CAMECO CORP — Annual Report 2005

Jul 13, 2005

CORRESP 1 filename1.htm corresp PAGEBREAK

	O. KIM GOHEEN
July 11, 2005
	Senior Vice-President, and Chief Financial Officer
VIA FACSIMILE & COURIER (202) 772-9220	CAMECO CORPORATION
Ms. Jill Davis	Corporate Office
Branch Chief	2121 – 11th Street West
United States Securities and Exchange Commission	Saskatoon, Saskatchewan
Division of Corporation Finance	Canada S7M 1J3
Mail Stop 70-10
100 “F” Street, NE.
Washington, DC 20549	Tel: 306.956.6256
	Fax: 306.956.6312
Dear Ms. Davis:	www.cameco.com

Cameco Corporation Form 40-F for the Year Ended December 31, 2004 File number 001-14228 Supplemental Response dated May 27, 2005

I am writing to respond to your June 21, 2005 letter, where you provide a list of additional questions relating to the application of Cameco’s revenue recognition policy to its uranium business. Our responses to your questions are below. We have reproduced each question and have assigned it a number. Our responses were prepared in consultation with KPMG LLP, Cameco’s external auditors.

As requested in SEC Question 15, attached as Exhibits A, B, and C are sample contracts for each type of revenue transaction described in our revenue recognition policy. Each of these contracts is representative of its respective type of uranium sale arrangement. To comply with Cameco’s confidentiality commitments to its customers, any information related to the customers who signed these contracts has been redacted. In addition, pursuant to the SEC’s Rule 83, confidential treatment is being requested of the entire contracts, which have been redacted from the EDGAR filing. In our responses below, we refer to the provisions of these sample contracts to assist you to understand our business. These sample contracts are:

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| 1) | Exhibit A is a uranium concentrates purchase agreement that was signed in 2004. Uranium
concentrates is also called yellowcake. This is an example of the first type of uranium sale
arrangement in our business, where Cameco sells and delivers yellowcake to the customer.
From now on in this letter, I will refer to this contract as a “Concentrates Purchase
Agreement.” |
| --- | --- |
| 2) | Exhibit B is a UF 6 Conversion Services Agreement that was signed in 2004. This is
a toll conversion contract, representing an example of the second type of uranium sale
arrangement in our business, where Cameco toll converts customer-owned yellowcake into
UF 6 and delivers the UF 6 to the customer. From now on in this letter, I
will refer to this contract as a “Conversion Services Agreement”. |
| 3) | Exhibit C is a UF 6 Supply Agreement that was signed in 2004. This represents the
third type of uranium sale arrangement in our business, where Cameco converts Cameco-owned
yellowcake into UF 6 and delivers the UF 6 to the customer. From now on in
this letter, I will refer to this contract as a “UF 6 Supply Agreement”. |

Form 40-F for the Year Ended December 31, 2004

2004 Consolidated Financial Statements

Revenue Recognition, Page 40

SEC Question No. 1

Tell us whether there is provisional pricing in yellowcake sales. Explain to us what the “firm” price is based upon, and whether it is based upon the quantity of yellowcake processed or whether it considers the quality of and quantity of converted uranium produced.

Cameco Response

There is no provisional pricing in yellowcake sales. For yellowcake sales, the price is firm in that:

| • | The price per pound of yellowcake is fixed by either being
specified exactly in the contract or derived by a uranium spot
price related formula specified in the contract (see section 3.01
of the Concentrates Purchase Agreement and our response to
question 2 for more information on uranium spot related pricing in
our yellowcake sales contracts). |
| --- | --- |
| • | There are no adjustment clauses in our yellowcake sale contracts
to adjust the price per pound, after invoicing, based upon
quantity and quality of yellowcake sold to the customer. |

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| • | The amount payable by the customer equals the product of the number of pounds of yellowcake
(in other words quantity) book transferred into the customer’s account and the price per
pound provided in the contract. (See sections 3.02 and 5.01 of the Concentrates Purchase
Agreement.) |
| --- | --- |
| • | The quality of yellowcake is not a factor in determining the
price. Cameco warrants to its customer all yellowcake supplied
conforms to stipulated quality specifications. (See section
2. 03(b) of the Concentrates Purchase Agreement as well as our
response below to SEC Question No 8 which indicates we have not
received a warranty claim for non-conformance with specifications
over the past 10 years.) |
| • | The quantity of yellowcake to be delivered is determined by the
contract. The price charged to a customer does not vary based upon
quantities delivered to that customer. |

We also confirm there is no provisional pricing for toll conversion services and UF 6 supply arrangements.

SEC Question No. 2

Tell us whether there is an active market for uranium in yellowcake form.

Cameco Response

There is an active market for uranium supply in yellowcake form. This active market is reflected by the following:

• Independent third party agencies report the price of yellowcake sold in the “spot market” and contracted to be sold under long term contracts. Often these third party agency reports are used to determine the price of yellowcake sold by Cameco to a customer. For example, see the definition of Concentrates Price in section 3.01 of the Concentrates Purchase Agreement. More information on these third party agencies can be found on their websites ( www.uxc.com and www.uranium.info).

SEC Question No. 3

Confirm that you sell uranium in yellowcake form on a standalone basis without providing conversion services.

Cameco Response

Yes, we do. For an example, please see the Concentrates Purchase Agreement.

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SEC Question No. 4

Confirm that you perform conversion services on yellowcake of which you are not the supplier.

Cameco Response

Yes, we do. For an example, please see the Conversion Services Agreement.

SEC Question No. 5

Arrangements for which you are both the supplier and the converter, tell us what happens if you sell yellowcake and deliver it to your conversion facilities but conversion is never completed.

Cameco Response

In the case of a UF 6 supply agreement, where Cameco supplies yellowcake as well as performs conversion services, delivery of the yellowcake and conversion services to the customer occurs simultaneously (See UF 6 Supply Agreement).

In addition, there are situations where Cameco sells yellowcake to its customer under the first type of uranium sale arrangement (see the Concentrates Purchase Agreement) and also has a contract with the same customer to provide toll conversion services (see Conversion Services Agreement). In these situations, Cameco recognizes revenue separately under the individual contracts.

We have considered the possibility that these separate contracts could be viewed as multiple deliverable arrangements. In so doing, we have reviewed and considered the implications of applying the EITF 00-21, Revenue Arrangements with Multiple Deliverables, and concluded that the accounting would not change as the uranium and toll conversion components of the arrangement would be considered separate units of accounting. The first criterion for separation is met for both uranium and conversion because each is sold separately by other suppliers. The second criterion is also met, as there is objective evidence of the fair value for both uranium and conversion. The pricing in Cameco’s sales contracts is either based upon or refers to market values (i.e. spot prices) for uranium or conversion. The third criterion is met because there are no general rights of return.

Cameco has never experienced the situation described in your question. Under a uranium sales contract, if Cameco sold and book transferred yellowcake to a customer’s account at its facilities, Cameco’s experience is that the yellowcake will ultimately be toll converted by Cameco into UF 6 and book transferred to the customer’s account at an Enricher under a toll conversion contract.

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SEC Question No. 6

Explain the terms of the sale/transfer of converted uranium to the enricher or fuel fabricator.

Cameco Response

Cameco does not sell converted uranium (UF 6 ) to fuel fabricators. However, Cameco does sell a very small quantity of UF 6 to Enrichers. They are just another customer for Cameco’s UF 6 . Enrichers, in turn, will enrich the UF 6 bought from Cameco and sell this enriched product to their customers.

These UF 6 sales take place by way of the third type of uranium sale arrangement (see UF 6 Supply Agreement) and on the same terms as UF 6 sales to Cameco’s utility customers.

Also see our response to your question 7.

SEC Question No. 7

We note once the enricher analyzes the content of the converted uranium it receives from you, it is transferred from your account to the customer’s account (book transfer). Please explain how the book transfer occurs again from company’s account to customer’s account when you have stated that such transfer occurred at the beginning of the conversion process.

Cameco Response

Our response is based upon your question relating to a book transfer at an Enricher under the second type of uranium sale arrangement (see Conversion Services Agreement) and under the third type of uranium sale arrangement (see UF 6 Supply Agreement).

Physical Inventory Transfer

Cameco stores inventory of UF 6 at enrichment facilities in the United States and the EU. To maintain inventory at each Enricher:

| • | Cameco physically delivers UF 6 to an Enricher’s
facility. Based upon Cameco’s shipping documents, the Enricher
credits Cameco’s account with the volume of delivered
UF 6 . |
| --- | --- |
| • | The Enricher will analyze the delivered UF 6 to ensure
that it meets the UF 6 ASTM standard (an industry
standard specification.) and to confirm that Cameco’s declared
volume of delivered UF 6 is correct. Based upon its
analysis, if necessary, the Enricher will adjust Cameco’s account
and this adjustment will be reflected in Cameco’s carrying value
of its inventory. |
| • | Cameco maintains this transferred UF 6 as inventory
until it is sold and book transferred to the customer. |

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Sale / Book Transfer Process

For the second type of uranium sale arrangement (see Conversion Services Agreement) and the third type of uranium sale arrangement (see UF 6 Supply Agreement), the steps in the book transfer process at the Enricher is as follows:

| • | Cameco’s customer will request delivery of a certain volume of
UF 6 at the Enricher’s facility on a specified date.
This notice is given several months prior to the requested
delivery date. (See section 3.2 of the Conversion Services
Agreement. The sample UF 6 Supply Agreement is
different than most Cameco UF 6 supply arrangements in
that the delivery date at the Enricher is specified in the
agreement (see Section 2.02 of the UF 6 Supply
Agreement)). |
| --- | --- |
| • | Cameco will direct the Enricher to transfer the requested volume
of UF 6 by book transfer to the customer’s account at
the Enricher’s facility on a specified delivery date. Once this
book transfer occurs, this is the point at which Cameco invoices
the customer and records revenue. (See sections 3.6, 5.2 and 5.3
of the Conversion Services Agreement and sections 2.04 and 3.03 of
the UF 6 Supply Agreement). |

SEC Question No. 8

Tell us who bears the risk if uranium sold and transferred to the converter does not meet the minimum operating specifications, or if the converted uranium transferred to the enricher does not meet the UF 6 ASTM standard.

Cameco Response

In both cases, Cameco bears this risk, as it provides a contractual warranty that the product supplied will conform to the specifications. (See section 2.03(b) of the Concentrates Purchase Agreement; see section 3.4(c) of the Conversion Services Agreement; and see section of 2.05 (b) of the UF 6 Supply Agreement).

Cameco has examined its past 10 years of uranium sales activity and confirms there has not been a warranty claim against it over that period for non-conformance with specifications.

SEC Question No. 9

We note you refer to a fixed schedule for delivery in the contracts. Tell us if you are referring to the date of book transfer to the customer’s account prior to conversion or prior to enrichment, or the date of physical delivery of uranium in its final form for which you are responsible to the enricher, fuel fabricator or the customer.

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Cameco Response

The fixed schedule for the delivery in the contracts refers to the date for delivery to the customer by book transfer. Under a yellowcake sales contract, the book transfer of yellowcake takes place prior to conversion. Under a toll conversion services contract and a UF 6 supply contract, book transfer of UF 6 takes place prior to enrichment.

Cameco physically delivers yellowcake to a converter and converted uranium to an enricher. Based Cameco’s shipping documents, each facility credits Cameco’s account with the volume of delivered product. This physical delivery of product, in the final form for which Cameco is responsible, takes place before a sale (and book transfer) to a customer and enables Cameco to maintain an inventory of product and subsequently make the book transfer to the customer.

Below are details on how this fixed schedule for the date of delivery is determined under each form of uranium sale arrangement, referring to each of sample contracts sent to you.

Under the sample Concentrates Purchase Agreement (first type of uranium sale arrangement):

| • | the customer has committed to take two deliveries of yellowcake
(see section 2.01 and the definitions of Contract Quantity,
Delivery Quantity 1, Delivery Quantity 2, Delivery Date, Delivery
Date 1 and Delivery Date 2 contained in section 1.01 of the
Concentrates Purchase Agreement); and |
| --- | --- |
| • | the date Cameco completes the book transfer from its account at
the Converter to the customer’s account is the date of delivery
(see section 5.01 of the Concentrates Purchase Agreement). This is
the point that Cameco invoices the customer and records revenue. (See section 3.02 of the Concentrates Purchase Agreement.) |

Under the sample Conversion Services Agreement (the second type of uranium sale arrangement):

| • | the customer commits to take delivery of an annual quantity of
conversion services (see section 3.3 of the Conversion Services
Agreement); |
| --- | --- |
| • | the customer gives a notice to fix a delivery date to take
delivery of a quantity of UF 6 by book transfer at a
location its selects (see section 3.2 of the Conversion Services
Agreement); |

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| • | the customer then is required to deliver to Cameco a sufficient quantity of yellowcake for
conversion in order for Cameco to complete the conversion process and deliver the requested
quantity of UF 6 . (See section 3.2, the last sentence of section 2.2 (b) and the
definitions of Accepted Concentrates and Preparation Period in section 1.1 of the Conversion
Services Agreement.) All conversion contracts are the same in this regard, whether the
yellowcake was purchased from Cameco or another supplier; and |
| --- | --- |
| • | the date Cameco completes the book transfer requested in the customer’s notice is the
point that Cameco invoices the customer and records revenue. (See sections 3.6 and 5.2 of
the Conversion Services Agreement.) |

Under the sample UF 6 Supply Agreement (the third type of uranium sale arrangement- delivery of converted uranium in the form of UF 6 ):

| • | the customer commits to take delivery of a quantity of
UF 6 (see Section 2.02 of the UF 6 Supply
Agreement); |
| --- | --- |
| • | the delivery date at the Enricher is specified (see 2.02 of the
UF 6 Supply Agreement)); and |
| • | the date Cameco completes the book transfer at the Enricher to the
customer’s account is the point that Cameco invoices the customer
and records revenue. (See sections 2.02 and 3.03 of the
UF 6 Supply Agreement.) |

In each case, Cameco will have ensured that the inventory of product is physically on hand at the delivery site specified in the contract prior to the sale and book transfer taking place.

SEC Question No. 10

Tell us how the customer is bearing the risk during the conversion process as to inventory risk of loss or diminution, price risk, quality and quantity risk, etc.

Cameco Response

Our response is based on your seeking clarification of the customer’s risk associated with the toll conversion (the second type of uranium sale arrangement) by Cameco of the customer’s yellowcake into UF 6 . In this process, the customer’s risk is as follows:

• When you refer to inventory risk of loss and quantity risk, we assume you are referring to risk of damage to the yellowcake, which is to be converted, and the resulting converted uranium. In both cases, while either good is in Cameco’s possession, Cameco, not the customer, assumes this risk, for which it carries insurance. (See sections 3. 12(l) , 7.1 and 7.2 of the Conversion Services Agreement.) When the converted uranium is physically delivered into the possession of the Enricher, the Enricher assumes this risk.

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| • | As part of the conversion process, a small percentage of the
customer’s yellowcake is not recovered and this is a processing
loss which the customer accepts. This is standard in the industry.
(In the Conversion Services Agreement, this defined in section 1.1
as the “UF 6 Yield” and this term is used in the first
sentence of Section 2.2 (b).) |
| --- | --- |
| • | There is no price risk for the yellowcake which is to be
converted. The customer has already paid for the yellowcake. |
| • | There is no price risk for toll conversion services once the
customer has taken delivery of the converted uranium. The pricing
mechanism under toll conversion agreements fixes the price at the
date of delivery. (See sections 4.2, 5.1, and 5.2 of the
Conversion Services Agreement). |
| • | The customer does not bear quality risk for the converted uranium.
(See section 3. 4(c) of the Conversion Services Agreement and our
response to your question 8.) |
| • | The customer, as owner of the yellowcake and purchaser of the
conversion services, bears the economic risk for loss in market
value of the products if it elects to subsequently sell the
converted uranium. |

SEC Question No. 11

Explain to us how product purchased by a customer is not used to fill other orders if it is not physically separated.

Cameco Response

Due to the nature of yellowcake and converted uranium (yellowcake is stored in drums and converted uranium is stored in specialized containers) which is fungible, industry participants do not physically segregate products owned or purchased by the customer and instead they are commingled with their own inventory of these products. This is recognized by Cameco’s customers. (See sections 2.8 and 3.7(k) of the Conversion Services Agreement.)

As specified in note 3 to Cameco’s 2004 audited financial statements, Cameco carries an inventory of uranium concentrate (yellowcake) valued in excess of $300 million (Canadian) and conversion services valued in excess of $36 million (Canadian).

This significant inventory position is intended to ensure that Cameco can meet its delivery obligations if a production interruption occurs at its uranium mining or uranium conversion facilities. This inventory position represents Cameco-owned product and does not include customer-owned product stored by Cameco. Cameco does not drawdown upon customer-owned product to make a delivery.

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SEC Question No. 12

Tell us how long the process takes from yellowcake sale to when it is book transferred to a customer’s account by the converter, how long conversion takes, and how long until the enricher determines that the converted uranium meets the ASTM standard.

Cameco Response

As described in our response to questions 7 and 8, the customer only receives yellowcake that meets contract specifications and converted uranium that meets the ASTM standard. There is no time delay between when revenue is recognized and product quality has been confirmed.

SEC Question No. 13

We note you have three types of uranium sale arrangements: 1) uranium supply, 2) toll conversion services and 3) conversion supply (a combination of uranium supply and toll conversion services). Please provide a separate SAB 104 analysis for each arrangement, and clarify when revenue is recognized for each type of arrangement.

Cameco Response

Please see our response that is attached as table 13.1

SEC Question No. 14

When you have contracted to provide bundled supply and conversion services, tell us if this is written as one or more contracts.

Cameco Response

When Cameco contracts to provide the third form of uranium supply (Cameco supplied uranium that is converted into UF 6 ), this is written as one contract. The UF 6 Supply Agreement is an example of such a contract.

Also please see our discussion in question 5 where uranium supply and conversion services are provided to a customer through two contracts.

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SEC Question No. 15

Provide us with a sample copy of a contract for each type of revenue transaction described in your revenue recognition policy.

Cameco Response

As noted above, attached to this letter are the Concentrates Purchase Agreement, the Conversion Services Agreement, and the UF 6 Supply Agreement.

Yours truly,

“O. Kim Goheen”

O. Kim Goheen

c:
Gerald W. Grandey, President and Chief Executive Officer, Cameco Corporation
KMPG LLP

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Exhibit A

Uranium Concentrates Purchase Agreement [Redacted]

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Exhibit B

UF 6 Conversion Services Agreement [Redacted]

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Exhibit C

UF 6 Supply Agreement [Redacted]

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TABLE 13.1

SAB 104	Uranium	Toll	Conversion Supply
Criteria	Supply	Conversion	(Converted Uranium)
1. Persuasive
evidence of an
arrangement exists	• Uranium is
sold to customers
under duly
authorized
contracts which
contain
descriptions of the
specific terms of
the arrangement.	• Conversion
services are sold
to customers under
duly authorized
contracts which
contain
descriptions of the
specific terms of
the arrangement.	• Converted
uranium is sold to customers under
duly authorized
contracts which
contain
descriptions of the
specific terms of
the arrangement.
	• The terms
of the contracts
are explicit as to
the nature of the
product to be
provided, timing of
delivery, price and
payment terms.	• The terms
of the contracts
are explicit as to
the nature of the
product to be
provided, timing of
delivery, price and
payment terms.	• The terms
of the contracts are explicit as to
the nature of the
product or service
to be provided,
timing of delivery,
price and payment
terms.
2. Delivery has
occurred or
services have been
rendered	• Nuclear
fuel products are
required to be
stored at a
licensed facility
until being shipped
to another licensed
facility for
further processing
(such as
conversion,
enrichment or
fabrication).	• Nuclear
fuel products are
required to be
stored at a
licensed facility
until being shipped
to another licensed
facility for
further processing
(such as
conversion,
enrichment or
fabrication).	• Nuclear
fuel products are
required to be stored at a
licensed facility
until being shipped
to another licensed
facility for
further processing
(such as
conversion,
enrichment or
fabrication).
	• Cameco
physically delivers
uranium to
conversion
facilities in
advance of sales to
customers.
Inventory is held
in Cameco’s account
at these
facilities.	• Cameco
physically delivers
converted UF 6 to
enrichment
facilities in
advance of sales to
customers.
Inventory is held
in Cameco’s account
at these
facilities.	• Cameco
physically delivers
converted UF 6 to
enrichment
facilities in
advance of sales to
customers.
Inventory is held
in Cameco’s account
at these
facilities.
	• In the
uranium business,
at the time of
sale, delivery of
product is
typically effected
via “book transfer”
at a conversion
facility from
Cameco’s account to
the customer’s
account.	• In the
conversion services
business, at the
time of sale,
delivery is
typically effected
via “book transfer”
at an enrichment
facility from
Cameco’s account to
the customer’s
account.	• In the uranium
and conversion
services businesses
at the time of
sale, delivery is
typically effected
via “book transfer”
at an enrichment
facility from
Cameco’s account to
the customer’s
account.
	• Given that
the customer does
not take physical
possession until
further processing
occurs, Cameco
considers other
factors in
assessing whether
or not this
criterion has been
met. These factors
are described in
items 2a) through
2h).	• Given that
the customer does
not take physical
possession until
further processing
occurs, Cameco
considers other
factors in
assessing whether
or not this
criterion has been
met. These factors
are described in
items 2a) through
2h).	• Given that
the customer does
not take physical
possession until
further processing
occurs, Cameco
considers other
factors in
assessing whether
or not this
criterion has been
met. These factors
are described in
items 2a) through
2h).

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SAB 104	Uranium	Toll	Conversion Supply
Criteria	Supply	Conversion	(Converted Uranium)
2 a) Risks and
rewards of
ownership	• Legal title
is transferred to
the buyer.	• Legal title
is transferred to
the buyer.	• Legal title
is transferred to
the buyer.
transferred to the
buyer.	• Price is
fixed and the buyer
is obligated to
pay.	• Price is
fixed and the buyer
is obligated to
pay.	• Price is
fixed and the buyer
is obligated to
pay.
	• The buyer
bears all risks
associated with a
decline in the
market value of any
goods or services
provided.	• The buyer
bears all risks
associated with a
decline in the
market value of any
goods or services
provided.	• The buyer
bears all risks
associated with a
decline in the
market value of any
goods or services
provided.
	• Any storage
risk (product risk
of the buyer)
retained by Cameco
is insured.	• Any storage
risk (product risk
of the buyer)
retained by Cameco
is insured.	• Any storage
risk (product risk
of the buyer)
retained by Cameco
is insured.
	• Contracts
include buyer’s
indemnification to
Cameco for any
third party claims
relating to the
uranium sold to the
buyer.	• Contracts
include buyer’s
indemnification to
Cameco for any
third party claims
relating to the
conversion sold to
the buyer.	• Contracts
include buyer’s
indemnification to
Cameco for any
third party claims
relating to the
converted uranium
sold to the buyer.
2 b) Customer has
made a firm
commitment to	• Supported
by legally binding
contracts signed in
advance of the sale
occurring.	• Supported
by legally binding
contracts signed in
advance of the sale
occurring.	• Supported
by legally binding
contracts signed in
advance of the sale
occurring.
purchase the
goods.	• Customer
will remit payment
on normal
commercial terms
(i.e. 30 days).	• Customer
will remit payment
on normal
commercial terms
(i.e. 30 days).	• Customer
will remit payment
on normal
commercial terms
(i.e. 30 days).
2 c) The buyer
requests that the
transaction be on a
bill and hold
basis .	• The terms
of the various
contracts dictate
when the book
transfer occurs.
The buyer
negotiates such
terms on the basis
of its business
requirements.	• The terms
of the various
contracts dictate
when the book
transfer occurs.
The buyer
negotiates such
terms on the basis
of its business
requirements.	• The terms
of the various
contracts dictate
when the book
transfer occurs.
The buyer
negotiates such
terms on the basis
of its business
requirements.

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SAB 104	Uranium	Toll	Conversion Supply
Criteria	Supply	Conversion	(Converted Uranium)
2 d) There
must be a fixed
schedule for
delivery of the goods.	• The date
for delivery is
determined in
accordance with the
terms of the
contract.	• The date
for delivery is
determined in
accordance with the
terms of the
contract.	• The date
for delivery is
determined in
accordance with the
terms of the
contract.
	• Periods of
storage are normal
in the industry.	• Periods of
storage are normal
in the industry.	• Periods of
storage are normal
in the industry.
	• Storage is
not provided for an
indefinite period
of time.	• Storage is
not provided for an
indefinite period
of time.	• Storage is
not provided for an
indefinite period
of time.
	• The
customer may be
charged a fee for
storage that is
outside the
industry norm.	• The
customer may be
charged a fee for
storage that is
outside the
industry norm.	• The
customer may be
charged a fee for
storage that is
outside the
industry norm.
2 e) The seller
retains no
significant
performance
obligations such
that the earnings
process is not
complete.	• At the time
of book transfer,
Cameco has
fulfilled all of
its
responsibilities
under the
contracted
arrangement.	• At the time
of book transfer,
Cameco has
fulfilled all of
its
responsibilities
under the
contracted
arrangement.	• At the time
of book transfer,
Cameco has
fulfilled all of
its
responsibilities
under the
contracted
arrangement.

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SAB 104	Uranium	Toll	Conversion Supply
Criteria	Supply	Conversion	(Converted Uranium)
2 f) The
ordered goods must
have been
segregated from the
seller’s	• Uranium is
segregated
logically through
book transfer.	• Conversion
services are
segregated
logically through
book transfer.	• Uranium and
conversion services
are segregated
logically.
inventory
and not be subject
to being used to
fill other orders.	• Uranium is
fungible and
segregation is not
a practice followed
in the industry. • The product
purchased by a
customer is not
subject to being
used to fill orders
for other
customers.	• UF 6 is
fungible and
segregation is not
a practice followed
in the industry. The
product purchased
by a customer is
not subject to
being used to fill
orders for other
customers.	• UF 6 is
fungible and
segregation is not
a practice followed
in the industry. The
product purchased
by a customer is
not subject to
being used to fill
orders for other
customers.
	• The
physical movement
of nuclear fuel
products is
monitored by the
International
Atomic Energy
Agency (IAEA).
Guidelines
established by the
IAEA are intended
to ensure that
nuclear materials
are used only for
peaceful purposes.
Thus, physical
movement is tightly
controlled and very
precise inventory
records are
maintained. The
IAEA conducts
regular audits of
the facilities that
store nuclear
materials to ensure
compliance.	• The
physical movement
of nuclear fuel
products is
monitored by the
International
Atomic Energy
Agency (IAEA). The
guidelines
established by the
IAEA are intended
to ensure that
nuclear materials
are used only for
peaceful purposes.
Thus, physical
movement is tightly
controlled and very
precise inventory
records are
maintained. The
IAEA conducts
regular audits of
the facilities that
store nuclear
materials to ensure
compliance.	• The
physical movement
of nuclear fuel
products is
monitored by the
International
Atomic Energy
Agency (IAEA). The
guidelines
established by the
IAEA are intended
to ensure that
nuclear materials
are used only for
peaceful purposes.
Thus, physical
movement is tightly
controlled and very
precise inventory
records are
maintained. The
IAEA conducts
regular audits of
the facilities that
store nuclear
materials to ensure
compliance.

PAGEBREAK

SAB 104	Uranium	Toll	Conversion Supply
Criteria	Supply	Conversion	(Converted Uranium)
2 g) The
product must be
ready for shipment.	• The product
is stored in
shipping containers
and is ready for
shipment at any
time.	• The product
is stored in
shipping containers
and is ready for
shipment at any
time.	• The product
is stored in
shipping containers
and is ready for
shipment at any
time.
2
h) Other factors.	• Cameco
extends normal
credit terms to its
customers and does
not make
exceptions.	• Cameco
extends normal
credit terms to its
customers and does
not make
exceptions.	• Cameco
extends normal
credit terms to its
customers and does
not make
exceptions.
3. Selling price is
fixed or
determinable.	• The selling
price is included
in the contract
with the customer.	• The selling
price is included
in the contract
with the customer.	• The selling
price is included
in the contract
with the customer.
	• Pricing terms
may be either
base-escalated or
market-related. In
either case, the
price is fixed on
the date the book
transfer occurs.	• Pricing
terms may be either
base-escalated or
market-related. In
either case, the
price is fixed on
the date the book
transfer occurs.	• Pricing
terms may be either
base-escalated or
market-related. In
either case, the
price is fixed on
the date the book
transfer occurs.

PAGEBREAK

SAB 104	Uranium	Toll	Conversion Supply
Criteria	Supply	Conversion	(Converted Uranium)
Timing of
Revenue Recognition	• As a supplier
of uranium, Cameco
physically delivers
uranium to a
conversion
facility. The
converter credits
Cameco’s account
for the quantity of
uranium received.	• As a toll
converter, Cameco
converts
customer-owned
uranium to
UF 6 and
physically delivers
that UF 6 to an enrichment
facility. The
enricher credits
Cameco’s account
for the quantity
received.	• As a provider
of bundled uranium
and conversion
services (converted
uranium), Cameco
converts its own
uranium to
UF 6 and
subsequently
delivers the
product to an
enrichment
facility. The
enricher credits
Cameco’s account
for the quantity
received.
	• Upon receiving
instructions from
Cameco, the
converter will
transfer title to
the uranium to
Cameco’s customer’s
account at the
conversion
facility. This is
the point in time
at which Cameco
invoices the
customer for the
uranium and records
revenue on the
sale.	• Upon receiving
instructions from
Cameco, the
enricher will
transfer title of
the conversion to
Cameco’s customer’s
account at the
enrichment
facility. This is
the point in time
at which Cameco
invoices the
customer for the
conversion service
and records revenue
on the sale.	• Upon receiving
instructions from
Cameco, the
enricher will
transfer title of
the converted
material (uranium
and conversion) to
Cameco’s customer’s
account at the
enrichment
facility. This is
the point in time
at which Cameco
invoices the
customer for the
combined uranium
and conversion
service and records
revenue on the
sale.