David Milstead, The Globe and Mail. Wednesday, May. 01 2013,
Did you know one of the largest sellers of uranium in Switzerland is Saskatoon-based Cameco Corp.? The Canada Revenue Agency has been aware for some time. And now Cameco shareholders are getting more details about the potential problems it may cause the company – as in more than $800-million in back taxes.
It wasn’t supposed to work out this way, of course. In 1999, Cameco set up a subsidiary, Cameco Europe Ltd., in low-tax Zug, Switzerland. Cameco then signed a 17-year deal to take the uranium it produces in Canada, sell it to Cameco Europe, and have Cameco Europe make the final sale to the end customers all across the world.
Why inject a middleman into the transaction? Well, Cameco is selling the uranium to Cameco Europe at the low prices reflective of 1999, when the deal was signed. Cameco is recording little to any profit in Canada; instead, all the profits appear in Zug, where the tax rate is lower.
A loss in the tax case – which may not occur until 2015 – would have even larger implications than a one-time $800-million tax bill; it will wipe out one of the key drivers of Cameco’s bottom line. Veritas estimates the company paid just $36-million in cash taxes for 2012 on $680-million pre-tax cash flow from operations, or a 5-per-cent rate. The difference between that and the statutory rate of 27 per cent would come right out of cash flow – a cut of more than 20 per cent, Veritas says.
If you’ll pardon the pun, it’s becoming quite the taxing situation for Cameco shareholders.
5 Year Performance
Cameco profit plunges 93 percent on weaker uranium sales
Wed May 1, 2013 10:04am EDT
By Rod Nickel (Reuters) - Cameco Corp (CCO.TO: Quote) (CCJ.N: Quote), one of the world's biggest uranium producers, reported on Wednesday that quarterly profit plunged 93 percent, sparking a 5 percent drop in its shares as uranium sales fell and prices were weaker. A significant decline in profit was widely expected, although not quite as steep, as Cameco had signaled that first-quarter shipments would likely be light. The timing of Cameco's uranium sales can vary widely, as customers choose when in the year they will accept deliveries. "It's a slight miss, but it's not that big a deal," said Cantor Fitzgerald analyst Rob Chang.
http://ca.reuters.com/article/
http://ca.reuters.com/article/
