Cameco signed a non-binding memorandum of understanding in early October 2011 with its joint venture partners to mill all ore from its Cigar Lake project, currently under development in northern Saskatchewan, at the McClean Lake mill. The Cigar Lake project is 50%-owned and operated by Cameco. Its joint venture partners are Areva Resources Canada (37%), Idemitsu Resources Canada (8%) and Tepco Resources (5%). The McClean Lake mill is owned by the McClean Lake joint venture, which is owned by Areva (70%), Denison Mines (22.5%) and OURD (Canada) (7.5%) and is operated by Areva.

Binding agreements with the owners of the Cigar Lake project and McClean Lake mill were required to proceed with the new milling arrangements. Cameco anticipated the agreements would be concluded before November 30, 2011. Under current toll-milling agreements, both the McClean Lake mill and Cameco’s Rabbit Lake mill would process uranium from Cigar Lake. Under the new arrangement, the McClean Lake mill would process and package 100% of Cigar Lake uranium. Cameco’s Rabbit Lake mill would continue to process ore mined on the site and would have the flexibility to process ore from other sources.

To reflect the impact of the new milling arrangement and other developments since its March 2010 Cigar Lake technical report, Cameco is planning to file an updated Cigar Lake technical report with, or prior to, its February 2012 annual information form. Significant Cigar Lake project developments since March 2010 include a decrease in the estimated average cash operating cost to about C$18.60/lb from C$23.14/lb, due primarily to the new milling arrangement, and a C$189-million increase in Cameco’s share of the total capital cost to C$1.1 billion, primarily as a result of the implementation of a surface freeze strategy, general cost escalation, costs to upgrade and expand the McClean Lake mill, and improvements in the mine plan. The planned production startup date for Cigar Lake remains mid-2013.

Construction of the underground Cigar Lake mine began in January 2005. Setbacks occurred in October 2006 and August 2008 due to separate water inflows into the mine. The sources of the inflows were identified and sealed, and dewatering was completed in February 2010.

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