. Once the decision to proceed to development is made,
development and other expenditures relating to the project area are deferred
and carried at cost with the intention that these will be depleted by charges
against earnings from future mining operations. No depreciation or depletion is
charged against the property until commercial production commences. After a
mine property has been brought into commercial production, costs of any
additional work on that property are expensed as incurred, except for large
development programs, which will be deferred and depleted over the remaining
life of the related assets. The carrying values of non-producing properties are periodically assessed by
management and if management determines that the carrying values cannot be
recovered, the unrecoverable amounts are written off against current earnings. Property Evaluations Cameco reviews the carrying values of its properties when changes in
circumstances indicate that those carrying values may not be recoverable.
Estimated future net cash flows are calculated using estimated recoverable
reserves, estimated future commodity prices and the expected future operating
and capital costs. An impairment loss is recognized when the carrying value of
an asset held for use exceeds the sum of undiscounted future net cash flows. An
impairment loss is measured as the amount by which the assets carrying amount
exceeds its fair value.
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FINANCIAL INFORMATION
  Future Income Taxes Future income taxes are recognized for the future income tax consequences
attributable to differences between the carrying values of assets and
liabilities and their respective income tax bases. Future income tax assets and
liabilities are measured using enacted income tax rates expected to apply to
taxable income in the years in which temporary differences are expected to be
recovered or settled. The effect on future income tax assets and liabilities of
a change in rates is included in earnings in the period which includes the
enactment date. Future income tax assets are recorded in the financial
statements if realization is considered more likely than not. Capitalization of Interest Interest is capitalized on expenditures related to construction or development
projects actively being prepared for their intended use. Capitalization is
discontinued when the asset enters commercial operation or development ceases. Depreciation and Depletion Conversion services assets, mine buildings, equipment and mineral properties
are depreciated or depleted according to the unit-of-production method. This
method allocates the costs of these assets to each accounting period. For
conversion services, the amount of depreciation is measured by the portion of
the facilities total estimated lifetime production that is produced in that
period. For mining, the amount of depreciation or depletion is measured by the
portion of the mines economically recoverable proven and probable ore reserves
which are recovered during the period. Other assets are depreciated according to the straight-line method based on
estimated useful lives, which generally range from three to 10 years. Research and Development and Exploration Costs Expenditures for applied research and technology related to the products and
processes of Cameco and expenditures for geological exploration programs are
charged against earnings as incurred. Environmental Protection and Reclamation Costs The fair value of the liability for an asset retirement obligation is
recognized in the period incurred. The fair value is added to the carrying
amount of the associated asset and depreciated over the assets useful life.
The liability is accreted over time through periodic charges to earnings and it
is reduced by actual costs of decommissioning and reclamation. Camecos
estimates of reclamation costs could change as a result of changes in
 regulatory requirements and cost estimates. Expenditures relating to ongoing
environmental programs are charged against earnings as incurred or capitalized
and depreciated depending on their relationship to future earnings. Employee Future Benefits Cameco accrues its obligations under employee benefit plans. The cost of
pensions and other retirement benefits earned by employees is actuarially
determined using the projected benefit method pro-rated on service and
managements best estimate of expected plan investment performance, salary
escalation, retirement ages of employees and expected health-care costs. For
the purpose of calculating the expected return on plan assets, those assets are
measured at fair value. Past service costs arising from plan amendments and net
actuarial gains and losses are amortized on a straight-line basis over the
expected average remaining service life of the plan participants. Stock-Based Compensation Cameco has a stock option plan that is described in note 20. Options granted
under the plan on or after January 1, 2003 are accounted for using the
fair-value method. Under this method, the compensation cost of options granted
is measured at estimated fair value at the grant date and recognized over the
vesting period. For options granted under the stock option plan prior to January 1, 2003, no
compensation expense was recognized when the stock options were granted. Any
consideration paid on exercise of stock options is credited to share capital. Cameco accounts for other stock-based compensation arrangements in accordance
with the fair-value method of accounting. Revenue Recognition Cameco supplies uranium concentrates and uranium conversion services to utility
customers. Third party fabricators process Camecos products into fuel for use
in nuclear reactors. Cameco records revenue on the sale of its nuclear products to utility customers
when title to the product transfers and delivery is effected through book
transfer. Since nuclear products must be stored at licensed storage facilities,
Cameco may hold customer-owned product at its premises prior to shipment of the
product to third parties for further processing. Cameco records revenue on the
sale of gold when title passes and delivery is effected.
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FINANCIAL INFORMATION
  Amortization of Financing Costs Debt discounts and issue expenses associated with long-term financing are
deferred and amortized over the term of the issues to which they relate. Foreign Currency Translation Monetary assets and liabilities denominated in foreign currencies are
translated into Canadian dollars at year-end rates of exchange. Revenue and
expense transactions denominated in foreign currencies are translated into
Canadian dollars at rates in effect at the time of the transactions. The
applicable exchange gains and losses arising on these transactions are
reflected in earnings. Foreign currency gains or losses arising on translation of long-term monetary
items with a fixed or ascertainable life beyond the end of the following fiscal
year are deferred and amortized to earnings over the remaining life of the
item. The United States dollar is considered the functional currency of most of
Camecos uranium and gold operations outside of Canada. The financial
statements of these operations are translated into Canadian dollars using the
current-rate method whereby all assets and liabilities are translated at the
year-end rate of exchange and all revenue and expense items are translated at
the average rate of exchange prevailing during the year. Exchange gains and
losses arising from this translation, representing the net unrealized foreign
currency translation gain (loss) on Camecos net investment in these foreign
operations, are recorded in the cumulative translation account component of
shareholders equity. Exchange gains or losses arising from the translation of
foreign debt and preferred securities designated as hedges of a net investment
in foreign operations are also recorded in the cumulative translation account
component of shareholders equity. These adjustments are not included in
earnings until realized through a reduction in Camecos net investment in such
operations. Derivative Financial Instruments and Hedging Transactions Cameco uses derivative financial and commodity instruments to reduce exposure
to fluctuations in foreign currency exchange rates, interest rates and
commodity prices. Cameco formally documents all relationships between hedging
instruments and hedged items, as well as its risk management objective and
strategy for undertaking various hedge transactions. This process includes
linking all derivatives to specific assets and liabilities on the balance sheet
or to specific firm commitments or forecasted transactions. Cameco also
formally assesses, both at the hedges inception and on an ongoing basis,
whether the derivatives that are used in hedging transactions are highly
 effective in offsetting changes in fair values or cash flows of hedged items.
Gains and losses related to hedging items are deferred and recognized in the
same period as the corresponding hedged items. If derivative financial
instruments are closed before planned delivery, gains or losses are recorded as
deferred revenue or deferred charges and recognized on the planned delivery
date. In the event a hedged item is sold, extinguished or matures prior to the
termination of the related hedging instrument, any realized or unrealized gain
or loss on such derivative instrument is recognized in earnings. Per Share Amounts Per share amounts are calculated using the weighted average number of paid
common shares outstanding.
   34