Project Summary

The Cigar Lake/Waterbury project includes the fully developed Cigar Lake mine, being a producing underground mining operation, located near Waterbury Lake in northern Saskatchewan, Canada approximately 660 km north of Saskatoon. Cameco has reported that the project is currently owned by a joint venture of four companies, being Cameco (50.025%), Orano Canada Inc. (37.1%), Idemitsu Canada Resources Ltd. (7.875%), and TEPCO Resources Inc. (5%).

As of December 31, 2020, Cameco disclosed estimated: (i) mineral reserves of 165.6 Mlbs of U3O8 at an average grade of 15.92% U3O8; and (ii) measured and indicated resources, exclusive of reserves, of 104.8 Mlbs at an average grade of 13.88% U3O8 and inferred resources of 22.8 Mlbs at an average grade of 5.55% U3O8, for the project.

The Cigar Lake deposit is a high-grade, unconformity-related uranium deposit with an average stated grade of 15.92% U3O8 for the above-estimated reserves. The mineralization occurs between 410 to 450 metres below surface with a strike length of approximately 1950 m. Cameco disclosed that the Cigar Lake mine produced 93.0 Mlbs pounds of U3O8 from 2014 through 2020. In Cameco’s management's discussion and analysis for the three and six months ended June 30, 2021, Cameco stated a total of 2.6 Mlbs of packaged production in the first two quarters of 2021. Totaling historical production and all current reserves and resources, it has an attributable endowment of 258.5 Mlbs of U3O8. This makes the Cigar Lake uranium mine the second largest, high-grade uranium mine in the world, extracting approximately 95.6 million pounds U3O8 since the start of production in 2014.

The project is permitted for a maximum of 18 Mlbs U3O8 of annual production. Ore is mined at Cigar Lake utilizing unique ground freezing from surface to mitigate risks of high-pressure ground water and increase geotechnical stability and vertical jet boring technology from underground. The ore is ground, thickened and blended into a slurry which is then shipped 69 km north to the McClean Lake mill for processing and production of calcined uranium ore concentrate. Cameco also disclosed that estimated operating costs for the mine are $15.98 per pound U3O8 based on operating and capital cost estimates for the estimated life of mine, stated in constant 2020 dollars and reflecting a forecast life of mine mill production of 163.1 Mlbs U3O8, including estimated milling costs. This would place Cigar Lake amongst the lowest cost uranium projects in the world.

Royalty Details

The Cigar Lake Royalty is a sliding scale 10% to 20% NPI on a 3.75% share of overall uranium production, derived from Orano’s current 37.1% production interest in the Waterbury Lake / Cigar Lake project lands. The royalty payor is Orano. The Cigar Lake Royalty does not apply to the entirety of the project lands. However, the Company believes that the Cigar Lake Royalty applies to substantially all areas of the project underlying the existing mine and areas underlying estimates of mineral reserve and mineral resource.

 The sliding scale royalty percentage for the Cigar Lake Royalty is based upon historical production and recoverable reserves of the combined Waterbury/Cigar Lake and Dawn Lake project lands, with the royalty rate having already achieved the maximum of 20% as the Cigar Lake mine has achieved such production and reserve threshold. The sliding royalty percentage will decrease to 10% after the combined production on both Waterbury/Cigar Lake and Dawn Lake projects reach a production hurdle of 200 Mlbs of U3O8 (Cameco has reported a total of 95.6 Mlbs production as at June 30, 2021). As a profit-based NPI interest, this royalty is calculated based upon generated revenue, with deductions for certain expenses and costs, which include cumulative expense accounts, including development costs. As such and given the significant amount of expenditures made in developing the existing operations at the Cigar Lake mine, the Cigar Lake Royalty will only generate revenue to the holder after these cumulative expenses are exhausted.

Historical Project Information

The original joint venture established over the Waterbury/Cigar Lake area in 1976 was the Keefe-Henday joint venture between Canadian Kelvin Resources Ltd. and Asamera Oil Corporation Ltd. The Keefe Lake Joint Venture was later divided into three separate project areas, the Dawn Lake, McArthur River, and Waterbury Lake project areas. The Cigar Lake uranium deposit was discovered in 1981 by surface exploration drilling. The deposit was subsequently delineated by surface drilling during the period 1982 to 1986, followed by several small campaigns of drilling for geotechnical and infill holes to 2007. Cameco disclosed that test mining was carried out between 1987 and 1992 and that the development of the Cigar Lake underground mine began in 2005, but development was delayed due to water inflows.

Under the Cigar Lake Joint Venture Agreement and related agreements, made effective January 1, 2002, the Mineral Lease and Mineral Claims were divided into the Cigar Lake lands, consisting of ML-5521 and claim S-106558, and the Waterbury Lake lands, consisting of the remaining claims. Cameco has been the operator for the Cigar Lake lands since 2002 and Orano is the operator of the Waterbury Lake lands and is also contract exploration operator of the remaining Cigar Lake lands.

From 2006 through 2008, the Cigar Lake project suffered several setbacks as a result of three water inflow incidents. The first occurred in 2006, resulting in the flooding of the then partially completed Shaft No. 2. The two subsequent incidents involved inflows in the mine workings connected to Shaft No. 1 and resulted in flooding of the mine workings. Re-entry into the main mine workings was achieved in 2010 and work to secure the mine was completed in 2011.

In 2011, agreements were signed by the Cigar Lake and McClean Lake joint venture participants to mill all Cigar Lake ore at the McClean Lake mill. The CNSC issued an eight-year operating licence for the operation in 2013 and that approval from the Saskatchewan Ministry of Environment (the "SMOE") was renewed in 2017 and expires in June 2023. Cameco disclosed that the McClean Lake mill started receiving Cigar Lake ore in March 2014 and produced its first drum of Cigar Lake yellowcake in October 2014, with commercial production declared in May 2015. The construction of an expanded McLean Lake mill facility was completed in 2016 to process and package all Cigar Lake ore and additional minor upgrades related to throughput optimization were completed in 2020.

In addition to the resources outlined above, the historical Tibia Lake showing has been outlined approximately 800 meters north of the Cigar Lake mine, though the deposit does not have any resources attributed to it as disclosed by Orano.

Recent Updates

In December 2020, Cameco announced that it had suspended operations at Cigar Lake due to impacts from COVID-19 on the operations workforce and stakeholder communities. Cameco announced on May 7th, 2021, that production at the Cigar Lake mine had resumed, with the first shipment of ore sent to the McClean Lake mill at the end of April. Between May 13th and May 18th, 2021, Cameco made a series of announcements of positive COVID tests at the Cigar Lake operation, citing that a total of five workers had tested positive at the site. Site-wide testing was announced on May 24th, identifying a total of nine individual that tested positive out of 294 tests. On May 28th, Cameco announced that a vaccination program had been initiated at site, and that a further three positive tests had been returned during routine testing. Cameco did not announce any impact to production at the site as a result of the outbreak, indicating that the site continued to operate safely.

Cameco announced on July 1, 2021, that the Cigar Lake site was evacuating all non-essential personnel due to an uncontrolled wildfire nearby. They further announced on July 2 that the fire had passed by without serious impact to the site facilities and on July 4 announced that personnel were returning to the site with regular operations of the site set to resume over the following days.

In Cameco’s management and discussion analysis for the three and six months ended June 30, 2021, Cameco disclosed: (i) a total of 2.6 Mlbs of packaged production from Cigar Lake in the six months ended June 30, 2021; (ii) the Cigar Lake operation was expected to produce up to 12.0 million packaged pounds in 2021; and (iii) the Canadian Nuclear Safety Commission granted it a renewal of the Cigar Lake operating license and that such renewed license is valid until June 30, 2031.

Note on Technical Disclosure

Unless otherwise indicated, the scientific and technical information herein regarding Waterbury Lake / Cigar Lake has been derived from the technical report titled "Cigar Lake Operation, Northern Saskatchewan, Canada, National Instrument 43-101 Technical Report", with an effective date of December 31, 2015 (the "Cigar Lake Technical Report"), prepared for Cameco, Cameco’s Annual Information Form for the year ended December 31, 2020, and Cameco's other public disclosures, copies of which are available under its profile on SEDAR. Historical uranium deposit information is outlined in the Saskatchewan Mineral Deposit Index (SMDI).