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The Future is Nuclear 2005 ANNUAL REPORT Bridging the Gene Producing affordable, clean energy while achieving a sustainable balance between increasing electricity demand and environmental stewardship – this is the promise and potential of a future powered by nuclear energy. It’s why a new generation is opting for nuclear as a reliable and secure energy choice. Cameco is poised and ready to support the new generation. We are a company with the expertise and capacity to deliver the benefits of nuclear energy – starting right now. As the world’s largest uranium producer, Cameco already provides about 20% of global uranium production from the richest mines on the planet. We are also expanding our production by developing two new mines. The company is looking ration Gap to the long-term nuclear future, seeking new reserves OUR PROFILE through a global exploration program with emphasis Cameco, with its head office in in North America and Australia. In nuclear fuel Saskatoon, Saskatchewan, is the production, Cameco has 38% of the western world’s world’s largest uranium producer UF6 conversion capacity, and provides conversion as well as a significant supplier of services and fuel fabrication for Candu reactors. conversion services. The company’s Power production rounds out Cameco’s nuclear competitive position is based on its focus, with 1,000 MW of nuclear power in Ontario. controlling ownership of the world’s largest high-grade reserves and low- A new generation, attentive to the wisdom of cost operations. Cameco’s uranium scientists, environmentalists and consumers, products are used to generate clean understands the future is nuclear. Cameco knows electricity in nuclear power plants nuclear and is ready for that future. around the world, including Ontario The choice being made by a new generation where the company is a partner in North America’s largest nuclear makes Cameco the nuclear investment of choice. electricity generating facility. The company also explores for uranium in North America and Australia, while holding a majority interest in a mid-tier gold company. Cameco’s shares trade on the Toronto and New York stock exchanges. INSIDE Governance 02 Leadership 04 Objectives 10 Analysis 12 Reserves 59 Financial Information 66 Our future is clear. LETTER FROM THE CHAIR From Hong Kong to Toronto, nuclear energy brightens cities around the world. “ Cameco, through the solid and strategic efforts of the past, is well positioned to continue growing towards our vision to be a dominant nuclear energy company.” CHAIR VICTOR J. ZALESCHUK We at Cameco take corporate governance very seriously. Has our level of integrity and morality increased as a result of all the recent legislation and regulation concerning governance? I don’t believe so because it has always been our priority to operate at the highest levels. But, over the past several years we have formalized the policies and procedures required, and disseminated them throughout our entire organization to ensure there is a clear understanding of our intentions and expectations. Continual review and improvement of our policies and procedures ensure we remain on course to achieve our objectives. The culmination of these efforts places an added burden on our talented employees and on board members. We do, however, feel that these efforts are worthwhile and are good for Cameco’s business and bottom line. I am especially pleased by the board’s dedication to ensuring Cameco has outstanding leadership in its various levels of management, that succession planning is continually monitored, and that employees throughout the organization are motivated and rewarded to create shareholder value. The energy industry is in the midst of a renaissance and uranium is becoming a vital piece of the world’s future energy needs. Cameco, as the world’s largest uranium producer, has amassed an extraordinary reserve base and is ready to respond to the world’s need for safe, reliable and clean electricity. In 2007, the Cigar Lake mine will add another low-cost, high-grade source of uranium to Cameco’s already impressive production portfolio. CAMECO ANNUAL REPORT 2005 The market has demonstrated its confi- leadership skills to Cameco. We look dence in our ability to deliver results as Monthly Share Price* forward to working with Mr. Clappison shown by our share performance over the for many years to come. past year. Our continuing belief that we (TSX $/share) are on track to grow our business led us to Each new year brings new business 40 the decision to split the stock and increase challenges, as well as the desire to the dividend on February 17, 2006. outperform the previous year. Cameco, through the solid and strategic efforts of 20 I would also like to take this the past, is well positioned to continue opportunity to welcome our new board growing towards our vision to be a member, Mr. John Clappison, who 0 dominant nuclear energy company. 03 recently retired as managing partner of J F M A M J J A S O N D PricewaterhouseCoopers’ Toronto office. Victor J. Zaleschuk > Cameco’s share price increased Chair Mr. Clappison brings a wealth of business 76% in 2005. and accounting experience, as well as MARCH 17, 2006 *Data reflects the stock split on February 17, 2006. Our Vision Cameco will be a dominant nuclear The key measures of our success are: by demonstrating our respect for energy company producing uranium a safe, healthy and rewarding individual dignity, creativity and fuel and generating clean electricity. workplace, a clean environment, cultural diversity. By being open supportive communities and and honest we achieve the strong Our Mission outstanding financial performance. relationships we seek. Our mission is to bring the multiple INTEGRITY benefits of nuclear energy to the world. Our Values Through personal and professional SAFETY AND ENVIRONMENT We are a global supplier of uranium integrity, we lead by example, earn fuel and a growing supplier of clean The safety of people and protection of trust, honour our commitments and electricity. the environment are the foundations conduct our business ethically. of our work. All of us share in the We deliver superior shareholder value responsibility of continually improving EXCELLENCE by combining our extraordinary assets, the safety of our workplace and the We pursue excellence in all that we do. exceptional employee expertise and quality of our environment. Through leadership, collaboration and unique industry knowledge to meet the innovation, we strive to achieve our PEOPLE world’s rising demand for clean, safe full potential and inspire others to and reliable energy. We value the contribution of every reach theirs. employee and we treat people fairly LETTER FROM THE CHAIR “ With the nuclear renaissance firmly Our future under way, the industry will build on the successes of the past year.” is nuclear. Cameco is at the forefront of a worldwide rebirth of nuclear energy. We’re leading the way, answering questions that demonstrate Cameco is poised to deliver the environmental, energy security and MESSAGE TO SHAREHOLDERS cost benefits nuclear power will provide. What were your successes and failures in 2005? This past year has been transformational for Cameco. The construction of two new, low-cost uranium mines, the utilization of excess capacity at our refining facility, the increase in conversion supply and the creation of value through a series of transactions has bolstered our foundation for the next wave of growth. We did this in pursuit of our vision to be a dominant nuclear energy company producing uranium fuel and generating clean electricity. Equally important, we adhered to our values and to our four measures of success: a safe, healthy and rewarding workplace, a clean environment, supportive communities and outstanding financial performance. During the year, Cameco met its uranium production targets, exceeded its refining objective in anticipation of supplying UO3 to Springfields, but fell short of its UF6 conversion targets by about 17%. The difficulties experienced in our Port Hope conversion facility were particularly vexing as they persisted in spite of vigorous efforts by our dedicated employees to overcome them. Sales for the year were slightly above plan and new uranium and conversion contracting exceeded expectations by a wide margin in response to very strong market demand. Contracts negotiated during the year captured rising prices and will help mitigate exposure to any future market weakness while preserving price upside. All of this transpired while maintaining our exemplary safety and health record – not an easy task when two major mine construction projects were under way. And, while there were no significant releases to the environment, as always, improving this performance is a major focus for 2006. What are your highest priorities? Cameco is extraordinarily well blessed with abundant geographically diverse reserves, low-cost operations, good customers and talented people. The first priority, then, is to enhance these assets, making sure that they are not taken for granted, while maximizing their potential. The best way I know to achieve this is by augmenting our leadership skills at all levels and by developing and nurturing the next generation of Cameco leaders. Every aspect of our daily effort to create value involves leadership, whether it be leading a team, being innovative or finding a new level of excellence. PRESIDENT AND CEO JERRY GRANDEY CAMECO ANNUAL REPORT 2005 Accordingly, we have defined the leadership characteristics Countries representing over one-half the world’s population we look for and promote, and we have embarked on a mission are now building new nuclear power plants, and several to implement them throughout the company. We will use others without the benefit of nuclear energy are planning for these characteristics to help us judge our individual and them. China and India are notable with their aggressive collective effectiveness and to guide our response to growth.