Thank you for standing by. This is the conference operator. Welcome to the Cameco Corporation Second Quarter 2017 Results Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Rachelle Girard, Director-Investor Relations. Please go ahead, Ms. Girard.

Thank you, operator, and good afternoon, everyone. Thanks for joining us. Welcome to Cameco’s conference call to discuss the second quarter financial results. With us today on the call are Tim Gitzel, President and CEO; Grant Isaac, Senior Vice President and CFO; Brian Reilly, Senior VP and Chief Operating Officer; Alice Wong, Senior VP and Chief Corporate Officer; and Sean Quinn, Senior VP, Chief Legal Officer and Corporate Secretary. Tim will begin with comments on our results and the industry. Then we’ll open it up for your questions. If you joined the conference call through our website event page, you will notice there will be slides displayed during the remarks portion of this call. These slides are also available for download in a PDF file called Conference Call Slides through the conference call link at cameco.com. Today’s conference call is open to all members of the investment community, including the media. During the Q&A session, please limit yourself to two questions and then return to the queue. For those on the webcast, if you have questions, please select the Submit a Question feature to submit your questions by email, and we will follow-up after the call. Please note that this conference call will include forward-looking information, which is based on a number of assumptions and actual results could differ materially. Please refer to our annual information form and MD&A for more information about the factors that could cause these different results and the assumptions we have made. With that, I will turn it over to Tim.

Well, thank you, Rachelle, and welcome to everyone on the call today. We appreciate you taking the time to join us to discuss Cameco’s second quarter results. Before I get to our results, I want to take a brief moment to recognize our good friend and colleague Bob Steane, who retired on June 30 after 34 years of outstanding service to Cameco. On behalf of our Board of Directors and our entire team we want to thank Bob for his contributions and wish him all the very best in his retirement. Related to that, I’m very pleased to welcome Brian Reilly to Cameco’s Senior Executive Team in the role of Chief Operating Officer. Brian joined Cameco in 2011 as Managing Director of Cameco Australia, where he was responsible for the Kintyre and Yerleri projects and a substantial exploration program. I have known Brian for over 20 years and worked with him for most of those and I know that he’ll be a great addition to our executive team. Brian is with us on the call today, his first in his new role as Chief Operating Officer. Alright, let me start today by saying that we are very pleased to announce that we have settled our tax dispute with the United States Internal Revenue Service and as we expected the financial impact was not material. Just to remind you our potential exposure based on the adjustments proposed by the IRS for this period was a tax expense of $122 million. By this settlement we were required to pay about $122,000 to resolve the dispute related to the 2009 through 2012 tax years. We are encouraged by this settlement as we believe it confirms from an IRS perspective, our view that our structure and transfer pricing arrangements are appropriate. Turning to our…

Thank you. We’ll now begin the question-and-answer session. In the interest of time, we ask you to limit your questions to one with one supplemental. If you have additional questions, you’re welcome to rejoin the queue. [Operator Instructions] The first question is from Ralph Profiti of Eight Capital. Please go ahead.

Hi, everyone. Thanks for taking my question. Tim, how much – just thinking how much of a positive to the CRA case the IRS decision is and other than the amounts and years in dispute, can the main difference in the two cases still be considered one of governance?

[Audio gap] I’m knocked down. And I think it confirms from an IRS perspective and let me say that our view that our structure and transfer pricing arrangements are appropriate as we say. So that’s as far as we can go on that, we’re certainly pleased with the decision and just on the CRA piece we’re happy to see the evidence all in. I’m looking at Sean Quinn here, the evidence is in on that. We’ve got the final arguments the second week of September in Toronto and then that one’s done and into the hands of the judge.

Yeah.

So, like I say, Ralph, we’re taking them one at a time. We’re happy with this IRS decision, CRA to come.

Okay. Yeah. As a follow-up, if I may your market update, Tim.

Yeah.

Talked about fully receiving 2016 primary and secondary production data. And I’m just wondering how much of a contributor was enricher underfeeding last year? And what’s your outlook for that number in the near future, increase, decrease or remain the same?

Yeah. I’m not sure we have a really precise numbers on that enricher underfeeding piece. We know URENCO is doing it, we know the Russian’s are doing it, I assume AREVA is probably doing it as well, just because the enrichment market is as bad or worse than the uranium market and they like to keep those centrifuges spinning. So I don’t know if you said in the range of 15 million pound something like that wouldn’t – we wouldn’t blink at that. So we think it’s flat for the moment and hopefully as the market improves and the Japanese units start coming back on requiring enrichment, again that’ll – that will start to go down and that’s the way we see it.

Okay. Always helpful. Thank you very much.

Thank you, Ralph.

The next question is from Orest Wowkodaw of Scotia Bank. Please go ahead.

Hi. Good morning. I’m sorry, unfortunately, there was some telephone difficulties just Tim in terms of your last answer to Ralph’s question. And just expanding from that, can you walk us through kind of in layman’s terms, how the IRS case is similar and different than the CRA case?

Yeah. Well, I’m not going to get too much into it. Maybe I’ll just get Sean to say a few words about that, we’re very cautious on this, so obviously this is an IRS decision, we’re happy about it, we were looking at some fairly significant exposure there and ended up paying $122,000 to settle it. But Sean, I’ll see how far you want to go with this, because we’re very cautious on this.

Yeah. I think if you looking at our MD&A, we have a little bit of commentary on what the IRS is looking at, they’re obviously focused on the U.S. implications of how we sell uranium. The CRA is looking at from a Canadian perspective and that’s really about as far as we can go in this forum.

So Orest, I would just say if you missed it. I think what we say is that, it can further decision from the IRS confirms from the IRS perspective our view that our structure and our transfer pricing arrangements are appropriate and so that’s where we’re at with this one.

Okay. Thank you. And then just as a follow-up. You mentioned earlier in terms of some of the demand changes out there with respect to or potentially with respect to South Korea and France. Can you give us a sense of how exposed you would be to those markets, based on your current contract book?

Yeah. It’s not something that worries us in the near-term. We do obviously have sales into Korea and France both. No change in the near-term as far as that goes. They’re talking long-term. Governments are going to change, once if not more than that while this goes on. So, really we’re not looking with respect to our contract portfolio to the length of time it runs out any affect on our book at all.

I see. Thank you very much.

Thank you.

The next question is from Andrew Wong with RBC Capital Markets. Please go ahead.

Hi. Thanks for having me on the call. So, looks like when I was looking through the MD&A, the contracted volumes increased for the quarter. But there wasn’t really a much change in the price sensitivity table. So, does that mean that volumes are contracted at similar terms to your existing contracts and I mean what does that tell us about the contract market is? Does it tell us that utilities are interested given with your current terms?

Hi, Andrew. It’s Tim. I’m going to pass it over to Grant to respond to that one.

Yeah. Andrew, thanks for the question. We’ve been very disciplined on the type of business that we’re willing to write in this market. You’ve heard us say that there are a number of factors that go in. The number one, of course, being we think that these are unsustainably low prices. So, we’re not really interested in locking in today’s prices out on the forward curve. So, we’ve been looking for business that gives us market related exposure, business that is consistent with our regional diversification, business that is consistent with our view on top customers and the Bruce Power contract would be a perfectly good example of that. But I think your general comment that it is reflective of the type of deals already in our portfolio that’s true and we’ve taken a pass on ones that are not reflective, or were not consistent with that portfolio strategy. So we have opportunities occasionally with some of the utilities, who want us in their portfolio and they are willing to do some business on those terms and others, we simply have walked on, either pursued to be responsive, but not with an effort to chase down the market or simply not responded. So we continue to be disciplined in this market and we can be because of our existing contract portfolio.

Okay. That’s helpful. And maybe just highlight a little bit, why would a utility be interested in locking in terms that looks like it’s higher than where the market would be and how come we don’t see it on the benchmarks?

Well, the utilities will have a set of factors that are driving them as well, so they will want a diversified portfolio, they’ll want reliable supplies, [indiscernible] supply, as well as price sensitive supplies. So occasionally, those two lines cross in the interest of a primary producer in this market will intersect with the interest of a fuel buyer. And when those – when you find those moments, we’ll have opportunities to layer-in business. So that happens occasionally, maybe you have a fuel buyer, who used their portfolio over weighted to sources other than maybe Canadian supply for example, that might be a good opportunity for us. Not all the business is through our feeds that are put out in the market, some are extensions of existing contracts and so that’s not hitting the benchmark directly or hitting it afterwards. And so there is just a bit of a price reporting issue. It is a fact that we’re in a an industry that it doesn’t have a truly discovered price, we have neither the volume or the frequency, so we have a reported price, and there is a bit of a lag and a bit of methodology for coming up with those numbers. We just look at what’s required for us to part with our uranium out into the future. I listed those factors earlier and occasionally we find utilities that want the safety and security of our supply, and they’re willing to agree to those terms.

That’s great. Thank you very much.

Thanks, Andrew.

The next question is from Fai Lee with Odlum Brown. Please go ahead.

Hi. Thanks. Tim, I was just wondering if you could just remind us where you are on the TEPCO dispute process, and what are the next steps, I guess, I’m just wondering about the timing when you actually go to finding arbitration?

Yeah, Fai, thanks. We – we went through the good faith discussions, negotiations and it didn’t result in any conclusions there. So, we are off to – we are off to arbitration now, and so the – the parties need to pick their arbitrators, and the third one has to be picked, and then it moves from there. So, we’re firmly into the arbitration process, and expect it’s going to run out probably for – it could run up for a couple of years if our last foray into this gives any indication.

Okay. And regardless CRA dispute, you’ve outlined the court process going to trial and your timing around expected decision. But, is it possible that you could come to a out-of-court settlement, like you did with the IRS or just right now given the procedure the CRA, you just have to go through this process with the court.

Fai – Fai it’s possible at any time to come to a settlement. Right now, we’re in as I see the final throes of the court case, and the lawyers are going to make their final arguments in mid-September, and then we’ll wait for a decision from the judge, but I mean that is a possibility at any time.

Okay. Thank you.

Thank you.

The next question is from Chelsea Laskowski of MBC Radio. Please go ahead.

Hi, there. You can hear me, all right, I assume.

Yeah, I can you hear you, Chelsea. No problem.

Okay. Perfect. So I wanted to touch on the summer shutdown that’s taking place at McArthur and I know it is one of the – it is the biggest operation, so far is there anything that the company feels it’s learned from having such a large scale shutdown at such an important operation?

Well, Chelsea, I would have to say it’s gone exceptionally well for us. It’s something we haven’t tried recently and we go into things like that a bit tentative, because there is a lot of organization that has going to it, it’s gone quite well. Now we’ll see, we – there often will be starting up again in the fall. We’ll see how that goes. We hope it will go very smoothly and so we’ve got the vacation shutdown for one month and then there is a maintenance shutdown for about two weeks, so right now it’s going very smoothly and hopefully, we can come out of it at the end of the summer just as smoothly.

And is there anything that you would improve in the future just from what you’ve seen so far?

Not that I can think of it, looking at Brian Reilly, but it’s gone very well. I was just up there last week, very quiet on the site. We’ve got a skeleton crew as we call it, just looking after things. The weather has been very good up there and so we’re hoping people get some good vacation and good rest. They’re working hard because we’re going to need them to work hard when they come back in August.

All right. Perfect. Thanks.

Thank you.

The next question is from Jim Ostroff of Platts. Please go ahead.

Yes, hi Tim. It’s Jim Ostroff here, two very quick things. When did McArthur shut and the other is, I should say you previously had mentioned that Cameco was seeking buyers for the U.S. properties, is there anything more you can provide about that?

So, Jim the mines and it’s both Key Lake and McArthur that went down, it was both it was around the 1st of July, we kind of picked the month of July as the vacation shut and it might not have been that day, dependent on when people shifts ended so that’s when it was. With respect to the U.S. assets, I don’t have anything new to report on that. We were looking at whether there was any interest out there, we’ve had some but nothing new to report on that Jim.

Just very quickly with respect to Key Lake and McArthur, if all goes as planned, you expect them to begin to resume operation about when?

Probably mid August, we’ve got about four-week vacation shutdown period.

Right.

And then, there is a maintenance shutdown as well where they do the maintenance, so I think Key Lake, if I remember correctly, Key Lake is August 24 and McArthur is a few days about August 14, a few days earlier, so that’s when we’re expecting that to happen.

Thank you very much.

Thanks, Jim.

[Operator Instructions] The next question comes from Andrew Wong with RBC Capital Markets. Please go ahead.

Hey, guys, I just had a follow-up, actually around the CapEx, could you provide a little bit more details on the lower CapEx guidance for the year and how does that effect the guidance that you guys have out there for future years? Thanks.

Hi, Andrew. It’s Tim. I think we’re down by about CAD 20 million for this year, I’d have to look over to Grant or Brian. I think it’s just, we looked at our CapEx numbers and Brian do you have the details, go ahead.

So the actual – that from 2016 was $270 million, we reduced that in the 2017 plan to CAD 190 million and after further review over the past six months we’re projecting a CAD 175 million. So that’s just – it’s a reflection of our team, looking at all costs across the organization and we think we can continue to run the business with capital expenditures of CAD 175 million.

Okay. Because I think from my recall looking at other like the annual reports and something, I think next year and the year after CapEx is around CAD 200 million, CAD 250 million, does that mean like maybe there is – there’s room towards the downside for that spending or like does that affect 2018, 2019 in anyway or maybe catch up I don’t know, sorry.

I could tell you Andrew, we’re always looking at as you see we tried it out some of the reductions across the sales production CapEx, everything is on the table, now just looking at for this year, I think we reduced for 2017, McArthur is down CAD 5 million, Cigar is down CAD 10 million, that gives you most of the those numbers. And going forward, is there potential, we’ll certainly be looking for it. I mean we’re looking at all of our CapEx to see whether we can stretch it out differ or not, preferably not spend. So, we’ll be looking hard at CapEx going forward.

Okay. Great. Thank you.

Thank you.

This concludes today’s question-and-answer session. I would now like to turn the conference back over to the presenters for closing remarks.

Well. Thank you very much, operator. And with that, I just want to say thanks to everybody, who was on the call today. We appreciate your interest and support. Just to let you know, we are working through this tough market and it’s tough and we are just trying to position the company to benefit from the future when we know additional uranium is going to be required. So thanks for joining us today. Have a nice day, and have a great summer. Thanks.

This concludes today’s conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.