DBRS Assigns A (low) Rating with Stable Trend to Cameco Corporation’s $500 Million New Debt Issue

DBRS has today assigned a rating of A (low) with a Stable trend to $500 million senior unsecured debentures (the Cameco New Notes) to be issued by Cameco Corporation (Cameco or the Company) following the pricing of the Cameco New Notes and the filing of a final prospectus supplement dated June 16, 2014, to the Company’s Short Form Base Shelf Prospectus dated May 29, 2012.

The Cameco New Notes will consist of $500 million aggregate principal amount of 4.19% senior unsecured debentures due June 24, 2024.

The Cameco New Notes will be direct, unsecured obligations of Cameco and will rank equally and rateably with one another and with all other present and future unsecured and unsubordinated indebtedness of Cameco, except to the extent prescribed by law.

In Canada, they will be offered and sold by way of a prospectus supplement to the Company’s Short Form Base Shelf Prospectus dated May 29, 2012, and will be issued under a trust indenture dated July 12, 1999, between Cameco and CIBC Mellon Trust Company (rated AA (low) by DBRS), as trustee, as supplemented by a supplemental trust indenture related to the Cameco New Notes. The Cameco New Notes issued in Canada and related trust indenture will be governed by and construed in accordance with the laws of the Province of Saskatchewan and the laws of Canada applicable therein.

The offering of the Cameco New Notes is expected to close on or about June 24, 2014, subject to customary closing conditions. Cameco intends to use the net proceeds of the issue to redeem its $300 million outstanding 4.70% senior unsecured debentures due September 16, 2015, and for general corporate purposes.

As noted in DBRS’s April 21, 2014, confirmation of Cameco’s ratings, Cameco’s business profile narrowed materially in early 2014 with the sale of its interests in nuclear electricity generator Bruce Power Limited Partnership (BPLP), which is expected to be partially offset by ongoing increases in primary uranium output. DBRS expects Cameco earnings before non-recurring items in 2014 to be lower than in 2013 due to the loss of earnings from BPLP, ongoing weak uranium markets and only partial benefit from the start-up of Cigar Lake. Over the longer term, DBRS expects the demand for primary uranium production will grow as secondary-market supplies are reduced, the number of operating reactors increases (mainly in China) and progress is made restarting idled Japanese reactors post-Fukushima, providing a positive outlook for players in the nuclear fuel cycle as a low-carbon alternative for electricity generation. Nonetheless, Cameco continues to face high operational risks related to Cigar Lake and other operations, as well as major income tax reassessments. Further significant operational or tax-related setbacks or a prolonged slump in the uranium market, could result in a downgrade of Cameco’s ratings.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodologies are Rating Companies in the Mining Industry (June 2011) and Rating Companies in the Industrial Products Industry (June 2013), which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.