##### 



EXHIBIT 99.2




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REPORT OF MANAGEMENTS ACCOUNTABILITY
      Original signed by Gerald W. Grandey
    
    Original signed by O. Kim GoheenPresident and Chief Executive Officer
    
    Senior Vice-President and Chief Financial OfficerFebruary 27, 2008
    
    February 27, 2008
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AUDITORS REPORT
 To the Shareholders of Cameco Corporation
    Original signed by KPMG LLP
 Chartered Accountants  Saskatoon, Canada
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Consolidated Balance Sheets
 As at December 31
    
    2007
    
    
    2006($Cdn thousands)AssetsCurrent assetsCash and cash equivalents
    
    $
    131,932
    
    
    $
    334,089Accounts receivable
    
    
    347,097
    
    
    
    402,847Inventories [note 4]
    
    
    437,487
    
    
    
    416,479Supplies and prepaid expenses
    
    
    210,464
    
    
    
    191,831Current portion of long-term receivables, investments and other [note 7]
    
    
    164,164
    
    
    
    9,1781,291,144
    
    
    
    1,354,424Property, plant and equipment [note 5]
    
    
    3,437,450
    
    
    
    3,198,133Intangible assets and goodwill [note 6]
    
    
    255,484
    
    
    
    294,158Long-term receivables, investments and other [note 7]
    
    
    387,304
    
    
    
    293,714Total assets
    
    $
    5,371,382
    
    
    $
    5,140,429Liabilities and Shareholders EquityCurrent liabilitiesAccounts payable and accrued liabilities
    
    $
    541,283
    
    
    $
    392,679Dividends payable
    
    
    17,220
    
    
    
    14,092Current portion of long-term debt [note 8]
    
    
    8,816
    
    
    
    7,900Current portion of other liabilities [note 10]
    
    
    32,492
    
    
    
    40,737Future income taxes [note 17]
    
    
    84,653
    
    
    
    46,289684,464
    
    
    
    501,697Long-term debt [note 8]
    
    
    717,130
    
    
    
    696,691Provision for reclamation [note 9]
    
    
    284,673
    
    
    
    228,496Other liabilities [note 10]
    
    
    258,511
    
    
    
    232,641Future income taxes [note 17]
    
    
    246,936
    
    
    
    339,4512,191,714
    
    
    
    1,998,976Minority interest
    
    
    435,807
    
    
    
    400,071Shareholders equityShare capital
    
    
    819,268
    
    
    
    812,769Contributed surplus
    
    
    119,531
    
    
    
    540,173Retained earnings
    
    
    1,779,629
    
    
    
    1,428,206Accumulated other comprehensive income (loss) [note 12]
    
    
    25,433
    
    
    
    (39,766
    )2,743,861
    
    
    
    2,741,382Total liabilities and shareholders equity
    
    $
    5,371,382
    
    
    $
    5,140,429
   Approved by the board of directors  Original signed by Gerald W. Grandey and Nancy E. Hopkins
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Consolidated Statements of Earnings
 For the years ended December 31
    
    2007
    
    
    2006($Cdn thousands, except per share amounts)Revenue fromProducts and services
    
    $
    2,309,741
    
    
    $
    1,831,690ExpensesProducts and services sold
    
    
    1,211,664
    
    
    
    1,127,772Depreciation, depletion and reclamation
    
    
    225,539
    
    
    
    199,665Administration
    
    
    127,229
    
    
    
    143,014Exploration
    
    
    66,813
    
    
    
    58,152Research and development
    
    
    3,609
    
    
    
    2,682Interest and other [note 14]
    
    
    (32,673
    )
    
    
    (3,708
    )Cigar Lake remediation [note 13]
    
    
    29,403
    
    
    
    20,559Restructuring of gold business [note 24]
    
    
    113,000
    
    
    
    Stock option plan amendment [note 21]
    
    
    94,175
    
    
    
    Gain on sale of assets [note 15]
    
    
    (4,028
    )
    
    
    (51,826
    )1,834,731
    
    
    
    1,496,310Earnings from operations
    
    
    475,010
    
    
    
    335,380Other income (expense) [note 16]
    
    
    (9,078
    )
    
    
    10,046Earnings before income taxes and minority interest
    
    
    465,932
    
    
    
    345,426Income tax expense (recovery) [note 17]
    
    
    29,468
    
    
    
    (68,843
    )Minority interest
    
    
    20,352
    
    
    
    38,554Net earnings
    
    $
    416,112
    
    
    $
    375,715Basic earnings per common share [note 28]
    
    $
    1.18
    
    
    $
    1.07Diluted earnings per common share [note 28]
    
    $
    1.13
    
    
    $
    1.02
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Consolidated Statements of Shareholders Equity
 For the years ended December 31
    
    2007
    
    
    2006($Cdn thousands)Share capitalBalance at beginning of year
    
    $
    812,769
    
    
    $
    779,420Shares repurchased [note 11]
    
    
    (22,750
    )
    
    
    Stock option plan
    
    
    29,249
    
    
    
    33,285Debenture conversions
    
    
    
    
    
    
    64Balance at end of year
    
    
    819,268
    
    
    
    812,769Contributed surplusBalance at beginning of year
    
    
    540,173
    
    
    
    529,245Shares repurchased [note 11]
    
    
    (406,577
    )
    
    
    Stock option plan amendment [note 21]
    
    
    (21,875
    )
    
    
    Stock-based compensation
    
    
    13,770
    
    
    
    17,549Options exercised
    
    
    (5,960
    )
    
    
    (6,612
    )Debenture conversions
    
    
    
    
    
    
    (9
    )Balance at end of year
    
    
    119,531
    
    
    
    540,173Retained earningsBalance at beginning of year
    
    
    1,428,206
    
    
    
    1,108,748Transition adjustment  financial instruments [note 3(a)]
    
    
    5,343
    
    
    
    Net earnings
    
    
    416,112
    
    
    
    375,715Dividends on common shares
    
    
    (70,032
    )
    
    
    (56,257
    )Balance at end of year
    
    
    1,779,629
    
    
    
    1,428,206Accumulated other comprehensive income (loss)Balance at beginning of year
    
    
    (39,766
    )
    
    
    (53,397
    )Transition adjustment  financial instruments [note 3(a)]
    
    
    38,839
    
    
    
    Other comprehensive income
    
    
    26,360
    
    
    
    13,631Balance at end of year [note 12]
    
    
    25,433
    
    
    
    (39,766
    )Total retained earnings and accumulated other comprehensive income
    
    
    1,805,062
    
    
    
    1,388,440Shareholders equity at end of year
    
    $
    2,743,861
    
    
    $
    2,741,382
 Consolidated Statements of Comprehensive Income
 For the years ended December 31
    
    2007
    
    
    2006($Cdn thousands)Net earnings
    
    $
    416,112
    
    
    $
    375,715Other comprehensive income (loss), net of taxesUnrealized foreign currency translation gains (losses)
    
    
    (111,169
    )
    
    
    13,631Gains on derivatives designated as cash flow hedges
    
    
    206,215
    
    
    
    Gains on derivatives designated as cash flow hedges
transferred to net earnings
    
    
    (62,320
    )
    
    
    Unrealized losses on assets available-for-sale
    
    
    (6,366
    )
    
    
    Other comprehensive income
    
    
    26,360
    
    
    
    13,631Total comprehensive income
    
    $
    442,472
    
    
    $
    389,346
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Consolidated Statements of Cash Flows
 For the years ended December 31
    
    2007
    
    
    2006($Cdn thousands)Operating activitiesNet earnings
    
    $
    416,112
    
    
    $
    375,715Items not requiring (providing) cash:Depreciation, depletion and reclamation
    
    
    225,539
    
    
    
    199,665Provision for future taxes [note 17]
    
    
    (134,129
    )
    
    
    (184,639
    )Deferred gains
    
    
    (18,441
    )
    
    
    (43,449
    )Unrealized losses (gains) on derivatives
    
    
    (50,032
    )
    
    
    10,400Stock-based compensation [note 21]
    
    
    13,770
    
    
    
    17,549Gain on sale of assets [note 15]
    
    
    (4,028
    )
    
    
    (51,826
    )Equity in loss from associated companies [note 16]
    
    
    6,439
    
    
    
    5,320Cigar Lake remediation [note 13]
    
    
    
    
    
    
    15,356Restructuring of gold business [note 24]
    
    
    113,000
    
    
    
    Stock option plan amendment [note 21]
    
    
    94,175
    
    
    
    Minority interest
    
    
    20,352
    
    
    
    38,554Other operating items [note 18]
    
    
    117,969
    
    
    
    35,375Cash provided by operations
    
    
    800,726
    
    
    
    418,020Investing activitiesAcquisition of business, net of cash acquired
    
    
    
    
    
    
    (83,856
    )Additions to property, plant and equipment
    
    
    (494,473
    )
    
    
    (459,559
    )Increase in long-term receivables, investments and other
    
    
    (38,167
    )
    
    
    (29,687
    )Proceeds on sale of property, plant and equipment
    
    
    5,824
    
    
    
    46,404Cash used in investing
    
    
    (526,816
    )
    
    
    (526,698
    )Financing activitiesDecrease in debt
    
    
    (7,900
    )
    
    
    (156,700
    )Increase in debt
    
    
    43,815
    
    
    
    Issue of shares
    
    
    23,289
    
    
    
    27,058Shares repurchased [note 11]
    
    
    (429,327
    )
    
    
    Dividends
    
    
    (66,906
    )
    
    
    (52,660
    )Cash used in financing
    
    
    (437,029
    )
    
    
    (182,302
    )Decrease in cash during the year
    
    
    (163,119
    )
    
    
    (290,980
    )Exchange rate changes on foreign currency cash balances
    
    
    (39,038
    )
    
    
    1,876Cash and cash equivalents at beginning of year
    
    
    334,089
    
    
    
    623,193Cash and cash equivalents at end of year*
    
    $
    131,932
    
    
    $
    334,089Supplemental cash flow disclosureInterest paid
    
    $
    47,691
    
    
    $
    53,551Income taxes paid
    
    $
    154,748
    
    
    $
    115,352
 *
    
    As of December 31, 2007, our cash and cash equivalents balance consisted of $89,438 in cash and
$42,494 in cash equivalents (primarily treasury bills)
As at December 31, 2006  $73,159 in cash and $260,930 in cash equivalents (primarily commercial
paper).
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Notes to Consolidated Financial Statements
   1.
    
    Cameco CorporationCameco Corporation is incorporated under the Canada Business Corporations Act. Cameco
Corporation and its subsidiaries (collectively, Cameco or the company) are primarily engaged in
the exploration for and the development, mining, refining, conversion and fabrication of uranium
for sale as fuel for generating electricity in nuclear power reactors in Canada and other
countries. The company has a 31.6% interest in Bruce Power L.P. (BPLP), which operates the four
Bruce B nuclear reactors in Ontario. Camecos 52.7% subsidiary Centerra Gold Inc. (Centerra) is
involved in the exploration for and the development, mining and sale of gold.2.
    
    Significant Accounting Policies
 (a)
    
    Consolidation PrinciplesThe consolidated financial statements include the accounts of Cameco and its subsidiaries.
Interests in joint ventures are accounted for by the proportionate consolidation method.
Under this method, Cameco includes in its accounts its proportionate share of assets,
liabilities, revenues and expenses.The consolidated financial statements are prepared by management in accordance with Canadian
generally accepted accounting principles. Management makes various estimates and assumptions
in determining the reported amounts of assets and liabilities, revenues and expenses for each
year presented, and in the disclosure of commitments and contingencies. The most significant
estimates are related to the lives and recoverability of mineral properties, provisions for
decommissioning and reclamation of assets, future income taxes, financial instruments and
mineral reserves. Actual results could differ from these estimates. This summary of
significant accounting policies is a description of the accounting methods and practices that
have been used in the preparation of these consolidated financial statements and is presented
to assist the reader in interpreting the statements contained herein.(b)
    
    Cash and cash equivalentsCash and cash equivalents consists of balances with financial institutions and investments in
money market instruments, which have a term to maturity of three months or less at time of
purchase.(c)
    
    InventoriesInventories of broken ore, uranium concentrates, refined and converted products and gold are
valued at the lower of average cost and net realizable value. Average cost includes direct
materials, direct labour, operational overhead expenses and depreciation, depletion and
reclamation.(d)
    
    SuppliesConsumable supplies and spares are valued at the lower of cost or replacement value.(e)
    
    InvestmentsInvestments in associated companies over which Cameco has the ability to exercise significant
influence are accounted for by the equity method. Under this method, Cameco includes in
earnings its share of earnings or losses of the associated company. Prior to January 1,
2007, portfolio investments were carried at cost or at cost less amounts written off to
reflect a decline in value that was other than temporary. Effective January 1, 2007,
portfolio investments were classified as available for sale and are carried at fair value in
the consolidated balance sheets with unrealized gains and losses reported in other
comprehensive income until realized, at which time they are recorded in the consolidated
statement of earnings.
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(f)
    
    Property, Plant and EquipmentAssets are carried at cost. Costs of additions and improvements are capitalized. When
assets are retired or sold, the resulting gains or losses are reflected in current earnings.
Maintenance and repair expenditures are charged to cost of production.The decision to develop a mine property within a project area is based on an assessment of
the commercial viability of the property, the availability of financing and the existence of
markets for the product. Once the decision to proceed to development is made, development
and other expenditures relating to the project area are deferred and carried at cost with the
intention that these will be depleted by charges against earnings from future mining
operations. No depreciation or depletion is charged against the property until commercial
production commences. After a mine property has been brought into commercial production,
costs of any additional work on that property are expensed as incurred, except for large
development programs, which will be deferred and depleted over the remaining life of the
related assets.The carrying values of non-producing properties are periodically assessed by management and
if management determines that the carrying values cannot be recovered, the unrecoverable
amounts are written off against current earnings.Cameco reviews the carrying values of its property, plant and equipment when changes in
circumstances indicate that those carrying values may not be recoverable. Estimated future
net cash flows are calculated using estimated recoverable reserves, estimated future
commodity prices and the expected future operating and capital costs. An impairment loss is
recognized when the carrying value of an asset held for use exceeds the sum of undiscounted
future net cash flows. An impairment loss is measured as the amount by which the assets
carrying amount exceeds its fair value.Interest is capitalized on expenditures related to development projects actively being
prepared for their intended use. Capitalization is discontinued when the asset enters
commercial operation or development ceases.Fuel services assets, mine buildings, equipment and mineral properties are depreciated or
depleted according to the unit-of-production method. This method allocates the costs of
these assets to each accounting period. For fuel services, the amount of depreciation is
measured by the portion of the facilities total estimated lifetime production that is
produced in that period. For mining, the amount of depreciation or depletion is measured by
the portion of the mines proven and probable reserves which are recovered during the period.Nuclear generating plants are depreciated according to the straight-line method based on the
lower of useful life and remaining lease term.Other assets are depreciated according to the straight-line method based on estimated useful
lives, which generally range from three to 10 years.(g)
    
    Intangible Assets and GoodwillIntangible assets acquired in a business combination are recorded at their fair values.
Finite-lived intangible assets are amortized over the estimated production profile of the
business unit to which they relate. The carrying values of intangible assets are periodically
assessed by management and if management determines that the carrying values cannot be
recovered, the unrecoverable amount is charged to earnings in the current period.Acquisitions are accounted for using the purchase method whereby acquired assets and
liabilities are recorded at fair value as of the date of acquisition. The excess of the
purchase price over such fair value is recorded as goodwill. Goodwill is assigned to assets
and is not amortized. Cameco tests goodwill for possible impairment on an annual basis and
at any other time if an event occurs or circumstances change that would more likely than not
reduce the fair value of a reporting unit below its carrying amount.(h)
    
    Future Income TaxesFuture income taxes are recognized for the future income tax consequences attributable to
differences between the carrying values of assets and liabilities and their respective income
tax bases. Future income tax assets and liabilities are measured using enacted or
substantively enacted income tax rates expected to apply to taxable income in the years in
which temporary differences are expected to be recovered or settled. The effect on future
income tax assets and liabilities of a change in rates is included in earnings in the period,
which includes the enactment date. Future income tax assets are recorded in the financial
statements if realization is considered more likely than not.
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(i)
    
    Research and Development and Exploration CostsExpenditures for research and technology related to the products, processes and expenditures
for geological exploration programs are charged against earnings as incurred.(j)
    
    Environmental Protection and Reclamation CostsThe fair value of the liability for an asset retirement obligation is recognized in the
period incurred. The fair value, discounted using the companys credit adjusted risk free
rate, is added to the carrying amount of the associated asset and depreciated over the
assets useful life. The liability is accreted over time, using the companys credit
adjusted risk free rate, through periodic charges to earnings and it is reduced by actual
costs of decommissioning and reclamation. Camecos estimates of reclamation costs could
change as a result of changes in regulatory requirements, reclamation plans, cost estimates
and timing of estimated expenditures. Costs related to ongoing environmental programs are
charged against earnings as incurred.(k)
    
    Employee Future BenefitsCameco accrues its obligations under employee benefit plans. The cost of pensions and other
retirement benefits earned by employees is actuarially determined using the projected benefit
method pro-rated on service and managements best estimate of expected plan investment
performance, salary escalation, retirement ages of employees and expected health care costs.
For the purpose of calculating the expected return on plan assets, those assets are measured
at fair value. Cameco measures the plan assets and the accrued benefit obligations on
December 31 each year.On both the Cameco-specific and BPLP-specific defined benefit pension plans, past service
costs arising from plan amendments are amortized on a straight-line basis over the expected
average remaining service life of the plan participants. Net actuarial gains, which exceed
10% of the greater of the accrued benefit obligation and the fair value of plan assets, are
amortized on a straight-line basis over the expected average remaining service life of the
plan participants.On the Cameco-specific retirement benefit plans that do not vest or accumulate, past service
costs arising from plan amendments, and net actuarial gains and losses, are recognized in the
period they arise. Conversely, the BPLP-specific amounts are amortized on a straight-line
basis over the expected average remaining service life of the plan participants.(l)
    
    Stock-Based CompensationCameco has five stock-based compensation plans that are described in note 21. These
encompass a stock option plan, an employee share ownership plan, a performance share unit
plan, a deferred share unit plan and a phantom stock option plan. In calculating
compensation expense, Cameco includes an estimate for forfeitures that is based on historic
trends.Prior to July 27, 2007, options granted under the stock option plan on or after January 1,
2003 were accounted for using the fair value method. Under this method, the compensation
cost of options granted was measured at estimated fair value at the grant date and recognized
over the shorter of, the period to eligible retirement, or the vesting period. For options
granted prior to January 1, 2003, no compensation expense was recognized when the stock
options were granted. Any consideration received on exercise of stock options was credited
to share capital. Effective July 27, 2007, options granted under the stock option plan are
accounted for as liabilities and are carried at their intrinsic value. The intrinsic value
of the liability is marked to market each period and is amortized to expense over the shorter
of, the period to eligible retirement, or the vesting period.Deferred share units, performance share units and phantom stock options are amortized over
their vesting periods and re-measured at each reporting period, until settlement, using the
quoted market value. Camecos contributions under the employee share ownership plan are
expensed during the year of contribution. Shares purchased with company contributions and
with dividends paid on such shares, become unrestricted on January 1 of the second plan year
following the date on which such shares were purchased.(m)
    
    Revenue RecognitionCameco supplies uranium concentrates and uranium conversion services to utility customers.Cameco recognizes revenue on the sale of its nuclear products when evidenced by a contract
that indicates the product, pricing and delivery terms, delivery occurs, the related revenue
is fixed or determinable and collection is reasonably assured.Cameco has three types of sales arrangements with its customers in its uranium and fuel
services businesses. These arrangements include uranium supply, toll conversion services and
conversion supply (converted uranium), which is a combination of uranium supply and toll
conversion services.
 9




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Uranium SupplyIn a uranium supply arrangement, Cameco is contractually obligated to provide uranium
concentrates to its customers. Cameco-owned uranium is physically delivered to conversion
facilities (Converters) where the Converter will credit Camecos account for the volume of
accepted uranium. Based on delivery terms in a sales contract with its customer, Cameco
instructs the Converter to transfer title of a contractually-specified quantity of uranium to
the customers account at the Converters facility. At this point, Cameco invoices the
customer and recognizes revenue for the uranium supply.Toll Conversion ServicesIn a toll conversion arrangement, Cameco is contractually obligated to convert customer-owned
uranium to a chemical state suitable for enrichment. The customer delivers uranium to
Camecos conversion facilities. Once conversion is complete, Cameco physically delivers
converted uranium to enrichment facilities (Enrichers) where the Enricher will credit
Camecos account for the volume of accepted processed uranium. Based on delivery terms in a
sales contract with its customer, Cameco instructs the Enricher to transfer title of a
contractually-specified quantity of converted uranium to the customers account at the
Enrichers facility. At this point, Cameco invoices the customer and recognizes revenue for
the toll conversion services.Conversion SupplyIn a conversion supply arrangement, Cameco is contractually obligated to provide uranium
concentrates and conversion services to its customers. Cameco-owned uranium is converted and
physically delivered to an Enricher as described in the toll conversion services arrangement.
Based on delivery terms in a sales contract with its customer, Cameco instructs the Enricher
to transfer title of a contractually-specified quantity of converted uranium to the
customers account at the Enrichers facility. At this point, Cameco invoices the customer
and recognizes revenue for both the uranium supplied and the conversion service provided. It
is rare for Cameco to enter into back-to-back arrangements for uranium supply and toll
conversion services. However, in the event that a customer requires such an arrangement,
revenue from uranium supply is deferred until the toll conversion service has been rendered.Revenue from deliveries to counterparties with whom Cameco has arranged a standby
product loan facility (up to the limit of the loan facilities) and the related cost of sales
are deferred until the loan arrangements have been terminated, or if drawn upon, when the
loans are repaid and that portion of the facility is terminated.Cameco records revenue on the sale of gold when title passes and delivery is effected.Electricity sales are recognized at the time of generation, and delivery to the purchasing
utility is metered at the point of interconnection with the transmission system. Revenues are
recognized on an accrual basis, which includes an estimate of the value of electricity
produced during the period but not yet billed.(n)
    
    Amortization of Financing CostsPrior to January 1, 2007, debt discounts and issue expenses associated with long-term
financing were deferred and amortized over the term of the issues to which they related and
were classified as deferred charges. Effective January 1, 2007, for financial instruments
measured at amortized cost, the effective interest method of amortization is used for any
debt discounts and issue expenses. The costs are now classified with their related financial
liability.(o)
    
    Foreign Currency TranslationMonetary assets and liabilities denominated in foreign currencies are translated into
Canadian dollars at year-end rates of exchange. Revenue and expense transactions denominated
in foreign currencies are translated into Canadian dollars at rates in effect at the time of
the transactions. The applicable exchange gains and losses arising on these transactions are
reflected in earnings.The United States dollar is considered the functional currency of most of Camecos uranium
and gold operations outside of Canada. The financial statements of these operations are
translated into Canadian dollars using the current rate method whereby all assets and
liabilities are translated at the year-end rate of exchange and all revenue and expense items
are translated at the average rate of exchange prevailing during the year. Exchange gains
and losses arising from this translation, representing the net unrealized foreign currency
translation gain (loss) on Camecos net investment in these foreign operations, are recorded
in the foreign currency translation adjustments component of accumulated other comprehensive
income (AOCI). Exchange gains or losses arising from the translation of foreign debt
designated as hedges of a net investment in foreign operations are also recorded in the
foreign currency translation adjustments component of accumulated other comprehensive income.
These adjustments are not included in earnings until realized through a reduction in Camecos
net investment in such operations.
 10




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(p)
    
    Derivative Financial Instruments and Hedging TransactionsPrior to January 1, 2007, Camecos policy was to use derivative financial and commodity
instruments to reduce exposure to fluctuations in foreign currency exchange rates, interest
rates and commodity prices. Cameco formally documented all relationships between hedging
instruments and hedged items, as well as its risk management objective and strategy for
undertaking various hedge transactions. This process included linking all derivatives to
specific assets and liabilities on the balance sheet or to specific firm commitments or
forecasted transactions. Cameco also formally assessed, both at the hedges inception and on
an ongoing basis, whether the derivatives that were used in hedging transactions were highly
effective in offsetting changes in fair values or cash flows of hedged items. Gains and
losses related to hedging items were deferred and recognized in the same period as the
corresponding hedged items. If derivative financial instruments were closed before planned
delivery, gains or losses were recorded as deferred gains or deferred charges and recognized
on the planned delivery date. In the event a hedged item was sold, extinguished or matured
prior to the termination of the related hedging instrument, any realized or unrealized gain
or loss on such derivative instrument was recognized in earnings.BPLP uses various energy and related sales contracts to reduce exposure to fluctuations in
the price of electricity in Ontario. Prior to January 1, 2007, gains or losses on hedging
instruments were recognized in earnings over the term of the contract when the underlying
hedged transactions occurred. All energy contracts were designated as hedges of BPLPs
electricity sales.Effective January 1, 2007, Camecos policy is in accordance with note 3(a).When hedge accounting criteria are met, derivative contracts are accounted for as described
in note 3(a). When hedge accounting criteria are not met, the derivative contracts which do
not qualify for hedge accounting are marked-to-market and the resulting net gains or losses
are recognized in interest and other in the consolidated statements of earnings.(q)
    
    Earnings Per ShareEarnings per share are calculated using the weighted average number of paid common shares
outstanding.The calculation of diluted earnings per share assumes that outstanding options and warrants,
which are dilutive to earnings per share are exercised and the proceeds are used to
repurchase shares of the company at the average market price of the shares for the period.
The effect is to increase the number of shares used to calculate diluted earnings per share.
 3.
    
    Accounting Standards
 (a)
    
    Changes in Accounting PoliciesFinancial Instruments  Recognition and Measurement, Hedges and Comprehensive IncomeOn January 1, 2007, Cameco adopted the standards issued by the Canadian Institute of
Chartered Accountants (CICA) relating to financial instruments, hedges and other
comprehensive income. In accordance with the new standards, prior periods have not been
restated except for the new accounting policies affecting the cumulative translation account.On January 1, 2007, Cameco recognized all of its financial assets and liabilities in the
consolidated balance sheets according to their classification. Any adjustment made to a
previous carrying amount was recognized as an adjustment to the balance of retained earnings
at that date or as the opening balance of AOCI, net of income taxes. Cameco has added two new
statements to the consolidated financial statements entitled Consolidated Statements of
Shareholders Equity and Consolidated Statements of Comprehensive Income.
 11




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##### 



Financial Assets and Financial LiabilitiesAll financial assets and liabilities will be carried at fair value in the consolidated
balance sheets, except for items classified in the following categories, which will be
carried at amortized cost: loans and receivables, held-to-maturity securities and financial
liabilities not held for trading. Realized and unrealized gains and losses on financial
assets and liabilities that are held for trading will be recorded in the consolidated
statements of earnings. Unrealized gains and losses on financial assets that are available
for sale will be reported in OCI until realized, at which time they will be recorded in the
consolidated statements of earnings. On transition, there was no impact to Cameco as the
accounting was either unchanged or the area was not applicable at January 1, 2007.Other significant accounting implications arising upon the adoption of the financial
instrument standards includes the use of the effective interest method of amortization for
any transaction costs or fees, premiums or discounts earned or incurred for financial
instruments measured at amortized cost. On transition, there was no impact to Cameco on the
amortization of these fees although applicable issue costs, which were previously recognized
as deferred charges, were reclassified to their related financial liabilities. As a result,
on transition Cameco recorded a net decrease in long-term receivables, investments and other
of $7,372,000 and a decrease in long-term debt of $7,372,000.Hedge Accounting and DerivativesThe purpose of hedging transactions is to modify Camecos exposure to one or more risks by
creating an offset between changes in the fair value of, or the cash flows attributable to,
the hedged item and the hedging item. Hedge accounting ensures that the offsetting gains,
losses, revenues and expenses are recognized to net earnings in the same period or periods.
When hedge accounting is appropriate, the hedging relationship will be designated as a fair
value hedge, a cash flow hedge, or a foreign currency risk hedge related to a net investment
in a self-sustaining foreign operation.At the inception of a hedging relationship, Cameco formally documents all relationships
between hedging instruments and hedged items, as well as its risk management objective and
strategy for undertaking various hedge transactions. The process includes linking all
derivatives to specific assets and liabilities on the balance sheet or to specific firm
commitments or forecasted transactions. Cameco also formally assesses, both at the inception
and on an ongoing basis, whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in fair values or cash flows of hedged items.For fair value hedges, changes in the fair value of the derivatives and corresponding changes
in fair value of the hedged items attributed to the risk being hedged will be recognized in
the consolidated statements of earnings. For cash flow hedges, the effective portion of the
changes in the fair values of the derivative instruments will be recorded in OCI until the
hedged items are recognized in the consolidated statements of earnings.At January 1, 2007, Cameco did not have any fair value hedges or hedges of net investments in
self-sustaining foreign operations. Upon adoption of the new standards, Cameco measured its
cash flow hedges at fair value, which resulted in a decrease in other liabilities of
$1,444,000 and an increase in AOCI of $1,444,000 pre-tax. Cameco also recognized an increase
in long-term receivables, investments and other of $54,567,000 and an increase of $54,567,000
in AOCI pre-tax for BPLPs various energy and sales related cash flow hedges.Derivatives may be embedded in other financial instruments (the host instrument). Prior to
the adoption of the new standards, most embedded derivatives were not accounted for
separately from the host instrument except in cases such as Camecos unsecured convertible
debentures where the fair value of the option component was reflected separately in
contributed surplus. Under the new standards, embedded derivatives are treated as separate
derivatives when their economic characteristics and risks are not clearly and closely related
to those of the host instrument, the terms of the embedded derivative are the same as those
of a stand-alone derivative, and the combined contract is not held for trading or designated
at fair value. These embedded derivatives are measured at fair value with subsequent changes
recognized in gains or losses on derivatives within interest and other on the consolidated
statements of earnings.Upon adoption of the new standards, Cameco recognized embedded foreign currency derivatives
on certain of its uranium products sales contracts. As a result, Cameco recorded a net
increase in long-term receivables, investments and other of $8,348,000 and an increase of
$8,348,000 in retained earnings pre-tax at January 1, 2007.
 12




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##### 



Cumulative Translation AccountPrior to the adoption of the financial instrument standards at January 1, 2007, exchange
gains and losses arising from the translation of the financial statements of a
self-sustaining foreign operation were recorded in the cumulative translation account as a
separate component of shareholders equity. Upon adoption of the new standards, the exchange
gains and losses are to be recognized in a separate component of other comprehensive income
with restatement of prior periods. The effect of the change in policy is to adjust the
opening balance of AOCI by $53,397,000 and eliminate the cumulative translation account.The following table summarizes the opening adjustments, gross and net of future income taxes,
required to adopt the new standards:
 Retained Earnings
    
    
    AOCIGross
    
    
    Net
    
    
    Gross
    
    
    NetCash flow hedges (net of $17,172 tax expense)
    
    $
    
    
    
    $
    
    
    
    $
    56,011
    
    
    $
    38,839Recognition of embedded derivatives on
sales contracts (net of $3,005 tax expense)
    
    
    8,348
    
    
    
    5,343
    
    
    
    
    
    
    
    Totals
    
    $
    8,348
    
    
    $
    5,343
    
    
    $
    56,011
    
    
    $
    38,839
 (b)
    
    Future Changes in Accounting Policy
 (i)
    
    InventoriesEffective January 1, 2008, Cameco will adopt the new Canadian standard, Handbook Section
3031, Inventories, which supersedes Handbook Section 3030 and converges with the
International Accounting Standard Boards recently amended standard IAS 2, Inventories.The standard introduces significant changes to the measurement and disclosure of inventory.
The measurement changes include: the elimination of the last in first out method (LIFO), the
requirement to measure inventories at the lower of cost and net realizable value, the
allocation of overhead based on normal capacity, the use of the specific cost method for
inventories that are not ordinarily interchangeable or goods and services produced for
specific purposes, the requirement for an entity to use a consistent cost formula for
inventory of a similar nature and use, and the reversal of previous write-downs to net
realizable value when there is a subsequent increase in the value of inventories.
Disclosures of inventories have also been enhanced. Inventory policies, carrying amounts,
amounts recognized as an expense, write-downs and the reversals of write-downs are required
to be disclosed.The adoption of this new standard is not expected to have a material impact on Camecos
consolidated financial statements.(ii)
    
    Financial Instruments  Disclosure and PresentationEffective January 1, 2008, Cameco will adopt two new Canadian standards: Handbook Section
3862, Financial Instruments  Disclosuresand Handbook Section 3863, Financial Instruments
 Presentation. These sections replace Handbook Section 3861, Financial Instruments 
Disclosures and Presentation, and enhance the users ability to evaluate the significance of
financial instruments to an entity, related exposures and the management of these risks.(iii)
    
    Capital DisclosuresEffective January 1, 2008, Cameco will adopt the new Canadian standard, Handbook Section
1535, Capital Disclosures. This section establishes standards for disclosure of both
qualitative and quantitative information that enable users to evaluate the companys
objectives, policies and processes for managing capital.
 13




---



##### 



4.
    
    Inventories
 2007
    
    
    2006UraniumConcentrate
    
    $
    291,071
    
    
    $
    280,650Broken ore
    
    
    8,313
    
    
    
    12,946299,384
    
    
    
    293,596Fuel Services
    
    
    93,788
    
    
    
    98,485GoldFinished
    
    
    10,986
    
    
    
    5,513Stockpile
    
    
    33,329
    
    
    
    18,88544,315
    
    
    
    24,398Total
    
    $
    437,487
    
    
    $
    416,479
 5.
    
    Property, Plant and Equipment
 AccumulatedDepreciation
    
    2007
    
    2006Cost
    
    and Depletion
    
    Net
    
    NetUraniumMining
    
    $
    2,990,665
    
    
    $
    1,575,167
    
    
    $
    1,415,498
    
    
    $
    1,333,397Non-producing
    
    
    888,872
    
    
    
    
    
    
    
    888,872
    
    
    
    748,442Fuel Services
    
    
    407,013
    
    
    
    184,121
    
    
    
    222,892
    
    
    
    206,765ElectricityAssets under capital lease
    
    
    164,290
    
    
    
    61,750
    
    
    
    102,540
    
    
    
    111,900Other
    
    
    547,771
    
    
    
    150,078
    
    
    
    397,693
    
    
    
    400,003GoldMining
    
    
    928,345
    
    
    
    563,051
    
    
    
    365,294
    
    
    
    352,201Non-producing
    
    
    4,676
    
    
    
    
    
    
    
    4,676
    
    
    
    4,552Other
    
    
    70,992
    
    
    
    31,007
    
    
    
    39,985
    
    
    
    40,873Total
    
    $
    6,002,624
    
    
    $
    2,565,174
    
    
    $
    3,437,450
    
    
    $
    3,198,133
 14




---



##### 



6.
    
    Intangible Assets and Goodwill
 AccumulatedCost
    
    Depreciation
    
    2007 Net
    
    2006 NetIntangible assets
    
    $
    118,819
    
    
    $
    10,107
    
    
    $
    108,712
    
    
    $
    114,019Goodwill
    
    
    146,772
    
    
    
    N/A
    
    
    
    146,772
    
    
    
    180,139Total
    
    $
    265,591
    
    
    $
    10,107
    
    
    $
    255,484
    
    
    $
    294,158
    7.
    
    Long-Term Receivables, Investments and Other
 2007
    
    
    2006BPLP [note 20]Capital
lease receivable from Bruce A L.P.
    
    $
    97,328
    
    
    $
    97,518Derivatives [note 27]
    
    
    75,788
    
    
    
    Receivable from Ontario Power Generation (OPG)
    
    
    2,907
    
    
    
    11,281Accrued pension benefit asset [note 22]
    
    
    5,864
    
    
    
    11,992Kumtor Gold Company (KGC)Reclamation trust fund
    
    
    4,795
    
    
    
    6,999Equity accounted investmentsUNOR Inc. (market value $5,527)
    
    
    7,790
    
    
    
    8,893UEX Corporation (market value $258,223)
    
    
    14,153
    
    
    
    19,151Huron Wind (privately held)
    
    
    2,174
    
    
    
    2,340Minergia S.A.C. (privately held)
    
    
    683
    
    
    
    Available-for-sale securitiesWestern Uranium Corporation
    
    
    13,351
    
    
    
    Cue Capital Corp.
    
    
    6,751
    
    
    
    Derivatives [note 27]
    
    
    168,641
    
    
    
    433Deferred chargesCost of sales [notes 10]
    
    
    54,943
    
    
    
    75,854Debt issue costs [note 3(a)]
    
    
    
    
    
    
    7,372Gold hedges
    
    
    
    
    
    
    593Advances receivable
    
    
    57,739
    
    
    
    46,094Asset-backed commercial paper in default
    
    
    8,000
    
    
    
    Accrued pension benefit asset [note 22]
    
    
    5,874
    
    
    
    7,889Other
    
    
    24,687
    
    
    
    6,483551,468
    
    
    
    302,892Less current portion
    
    
    (164,164
    )
    
    
    (9,178
    )Net
    
    $
    387,304
    
    
    $
    293,714
 15




---



##### 



8.
    
    Long-Term Debt
 2007
    
    
    2006Convertible debentures
    
    $
    205,575
    
    
    $
    207,091Debentures
    
    
    297,905
    
    
    
    300,000Capital lease obligation  BPLP
    
    
    189,600
    
    
    
    197,500Commercial paper
    
    
    32,866
    
    
    
    725,946
    
    
    
    704,591Less current portion
    
    
    (8,816
    )
    
    
    (7,900
    )Net
    
    $
    717,130
    
    
    $
    696,691
        16




---



##### 



2008
    
    $
    8,8162009
    
    
    10,1122010
    
    
    11,6922011
    
    
    13,2722012
    
    
    14,852Thereafter
    
    
    667,202Total
    
    $
    725,946
 Standby Product Loan Facilities
 3 8 6
   3 8 6
 9.
    
    Provision for Reclamation
    17




---



##### 



2007
    
    
    2006Balance, beginning of year
    
    $
    228,496
    
    
    $
    167,568Acquisition of Zircatec interest [note 23]
    
    
    
    
    
    
    7,129Changes in estimates
    
    
    59,487
    
    
    
    50,299Liabilities settled
    
    
    (6,034
    )
    
    
    (6,420
    )Accretion expense
    
    
    14,768
    
    
    
    9,954Impact of foreign exchange
    
    
    (12,044
    )
    
    
    (34
    )Balance, end of year
    
    $
    284,673
    
    
    $
    228,496
  (i)
    
    Total undiscounted amount of the estimated cash flows  $440,000,000.(ii)
    
    Expected timing of payment of the cash flows  timing is based on life of mine plans.
The majority of expenditures are expected to occur after 2013.(iii)
    
    Discount rates  5.25% to 7.50% for operations in North America; 8.00% for operations
in Kyrgyzstan; 8.00% for operations in Mongolia.
  2007
    
    
    2006Uranium
    
    $
    166,725
    
    
    $
    118,272Fuel Services
    
    
    97,329
    
    
    
    90,789Gold
    
    
    20,619
    
    
    
    19,435Total
    
    $
    284,673
    
    
    $
    228,496
 10.
    
    Other Liabilities
 2007
    
    
    2006Deferred sales [note 7]
    
    $
    113,461
    
    
    $
    107,330Derivatives [note 27]
    
    
    21,619
    
    
    
    10,127Deferred currency hedges [note 3(a)]
    
    
    
    
    
    
    26,333Accrued post-retirement benefit liability [note 22]
    
    
    13,143
    
    
    
    12,166Zircatec acquisition holdback [note 23]
    
    
    10,000
    
    
    
    20,000BPLPAccrued post-retirement benefit liability [note 22]
    
    
    104,046
    
    
    
    86,856Derivatives [note 27]
    
    
    1,057
    
    
    
    Deferred revenue  electricity contracts
    
    
    
    
    
    
    856Other
    
    
    27,677
    
    
    
    9,710291,003
    
    
    
    273,378Less current portion
    
    
    (32,492
    )
    
    
    (40,737
    )Net
    
    $
    258,511
    
    
    $
    232,641
 18




---



##### 



11.
    
    Share CapitalAuthorized share capital:
     Unlimited number of first preferred shares
     Unlimited number of second preferred shares
     Unlimited number of voting common shares, and
     One Class B share
 (a)
    
    Common Shares
 Number Issued (Number of Shares)
    
    2007
    
    
    2006Beginning of year
    
    
    352,292,632
    
    
    
    349,570,048Issued:Shares repurchased
    
    
    (9,575,300
    )
    
    
    Debenture conversions
    
    
    
    
    
    
    5,905Stock option plan [note 21]
    
    
    1,681,366
    
    
    
    2,716,679Issued share capital
    
    
    344,398,698
    
    
    
    352,292,632
 (b)
    
    Class B ShareOne Class B share issued during 1988 and assigned $1 of share capital, entitles the
shareholder to vote separately as a class in respect of any proposal to locate the head
office of Cameco to a place not in the province of Saskatchewan.(c)
    
    Share Repurchase ProgramOn September 6, 2007, Cameco announced an open market share repurchase program for
cancellation of up to 17,700,000 of its common shares, representing 5% of its common shares
then outstanding. This repurchase program is authorized to be in effect until September 10,
2008. As at December 31, 2007, 9,575,300 shares had been repurchased under this program at a
cost of $429,327,000 at an average share price of $44.84. The excess of the repurchase cost
of these shares over their book value, amounting to $406,577,000, has been charged to
contributed surplus.
 12.
    
    Accumulated Other Comprehensive Income (Loss)
 2007
    
    
    2006Unrealized foreign currency translation losses
    
    $
    (150,935
    )
    
    $
    (39,766
    )Gains on derivatives designated as cash flow hedges
(net of $64,756 tax expense)
    
    
    182,734
    
    
    
    Unrealized loss on available-for-sale securities
(net of $1,152 tax recovery)
    
    
    (6,366
    )
    
    
    Balance at end of year
    
    $
    25,433
    
    
    $
    (39,766
    )
 13.
    
    Cigar Lake RemediationAs a result of the water inflow at Cigar Lake, Cameco recorded an expense of $29,403,000 during
2007 (2006  $20,599,000). The amount recorded in 2007 related to remediation efforts. Of the
amount recorded in 2006, $15,356,000 related to the write-down of assets while $5,203,000
related to remediation efforts.
 19




---



##### 



14.
    
    Interest and Other
 2007
    
    
    2006Interest on long-term debt
    
    $
    42,743
    
    
    $
    43,223Writedown of investment in commercial paper
    
    
    5,000
    
    
    
    Other interest and financing charges
    
    
    8,922
    
    
    
    4,642Foreign exchange losses
    
    
    20,955
    
    
    
    1,413(Gains) losses on derivatives
    
    
    (53,606
    )
    
    
    10,400Interest income
    
    
    (25,960
    )
    
    
    (32,348
    )Capitalized interest
    
    
    (30,727
    )
    
    
    (31,038
    )Net
    
    $
    (32,673
    )
    
    $
    (3,708
    )
 15.
    
    Gain on Sale of Assets
 2007
    
    
    2006Sale of geological data
    
    $
    (5,317
    )
    
    $
    Interest in Fort a la Corne Joint Venture
    
    
    
    
    
    
    (44,782
    )Voting rights in Fort a la Corne Joint Venture
    
    
    
    
    
    
    (5,889
    )Other
    
    
    1,289
    
    
    
    (1,155
    )Net
    
    $
    (4,028
    )
    
    $
    (51,826
    )
 16.
    
    Other Income (Expense)
 2007
    
    
    2006Equity in loss from associated companies
    
    $
    (6,439
    )
    
    $
    (5,320
    )Claim settlement [note 25(c)]
    
    
    (3,175
    )
    
    
    Insurance settlement (Kumtor)
    
    
    
    
    
    
    15,366Other
    
    
    536
    
    
    
    Net
    
    $
    (9,078
    )
    
    $
    10,046
 20




---



##### 



17.
    
    Income TaxesThe significant components of future income tax assets and liabilities at December 31 are as
follows:
 2007
    
    
    2006AssetsProperty, plant and equipment
    
    $
    201,560
    
    
    $
    173,774Provision for reclamation
    
    
    78,335
    
    
    
    65,234Foreign exploration and development
    
    
    46,389
    
    
    
    31,144Other
    
    
    65,060
    
    
    
    37,031Future income tax assets before valuation allowance
    
    
    391,344
    
    
    
    307,183Valuation allowance
    
    
    (113,092
    )
    
    
    (128,771
    )Future income tax assets, net of valuation allowance
    
    $
    278,252
    
    
    $
    178,412LiabilitiesProperty, plant and equipment
    
    $
    473,734
    
    
    $
    502,579Inventories
    
    
    19,601
    
    
    
    18,935Long-term investments and other
    
    
    116,506
    
    
    
    42,638Future income tax liabilities
    
    $
    609,841
    
    
    $
    564,152Net future income tax liabilities
    
    $
    331,589
    
    
    $
    385,740Less current portion
    
    
    (84,653
    )
    
    
    (46,289
    )$
    246,936
    
    
    $
    339,451
 The provision for income taxes differs from the amount computed by applying the combined
expected federal and provincial income tax rate to earnings before income taxes. The reasons
for these differences are as follows:
 2007
    
    
    2006Earnings before income taxes and minority interest
    
    $
    465,932
    
    
    $
    345,426Combined federal and provincial tax rate
    
    
    35.7
    %
    
    
    39.3
    %Computed income tax expense
    
    
    166,338
    
    
    
    135,752Increase (decrease) in taxes resulting from:Reduction in income tax rates
    
    
    (18,036
    )
    
    
    (66,749
    )Provincial royalties and other taxes
    
    
    1,240
    
    
    
    1,092Federal and provincial resource allowance
    
    
    (492
    )
    
    
    (6,617
    )Manufacturing and processing deduction
    
    
    (5,112
    )
    
    
    (5,719
    )Difference between Canadian rate and rates
applicable to subsidiaries in other countries
    
    
    (187,328
    )
    
    
    (133,988
    )Restructuring of gold business
    
    
    40,156
    
    
    
    Change in valuation allowance
    
    
    (4,827
    )
    
    
    19,126Capital and other taxes
    
    
    1,938
    
    
    
    2,296Stock-based compensation plans
    
    
    (306
    )
    
    
    6,700Recovery of taxes due to amendment of tax treatment
    
    
    
    
    
    
    (16,950
    )Other permanent differences
    
    
    35,897
    
    
    
    (3,786
    )Income tax expense (recovery)
    
    $
    29,468
    
    
    $
    (68,843
    )
 21




---



##### 



In 2007, the federal government introduced amendments to the Canadian Income Tax Act that
provide for a 4% reduction in the general corporate income tax rate. The federal tax rate will
decline in 2012 from 19% to 15%. This legislation was substantively enacted in 2007.Under Canadian accounting rules, the cumulative effect of a change in income tax legislation on
future income tax assets and liabilities is included in a companys financial statements in the
period of substantive enactment. Accordingly, Cameco reduced its balance sheet provision for
future income taxes and recognized a non-cash income tax adjustment of $25,400,000 in 2007.During 2006, the federal and provincial governments enacted amendments to current tax
legislation, which provided for a reduction in corporate tax rates. The cumulative effect of
the change in income tax legislation on Camecos future income tax liability was a reduction of
$73,000,000.
 2007
    
    
    2006Earnings before income taxes and minority interestCanada
    
    $
    (297,519
    )
    
    $
    (17,703
    )Foreign
    
    
    763,451
    
    
    
    363,129$
    465,932
    
    
    $
    345,426Current income taxesCanada
    
    $
    99,066
    
    
    $
    91,730Foreign
    
    
    64,531
    
    
    
    24,066$
    163,597
    
    
    $
    115,796Future income taxes (recovery)Canada
    
    $
    (126,303
    )
    
    $
    (167,189
    )Foreign
    
    
    (7,826
    )
    
    
    (17,450
    )$
    (134,129
    )
    
    $
    (184,639
    )Income tax expense (recovery)
    
    $
    29,468
    
    
    $
    (68,843
    )
 Other comprehensive income included on the consolidated statements of shareholders equity and
the consolidated statements of comprehensive income is presented net of income taxes. The
following income tax amounts are included in each component of other comprehensive income
 2007
    
    
    2006Net gains on derivatives designated as cash flow hedges
    
    $
    92,860
    
    
    $
    Net gains on derivatives designated as cash flow hedges transferred to net earnings
    
    
    (28,104
    )
    
    
    Unrealized losses on assets available-for-sale
    
    
    (1,152
    )
    
    
    Total income tax expense included in OCI
    
    $
    63,604
    
    
    $
    
 22




---



##### 



18.
    
    Statements of Cash FlowsOther Operating Items
 2007
    
    
    2006Changes in non-cash working capital:Accounts receivable
    
    $
    103,118
    
    
    $
    36,180Inventories
    
    
    (61,810
    )
    
    
    (63,623
    )Supplies and prepaid expenses
    
    
    (35,631
    )
    
    
    (38,393
    )Accounts payable and accrued liabilities
    
    
    27,677
    
    
    
    58,258Hedge position settlements
    
    
    67,948
    
    
    
    32,113Other
    
    
    16,667
    
    
    
    10,840Total
    
    $
    117,969
    
    
    $
    35,375
 19.
    
    Uranium Joint VenturesCameco conducts a portion of its exploration, development, mining and milling activities through
joint ventures. Camecos significant uranium joint venture interests are comprised of:
 Producing:McArthur River
    
    
    69.81
    %Key Lake
    
    
    83.33
    %Non-producing:Cigar Lake
    
    
    50.03
    %Inkai
    
    
    60.00
    %
 Uranium joint ventures allocate uranium production to each joint venture participant and the
joint venture participant derives revenue directly from the sale of such product. Mining and
milling expenses incurred by the joint venture are included in the cost of inventory. At
December 31, 2007, Camecos share of property, plant and equipment in these joint ventures
amounted to $2,037,000,000 (2006  $1,862,000,000) [note 5].20.
    
    Investment in BPLPCameco holds a 31.6% interest in the BPLP partnership, which is governed by an agreement that
provides for joint control of the strategic operating, investing and financing activities among
the three major partners. Cameco proportionately consolidates its 31.6% interest in BPLP.
 Fuel Supply Agreements
  23




---



##### 



Balance Sheets
 (Millions)
    
    2007
    
    
    2006Current assets
    
    $
    159
    
    
    $
    129Property, plant and equipment
    
    
    411
    
    
    
    417Long-term receivables and investments
    
    
    181
    
    
    
    131$
    751
    
    
    $
    677Current liabilities
    
    $
    97
    
    
    $
    100Long-term liabilities
    
    
    370
    
    
    
    358467
    
    
    
    458Equity
    
    
    284
    
    
    
    219$
    751
    
    
    $
    677
 Statements of Earnings
 (Millions)
    
    2007
    
    
    2006Revenue
    
    $
    417
    
    
    $
    393Operating costs
    
    
    278
    
    
    
    256Earnings before interest and taxes
    
    
    139
    
    
    
    137Interest
    
    
    
    
    
    
    14Earnings before taxes
    
    $
    139
    
    
    $
    123
 Statements of Cash Flows
 (Millions)
    
    2007
    
    
    2006Cash provided by operations
    
    $
    159
    
    
    $
    163Cash used in investing
    
    
    (35
    )
    
    
    (38
    )Cash used in financing
    
    
    (126
    )
    
    
    (143
    )
 21.
    
    Stock-Based Compensation PlansStock Option PlanCameco has established a stock option plan under which options to purchase common shares may be
granted to directors, officers and other employees of Cameco. Options granted under the stock
option plan have an exercise price of not less than the closing price quoted on the TSX for the
common shares of Cameco on the trading day prior to the date on which the option is granted.
The options vest over three years and expire eight years from the date granted. Options granted
prior to 1999 expire 10 years from the date of the grant of the option. Options have not been
awarded to directors since 2003.
 24




---



##### 



The aggregate number of common shares that may be issued pursuant to the Cameco stock option
plan shall not exceed 43,017,198, of which 24,011,079 shares have been issued.Stock option transactions for the respective years were as follows:
 (Number of Options)
    
    2007
    
    
    2006Beginning of year
    
    
    7,390,053
    
    
    
    8,723,170Options granted
    
    
    976,475
    
    
    
    1,537,330Options exercised [note 11]
    
    
    (1,794,515
    )
    
    
    (2,716,679
    )Options forfeited
    
    
    (149,421
    )
    
    
    (153,768
    )End of year
    
    
    6,422,592
    
    
    
    7,390,053Exercisable
    
    
    3,696,479
    
    
    
    3,088,841
 Upon exercise of certain existing options, additional options in respect of 15,300 shares
would be granted.Weighted average exercise prices were as follows:
 2007
    
    
    2006Beginning of year
    
    $
    19.92
    
    
    $
    13.29Options granted
    
    
    46.82
    
    
    
    41.04Options exercised
    
    
    13.34
    
    
    
    9.84Options forfeited
    
    
    39.32
    
    
    
    32.92End of year
    
    $
    25.40
    
    
    $
    19.92Exercisable
    
    $
    16.46
    
    
    $
    10.46
 Total options outstanding and exercisable at December 31, 2007 were as follows:
 2007
    
    
    
    
    
    Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    AverageRemaining
    
    
    Exercisable
    
    
    
    
    
    
    ExercisableOption Price Per Share
    
    Number
    
    
    Life
    
    
    Price
    
    
    Number
    
    
    Price$3.13  5.99
    
    
    129,300
    
    
    
    1
    
    
    $
    4.47
    
    
    
    129,300
    
    
    $
    4.476.00  13.49
    
    
    2,347,560
    
    
    
    4
    
    
    
    8.21
    
    
    
    2,227,560
    
    
    
    8.3213.50  32.99
    
    
    1,698,552
    
    
    
    7
    
    
    
    26.92
    
    
    
    929,010
    
    
    
    26.8133.00  55.43
    
    
    2,247,180
    
    
    
    7
    
    
    
    43.40
    
    
    
    410,609
    
    
    
    41.006,422,592
    
    
    
    
    
    
    
    
    
    
    
    3,696,479
 The foregoing options have expiry dates ranging from February 23, 2008 to May 29, 2017.
 25




---



##### 



On July 27, 2007, Camecos board of directors approved an amendment to the companys stock
option program introducing a cash settlement feature for the exercise of employee stock options.
The cash settlement feature allows option holders to elect to receive an amount in cash equal
to the intrinsic value, being the excess market price of the common share over the exercise
price of the option, instead of exercising the option and acquiring common shares. All
outstanding stock options are now classified as liabilities and are carried at their intrinsic
value. The intrinsic value of the liability is marked to market each period. The intrinsic
value is amortized to expense over the shorter of, the period to eligible retirement, or the
vesting period. Previously, all stock options were classified as equity and were accounted for
using the fair value method. Under this method, the compensation cost of options granted was
measured at estimated fair value at the grant date and recognized over the shorter of, the
period to eligible retirement, or the vesting period. The impact of the reclassification of the
stock options at July 27, 2007 was an increase in liabilities of $116,050,000, a decrease in
contributed surplus of $21,875,000 and a decrease to earnings of $94,175,000. In addition, a
future tax recovery of $35,225,000 was recorded.For the year ended December 31, 2007, Cameco has recorded a net recovery of $4,868,000 (2006
expense  $17,549,000), related to options issued and vested during the year. These amounts are
exclusive of the expense recorded upon adoption of the cash settlement feature on July 27, 2007.The fair value of the options granted prior to July 27, 2007, was determined using the
Black-Scholes option-pricing model with the following assumptions:
 2007
    
    
    2006Number of options granted
    
    
    976,475
    
    
    
    1,537,330Average strike price
    
    $
    46.82
    
    
    $
    41.04Expected dividend
    
    $
    0.20
    
    
    $
    0.16Expected volatility
    
    
    36
    %
    
    
    35
    %Risk-free interest rate
    
    
    4.0
    %
    
    
    4.0
    %Expected life of option
    
    3.5 years
    
    4 yearsExpected forfeitures
    
    
    15
    %
    
    
    15
    %Weighted average grant date fair values
    
    $
    14.30
    
    
    $
    13.19
 Executive Performance Share Unit (PSU), Deferred Share Unit (DSU), and Other PlansCommencing in 2005, Cameco provides each planned participant an annual grant of PSUs in an
amount determined by the board. Each PSU represents one phantom common share that entitles the
participant to a payment of one Cameco common share purchased on the open market, or cash at the
boards discretion, at the end of each three-year period if certain performance and vesting
criteria have been met. The final value of the PSUs will be based on the value of Cameco common
shares at the end of the three-year period and the number of PSUs that ultimately vest. Vesting
of PSUs at the end of the three-year period will be based on total shareholder return over the
three years, Camecos ability to meet its annual cash flow from operations targets and whether
the participating executive remains employed by Cameco at the end of the three-year vesting
period. As of December 31, 2007, the total PSUs held by the participants was 152,196 (2006 
292,150).Cameco offers a deferred share unit plan to non-employee directors. A DSU is a notional unit
that reflects the market value of a single common share of Cameco. 60% of each directors
annual retainer is paid in DSUs. In addition, on an annual basis directors can elect to receive
the remaining 40% of their annual retainer and any additional fees in the form of DSUs. Each
DSU fully vests upon award. The DSUs will be redeemed for cash upon a director leaving the
board. The redemption amount will be based upon the weighted average of the closing prices of
the common shares of Cameco on the TSX for the last 20 trading days prior to the redemption date
multiplied by the number of DSUs held by the director. As of December 31, 2007, the total DSUs
held by participating directors was 329,908 (2006  299,928).
 26




---



##### 



Cameco makes annual grants of bonuses to eligible non-North American employees in the form of
phantom stock options. Employees receive the equivalent value of shares in cash when exercised.
Options granted under the phantom stock option plan have an award value equal to the closing
price quoted on the TSX for the common shares of Cameco on the trading day prior to the date on
which the option is granted. The options vest over three years and expire eight years from the
date granted. As of December 31, 2007, the number of options held by participating employees
was 339,072 (2006  383,181) with exercise prices ranging from $4.81 to $54.38 per share (2006 -
$4.81 to $41.00) and a weighted average exercise price of $39.56 (2006  $18.63).Commencing in 2007, Cameco created an employee share ownership plan whereby both employee and
company contributions are used to purchase shares on the open market for employees. The
companys contributions are expensed during the year of contribution. Under the plan, all
employees have the opportunity to participate in the program to a maximum of 6% of eligible
earnings each year with Cameco matching the first 3% of employee  paid shares by 50%. Cameco
contributes $1,000 of shares annually to each employee that is enrolled in the plan. At
December 31, 2007, there were 2,637 participants in the plan. The total number of shares
purchased in 2007 on behalf of participants, including the company contribution, was 159,761
shares. In 2007, the companys contributions totaled $3,716,000.Cameco has recognized the following expenses (recoveries) under these plans:
 2007
    
    
    2006Performance share units
    
    $
    4,288
    
    
    $
    4,884Deferred share units
    
    
    (2,606
    )
    
    
    3,206Phantom stock options
    
    
    (1,410
    )
    
    
    5,212Employee share ownership plan
    
    
    3,716
    
    
    
    
 22.
    
    Pension and Other Post-Retirement BenefitsCameco maintains both defined benefit and defined contribution plans providing pension and
post-retirement benefits to substantially all of its employees.Under the defined pension benefit plans, Cameco provides benefits to retirees based on their
length of service and final average earnings. The non-pension post-retirement plan covers such
benefits as group life and supplemental health insurance, to eligible employees and their
dependents. The costs related to the non-pension post-retirement plans are charged to earnings
in the period during which the employment services are rendered. However, these future
obligations are not funded.The effective date for the most recent valuations for funding purposes on the pension benefit
plans is January 1, 2006. The next planned effective date for valuation for funding purposes of
the pension benefit plans is set to be January 1, 2009. The status of the defined plans is as
follows:
 27




---



##### 



(a)     Accrued Benefit Obligation
 Pension Benefit Plans
    
    
    Other Benefit Plans2007
    
    
    2006
    
    
    2007
    
    
    2006Balance at beginning of year
    
    $
    23,272
    
    
    $
    15,926
    
    
    $
    12,166
    
    
    $
    7,403Current service cost
    
    
    1,027
    
    
    
    1,028
    
    
    
    510
    
    
    
    487Interest cost
    
    
    1,259
    
    
    
    872
    
    
    
    606
    
    
    
    544Actuarial (gain) loss
    
    
    3,536
    
    
    
    6,056
    
    
    
    (370
    )
    
    
    395Plan amendments
    
    
    
    
    
    
    
    
    
    
    3,838
    
    
    
    588Plan curtailments
    
    
    
    
    
    
    
    
    
    
    (2,990
    )
    
    
    Acquisition of Zircatec interest [note 23]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,116Benefits paid
    
    
    (619
    )
    
    
    (611
    )
    
    
    (617
    )
    
    
    (367
    )Foreign exchange rate changes
    
    
    (34
    )
    
    
    1
    
    
    
    
    
    
    
    $
    28,441
    
    
    $
    23,272
    
    
    $
    13,143
    
    
    $
    12,166
 (b)     Plan Assets
 Pension Benefit Plans2007
    
    
    2006Fair value at beginning of year
    
    $
    24,412
    
    
    $
    23,403Actual return on plan assets
    
    
    (8
    )
    
    
    1,569Employer contributions
    
    
    55
    
    
    
    51Benefits paid
    
    
    (595
    )
    
    
    (611
    )Fair value at end of year
    
    $
    23,864
    
    
    $
    24,412
  Pension Benefit Plans2007
    
    
    2006Asset Category (i)Equity securities
    
    
    44
    %
    
    
    34
    %Fixed income
    
    
    11
    %
    
    
    23
    %Other (ii)
    
    
    45
    %
    
    
    43
    %Total
    
    
    100
    %
    
    
    100
    %
 (i)
    
    The defined benefit plan assets contain no material amounts of related party
assets at December 31, 2007 and 2006 respectively.(ii)
    
    Relates to the value of the refundable tax account held by the Canada Revenue
Agency. The refundable total is approximately equal to half of the sum of the realized
investment income plus employer contributions less half of the benefits paid by the
plan. 28




---



##### 



(c)     Funded Status Reconciliation
 Pension Benefit Plans
    
    
    Other Benefit Plans2007
    
    
    2006
    
    
    2007
    
    
    2006Fair value of plan assets
    
    $
    23,864
    
    
    $
    24,412
    
    
    $
    
    
    
    $
    Accrued benefit obligation
    
    
    28,441
    
    
    
    23,272
    
    
    
    13,143
    
    
    
    12,166Funded status of plans  surplus (deficit)
    
    
    (4,577
    )
    
    
    1,140
    
    
    
    (13,143
    )
    
    
    (12,166
    )Unamortized net actuarial loss
    
    
    10,451
    
    
    
    6,509
    
    
    
    
    
    
    
    Unamortized transitional obligation
    
    
    
    
    
    
    240
    
    
    
    
    
    
    
    Accrued benefit asset (liability) [notes 7, 10]
    
    $
    5,874
    
    
    $
    7,889
    
    
    $
    (13,143
    )
    
    $
    (12,166
    )
 (d)     Net Pension Expense
 2007
    
    
    2006Current service cost
    
    $
    1,027
    
    
    $
    1,028Interest cost
    
    
    1,259
    
    
    
    872Actual return on plan assets
    
    
    8
    
    
    
    (1,569
    )Actuarial loss
    
    
    3,536
    
    
    
    6,056Balance prior to adjustments to recognize the long-term
nature of employee future benefit costs
    
    
    5,830
    
    
    
    6,387Difference between actual and expected return on plan assets
    
    
    (820
    )
    
    
    796Difference between actuarial loss recognized for year and
actual actuarial loss on accrued benefit obligation for year
    
    
    (3,122
    )
    
    
    (6,056
    )Amortization of transitional obligation
    
    
    240
    
    
    
    723Defined benefit pension expense
    
    
    2,128
    
    
    
    1,850Defined contribution pension expense
    
    
    10,905
    
    
    
    8,973Net pension expense
    
    $
    13,033
    
    
    $
    10,823
 2007
    
    

    2006Significant assumptions at December 31Discount rate
    
    
    5.5
    %
    
    
    5.3
    %Rate of compensation increase
    
    
    5.5
    %
    
    
    4.5
    %Long-term rate of return on assets
    
    
    6.5
    %
    
    
    6.3
    %
 29




---



##### 



(e)     Other Post-Retirement Benefit Expense
 2007
    
    
    2006Current service cost
    
    $
    510
    
    
    $
    487Interest cost
    
    
    606
    
    
    
    544Actuarial (gain) loss
    
    
    (370
    )
    
    
    395Plan amendment costs
    
    
    3,838
    
    
    
    588Plan curtailment gain
    
    
    (2,990
    )
    
    
    Other post-retirement benefit expense
    
    $
    1,594
    
    
    $
    2,014
 2007
    
    
    2006Significant assumptions at December 31Discount rate
    
    
    5.5
    %
    
    
    5.1
    %Initial health care cost trend rate
    
    
    9
    %
    
    
    10
    %Cost trend rate declines to
    
    
    6
    %
    
    
    6
    %Year the rate reaches its final level
    
    
    2011
    
    
    
    2011
 (f)     Pension and Other Post-Retirement Benefits Cash Payments
 2007
    
    
    2006Employer contributions to funded pension plans
    
    $
    55
    
    
    $
    51Benefits paid for unfunded benefit plans
    
    
    617
    
    
    
    367Cash contributions to defined contribution plans
    
    
    10,905
    
    
    
    8,973Total cash payments for employee future benefits
    
    $
    11,577
    
    
    $
    9,391
 BPLP
    30




---



##### 



(a)     Funded Status Reconciliation
 Pension Benefit Plans
    
    
    Other Benefit Plans2007
    
    
    2006
    
    
    2007
    
    
    2006Fair value of plan assets
    
    $
    618,096
    
    
    $
    605,789
    
    
    $
    
    
    
    $
    Accrued benefit obligation
    
    
    816,574
    
    
    
    800,050
    
    
    
    137,421
    
    
    
    141,746Funded status of plans  deficit
    
    
    (198,478
    )
    
    
    (194,261
    )
    
    
    (137,421
    )
    
    
    (141,746
    )Unrecognized prior service cost
    
    
    
    
    
    
    
    
    
    
    3,331
    
    
    
    5,856Unamortized net actuarial loss
    
    
    204,342
    
    
    
    206,253
    
    
    
    30,044
    
    
    
    49,034Accrued benefit asset (liability) [notes 7, 10]
    
    $
    5,864
    
    
    $
    11,992
    
    
    $
    (104,046
    )
    
    $
    (86,856
    )
 (b)     Pension Asset Categories
 Asset Allocation
    
    
    Target Allocation2007
    
    
    2006
    
    
    2007
    
    
    2006Asset Category (i)Equity securities
    
    
    57
    %
    
    
    71
    %
    
    
    60
    %
    
    
    70
    %Fixed income
    
    
    42
    %
    
    
    28
    %
    
    
    40
    %
    
    
    30
    %Cash
    
    
    1
    %
    
    
    1
    %
    
    
    
    
    
    
    Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  
 (i)
    
    The defined benefit plan assets contain no material amounts of related party assets at
December 31, 2007. (c)     Net Pension Expense
 2007
    
    
    2006Current service cost
    
    $
    29,093
    
    
    $
    24,229Interest cost
    
    
    40,658
    
    
    
    35,406Actual return on plan assets
    
    
    2,215
    
    
    
    (64,194
    )Actuarial (gain) loss
    
    
    (34,978
    )
    
    
    89,119Balance prior to adjustments to recognize the long-term
nature of employee future benefit costs
    
    
    36,988
    
    
    
    84,560Difference between actual and expected return on plan assets
    
    
    (44,632
    )
    
    
    25,679Difference between actuarial loss recognized and actual actuarial
loss on accrued benefit obligation for year
    
    
    46,544
    
    
    
    (81,322
    )Net pension expense
    
    $
    38,900
    
    
    $
    28,917
 31




---



##### 



2007
    
    2006Significant assumptions at December 31Discount rate
    
    
    5.3
    %
    
    
    5.0
    %Rate of compensation increase
    
    
    3.5
    %
    
    
    3.5
    %Long-term rate of return on assets
    
    
    7.0
    %
    
    
    7.0
    %
 (d)     Other Benefit Plans Expense
 2007
    
    
    2006Current service cost
    
    $
    8,423
    
    
    $
    6,304Interest cost
    
    
    7,272
    
    
    
    4,394Past service cost
    
    
    (1,829
    )
    
    
    5,856Actuarial (gain) loss
    
    
    (15,939
    )
    
    
    59,563Balance prior to adjustments to recognize the long-term nature of employee
future benefit costs
    
    
    (2,073
    )
    
    
    76,117Difference between actual and recognized past service costs for year
    
    
    2,526
    
    
    
    (5,856
    )Difference between actuarial gain recognized and actual actuarial loss on
accrued benefit obligation for year
    
    
    18,991
    
    
    
    (59,931
    )Other benefit plans expense
    
    $
    19,444
    
    
    $
    10,330
 2007
    
    
    2006Significant assumptions at December 31Discount rate
    
    
    5.1
    %
    
    
    5.0
    %Rate of compensation increase
    
    
    3.5
    %
    
    
    3.5
    %Initial health care cost trend rate
    
    
    10.0
    %
    
    
    10.0
    %Cost trend rate declines to
    
    
    5.0
    %
    
    
    5.0
    %Year the rate reaches its final level
    
    
    2019
    
    
    
    2018
  Increase
    
    DecreaseEffect on December 31, 2007, obligation
    
    $
    23,430
    
    
    $
    (19,647
    )Aggregate of 2007 current service cost and interest cost
    
    
    2,575
    
    
    
    (2,101
    )
 (e)     Pension and Other Post-Retirement Benefits Cash Payments
 2007
    
    
    2006Employer contributions to funded pension plans
    
    $
    31,284
    
    
    $
    21,665Benefits paid for unfunded benefit plans
    
    
    2,458
    
    
    
    1,705Total cash payments for employee future benefits
    
    $
    33,742
    
    
    $
    23,370
  32




---



##### 



The following are estimated future benefit payments, which reflect expected future service:
 Pension Benefit Plans
    
    Other Benefit Plans2008
    
    $
    26,100
    
    
    $
    3,3002009
    
    
    29,700
    
    
    
    3,7002010
    
    
    33,500
    
    
    
    4,1002011
    
    
    37,300
    
    
    
    4,6002012
    
    
    41,500
    
    
    
    5,1002013 to 2017
    
    
    267,600
    
    
    
    32,900
 23.
    
    Acquisition of Interest in Zircatec Precision Industries, Inc.Effective February 1, 2006, Cameco acquired a 100% interest in Zircatec Precision Industries,
Inc. for $108,884,000. Zircatecs primary business is manufacturing nuclear fuel bundles for
sale to companies that generate electricity from Candu reactors. The acquisition was accounted
for using the purchase method and the results of operations are included in the consolidated
financial statements from February 1, 2006.The values assigned to the net assets acquired were as follows:
 Cash and other working capital
    
    $
    20,738Tangible assets
    
    
    30,928Intangible assets
    
    
    118,819Future income taxes
    
    
    (40,836
    )Net liabilities
    
    
    (20,765
    )Net assets acquired
    
    $
    108,884Financed by:Cash
    
    $
    88,884Holdback [note 10]
    
    
    20,000$
    108,884
 33




---



##### 



24.
    
    Restructuring of the Gold BusinessDuring the first quarter of 2007, the Parliament of the Kyrgyz Republic accepted in the first
reading and returned to committee for further deliberation draft legislation that, among other
things, challenges the legal validity of Kumtor Gold Company (Kumtor) agreements with the Kyrgyz
Republic, proposes recovery of additional taxes on amounts relating to past activities, and
provides for the transfer of gold deposits (including Kumtor) to a state-owned entity. If the
law is enacted, there would be a substantial risk of harm to Centerras rights and therefore the
value of Camecos investment in Centerra.As a result, Cameco and Centerra entered into discussions with the Kyrgyz Government. These
discussions resulted in the signing of two agreements, both dated August 30, 2007, between the
Government of the Kyrgyz Republic and, respectively, Cameco and Centerra. Under the terms of
the agreements, the Kyrgyz Government and Kyrgyzaltyn JSC, a joint stock company owned by the
Kyrgyz Government, agree to support Centerras continuing long-term development of the Kumtor
project and agree to facilitate eventual divestiture of Camecos interest in Centerra. In
return, the Kyrgyz Government will receive 32,305,238 shares (22,305,238 net from Cameco and
10,000,000 treasury shares from Centerra) upon closing of the definitive legal agreements. Of
these, 15,000,000 shares will be received immediately and 17,305,238 shares will be held in
escrow to be released within four years subject to a number of conditions, including the
approval by the Parliament of the Kyrgyz Republic.These agreements were originally to expire on October 31, 2007, but the parties have agreed to
extend the deadline for closing the transactions to April 30, 2008. The conditions that gave
rise to these agreements still exist and Cameco believes the number of Centerra shares that
would have been transferred to the Kyrgyz Government is indicative of the ultimate cost to
remedy those conditions. Thus, Cameco has recorded a charge of $113,000,000 ($153,000,000 after
a tax expense of $40,000,000).25.
    
    Commitments and Contingencies
 (a)
    
    Cameco signed a toll-conversion agreement with British Nuclear Fuels plc (BNFL) to
acquire uranium UF6 conversion services from BNFLs Springfields plant in
Lancashire, United Kingdom. Under the 10-year agreement, BNFL is obligated to annually
convert a base quantity of five million kgU as UO3 to UF6 for Cameco.(b)
    
    On February 12, 2004, Cameco, Cameco Bruce Holdings II Inc., BPC Generation
Infrastructure Trust and TransCanada Pipelines Limited (collectively, the Consortium)
sent a letter to British Energy Limited and British Energy International Holdings Limited
(collectively, BE) requesting, amongst other things, indemnification for breach of a
representation and warranty contained in the February 14, 2003, Amended and Restated Master
Purchase Agreement. The alleged breach is that the Unit 8 steam generators were not in
good condition, repair and proper working order, having regard to their use and age. This
defect was discovered during a planned outage conducted just after closing. As a result
of this defect, the planned outage had to be significantly extended. The Consortium has
claimed damages in the amount of $64,558,200 being 79.8% of the $80,900,000 of damages
actually incurred, plus an unspecified amount to take into account the reduced operating
life of the steam generators. The parties have agreed that the arbitration should be
before a single arbitrator.In anticipation of this claim, BE issued on February 10, 2006, and then served on Ontario
Power Generation Inc. (OPG) and Bruce Power LP a Statement of Claim. This Statement of Claim
seeks damages for any amounts that BE is found liable to pay to the Consortium in connection
with the Unit 8 steam generator arbitration described above, damages in the amount of
$500,000,000, costs and pre and post judgment interest amongst other things. This action is
in abeyance pending further developments on the Unit 8 steam generator arbitration.Management is of the opinion, after review of the facts with counsel, that this action
against Bruce Power LP will not have a material financial impact on Camecos financial
position, results of operations and liquidity.
 34




---



##### 



(c)
    
    Pursuant to an agreement between Centerra Gold Mongolia Limited (CGM) and Gatsuurt LLC, an
unrelated Mongolian company, under which CGM acquired the Gatsuurt licenses, CGM agreed to
transfer the principal license covering the Gatsuurt property to Gatsuurt LLC if CGM did not
complete a feasibility study by December 31, 2005. CGM completed a feasibility study in
December 2005. Gatsuurt LLC informed Centerra that it does not believe that CGM complied
with its obligation and began proceedings in the Mongolian National Arbitration Court (MNAC)
alleging non-compliance by CGM and seeking the return of the principal license for the
Gatsuurt property. CGM believes that the Gatsuurt LLC claim is without merit and on July 10,
2007, filed a petition with Mongolias District Court contesting the jurisdiction of the
MNAC. On July 25, 2007, the Mongolian District Court returned CGMs petition, without a
decision on the jurisdictional issue, to permit CGM to supplement its submissions. All
proceedings were suspended in August 2007 pending the outcome of settlement discussions. CGM
and Gatsuurt LLC have reached an agreement in principle to suspend, and upon signing a
definitive agreement, to terminate the arbitration proceedings between CGM and Gatsuurt LLC.
In anticipation of a settlement, CGM has recorded a $3,000,000 (US) charge as an estimate of
the cost to settle the matter.(d)
    
    Annual supplemental rents of $26,000,000 (subject to CPI) per operating reactor are
payable by BPLP to OPG. Should the hourly annual average price of electricity in Ontario
fall below $30 per megawatt hour, the supplemental rent reduces to $13,000,000 per
operating reactor. In accordance with the Sublease Agreement, Bruce A L.P. will
participate in its share of any adjustments to the supplemental rent.(e)
    
    Cameco, TransCanada and BPC have assumed the obligations to provide financial
guarantees on behalf of BPLP. Cameco has provided the following financial assurances, with
varying terms that range from 2004 to 2018:
 i)
    
    Licensing assurances to Canadian Nuclear Safety Commission of up to $133,300,000.
At December 31, 2007, Camecos actual exposure under these assurances was $23,700,000.ii)
    
    Guarantees to customers under power sales agreements of up to $47,000,000.
Cameco did not have any actual exposure under these guarantees at December 31, 2007.iii)
    
    Termination payments to OPG pursuant to the lease agreement of $58,300,000.
 The fair value of these guarantees is nominal.(f)
    
    CommitmentsAt December 31, 2007, Camecos purchase commitments, the majority of which are fixed price
uranium and conversion purchase arrangements, were as follows:
 (Millions (US))2008
    
    $
    1602009
    
    
    1222010
    
    
    1202011
    
    
    1232012
    
    
    129Thereafter
    
    
    195Total
    
    $
    849
 26.
    
    Port Hope Conversion FacilityOn July 13, 2007, Cameco discovered uranium and other production-associated chemicals in the
soil beneath its Port Hope uranium hexafluoride (UF6) conversion plant. As a result,
production of UF6 has been suspended until Cameco is able to remove the contaminated
soil and implement necessary corrective measures. Current estimates indicate that the clean up
of the contaminated area will cost approximately $15,000,000 to $20,000,000 and a total of
$17,000,000 was recognized in earnings for 2007.
 35




---



##### 



27.
    
    Financial InstrumentsThe majority of revenues at Cameco are derived from the sale of uranium products, electricity
through its investment in BPLP, and gold through its investment in Centerra. Camecos uranium
product financial results are closely related to the long and short-term market price of uranium
sales and conversion services. Prices fluctuate and can be affected by demand for nuclear
power, worldwide production and uranium levels, and political and economic conditions in uranium
producing and consuming countries. BPLPs revenue from electricity is affected by changes in
electricity prices associated with an open spot market for electricity in Ontario. Centerras
gold revenue is largely dependent on the market price of gold, which can be affected by
political and economic factors, industry activity and the policies of central banks with respect
to their level of gold held as reserves. Financial results for Cameco are also impacted by
changes in foreign currency exchange rates and other operating risks. Finally, certain
financial assets are subject to credit risks including cash and securities, accounts receivable,
and commodity and currency instruments.To mitigate risks associated with certain financial assets, Cameco will hold positions with a
variety of large creditworthy institutions. Sales of uranium products, with short payment
terms, are made to customers that management believes are creditworthy.To mitigate risks associated with foreign currency on its sale of uranium products, Cameco
enters into forward sales contracts to establish a price for future delivery of the foreign
currency. The majority of the contracts qualify as cash flow hedges.To mitigate risks associated with the fluctuations in the market price for uranium products,
Cameco seeks to maintain a portfolio of uranium product sales contracts with a variety of
delivery dates and pricing mechanisms that provide a degree of protection from price volatility.
To mitigate risks associated with the fluctuations in the market price for electricity, BPLP
enters into various energy and sales related contracts that qualify as cash flow hedges. These
instruments have terms ranging from 2008 to 2013. At December 31, 2007, the mark-to-market gain
on these sales contracts was $67,600,000.Except as otherwise disclosed, the fair market value of Camecos financial assets and
liabilities approximates the carrying amount as a result of the short-term nature of the
instruments, or the variable interest rate associated with the instruments, or the fixed
interest rate of the instruments being similar to market rates.CurrencyAt December 31, 2007, Cameco had $1,908,000,000 (US) in forward contracts at an average exchange
rate of $1.11 and 88,420,000 at an average exchange rate of $1.35. The foreign currency
contracts are scheduled for use as follows:
 (Millions)
    
    US
    
    
    Rate
    
    
    Cdn
    
    
    Euro
    
    
    Rate
    
    
    US2008
    
    $
    918
    
    
    
    1.12
    
    
    $
    1,028
    
    
    
    45
    
    
    
    1.36
    
    
    $
    612009
    
    
    510
    
    
    
    1.11
    
    
    
    566
    
    
    
    20
    
    
    
    1.29
    
    
    
    262010
    
    
    380
    
    
    
    1.11
    
    
    
    422
    
    
    
    15
    
    
    
    1.34
    
    
    
    202011
    
    
    100
    
    
    
    1.08
    
    
    
    108
    
    
    
    8
    
    
    
    1.40
    
    
    
    11Total
    
    $
    1,908
    
    
    
    1.11
    
    
    $
    2,124
    
    
    
    88
    
    
    
    1.35
    
    
    $
    118
 These positions consist entirely of forward sales contracts. The average exchange rate reflects
the original spot prices at the time the contracts were entered into and includes deferred gains
and deferred charges. The realized exchange rate will depend on the forward premium (discount)
that is earned (paid) as contracts are utilized. Of these amounts, $1,293,000 of the
US-denominated contracts and $88,000,000 of the Euro-denominated contracts mature in 2008. The
remaining $615,000 in US-denominated contracts matures in 2009.At December 31, 2007, Camecos net mark-to-market gain on these foreign currency instruments was
$139,700,000 (Cdn).
 36




---



##### 



DerivativesThe following table summarizes the fair value of derivatives and classification on the December
31, 2007, balance sheet:
 Cameco
    
    
    BPLP
    
    
    TotalNon-hedge derivatives:Embedded derivatives  sales contracts
    
    $
    7,318
    
    
    $
    7,185
    
    
    $
    14,503Foreign currency contracts
    
    
    14,834
    
    
    
    
    
    
    
    14,834Cash flow hedges:Foreign currency contracts
    
    
    124,870
    
    
    
    
    
    
    
    124,870Energy and sales contracts
    
    
    
    
    
    
    67,546
    
    
    
    67,546Net
    
    $
    147,022
    
    
    $
    74,731
    
    
    $
    221,753Classification:Current portion of long-term receivables, investments
and other [note 7]
    
    $
    125,101
    
    
    $
    35,839
    
    
    
    160,940Long-term receivables, investments and other [note 7]
    
    
    43,540
    
    
    
    39,949
    
    
    
    83,489Current portion of other liabilities [note 10]
    
    
    (17,213
    )
    
    
    (448
    )
    
    
    (17,661
    )Other liabilities [note 10]
    
    
    (4,406
    )
    
    
    (609
    )
    
    
    (5,015
    )Net
    
    $
    147,022
    
    
    $
    74,731
    
    
    $
    221,753
 The following table summarizes different components of the (gains) and losses on derivatives:
 Cameco
    
    
    BPLP
    
    
    TotalNon-hedge derivatives:Embedded derivatives  sales contracts
    
    $
    (634
    )
    
    $
    
    
    
    $
    (634
    )Foreign currency contracts
    
    
    (14,107
    )
    
    
    
    
    
    
    (14,107
    )Energy and sales contracts
    
    
    
    
    
    
    (7,183
    )
    
    
    (7,183
    )Cash flow hedges:Energy and sales contracts
    
    
    
    
    
    
    (7,616
    )
    
    
    (7,616
    )Ongoing hedge inefficiency
    
    
    (6,252
    )
    
    
    
    
    
    
    (6,252
    )Ineligible for hedge accounting
    
    
    (17,814
    )
    
    
    
    
    
    
    (17,814
    )Net
    
    $
    (38,807
    )
    
    $
    (14,799
    )
    
    $
    (53,606
    )
 Over the next twelve months, based on current exchange rates, Cameco expects an estimated
$89,300,000 of pre-tax gains from the foreign currency cash flow hedges to be reclassified
through other comprehensive income to net earnings. The maximum length of time Cameco hedges
its exposure to the variability in future cash flows related to foreign currency on anticipated
transactions is five years.Over the next twelve months, based on current prices, Cameco expects an estimated $33,200,000 of
pre-tax gains from BPLPs various energy and sales related cash flow hedges to be reclassified
through other comprehensive income to net earnings. The maximum length of time BPLP is hedging
its exposure to the variability in future cash flows related to electricity prices on
anticipated transactions is five years.
 37




---



##### 



28.
    
    Per Share AmountsPer share amounts have been calculated based on the weighted average number of common shares
outstanding during the year net of shares held as security for employee loans to purchase such
shares. The weighted average number of paid shares outstanding in 2007 was 351,175,226 (2006 
351,223,724).
 2007
    
    
    2006Basic earnings per share computationNet earnings
    
    $
    416,112
    
    
    $
    375,715Weighted average common shares outstanding
    
    
    351,175
    
    
    
    351,224Basic earnings per common share
    
    $
    1.18
    
    
    $
    1.07Diluted earnings per share computationNet earnings
    
    $
    416,112
    
    
    $
    375,715Dilutive effect of:Convertible debentures
    
    
    9,624
    
    
    
    8,992Net earnings, assuming dilution
    
    $
    425,736
    
    
    $
    384,707Weighted average common shares outstanding
    
    
    351,175
    
    
    
    351,224Dilutive effect of:Convertible debentures
    
    
    21,209
    
    
    
    21,209Stock options
    
    
    4,487
    
    
    
    4,402Weighted average common shares outstanding, assuming dilution
    
    
    376,871
    
    
    
    376,835Diluted earnings per common share
    
    $
    1.13
    
    
    $
    1.02
 38




---



##### 



29.
    
    Segmented InformationCameco has four reportable segments: uranium, fuel services, electricity and gold. The uranium
segment involves the exploration for, mining, milling, purchase and sale of uranium concentrate.
The fuel services segment involves the refining, conversion and fabrication of uranium
concentrate and the purchase and sale of conversion services. The electricity segment involves
the generation and sale of electricity. The gold segment involves the exploration for, mining,
milling and sale of gold.Camecos reportable segments are strategic business units with different products, processes and
marketing strategies.Accounting policies used in each segment are consistent with the policies outlined in the
summary of significant accounting policies.(a)      Business Segments
 2007Fuel
    
    
    
    
    
    
    
    
    
    Inter-(Millions)
    
    Uranium
    
    Services
    
    Electricity
    
    Gold
    
    Segment
    
    TotalRevenue
    
    $
    1,269.4
    
    
    $
    238.6
    
    
    $
    417.8
    
    
    $
    404.9
    
    
    $
    (21.0
    )
    
    $
    2,309.7ExpensesProducts and services sold
    
    
    516.3
    
    
    
    237.8
    
    
    
    233.0
    
    
    
    246.0
    
    
    
    (21.4
    )
    
    
    1,211.7Depreciation, depletion and reclamation
    
    
    104.7
    
    
    
    24.1
    
    
    
    45.8
    
    
    
    50.9
    
    
    
    
    
    
    
    225.5Exploration
    
    
    46.0
    
    
    
    
    
    
    
    
    
    
    
    20.8
    
    
    
    
    
    
    
    66.8Research and development
    
    
    0.2
    
    
    
    3.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.6Other
    
    
    6.4
    
    
    
    
    
    
    
    
    
    
    
    3.2
    
    
    
    
    
    
    
    9.6Cigar Lake remediation
    
    
    29.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.4Restructuring costs [note 24]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113.0
    
    
    
    
    
    
    
    113.0Loss (gain) on sale of assets
    
    
    (5.8
    )
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    
    
    
    
    (4.0
    )Non-segmented expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188.1Earnings (loss) before income taxes
and minority interest
    
    
    572.2
    
    
    
    (26.7
    )
    
    
    137.2
    
    
    
    (29.0
    )
    
    
    0.4
    
    
    
    466.0Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.5Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20.4Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    416.1Assets
    
    $
    3,383.8
    
    
    $
    272.2
    
    
    $
    821.3
    
    
    $
    638.6
    
    
    $
    
    
    
    $
    5,115.9Intangibles
    
    $
    
    
    
    $
    108.7
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    108.7Goodwill
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    146.8
    
    
    $
    
    
    
    $
    146.8Capital expenditures for the year
    
    $
    304.9
    
    
    $
    26.3
    
    
    $
    30.9
    
    
    $
    132.4
    
    
    $
    
    
    
    $
    494.5
 39




---



##### 



2006Fuel
    
    
    
    
    
    
    
    
    
    Inter-(Millions)
    
    Uranium
    
    Services
    
    Electricity
    
    Gold
    
    Segment
    
    TotalRevenue
    
    $
    803.3
    
    
    $
    224.1
    
    
    $
    407.6
    
    
    $
    414.1
    
    
    $
    (17.4
    )
    
    $
    1,831.7ExpensesProducts and services sold
    
    
    472.1
    
    
    
    180.2
    
    
    
    221.0
    
    
    
    268.4
    
    
    
    (13.9
    )
    
    
    1,127.8Depreciation, depletion and reclamation
    
    
    94.2
    
    
    
    19.1
    
    
    
    43.5
    
    
    
    44.4
    
    
    
    (1.5
    )
    
    
    199.7Exploration
    
    
    31.7
    
    
    
    
    
    
    
    
    
    
    
    26.5
    
    
    
    
    
    
    
    58.2Research and development
    
    
    
    
    
    
    2.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.7Other
    
    
    4.2
    
    
    
    
    
    
    
    
    
    
    
    (15.4
    )
    
    
    
    
    
    
    (11.2
    )Cigar Lake remediation
    
    
    20.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20.6Loss (gain) on sale of assets
    
    
    (0.4
    )
    
    
    0.5
    
    
    
    
    
    
    
    (1.3
    )
    
    
    
    
    
    
    (1.2
    )Non-segmented expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89.6Earnings (loss) before income taxes
and minority interest
    
    
    180.9
    
    
    
    21.6
    
    
    
    143.1
    
    
    
    91.5
    
    
    
    (2.0
    )
    
    
    345.5Income tax recovery
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68.8
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38.6Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    375.7Assets
    
    $
    3,100.6
    
    
    $
    252.5
    
    
    $
    758.6
    
    
    $
    734.6
    
    
    $
    
    
    
    $
    4,846.3Intangibles
    
    $
    
    
    
    $
    114.0
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    114.0Goodwill
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    180.1
    
    
    $
    
    
    
    $
    180.1Capital expenditures for the year
    
    $
    287.8
    
    
    $
    17.9
    
    
    $
    33.2
    
    
    $
    120.7
    
    
    $
    
    
    
    $
    459.6
 (b)     Geographic Segments
 (Millions)
    
    2007
    
    
    2006Revenue from products and servicesCanada  domestic
    
    $
    610.7
    
    
    $
    525.2 export
    
    
    258.8
    
    
    
    271.0United States
    
    
    1,035.3
    
    
    
    621.3Kyrgyzstan
    
    
    225.0
    
    
    
    223.1Mongolia
    
    
    179.9
    
    
    
    191.1$
    2,309.7
    
    
    $
    1,831.7AssetsCanada
    
    $
    3,894.0
    
    
    $
    3,560.7United States
    
    
    242.5
    
    
    
    323.4Kyrgyzstan
    
    
    577.7
    
    
    
    576.9Mongolia
    
    
    247.6
    
    
    
    305.5Europe
    
    
    275.8
    
    
    
    286.2Kazakhstan
    
    
    133.8
    
    
    
    87.7$
    5,371.4
    
    
    $
    5,140.4
 40




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##### 



(c)
    
    Major Customers
Cameco relies on a small number of customers to purchase a significant portion of its uranium
concentrates and uranium conversion services. During 2007, revenues from one customer of
Camecos uranium and fuel services segments represented approximately $179,175,000 (2006 
$64,270,000), approximately 12% (2006  6%) of Camecos total revenues from these segments.
As customers are relatively few in number, accounts receivable from any individual customer
may periodically exceed 10% of accounts receivable depending on delivery schedules.During 2007, electricity revenues from one customer of BPLP represented approximately 6% of
BPLPs total revenues. In 2006, electricity revenues from BPLPs two largest customers
represented approximately 15% and 12% of BPLPs total revenues.
 30.
    
    Comparative FiguresCertain prior year balances have been reclassified to conform to the current financial statement
presentation.
 41