International Minerals and Materials Industry

1. International Minerals and Materials Industry Trevor Thompson-Harry Gary Liang Katya Revenko Brian

2. Contents: • Industry Overview • Cameco • GoldCorp • Teck Cominco

3. Mining industry is very capital intensive -exploration expenditure - hard assets focus: machinery, drills, trucks Cyclical industry - dominated by fluctuations in prices of metals and minerals mined Canada is the world leader in mineral exploration -International Standards for Geophysical Instrumentation for Mineral Exploration are based on Canadian experience Commodity markets are extremely sensitive to economic growth Industry Structure

4. Industry Structure • Small number of senior companies -generate revenues from their mining assets to fund own exploration projects • Larger number of intermediate-sized mining companies - fund smaller exploration projects from revenues or from equity financing • Greater number of junior exploration companies -group that carries out most of the exploration -entirely dependent upon equity financing in the stock market

5. Junior companies perform most explorations => Explorations rely on juniors’ ability to raise capital

6. Mining Process Overview Open pit mining Underground mining • Technology vs labour intensity

7. Reclamation plans include many of the following concerns: drainage control preservation of top soil segregation of waste material erosion and sediment control solid waste disposal control of fugitive dust regrading, and restoration of waste and mine areas. Environmental and gov-t regulations Site reclamation in process

8. Current Cycle • Supercycle. • On the rise since 2002 • “fundamental break from the long-termdownward trend of the past few decades “

9. Production rises and commodities prices go up due to increased demand long lead time required to develop new mine supply BUT CAN IT KEEP UP WITH DEMAND? Material uses Demand form USA China India Long term trend here Supply and Demand

10. Consolidation acquisitions peaked in 2005 Allows to act on current demand immediately BUT: lack of new large-scale projects => pressure on global supply Costly new projects but future prospects, payoff periods long-term….. 2006- new peak in explorations cycle To acquire or to explore?

11. To acquire? Or to explore?

12. What contributes to revenue growth? • Commodity price increase (commodity boom began in 2003) • globalisation-led commodity supercycle • Acquisitions => Production increases & reserve increases

13. Commodity Price history

14. Uranium Sector • Uranium was discovered in 1789 by German chemist Martin Klaproth • About 14 per cent of the world's known uranium reserves are located in northern Saskatchewan where four mines produce about 30 per cent of the world's supply.

15. Health factors What influences price The nuclear industry is experiencing stable growth through capacity factor improvements, refurbishments, life extensions and, in Asia, aggressive new-build programs Nuclear power provides nearly 17% of the world’s total annual electricity generation The use of nuclear power is controversial because of the problem of storing radioactive waste for indefinite periods, the potential for possibly severe radioactive contamination by accident or sabotage, and the possibility that its use in some countries could lead to the proliferation of nuclear weapons. Uranium industry Specifics

16. Production info Secondary sources of supply consist of surplus US and Russian military materials, excess commercial inventory and recycled products. Major suppliers World supply(reserve) Global Uranium Production

18. Demand is projected to grow by 2.8 per cent annually to 2010 and double by 2020 Uses: Power generation, medical, nuclear weapons, food safety Growing demand for electricity and concern over greenhouse gas emissions are fuelling a rediscovery of nuclear as a clean, reliable and affordable source of baseload electricity. Substitutes Uranium Demand and Uses

19. 5-year Uranium price in USD/lb

20. Gold Industry • Gold • soft, lustrous yellow, malleable metal • Prices influences by… • World reserve • Canada 4th in the world after South Africa, USA, Australia

21. Supply Who uses Uses: Jewellery Investments as a currency reserve--usually stored in the form of gold bricks weighing 13 kg (35 troy lb). Gold Supply and Demand

22. GOLD PRICE Historically, the gold market has followed a strong seasonal cycle.  The old adage traders live by is “sell in May and walk away, buy in September and harvest by spring.”

23. Zinc A chemical element, Zn, atomic number 30, and atomic weight 65.38. Zinc is a malleable, ductile, gray metal. The most important uses of zinc are in its alloys and as a protective coating on other metals (galvanizing) Zinc ranks fourth in world metal consumption behind iron, aluminum and copper. Copper A chemical element, Cu, atomic number is 29, and its atomic weight is 63.546. Copper is a malleable, ductile, metal. -used in electrical applications, construction, transportation, consumer and general products Zinc & Copper

24. Zinc supply /warehouse stock 5-year Zinc price

25. World reserves Zinc consumption has grown dramatically over the past 50 years and continues to increase as world demand increases and as new uses for zinc are developed. China is the biggest copper user in the world and becoming the main driver of overall global copper usage. Demand for zinc & copper

26. 1-year Copper price in USD/lb

27. Coal provides 25% of global primary energy needs and generates 40% of the world’s electricity. over 66% of total global steel production is dependent on coal. Worldwide, coal is the most abundant of the fossil fuels, and its reserves are also the most widely distributed. Estimates of the world's total recoverable reserves of coal in 2002 were about 1,081 billion tons. At current production levels, proven coal reserves are estimated to last 155 years. Coal

28. Coal Supply & Demand

29. Recap on Industry • Cycle • Commodity prices • Demand expectations • Supply expectations • Growth opportunities • Volatility? BUT rewards

30. Cameco Corporation

31. Agenda • Business Analysis • Company Financial Analysis • Segment Performance Analysis • Fisher Analysis • Recommendation

32. Stock Today EPS: $1.20 P/E: 32.2 Annual Div: $0.16 Div Yield: 0.42 # of Shares: 352 million Market Cap: $13.6 billion Last price: $38.76 Day high: $38.82 Day low: $37.93 52-week high: $49.95 52-week low: $28.25 Listed: TSX (CCO-T) NYSE (CCO – N) Source: www.globeinvestor.com, retrieved on Nov. 13, 2006

33. Stock Price Movement (5 year weekly) Source: www.globeinvestor.com, retrieved on Nov. 13, 2006

34. Business Analysis

35. History Highlights • 1988 Cameco was created by the merger of two Crown corporations—Saskatchewan Mining Development Corporation and Eldorado Nuclear Limited. • 1991 Cameco shares began trading on the Toronto and Montreal stock exchanges. • 1998 Through acquisition, Cameco increased its reserves and resources and production levels by about 30%. • 2000 The McArthur River mine achieved commercial production and became the world's largest high-grade uranium mine. • 2002 Cameco increases its stake in Bruce Power to 31.6%. • 2004 Cameco creates Centerra Gold and consolidates gold assets.  • 2004 Cameco announces development of uranium mine at Inkai, Kazakhstan and at Cigar Lake in northern Saskatchewan. 

36. Company Snapshot • VISION “Cameco will be a dominant nuclear energy company producing uranium fuel and generating clean electricity.” Core Business: • Uranium • Fuel services • Nuclear electricity generation, and • Gold

37. Growth Strategy • Maintain our competitive advantage in uranium and conversion • Maximize growth in uranium markets • Continue vertical integration, and • Promote growth in the nuclear energy industry.

38. Uranium • World’s largest low-cost producer, 20% of world’s production in 2005 • Controlling ownership of the world’s largest high-grade reserve and low-lost operation in North Saskatchewan • Operate four mines in Canada and US, two underdevelopments in Canada and Central Asia

39. Fuel Service • Refining facilities at Blind River, Ont. • Refine uranium concentrates into UO3 • Conversion and fuel fabrication at Port Hope, Ont. • Change UO3 to UF6 or UO2 • Licensed capacity to produce 20% of the world’s requirements of UF6 • World’s only producer of natural UO2

40. Fuel Service (cont.) • Enter 10-year agreement with Springfields, UK in 2005 • Increase company’s UF6 convert capacity by 40% • Acquire Zircatec Precision Industries, Inc. in 2006 • Now covers all stages of the Candu nuclear fuel cycle

41. Nuclear Electricity Generation and Gold • Owns 31.6% interest in four B reactors in Bruce Power Limited Partnership (BPLP) • Net generation of 3200 Megawatts (net generation in Bruce Power is 4640 MW) • Supply 17% of Ontario’s electricity (Withdrew 31.6% interest in four A reactors in BPLP on Nov. 1, 2005) • Gold • 53% ownership of Centerra Gold, Inc.

42. Key Management • President and CEO Jerry Grandey • Appointed to be CEO in 2003 • Join Cameco as VP marketing and corporate development in 1993 • Practiced law in mining industry • Served in the US military for 2 years • COO Terry Rogers • Appointed to be COO in 2003 • 25 years experience in mining engineering and project and operation management • Extensive international experience including positions in the US, Indonesia, Germany and Kyrgyzstan

43. Uranium Production

44. Major Uranium Reserves- at Dec 31, 2005 production commences in 07,08

45. Uranium Reserves

46. Cigar Lake Water Inflow • On Monday, October 23, 2006 Cameco reported water inflow at Cigar Lake • Production will be delayed • Company’s supply ability in doubt • Share price dropped to $38 from $43 • During the fourth quarter, the value of the assets lost underground at Cigar Lake due to the water inflow will be estimated and this will be expensed in the fourth quarter.

47. Long-term Contracts and Price Sensitivity • Uranium • 60% reference spot price near delivery time vs. 40% at fixed prices adjusted for inflation • For deliveries in 2006, based on exchange rate of 1.22, a $1.00 (US) per pound change in the uranium spot price from $33.00 (US) per pound would change revenue by about $4 million (Cdn) and net earnings by $2 million (Cdn). • Conversion services • Primarily through long-term contracts • Majority fixed priced adjusted for inflation • Short-term not price sensitive • Long-term positively impacted by increasing prices

48. Long-term Contracts and Price Sensitivity (cont.) • Power Generation • BPLP has 13 TWh sold under fixed-price contracts for 2006. This would represent about 50% of Bruce B’s generation at its planned capacity factor • A $1.00 per MWh change in the spot price for electricity in Ontario would change Cameco’s after-tax earnings from BPLP by about $3 million. • Gold • For 2006, a $25.00 (US) per ounce change in the gold spot price would change Cameco revenue by about $21 million (Cdn), cash flow by about $20 million (Cdn) and net earnings by about $9 million (Cdn).

49. Foreign Exchange Rate Effect • Cameco sells most of its uranium and conversion services in US dollars while most are produced in Canada • For 2006, every one-cent change in the US to Canadian dollar exchange rate would change net earnings by about $4 million (Cdn).

50. Hedging Foreign Exchange Risk • Natural Hedge: • Purchase of uranium and conversion services in US dollars • Foreign Exchange Contracts • At December 31, 2005, we had foreign currency contracts of $1,112 million (US) • Average effective exchange rate of 1.25 (Cdn/US) • Exchange Rate on Nov 13, 2006 is 1.1374