Panel Report

The McArthur River proponent, Cameco Corporation, was formed in 1988 by the merger of the Saskatchewan Mining Development Corporation, a provincial Crown Corporation, and Eldorado Nuclear Limited, a federal Crown Corporation. At the time of the merger, Saskatchewan received $400-million and a 61.5% share of the new company, while Canada received $250-million and a 38.5% share. Today Cameco is a publicly traded company with only 9.6% of its shares retained by the Government of Saskatchewan and none by the Government of Canada.

Cameco has a partnership interest in three operating uranium mines, at Key Lake, Saskatchewan (66.67%), Rabbit Lake, Saskatchewan (66.67%) and Crow Butte, Nebraska (32.309%), and in two proposed mines currently under environmental review - McArthur River (55.844%, when operational) and Cigar Lake (48.75%; voting 50.75%). It has an interest in two gold mines, one at Contact Lake, Saskatchewan (66.67%), and the other at Kumtor in the Republic of Kyrgyzstan (33.33%).⁴ Cameco also owns and operates uranium refining and conversion facilities at Blind River and Port Hope, Ontario.

Cameco Corporation, with its head office in Saskatoon, Saskatchewan, is the world’s largest publicly traded uranium company; it is a dominant member of the global uranium industry. In 1995, it reported revenues of $395- million, with about 95% coming from uranium and the remainder from its gold operations. On December 31, 1995, it had 1,237 employees.⁵

3.1 Royalties, Taxes, Fees and Dividends

In Saskatchewan, The Crown Mineral Royalty Schedule sets the rate at which royalties are paid to the province and ensures that the value of uranium sold represents fair market value for Crown royalty purposes. The total royalties paid consist of a basic royalty (5% of the gross sales revenue) and graduated royalties,⁶ less the Saskatchewan Resources Credit (1% of gross sales revenue).

All uranium mining companies are also required to pay various taxes to both the federal and provincial governments These include property taxes, surface lease fees, mine property taxes, corporate capital taxes and surcharges, federal and provincial sales taxes and large corporation taxes. In addition, the proponent would pay the employer’s portion of payroll taxes, such as unemployment insurance premiums and Canada pension plan payments. Fees are also paid to the Atomic Energy Control Board for regulatory services and to the Workers’ Compensation Board for accident and disability insurance.

Cameco has indicated that, over the past decade, it and its partners in the McArthur River Project (Cogema Resources, Inc. and Uranerz Exploration and Mining Limited) have returned to governments the amounts summarized in Table 1. The provincial and federal governments realized $893.8-million and $333.3-million, respectively, in share divestitures during the same time period. Cameco also indicated that it has contributed over the past decade to various educational programs to the extent of: $252,000 for scholarships to residents of Saskatchewan’s north; $88,000 for scholarships to southern residents, primarily dependents of Cameco employees; $34,500 to the Athabasca Education Awards Program, which is designed to encourage students from grades 7-l 2 in the Athabasca region to stay in school; $1,289,000 to the Multi-Party Training Plan and $1,500,000 to the University of Saskatchewan. Its current policy is to provide an annual budget for donations and sponsorships equal to 0.5% of its annual net earnings, which were $102-million in 1995.⁷

Cameco also supports a large number of other programs ranging from cross-country skiing competitions to multiple sclerosis research. In many respects, Cameco appears to have been an exceptionally good corporate citizen, particularly of the northern part of the province.

3.2 Benefits to Northern Saskatchewan

The primary benefits to northern people from mining developments are jobs and business opportunities. There have also been indirect benefits in the form of infrastructure improvements, particularly with respect to additional transportation facilities, and employment training programs.

^a Amounts included in Cameco estimates as operator of joint venture projects.

^b Not Available.

It is estimated that there are about 9,000-11,000 employable people in northern Saskatchewan. Of these, about 750 (or 7%) currently work in mining. In addition, approximately 250 workers, who no longer live in northern Saskatchewan but are still counted as northerners,⁹ also work in mining.

In 1990, Cameco announced a corporate objective of obtaining at least 50% of its mine-site work force from residents of Saskatchewan’s North, a goal that was achieved for the first time in March of 1995. The company has also made a future commitment to maximize the number of northern residents working on its sites, both as employees of Cameco and of its associated contractors.¹⁰

Cameco has attempted to maximize business opportunities for northerners by tendering contracts solely in the north whenever possible; by giving preferential bidding opportunities to northerners; by packaging projects within the capabilities of northern contractors; by encouraging joint ventures between northern contractors and well-established southern firms for large contracts; by maintaining a Northern Affairs Office in La Ronge where contract information can be obtained and northerners can receive advice on contracting procedures; and by monitoring all of its contracts to ensure that northern content is maximized. The value of Cameco’s northern contracts has increased substantially from $10.6-million in 1991, to about $48-million in 1995.¹¹

During the past decade, uranium mining has contributed an estimated 1,400 person-years of work annually.¹² About one-half of these have been held by northerners.

It is the panel’s observation that the people who represented Cameco at the public hearings were strong advocates of northern development and articulated a genuine desire to ensure that northern people benefitted from northern development.

3.3 The Underground Exploration Program

The McArthur River site was subjected to an environmental review in 1992 prior to the start of an underground exploration program.¹³ The purpose of the underground exploration program was to provide additional information concerning the physical nature of the ore, since difficulties had been encountered when attempts were made to delineate the ore body by drilling from the surface. It was concluded that a single shaft and drift at depth would have less adverse environmental impact than would the use of numerous, longer drill holes from the surface.¹⁴

Terrestrial, aquatic and atmospheric baseline studies completed for the Underground Exploration Program provided data against which impacts of the current project can be judged. The underground exploration, in addition to confirming the existence of the so-called “P2 ore body”, revealed an additional substantial ore block, the “Pelite Ore”. The proponent also obtained information concerning the geology, rock mechanical character and hydrogeology of the site that may be useful for mining purposes.

The explorations revealed that the P2 ore body consists of discrete areas of high-grade mineralization and discontinuous zones of lower grade material. Ore is associated with the unconformity and nose of the P2 fault and with the P2 fault itself. The previously unknown Pelite Ore is associated with the P2 fault in the basement rock. See Figure 3. Observations resulting from the exploration program form the basis for selecting the mining methods proposed by Cameco.

Figure 3: ldealized Cross-Section of the P-Z Ore Body

⁴ Cameco Corporation, Annual Report, 7995, pp. 18-19.

⁵ Ibid, p. 3.

⁶ Graduated royalties, calculated on the basis of operating profit as a percentage of capital investment, are collected only when the operating profit exceeds 15% of the capital investment. For details, see, Final Report, Saskatchewan Environment and Resource Management, May 1996, Section 2, pp. 74-75.

⁷ Cameco Corporation, Annual Report, 7995, p. 37.

⁸ McArthur River Project Environmental Impact Statement, Addendum, Cameco Corporation, 1996, Tables 2.6.4.1, 2.6.4.2 and 2.6.4.3.

⁹ A resident of Saskatchewan’s North is defined in the Key Lake human resources agreement as a person who has been a resident of Saskatchewan’s North for 10 years or one-half of his/her life or three years immediately prior to making an application for employment, as based on Saskatchewan Health records.

¹⁰ McArthur River Project Environmental Impact Statement, Main Volume, Cameco Corporation, 1995, p. 3.11.10.

¹¹ Cameco Corporation, Submission to the McArthur River Project Public Hearings, La Ronge, Saskatchewan, October 2, p. 3.

¹² Jane Forster, Transcript of Public Hearings, La Ronge, Saskatchewan, October 2. 1996. D. 55.

¹³ McArthur River Project Underground Exploration Program Environmental Impact Statement, Cameco Corporation, 1992.

¹⁴ D.G. Lee, J-F. Archibald, J. Dantouze, R. Neal and A. Yassi, McArthur River Underground Exploration Program, Supply and Services Canada, 1993, p. 7.