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EXHIBIT 3

Cameco Corporation

2002 Managements Discussion and Analysis





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(CONFIDENT LOGO)

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Contents
 OverviewCamecos vision and mission statements
    
    
    2Camecos business
    
    
    2Corporate StrategyManagements strategy
    
    
    3The Year in ReviewOperating highlights
    
    
    4Consolidated financial highlights
    
    
    5Business Segments and Corporate ExpensesUranium business
    
    
    6Conversion business
    
    
    7Electricity business
    
    
    8Gold business
    
    
    8Corporate expenses
    
    
    9Cash and LiquidityCash resources
    
    
    9Liquidity and capital resources
    
    
    10MarketsUranium market review
    
    
    12Trends in the nuclear power industry
    
    
    13Ontario electricity market review
    
    
    14Update on uranium supplies
    
    
    15Gold market review
    
    
    15Business RisksRisks and uncertainties
    
    
    16The FutureOutlook for 2003
    
    
    19Supplementary InformationCritical accounting policies
    
    
    21Caution Regarding Forward-Looking Information
    
    
    22Subsequent Event
    
    
    23


Overview
This section includes the companys vision
and mission statements. The nature of
Camecos business lines are described
including the types and locations of
operations and the key financial drivers. Corporate Strategy
This section discusses how management
plans to generate value by leveraging the
companys
strengths and competencies in its
business environment. The Year in Review
The important corporate developments for the
year are discussed. A review of the
consolidated financial highlights completes
the section. Business Segments and Corporate Expenses
This section provides a detailed
explanation of the financial results
achieved by Cameco during the year in its
four business segments. Corporate expenses
(administration expenses, interest costs
and income taxes) incurred to support the
companys operations are also reviewed. Cash and Liquidity
This discussion provides insight into the
companys ability to generate cash flow and
the areas to which cash is directed to
achieve business objectives. Markets
To facilitate understanding of Camecos
business environment, this section provides
a review of conditions and trends in the
uranium and gold markets into which the
company sells its products and services.
Also a review of the Ontario electricity
market discusses trends and their potential
impact on Bruce Power. Business Risks
This section outlines certain risks in
the companys business environment and
how Cameco manages those risks. The Future
This section outlines current key business
conditions, trends and risks that are
expected to affect the operating results
and the financial health of the company.




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MANAGEMENTS DISCUSSION AND ANALYSIS









Introduction This MD&A complements the
companys consolidated
financial statements which
have been prepared in
accordance with Canadian
GAAP and stated in Canadian
dollars, unless otherwise
noted.


World Electricity Generation
 Nuclear energy accounts for 16% of the worlds electricity generation avoiding the emission of up to 2.3 billion tonnes of carbon dioxide annually.
 (GENERATION PIE CHART)






Overview Camecos Vision Cameco seeks to be a
dominant nuclear energy
company producing uranium
fuel and generating clean
electricity. Camecos Mission Our core business is
uranium fuel supply.
Through our nuclear
investments we participate
in the generation of clean
energy, and we achieve
diversity through gold. Sustainable growth is
realized by building upon
our core business strengths
through socially,
environmentally and
economically responsible
conduct. In doing so, we
will enhance our status as
an investment, supplier and
employer of choice, and
continue to earn the support
of the communities where we
interact. The key measures of our
success will be a healthy
workplace, a clean
environment and supportive
communities wherever we
operate, together with
solid financial
performance, all reflected
in a growing return to
shareholders. Camecos Business Camecos core business is
uranium fuel supply. The
company is a leading
supplier of uranium
concentrates and uranium
conversion services and is
a limited partner in North
Americas largest nuclear
electricity generating
facility, Bruce Power.
Cameco also operates a
large gold mine in Central
Asia and is developing
another gold mine in
Mongolia.


Cameco is the worlds
largest uranium
concentrates supplier.
The companys competitive
position is based upon its
large high-grade reserves
and low-cost operations.
Cameco mines uranium in
Canada and the United
States, has a test mine in
Kazakhstan, and sells
uranium concentrates (U3O8)
from these and other
sources. Camecos uranium
concentrates are
undifferentiated from those
sold by its competitors.
Camecos U3O8 is sold
primarily through long-term
contracts negotiated
between the company and its
electric utility customers.
Uranium is not traded on
any commodities exchange. The company operates two
uranium conversion plants
in Canada. Conversion is a
process whereby U3O8 is
purified and converted into
uranium hexafluoride
(UF6), an intermediate compound in
the production of fuel for
light water reactors, or
into natural uranium
dioxide (UO2), which is
used as fuel for heavy
water reactors. The company is also a producer of gold. The most significant
factors affecting the
financial performance of
Cameco are:  
 
 the market
prices for U3O8, conversion
services, gold and
electricity,  
 
 sales
volumes for uranium and
conversion services, gold
and electricity,  
 
 foreign
exchange rates between the
Canadian and US dollars,
and  
 
 the unit costs of
production.


Uranium is the fuel used by
nuclear reactors to
generate electricity. More
than 430 reactors operate
in 31 countries and account
for about 16% of the
worlds electricity. The
US, which generates about
20% of its electricity
using nuclear reactors, is
the worlds largest market
for
nuclear products and
services and accounts for
about 35% of the western
worlds uranium
consumption. The International Energy
Agency in its World Energy
Outlook 2002 forecasts
global demand for
electricity to grow at an
annual rate of 2.4%, faster
than the total demand for
energy. Annual growth in
uranium demand is expected
to remain at about 1% over
the next 10 years as
capacity uprates,
improvements in existing
reactors and new reactor
startups are offset by
closures of older generating
units.  Western World Market
(million lbs U3O8)
 In each of the last three years, world mine production supplied only about 60% of the uranium required by western world reactors.
 (MARKET BAR GRAPH)




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MANAGEMENTS DISCUSSION AND ANALYSIS









Supplies of uranium are
provided by primary
production centres such as
Camecos mines, and
secondary sources such as
excess utility and
government inventories
including material derived
from the dismantling of
Russian nuclear weapons.
The western world consumes
about 154 million pounds of
U3O8 annually and, in 2002,
approximately 60% of this
consumption came from world
primary mine production,
continuing the trend of
underproduction and
inventory drawdown that has
persisted for more than a
decade. Corporate Strategy Managements Strategy Strengths and core competencies
Camecos strategies are
built upon strengths and
core competencies that it
believes
are significant and
sustainable. These include: Large, low-cost diversified
reserves, and prime
exploration properties and
expertise
The Saskatchewan uranium
deposits at McArthur River
and Cigar Lake are unique
with their large reserves
and high grades. Combined,
these reserves contain
more energy than all of
Canadas established
conventional oil reserves. New uranium deposits will
be required to satisfy
forecast demand. Cameco
has a significant land
position in both
Saskatchewans Athabasca
Basin and Australias
Arnhem Land, two very
prospective areas for
uranium. Coupled with this
land position, the company
has years of exploration
expertise and is well
placed to discover
significant new resources. An ability to offer
integrated fuel supply
Utilities often contract
for their uranium
requirements at each stage
of the fuel supply chain.
Unlike most of its


competitors, Cameco has
the ability to deliver a
combination of uranium
concentrates and uranium
conversion services.
Strategic alliances also
allow us to participate in
offers of enriched uranium
and, in the case of Bruce
Power, to provide fuel
procurement services. This
vertical integration and
diversity of sources makes
Cameco a preferred
supplier with an advantage
over non-integrated
competitors. A significant market position
Cameco supplies about 20%
of
the western worlds uranium
and conversion
requirements. This allows
Cameco to assess evolving
market conditions in most
regions of the world; serve
our customers changing
requirements through
inventories and flexible
production sources; and
influence the market
through intervention
strategies, which involve
the use of our market
position to purchase
significant quantities of
uranium from others at
favourable prices. A low-cost producer of
nuclear electricity
Camecos 31.6% interest in
Bruce Power Limited
Partnership (Bruce Power)
allows the company to
expand its uranium and
conversion market share and
add value through the use
of the energy content of
this fuel to produce
low-cost electricity for
about 15% of the Ontario
market. Superior financial position
Cameco enjoys
consistently strong cash
flows, a conservative
financial structure and
an investment-grade
credit rating. Key Strategies With these core
competencies, Cameco sees
a number of opportunities
to create value with
acceptable levels of risk. Uranium and Conversion
Growth Strategies Cameco intends to continue
optimizing its production
at the lowest cost.Cameco
is one of the lowest


cost uranium producers in
the world. The company and
its employees continually
seek ways
to reduce costs to maintain
Camecos competitive
advantage over the long
term. Cameco intends to increase
its supply flexibility,to
support its market
leadership role. Diversity
of supply is an important
consideration for many
customers. In 2002, Cameco
acquired the Smith Ranch in
situ leach (ISL) operation
in Wyoming and merged it
with its nearby Highland
operation. During 2003,
test mining will continue
at the Inkai ISL
development project in
Kazakhstan. Cameco and its
partners have been pursuing
a construction licence for
the Cigar Lake mine located
in Saskatchewan. Further
diversity of supply is
available through Camecos
access to highly enriched
uranium (HEU) material
under the US/Russia HEU
weapons dismantling
agreement and through
purchases and co-operative
marketing arrangements with
others. Cameco plans to increase its reserves.
This strategy is being
pursued through exploration
programs, currently focused
in Canada and Australia,
and through the acquisition
of attractive properties.
Since reserves take up to
20 years to bring into
production, it is essential
to plan for the long term.  Customer Countries
 Cameco sells uranium and conversion services to companies located in 17 countries around the globe.
 (CUSTOMER COUNTRIES)




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MANAGEMENTS DISCUSSION AND ANALYSIS









Cameco intends to continue
to strategically manage its
product supply to the
market.This is achieved
through production
management, tactical market
purchases and the exercise
of options to purchase
uranium from HEU. Cameco plans to maximize UF6
production capability.In
2001, a British competitor
ceased marketing conversion
services and announced its
intention to stop production
and deliveries in 2006. As
the number of conversion
suppliers decreases, Cameco
plans to improve its
refining and conversion
capacity utilization and
looks to increase plant
capacity and market share. Cameco intends to actively
serve the UO2 market.
Cameco plans to maintain
and enhance its role as a
reliable supplier of UO2 to
Candu reactors in Canada,
Korea and elsewhere. To summarize, in the area
of uranium mining and
conversion, Cameco intends
to expand market share
where profitable and lower
costs to increase value
from its market-leading
assets. Vertical Integration Strategies With the cash flows
generated from its assets
supplemented by accessing
capital markets, as
appropriate, Cameco will
focus on achieving
profitable vertical
integration in areas related
to its core business. Cameco intends to build
upon its partnership in
Bruce Power.In February
2003, Cameco closed an
agreement, along with
its partners, to
purchase 79.8% of Bruce
Power from British
Energy plc. This
expanded Camecos
ownership in Bruce Power
to 31.6% from 15%. Cameco believes its
experience with Bruce Power
can be applied to other
situations where partnering
with customers presents
attractive opportunities.
Quality projects and
partners will be essential
to any potential Cameco
participation.


Cameco plans to examine
other fuel-cycle
opportunities.The company
plans to pursue
opportunities along the
nuclear fuel supply chain
that may arise downstream
in enrichment or fuel
fabrication. Gold Strategies Cameco intends to obtain
full value from its gold
assets.Cameco believes
these assets are
under-valued in a nuclear
energy company. Camecos
goal is to obtain
recognition for the
considerable value
generated by its
investments in gold and
their future prospects. To
this end, the company
acquired a majority
interest in AGR Limited
(AGR) in 2002. The company
is seeking to consolidate
its gold assets. Following
the recent rise in gold
prices, the evaluation of
available options for asset
consolidation has taken
longer than previously
anticipated. In February 2003, Cameco
announced that the company
and the Kyrgyz government
had agreed in principle to
restructure the Kumtor mine
ownership. The proposed
restructuring envisions an
exchange of assets between
the parties wherein Cameco
would ultimately hold all
common shares of Kumtor Gold
Company (KGC), the owner of
the Kumtor mine. The
government would realize a
more predictable revenue
stream, obtain additional
tax proceeds, and benefit
from higher gold prices
through royalties. This
proposal also contemplates
that the Kumtor mine would
eventually be part of a
publicly traded gold company
established by Cameco. Conclusion to Management
Strategies Cameco will use its strong
cash flows to pursue
growth of shareholder
value in areas related to
its core business. If
Cameco cannot deploy these
funds in businesses with
attractive risk/reward
profiles, it will return
cash to its shareholders
by means that may include
share buybacks and/or
increased


dividends. In
2002, Cameco announced a
20% increase in its annual
dividend beginning in
2003. The Year in Review Operating Highlights A number of operational
events and developments
in 2002 were significant
in the ongoing
implementation of
Camecos strategic plan. Uranium
A strategic goal of Cameco
is to reduce its uranium
production costs and to
diversify its sources of
supply. The acquisition of
the Smith Ranch ISL uranium
mine and various other ISL
properties in Wyoming from
Rio Algom Mining LLC in
July 2002 was
beneficial in both
respects. Cameco merged the
Smith Ranch mine with its
adjacent Highland mining
operation, achieving cost
savings and increasing its
production presence in the
companys largest market,
the US. In Kazakhstan, test mining
on the companys large
Inkai deposit continued
successfully. The
companys experience with
its US-based ISL mines is
being utilized at Inkai. The restart of mining at
Camecos Rabbit Lake
uranium operation in
northern Saskatchewan did
not go as smoothly as
planned due to equipment
problems and poor ground
conditions. By year-end,
most major difficulties
had been overcome. The majority of Camecos
uranium was mined and
milled at McArthur River
and Key Lake. At these
important sites,
continued productivity
improvements, cost
reductions and ISO 14001
certification, one of the
most internationally
recognized standards for
environmental management
systems, were attained.
Maximum production
permitted by licence was
achieved.




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MANAGEMENTS DISCUSSION AND ANALYSIS









Conversion
Camecos uranium
conversion business showed
significant productivity
and cost improvements,
primarily due to volume
increases. In March 2002,
the companys Blind River
uranium refinery received
certification under ISO
14001. Electricity
In February 2003, Cameco,
along with others,
purchased 79.8% of Bruce
Power from
British Energy plc, which
held an 82.4% interest.
The Power Workers Union
and The Society of Energy
Professionals obtained
the remaining 2.6%. As part of the agreement,
Cameco invested
approximately $209 million,
to purchase an additional
16.6% interest in Bruce
Power, bringing its total
interest to 31.6%. Also at
the closing, Cameco paid $75
million representing its
one-third share of $225
million in deferred Bruce
Power rental payments to
Ontario Power Generation
Inc. (OPG). Following the
closing, Camecos total
commitment in financial
assurances is estimated to
be approximately $200
million, related to the
operating licence from the
Canadian Nuclear Safety
Commission (CNSC), the lease
with OPG, and the power
purchase agreements with
large industrial customers.
Discussion of the operations
and prospects of Bruce Power
are included elsewhere in
this MD&A.


the discovery of
high-grade gold
mineralization at its REN
project in northern Nevada.
These developments add to
the scale and potential
value of Camecos gold
holdings. The failure of a pit wall
in July 2002 at the Kumtor
mine in Kyrgyzstan severely
curtailed production, but
this reduction is temporary
and no reserves were
believed lost as a result
of the accident. Net earnings for 2002 were
reduced by $27 million as
a result of the incident
at Kumtor. Management Transition
Cameco management underwent
an important transition at
year-end, with the
appointment of Gerald
Grandey as CEO succeeding
Bernard Michel. Mr. Michel
has guided Cameco for
nearly 14 years and will
remain as chair of Cameco
until March 31, 2003. Mr.
Grandey has been a senior
officer of Cameco since
1993. In addition, Terry
Rogers was appointed senior
vice-president and chief
operating officer, and
George Assie was named
senior vice-president,
marketing and business
development. Mr. Assie has
been with Cameco since 1981
and Mr. Rogers has been
with Camecos subsidiary,
Kumtor Operating Company,
since 1999.


Dividends
In December, the company
announced its first
dividend increase, to $0.60
per share annually from
$0.50. Cameco has never
missed a dividend payment
since it went public in
1991. Safety
Cameco, along with its
subsidiaries and long-term
contractors, achieved a
combined accident frequency
of 0.27 lost-time accidents
per 200,000 person hours
worked, which was slightly
higher than last years
company record of 0.22.
This accident frequency
compares favourably to the
1.3 and 1.6 frequencies
recorded by the Ontario and
Saskatchewan mining
industries respectively.
Unfortunately, the life of
a mineworker was lost in
the July Kumtor pit wall
failure in Kyrgyzstan. Consolidated Financial Highlights Consolidated Earnings
In 2002, net earnings
attributable to common
shares were $46 million
($0.83 per share), a
decrease of $10 million
compared to $56 million
($1.01 per share) in 2001.
The decline was
attributable to the gold
business where after-tax
earnings declined by $27
million due to the failure
of the pit wall at Kumtor
in July 2002. Earnings






The four Bruce B reactors were all in
service entering 2003. Together with the
scheduled restart of two Bruce A reactors
before mid-2003, Cameco expects a
significant financial contribution this year
from the generation of nuclear electricity.
The additional investment in Bruce Power
has allowed Cameco to expand its
presence in the nuclear generation market
more quickly than it had expected. Gold
In the gold business, Cameco acquired a
majority interest in March 2002 in AGR
which owns 95% of the Boroo gold deposit located
in Mongolia. The Boroo
property is currently being
developed by Cameco. In
November, the company announced


Consolidated Financial Highlights
 ($ millions except where otherwise noted)
    
    2002
    
    
    2001
    
    
    % changeRevenue
    
    
    748
    
    
    
    701
    
    
    
    7Earnings from operations
    
    
    89
    
    
    
    95
    
    
    
    (6
    )Net earnings1
    
    
    46
    
    
    
    56
    
    
    
    (18
    )Cash provided by operations
    
    
    251
    
    
    
    116
    
    
    
    116ProductionUranium concentrates (million lbs U3O8)
    
    
    15.9
    
    
    
    18.8
    
    
    
    (15
    )Uranium conversion (million kgU)
    
    
    12.4
    
    
    
    11.0
    
    
    
    13Electricity generation (terawatt hours)
    
    
    3.1
    
    
    
    2.3
    2
    
    
    34Gold (thousand oz)
    
    
    176
    
    
    
    251
    
    
    
    (30
    )
 1
    
    Attributable to common shares.2
    
    For period May 12, 2001 to December 31, 2001.




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MANAGEMENTS DISCUSSION AND ANALYSIS









were also impacted by higher
costs for administration,
exploration and income
taxes. These unfavourable
factors were partially
offset by improved results
in the uranium and
conversion businesses where
gross profits rose due
primarily to increased
volumes. In 2002,
Cameco achieved record
delivery levels for its
uranium products and
conversion services.
Camecos share of earnings
from Bruce Power also
improved, rising to $16
million from $12 million in
2001. For 2002, the
effective tax rate increased
to 47% from 39% in 2001 as a
higher proportion of pre-tax
income was earned in the
uranium and conversion
businesses and there was
minimal tax relief from the
pre-tax loss in the gold
segment. Earnings from operations
were $89 million for 2002
compared to $95 million in
2001. The aggregate gross
profit margin declined to
20% from 21% in 2001. Cash Flow In 2002, cash provided by
operating activities was a
record $251 million,
representing an increase of
$135 million compared to
$116 million in 2001. This
increase largely reflects
reduction of accounts
receivable, higher sales
volumes, and a reduction in
uranium inventories. Inventories At the end of 2002, total
product inventories
amounted to $340 million,
$14 million or 4% lower
than the previous year-end.
There was a reduction in
the quantity of uranium
inventory during the year
as record deliveries
exceeded production and
purchases.


acquisition of
an additional interest in
Bruce Power this ratio rose
to 19%. Business Segments and Corporate Expenses Uranium Business Camecos uranium business
consists of the McArthur
River, Key Lake and Rabbit
Lake mine/mill operations in
Saskatchewan, two ISL mines
in the US, the Inkai ISL
test mine in Kazakhstan, the
Cigar Lake development
project in Saskatchewan
(currently in the licensing
phase) and uranium
exploration, primarily in
Canada and Australia. Revenue
In 2002, revenue from the
uranium business rose by
11% to $524 million from
$471 million in 2001 due to
an 11% increase in sales
volume. During the year,
Cameco delivered a record
quantity of uranium
concentrates. Compared to
2001, the average realized
selling price for uranium
concentrates increased only
marginally even though the
spot price averaged $9.86
(US) compared to $8.77 (US)
in 2001. The positive
influence of the spot
market increase was offset
by a lower average realized
price on fixed-price
contracts. Cost of products and services
sold
In 2002, the cost of
products and services sold
was $345 million compared
to $298 million in 2001, an
increase of


Nuclear Revenue
(by market region)
 The US, Camecos largest customer region, accounts for 52% of the companys total nuclear revenue.
 (REVENUE PIE GRAPH) 16% due to the higher sales
volume and a 5% increase in
the average unit cost of
product sold. The unit cost
rose due to a higher
proportion of sales of
purchased material and
higher care and maintenance
expenses at Rabbit Lake,
which were $8 million
compared to $6 million in
2001. Partially offsetting
these
increases was a reduced
unit cost for McArthur
River production which
benefited from increased
mine and mill operating
efficiencies. Depreciation, depletion and reclamation
In 2002, depreciation,
depletion and reclamation
(DD&R) charges were $83
million, a decrease of $3
million compared to $86
million in 2001. In spite of
higher sales volume, total
DD&R declined due to the
higher proportion of sales
of






Debt At the end of 2002, total
outstanding debt amounted to
$225 million, a decrease of
$129 million compared to
$354 million at the end of
2001. The net debt to
capitalization ratio
declined to 8% from 15% in
2001. In February 2003, with
the


Uranium Business Financial Highlights
 2002
    
    
    2001
    
    
    % changeProduction
(million lbs U3O8)
    
    
    15.9
    
    
    
    18.8
    
    
    
    (15
    )Revenue ($ millions)
    
    
    524
    
    
    
    471
    
    
    
    11Gross profit ($ millions)
    
    
    96
    
    
    
    88
    
    
    
    9Gross profit (%)
    
    
    18
    
    
    
    19
    
    
    
    (5
    )Earnings before taxes ($ millions)
    
    
    87
    
    
    
    78
    
    
    
    12




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MANAGEMENTS DISCUSSION AND ANALYSIS









Uranium Operating Highlights


(100% basis except where noted otherwise)

McArthur River/Key Lake*
    
    
    Rabbit Lake
    
    
    Smith Ranch/Highland
    
    
    Crow Butte2002
    
    
    2001
    
    
    2002
    
    
    2001
    
    
    2002
    
    
    2001
    
    
    2002
    
    
    2001Tonnes milled
    
    
    211,263
    
    
    
    197,717
    
    
    
    98,227
    
    
    
    139,288
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aProduction (million lbs U3O8)
    
    
    18.7
    
    
    
    18.0
    
    
    
    1.1
    
    
    
    4.6
    
    
    
    0.9
    
    
    
    0.8
    
    
    
    0.8
    
    
    
    0.7Camecos share
    
    
    13.1
    
    
    
    12.6
    
    
    
    1.1
    
    
    
    4.6
    
    
    
    0.9
    
    
    
    0.8
    
    
    
    0.8
    
    
    
    0.7Recovery (%)
    
    
    98.9
    
    
    
    98.3
    
    
    
    96.8
    
    
    
    97.2
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aAverage mill head grade (% U3O8)
    
    
    4.06
    
    
    
    4.31
    
    
    
    0.76
    
    
    
    1.35
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a


|* |  | McArthur River ore is milled at Key Lake. Due to licence conditions, stockpiled low-grade ore at Key Lake is used to dilute the grade of McArthur River ore.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



---




purchased material. In
addition, the unit cost
for McArthur River
production declined in
comparison to 2001 as the
result of higher reported
reserves. Gross profit
In 2002, gross profit
from the uranium business
amounted to $96 million
compared to $88 million
in 2001, an increase of
$8 million or 9%. This
improvement was mainly
attributable to the 11%
increase in deliveries of
uranium concentrates. The
gross profit margin for
the uranium business fell
marginally to 18% from
19% due to a higher
average unit cost. Uranium exploration
In 2002, uranium
exploration expenditures
were $12 million, up $2
million compared to 2001.
Exploration efforts
continue to be focused on
prospects in Canada and
Australia which are
considered to have the
best potential for
economically attractive
discoveries.


15.9 million pounds U3O8,
Camecos share of
production declined almost
3 million pounds or 15% in
2002 due to lower than
planned production at
Rabbit Lake. Conversion Business Camecos conversion
business consists of the
uranium refining and
conversion facilities
located in Ontario. Revenue
In 2002, revenue from the
conversion business rose by
20% to $137 million from
$114 million in 2001 due to
a 17% increase in sales
volume and a 3% improvement
in the realized price. In
2002, Cameco sold a record
quantity of conversion
services. Cost of products and services
sold
In 2002, the cost of
products and services sold
was $83 million compared to
$72 million in 2001, an
increase of 15%. This
increase was attributable
to the higher


sales volume
and was partially offset by
a 2% decrease in the unit
cost of product sold. Lower
conversion costs in 2002
were the result of a 13%
increase in production and
more favourable costs for
purchased conversion
services. Depreciation, depletion and reclamation
In 2002, depreciation,
depletion and reclamation
(DD&R) charges were $10
million, a decrease of $4
million compared to $14
million in 2001. In spite of
the higher deliveries, total
DD&R declined due to selling
a higher proportion of
purchased conversion and an
increase in the estimated
life of the conversion
facilities. Late in 2001,
the company conducted an
assessment of the estimated
useful lives of its
conversion facilities and
concluded that it was
appropriate to extend
previous estimates by 10
years. Gross profit
In 2002, gross profit from
the conversion business was
$45 million compared to




Gain on property interests
In July of 2002, Cameco
acquired a 35.3% interest
in UEX Corporation (UEX)
in exchange for the
transfer to UEX of certain
Saskatchewan-based
exploration properties. In
so doing, Cameco
recognized a gain of $3
million. Uranium production
The schedule (see top of
page) summarizes the 2002
milling statistics for
Camecos uranium
production centres. At


Conversion Business Highlights
 2002
    
    
    2001
    
    
    % changeProduction (million kgU)
    
    
    12.4
    
    
    
    11.0
    
    
    
    13Revenue ($ millions)
    
    
    137
    
    
    
    114
    
    
    
    20Gross profit ($ millions)
    
    
    45
    
    
    
    28
    
    
    
    61Gross profit (%)
    
    
    32
    
    
    
    25
    
    
    
    28Earnings before taxes ($ millions)
    
    
    42
    
    
    
    26
    
    
    
    61




---

7



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##### 








MANAGEMENTS DISCUSSION AND ANALYSIS









$28 million in 2001, an
increase of $17
million. Electricity Business The operating year included
a series of major planned
outages to prepare the four
Bruce B reactors for better
long-term service. As a
result, power generation by
the B reactors was limited
to 20.8 terawatt hours,
reflecting a capacity factor
of 75%. The average realized
price was approximately
$44/MWh compared to about
$38/MWh in 2001. Interest
cost of $63 million included
interest on the long-term
lease and the deferred lease
payments due to OPG. In 2002, Cameco recorded
earnings before taxes of $16
million from its 15% limited
partnership interest in
Bruce Power. Gold Business Camecos gold business
consists of one operating
mine, one mine
in development and several
exploration properties.
Through wholly owned
subsidiaries, Cameco owns a
one-third interest in and
operates the Kumtor gold
mine located in Kyrgyzstan,
Central Asia. The Republic
of Kyrgyzstan, through
Kyrgyzaltyn, owns the
remaining two-thirds.


Electricity Business Financial Highlights
 Bruce Power Limited Partnership (100% basis)
    
    2002
    
    
    20011
    
    
    % changeOutput (terawatt hours)
    
    
    20.8
    
    
    
    15.5
    
    
    
    34Capacity factor (%)2
    
    
    75
    
    
    
    87
    
    
    
    (14
    )($ millions)Revenue
    
    
    919
    
    
    
    599
    
    
    
    53Operating costs
    
    
    750
    
    
    
    471
    
    
    
    59Earnings before interest & taxes
    
    
    169
    
    
    
    128
    
    
    
    32Interest
    
    
    63
    
    
    
    41
    
    
    
    54Earnings before taxes
    
    
    106
    
    
    
    87
    
    
    
    22Camecos 15% interest
    
    
    16
    
    
    
    13
    
    
    
    23Adjustments
    
    
    
    
    
    
    (1
    )
    
    
    Camecos share of earnings before taxes
    
    
    16
    
    
    
    12
    
    
    
    33
 1
    
    The comparative data in 2001 is for a 7.5-month period from May 12 to December 31.2
    
    Capacity factor for a given period represents the amount of electricity actually produced for sale as a percentage of the amount of
electricity the plants are capable of producing for sale.






Cameco acquired in 2002
majority ownership of AGR,
which holds a controlling
interest in the Boroo
development project located
in Mongolia. Commercial
production at Boroo is not
expected until early 2004.
Camecos exploration
interests are located in
North America and Central
Asia.
 Significant Event
In July 2002, there was a failure of the
pit wall at the Kumtor mine site. This
event brought about a significant revision
to the mining plan for 2002. Since July,
Kumtor has been milling lower grades
and experiencing lower recovery rates,
with production reduced by about
172,000 ounces (100% basis) from the
2002 plan. The production decline also
caused a significant increase in the unit
cash cost which is expected to continue until mid-2003 when higher
grade ore, buried by the
pit wall failure, is
expected to become
accessible.


Revenue
In 2002, revenue from the
gold business declined 24%
to $87 million from $115
million in 2001, reflecting
a 28% decrease in sales
volume which more than
offset an increase in the
average realized selling
price. Camecos realized
price for gold was $300
(US) per ounce in 2002
compared to $292 (US) in
2001. The average spot market
price for gold during 2002
was $310 (US) per ounce,


up 14% from the average
price of $271 (US) for
2001. KGCs hedge position
at December 31, 2002 was
769,400 ounces. It is
expected that these hedges
will yield average prices
in the range of $310 (US)
to $317 (US) per ounce.
The mark-to-market loss on
these hedge positions is
fully guaranteed by Cameco
and amounted to $38
million (US) at December
31, 2002, based on a spot
gold price of $347 (US). Cost of products and services sold
In 2002, the cost of
products and services sold
was $58 million compared to
$52






Gold Business Financial Highlights
 2002
    
    
    2001
    
    
    % changeRevenue ($ millions)
    
    
    87
    
    
    
    115
    
    
    
    (24
    )Gross profit ($ millions)
    
    
    9
    
    
    
    34
    
    
    
    (74
    )Gross profit (%)
    
    
    10
    
    
    
    29
    
    
    
    (66
    )Earnings before taxes ($ millions)
    
    
    (3
    )
    
    
    26
    
    
    
    (112
    )Sales volume (Camecos share in 000 oz)
    
    
    174
    
    
    
    243
    
    
    
    (28
    )Selling price ($US/oz)
    
    
    300
    
    
    
    292
    
    
    
    3Cash cost* ($US/oz)
    
    
    216
    
    
    
    142
    
    
    
    52
 *
    
    As defined by the Gold Institute.




---

8



---



##### 








MANAGEMENTS DISCUSSION AND ANALYSIS









Gold Operating Highlights
 2002
    
    
    2001
    
    
    % changeReserves  proven and probable (000 tonnes)
    
    
    34,514
    
    
    
    31,222
    
    
    
    11Average grade (g/t)
    
    
    4.13
    
    
    
    3.85
    
    
    
    7Contained gold (000 oz)
    
    
    4,588
    
    
    
    3,864
    
    
    
    19Tonnes milled (000 tonnes)
    
    
    5,611
    
    
    
    5,470
    
    
    
    3Grade (g/t)
    
    
    3.71
    
    
    
    5.14
    
    
    
    (28
    )Mill recovery (%)
    
    
    78.1
    
    
    
    83.1
    
    
    
    (6
    )Production (000 oz)
    
    
    528.6
    
    
    
    752.7
    
    
    
    (30
    )Production (Camecos share in 000 oz)
    
    
    176.2
    
    
    
    250.9
    
    
    
    (30
    )Cash cost ($US/oz)*
    
    
    216
    
    
    
    142
    
    
    
    52
 *
    
    As defined by the Gold Institute.


an increase of $7 million.
Compared to 2001, the
effective tax rate increased
to 47% from 39% due to a
higher proportion of pre-tax
income being earned in the
uranium and conversion
businesses and minimal tax
relief from the pre-tax loss
in the gold business.
Earnings from the gold
business generally occur in
lower tax jurisdictions than
earnings from the uranium
and conversion
businesses. The effective tax rate
includes the large
corporation tax which
amounted to $5 million in
each of 2002 and 2001.
See note 15 to the
consolidated financial
statements. Cash and Liquidity Cash Resources Operating Activities
In 2002, Cameco generated
cash from operations of
$251 million ($4.50 per
share) compared to $116
million ($2.10 per share)
in 2001.






million in 2001, an increase
of $6 million. The higher
costs were largely
attributable to addressing
the pit wall failure and
partial reconfiguration of
the pit. Mill production at
Kumtor was 30% lower than in
2001 due mainly to lower
grade ore which averaged 3.7
grams per tonne (g/t) in
2002 compared to 5.1 g/t the
year before. Production was
also influenced by a reduced
recovery rate which
decreased to 78% from 83% in
the prior year. The cash cost* per ounce
increased to $216 (US) from
$142 (US) in 2001 as the
result of the lower
production. The reported
cash cost per ounce was
also impacted by the
conclusion of a five-year
tax indemnification period
in May of 2002. Income
taxes paid by Kumtor are
included in the cash cost
as defined by the Gold
Institute. Since May 2002,
under an agreement with the
government of Kyrgyzstan,
Cameco has been reimbursed
for its share of these
taxes. In 2002, the
indemnified tax amounted to
$13 (US) per ounce. Depreciation,
depletion and
reclamation
In 2002, depreciation,
depletion and reclamation
(DD&R) charges were $20
million, a decline of $9
million compared to $29
million in 2001 due mainly
to the lower production. On
a unit basis, the


DD&R rate fell to $73
(US) per ounce from $77
(US) in 2001 as the
result of higher
reserves. Gross profit
In 2002, gross profit from
the gold business amounted
to $9 million compared to
$34 million in 2001, a
decrease of $25 million or
74%. The gross profit
margin for gold was 10%
compared to 29% in 2001. On
a unit basis, the higher
cash costs* more than
offset higher prices and
the reduced DD&R rate. Gold exploration
In 2002, gold exploration
expenditures increased to
$10 million from $8 million
in the prior year with
about 65% of the total
exploration expenditures
incurred in North America. Corporate Expenses Administration
In 2002, administration
costs of $42 million
increased by $5 million
compared to 2001 due
primarily to the addition
of the administration costs
of AGR, control of which
was acquired in March of
2002. Income Taxes
In 2002, income tax expense
was $49 million compared to
$42 million in 2001,


This increase of
$135 million largely
reflects a reduction of
accounts receivable, higher
sales volumes and the
reduction in uranium
inventories. Due to the
high volume of uranium
deliveries late in 2001,
accounts receivable were
higher than usual at the
end of
that year. These were
collected early in 2002.
 Investing Activities
In 2002, cash used in
investing activities was $74
million compared to $131
million in the prior year.
Significant investments
included the Boroo project
($24 million) and an
additional $33 million to
Bruce Power for the A
restart program bringing
Camecos total cash
investment in Bruce Power to
$93 million. In 2001, the investment in
Bruce Power ($88 million),
including fabricated fuel
inventory, was made. During 2002, Cameco
received $15 million (US)
in repayment of principal
on






---

|* |  | As defined by the Gold Institute.
|- |  | ---------------------------------

---

9



---



##### 



| |  | 
| |  | 




MANAGEMENTS DISCUSSION AND ANALYSIS









Cash From Operations
($ millions)
 In 2002, Cameco used record cash flow to pay down $130 million in debt as well as fund capital expenditures, dividends and preferred security charges.
 (CASH FROM OPERATIONS BAR CHART) the subordinated loan to
KGC compared to $21 million
(US) in 2001. The failure
of the pit wall at Kumtor
limited the amount of cash
available for repayment. In
accordance with the terms
of the loan agreement, a
shortfall of $6 million
(US) in principal repayment
has been deferred. At
December 31, 2002, the
outstanding balance on this
loan was $61 million (US).
The cash
shortfall also necessitated
the rescheduling of senior
debt for which the December
2002 and June 2003
principal repayments have
been deferred. Financing Activities
During the year, cash
provided by operating
activities exceeded the
cash used in investing
activities by $176 million.
After meeting its
obligations for dividends
and preferred securities
charges, Cameco was able to
reduce its debt by $129
million. In February 2003, Cameco
increased its debt to
about $400 million upon
closing of the Bruce Power
transaction. Quarterly Financial Results
Camecos uranium
deliveries vary
significantly from quarter
to quarter with the fourth
quarter typically having
the heaviest volume during
the year. Accordingly, the
companys quarterly
earnings and cash flow
fluctuate as well.


In 2002, the company
achieved records in
revenues at $748 million
and cash provided by
operations at $251
million. Liquidity and
Capital Resources Overview
Financial liquidity
represents the companys
ability to fund future
operating activities and
investments. Some important
measures of liquidity are
summarized in the table on
the next page. Access to capital in the
future will be dependent
upon the prevailing
conditions in the markets
and upon the extent to
which investors support the
companys business plan.
Cameco last issued common
equity in the capital
markets in 1997 and last
issued debt in the capital
markets in 2001. The
company renewed its
revolving credit facility
in December 2002. Indicators Defined
Cash provided by
operations reflects the
net cash flow generated by
operating activities after
consideration for changes
in other operating items
including working capital. Cash provided by
operations to net debt
indicates the companys
ability to meet debt
obligations from
internally generated
funds. Net debt to total
capitalization measures the
companys use of financial
leverage. A lower
percentage means less
reliance upon debt as a
source of financing.
Although debt is a lower
cost method of financing
compared to equity, a lower
percentage of debt also
represents less exposure to
fixed payment obligations. Credit Ratings
As of February 2003, the
company has the following
ratings from third-party
rating agencies:  
 
 Standard & Poors
A- with a stable outlook.



 
 Moodys
Baa1 following Camecos
announcement to increase its
interest in Bruce Power from
15% to 31.6%.  
 
 DBRS
A (low) with a stable outlook. Debt
After cash flow from
operations, debt is used to
provide liquidity. Cameco
has access to about $719
million in unsecured lines
of credit. Commercial lenders have
provided a $425-million
unsecured revolving credit
facility that was negotiated
in December 2002 and is
available in two tranches.
The first tranche is a
three-year, $200-million
revolving facility. The
second tranche is a
$225-million revolving
facility available for 364
days with a two-year
term-out option. (This
means, as long as the
company is not in default,
Cameco has the option to
extend the repayment date on
the balance outstanding at
maturity of the tranche for
an additional two years.) Up
to $100 million of this
facility can be used to
support letters of credit.
The facility ranks pari
passu (or equal ranking)
with all other senior debt
of the company. The company
may borrow directly from
investors by issuing
commercial paper up to $400
million. To the extent
necessary, Cameco uses the
revolving credit facility to
provide liquidity support
for its commercial paper
program. Cameco also has agreements
with various financial
institutions to provide up
to $294 million in
short-term borrowing and
letter of credit facilities.
These arrangements are
predominantly used to
fulfill regulatory
requirements to provide
financial assurance for
future reclamation of the
companys operating sites.
See note 6 to the
consolidated financial
statements. Cameco operates within the
investment-grade segment
(high-credit quality) of the
market when obtaining
credit. The cost, terms and
conditions under which
financing is available vary
over time. While




---

10



---



##### 








MANAGEMENTS DISCUSSION AND ANALYSIS







Quarterly Financial Results


2002
    
    
    2001($ millions except per share amounts)
    
    Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    Year
    
    
    Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    YearRevenue
    
    
    124
    
    
    
    195
    
    
    
    158
    
    
    
    271
    
    
    
    748
    
    
    
    70
    
    
    
    139
    
    
    
    170
    
    
    
    322
    
    
    
    701Net earnings*
    
    
    5
    
    
    
    12
    
    
    
    7
    
    
    
    22
    
    
    
    46
    
    
    
    1
    
    
    
    12
    
    
    
    15
    
    
    
    28
    
    
    
    56-per share*
    
    
    0.09
    
    
    
    0.22
    
    
    
    0.12
    
    
    
    0.40
    
    
    
    0.83
    
    
    
    0.01
    
    
    
    0.23
    
    
    
    0.27
    
    
    
    0.50
    
    
    
    1.01Cash provided by operations
    
    
    134
    
    
    
    80
    
    
    
    22
    
    
    
    15
    
    
    
    251
    
    
    
    28
    
    
    
    11
    
    
    
    14
    
    
    
    63
    
    
    
    116-per share
    
    
    2.41
    
    
    
    1.44
    
    
    
    0.40
    
    
    
    0.25
    
    
    
    4.50
    
    
    
    0.50
    
    
    
    0.22
    
    
    
    0.25
    
    
    
    1.13
    
    
    
    2.10Cash dividends
    
    
    0.125
    
    
    
    0.125
    
    
    
    0.125
    
    
    
    0.125
    
    
    
    0.50
    
    
    
    0.125
    
    
    
    0.125
    
    
    
    0.125
    
    
    
    0.125
    
    
    
    0.50


|* |  | Attributable to common shares.
|- |  | ------------------------------
| 
|  |  |                               

Liquidity Indicators


2002
    
    
    2001
    
    
    2000
    
    
    1999
    
    
    1998
    
    
    1997Cash provided by operations ($ millions)
    
    
    251
    
    
    
    116
    1
    
    
    224
    
    
    
    249
    
    
    
    237
    
    
    
    162Cash provided by operations/net debt2 (%)
    
    
    151
    
    
    
    36
    1
    
    
    86
    
    
    
    80
    
    
    
    42
    
    
    
    92Net debt2/total capitalization (%)
    
    
    8
    
    
    
    15
    
    
    
    13
    
    
    
    14
    
    
    
    23
    
    
    
    9


|1 |  | Unusually low due to large amounts of deliveries late in the fourth quarter for which payment was received in early 2002.
|- |  | -------------------------------------------------------------------------------------------------------------------------
| 
|2 |  | Total debt less cash and cash equivalents.                                                                               



---



future access to credit
cannot be assured, it was
readily available during
2002. Preferred Securities
Camecos issue of preferred
securities ($125 million
(US)) is redeemable at par
on or after October 14,
2003. Currently, the
company has not determined
whether the issue will be
redeemed in 2003.


principal at
the end of 2002 was $61
million (US) compared to $76
million (US) at year-end
2001. Scheduled interest
payments were made when due
during 2002. At the end of
each year, accrued interest
was not a material amount.
Cameco also invested $45
million (US) as an equity
contribution in 1996. Effective April 29, 2002,
KGC entered into a new
credit agreement to
refinance


its senior debt.
The term was extended to
June 1, 2006 and a group
of noncommercial lenders
was replaced with a
consortium of commercial
banks. In November 2002,
the credit
agreement was amended to
defer the December 2002
and June 2003 semi-annual
principal payments until
the period December 2004
to June 2006. The senior
debt is the direct
obligation of KGC,
although Cameco has
guaranteed the payment of
principal and interest
owing. See note 18 to the
consolidated financial
statements. Under






Kumtor Gold Company
To finance the Kumtor gold
project, a consortium of
financial institutions
advanced $285 million (US)
in senior and subordinated
loans to the project in
1996. During 2002, KGC
repaid $15 million (US) of
these third-party loans.
After these repayments, the
outstanding balances were
$77 million (US) in senior
debt and $20 million (US) in
subordinated debt. Since
Cameco proportionately
consolidates its interest in
KGC, $32 million (US) ($51
million (Cdn)) of the
remaining loans were
included in Camecos
long-term debt. See note 6
to the consolidated
financial statements. In addition, Cameco provided
a subordinated loan of $107
million (US) to the project.
The outstanding


Kumtor Gold Company Capital Structure
 ($US millions)
    
    Initial Funding
    
    
    Balance at Dec. 31, 2002DebtThird partySenior *
    
    
    265
    
    
    
    77Subordinated
    
    
    20
    
    
    
    20Total third party
    
    
    285
    
    
    
    97Cameco subordinated loan
    
    
    107
    
    
    
    61Total debt
    
    
    392
    
    
    
    158Equity
    
    
    45
    
    
    
    45Total Capital
    
    
    437
    
    
    
    203
 *
    
    Cameco has guaranteed the payment of all principal and interest that becomes due on the senior debt.




---

11



---



##### 








MANAGEMENTS DISCUSSION AND ANALYSIS









current production plans,
the guarantee is not
expected to be called upon
so long as the remaining
unhedged production is sold
at prices of at least $190
(US) per ounce. As part of the Kumtor
financing
arrangements, KGC must
maintain a debt reserve
bank account as described
in note 5 to the
consolidated financial
statements. Debt Covenants
Cameco is bound by certain
covenants in its general
credit facilities and in
those of Kumtor. The
financially related
covenants place
restrictions on total debt,
including guarantees, and
set minimum levels for net
worth. As of December 31,
2002, Cameco met these
financial covenants and
does not expect its
operating and investment
activities in 2003 to be
constrained by them. Markets Uranium Market Review Spot Uranium Market Cameco observed that spot
market demand in 2002 was
steady through the year,
however some aggressive
sellers of
uranium inventory in the form of UF6
(that is, combined U3O8 and
conversion services) caused
the U3O8 price to remain
relatively flat. Over the
year the spot price
experienced a modest 7%
increase, closing the year
at $10.20 (US) per pound
U3O8. As
in recent years, the spot
market represented only
about 12% of the western
worlds uranium
consumption.


with estimated spot market
sales of about 19 million
pounds, represented only
about 60% of western
consumption during the year. Spot Conversion Market
Spot prices for UF6 conversion services
in the US market declined
by 4% during 2002 to $5.03
(US) per kgU. Management
believes this decline
resulted from
aggressively priced UF6 inventory sales
as previously mentioned, in addition to
the presence of ample supplies of UF6
conversion services. In
contrast, supplies in the
European market are tight
and the spot price rose by
10%, closing the year at
$6.13 (US). Market Significance to Cameco
Cameco does not generally
sell uranium and conversion
services in the spot
markets. However, it has
been an active buyer in
both spot markets. About
60% of Camecos uranium
under long-term contract is
sold at prices which
reference the spot market
price near the time of
delivery, and a
significantly lower
percentage of the companys
conversion contracts
reference
the spot market price near
the time the service is
provided.


Western World Contract Volumes
(million lbs U3O8)
 During the past three years about 80% of the western worlds contracting took place in the long-term market.
 (CONTRACT VOLUMES BAR GRAPH) The company has more than
100 million pounds U3O8 and
over 60,000 tonnes of
uranium conversion services
under contract for delivery
during the next 10 years.
Cameco also has purchase
commitments, the majority
of which are under
long-term, fixed-price
arrangements, for uranium
products and services from
various sources totalling
$1.1 billion (US) at
December 31, 2002. See note
24 to the consolidated
financial statements.






Long-Term Uranium Market
The published long-term
contract price indicator
closed the year at $10.75
(US), only a 2% increase
during 2002, reflecting
continued inventory
draw-down and the adequacy
of competitive supplies. Analysts believe that
long-term contracting in
2002 by western world
utilities was about 70
million pounds. This,
combined


Uranium Market Review
 Year-End Prices$ US/lb U3O8Market
    
    2002
    
    
    2001
    
    
    % changeSpot uranium*
    
    
    10.20
    
    
    
    9.53
    
    
    
    7Long-term uranium
    
    
    10.75
    
    
    
    10.50
    
    
    
    2
 *
    
    Spot prices are industry averages. Spot Conversion Market Review
 Year-End Prices*$ US/kgU as UF6Spot UF6 conversion market
    
    2002
    
    
    2001
    
    
    % changeNorth America
    
    
    5.03
    
    
    
    5.25
    
    
    
    (4
    )Europe
    
    
    6.13
    
    
    
    5.55
    
    
    
    10
 *
    
    All prices are industry averages.




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12



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MANAGEMENTS DISCUSSION AND ANALYSIS









Trends in the Nuclear Power
Industry A number of important trends
continue to evolve which
have the potential to affect
Camecos business
environment. Nuclear Utilities Consolidate
Electric utilities in the
US and Europe continued to
restructure in 2002,
albeit at a slower pace
than in the previous five
years. Consolidation can
be expected to continue in
response to market
deregulation resulting in
more concentrated customer
buying power. Nuclear Plants Operate Better
Utilities continue to
upgrade the performance of
their nuclear reactors,
generating more electricity
at lower costs. In the US,
capacity factors, which are
expected to continue their
steady improvement,
averaged nearly 92% in
2002, about 1% higher than
in 2001. (Capacity factor
measures how efficiently
reactors operate.) Non-US
generators also increased
2002 capacity factors,
including Switzerland and
Mexico where capacity
factors increased by 1% and
5% respectively. European countries
maintained their high
levels of nuclear
generation performance. In
Sweden, nuclears share of
overall domestic
electricity production
increased 2% to 46%, and in
France, the nuclear
generated share of
electricity also rose 2%,
accounting for 78% of total
electricity generated in
2002.


demand for uranium
concentrates and conversion
services. In 2002, US regulators
authorized uprates at 18 of
the nations 104 reactors,
resulting in an increase in
capacity of about 700
megawatts (equivalent to
the capacity of one average
size nuclear reactor).
Nuclear reactors in other
countries have also
increased capacity in the
past through uprates, a
trend that Cameco expects
to continue.  US Capacity Factor
(%)
 US nuclear utilities have increased output from existing reactors enough to add the equivalent of 13 new 1,000-megawatt power plants in the last five years.
 (CAPACITY FACTOR BAR GRAPH) Nuclear Plant Licence Extensions
In 2002, four US nuclear
units received 20-year
licence extensions, joining
the six that received
extensions in 2001 and
2000. Operators of an
additional 40 units have
applied or are expected to
apply for


extensions in the
next few years. In total,
this represents about 50%
of the US nuclear
generating capacity. The Russian government has
implemented a program of
safety and equipment
upgrades to extend the
lives of most of its
nuclear reactors. New Nuclear Construction
Six new reactors began
commercial operation around
the world in 2002, three in
China, two in South Korea,
and one in Japan. In
addition, construction began
on a further six units in
India and four in South
Korea. In Finland, the government
approved the construction
of a fifth reactor,
expected to commence
operations later in the
decade. In the US,
Tennessee Valley Authority
announced that it would
spend some $1.8 billion
(US) to return the Browns
Ferry 1 unit to operation
by 2007. Russia has
announced that it would
complete the construction
of four partially built
units by 2006. Financing
has been secured to
complete two units in
Ukraine and one in Romania. In Canada, six units
mothballed in the latter
part of the 1990s are
expected to return to
service in the course of
the next few years. In 2003, Brazil and
Bulgaria are expected to
approve and begin
construction of two units
that were halted in the
1990s. In the






Existing Nuclear PlantsIncrease Capacity
Nuclear plants continue
to increase generating
capacity through uprates,
that is, increasing the
nominal level of output
through installation of
more efficient equipment
and/or improved
instrumentation. These
uprates can increase a
power plants capacity by
2% to 20%. In most cases,
an increase in capacity
translates into increased


CO2 Emission by Fuel Type
(g CO2/kWh)
 Nuclear power provides countries around the world with the opportunity to reduce carbon dioxide emissions in order to achieve Kyoto targets.
 (EMISSION BY FUEL TYPE BAR GRAPH)




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MANAGEMENTS DISCUSSION AND ANALYSIS









US, three utilities are
expected to submit
applications to the
Nuclear Regulatory
Commission (NRC) for
approval of sites where
new reactors could be
built. Nuclear Power and Politics
In Europe, reactors in some
countries are scheduled to
close in the short term as
a result of political
decisions. However, the
policies of these countries
may change to address
economic and environmental
realities as well as the
need to expand electricity
supply to meet demand
growth. In Sweden, the government
is expected to decide
whether or not to close one
reactor at the end of 2003.
At least two reports to the
government have recommended
against closure, citing the
lack of emission-free
replacement power and the
potential for power
shortages. A recent Swedish
opinion poll shows that 83%
favour keeping the reactor
operating along with
Swedens other reactors,
conditional only upon
continued safe operation. The Belgian government has
voted to limit the
operation of the countrys
nuclear reactors to 40
years, effectively calling
for a
phase-out of nuclear by
2025. However, the
government stated that the
phase-out will be delayed
if clean replacement power
is not available. Nuclear
generated electricity
accounts for about 60% of
Belgiums electricity
supply. As a condition of joining
the European Union (EU),
Lithuania, Slovakia and
Bulgaria have agreed to
close eight old Soviet-era
reactors which the EU
believes fail to meet
western safety standards. In the US, a public
opinion survey conducted
in late 2002 for the
Nuclear Energy Institute,
indicated that 65% of
Americans supported the
construction of new
nuclear power plants. One of the characteristics
of the nuclear industry is
stringent regulation. In
2002, the Japanese
regulator severely
penalized its largest
nuclear operator, Tokyo
Electric Power Company,
for falsifying


certain
documentation. All 17 of
its reactors will shut
down in 2003 on a
temporary basis for
inspection while one unit
will be removed from
service for one year as a
penalty. Cost of Energy Supply
In 2001, the latest year
for which data is
available, the direct costs
of US nuclear electricity
production continued, for
the third consecutive year,
to be lower than the cost
of electricity from coal
plants. Other than hydro,
nuclear energy is the
cheapest source of
electricity. This is
largely attributable to
improved performance of US
nuclear power plants. Impact on the Global
Nuclear Industry
The foregoing trends are
generally positive for
nuclear energy. However, it
is difficult to know
whether these trends and
the national debates on the
long-term future of nuclear
power will eventually
result in more or less
favourable conditions for
the nuclear industry. Of
note, however, is that the
two most populous
countries, China and India,
representing over one-half
of the worlds population,
are committed to increasing
their share of nuclear
generated electricity. New construction, improved
reactor operations, uprates
and the extension of reactor
lives make it highly likely
that, at least, the current
demand for uranium and
conversion services will
continue for many years. In
the shorter term,
perceptions that there are
ample uranium supplies are
likely to change as excess
inventories continue to
decline. This change should
favourably impact future
uranium prices. The cost of
secondary supplies continues
to exert a negative
influence on market prices.
In the future, as
inventories dwindle, it is
expected that uranium prices
will more closely reflect
the cost of primary mine
production.


The increased attention to
the risks associated with
international terrorist
organizations does not
appear to have had an
adverse impact on public
acceptance of nuclear power.
Also, recent independent
studies indicate that
nuclear plants remain the
most robust of industrial
facilities, adequately
protected against natural
disasters and terrorist
attacks, including direct
land assaults and airplane
crashes.  Ontario Electricity Spot Price
(Monthly Weighted Average $/MWh)
 Following market deregulation in May 2002, the average spot price was $56 per MWh for the year.
 (SPOT PRICE LINE GRAPH) Ontario Electricity Market Review In Ontario, the retail and
wholesale power markets
were deregulated on May 1,
2002. Due to a number of
factors, including an
unusually hot, dry summer,
spot power prices climbed
to unexpectedly high
levels. Prices in September
averaged $83/megawatt hour
(MWh) compared to an
average price before
deregulation of about
$38/MWh. In response, the
Ontario government froze
retail market prices at
$43/MWh until 2006 for
smaller consumers. Impact on Bruce Power
This has had no direct
impact on spot prices in
the wholesale electricity
market into which Bruce
Power sells its production.
However, the level of
activity in the forward
wholesale market




---

14



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MANAGEMENTS DISCUSSION AND ANALYSIS









dramatically diminished for
the duration of 2002 and
early 2003. The governments
reversal of policy has
increased market uncertainty
for Ontario generators like
Bruce Power. Update on Uranium Supplies Inventory Drawdown Continues
Prior to 1985, uranium mine
production exceeded reactor
requirements due, in large
part, to government
incentive programs that
anticipated rapid growth of
nuclear generated
electricity. The result was
a build up of large
inventories, both in the
commercial and government
sectors. Over the past 17
years, production has fallen
short of annual requirements
and a large portion of these
inventories has been
consumed. The drawdown in 2002 of
excess inventory held by
western world utilities,
producers, governments and
others was estimated by
Cameco to be in the order of
35 million pounds U3O8.
Inventory drawdown in 2003
is expected to be somewhat
lower than in 2002,
reflecting increases in the
US quota for HEU and world
production, as noted below. World Uranium Production Update
World production in 2002
was estimated at about 92
million pounds U3O8, down
slightly from 2001. Western
world production decreased
7% to about 69


million
pounds, but is expected to
increase to about 74
million pounds in 2003. Russian Uranium from
Highly Enriched Uranium
(HEU)
As a result of a 1994
agreement between the US and
Russia to reduce the number
of nuclear weapons,
additional supplies of
uranium have been available
to the market. Under the
20-year agreement,
weapons-grade HEU is blended
down in Russia to low
enriched uranium (LEU)
capable of being used in
western world nuclear power
plants. Cameco, together
with three other companies,
annually purchases an
increasing quota of the
uranium feed component of
the Russian LEU and sells it
to customers. Uranium not
purchased is returned to
Russia and held in a special
stockpile for use in
blending additional HEU or,
to the extent the stockpile
exceeds 58 million pounds
U3O8, is sold. Cameco and
its partners also have
options to purchase uranium
from this stockpile. In 2002, all scheduled LEU
deliveries (24 million
pounds U3O8 equivalent) were
received in the US from
Russia. For the year, the
aggregate US sales quota of
uranium derived from Russian
HEU was 10 million pounds
and Cameco purchased its
prescribed share. Russian
HEU is a significant supply
source expanding over the
next six years to 12% of the
western world market. Due to
the decline in mine


production, the
weapons-derived uranium has
become a necessary source of
supply.  Daily Gold Prices  2002
($US/oz)
 In response to higher gold prices, Kumtor Gold Company actively decreased its hedge positions in the latter part of 2002 to take advantage of higher spot market prices.
 (GOLD PRICES LINE GRAPH) Gold Market Review Gold prices began the year
at $277 (US) per ounce and
ended 2002 significantly
higher at $347 (US), a price
not seen since April
1997. The average spot price
for the year was $310 (US)
per ounce.






World Uranium Production
 In 2002, Camecos 16 million pounds of production represented 17% of the worlds output. The company plans to produce more than 20 million pounds in 2003.
 (PRODUCTION PIE GRAPH)


Since the events of
September 11, 2001, the gold
price has trended upward
with the spot price of gold
above $300 (US) per ounce
for most of 2002. A number
of factors appear to be
supporting the strengthening
gold price, including
ongoing global economic and
geopolitical uncertainty,
recent US dollar weakness,
bearish financial markets,
and reductions in producer
hedging. These same factors
have carried over to early
2003 and continue to
influence gold market
activity. Significance to Cameco
Camecos gold operating
companies, KGC and AGR,
hedge price risk for future
gold sales. In the latter
part of 2002, KGC actively
decreased its gold hedge
positions to take advantage
of the higher spot market
gold prices. For 2003, about
46% of Camecos gold
production is hedged at a
price range of $302 (US) to
$307 (US). If the price of
gold maintains its current




---

15



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MANAGEMENTS DISCUSSION AND ANALYSIS









level, Cameco will be able
to participate in upward
price movements to the
extent it is unhedged.
Rising gold prices also
increase the credit support
required under KGCs hedge
obligations. Cameco has
agreed to provide credit
support to the
counterparties of KGC and
AGR to mitigate the
potential of default. At
December 31, 2002, Camecos
maximum financial exposure
under these support
arrangements was $61 million
(US). See note 25 to the
consolidated financial
statements. On the other
hand, should the price of
gold decline, Cameco could
incur


a lost
opportunity due to less
protection from hedge
positions. Business Risks Risks and Uncertainties The following discussion
reviews a number of
important risks which
management believes could
impact Camecos business.
There are other risks, not
identified below, which
currently, or may in the
future, exist in the
companys


operating
environment. For a
discussion of these other
risks, see the companys
most recent annual
information form filed on
www.sedar.com and posted
on www.cameco.com Financial Risk
Camecos financial
condition is influenced by
operational performance and
by a number of market
risks. The most significant
of these are fluctuations
in market prices and sales
volumes of uranium,
conversion, gold and
electricity prices, foreign
exchange rates and unit
costs of production. Risk
management strategies are
employed to assist in
identifying and mitigating
these risks.






Contingent Commitments and Guarantees
As at December 31, 2002
 Total amounts($ Cdn millions)
    
    committedContingent Commitments:Standby letters of credit1
    
    
    209Guarantees:KGC senior debt2, 4
    
    
    81Gold hedge program3, 4, 7
    
    
    96Bruce Power investment5, 8
    
    
    7Bruce Power guarantees6, 8
    
    
    84Total commercial commitments
    
    
    268
 1
    
    The standby letters of credit maturing in 2003 were issued with a one-year term and will be automatically renewed on a year-by-year
basis until the underlying obligations are resolved. These obligations are primarily the decommissioning and reclamation of
Camecos mining and conversion facilities. As such, the letters of credit are expected to remain outstanding well into the future.2
    
    See note 18 to the consolidated financial statements.3
    
    See note 24 to the consolidated financial statements.4
    
    Denominated in US dollars. Converted to Canadian dollars at the year-end rate of 1.5796.5
    
    Under its 15% partnership interest, Cameco agreed to invest up to $100 million in Bruce Power. To the end of 2002, Cameco had
invested $93 million in the partnership.6
    
    Under its 15% partnership interest, Cameco agreed to guarantee up to $102 million in respect of contingent obligations of Bruce
Power and at the end of 2002, $84 million of such guarantees had been provided by Cameco. See note 19 to the consolidated
financial statements.7
    
    See discussion below under gold prices in the section titled Business Risks  Risks and Uncertainties.8
    
    As noted elsewhere in this MD&A, Cameco acquired an increased interest in Bruce Power in February 2003 which increased its
investment and contingent obligations.


Uranium Prices
The company reduces its
exposure to volatility in
uranium prices by
maintaining a long-term
contract portfolio which is
diversified by price
mechanism, delivery date and
customer. About 60% of
Camecos contract portfolio
has been priced in relation
to the spot market price in
effect at or near the time
of delivery. The remaining
40% has been sold at a fixed
price (usually adjusted for
inflation) over the term of
the contract. The companys
sensitivity to changes in
the uranium spot price is
noted in the outlook for
2003 section below. Limited Number of Customers
Cameco relies on a small
number of customers that
purchase a significant
portion of the companys
uranium concentrates and
conversion services. For
example, Camecos five
largest customers are
expected to account for 39%
of the




Contractual Cash Obligations
As at December 31, 2002


($ Cdn millions)
    
    Total
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    After 5 yearsLong-term debt
    
    
    225
    
    
    
    6
    
    
    
    53
    
    
    
    166
    
    
    
    Unconditional product purchase
obligations*
    
    
    1,778
    
    
    
    186
    
    
    
    341
    
    
    
    365
    
    
    
    886Total contractual cash obligations
    
    
    2,003
    
    
    
    192
    
    
    
    394
    
    
    
    531
    
    
    
    886


|* |  | Denominated in US dollars. Converted to Canadian dollars at the year-end rate of 1.5796.
|- |  | ----------------------------------------------------------------------------------------

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16



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| |  | 
| |  | 




MANAGEMENTS DISCUSSION AND ANALYSIS









companys contracted supply
of U3O8 for 2003 through
2005. This compares to 37%
of the contracted supply of
U3O8 for
2002 through 2004. The loss
of any of these large
customers, or any
significant curtailment of
purchases or lack of timely
payments could have a
material adverse effect on
Camecos financial
performance. Use of Derivatives
Cameco uses financial
derivatives to mitigate
market risks in connection
with gold price and foreign
exchange. A derivative is
entered into as a hedge
against specific economic
and transactional exposures.
However, derivatives bring
with them an exposure to
counterparty default*. As of
December 31, 2002, Camecos
exposure is predominantly
with counterparties that had
credit ratings of A+ or
higher. Accordingly, Cameco
believes the risks of
default are low and the
benefits derived from using
derivatives outweigh the
risks. Gold Prices
KGC and AGR hedge the price
risk for future gold sales.
At December 31, 2002, KGC
had in place forward sales
and option agreements on
769,400 ounces and AGR had
in place forward sales on
200,000 ounces. Combined,
these hedge positions
represented about 22% of
proven and probable
reserves. Camecos share of
these hedging agreements was
456,500 ounces, consisting
of 371,500 ounces in forward
contracts, and a net
position of 85,000 ounces in
collars (matched puts and
calls). These hedges are
expected to yield average
prices in the range of $310
(US) to $317 (US) per ounce. As of December 31, 2002,
Cameco agreed to provide
credit support to a maximum
of $70 (US) per ounce to the
counterparties of
KGC and AGR.
Camecos maximum financial exposure


under these arrangements based on
outstanding commitments was $61 million (US). Timing differences between
the usage and designation of
hedge contracts may result
in deferred revenue or
deferred charges. At the end
of 2002, Camecos share of
deferred charges to be
recognized in future years
totalled $4 million (US).
See note 25 to the
consolidated financial
statements. Foreign Exchange Risk
The US/Canadian foreign
exchange rate started the
year at $1.5926 and
averaged $1.5703 during the
year. Most of the companys
revenues are in US dollars
with a majority of its
costs in Canadian dollars.
To reduce its currency
risk, at December 31, 2002,
Cameco had sold forward
$499 million (US). These
hedges are expected to
yield an average exchange
rate of $1.5870. The
mark-to-market loss on
these positions was $10
million (Cdn) at December
31, 2002, based on a
year-end exchange rate of
$1.5796. Timing differences between
the usage and designation
of hedge contracts may
result in deferred revenue
or deferred charges. At the
end of 2002, deferred
charges to be recognized in
future years totalled $12
million (Cdn). Political Risk
The company has diversified
its political risk
internationally. The Kumtor
gold mine is located in the
Kyrgyz Republic, a country
that was part of the former
Soviet Union. The mine is
the largest foreign
investment in the country
and represented about 9% of
the countrys gross domestic
product, 47% of export
earnings and 35% of total
industrial production in
2001, the latest date for
which
information is available.
The importance of Kumtor in
relation to the rest of the
Kyrgyz economy has meant
that Kumtor has maintained a


very high profile within the
country. This level of
attention is not without
risk; however, it has also
been of benefit in ensuring
continued efficient
operations. Cameco also owns a 60%
interest in Joint Venture
Inkai (JVI) which is
developing a uranium mine in
the Republic of Kazakhstan.
Through KazAtomProm, the
Republic of Kazakhstan owns
the remaining 40% of JVI.
Cameco has agreed to provide
funding of up to $40 million
(US) to JVI for project
development of which $16
million (US) has been funded
to the end of 2002. Test
mining was started in 2002
and will continue for most
of 2003. To date, the
Kazakhstan government has
supported the project, but
there is no assurance that
such support will continue
for the projects duration. Cameco also owns a 56%
interest in AGR, which owns
95% of the Boroo gold
project in Mongolia. The
mine is currently under
construction. AGRs
investment in Boroo may be
exposed to adverse
political developments that
could affect the economics
of the project. The
Mongolian government has
supported the project to
date, but there is no
assurance that this support
will continue for the
projects duration.
Camecos investment in
these operations may be
exposed to adverse
political developments that
could affect the economics
of each operation. The
company has made an
assessment of the political
risk associated with each
of its foreign investments
and has purchased political
risk insurance to mitigate
losses as
deemed appropriate. Operations Risk
The mining of uranium and
gold and the conversion of
uranium are subject to a
number of risks including
environmental spills,
industrial accidents, and
unexpected or uncontrolled
events from geological
conditions. At each
operating site,






---

|* |  | Counterparty default means that the other party in a derivative contract
is unable to perform its obligations at the time of contract maturity,
resulting in the intended hedge being of no value. This concern is
addressed by dealing with a variety of counterparties, ensuring they have
high credit quality, and limiting the amount and duration of the exposure.
A measure of default risk is the mark-to-market value of a hedge position.
This value is the difference between the price at which a derivative
contract was entered into and its current market value. A positive number
indicates that the company has that amount of value at risk should its
counterparties default. A negative number, such as the mark-to-market loss
mentioned for gold and foreign exchange hedges, represents the amount of
value Cameco would have to pay should the hedge position need to be
settled immediately.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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MANAGEMENTS DISCUSSION AND ANALYSIS









comprehensive programs in
plant and equipment
maintenance, quality
assurance, environmental
protection and worker
safety have been
implemented and oriented to
manage operations risk.
Emergency response plans
are in place at each site. At McArthur River, the
mines regulatory-approved
capacity of 18.7 million
pounds U3O8 per year (100%
basis) was achieved in
2002. Based on experience,
there is confidence that
the mining method works
effectively and that the
operating risks are
acceptable. However, the
high ore grade, the
critical need to control
ground water and radiation
exposure, as well as the
innovative applications of
technology employed, means
that some measure of
operating risk will
continue throughout the
life of the mine. At Cigar Lake, technical
challenges exist regarding
ground water control, rock
stability and radiation
protection. In addition,
the application of the
unique jet boring mining
method and the extended
time to obtain construction
and operating licences, are
expected to delay
commercial production into
2006. This combination of
factors could
have an adverse effect on
Camecos future results. Environmental and Safety Risk
Cameco is subject not only
to the normal worker health,
safety and environmental
risks associated with all
mining and chemical
processing, but also to
additional risks uniquely
associated with uranium
mining, milling and
conversion operations. In 2001, to better manage
these risks and to enhance
its quality culture, Cameco
embarked upon the design and
implementation of an
integrated quality
management system (QMS).
Program development
continued in 2002. The QMS
is to be fully implemented
at Camecos Canadian uranium
sites by the end of 2004 and
is based upon ISO 9001-2000
principles. The related
program, to


implement an environmental management
system, also continued. In 2002, the
company received ISO 14001 certification
at its Blind River refining facility, the
McArthur River mine and the Key Lake
milling operation. The Port Hope
conversion facility received this
certification in 2000. Also in conjunction with the QMS
program, Cameco is introducing a new
health and safety management system,
based upon principles similar to those in
the ISO series of quality assurance
programs. For the year, on a combined
basis, Cameco, its subsidiaries and long-term contractors achieved an accident
frequency of 0.27 lost-time accidents per
200,000 person hours worked, which was
up slightly from last years best overall
record of 0.22. Regulators must approve the startup,
continued operation and decommissioning of many of Camecos facilities.
These facilities are subject to numerous
laws and regulations regarding safety
and environmental matters and the
management of hazardous wastes and
materials. Significant economic value
is dependent on the companys ability
to obtain and renew licences necessary
to operate. In 2002, the CNSC renewed
the Port Hope and Blind River licences
for five-year terms. The current two-year
licences for the Canadian uranium mines
will require renewal in 2003. Cameco continues to face challenges
from the burden of increasing regulatory
demands and costs from the CNSC,
Canadian Environmental Assessment
Agency, and other federal and provincial
regulators. In particular, the lead regulator,
CNSC, intends to increase its fees charged
to the nuclear industry, and is increasing
the regulatory burden as a result of the
implementation of the new Canadian
Nuclear Safety Control Act. In addition
the CNSC and Environment Canada
are calling for more stringent environmental monitoring of uranium mining


and milling. Operational
changes are increasingly
subject to regulatory
approval which may include
delays due to longer
regulatory approval
processes. These increasing
requirements are expected
to continue to result in
creeping administration
costs and some capital
expenditures for
compliance. As well, the
complex regulatory approval
process reduces the
flexibility of the company
to make operational changes
in a timely fashion. Insurance
Cameco purchases insurance
to mitigate losses that may
arise from certain
liability and property
risks. The cost of this
insurance and the specific
protection provided by the
policies varies from year
to year depending on
conditions in the insurance
market. In 2002, market
conditions were difficult
across all lines of
insurance. This resulted in
significantly increased
premiums along with more
restrictive policy terms
and
conditions. Cameco believes that the
insurance program it has
in place continues to
prudently address its
major liability and
property risk exposures. The pit wall failure that
occurred at the Kumtor
mine site in July 2002
resulted in significant
losses. The extent to
which insurance coverage
will apply to the damages
suffered has yet to be
fully determined with the
insurers and is expected
to take some time to
resolve. Uncertainty in the
insurance market is
expected to continue. As
a result, the
availability of certain
types of coverage that
Cameco has purchased in
the past may be
significantly reduced
and/or the cost to
acquire insurance may
significantly increase. Reclamation and Decommissioning
The company plans for the
closure, reclamation and
decommissioning of its
operating sites.
Decommissioning and
reclamation costs may
increase over time




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MANAGEMENTS DISCUSSION AND ANALYSIS









due to increasingly
stringent regulatory
requirements. At least
bi-annually, Cameco
estimates its total future
decommissioning and
reclamation costs for its
operating assets. At the
end of 2002, the estimate
was $253 million. The
majority of such
expenditures are typically
incurred at the end of the
useful lives of the
operations to which they
relate and, therefore, only
a very small percentage of
the total estimated costs
is expected to be incurred
over the next five years.
See note seven to the
consolidated financial
statements. At the end of 2002, Camecos
accounting provision for
future reclamation costs
totalled $155 million. To
provide financial assurances
for these costs, Cameco has
provided letters of credit
(LOCs), where required.
Camecos LOCs totalled $209
million at the end of 2002,
of which $205 million was
related to reclamation and
decommissioning activities. In 2002, LOCs totalling $48
million were issued for the
first time for the Port
Hope and Blind River
facilities, in conjunction
with their CNSC
re-licensing. Therefore,
all North American
operations now have in
place letters of credit
providing financial
assurance that future
reclamation activities will
be performed. Beginning in
mid-2001, the company has
conducted
regulatory-required reviews
of its decommissioning
plans for all Canadian
sites. These periodic
reviews are generally
related to the licence
renewal process previously
described. Reclamation and
decommissioning obligations
represent unfunded
liabilities of the company. Electricity Business Risks
Through its interest in
Bruce Power, Cameco is
exposed to various business
risks associated with the
generation and marketing of
electricity. The following
discusses some, but not all,
risks associated with this
business.


In Ontario, political risk
results from uncertainty
over the future direction of
government energy policies.
This risk was amplified in
late 2002 when the Ontario
government abandoned the
deregulation of the retail
electricity market. Thus
far, the wholesale market
remains unregulated, but
there can be no assurance
that this will continue.
Political risk is beyond the
control of Bruce Power. Of the remaining risks, the
most significant is
directly related to the
operating performance of
Bruce Powers generating
assets. Bruce Power manages
this risk through
preventive maintenance to
improve overall equipment
reliability, by adopting
simple operational
processes and by improving
employee performance at all
levels. Another category of risk is
electricity price. Bruce
Power has mitigated this
risk by entering into
long-term, fixed-price
supply contracts with
reliable customers for the
delivery of a significant
portion of its annual
generation. Electricity
generated, but not covered
by such contracts, is sold
on the wholesale spot market
and is subject to prices in
effect at the time of
delivery. Most long-term supply
agreements obligate Bruce
Power to deliver electricity
at a predetermined
contractual price. Credit
risk arises from these
contracts. On the one hand,
the counterparty must have
the financial resources to
take delivery and pay for
contracted electricity. On
the other hand, if quoted
forward market prices exceed
contracted prices, then the
counterparty has the right,
in most cases, to request
financial assurance to
mitigate the possibility
that Bruce Power does not
deliver the electricity as
contracted. In such
circumstances, Camecos
contingent obligations may
increase if it is called
upon to guarantee its share
of Bruce
Powers obligation. To
maintain the economic
benefit of the electricity
supply contracts,


Cameco and its partners
must have the financial
ability to address this
credit risk. A final risk category
relates to the transmission
grid. The ability of Bruce
Power to deliver electricity
to its customers is
dependent on the provincial
transmission grid, owned and
maintained by Hydro One, an
Ontario provincial Crown
corporation. Any adverse
conditions such as severe
weather or inadequate
maintenance that results in
unreliable performance by
the grid could cause
significant financial loss
to Bruce Power. Transmission
grid risks are beyond Bruce
Powers control. The Future Outlook for 2003 Total mine production is
expected to rise to 20.9
million pounds U3O8, up
5.0 million pounds over
2002 levels, due largely
to a full years
operation at Rabbit Lake. At McArthur River/Key Lake,
production of 13.0 million
pounds U3O8 is planned for
2003. McArthur River
high-grade ore will
continue to be blended with
special waste rock at Key
Lake to achieve an average
mill feed of approximately
4% U3O8. At Rabbit Lake, the Eagle
Point underground mine is
expected to produce 6.0
million pounds in 2003,
from its remaining reserves
of about 17.6 million
pounds U3O8. Prospects for
additional reserves are
being explored both from
the surface as well as
underground, where
extensions to known ore
have
been identified. In the US ISL operations,
the Smith Ranch and Highland
mines, which merged
operations during 2002, have
planned production of 1.1
million pounds while Crow
Butte is expected to package
0.8 million pounds in 2003.
At the Inkai




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19



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MANAGEMENTS DISCUSSION AND ANALYSIS









Uranium Production Outlook
 (Camecos share 000 lbs U3O8) 2003 Plan
    
    
    2002 ActualMcArthur River/Key Lake
    
    
    13,000
    
    
    
    13,095Rabbit Lake
    
    
    6,000
    
    
    
    1,143Smith Ranch/Highland
    
    
    1,100
    
    
    
    887Crow Butte
    
    
    800
    
    
    
    768Total
    
    
    20,900
    
    
    
    15,893


Operations
For the year, an average
Bruce Power
site-capacity factor of
about 88% is planned,
slightly below the
long-term target of over
90%. Capital Expenditures
In 2003, Bruce Powers
capital expenditure program,
excluding the Bruce A
restart, is expected to
total about $165 million. In
addition to sustaining
capital expenditures of
about $15 million annually
per reactor, the main
projects, which were in
Bruce Powers original
business plan, include:






development
project in Kazakhstan,
nominal production is
expected as test mining
continues through 2003. Uranium Market
In 2002, long-term
contracting in the western
world market is reported
to have been approximately
70 million pounds. In
2003, long-term market
demand is expected to be
similar to 2002. Uranium Revenue and Margins
In 2003, Camecos uranium
revenue is expected to rise
nominally over the 2002
level as the result of a
modest improvement in price.
Although market prices have
risen over the past two
years, Cameco expects its
average realized price will
increase by only 2% in 2003.
For scheduled deliveries in
2003, about 60% of Camecos
long-term contracts contain
pricing terms that reference
the spot price at or
near the time of delivery.
The remaining 40% of the
contracts include fixed
pricing (usually adjusted
for inflation). In 2003, the
average price realized from
these fixed-price contracts
is expected to be lower than
in 2002 due to the
expiration of more
favourably priced contracts.
At approximately 20% of
western world requirements,
Camecos sales volumes are
projected to be similar to
those for 2002. As well,
uranium margins are expected
to be similar to 2002. For 2003 deliveries, a
$1.00 (US) change in the
U3O8 spot price from
current levels would change
revenue by about $27
million (Cdn), net earnings
by about $15 million (Cdn)
and cash flow by about $21
million (Cdn).


Conversion Business
At Port Hope, conversion
production is expected to
be about 12,200 tonnes,
similar to 2002. Revenue from the conversion
business is likely to be
slightly lower than in 2002
as a change in the mix of
contracts is expected to
result in a decline in
realized price and lower
profit margins. Electricity Business (Bruce Power) Acquisition of Additional Interest
As previously discussed,
Cameco and its new partners
completed the acquisition
of British Energys
interest in Bruce Power on
February 14, 2003. Bruce A Restart
An important milestone in
the Bruce A restart program
was achieved in early
January 2003 when Bruce
Powers environmental
assessment report was
accepted by the CNSC. The
final hearing on the Bruce A
restart program was held
February 26. Bruce Power
expected to receive
regulatory approval to
operate units 3 and 4
possibly by the end of
March. On January 14, 2003, Bruce
Power received permission
from the CNSC to begin
refuelling unit 4. The
refuelling of unit 4 is now
complete and fuelling of
unit 3 is expected to begin
in early April. The overall
project remains on schedule
for the restart of unit 4 in
April and unit 3 in June
2003.



 
 a project to uprate the
capacity of the B
reactors (approximate
annual expenditures in
millions for 2003 to
2005: $15, $185, and
$100), and  
 
 the completion of the
Bruce B environmental
qualification program (to
be completed in 2003 at an
estimated expenditure of
$30 million). Over the next three years,
annual capital
expenditures, excluding
the Bruce A restart
program, are expected to
average about $245
million. Bruce Powers internal cash
flow is expected to be
sufficient to fund its 2003
capital programs including
the restart of two Bruce A
reactors. Gold Business Acquisition of Additional Interest
As discussed above,
Cameco
and the Kyrgyz
government are involved
in discussions to
restructure the various
interests in KGC. For 2003, production at
Kumtor is expected to be
670,000 ounces (Camecos
share is one-third), with
35% of the production
anticipated to occur in the
first half of the year. This
represents a 25% increase
over 2002 due to an increase
in average ore grade to 5.4
grams per tonne. The
improvement in the grade
assumes access to the
high-grade ore buried when
the pit wall failed in July
2002. The unit




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20



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MANAGEMENTS DISCUSSION AND ANALYSIS









Capital and Development Expenditures*
 (Camecos share in $ millions) Planned 2003
    
    
    Actual 2002Sustaining CapitalUranium and conversion
    
    
    47
    
    
    
    26Gold
    
    
    5
    
    
    
    4Other
    
    
    13
    
    
    
    10Total Sustaining
    
    
    65
    
    
    
    40DevelopmentUranium
    
    
    12
    
    
    
    14Gold
    
    
    70
    
    
    
    24Other
    
    
    4
    
    
    
    Capitalized Interest
    
    
    11
    
    
    
    12Total Development
    
    
    97
    
    
    
    50Total
    
    
    162
    
    
    
    90
 *
    
    On its 31.6% interest, Camecos share of Bruce Powers 2003 capital expenditures program is $52 million.


to continue through most of
the year. A feasibility
study has begun and is
expected to be completed by
the end of 2003. First Quarter of 2003
Earnings from the uranium
and conversion segments are
projected to show an
improvement over the first
quarter of 2002 due to
higher realized prices. As
well, earnings from Bruce
Power are expected to be
higher than in the first
quarter of 2002 due to
increased output and
improved prices along with
an increased ownership
interest. On the other hand,
earnings from the gold
business are projected to
decline, compared to the
same quarter in 2002, due to
lower production.
Consolidated earnings for
the first quarter of 2003
are expected to be higher
than those recorded in the
same period last year. Liquidity
During 2003, the companys operating
and capital expenditure programs, the
additional investment in Bruce Power
and the companys growth strategy are
expected to be funded by internal cash
flow and the companys existing debt
capacity. There are no requirements
foreseen at this time that cannot be
met by these sources.






cash cost is expected to
decline from the 2002
average by about 15% to $180
(US) per ounce due to the
higher production volume. A
change of $10 (US) per ounce
in the spot market price for
gold from the year-end price
of $347 (US) would change
Camecos one-third share of
revenue by about $2 million
(Cdn). At Boroo, mine construction
is proceeding at a slower
than expected pace with some
construction and procurement
activities behind schedule.
Development cost to
commercial production is
estimated to be $63 million
(US), an increase from the
original estimate of $40
million (US). About half of
the increase relates to a
change in the operating plan
from a contractor-supplied
mine equipment fleet to one
where AGR purchases the
fleet. Therefore mine
operating costs are expected
to be lower. The remainder
of the capital cost increase
is due to improvements in
the processing facilities.
To the end of January 2003
about 40% of the budget was
spent which was funded by
Cameco. The remaining
development costs will be
funded internally or
possibly with funds raised
through an equity offering
if Camecos gold business
becomes publicly traded.


The project schedule is
under review and commercial
production is expected in
early 2004. Tax Rate
Camecos effective tax
rate is expected to be in
the 30% to
35% range in 2003. Capital Expenditures
In 2003, total capital
expenditures, excluding the
additional investment in
Bruce Power, are expected
to amount to $162 million,
an increase of $72 million
over 2002. In 2003, most
site-sustaining capital
expenditures are expected
to be higher than normal
due to mill modifications
at Key Lake, the
acquisition of Smith Ranch,
and the volume of projects
at Fuel Services. For development projects,
Camecos share of
expenditures at Cigar Lake
is estimated at $9 million.
CNSC approval of the
construction licence is not
expected before October
2003. After receipt of the
licence, the partners are
expected to make a decision
on when to proceed with mine
development. At Inkai, reserve data
collection and analysis
and test mining are
expected


Supplementary
Information Critical Accounting Policies Cameco prepares its consolidated financial
statements in accordance with Canadian
GAAP. In doing so, management is
required to make various estimates and
judgments in determining the reported
amounts of assets and liabilities, revenues
and expenses for each year presented, and
in the disclosure of commitments and
contingencies. Management bases its
estimates and judgments on its own
experience, guidelines established by the




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MANAGEMENTS DISCUSSION AND ANALYSIS









Canadian Institute of
Mining, Metallurgy and
Petroleum and various other
factors believed to be
reasonable under the
circumstances. Management
believes the following
critical accounting
policies reflect its more
significant estimates and
judgments used in the
preparation of the
consolidated financial
statements. Depreciation and depletion
on property, plant and
equipment is primarily
calculated using the unit of
production method. This
method allocates the cost of
an asset to each period
based on current period
production as a portion of
total lifetime production or
a portion of estimated
recoverable ore reserves.
Estimates of lifetime
production and amounts of
recoverable reserves are
subject to judgment and
significant change over
time. If actual reserves
prove to be significantly
different than the
estimates, there could be a
material impact on the
amounts of depreciation and
depletion charged to
earnings. Significant decommissioning
activities are often not
undertaken until substantial
completion of the useful
lives of productive assets.
Future decommissioning and
reclamation costs are
estimated and accrued using
the unit of production
method so that the estimated
future liability will be
fully provided when
decommissioning and
reclamation activities are
undertaken. Regulatory
requirements and
alternatives with respect to
decommissioning and
reclamation activities are
subject to change over time.
The amount of reclamation
charged to earnings is also
dependent upon estimated
recoverable reserves. A
significant change to either
the estimated costs or
recoverable reserves may
result in a material change
in the amount of reclamation
charged to earnings. If it is determined that
carrying values of assets
cannot be recovered, the
unrecoverable amounts are
written off against current
earnings. Recoverability is
dependent upon assumptions
and


judgments regarding
future prices, costs of
production, sustaining
capital requirements and
economically recoverable
ore reserves. A material
change in assumptions may
significantly impact the
potential impairment of
these assets. Cameco uses derivative
financial and commodity
instruments to reduce
exposure to fluctuations
in foreign currency
exchange rates, interest
rates and commodity
prices. As long as these
instruments are effective,
they have the effect of
offsetting future changes
in these underlying rates
and prices. Future
earnings may be adversely
impacted should these
instruments become
ineffective over time. Caution Regarding Forward-Looking Information Statements contained in this
document which are not
historical
facts are forward-looking
statements that involve
risks, uncertainties and
other factors that could
cause actual results to
differ materially from those
expressed or implied by such
forward-looking statements.
Factors that could cause
such differences, without
limiting the generality of
the following, include:
volatility and sensitivity
to market prices for
uranium, electricity in
Ontario and gold; the impact
of the sales volume of
uranium, conversion
services, electricity
generated and gold;
competition; the impact of
change in foreign currency
exchange rates and interest
rates; imprecision in
reserve estimates;
environmental and safety
risks including increased
regulatory burdens;
unexpected geological or
hydrological conditions;
political risks arising from
operating in certain
developing countries; a
possible deterioration in
political support for
nuclear energy; changes in
government regulations and
policies, including trade
laws and policies; demand
for nuclear


power;
replacement of production
and failure to obtain
necessary permits and
approvals from government
authorities; legislative and
regulatory initiatives
regarding deregulation,
regulation or restructuring
of the electric utility
industry in Ontario; Ontario
electricity rate
regulations; weather and
other natural phenomena;
ability to maintain and
further improve positive
labour relations; operating
performance of the
facilities; success of
planned development
projects; and other
development and operating
risks. Although Cameco
believes that the
assumptions inherent in the
forward-looking statements
are reasonable, undue
reliance
should not be placed on
these statements, which only
apply as of the date of this
document. Cameco disclaims
any intention or obligation
to update or revise any
forward-looking statement,
whether as a result of new
information, future events
or otherwise.




22



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SUBSEQUENT EVENT









ADDENDUM (dated April 16, 2003) TO 2002 MANAGEMENTS DISCUSSION
AND ANALYSIS OF CAMECO CORPORATION



Subsequent Event

---



The preceding statements in the MD&A are modified in their entirety to the extent that they are inconsistent or conflict with the following information which is current as of April 16, 2003: On April 6, 2003, production at McArthur River was suspended due to increased water inflow into the mine. As of April 16, 2003, it was estimated that production at the McArthur River mine would be suspended for four to six months. However, events were still unfolding leaving some uncertainty as to the duration of the shutdown. Management is assessing the operational implications of the event.
A description of financial implications of the event on the outlook for 2003 is provided
below. For additional
information, see the company's 2002 annual information form filed at www.sedar.com and posted on www.cameco.com. Uranium Production As a result of this event, the total uranium production for 2003 will be lower
than the previous estimate of 20.9 million pounds U3O8. Compared to the
previous estimate, Camecos share of production is expected to decline by
approximately 1.1 million pounds for each month that McArthur River does not
produce.
 Uranium Revenue and Margins The water inflow problem will also have an adverse effect on uranium margins
which are expected to be lower than in 2002 due to the reduced production.
Deliveries of uranium are not expected to be impacted but the cost of product
sold will be higher than previously expected. Costs associated with the efforts
to bring the mine back into production will be expensed as incurred and
McArthur River production will be replaced by drawing down higher-cost
inventory.


Consolidated Earnings Preliminary estimates of the impact of this event indicate that 2003 net
earnings will decline by about $4 to $5 million for each month that McArthur
River does not produce at design capacity. This net earnings projection does
not include any provision for potential writedown of assets. At this time, it
is not expected that a writedown of a material amount would be necessary.
However, the company will continue to assess the carrying values of its assets
as new information becomes available.
 Credit Ratings As a result of the water inflow problem at McArthur River, Standard & Poors,
Moodys and DBRS have placed the companys debt on credit watch with negative
implications pending resolution to the situation.






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