UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 Under
the Securities Exchange Act of 1934

Cameco Corporation

(Translation of registrant’s name into English)

2121-11th Street West
Saskatoon, Saskatchewan, Canada S7M 1J3
(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F o     Form 40-F þ

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o     No þ

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

 

 

Exhibit Index

Exhibit No.		Description
99.1		McArthur River Technical Report dated February 16, 2009

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Exhibit 99.1

McArthur River Operation

Northern Saskatchewan, Canada

National Instrument 43-101

Technical Report

Effective Date: December 31, 2008
Filed on February 16, 2009

Prepared for:
Cameco Corporation

Qualified Persons:
David Bronkhorst, P.Eng.
Charles R. Edwards, P.Eng.
Alain G. Mainville, P.Geo.
Gregory M. Murdock, P.Eng.
Leslie D. Yesnik, P.Eng.

		CAMECO CORPORATION McARTHUR RIVER OPERATION, NORTHERN SASKATCHEWAN, CANADA NI 43-101 TECHNICAL REPORT

Table of Contents

1		SUMMARY					1
		1.1		Property Tenure			1
		1.2		Location and Site Description			2
		1.3		Geology and Mineralization			3
		1.4		Mineral Resources and Mineral Reserves			4
		1.5		Exploration of the McArthur River Deposit			7
		1.6		Exploration of P2 Grid			8
		1.7		Mining Methods			9
		1.8		Mine Operations			10
		1.9		Processing			11
		1.10		Environmental Assessment and Licensing			12
		1.11		Production Plan			15
		1.12		Economic Analysis			16
		1.13		Project Risks			17
		1.14		Conclusions and Recommendations			20
2		INTRODUCTION					22
		2.1		Introduction and Purpose			22
		2.2		Report Basis			23
3		RELIANCE ON OTHER EXPERTS					24
4		PROPERTY DESCRIPTION AND LOCATION					25
		4.1		Location			25
		4.2		Mineral Tenure			27
		4.3		Surface Tenure			30
		4.4		Mine and Infrastructure			32
		4.5		Royalties			32
		4.6		Known Environmental Liabilities			32
		4.7		Permitting			34
5		ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY					35
		5.1		Access			35
		5.2		Climate			36
		5.3		Physiography			37
		5.4		Local Resources and Proximity to Population Centre			37
		5.5		Infrastructure			38
6		HISTORY					40
		6.1		Ownership			40
		6.2		Exploration and Development History			41
				6.2.1 General			41
				6.2.2 P2 Grid Exploration History			42
		6.3		Historical Mineral Resource and Mineral Reserve Estimates			45
				6.3.1 Historical Estimates 1991 - 2000			45
		6.4		Historical Production			49
7		GEOLOGICAL SETTING					50
		7.1		Regional Geology			50

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		7.2		Local Geology			52
				7.2.1 General			52
		7.3		Structure			55
				7.3.1 Alteration			58
		7.4		Property Geology			59
8		DEPOSIT TYPES					61
9		MINERALIZATION					63
10		EXPLORATION					64
		10.1		Asamera 1976 — 1979			64
		10.2		SMDC / Cameco 1980 — 1993			64
		10.3		Recent Exploration 2000 — Present			64
11		DRILLING					68
		11.1		Surface Drilling			68
		11.2		Underground Drilling			70
		11.3		Core Logging — Underground Diamond Drilling			73
		11.4		Core Logging — Exploration Surface Drilling			74
		11.5		Cementing of Surface Diamond Drill Holes			75
12		SAMPLING METHOD AND APPROACH					76
		12.1		Sample Density and Sampling Methods			76
		12.2		Core Recovery			77
		12.3		Sample Quality and Representativeness			78
		12.4		Sample Composites with Values and Estimated True Widths			78
13		SAMPLE PREPARATION, ANALYSES AND SECURITY					81
		13.1		Sample Preparation by Cameco Employees			81
		13.2		Sample Preparation			81
				13.2.1 Introduction			81
				13.2.2 Sample Receiving			82
				13.2.3 Sample Sorting			82
				13.2.4 Sample Preparation			82
				13.2.5 Summary of Licenses, Certifications and Registrations			83
		13.3		Assaying			84
		13.4		Radiometric Surveying and Assaying			84
		13.5		Density Determinations			85
		13.6		Quality Assurance/Quality Control (QA/QC)			86
				13.6.1 Exploration Surface Drilling			86
				13.6.2 Underground Drilling			88
		13.7		Sample Security			89
		13.8		Adequacy of Sample Preparation, Assaying, QA/QC, and Security			89
14		DATA VERIFICATION					90
15		ADJACENT PROPERTIES					91
16		MINERAL PROCESSING AND METALLURGICAL TESTING					92
		16.1		Overview			92
		16.2		Processing at McArthur River			94
				16.2.1 Metallurgical Testwork			94
				16.2.2 Current McArthur River Flowsheet			96
		16.3		Processing at Key Lake			96
				16.3.1 Metallurgical Testwork			97

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				16.3.2 Current Key Lake Process			98
		16.4		Revitalization at Key Lake			100
				16.4.1 Metallurgical Testwork			101
				16.4.2 Modifications at Key Lake for Revitalization			102
17		MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES					102
		17.1		Definitions			103
		17.2		Mineral Resources and Mineral Reserves			104
				17.2.1 Key Assumptions			104
				17.2.2 Key Parameters			105
				17.2.3 Key Methods			105
				17.2.4 Cut-off Grade			108
				17.2.5 Mineral Resource and Mineral Reserve Classifications			108
				17.2.6 Mineral Resource and Mineral Reserve Estimates			109
		17.3		Discussion on Factors Potentially Affecting Materiality of Mineral Resources and Mineral Reserves			112
18		ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES					113
		18.1		Mining			113
				18.1.1 Geotechnical Characteristics of the Deposit			113
				18.1.2 Hydrogeology and Mine Dewatering			117
				18.1.3 Mining Methods			118
				18.1.4 Mine Operations			129
		18.2		Recoverability			137
		18.3		Markets			138
				18.3.1 Worldwide Uranium Supply and Demand			138
				18.3.2 Uranium Markets and Prices			142
		18.4		Contracts			145
				18.4.1 Labour Relations			145
				18.4.2 Operational Support			145
				18.4.3 Toll Milling Contracts			145
				18.4.4 Uranium Sales Contracts			146
		18.5		Environmental Considerations			148
				18.5.1 Regulatory Framework			148
				18.5.2 Environmental Assessment History			149
				18.5.3 Significant Environmental Issues			151
				18.5.4 Corporate Environmental Commitment			155
				18.5.5 Decommissioning and Reclamation			155
				18.5.6 Known Environmental Liabilities			156
		18.6		Taxes and Royalties			159
				18.6.1 Taxes			159
				18.6.2 Royalties			159
		18.7		Capital and Operating Cost Estimates			162
				18.7.1 Operating Cost Estimates			162
				18.7.2 Capital Cost Estimates			162
				18.7.3 Economic Analysis			166
				18.7.4 Payback			169
				18.7.5 Mine Life			169
19		OTHER RELEVANT DATA AND INFORMATION					170
		19.1		McArthur River Water Inflow Incidents Investigations			170
				19.1.1 2003 Water Inflow			170

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				19.1.2 2008 Water Inflow			171
				19.1.3 Mine Flooding Mitigation			171
		19.2		Rock Falls			174
		19.3		Worker Exposure to Radiation			175
		19.4		Mine Fires			175
		19.5		Worker Exposure to Mine Gases and Diesel Particulates			176
		19.6		Mine Productivity of Boxhole Boring Mining Method			177
		19.7		Deilmann Tailings Management Facility			177
		19.8		Tailings Capacity			179
		19.9		Aboriginal Title and Consultation Issues			180
		19.10		Project Risks			182
				19.10.1 Technical Risks			182
				19.10.2 Regulatory Approval and Expediency			185
				19.10.3 Environmental Regulations			186
20		INTERPRETATION AND CONCLUSIONS					189
21		RECOMMENDATIONS					191
22		REFERENCES					193
23		DATE AND SIGNATURE PAGE					196

Tables

Table 1-1: Summary of Mineral Resources — December 31, 2008			5
Table 1-2: Summary of Mineral Reserves — December 31, 2008			6
Table 4-1 — McArthur River Operation — Disposition Status			28
Table 6-1: Historical Resource Estimate — Cameco, October 1991			46
Table 6-2: Historical Resource & Reserve Estimates — Cameco, November 1995			46
Table 6-3: Historical Resource & Reserve Estimates — Cameco, December 1998			46
Table 6-4: Historical Resource & Reserve Estimates — Cameco, December 2000			48
Table 6-5 — McArthur River Historical U3O8 Mine Production			49
Table 10-1: Summary of Surface Exploration at McArthur River 2000 — 2008			66
Table 11-1: Summary of Surface Drilling by Year			70
Table 13-1: Materials Analyzed Within a Typical Assay Group			87
Table 17-1: Production Reconciliation with Reserves			107
Table 17-2: Summary of Mineral Resources — December 31, 2008			109
Table 17-3: Summary of Mineral Reserves — December 31, 2008			110
Table 17-4: Mineral Reserves and Resources by Zones — December 31, 2008			111
Table 18-1: Underground Development Risk Classification			116
Table 18-2: Action Required for Risk Classification			117
Table 18-3 — Planned Yearly Mine Development Summary			132
Table 18-4 — Production Forecast Summary based on Estimated Mineral Reserves			136

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Table 18-5 — Projected Average U3O8 Sales Prices			147
Table 18-6 — Expected Royalties to be Incurred by Cameco for McArthur River			161
Table 18-7 — Estimated Capital Costs for 2009 — MRJV basis			163
Table 18-8 — Total Estimated Capital Costs by Year to the MRJV — Based on estimated Mineral Reserves only			164
Table 18-9 — Operating Cost Forecast by Year to the MRJV — Based on estimated Mineral Reserves only			165
Table 18-10 — Economic Analysis — Cameco’s Share — Based on estimated Mineral Reserves only			167

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Figures
Figure 1 — McArthur River Operation Location			26
Figure 2 — Mineral Lease and Claims Map			29
Figure 3 — Map of Mine Facilities and Surface Lease			31
Figure 4 — McArthur River Site — Regional Location and Roads			36
Figure 5 — P2 Grid Map			44
Figure 6 — McArthur River Property, Regional Geology			51
Figure 7 — McArthur River Deposit — Schematic Cross-Section			54
Figure 8 — Underground Development and Mineralized Zones from Drilling			56
Figure 9 — Plan View of Zone 2			57
Figure 10 — Typical Zone 2 Geological Section Looking North			60
Figure 11 — Map of Surface Drilling			67
Figure 12 — Surface Drill Collar Location Map			69
Figure 13 — Map of Underground Drilling			72
Figure 14 — Typical Underground Drill Hole Spacing — Section Looking North			80
Figure 15 — Schematic of Sample Preparation Procedures			83
Figure 16 — Density Summary			86
Figure 17 — McArthur River Ore Processing Activities — Block Flow Sheet			93
Figure 18 — Typical Geotechnical Model Section — Looking North			115
Figure 19 — Freeze Hole Drilling			120
Figure 20 — Raisebore Mining Schematic			123
Figure 21 — Plan of Raisebore Chamber			124
Figure 22 — Plan of Extraction Drift			124
Figure 23 — Plan View, Zone 2 Raisebore Locations			125
Figure 24 — Boxhole Boring Mining Schematic			127
Figure 25 — Blasthole Stoping Mining Schematic			129
Figure 26 — Mine Layout			133
Figure 27 — Life of Mine Production Summary — Mineral Reserves only			137
Figure 28 — World Uranium Production and Consumption 2006-2008			138
Figure 29 — 2008 World Uranium Production by Country			141
Figure 30 — Spot and Long Term Uranium Contract Volumes 2006-2008			144
Figure 31 — McArthur River Mine Sensitivity Analysis			168

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		CAMECO CORPORATION McARTHUR RIVER OPERATION, NORTHERN SASKATCHEWAN, CANADA NI 43-101 TECHNICAL REPORT

Units of Measure and abreviations
a		Annum (year)
BTU		British Thermal Unit
BTU/h		British Thermal Units per hour
%		Percent
°		Degrees
°C		Degrees Celsius
cm		Centimetres
CNSC		Canadian Nuclear safety Commission
cps		Counts per Second
d		Day
g		Grams
g/cm3		Grams per cubic centimetre
g/m3		Grams per cubic metre
GHM		Ground Hazards Model
h		Hour(s)
ha		Hectares (10,000 square metres)
HP		Horsepower
Hwy		Highway
IRR		Internal rate of return
K		Thousand
kg		Kilograms
km		Kilometres
km/h		Kilometres per hour
km2		Square kilometres
kV		Kilovolts
kW		Kilowatts
l		Litre
Lbs		Pounds
M		Million
Mt		Million tonnes
m		Metres
m2/t/d		Square metres per tonne per day (thickening)
m3		Cubic metres
m3/h		Cubic metres per hour
m%U		metres times per cent uranium
m%U3O8		metres times per cent uranium oxide
masl		Metres above sea level (elevation)
mm		Millimetres
Mo		Molybdenium
MPa		Megapascal
Mt/a		Million dry tonnes per year
MW		Megawatts
N		Newton
NPV		Net present value
Pa		Pascal (Newtons per square metre)
ppm		Parts per million
P80		80% passing (particle size nomenclature)
RMR		Rock Mass Rating
Se		Selenium
st		Short tons
SX		Solvent extraction
t		Tonnes (metric)
t/h		Tonnes per hour
t/d		Tonnes per day
t/a		Tonnes per year

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U		Uranium
%U		Percent uranium (%U x 1.179 = % U3O8)
U3O8		Triuranium octoxide (yellowcake)
%U3O8		Percent triuranium octoxide (%U3O8 x 0.848 = %U)
Cdn		$Canadian Dollars
Cdn$M		Million Canadian Dollars
US		$US dollars
US$M		Million US dollars
$/t		Canadian dollars per tonne
US$/lb		US dollars per pound
US$/t		US dollars per tonne
W/W%		per cent solids by weight
>		Greater than
<		Less than

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		CAMECO CORPORATION McARTHUR RIVER OPERATION, NORTHERN SASKATCHEWAN, CANADA NI 43-101 TECHNICAL REPORT

1

SUMMARY

McArthur River in northern Saskatchewan is an underground uranium mine, in which Cameco Corporation (Cameco) has a direct and indirect ownership interest of 69.805%. It contains the world’s largest known high-grade uranium deposit and has produced 150 million pounds of U₃O₈ since the start of production in 1999. McArthur River is owned by joint venture partners Cameco (55.844%), AREVA Resources Canada Inc. (AREVA) (16.234%) and UEM Inc. (27.922%), a company equally owned by Cameco and AREVA. Cameco is the operator.

At December 31, 2008, the Company’s share of estimated Proven and Probable Reserves was 509,000 tonnes of ore containing 232.2 million pounds U₃O₈ with an average grade of 20.7% U₃O₈, its share of estimated Measured and Indicated Resources was 173,700 tonnes containing 34.7 million pounds U₃O₈ with an average grade of 9.1% U₃O ₈, and its share of estimated Inferred Resources was 448,600 tonnes containing 97.0 million pounds U₃O₈ at an average grade of 9.8% U₃O ₈. A breakdown of the Mineral Reserve and Mineral Resource estimates is set out in Table 1-1 and Table 1-2.

Annual production rate from McArthur River is forecast at 18.7 million pounds until 2016, and declines thereafter until 2033. Cameco estimates that, based upon the current Mineral Reserves only, McArthur River will have a mine life of at least 25 years, with an expected payback of capital invested by 2010, on an undiscounted pre-tax basis. Mineral resources are not included in the Life of Mine plan, however, any Mineral Resources that are upgraded to Mineral Reserves in the future would be used to both extend the years the mine produces at 18.7 million pounds and potentially extend mine life.

This technical report has been prepared for Cameco by, or under the supervision of, internal qualified persons and an external qualified person in support of disclosure of scientific and technical information relating to the McArthur River operation.

1.1

Property Tenure

The mineral property consists of one mineral lease, totalling 1,380 hectares, and 21 mineral claims totalling 83,438 hectares. The mineral lease and mineral claims are contiguous. The McArthur River uranium deposit is located in the area subject to mineral lease ML-5516. The right to mine this uranium deposit was acquired by Cameco under this mineral lease. The current mineral lease expires in March 2014 with a right to renew for successive 10 year terms absent a default by Cameco. Title to the 21 mineral claims is secured until 2017 as a result of previous assessment work completed by Cameco.

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The surface facilities and mine shafts for the McArthur River operation are located on lands owned by the province of Saskatchewan. Cameco acquired the right to use and occupy the lands under a surface lease agreement with the province. The most recent surface lease agreement was signed in April 1999 and has a term of 33 years. Upon termination or expiry of the surface lease, a new surface lease can be entered into until full property decommissioning and reclamation has been achieved. The McArthur River surface lease presently covers approximately 651 hectares.

1.2

Location and Site Description

The McArthur River minesite is located near Toby Lake in northern Saskatchewan, approximately 620 km north of Saskatoon. The McArthur River mine site is compact, occupying approximately an area of one kilometre in the north/south direction and half a kilometre in the east/west direction. The site consists of an underground mine, one full service shaft and two ventilation shafts along with numerous surface facilities, including inert waste rock stockpiles, a large capacity mine water treatment plant, a pump hose, ponds, standby diesel generators as well as maintenance and warehousing facilities.

The means of access to the McArthur River property is by an all-weather road and by air. All supplies to the site and shipment of product are transported by truck year round. An 80 km all weather gravel road runs between the mine site and the Key Lake milling operation.

The topography and the environment are typical of the taiga forested lands common to the Athabasca basin area of northern Saskatchewan. The surface facilities are at an elevation of approximately 550 masl.

The site is connected to the provincial electricity grid with standby generators installed in case of grid power interruption.

Personnel are flown to site from the northern area communities and major Saskatchewan population centres such as Saskatoon. Underground development and construction is performed by a number of contractors. Cameco personnel conduct all production functions.

McArthur River is a developed producing property, with surface right holdings that cover all of its mining operation needs as well as requirements for residences, access to water, airport, site roads and other necessary buildings and infrastructures. No tailings management facilities are required as McArthur River ore is sent to the Key Lake mill for processing.

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1.3

Geology and Mineralization

The McArthur River deposit is located in the south-eastern portion of the Athabasca Basin, within the south-west part of the Churchill structural province of the Canadian Shield. The crystalline basement rocks underlying the deposit are members of the Aphebian Wollaston Domain, metasedimentary sequence. These rocks are overlain by flat lying sandstones and conglomerates of the Helikian Athabasca Group. These sediments are over 500 m thick in the deposit area.

High grade uranium mineralization has been delineated from surface drilling over a strike length of 1,700 m, occurring at depths ranging between 500 m to 640m below surface. Underground drilling programs have covered approximately 750 m of the 1,700 m strike length delineated from surface. Ore widths are variable along strike but the most consistent, high grade mineralization occurs proximal to the main graphitic thrust fault around the “nose” of the upthrust basement rock. Less consistent and generally lower grade mineralization occurs down dip along this fault contact between basement rock and sandstone.

Four distinct mineralized zones, identified as Zones 1, 2, 3 and 4, have been defined to date. Two additional Zones, A and B, are on the northern portion of the deposit and are indicated through surface drill holes only.

The P2 thrust fault is the most important mineralization control for the McArthur River deposit. Uranium occurs in both the Athabasca sandstone and the overlying basement rock near the main zone of thrust faulting. Mineralization is generally within 15 m of the basement/sandstone contact with the exception of Zone 2. Less significant zones of mineralization may occur further from the contact, usually in the sandstone, associated with subsidiary fracture/fault zones or along the margins of flat lying siltstone beds.

Zone 2 mineralization occurs deeper in the basement rocks in a unique area of the deposit. Here a footwall quartzite unit lies in close proximity to the main zone of thrust faulting. In this area of structural disruption, high-grade mineralization occurs not only in the hanging wall basement wedge but also overlies the footwall quartzite unit. The strike extent of this deeper basement mineralization is approximately 100 m.

In general, the high-grade mineralization, characterized by botryoidal uraninite masses and subhedral uraninite aggregates, constitutes the earliest phase of mineralization in the deposit. Pyrite, chalcopyrite, and galena were also deposited during this initial mineralizing event. Later stage, remobilized uraninite occurs as disseminations, veinlets, and fracture coatings within chlorite breccia zones and along the margins of silt beds in the Athabasca sandstone.

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1.4

Mineral Resources and Mineral Reserves

The Mineral Resource and Mineral Reserve estimates are based on 36 drillholes from surface, of which 15 drillholes intersected mineralization, and 632 drillholes from underground, of which 334 holes intersected mineralization.

A summary of the estimated Mineral Resources for McArthur River with an effective date of December 31, 2008 is shown in Table 1-1. Alain G. Mainville, P.Geo., of Cameco, is the qualified person within the meaning of National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) for the purpose of the Mineral Resource and Mineral Reserve estimates.

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Table 1-1: Summary of Mineral Resources — December 31, 2008

										Contained				Cameco’s Share
		Tonnes				Grade				Lbs U3O8				Lbs U3O8
Category		(x 1000)				% U3O8				(millions)				(millions)
Measured			209.0				9.20				42.4				29.6
Indicated			39.8				8.37				7.4				5.1
Total			248.8				9.07				49.7				34.7
Inferred			642.6				9.81				139.0				97.0

Notes:

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A summary of the estimated Mineral Reserves with an effective date of December 31, 2008 is shown in Table 1-2.

Table 1-2: Summary of Mineral Reserves — December 31, 2008

										Contained				Cameco’s Share
		Tonnes				Grade				Lbs U3O8				Lbs U3O8
Category		(x 1000)				% U3O8				(millions)				(millions)
Proven			449.2				17.18				170.1				118.8
Probable			280.0				26.33				162.5				113.4
Total			729.2				20.69				332.6				232.2

Notes:

The current mine plan has been designed to extract all of the current Mineral Reserves. Over the last five years, the reconciliation of the mine production has been within 5% of the Mineral Reserve estimates of contained pounds of uranium.

Mineral Resources in the Measured, Indicated and Inferred Mineral Resource categories have not been included in the current mine plans. Mineral Resources have no demonstrated economic viability.

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1.5 Exploration of the McArthur River Deposit

Cameco, through its predecessor company, the Saskatchewan Mining Development Corporation (SMDC), became operator of the McArthur River project in 1980. Surface exploration programs, ranging from small line cutting crews to large helicopter supported drilling and prospecting camps, were active from 1980 through to 1992. The mineral property presently consists of 84,818 ha.

Surface exploration programs were active from 1980 through to 1992. Significant mineralization of potentially economic uranium grades were first discovered as a result of surface drilling in the 1988 and 1989 exploration seasons.

In the summer of 1988, drilling along the northern portion of an electromagnetic conductor encountered structural disruption and sandstone alteration in hole MAC-195. The last hole of the year, MAC-198, encountered the contact between the overlying sandstone and basement rock (“unconformity”) much higher than expected, but 65 m deeper it passed back into sandstone and intersected a 10 m thick zone of high grade mineralization along the faulted basement/sandstone contact. Subsequent surface drilling programs in 1989, 1990, 1991, and 1992 delineated the mineralization over a strike length of 1,700 m, occurring at depths ranging between 500 to 640m below surface.

In 1993, an underground exploration program, consisting of shaft sinking, lateral development, and diamond drilling was approved by government agencies. The shaft was completed in 1994. Following review of the environmental impact statement, public hearings, and receipt of approvals from the governments of Canada and Saskatchewan, the Atomic Energy Control Board (AECB) issued construction licences for McArthur River in August 1997 and May 1998. In October 1999, Cameco received an operating licence from federal authorities and operating approval from provincial authorities.

Construction and development of the McArthur River mine was completed on schedule and mining commenced in December 1999. Commercial production was achieved on November 1, 2000.

Since 1993 over 630 underground drill holes, totalling in excess of 56,000 m, have provided detailed information for delineation of 750 m of the strike length. Over 1,400 additional underground diamond drill holes, totalling 85,000 m, were drilled for geotechnical information; probe and grout covers; service and drain holes; and freeze holes.

Underground exploration drilling and development continued in 2008. Activity for 2009 focuses on evaluation of Mineral Resources, mainly to the south of the current McArthur River Mineral Reserves. In 2008, Cameco concluded that Mineral Resources to the

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south of the mine have greater near-term development potential for future mining due to established infrastructure and were made a higher priority exploration target. Mineral Resources to the north of the mine are planned for further evaluation in either late 2009 or 2010, depending on the progress made in the south of the mine.

1.6 Exploration of P2 Grid

The McArthur River deposit, originally called P2 North, is on the P2 grid situated on the north western boundary of the property. Other significant, but sub-economic discoveries, which are located on the property include the Harrigan Zone, the BJ Zone, and P2 Main.

Routine prospecting in 1980 and 1981 discovered radioactive boulders about 10 km southwest of the McArthur River deposit. Exploration on the P2 grid accelerated in 1984 and definition of the P2 electromagnetic conductor, identified by reconnaissance geophysical surveys, was completed in 1986. The open ended conductor extended for 12 km on the property and became a high priority exploration target.

In 1985, drilling on the P2 conductor resulted in the discovery of the P2 Main sandstone hosted mineralization, associated with a major fault zone. Continued drilling through to 1988 defined this 500 m long, sub-economic zone of mineralization.

Exploration focus shifted to the P2 North area in 1988, with the discovery of high grade mineralization (4.3% U₃O₈ / 10.0 m) in drill hole MC-198. Successive diamond drill programs from 1989 — 91, totalling 27,928 metres in 43 holes, delineated the P2 North uranium deposit from surface. Subsequent geotechnical and hydrological evaluation of the deposit area in 1992 preceded the approval for underground development in 1993.

Surface exploration drilling was conducted in 2004, 2005 and 2006 to the north to test the extension of mineralization previously identified from historical surface drill holes and to also test new targets along strike. In 2007, surface diamond drilling to evaluate the P2 trend north of the McArthur River mine was significantly accelerated in order to understand as quickly as possible the full potential of the prolific P2 structure. As at December 31, 2008, approximately 80 surface drill holes totalling in excess of 42,000 m, comprising a combination of conventional and directional drilling have tested the P2 structure at approximately 200 m intervals for a distance of 4.3 km north of the mine. Results continue to be encouraging and will require follow-up drilling. For 2009, $3.5 million has been budgeted towards diamond drilling on extension of the P2 fault both to the north and south of the mine.

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1.7 Mining Methods

The mining of the McArthur River deposit faces a number of challenges including control of groundwater, weak rock formations, and radiation protection from very high grade uranium ores. Based on these challenges, it was identified during initial mining studies that non-entry mining methods would be required to mine the majority of the deposit.

The sandstones that overlay the ore zones and basement rocks contain significant amounts of high pressure water that will flow into the underground workings unless they are controlled. Ground freezing is used to form an impermeable freeze wall, to prevent water from the sandstones entering into the active ore zones, and to help stabilize highly fractured footwall rocks during mining operations.

The raisebore mining method was selected as an innovative approach to meet these challenges and was adapted to meet the conditions at the McArthur River mine. The raisebore method involves drilling a series of raisebore holes through the ore zone. The ore is collected by remote controlled scooptrams at the bottom of the raise. Once the raise is completed, the raise is concrete filled.

This method has been used to extract all the ore at McArthur River since mine production started in 1999. The method has proven to be very successful both in terms of achieving budgeted production and safety goals including low accident frequency and radiation exposure.

Alternate mining methods planned for other Zones of the ore body include boxhole boring and blasthole stoping.

In 2005, a mining method study determined that a modification to this method, the boxhole mining method, would be better suited for the Upper Zones 1, 3 and 4 because it would allow development from a preferred location within the basement rockmass since this zone is overlain by water bearing sandstones. Cameco plans to use this method for production from Upper Zone 4 beginning in 2013.

Boxhole boring is a vertical development technique used at a few mines in the world; however, this will represent its first application to uranium mining. Cameco has some experience with boxhole boring as it previously tested the method at Rabbit Lake and Cigar Lake. Additional testing at McArthur River will be required to evaluate the productivity of this method, and will likely require additional operational development during test work and initial mining phases.

The technical challenges associated with this mining method include reaming through frozen ground, raise stability (due to thawing from reaming and backfill), controlling raise deviation, reaming through backfilled raises, and control of radiation exposure. Accordingly, Cameco has scheduled a long lead-time for implementation to ensure the

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technical challenges are understood and risks mitigated. Until Cameco has fully developed and tested the boxhole boring method at McArthur River, there is uncertainty in the estimated productivity.

Cameco plans to develop and test the boxhole boring method over the next four years. In 2006, Cameco placed an order for a boxhole borer for delivery in the first half of 2008 and in 2007 completed the mine plan for the boxhole boring test area. The first test raise was setup at the end of 2008 and pilot hole drilling commenced in January 2009. Three raises in waste are planned for 2009 as is completion of freeze drilling for a boxhole boring ore extraction test area. The brine distribution system for this area is scheduled to be installed in 2009 as part of the plan to test this method in ore in 2010. Cameco has CNSC approval for the boxhole boring test program in waste and will provide a second submission for boxhole boring in ore planned for 2010.

A third mining method, blasthole stoping is being evaluated for small isolated ore zones where raisebore or boxhole boring is impractical. McArthur River plans to implement this method for ore remnant recovery in Zone 2, pending regulatory review and approval.

1.8 Mine Operations

Underground exploration drilling has identified four mineralized zones (Zones 1 to 4). Cameco is working on the transition to new mining zones at McArthur River, including mine planning and development. Since mining startup in 1999, only Zone 2 has been mined. Zone 2 is divided into four Panels (1, 2, 3, and 5).

As extraction of Zone 2 (Panels 1, 2, and 3) progresses, Cameco expects to place Lower Zone 1, Zone 2 (Panel 5) and the lower mining area of Zone 4 into production in stages between 2009 and late 2010, subject to regulatory approval. Cameco plans to continue to use the raisebore mining method to extract ore in these zones.

Freeze drilling and raisebore access for Lower Zone 1 has been developed on the 530L. Due to water risks, the 560 level extraction chamber development will not be driven until the production freeze wall has been established. Freeze drilling for Lower Zone 1 is scheduled to begin in the 2nd quarter of 2009.

At Zone 2 (Panel 5), the brine system to form the new freeze wall was activated in the fourth quarter of 2008 and formation of the new freeze wall is in progress. The new freeze wall is expected to be in place in the second quarter of 2009. Approximately six months of freeze time is required before the raisebore chamber can be developed. By mid-2009, the ground should be sufficiently frozen to begin developing the raisebore chamber. Production is scheduled for Zone 2 (panel 5) in the second half of 2009. Cameco intends to produce over 85 million pounds of U₃O₈ from this area.

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Development work for Lower Zone 4 is progressing. This area is classified as higher risk development for the raisebore chamber on the upper level and Cameco has adjusted its development and production schedules to recognize and mitigate these risks. In 2009, development of this Zone will continue and freeze hole drilling is expected to take place. Production from this area is now scheduled for 2010.

During the fourth quarter of 2008, access was successfully re-established along the previously backfilled Zone 2 Panel 3 freeze wall on the 530 level. This mining area will be used to extend the life of Panel 3 and is part of the revised production plan for 2009 to address the rescheduling of production from Lower Zone 4.

In November of 2008, the lower extraction area for Lower Zone 4 development on the 590 m level encountered a small inflow of water that was quickly captured and controlled. This area was considered low risk development which is defined as having an inflow potential of less than 100 m³/h or an order of magnitude below the available pump and treat capacity. The inflow has not caused Cameco to alter any planned mining in this area. However, full grouting of the inflow area is required before development resumes. As of January 2009, the critical path for production in this area is on the 530 m level where freeze drilling will be carried out and not the 580/590 m level extraction area where the inflow was encountered. Other development on the 580 level continues.

1.9 Processing

McArthur River ore is processed at two locations. Size reduction is conducted underground at McArthur River and the resulting finely ground ore is pumped to surface and transported in truck mounted containers to Key Lake as a 50% solids slurry at a typical grade range of 15% to 30% U₃O₈. Blending down with mineralized waste to a nominal 4% U₃O₈ mill feed grade and all remaining uranium processing, tailings disposal and effluent treatment steps occur at Key Lake. The final uranium product is a calcined yellowcake grading 98% U₃O₈ on average.

The current CNSC licensed production rate for the combined McArthur River/Key Lake operations is limited to a maximum of 7.2 million kilograms U (approximately 18.7 million pounds U₃O₈) per year. Cameco has applied for an increased licensed capacity of 22 million pounds U₃O₈ annually. Options to further increase the production rate to 24 million pounds U₃O₈ annually are currently being assessed as part of a program to revitalize and expand the Key Lake operation.

The Key Lake mill is owned by the Key Lake Joint Venture (KLJV) and operated by Cameco. The KLJV is comprised of Cameco (66 2/3%) and UEM (33 1/3%). UEM is a company owned equally by Cameco and AREVA.

The KLJV has entered into a toll milling agreement with AREVA for the processing of AREVA’s share of McArthur River uranium at the Key Lake mill. Cameco and UEM, the

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other owners of the McArthur River Joint Venture (MRJV), have agreed that milling of each party’s share of McArthur River ore will be accomplished through the KLJV and it is not necessary to enter into a formal toll milling agreement with the KLJV.

1.10 Environmental Assessment and Licensing

The McArthur River operation has regulatory obligations to both the federal and provincial governments. Being a nuclear facility, primary regulatory authority resides with the federal government and its agency, the CNSC. The main regulatory agencies that issue permits / approvals and inspect the McArthur River mine are: the CNSC (federal), Fisheries and Oceans Canada (federal), Environment Canada (federal), Transport Canada (federal), Ministry of Advanced Education, Employment and Labour (provincial), and Ministry of Environment (provincial) (SMOE).

Three permits must be maintained to operate the mine. Cameco holds a “Uranium Mine Facility Operating Licence” from the CNSC, and an “Approval to Operate Pollutant Control Facilities” and a “Permit to Operate Waterworks” both from the SMOE. These permits are current. The CNSC operating licence was renewed for 5 year term in 2008 and expires on October 31, 2013. The SMOE approvals will require renewal in 2009 as they expire on October 31, 2009. The renewal process for these approvals has been started.

The Key Lake operation is regulated in a similar manner as the McArthur River mine and as such has regulatory obligations to both the federal and provincial governments. Three permits must be maintained to operate the Key Lake uranium mill. Cameco holds a “Uranium Mill Operating Licence” from the CNSC and an “Approval to Operate Pollutant Control Facilities” and “Permit to Operate Waterworks” both from SMOE. These permits are current. The CNSC operating licence was renewed for a five year term in 2008 and expires on October 31, 2013. The SMOE approvals will require renewal in 2009 as they expire on November 30, 2009. The renewal process for these approvals has been started.

The CNSC operating licences for McArthur River and Key Lake limit production to approximately 18.7 million pounds of U₃O₈ per year, while the provincial approval to operate pollution control facilities sets restrictions on the rates and quality of treated effluent that can be released to the environment. This provincial approval also specifies restrictions associated with the management and transport of mineralized wastes generated from the mining activities.

In 2002, Cameco applied to increase the annual licence capacity at both the McArthur River mine and the Key Lake mill to 22 million pounds U₃O₈ per year (compared to the current 18.7 million pounds). This application has been undergoing a screening level environmental assessment (EA) under the Canadian Environmental Assessment Act

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(CEAA) with the CNSC as the responsible authority. The EA has been delayed due to discussions with the CNSC regarding how to address the local accumulation of molybdenum and trace amounts of selenium in the Key Lake downstream environment.

Cameco has developed an action plan to modify the effluent treatment process to reduce concentrations of molybdenum and selenium discharged to the environment. The CNSC facility operating licence includes a condition for the Key Lake mill to implement this action plan.

Pursuant to this action plan Cameco has been proceeding to modify the mill effluent treatment process in order to reduce molybdenum and selenium levels to very low concentrations. The project, originally planned to be complete in the first part of 2008, experienced difficulties in commissioning that have subsequently required further project changes. Cameco now expects this project to be completed and the new process changes optimized in the first half of 2009. Cameco plans to update the CNSC in April 2009 with respect to the indicative performance of the molybdenum and selenium removal circuit. Depending on the relative success of this project in reducing molybdenum and selenium concentrations in the Key Lake mill effluent, further work identified in the action plan referred to in the licence condition may or may not be required.

The EA for the increased licence capacity is pending demonstration of the effectiveness of the process to reduce concentrations of molybdenum and selenium. Cameco expects that reducing the current level of these metals will help advance this EA.

In addition to obtaining approval for the EA (which has to be resubmitted at the appropriate time) and licence approval to operate at higher production levels, Cameco needs to transition to new mining zones at McArthur River and to implement various mill process modifications at Key Lake in order to sustain increased production levels. Mine planning, development and freeze hole drilling for the McArthur River zone transition is ongoing and only after this transition is complete, can Cameco fully assess the production rate capacity of the new mining zones.

A revitalization assessment of the Key Lake mill was completed in the first part of 2008. Subsequently, engineering commenced and further assessment of alternative options began. The Key Lake revitalization plan includes upgrading circuits with new technology for simplified operation, increased production capacity and improved environmental performance. The engineering and project planning for replacement of the acid and oxygen plants was further advanced in 2008. Construction of these replacement plants is planned to start in 2009, subject to regulatory approvals.

If Cameco receives approval for the increased production limit, Cameco expects that annual production will range between current levels and 20 million pounds until such time as revitalization is completed at Key Lake. Annual production levels after mill

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revitalization are expected to be largely dependent on mine production. As such, Cameco anticipates it will be a number of years before it can achieve the sustainable increased production rates at these operations.

The tailings management facility (TMF) is located within the Deilmann pit, which was mined out in the 1990s. Tailings from processing McArthur River ore is deposited in this TMF.

In February of 2009, Cameco received regulatory approval for the deposition of tailings to a moderately higher elevation in the Deilmann TMF. At current production rates, the approved capacity of the Deilmann TMF increases from five years to approximately eight years, assuming only minor storage capacity losses due to sloughing (or erosion) from the pit walls.

Cameco also initiated technical pre-feasibility work to secure long-term tailings capacity at Key Lake that will be sufficient to hold all tailings generated from processing of McArthur River Mineral Reserves as well as substantial additional capacity to allow for other potential sources of production. This tailings option study is considering the feasibility of further extending the capacity of the Deilmann TMF and options for new tailings management facilities. Cameco expects to submit a project description to regulatory agencies in 2009 that will initiate the environmental assessment process for securing long-term tailings capacity at Key Lake.

With respect to the ongoing operation of the Deilmann TMF, Cameco has performed several studies to better understand the pitwall sloughing mechanism and initiated engineering work to design and build mitigation measures for prevention of sloughing. Sloughing has occurred in the past at the Deilmann TMF resulting in the loss of approved capacity. Although the situation has recently stabilized as a result of stabilizing the water level in the pit, there is a risk of further sloughing at the Deilmann TMF.

At the Key Lake site there is another TMF. It is an above-ground impoundment with tailings stored within compacted till embankments. This facility, constructed in 1983, has not received tailings since 1996. Cameco is reviewing several decommissioning options regarding this facility.

There are five rock stockpiles at the Key Lake site. Three of the stockpiles contain non-mineralized waste rock and two contain low-grade mineralized material. The latter are currently used to lower the grade of McArthur River ore to approximately 4% U₃O₈ before entering the milling circuit. The dilution of the high-grade ore serves three purposes: recovery of uranium from the low-grade material, reduction of radiation exposures in the mill, and final disposal of the low- grade waste. The remaining non-mineralized waste rock stockpiles will require decommissioning upon site closure.

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1.11 Production Plan

The mining plan has been designed to extract all of the current Mineral Reserves. McArthur River currently has sufficient Mineral Reserves to continue production to 2033. Yearly production is currently limited by McArthur’s Uranium operating license at 18.7 million pounds of U₃O₈.

It is expected that Mineral Reserves may increase as further exploration continues from both surface and underground and mining plans are put in place for Zones 4 South, A and B Mineral Resources. Cameco believes there is good potential it will be able to convert portions of the McArthur River Measured and Indicated Mineral Resources to Mineral Reserves, in order to maintain annual production at 18.7 million pounds for longer than currently estimated and/or extend mine life. Mineral Resources that are not Mineral Reserves have no demonstrated economic viability.

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1.12 Economic Analysis

The economic analysis for the McArthur River Mine, is based on the current mine plan and the estimated Mineral Reserves only. The analysis does not contain any estimating involving the potential mining and milling of the Mineral Resources from any mineralized zone. It cannot be assumed that all or any part of the Inferred Mineral Resources will ever be upgraded to a higher category. Accordingly, expenditures that may be required to bring any of the Mineral Resources into production or to identify additional Mineral Resources have not been included.

The analysis is from the point of view of Cameco, which owns, directly or indirectly, 69.805% of the MRJV, and incorporates Cameco’s projected sale revenue from its proportionate share of the related production, less its share of the related operating and capital costs of the MRJV, as well as all royalties that will be payable on the sale of concentrates.

The analysis estimated a pre-tax NPV (10%) to Cameco, as at January 1, 2009, of Cdn$2.69 billion for its share of the McArthur River Mineral Reserves. The pre-tax IRR has been estimated to be 13%.

Operating costs for the MRJV were estimated to average Cdn$19.69/lb U₃O₈ over the life of the estimated Mineral Reserves only. For the period from 2009 to 2013, operating costs were estimated to average Cdn$15/lb U₃O₈. The operating projections are stated in constant 2009 dollars and assume an annual production rate of 18.7 million pounds until 2016, and gradually declining annual production until 2033. Operating costs include estimated underground mining operations and milling costs.

Mining of the McArthur deposit is capital intensive in comparison to other underground types of mining. The extraction method utilizing raisebores allows the operation to minimize the size of excavations in ore and therefore reduce the risk of ground movement that could potentially impact the freeze wall integrity. Given the importance of preserving freeze wall integrity, the mining methods in this report has taken this into account.

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1.13 Project Risks

McArthur River is a challenging deposit to mine. These challenges include control of ground water, weak ground formations, radiation protection, water inflow, mining method uncertainty and changes to productivity, mine transitioning, regulatory approvals, tailings capacity, reliability of facilities at Key Lake, surface and underground fires.

Two of the primary geotechnical challenges in mining the deposit are control of groundwater and ground support in the immediate area of massive mineralization, in areas where the rock is fractured and faulted, and in the overlying sandstone. In general, the poorest ground conditions have been encountered in the hanging wall sandstone along the western edge of the deposit, up from the footwall unconformity to the tip of the basement wedge. Geotechnical investigation holes are drilled into any planned mining areas prior to mining and help determine the mining design and whether development in an area is low, medium or high risk.

Major water bearing formations at high hydrostatic pressure are present in the altered sandstone, P2 fault and unconformity overlying the basement rocks. A risk of mine flooding is present if either of these formations is intersected with mine openings or exploration drill holes. As a result, prior to mining an ore zone, the footwall areas must be frozen to isolate the ore zone from the water bearing sandstone and vertical faults that form the western part of the deposit. Ground freezing also helps stabilize the highly fractured footwall rocks during mining operations and reduces the potential for radiation exposure from radon dissolved in the ground water. Ground freezing, however, will only reduce, but not eliminate, these challenges. The different methods of ground freezing can result in freeze walls that are not 100% enclosed and therefore do not provide full protection from water inflows. There is a possibility of a water inflow event during the drilling of holes to freeze the ground as well as due to other causes. Therefore, the risk of water inflows at McArthur River remains.

All mine development to date has attempted to minimize the amount of water to be encountered. This was done through extensive grouting and careful placement of mine development away from known groundwater sources whenever possible, as well as ground freezing.

Production at the McArthur River mine was temporarily suspended on April 6, 2003, as increased water inflow from an area of collapsed rock in a new development area, located just above the 530 m level, began to flood portions of the mine. Remedial work to return the mine to safe operating condition was initiated during the second quarter of 2003 and was sufficiently advanced in July 2003 for mine production to resume. The excess water inflow was sealed off by July 2004. Permanent water treatment capacity was expanded to about 750 m³/h.

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During the water inflow incident, additional temporary capacity was put in place to treat the water flows. Construction was completed in 2005 to increase the permanent and contingency water treatment capacity to approximately 1,500 m³/h. In 2008, Cameco increased pumping capacity at the McArthur River mine to 1,650 m³/h from the previous 1,500 m³/h, with a potential to add additional capacity. Cameco has the ability to treat between 750 and 800 m³/h through its conventional water treatment plant. In addition, another 750 m³/h contingency water treatment capacity is available which requires regulatory approval to use. Beyond that, Cameco has water storage capability of 50,000 m³ in a surface pond which could provide several weeks storage for any inflows in excess of hourly treatment capacity.

Current discharge rates are limited by the Saskatchewan MOE with the approval to release up to 360 m³/h during the period of April 15 to June 15 to allow passage of spawning fish through the downstream Read Creek culvert and up to 833 m³/h for the remainder of the year. Cameco is working on obtaining regulatory clarity for contingency water treatment and release in the event of a large water inflow.

In 2009, McArthur River plans to upgrade the Read Creek culvert to allow fish passage during high flow conditions, apply to Saskatchewan MOE for removal of the 360 m³/h flow restriction, and submit an application to CNSC and Saskatchewan MOE for formal approval of the McArthur Contingency Water Management Plan that would allow Cameco to operate the contingency water treatment plant and discharge at rates up to 1500 m³/h during mine inflow conditions.toto

In November of 2008, the lower extraction area for Lower Zone 4 development on the 590 m level encountered a small inflow of water that was quickly captured and controlled. This area was considered low risk development which is defined as having an inflow potential of less than 100 m³/h or an order of magnitude below our pump and treat capacity. The inflow has not caused Cameco to alter any planned mining in this area. However, full grouting of the inflow area is required before development resumes.

The 2008 water inflow is still under investigation, however the necessary measures to control the water have been implemented and progress is being made. The water is being managed through the conventional water handling

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		systems, and contingency water treatment systems have not been required to mitigate this situation.
		The consequence of another water inflow at McArthur River will depend upon the magnitude, location and timing of any such event, but could include a significant reduction in McArthur River production, a material increase in costs, a loss of Mineral Reserves, or require Cameco to give notice to many of its customers that it is declaring an interruption in planned uranium supply. Although Cameco takes steps to mitigate the risks of water inflow, there can be no guarantee that such steps will be successful and water inflow could have a material impact upon Cameco.
		A significant amount of the estimated Mineral Reserves in Upper Zones 1, 3, and 4 have been planned for mining with the boxhole boring method, with production planned to commence in Upper Zone 4 in 2013. This method has had limited testing at Cigar Lake and Rabbit Lake. Boxhole boring is a mining technique used around the world, this will represent its first application in uranium mining. Additional testing at McArthur River will be required to evaluate the productivity of this method, and will likely require additional operational development during test work and initial mining phases.
		In order to address the technical challenges with this mining method (described above), Cameco has scheduled a long lead-time for implementation to ensure the technical challenges are understood and risks mitigated. Until Cameco has fully developed and tested the boxhole boring method at McArthur River, there is uncertainty in the estimated productivity. Failure to resolve the technical challenges with this mining method could adversely impact planned production and timing, which could have a material impact upon Cameco.
		Beginning in 2009, Cameco expects to transition to new mining areas at McArthur River, which involves significant technical challenges. Failure or delay in overcoming these challenges may have a material impact upon Cameco.
		Underground mine fires pose a serious threat to mine workers and mine operations. Controls and procedures are in place to mitigate the risk of mine fires.
		Failure to maintain existing tailings capacity at the Deilmann TMF due to sloughing or other causes or failure to obtain or delay in obtaining regulatory approval for a new tailings management facility or to expand existing tailings capacity at the Deilmann TMF could constrain uranium production, which could have a material adverse impact upon Cameco.
		The original Key Lake milling facilities and related infrastructure have been in service for over twenty five years. In late 2006 to address the risks associated with an aging facility, Cameco initiated the development of a strategic plan to revitalize the Key Lake facilities for the next 25 years of operation to mill McArthur River ore. The key

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objectives of this plan are to refurbish or replace selected areas of the existing infrastructure, enhance environmental performance and increase nominal production capacity to approximately 24 million pounds U3O8 per year. As part of the revitalization of the Key Lake mill, Cameco is planning to commence the construction of replacement of acid and oxygen plants in 2009.

1.14

Conclusions and Recommendations

		With more than a 150 M lbs of U3O8 mined from the McArthur River deposit, Cameco has demonstrated that the challenging conditions associated with mining in the Athabasca Basin can be overcome. The operational experience gained since the start of commercial production has resulted in significant risk reduction.
		The McArthur River operation estimated Mineral Reserves have proven, thus far, to be conservative with more U3O8 extracted than predicted to date. As a result of the high grade of the deposit it has been shown that the Mineral Reserve based economics produce robust cash flow margins and are not significantly sensitive to the grade and price variations assumed in this report. Given that the Zone 4 area, planned for production in 2010, has no historic production base for comparison with the Mineral Reserve estimates, calibration may be required.
		The single greatest risk to the operation is production interruption from water inflows. Although significant improvements have been made since 2003, mining has inherent risk as rockmass quality is variable in nature. The operation has developed maximum inflow volume scenarios that have been validated by independent consultants and pumping and treatment systems have been established accordingly. However, it is recommended that ongoing assessment and redundant capacity requirements continue to be reviewed.
		Cameco has recognized the need to develop new mining methods such as boxhole boring for ore extraction in the upper portion of the mineralized zones of the McArthur River deposit where raisebore chambers are difficult to develop. This approach is fully endorsed, but productivity from the boxhole method is not yet firmly established. The test program for boxhole boring therefore needs to continue as planned.
		The Mineral Resources at the operation are significant and it is recommended that Cameco assess the potential for converting Mineral Resources to Mineral Reserves in the south end of the mine initially. This is necessary for the mine to increase either the time frame for mining at 18.7 million lbs of U3O8 per year or extending the mine life. In light of the positive surface drilling results encountered over the last several years, it is recommended that surface exploration be continued along the north and south ends of the P2 structure.

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		In order to improve confidence on the calculation of uranium grade from radiometric probing results it is recommended that one in twenty underground holes should be assayed to confirm that the current calibration of the probe is reliable. Further density determination should be made on core samples prior to sampling the core. This is for confirmation of the formula currently used to calculate density.
		With the recent and planned expenditures on infrastructure at Key Lake, mill capacity is expected to return to past performance levels, and in the future have capacity to produce beyond the current license limit. Longer term issues with tailings are well understood and studies for tailings capacity expansion take into account the Mineral Reserves and Resources at McArthur River as well as other potential tailings streams.
		The high grade nature of the deposit has required a capital intensive approach to extraction. As such, the operating and capital budgets set out in Tables 18-7, 18-8 and 18-9 of Section 18.7 are necessary to ensure that the McArthur River operations continue to produce in the lowest risk environment possible and are endorsed by the authors of this technical report. Given the significant margin of cost to revenue, it is believed that all estimated Mineral Reserves can be extracted economically. It is recommended that any increased production be in the context of increased raisebore access along the strike length of the estimated Mineral Reserve and potential Mineral Resource additions.
		The authors of this technical report concur with, and recommend that Cameco proceed with, the foregoing plans.

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2

INTRODUCTION

2.1

Introduction and Purpose

This report prepared for Cameco, by or under the supervision of internal qualified persons and one external qualified person, is in support of disclosure of material scientific and technical information on the McArthur River operation. The report has an effective date of December 31, 2008 and has been prepared to comply with NI 43-101 under the supervision of the following individuals:

	•		David Bronkhorst, P. Eng., General Manager, McArthur River Operation, Cameco Corporation;
	•		Charles R. Edwards, P. Eng., Director Metallurgy, AMEC Americas Ltd.
	•		Alain G. Mainville, P. Geo, Director, Mineral Resources Management, Cameco Corporation;
	•		Gregory M. Murdock, P.Eng., Technical Superintendent, McArthur River Operation, Cameco Corporation
	•		Leslie D. Yesnik, P. Eng., General Manager, Key Lake Operation, Cameco Corporation

		The individuals noted above are “qualified persons” within the meaning of NI 43-101 responsible for the content of this report. All five qualified persons have visited the McArthur River and Key Lake sites. The date and duration of each qualified person’s most recent inspection of the McArthur River and Key Lake sites are included in their respective Certificate of Qualified Person filed with this report and are listed below.
		Charles R. Edwards visited the McArthur River Operation for a day in April 2008 to review the ore slurry handling processes, equipment and structures and tour the plant. Mr. Edwards went to the Key Lake Operation in May 2008 for a day to review the milling processes, equipment, technology development and revitalization plans and to tour the plant. Mr. Edwards previously made numerous visits to both sites while Director, Engineering & Projects with Cameco.
		Alain G. Mainville toured the Key Lake mill and the McArthur River underground mine on February 22, 2008. Mr. Mainville was previously an employee at Key Lake for seven years. He has been involved with the McArthur River Operations since 1995 and has visited the site on numerous occasions.
		Mr. Bronkhorst and Mr. Murdock’s work locations are at the McArthur River Operation and have therefore visited the site generally at least twice a month for periods extending up to seven days.

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Mr. Yesnik is General Manager of Key Lake Operation and is present at the site generally at least twice a month for periods extending up to 7 days.

2.2

Report Basis

		This report has been prepared with available internal Cameco data and information and data and information prepared for the MRJV.
		The principal technical documents and files relating to the McArthur River operation that were used in preparation of this report are listed in Section 22.

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3		RELIANCE ON OTHER EXPERTS
		In the context of Form 43-101F1, item 5, the authors have relied, and believe they have a reasonable basis to rely, upon the following individuals who have contributed the environmental, legal, social, marketing and taxation information stated in this report, as noted below:
		Jean Alonso, P. Eng, Director, Compliance & Licensing, Cameco Corporation, Sections 4.6 (a description of known environmental liabilities) and 18.5 (a description of environmental considerations)
		Pat Landine, P. Eng, Chief Geo-Environmental Engineer, Technical Services, Cameco Corporation, Sections 4.6 (a description of known environmental liabilities) and 18.5.3 (a description of environmental considerations).
		Larry Korchinski, LLB, Director, Legal Affairs, Securities Compliance, Cameco Corporation, Sections 4.2 (a description of mineral tenure), 4.3 (Surface tenure), 6.1 (a description of ownership), and 18.4.3 (a description of toll milling contracts), and 19.9 (aboriginal title and consultation issues).
		Penny Buye, BA Econ, Manager, Market planning and Analysis, Marketing, Cameco Corporation, Section 18.3 (a description of uranium markets) and 18.4.4 (a description of uranium sales contracts).
		Bev Godson, CMA, Director, Financial Services, Cameco Corporation, Section 18.6 (a description of taxes and royalties).

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4

PROPERTY DESCRIPTION AND LOCATION

4.1

Location

		The McArthur River minesite is located near Toby Lake in northern Saskatchewan, approximately 620 km north of Saskatoon, at approximate latitude 57o 46’ north and longitude 105o 03’ west, and about 40 km inside the eastern margin of the Athabasca Basin Region in northern Saskatchewan, Canada (see Figure 1).
		The McArthur River minesite is 80 km northeast by road from the Key Lake milling operation. The Cigar Lake project is 46 km northeast and the Rabbit Lake operation is 95 km northeast from the McArthur River minesite. No direct roads connect McArthur River to the Cigar Lake or Rabbit Lake operations.

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Figure 1 — McArthur River Operation Location

Source: Cameco

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4.2

Mineral Tenure

		The mineral property consists of 21 mineral claims and one mineral lease (“ML-5516”) totalling 84,818 ha.
		The McArthur River uranium deposit is located in the area subject to ML-5516, totalling 1,380 ha. The right to mine this uranium deposit was acquired by Cameco under this mineral lease, as renewed, effective March 8, 1994 from the province of Saskatchewan. This mineral lease is granted by the province of Saskatchewan under The Crown Minerals Act (Saskatchewan). Under the Mineral Disposition Regulations, 1986 (Saskatchewan), issued under The Crown Minerals Act (Saskatchewan), the term of ML-5516 is for 10 years, with a right to renew for successive 10 year terms absent a default by Cameco. Lease ML-5516, like all Crown leases, cannot be terminated by the provincial government except in the event of default or default under any of the provisions of The Crown Minerals Act (Saskatchewan), or regulations there under, including for certain prescribed environmental concerns. The current mineral lease expires in March 2014.
		Surrounding the McArthur River uranium deposit are 21 mineral claims, totalling 83,438 hectares. The 21 mineral claims were also granted by the province of Saskatchewan under The Crown Minerals Act (Saskatchewan). These mineral claims grant the right to explore for minerals. A holder of a mineral claim in good standing has the right to convert the mineral claim into a mineral lease. Surface exploration work of a mineral claim requires additional government approval. The mineral lease and claims are delineated on the ground by staking posts. The Mineral Disposition Regulations, 1986, (Saskatchewan) recognize the staked boundaries as the legal boundaries. A legal survey of a portion of the western property line was done in 1984 and covers the boundary adjacent to the McArthur River mine site.
		An annual cash payment of $13,800 is required to maintain ML-5516 in good standing. The 21 mineral claims require annual exploration expenditures of $2.1 million. However, title is secured until at least 2017, by virtue of previous assessment work submitted and approved by the province of Saskatchewan. Disposition status is included in Table 4-1.
		Figure 2 shows the McArthur River mineral lease and mineral claims as currently registered with the province of Saskatchewan.

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Table 4-1 — McArthur River Operation — Disposition Status

Record

Area

Annual

Next Payment

Disposition

Date

(ha)

Assessment

Due

ML 5516

8-Mar-84

1,380

$13,800

08-Mar-09

S 105653

8-Mar-77

4,880

$122,000

08-Mar-17

S 105654

8-Mar-77

4,076

$101,900

08-Mar-17

S 105655

8-Mar-77

4,380

$109,500

08-Mar-17

S 105656

8-Mar-77

3,434

$85,850

08-Mar-17

S 105657

8-Mar-77

3,290

$82,250

08-Mar-17

S 105658

8-Mar-77

4,060

$101,500

08-Mar-17

S 105659

8-Mar-77

4,752

$118,800

08-Mar-17

S 105660

8-Mar-77

2,945

$73,625

08-Mar-17

S 105661

8-Mar-77

4,505

$112,625

08-Mar-17

S 105662

8-Mar-77

3,470

$86,750

08-Mar-17

S 105663

8-Mar-77

3,248

$81,200

08-Mar-18

S 105664

8-Mar-77

5,055

$126,375

08-Mar-19

S 105665

8-Mar-77

4,519

$112,975

08-Mar-18

S 105666

8-Mar-77

4,930

$123,250

08-Mar-17

S 105667

8-Mar-77

3,926

$98,150

08-Mar-17

S 105668

8-Mar-77

2,075

$51,875

08-Mar-17

S 105669

8-Mar-77

2,838

$70,950

08-Mar-17

S 105670

8-Mar-77

5,207

$130,175

08-Mar-17

S 105671

8-Mar-77

3,586

$89,650

08-Mar-18

S 105672

8-Mar-77

3,390

$84,750

08-Mar-17

S 105673

8-Mar-77

4,872

$121,800

08-Mar-18

Total Claims (21)

83,438

$2,085,950

Total Lease (1) and Claims (21)

84,818

$2,099,750

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Figure 2 — Mineral Lease and Claims Map

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4.3

Surface Tenure

The surface facilities and mine shafts for the McArthur River operation are located on lands owned by the province of Saskatchewan. Cameco acquired the right to use and occupy the lands under a surface lease agreement with the province of Saskatchewan. The most recent surface lease agreement was signed in April 1999 and has a term of 33 years. The province of Saskatchewan uses surface leases as a mechanism to achieve certain environmental protection and socio-economic objectives. As a result, certain obligations are attached to the surface lease and relate primarily to annual reporting regarding the status of the environment, land development, and progress on northern employment and business development. On termination or expiry of the surface lease, a new surface lease can be entered into, if necessary, until full property decommissioning and reclamation has been achieved. The McArthur River surface lease presently covers approximately 651 ha.

The McArthur River operation is located on historical traditional lands of First Nations. Pursuant to historical treaties, it is generally acknowledged that First Nation bands ceded Aboriginal Title to most traditional lands in northern Saskatchewan in exchange for treaty benefits and reserve lands but generally retained their right to hunt, fish, and trap on these traditional lands. Cameco understands that the federal and Saskatchewan governments have a duty to consult First Nations before taking actions that affect the ability of First Nations to exercise treaty rights. A more detailed discussion of the governments’ duty to consult, its impact on project proponents generally, and Cameco’s notice of claims potentially affecting the Key Lake and McArthur River sites is provided in section 19.9 below.

The McArthur River mine site is compact, occupying approximately an area of one kilometre in the north/south direction and half a kilometre in the east/west direction. Figure 3 shows the McArthur River general site arrangement with the outline of the surface leases.

In 2007, the annual rent and taxes for the McArthur River surface lease were $1 million and for quarries and miscellaneous, $19,000.

Tri-City Surveys of Saskatoon, Saskatchewan, carried out the McArthur River surface lease survey in March 2000.

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Figure 3 — Map of Mine Facilities and Surface Lease

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4.4

Mine and Infrastructure

All current Mineral Reserves and Mineral Resources are contained within mineral lease ML-5516. Underground workings are confined to a small area of the mineral lease where mining is concentrated.

Waste rock piles from the excavation of the three shafts and all underground development are confined to a small footprint within the surface lease. Waste rock management is further discussed in Section 5.5 and Section 18.5.3.

No tailings are stored at the McArthur River site since all ore mined is transported to the Key Lake mill for processing. Tailings management at the Key Lake site is discussed in Section 18.5.3.

A discussion of the mine shafts, buildings, and infrastructure at the McArthur River site is included in Section 5.5.

A site plan of the existing and planned surface facilities is shown in Figure 3. . The locations of the McArthur River deposit and other significant but sub-economic uranium discoveries are further discussed in section 6.2.1 and presented on Figure 6-1.

4.5

Royalties

For a discussion of royalties, see Section 18.6.2.

4.6

Known Environmental Liabilities

Material environmental liabilities are essentially future decommissioning liabilities. These are covered by regulatory-required financial assurances. In this process, Cameco develops a conceptual plan describing how a particular site could be decommissioned. Once the plan is accepted by the regulatory agencies, it is then cost estimated, typically resulting in the issuance of letters of credit. The design basis for this work is a “decommission tomorrow” scenario, as the regulatory foundation of this work is protection of the taxpayer in the event that a company is unable to meet its decommissioning obligations. It is important to note that regulators accept the decommissioning plans in concept — as an approach to address environmental liabilities which has reasonable prospects of meeting current regulatory requirements. As Cameco-operated properties approach or go into decommissioning, further regulatory review of the detailed decommissioning plans may result in additional requirements, associated costs

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and financial assurances. It is not possible to predict what level of decommissioning and reclamation (and financial assurances relating thereto) may be required in the future by regulators. If Cameco is required to comply with significant additional regulations or if the actual cost of future decommissioning and reclamation is significantly higher than current estimates, this could have a material adverse impact on the work needed to address these future environmental liabilities.

Beginning in 1996, Cameco has conducted regulatory-required reviews of its decommissioning plans for all Canadian sites. These periodic reviews are nominally done on a five-year basis, or at the time of an amendment to or renewal of an operating licence. These updates serve to reflect changes in operations, conditions, evolving technologies and changing regulatory requirements. In 2003, Preliminary Decommissioning Plans (PDPs) for both the Key Lake (Cameco, 2003a) and McArthur River operations (Cameco, 2003b) were prepared by Cameco and approved of by both the CNSC and SMOE. These conceptual PDPs discussed the environmental liabilities that were known at that time. The estimated cost of implementing these PDPs and addressing the known environmental liabilities resulted in production of two other associated documents called preliminary decommissioning cost estimates (PDCEs) for both Key Lake (Cameco 2003c) and McArthur River Operations (Cameco, 2003d). Financial assurances to cover the 2003 PDCEs for McArthur River and for Key Lake operations were posted with SMOE in the form of irrevocable standby letters of Credit (LOC).

These documents were revised in 2008 in support of the CNSC licence renewal process, and considered changes to conditions over the preceding 5 year period since the last revision. Based on the total estimated decommissioning costs presented and approved in these PDCEs, Cameco increased the financial assurance posted with the province of Saskatchewan to Cdn$120.7M and Cdn$36.1M for decommissioning the Key Lake and McArthur River operations, respectively. These estimates replace the 2003 estimates of Cdn$45.5M and Cdn$8.6M respectively. These financial assurances represent 100% of the total estimated costs and not Cameco’s share of such costs. Broadly speaking, the increases in the estimates have resulted from significant escalation of labour and equipment rates, increases in up-front project management efforts, interim care and maintenance costs while awaiting regulatory approvals, higher levels of contingency in engineering cost estimates, and general inflation provisions. A measure of stability in the estimates for the next few years is expected, given the granting of five-year licences to 2013.

The known environmental liabilities are discussed further in Section 18.5.

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4.7

Permitting

For a discussion of permitting, see Section 18.5.1.

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5

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

5.1

Access

McArthur River ore is transported to the Key Lake mill for processing some 80 km to the southwest along a gravel road.

The property is accessible by road and air. Supplies are transported by truck and can be shipped from anywhere in North America through the company transit warehouse in Saskatoon. Trucks travel north from Saskatoon, on a paved provincial road through Prince Albert to just south of La Ronge, then west on gravel surfaced Provincial Road 165 and north on gravel Provincial Road 914 to the Key Lake mill. The 80 km road from Key Lake to McArthur River is gravel surfaced and maintained by Cameco. The Key Lake to McArthur River road is used to transport ore to Key Lake for processing and to ship supplies to McArthur River. Public access to this road is controlled and restricted.

Figure 4 shows the regional location of the McArthur River site and local roads.

An unpaved airstrip is located approximately one kilometre east of the minesite within the surface lease, allowing flights to and from the McArthur River property.

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Figure 4 — McArthur River Site — Regional Location and Roads

5.2

Climate

The climate is typical of the continental sub-arctic region of northern Saskatchewan. Summers are short and rather cool, even though daily temperatures can reach above 30⁰ C on occasion. Mean daily maximum temperatures of the warmest months are around 20⁰ C and only three months on average have mean daily temperature of 10⁰ C or more. The winters are cold and dry with mean daily temperature for the coldest month below minus 20⁰ C. Winter daily temperatures can reach below minus 40⁰ C on occasion.

Freezing of surrounding lakes, in most years, begins in November and breakup occurs around the middle of May. The average frost-free period is approximately 90 days.

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Average annual total precipitation for the region is approximately 450 mm, of which 70% falls as rain, more than half occurring from June to September. Snow may occur in all months but rarely falls in July or August. The prevailing annual wind direction is from the west with a mean speed of 12 km/h.

Site operations are carried out throughout the year despite cold winter conditions. The fresh air necessary to ventilate the underground workings is heated during the winter months using propane-fired burners.

5.3

Physiography

The McArthur River project lies within the Athabasca South Eco-District of the Northern Boreal Eco-Region. The vegetation at the McArthur River property are typical of the taiga forested land common to the Athabasca basin area of northern Saskatchewan. The topography in the region is dominated by large scale drumlins, which locally can have relief of 100 m above the surrounding lakes. Overburden thickness over the deposit is approximately 10 m. The terrain consists primarily of sandy rolling hills which are separated by a number of low-lying areas filled with lakes, creeks, and muskegs.

The dominant upland forest type is a semi-open jack pine forest with an understory of lichens and blueberries. The moister lowlands are predominated by open black spruce and tamarack stands with an understory of mosses and Labrador tea. Major forest fires have covered most of the McArthur River area over the last 20 years and have modified the local vegetation.

The minesite elevation is approximately 550 masl.

5.4

Local Resources and Proximity to Population Centre

No communities are located in the immediate vicinity of either the McArthur River or Key Lake operations. The closest community to the two operations is the village of Pinehouse, 240 km south of the Key Lake site by gravel Provincial Road 214. The McArthur River minesite is a further 80 km north from the Key Lake site via a Cameco maintained gravel road.

Employees commute from a number of designated communities by air. Most company employees are on a week-in and week-off schedule. Contractor employees are generally on a longer work schedule.

Athabasca Basin community residents fly from various pick-up points in smaller airplanes to the minesite. Southern resident employees fly to the site from

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Saskatoon with stop-over pick-up points in Prince Albert and La Ronge. The number of weekly flights varies with the size of the workforce.

Personnel are recruited on a preferential basis: initially from the communities of northern Saskatchewan, followed by the province of Saskatchewan generally, and then from outside the province. Personnel are flown to site from the northern area communities and major Saskatchewan population centres such as Saskatoon.

Site activities such as construction work and mine development work are performed by northern owned or joint venture contactors and major contractors that have the ability to hire qualified personnel from the major mining regions across Saskatchewan and Canada. Cameco personnel conduct all production functions.

The McArthur River site is linked by road and by air to the rest of the province of Saskatchewan facilitating easy access to any population centre for purchasing of goods at competitive prices. Saskatoon is a major population centre some 620 km south of the McArthur River mine with highway and air links to the rest of North America.

5.5

Infrastructure

McArthur River is a developed producing property, with sufficient surface rights to meet all of its mining operation needs as well as sufficient site facilities and infrastructure. Site facilities include a 1600 m long gravel airstrip and air terminal, permanent residence and recreation complex, administration and maintenance shops building, warehouse, water treatment plant and ponds, freeze plant, concrete batch plant, Pollock, No. 2, and No. 3 Shaft headframes and hoisthouses, site roads, powerhouse, electrical substations, ore loadout building, fresh water pumphouse and miscellaneous infrastructure.

Power to the McArthur River site is provided by a SaskPower 10 km long 138 kV feeder line from the main power transmission line. There are standby generators in case of grid power interruption.

The McArthur River mine site has access to sufficient water from nearby Toby Lake to satisfy all industrial and residential water requirements.

No tailings management facilities are required as McArthur River ore is sent to the Key Lake mill for processing. Processing facilities at Key Lake are discussed in Section 16.3. Tailings management facilities at Key Lake are discussed in Section 18.5.3.

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Waste rock piles from the excavation of the three shafts and all underground development are confined to a small footprint within the surface lease. Waste piles have been segregated into three separate areas: clean waste, mineralized waste (>0.03% U₃O₈) and potentially acid generating waste (PAG). The latter two stockpiles are contained on engineered lined pads. The clean waste piles include piles for mine development waste, crushed waste, and various piles for concrete aggregate and backfill. Waste rock management is discussed in Section 18.5.3.

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6

HISTORY

6.1

Ownership

There have been numerous changes in ownership of participating interests in the joint venture that governs the McArthur River property. The current owners, and their participating interests in the MRJV are as follows: Cameco has a direct and indirect participating interest of 69.805% and AREVA has a direct and indirect participating interest of 30.195%.

The original joint venture was established in 1976 between Canadian Kelvin Resources Ltd. and Asamera Oil Corporation Ltd. (Asamera) to explore the Keefe Lake area. Asamera was the operator of the joint venture. In 1977, SMDC, a predecessor company to Cameco, acquired a 50% interest in the joint venture.

Around 1979, the Keefe Lake Joint Venture proceeded to divide the Keefe Lake area into three separate project areas of Dawn Lake, McArthur River and Waterbury Lake (which includes a portion of the lands now known as Cigar Lake).

Effective January 1, 1980, a joint venture agreement was entered into to govern exploration of the McArthur River area and SMDC, holding a 50.75% participating interest in the joint venture at that time, was appointed the operator of the MRJV.

Between 1980 and 1988, SMDC was involved in a number of transactions of sales and purchases of participating interests in the MRJV.

In 1988, Eldorado Resources Limited merged with SMDC to form Cameco. In connection with that merger transaction, SMDC assigned to Cameco its 43.991% participating interest in the MRJV and Cameco became the operator of the MRJV.

In 1992, Cameco acquired an additional 10.0% participating interest in the MRJV and in 1995, Cameco entered into two transactions with Uranerz Exploration and Mining Limited (Uranerz) that resulted in Cameco holding, in total, a 55.844% participating interest in the MRJV.

Since 1995, there have been two significant changes in ownership in the MRJV:

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	•		in 1998, Cameco bought all of the shares of Uranerz (and changed Uranerz’s name to UEM Inc.), thereby increasing its direct and indirect participating interest in the MRJV to 83.766%; and
	•		in 1999, AREVA acquired one-half of the shares of UEM Inc., thereby reducing Cameco’s direct and indirect participating interest in the MRJV to 69.805% and increasing AREVA’s direct and indirect participating interest in the MRJV to 30.195%.

6.2

Exploration and Development History

6.2.1

General

Cameco, through its predecessor company, SMDC, became operator of the McArthur River project in 1980. Surface exploration programs, ranging from small line cutting crews to large helicopter supported drilling and prospecting camps, were active from 1980 through to 1992.

The McArthur River deposit was discovered by surface drilling in 1988. Additional surface diamond drilling from 1988 to 1992 further delineated the ore zone. Mineralization occurs at depths of 500 m to 640 m and is hosted in both the Athabasca sandstones and the underlying Aphebian metasedimentary gneisses. A graphitic, southeast dipping thrust fault is the source of a coincident electromagnetic conductor. The deposit does not have the extensive clay alteration halo or the cobalt-nickel-arsenide mineral association common to many other Saskatchewan uranium deposits.

In 1993, an underground exploration program, consisting of shaft sinking, lateral development, and diamond drilling was approved by government agencies. Approvals for mine construction and development were obtained in 1997. First production was achieved in December 1999.

Construction and development of the McArthur River mine was completed on schedule and mining commenced in December 1999. Commercial production was achieved on November 1, 2000.

The McArthur River deposit, originally called P2 North, is on the P2 grid situated on the north western boundary of the property (see Figure 5). Other significant, but sub-economic discoveries which are located on the property include the Harrigan Zone, the BJ Zone, and P2 Main. A brief history of exploration on the P2 grid is discussed below.

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6.2.2

P2 Grid Exploration History

Routine prospecting in 1980 and 1981 discovered radioactive boulders about 10 km southwest of the McArthur River deposit. Although an on-property source for these boulders has never been proven, they did help to intensify exploration efforts in this portion of the property. Exploration on the P2 grid accelerated in 1984 following the detection of a basement conductor with reconnaissance geophysical surveying. Definition of the entire P2 conductor was completed in 1986. The open ended conductor extended for 12 km on the property and became a high priority exploration target.

In 1985, drilling on the P2 conductor resulted in the discovery of the P2 Main sandstone hosted mineralization, associated with a major fault zone. Additional drilling to 1988 defined a 500 m long, sub-economic zone of mineralization with the best intersection being 1.38% U₃O₈ over 7.3 m.

In the summer of 1988, drilling along the northern portion of the conductor encountered structural disruption and sandstone alteration in hole MAC-195. MAC-196 was collared about 100 m to the west and intersected weak sandstone hosted mineralization, with characteristics similar to P2 Main. The next hole, 100 m north, intersected a similar but wider zone of mineralization. The last hole of the year, MAC-198, encountered the unconformity much higher than expected, but 65 m deeper it passed back into sandstone and intersected a 10 m thick zone of high-grade mineralization along the faulted basement/sandstone contact. Subsequent surface drilling programs in 1989, 1990, 1991, and 1992 delineated the mineralized zone over a strike length of 1,700 m and occurring at depths ranging between 500 m and 640 m. Since 1993 over 630 underground drill holes, totalling in excess of 56,000 m, have since provided detailed information for 750 m of the strike length. Over 1,400 additional underground diamond drill holes, totalling 85,000 m, were drilled for geotechnical information; probe and grout covers; service and drain holes; and freeze holes. Four distinct mineralized zones, identified as Zones 1, 2, 3, and 4, have been defined to date. Two additional Zones, A and B, are on the northern portion of the deposit and are indicated by surface drill holes only.

Diamond drilling to evaluate the P2 trend north of the McArthur River mine has been ongoing since 2004. As at December 31, 2008, approximately 80 surface drill holes totalling in excess of 42,000 m, comprising a combination of conventional and directional drilling, have tested the P2 structure at approximately 200 m intervals for a distance of 4.3 km north of the mine.

The exploration program for 2008 was a continuation of the “brownfield” drilling program which commenced in 2004. The area of focus was along the P2 trend

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to the north of Zone B. 2008 marked the second year of a three year accelerated “brownfield” exploration program with the goal to evaluate the full potential of the entire P2 trend.

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Figure 5 — P2 Grid Map

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6.3

Historical Mineral Resource and Mineral Reserve Estimates

The original McArthur River resource estimates were derived from surface diamond drilling. The drill hole data consists of assay results from 42 drill holes compiled with all relevant geological and technical data. The very high grade encountered in these drill holes justified the development of an underground exploration project. National Instrument 43-101 defines “historical estimate” as an estimate of mineral resources or mineral reserves prepared prior to February 1, 2001. Unless specified, reported estimates are for the McArthur River operation on a 100% basis and not solely for Cameco’s share thereof.

6.3.1

Historical Estimates 1991 - 2000

McArthur River Mineral Resources and Mineral Reserves published in Cameco Annual Reports for year-ends 1991 to 2000 were estimated and disclosed prior to the adoption of NI 43-101 and should be considered as historical. Except for 2000 year-end, they were not classified in compliance with NI 43-101. Their classifications as “geological reserves” or “mineable reserves” do not conform to the current “CIM Definitions Standards for Mineral Resources and Reserves” since the categories used at the time are not acceptable today. In today’s terminology, they would likely be equivalent to “Mineral Resources” or “Mineral Reserves” but still lacking proper resource and reserve sub-classification., These historical estimates are reported for historical purposes only. Except for the November 1995 historical resource model based on the pre-1992 surface drillholes, the historical estimates are not relevant or reliable as they have been superseded by a number of updated mineral resources and mineral reserves disclosures.

“Geological reserves” reported by Cameco for year-ends 1991 to 1994 are shown on Table 6-1. The estimates were based on 44 surface holes covering sections 7600N to 9300N. They were done using a cross-sectional method and a cut-off grade of 0.50% U₃O₈.

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Table 6-1: Historical Resource Estimate — Cameco, October 1991

Tonnes

Grade

Lbs U3O8

Year-ends

Type

(x 1000)

% U3O8

(millions)

1991-1994

“Geological Reserves”

2,370

5.0

260

Notes:

(1)		See the cautionary statements for historical estimates in the first paragraph of Section 6.3.1.
(2)		The necessary work to verify this historical estimate, its classifications and assumptions has not been completed. As such, this historical estimate should not be relied upon. It may not be equivalent to current classification definitions.

In November 1995, Cameco announced the results of an updated estimate of “geological reserves” and “mineable reserves”. They are based on 37 surface holes and 50 underground diamond drill holes intersections above a cut-off of 0.5% U₃O₈ on sections 7600N to 9300N. The 1995 historical estimates are listed on Table 6-2. In Cameco Annual Report for year-end 1995 “geological reserves” and “mineable reserves” were reported respectively as resources and reserves. The ‘geological reserves” were defined by a cross-sectional method on 21 vertical sections spaced at 50m and 100 m. The qualified person for this section, Alain G. Mainville, has verified the data, assumptions and methodology for the November 1995 estimate of “geological reserves”, and found the estimate not relevant but reliable as a basis to report remaining mineral inferred resources defined by the pre-1993 surface drilling. As additional underground and surface drilling was added over the years, the mineral resources for the areas not drilled since 1992 were reported from the November 1995 resource model. The underground drilling, from which the “mineable reserves” were defined, was contained within the area between mine grid Northing 8125N and 8450N.

Table 6-2: Historical Resource & Reserve Estimates — Cameco, November 1995

				Tonnes				Grade				Lbs U3O8
Year-ends		Type		(x 1000)				% U3O8				(millions)
1995-1997		“Mineable Reserves”			365.7				19.06				153.7
		“Geological Reserves”			859.0				12.02				227.8

Notes:

(1)		See the cautionary statements for historical estimates in the first paragraph of Section 6.3.1.
(2)		The necessary work to verify the historical “mineable reserves” estimate, its classifications and assumptions has not been completed. As such, the historical “mineable reserves” estimate should not be relied upon. It may not be equivalent to current classification definitions.

The historical reserves and resources published by Cameco at the end of 1998 and 1999 are presented on Table 6-3. They are the result of a 3-year program of underground drilling in the area between 8187N and 8307N defined as Zone 2.

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Table 6-3: Historical Resource & Reserve Estimates — Cameco, December 1998

						Tonnes				Grade				Lbs U3O8
Year-ends				Type		(x 1000)				% U3O8				(millions)
	1998-1999			Proven Reserves			505.0				22.15				246.5
				Probable Reserves			163.0				2.42				8.7
				Total Reserves			668.0				17.33				255.2
				Indicated Resources			859.0				12.02				227.8

Notes:

McArthur River Mineral Resources and Reserves, published in Cameco Annual Report for year-end 2000 and listed on Table 6-4 are historical estimates. The classification of mineral resources and reserves and the subcategories of each, conformed to the definitions prescribed in the proposed NI 43-101 dated November 17, 2000 and defined by the Canadian Institute of Mining, Metallurgy and Petroleum as the CIM Definition Standards on Mineral Resources and Mineral Reserves and adopted by CIM Council on August 20, 2000. The year-end 2000 Mineral Reserves and Resources estimates reflected additional drilling in Zones 1, 2, 3 and 4, along with a density adjustment based on mining production during 2000. They are not relevant and reliable as they have been superseded with a number of updated mineral resources and reserves disclosures.

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Table 6-4: Historical Resource & Reserve Estimates — Cameco, December 2000

						Tonnes				Grade				Lbs U3O8
Year-end				Type		(x 1000)				% U3O8				(millions)
	2000			Proven Reserves			768.0				21.00				355.5
				Probable Reserves			77.0				23.04				39.0
				Total Reserves			845.0				21.18				394.5
				Indicated Resources			614.0				10.74				145.4

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6.4

Historical Production

The McArthur River operation received its first operating licence in October 1999 from the AECB who later became CNSC. The underground development completed in 1999 was sufficient to allow production mining to begin in the fourth quarter. Mine production was ramped up over the next two years to just under the operating license limit of 18.718 million pounds of U₃O₈ per year (see Table 6-5). During 2008 Cameco’s share of the mine production was 12.2 million pounds U₃O₈ and portions of it remained stockpiled.

Table 6-5 — McArthur River Historical U3O8 Mine Production

																Cameco’s
																Share
				Tonnes				Grade				Lbs U3O8				Lbs U3O8
Year				(x 1000)				% U3O8				(millions)				(millions)				Comments
	1999				—				—				—				—			One production raise mined »50,000lbs U3O8. Pounds carried over to 2000.
	2000				43.7				11.6				11.174				7.800
	2001				48.0				16.2				17.166				11.983
	2002				52.5				16.0				18.524				12.931
	2003				45.4				15.2				15.243				10.641			Three-month shutdown due to water inflow event.
	2004				55.9				15.2				18.699				13.053
	2005				60.4				13.9				18.512				12.922
	2006				57.6				14.7				18.698				13.052
	2007				59.6				14.2				18.718				13.066
	2008				53.2				14.9				17.502				12.218
TOTAL					476.3				14.7				154.236				107.666

Cameco’s share of production of U₃O₈ at McArthur River/Key Lake was 11.6 million pounds for 2008, 0.4 million pounds less than the previous estimate of 12.0 million pounds. The production shortfall resulted from various process and equipment problems experienced at Key Lake. The problems encountered were corrected and Cameco’s share of production for 2009 is expected to be 13.1 million pounds. Average metallurgical mill recovery for 2008 was 98.34%.

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7

GEOLOGICAL SETTING

7.1

Regional Geology

The McArthur River deposit is located in the south-eastern portion of the Athabasca Basin, within the south-west part of the Churchill structural province of the Canadian Shield.

The Wollaston Domain, together with the Mudjatik Domain and the Virgin River Domain, form the Cree Lake Mobile Zone of the Churchill Structural Province (Lewry et al., 1978). The McArthur River area overlies the Wollaston Domain, near the contact with the Mudjatik Domain (see Figure 6). In general terms, the Wollaston Domain consists of Archean granitoid gneisses overlain by an assemblage of Aphebian pelitic, semipelitic, and arkosic gneisses, with minor interlayered calc-silicates and quartzites. These rocks are overlain by an upper assemblage of semipelitic and arkosic gneisses with magnetite bearing units. The major uranium deposits of the eastern Athabasca region, including McArthur River, are associated with graphitic members of the lower assemblage. The majority of the Wollaston Domain rocks have been influenced by mid to upper amphibolite facies metamorphism.

The Wollaston Domain basement rocks are unconformably overlain by flat lying, unmetamorphosed sandstones, and conglomerates of the Helikian Athabasca Group which is a major aquifer in the area.

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