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Jul 27, 2017

​Cameco settles U.S. tax dispute; CRA fight looms

Cameco

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Cameco Corp (CCO.TO), the world's second-largest uranium producer, said on Thursday it had settled a U.S. tax dispute for a fraction of the original claim, which may bode well for the company's multi-billion-dollar battle with the Canada Revenue Agency.

Cameco will pay the U.S. Internal Revenue Service US$122,000 for its 2009 through 2012 taxation years, compared with the US$122 million the IRS claimed Cameco underpaid.

The company's shares jumped 4.3 per cent to $13.09 in Toronto, touching a two-month high, as the settlement news helped investors look past the company reporting a wider-than-expected quarterly loss.

Cameco's dispute with tax authorities relates to its offshore marketing structure and transfer pricing. Cameco sells uranium to its marketing subsidiary in Switzerland, which re-sells it to buyers, incurring less tax than the company would through its Canadian office.

Cameco says it has a marketing subsidiary there because most of its customers are located outside Canada.

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Cameco's dispute with CRA could result in a $2.4 billion tax expense for past years, the company said on Thursday.

"It is tempting to conclude that this (IRS settlement) weakens the CRA's position," BMO analyst Edward Sterck said in a note.

CRA declined comment as the case is before the courts, spokesman Zoltan Csepregi said.

The global uranium industry is locked in a six-year slump, dating back to the 2011 tsunami that caused Japan to shutter all of its nuclear reactors. The world's uranium market is oversupplied, although some reactors in Japan have restarted.

Cameco reported a loss of $1.56 million in the second quarter, breaking even on a per share basis.

It had posted a loss a year earlier of $137.4 million, or 35 cents.

The latest quarter's results were hit by the loss of a contract with Tokyo Electric Power (Tepco), the operator of Japan's wrecked Fukushima nuclear plant.

The company said it was addressing low uranium prices by reducing supply and avoiding sales into a weak spot market.

Adjusted for one-time items, Cameco lost 11 cents per share, disappointing analysts who had expected, on average, a loss of 2 cents a share, according to Thomson Reuters I/B/E/S.

Revenue rose 1 per cent to $469.7 million.

The company's uranium sales rose 33 per cent to 6.1 million pounds, while its average realized uranium price fell 14.9 per cent to US$36.51 per pound.