Form 6-K CAMECO CORP For: Jul 28

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

Under the Securities Exchange Act of 1934

For the month of July, 2021

Cameco Corporation

(Commission file No. 1-14228)

2121-11th Street West

Saskatoon, Saskatchewan, Canada S7M 1J3

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  ☐            Form 40-F  ☒

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ☐            No  ☒

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Exhibit 99.1

TSX: CCO NYSE: CCJ				website: cameco.com currency: Cdn (unless noted)

2121 – 11th Street West, Saskatoon, Saskatchewan, S7M 1J3 Canada

Tel: 306-956-6200 Fax: 306-956-6201

Cameco reports second quarter results, further contracting progress and the continued execution of strategy to support global clean-air transition

Saskatoon, Saskatchewan, Canada, July 28, 2021 ..    .    .    .    .    .    .    .    .    .     ..    .    .    .    .    .    .

Cameco (TSX: CCO; NYSE: CCJ) today reported its consolidated financial and operating results for the second quarter ended June 30, 2021 in accordance with International Financial Reporting Standards (IFRS).

“Our second quarter results reflect the continued execution of our strategy and the proactive decisions to suspend production to protect the health and safety of our workers, their families and their communities,” said Tim Gitzel, Cameco’s president and CEO. “We are not at the regular tier-one run rate of our business. We are taking the steps we believe are necessary, including investing in digital and automation technologies, to support the restart of our tier-one assets to create a more flexible asset base that will allow us to align our production decisions with our contract portfolio commitments and opportunities, allow us to eliminate the care and maintenance costs incurred while our tier-one production is suspended, and to benefit from the very favourable life-of-mine economics our tier-one assets provide.

“Despite the near-term costs of our strategy and associated with the precautionary production suspensions at Cigar Lake, we have a strong balance sheet. We ended the quarter with about $1.2 billion dollars in cash. We also successfully added an additional 7 million pounds U₃O₈ to our long-term sales contract portfolio, bringing the total contracted so far in 2021 to 16 million pounds.

“We are excited about the future of nuclear power generation, about the fundamentals of uranium supply and demand and about the prospects for our company and remain committed to our tier-one strategy and to our vision. Globally, we see demand for both traditional and non-traditional uses of nuclear power growing as the increasing focus on electrification while phasing out carbon intensive sources of energy continues to take hold.

“Our vision to energize a clean-air world recognizes that we have an important role to play in enabling the vast reductions in greenhouse gas emissions required to accomplish the targets being set by countries and companies around the world to achieve a resilient, net-zero carbon economy. We are vertically integrated across the nuclear fuel cycle. Our uranium and fuel services products are used around the world in the generation of safe, carbon-free, affordable, base-load nuclear energy. In addition, we are exploring other emerging and non-traditional opportunities within the fuel cycle, which align well with our commitment to responsibly and sustainably manage our business and increase our contributions to global climate change solutions, such as our investment in Global Laser Enrichment LLC and the memorandum of understanding signed with GE Hitachi Nuclear Energy and Global Nuclear Fuel-Americas to explore several areas of cooperation to advance the commercialization and deployment of BWRX-300 small modular reactors in Canada and around the world.

“We believe we have the right strategy to achieve our vision and we will do so in a manner that reflects our values. For over 30 years, we have been delivering our products responsibly. Sustainability is at the heart of what we do. Embedded in all our decisions is a commitment to addressing the environmental, social and governance risks and opportunities that we believe will make our business sustainable over the long term.”

- 1 -

Consolidated financial results

The financial information presented for the three months and six months ended June 30, 2020 and June 30, 2021 is unaudited.

- 2 -

NET EARNINGS

The following table shows what contributed to the change in net earnings and adjusted net earnings (non-IFRS measure, see page 3) in the second quarter and first six months of 2021, compared to the same period in 2020.

Adjusted net earnings (non-IFRS measure)

Adjusted net earnings is a measure that does not have a standardized meaning or a consistent basis of calculation under IFRS (non-IFRS measure). We use this measure as a meaningful way to compare our financial performance from period to period. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance. Adjusted net earnings is our net earnings attributable to equity holders, adjusted to reflect the underlying financial performance for the reporting period. The adjusted earnings measure reflects the matching of the net benefits of our hedging program with the inflows of foreign currencies in the applicable reporting period and has also been adjusted for reclamation provisions for our Rabbit Lake and US operations, which had been impaired, and income taxes on adjustments.

Adjusted net earnings is non-standard supplemental information and should not be considered in isolation or as a substitute for financial information prepared according to accounting standards. Other companies may calculate this measure differently, so you may not be able to make a direct comparison to similar measures presented by other companies.

- 3 -

The following table reconciles adjusted net earnings with net earnings for the second quarter and first six months of 2021 and compares it to the same periods in 2020.

Every quarter we are required to update the reclamation provisions for all operations based on new cash flow estimates, discount and inflation rates. This normally results in an adjustment to an asset retirement obligation asset in addition to the provision balance. When the assets of an operation have been written off due to an impairment, as is the case with our Rabbit Lake and US ISR operations, the adjustment is recorded directly to the statement of earnings as “other operating expense (income)”. See note 8 of our interim financial statements for more information. This amount has been excluded from our adjusted net earnings measure.

Selected segmented highlights

Management’s discussion and analysis and financial statements

The second quarter MD&A and unaudited condensed consolidated interim financial statements provide a detailed explanation of our operating results for the three and six months ended June 30, 2021, as compared to the same periods last year. This news release should be read in conjunction with these documents, as well as our audited consolidated financial statements and notes for the year ended December 31, 2020, first quarter and annual MD&A, and our most recent annual information form, all of which are available on our website at cameco.com, on SEDAR at sedar.com, and on EDGAR at sec.gov/edgar.shtml.

Qualified persons

The technical and scientific information discussed in this document for our material property Cigar Lake was approved by the following individual who is a qualified person for the purposes of NI 43-101:

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Caution about forward-looking information

This news release includes statements and information about our expectations for the future, which we refer to as forward-looking information. Forward-looking information is based on our current views, which can change significantly, and actual results and events may be significantly different from what we currently expect.

Examples of forward-looking information in this news release include: the expected benefits to us associated with a restart of our tier-one assets; our views about the future of nuclear power generation, uranium supply and demand, our long-term contracting portfolio, our prospects, strategy and vision, exploring emerging and non-traditional fuel cycle opportunities, and not drawing upon our credit facility this year; our views about the future growth in demand for traditional and non-traditional uses of nuclear power and the factors causing the anticipated growth, and our role in the reduction of greenhouse gas emissions; our intention to address environmental, social and governance risk and opportunities that we believe will make our business sustainable over the long term; Cigar Lake 2021 expected uranium production; the intention of GE Hitachi Nuclear Energy, Global Nuclear Fuel-Americas and Cameco to explore several areas of cooperation to advance the commercialization and deployment of BWRX-300 small modular reactors in Canada and around the world; and the expected date for future announcement of financial results.

Material risks that could lead to different results include: unexpected changes in uranium supply, demand, long-term contracting, and prices; changes in demand for nuclear power and uranium as a result of changing societal views and objectives regarding nuclear power, electrification and decarbonization; the risk that Canada Revenue Agency (CRA) will not return all or substantially all of the cash and security that has been paid or otherwise secured by us in a timely manner, or at all; that we may be unable to successfully manage the uncertain environment resulting from the COVID-19 pandemic and its related operational, safety, marketing or financial risks successfully, including the risk of significant disruption to our operations, workforce, required supplies or services, and ability to produce, transport and deliver uranium; that our Cigar Lake production plans do not succeed for any reason, including forest fires; the risk that GE Hitachi Nuclear Energy, Global Nuclear Fuel-Americas and Cameco will not be successful in advancing the commercialization and deployment of BWRX-300 small modular reactors in Canada and around the world; the risk that the strategy we are pursuing may prove unsuccessful, or that we may not be able to execute it successfully; the risk of incurring higher care and maintenance costs than expected; a major accident at a nuclear power plant; changes in government regulations or policies; the risk of litigation or arbitration claims or appeals against us that have an adverse outcome; the risk our estimates and forecasts prove to be incorrect; and the risk that we may be delayed in announcing our future financial results.

In presenting the forward-looking information, we have made material assumptions which may prove incorrect about: our ability to successfully manage the current uncertain environment resulting from the COVID-19 pandemic and its related operational, safety, marketing and financial risks successfully; uranium demand, supply, consumption, long-term contracting, prices, our prospects, and growth in the demand for and global public acceptance of nuclear energy; societal objectives for electrification and decarbonization; the continuing pursuit of carbon reduction strategies by governments and companies and the role of nuclear power in the pursuit of those strategies; that GE Hitachi Nuclear Energy, Global Nuclear Fuel-Americas and Cameco will be able to collaborate successfully to advance the commercialization and deployment of BWRX-300 small modular reactors in Canada and around the world; our production, purchases, sales, deliveries and costs; that we will recover all or substantially all of the amounts paid or secured in respect of the CRA dispute to date; the market conditions and other factors upon which we have based our future plans and forecasts; the success of our plans and strategies; the absence of new and adverse government regulations, policies or decisions; and our ability to announce future financial results when expected.

Forward-looking information is designed to help you understand management’s current views of our near-term and longer-term prospects, and it may not be appropriate for other purposes. We will not necessarily update this information unless we are required to by securities laws.

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Conference call

We invite you to join our second quarter conference call on Wednesday, July 28, 2021, at 8:00 a.m. Eastern.

The call will be open to all investors and the media. To join the call, please dial 1-800-319-4610 (Canada and US) or 1-604-638-5340. An operator will put your call through. The slides and a webcast of the conference call will be available from a link at cameco.com. See the link on our home page on the day of the call.

A recorded version of the proceedings will be available:

2021 third quarter report release date

We expect to announce our 2021 third quarter consolidated financial and operating results before markets open on October 29, 2021.

Announcement dates are subject to change.

Profile

Cameco is one of the largest global providers of the uranium fuel needed to energize a clean-air world. Our competitive position is based on our controlling ownership of the world’s largest high-grade reserves and low-cost operations. Utilities around the world rely on our nuclear fuel products to generate power in safe, reliable, carbon-free nuclear reactors. Our shares trade on the Toronto and New York stock exchanges. Our head office is in Saskatoon, Saskatchewan.

As used in this news release, the terms we, us, our, the Company and Cameco mean Cameco Corporation and its subsidiaries unless otherwise indicated.

- End -

Investor inquiries:

Rachelle Girard

306-956-6403

[email protected]

Media inquiries:

Jeff Hryhoriw

306-385-5221

[email protected]

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Exhibit 99.2

Management’s discussion and analysis

for the quarter ended June 30, 2021

This management’s discussion and analysis (MD&A) includes information that will help you understand management’s perspective of our unaudited condensed consolidated interim financial statements and notes for the quarter ended June 30, 2021 (interim financial statements). The information is based on what we knew as of July 27, 2021 and updates our first quarter and annual MD&A included in our 2020 annual report.

As you review this MD&A, we encourage you to read our interim financial statements as well as our audited consolidated financial statements and notes for the year ended December 31, 2020 and annual MD&A. You can find more information about Cameco, including our audited consolidated financial statements and our most recent annual information form, on our website at cameco.com, on SEDAR at sedar.com or on EDGAR at sec.gov. You should also read our annual information form before making an investment decision about our securities.

The financial information in this MD&A and in our financial statements and notes are prepared according to International Financial Reporting Standards (IFRS), unless otherwise indicated.

Unless we have specified otherwise, all dollar amounts are in Canadian dollars.

Throughout this document, the terms we, us, our and Cameco mean Cameco Corporation and its subsidiaries unless otherwise indicated.

Caution about forward-looking information

Our MD&A includes statements and information about our expectations for the future. When we discuss our strategy, plans, future financial and operating performance, or other things that have not yet taken place, we are making statements considered to be forward-looking information or forward-looking statements under Canadian and United States (US) securities laws. We refer to them in this MD&A as forward-looking information.

Key things to understand about the forward-looking information in this MD&A:

Examples of forward-looking information in this MD&A

Material risks

2    CAMECO CORPORATION

Material assumptions

2021 SECOND QUARTER REPORT    3

4    CAMECO CORPORATION

Our strategy

We are a pure-play nuclear fuel supplier, focused on providing a clean source of energy and taking advantage of the long-term growth we see coming in our industry. Our strategy is to focus on our tier-one assets and profitably produce at a pace aligned with market signals in order to preserve the value of those assets and increase long-term value, and to do that with an emphasis on safety, people and the environment.

We have been executing our strategy on three fronts – operational, marketing and financial. Currently, our financial results reflect the strategic decisions we have made and the costs associated with those decisions, not our tier-one cost structure. However, we believe the steps we are taking, including the investment in digital and automation technologies, will support the restart of our tier-one assets and create a more flexible asset base, thereby enabling us to align our overall production decisions with our contract portfolio commitments and opportunities, allow us to eliminate the care and maintenance costs incurred while our tier-one production is suspended and to benefit from the favourable life-of-mine economics our tier-one assets provide. We have undertaken a number of deliberate and disciplined actions: we have cut production below our committed sales level, we are actively purchasing material on the spot market to meet our sales commitments, we are focused on protecting and extending the value of our contract portfolio and providing a home for our future tier-one production, and we are prudently managing the company. As a result, our balance sheet is strong, and we are well-positioned to self-manage risk.

Our vision – “Energizing a clean-air world” – recognizes that we have an important role to play in enabling the vast reductions in global greenhouse gas emissions required to achieve a resilient net-zero carbon economy. We are vertically integrated across the nuclear fuel cycle. Our uranium and fuel services products are used around the world in the generation of safe, carbon-free, affordable, base-load nuclear energy. In addition, we are exploring other emerging and non-traditional opportunities within the fuel cycle, which align well with our commitment to responsibly and sustainably manage our business and increase our contributions to global climate change solutions, such as our investment in Global Laser Enrichment LLC and the memorandum of understanding signed with GE Hitachi Nuclear Energy and Global Nuclear Fuel-Americas to explore several areas of cooperation to advance the commercialization and deployment of BWRX-300 small modular reactors in Canada and around the world.

We believe we have the right strategy to achieve our vision and we will do so in a manner that reflects our values. For over 30 years, we have been delivering our products responsibly. Building on that strong foundation, we remain committed to identifying and addressing the environmental, social and governance (ESG) risks and opportunities that we believe may have a significant impact on our ability to add long-term value for our stakeholders.

You can read more about our strategy and our approach to ESG matters in our 2020 annual MD&A.

Strategy in action

In the current environment, we believe the risk to uranium supply is greater than the risk to uranium demand and expect it will create a renewed focus on ensuring availability of long-term supply to fuel nuclear reactors. Over time, we expect this renewed focus on security of supply will provide the market signals producers need and will help offset any near-term costs we may incur as a result of the recent disruptions to our business.

Our utility customers’ nuclear power plants continue to be part of the critical infrastructure needed to guarantee the availability of 24-hour electricity to run hospitals, care facilities and other essential services. Our customers are going to need uranium. As a reliable, independent, commercial supplier, we will continue to work with our customers to help meet their delivery needs. And, year-to-date we have finalized and executed 16 million pounds U₃O₈ (including the 9 million finalized and executed in April and reported in our first quarter MD&A) in long-term sales contracts which had been under negotiation.

2021 SECOND QUARTER REPORT    5

As we continue to build our contract portfolio, we do so within the context of global market realities. The primary driver for our contracting activity is value. In the uranium market, the spot market is not the fundamental market. Historically, the majority of uranium has been bought under long-term contracts. We recognize that in our business real value is created by building a long-term contract portfolio that supports the operation of our productive assets, is leveraged to greater returns as prices increase, and provides downside protection. Therefore, to create long-term value, we manage our contract portfolio, layering in volumes over time and in accordance with market conditions. Long-term demand in the uranium market remains discretionary and despite the increase in spot prices, long-term prices remain relatively flat. While our preference is for market-related pricing mechanisms, in the current carry-trade window (next two to three years) where prices are largely driven by the spot market, we may secure some volumes taking into account the duration of the contract, volumes, product form, region and customer to ensure we have a diversified portfolio. In this environment, contracts often contain hybrid pricing mechanisms, a mix of fixed-price and market-related, that while profitable, reflect current market conditions. As the market improves, we expect to continue to layer in volumes capturing greater upside using market-related pricing mechanisms. We also expect to lock in value at higher prices to carry that value through the next price cycle, always with a view to our preference for a 60/40 split of market-related and fixed priced contracts.

Thanks to the disciplined execution of our strategy on all three fronts – operational, marketing and financial – we expect to have the financial capacity to execute our strategy. As of June 30, 2021, we had $1.2 billion in cash and short-term investments and $1.0 billion in long-term debt. In addition, we have a $1.0 billion undrawn credit facility.

We expect our cash balances and operating cash flows to meet our capital requirements during 2021, therefore, we do not anticipate drawing on our credit facility. Our balance sheet remains strong, and we believe we are well positioned to self-manage risk. With the Supreme Court of Canada’s dismissal of Canada Revenue Agency’s (CRA) application for leave, the dispute for the 2003 through 2006 tax years is fully and finally resolved in our favour. Furthermore, we are confident the courts would reject any attempt by CRA to utilize the same or similar positions and arguments for the other tax years currently in dispute (2007 through 2014) and believe CRA should return the $785 million in cash and letters of credit we have been required to pay or otherwise secure. However, other than for the tax years 2003 through 2006, timing of any payments is uncertain.

Our response to Coronavirus (COVID-19)

We continue to closely monitor the developments related to the COVID-19 pandemic. The situation continues to evolve, and our priority is to protect the health and well-being of our employees, their families and their communities. We activated our Corporate Crisis Management Plan, which includes our Pandemic Plan, and our various Local and Corporate Business Continuity Plans. Our Pandemic Plan and Local and Corporate Business Continuity Plans continue to be in effect across our global operations.

Following the precautions and restrictions enacted by all levels of government where we operate and considering the unique circumstances at each of our operating sites, we proactively implemented a number of measures and made a number of decisions to ensure a safe working environment for all our workers and help slow down the spread of the virus. In addition to the safety protocols we put in place, we:

6    CAMECO CORPORATION

The proactive decisions we have made to protect our employees and to help slow down the spread of the COVID-19 virus are necessary decisions that are consistent with our values. The health and safety of our employees, their families and their communities continue to be the priority in all our plans, which will align with the guidance of the relevant health authorities where we operate.

In April 2021 production at the Cigar Lake mine resumed. As a result of the temporary production suspension at Cigar Lake, until its restart in mid-April, we incurred an additional $8 million in care and maintenance costs in the month of April ($40 million year-to-date). Even while production was suspended, we kept and continued to pay all our employees. Partially offsetting these additional costs was the receipt of $9 million ($21 million year-to-date) under the Canada Emergency Wage Subsidy program.

While vaccinations progress and provincial restrictions are starting to be lifted, we continue to take a measured approach. We will continue to assess our gradual return to the workplace plan for those employees at our corporate and division head offices who are currently working from home.

The COVID-19 pandemic has disrupted global uranium production adding to the supply curtailments that have occurred in the industry for many years. The duration and extent of these disruptions and risk of additional disruptions are still not fully known.

Second quarter market update

Low uranium prices, government-driven trade policies, and the COVID-19 pandemic continue to have an impact on the security of supply in our industry. In addition to the decisions many producers, including the lowest-cost producers, have made to preserve long-term value by leaving uranium in the ground, there have been unplanned supply disruptions related to the impact of the COVID-19 pandemic on uranium mining and processing activities. Adding to security of supply concerns is the role of commercial and state-owned entities in the uranium market, and trade policies that highlight the disconnect between where uranium is produced and where it is consumed. Nearly 80% of primary production is in the hands of state-owned enterprises, after taking into account the cuts to primary production that have occurred over the last several years. Furthermore, about 80% of primary production comes from countries that consume little-to-no uranium, and 90% of uranium consumption occurs in countries that have little-to-no primary production. As a result, government-driven trade policies can be particularly disruptive for the uranium market. Some of the more significant developments affecting supply in the quarter and to date are:

2021 SECOND QUARTER REPORT    7

The demand gap left by forced and premature nuclear reactor shutdowns since March of 2011 was filled in 2018. According to the International Atomic Energy Agency (IAEA), there are currently 443 reactors operating globally and 51 reactors under construction. With a number of reactor construction projects recently approved, and many more planned, the demand for uranium is growing. This growth is largely occurring in Asia and the Middle East. Some of this growth is tempered by early reactor retirements, plans for reduced reliance on nuclear or phase-out policies in other regions. However, there is growing recognition of the role nuclear power must play in providing safe, reliable, affordable carbon-free baseload electricity and achieving a low-carbon economy. Momentum is also building for non-traditional commercial uses of nuclear power such as the development of small modular reactors and advanced reactors, with numerous companies and countries pursuing projects. Longer term, these projects have the potential to open up new fuel cycle opportunities and demand for uranium. In the medium-term, reactor life extensions are adding demand and in the near-term unplanned demand has come from junior uranium companies and financial funds purchasing in the spot market. Policy decisions to support the continued operation of existing reactors also have the potential to increase near-term demand. Some of the more significant developments affecting demand in the quarter and to date are:

8    CAMECO CORPORATION

Caution about forward-looking information relating to the nuclear industry

This discussion of our expectations for the nuclear industry, including its growth profile, uranium supply and demand, and reactor growth is forward-looking information that is based upon the assumptions and subject to the material risks discussed under the heading Caution about forward-looking information beginning on page 2.

2021 SECOND QUARTER REPORT    9

Industry prices at quarter end

Note: the industry does not publish UO₂ prices.

On the spot market, where purchases call for delivery within one year, the volume reported by UxC for the second quarter of 2021 was 15 million pounds U₃O₈ equivalent, compared to 39 million pounds U₃O₈ equivalent in the second quarter of 2020. Volume through the first six months of 2021 was 37 million pounds U₃O₈ equivalent, compared to about 59 million pounds U₃O₈ equivalent over the same period in 2020. As of June 30, 2021, the average reported spot price was $32.25 (US) per pound, up $1.30 (US) per pound from the previous quarter.

Long-term contracts usually call for deliveries to begin more than two years after the contract is finalized, and use a number of pricing formulas, including fixed prices escalated over the term of the contract, and market referenced prices quoted near the time of delivery. Long-term contracting reported by UxC for the first six months of 2021 continues to be moderate with about 38 million pounds U₃O₈ equivalent transacted, up from about 25 million pounds U₃O₈ equivalent reported over the same period in 2020. The average reported long-term price at the end of the quarter was $33.50 (US) per pound U₃O₈ equivalent, down $0.25 (US) per pound from the previous quarter.

Both spot and long-term UF₆ conversion prices decreased in the North American and European markets. For North American delivery, the average reported spot price at the end of the quarter was $20.25 (US) per kilogram uranium as UF₆ (US/kgU as UF₆), down $1.25 (US) from the previous quarter. Long-term UF₆ conversion prices finished the quarter at $18.00 (US/kgU as UF₆), down $0.50 (US) from the previous quarter.

10    CAMECO CORPORATION

Financial results

This section of our MD&A discusses our performance, financial condition and outlook for the future.

Consolidated financial results

2021 SECOND QUARTER REPORT    11

NET EARNINGS

The following table shows what contributed to the change in net earnings and adjusted net earnings (non-IFRS measure, see page 12) in the second quarter and the first six months of 2021, compared to the same periods in 2020.

See Financial results by segment beginning on page 22 for more detailed discussion.

ADJUSTED NET EARNINGS (NON-IFRS MEASURE)

Adjusted net earnings (ANE) is a measure that does not have a standardized meaning or a consistent basis of calculation under IFRS (non-IFRS measure). We use this measure as a meaningful way to compare our financial performance from period to period. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance. Adjusted net earnings is our net earnings attributable to equity holders, adjusted to reflect the underlying financial performance for the reporting period. The adjusted earnings measure reflects the matching of the net benefits of our hedging program with the inflows of foreign currencies in the applicable reporting period and has also been adjusted for reclamation provisions for our Rabbit Lake and US operations, which had been impaired, and income taxes on adjustments.

Adjusted net earnings is non-standard supplemental information and should not be considered in isolation or as a substitute for financial information prepared according to accounting standards. Other companies may calculate this measure differently, so you may not be able to make a direct comparison to similar measures presented by other companies.

12    CAMECO CORPORATION

The following table reconciles adjusted net earnings with net earnings for the second quarter and first six months of 2021 and compares it to the same periods in 2020.

Every quarter we are required to update the reclamation provisions for all operations based on new cash flow estimates, discount and inflation rates. This normally results in an adjustment to an asset retirement obligation asset in addition to the provision balance. When the assets of an operation have been written off due to an impairment, as is the case with our Rabbit Lake and US ISR operations, the adjustment is recorded directly to the statement of earnings as “other operating expense (income)”. See note 8 of our interim financial statements for more information. This amount has been excluded from our adjusted net earnings measure.

Quarterly trends

Key things to note:

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The following table compares the net earnings and adjusted net earnings for the second quarter to the previous seven quarters.

Corporate expenses

ADMINISTRATION

Direct administration costs were $2 million higher for the second quarter of 2021 compared to the same period last year, and $1 million lower for the first six months. Stock-based compensation in the first six months was higher due primarily to the increase in our share price during the period compared to 2020. See note 16 to the financial statements. As a result of the Supreme Court of Canada’s (Supreme Court) dismissal of CRA’s application for leave to appeal the June 26, 2020 decision of the Federal Court of Appeal (Court of Appeal), we recorded $27 million in the first quarter as a reduction to administration costs to reflect the amounts owing to us for legal fees and disbursements for costs as was awarded to us by the Tax Court of Canada (Tax Court) and nominal cost awards related to the Court of Appeal hearing and Supreme Court application.

Exploration

In the second quarter, uranium exploration expenses were $2 million, unchanged from the second quarter of 2020. Exploration expenses for the first six months of the year decreased by $3 million compared to 2020, to $3 million.

INCOME TAXES

We recorded an income tax recovery of $5 million in the second quarter of 2021, compared to a recovery of $14 million in the second quarter of 2020.

On an adjusted basis, we recorded an income tax recovery of $7 million this quarter compared to a recovery of $20 million in the second quarter of 2020. In 2021, we recorded losses of $23 million in Canada compared to losses of $76 million in 2020, while we recorded losses of $22 million in foreign jurisdictions compared to losses of $9 million last year.

In the first six months of 2021, we recorded an income tax recovery of $7 million compared to a recovery of $8 million in 2020.

On an adjusted basis, we recorded an income tax recovery of $16 million for the first six months compared to an expense of $2 million in 2020. In 2021, we recorded losses of $29 million in Canada compared to earnings of $8 million in 2020, while we recorded losses of $54 million in foreign jurisdictions compared to losses of $42 million last year.

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TRANSFER PRICING DISPUTE

Supreme Court of Canada decision

On February 18, 2021, the Supreme Court dismissed CRA’s application for leave to appeal the June 26, 2020 decision of the Court of Appeal. The dismissal means that the dispute for the 2003, 2005 and 2006 tax years is fully and finally resolved in Cameco’s favour.

Background

In September 2018, the Tax Court ruled that our marketing and trading structure involving foreign subsidiaries, as well as the related transfer pricing methodology used for certain intercompany uranium sales and purchasing agreements, were in full compliance with Canadian law for the tax years in question. The Court of Appeal upheld the Tax Court’s decision and the Supreme Court dismissed CRA’s application for leave to appeal.

The total tax reassessed for the three tax years was $11 million, and we remitted 50%. Therefore, we expect to receive refunds totaling about $5.5 million plus interest in 2021. The Minister of National Revenue has issued new reassessments for the 2003 through 2006 tax years in accordance with the decision.

Cost award

On April 30, 2019, the Tax Court awarded us $10 million for legal fees incurred, plus an amount for disbursement of up to $17 million. The amount of the award for disbursements will be determined by an officer of the Tax Court. We are optimistic we will recover all, or substantially all, of the $17 million in disbursements.

On April 20, 2021 we received $10 million from CRA, which includes payment of the legal fees awarded by the Tax Court as well as the cost awards related to the Court of Appeal and Supreme Court decisions.

Timing of payment for disbursements remains uncertain.

Reassessments and remittances

The Canadian income tax rules include provisions that generally require larger companies like us to remit or otherwise secure 50% of the cash tax plus related interest and penalties at the time of reassessment. Based on reassessments received to date (2003 through 2014), under these provisions, after applying elective deductions, we have paid or secured $785 million ($303 million in cash and $482 million in letters of credit) in relation to this dispute. We believe CRA should return the full amount of this cash and security, given the overwhelming clarity of the court decisions received to date. However, other than for the tax years 2003 through 2006, timing of any payments is uncertain.

While the court rulings pertain to the 2003, 2005 and 2006 tax years, given the strength of the decisions handed down, we are confident the courts would reject any attempt by CRA to utilize the same or similar positions and arguments for the other tax years currently in dispute (2007 through 2014). For 2014, CRA has also proposed an alternative reassessing position that, if applied, would result in a less adverse, albeit still material, adjustment to our income taxable in Canada. This proposed new basis of reassessment is inconsistent with the methodology CRA has pursued for prior years and we are assessing it. Our initial view is that this alternative methodology will not result in a materially different outcome for 2014.

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We will not be in a position to determine the definitive outcome of this dispute for any tax year other than 2003 through 2006 until such time as all reassessments have been issued advancing CRA’s arguments and final resolution is reached for that tax year. CRA may also advance alternative reassessment methodologies for years other than 2003 through 2006, such as the alternative reassessing position advanced for 2014. See our 2020 annual MD&A for additional background about the payments we have made.

Caution about forward-looking information relating to our CRA tax dispute

This discussion of our expectations relating to our tax dispute with CRA and future tax reassessments by CRA is forward-looking information that is based upon the assumptions and subject to the material risks discussed under the heading Caution about forward-looking information beginning on page 2 and also on the more specific assumptions and risks listed below. Actual outcomes may vary significantly.

FOREIGN EXCHANGE

The exchange rate between the Canadian dollar and US dollar affects the financial results of our uranium and fuel services segments.

We sell the majority of our uranium and fuel services products under long-term sales contracts, which are routinely denominated in US dollars. Our product purchases are denominated in US dollars, while our production costs are largely denominated in Canadian dollars. To provide cash flow predictability, we hedge a portion of our net US/Cdn exposure (e.g. total US dollar sales less US dollar expenditures and product purchases) to manage shorter term exchange rate volatility. Our results are therefore affected by the movements in the exchange rate on our hedge portfolio, and on the unhedged portion of our net exposure.

Impact of hedging on IFRS earnings

We do not use hedge accounting under IFRS and, therefore, we are required to report gains and losses on economic hedging activity, both for contracts that close in the period and those that remain outstanding at the end of the period. For the contracts that remain outstanding, we must treat them as though they were settled at the end of the reporting period (mark-to-market).

However, we do not believe the gains and losses that we are required to report under IFRS appropriately reflect the intent of our hedging activities, so we make adjustments in calculating our ANE to better reflect the benefits of our hedging program in the applicable reporting period.

Impact of hedging on ANE

We designate contracts for use in particular periods, based on our expected net exposure in that period. Hedge contracts are layered in over time based on this expected net exposure. The result is that our current hedge portfolio is made up of a number of contracts which are currently designated to net exposures we expect in 2021 and future years, and we will recognize the gains and losses in ANE in those periods.

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For the purposes of ANE, gains and losses on derivatives are reported based on the difference between the effective hedge rate of the contracts designated for use in the particular period and the exchange rate at the time of settlement. This results in an adjustment to current period IFRS earnings to effectively remove reported gains and losses on derivatives that arise from contracts put in place for use in future periods. The effective hedge rate will lag the market in periods of rapid currency movement. See Non-IFRS measures on page 12.

For more information, see our 2020 annual MD&A.

HEDGE PORTFOLIO SUMMARY

At June 30, 2021:

For information on the impact of foreign exchange on our intercompany balances, see note 17 to the financial statements.

Outlook for 2021

Production at Cigar Lake has resumed, and we expect up to 12 million pounds on a 100% basis in 2021, provided there are no further disruptions due to COVID-19, forest fires or any other cause. We have updated our 2021 consolidated outlook, including for our uranium segment.

Despite the disruptions to our business in 2021 and the costs we are incurring, we expect our business to be resilient. Our deliveries to-date have not been materially impacted by the disruptions to our business as a result of the COVID-19 pandemic or forest fires, and we do not currently expect there will be a material impact on our remaining 2021 deliveries.

Our outlook has changed for fuel services revenue as a result of additional sales commitments. Fuel services deliveries are now expected to be between 13 million and 14 million kgU (previously 12 million to 13 million kgU), increasing the outlook for fuel services revenue to between $380 million and $410 million (previously $360 million to $390 million).

Our revised outlook for 2021 reflects the expenditures necessary to help us achieve our strategy. We have made significant progress in reducing our administration, exploration and operating costs, as well as capital expenditures. We have also made a number of strategic and prudent decisions to curtail production that come with significant costs in the near term, costs we factored into our decisions, and that we continue to believe are the right decisions for our company over the long-term.

The largest of these costs are care and maintenance related to the production suspensions at the McArthur River and Key Lake operations and at our tier-two operations, and the proactive health and safety-related decision to suspend production at Cigar Lake a second time due to the COVID-19 pandemic. These costs are expensed directly to cost of sales and are expected to represent between $7.40 per pound and $9.35 per pound of our average unit cost of sales (including D&A) this year.

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In addition, with our production well below our sales commitments, we are required to purchase uranium to meet our committed sales and to maintain a working inventory. We expect the average purchase price for these pounds to be about $38.00 per pound, approximately $7.00 per pound higher than the production costs at Cigar Lake for the past two years.

2021 FINANCIAL OUTLOOK

We do not provide an outlook for the items in the table that are marked with a dash.

The following assumptions were used to prepare the outlook in the table above:

Our 2021 financial outlook is presented on the basis of equity accounting for our minority ownership interest in JV Inkai. Under equity accounting, our share of the profits earned by JV Inkai on the sale of its production will be included in “income from equity-accounted investees” on our consolidated statement of earnings. Our share of production will be purchased at a discount to the spot price and included at this value in inventory. In addition, JV Inkai capital is not included in our outlook for capital expenditures.

For more information on how changes in the exchange rate or uranium prices can impact our outlook see Revenue, adjusted net earnings, and cash flow sensitivity analysis below, and Foreign exchange on page 16.

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REVENUE, ADJUSTED NET EARNINGS, AND CASH FLOW SENSITIVITY ANALYSIS

For the remainder of 2021, the volume of purchase commitments sensitive to the spot price is higher than the volume of committed deliveries that are sensitive to the spot price. As a result, our adjusted net earnings and cash flow are expected to move in the opposite direction from the uranium spot price. However, the impact on adjusted net earnings is expected to be very small with cash flow expected to be more sensitive to price changes.

PRICE SENSITIVITY ANALYSIS: URANIUM SEGMENT

The following table is not a forecast of prices we expect to receive. The prices we actually realize will be different from the prices shown in the table. It is designed to indicate how the portfolio of long-term contracts we had in place on June 30, 2021 would respond to different spot prices. In other words, we would realize these prices only if the contract portfolio remained the same as it was on June 30, 2021 and none of the assumptions we list below change.

We intend to update this table each quarter in our MD&A to reflect changes to our contract portfolio. As a result, we expect the table to change from quarter to quarter.

Expected realized uranium price sensitivity under various spot price assumptions

(rounded to the nearest $1.00)