Cameco Corporation CCO Waiting and Watching

admin — Tue, 19 Jan 2010 18:20:32 +0000

Cameco Corporation (CCO) – $31.05 – Waiting and Watching
Outperform, Above Average Risk, Price Target: $35.00
RBC CM is resuming coverage following the completion of the disposal of all of Cameco’s interest in Centerra Gold. On December 30, 2009, Cameco completed the sale of 88,618,472 shares of Centerra Gold at $10.25 per share for net proceeds of $871 million. It also transferred an additional 25,300,000 shares to the Kyrgyz government, completing the disposal of the company’s entire interest in Centerra. Following the Centerra sale RBC CM estimates that Cameco had approximately $1.4 billion in cash and $1.2 billion in debt on its balance sheet. RBC CM estimates the company could finish the year with approximately $1.7 billion in cash on hand. At the beginning of December 2009 Cameco increased its regular dividend from $0.24 to $0.28 per share. The increased dividend can be easily funded from forecast operating cash flow. Cameco has indicated that acquisitions are a key part of its growth strategy, which is predominantly focused on uranium production. With its large cash balance and under levered balance sheet, RBC CM believes that Cameco has substantial financial capacity for acquisitons. RBC CM has revised its estimates to reflect the sale of Centerra. In the near term there is uncertainty concerning the net effects of any possible acquisition. However, RBC CM believes the shares offer upside potential from current levels based on what it believes will be a rising uranium price environment over the next 12 to 24 months and the benefits of the company’s sales contract portfolios.

TSX Commentary » Cameco Corporation

Cameco Corporation CCO Waiting and Watching