Cameco Completes Spin-off of Gold Mining Assets

Cameco Corp., the world’s largest uranium producer, completed the spin-off of its gold mining assets with the C$253.2 million initial public and secondary offering of Centerra Gold Inc. on June 30, 2004. The offering was the largest mining IPO on the TSX in seven years.

The IPO followed a significant restructuring and consolidation of Cameco’s gold assets. Prior to the restructuring, Cameco’s wholly owned subsidiary, Cameco Gold, held a 33 per cent interest in the Kumtor mine in the Kyrgyz Republic, with the remaining 67 per cent held by Kyrgyzaltyn JSC, whose shares are 100 per cent owned by the Government of the Kyrgyz Republic. The Kumtor mine, which began operations in 1997, is the largest private-sector employer and the largest foreign investment in the country. In addition, Cameco Gold held a 56 per cent ownership interest in Australia-based AGR Ltd., which in turn holds a 95 per cent indirect equity interest in the Boroo mine in Mongolia. The Boroo mine, which began operations in March 2004, is the first significant foreign investment in Mongolia for industrial development since 1979.

On June 22, 2004, the Kumtor restructuring was completed, in which Centerra acquired each of Kyrgyzaltyn’s and Cameco Gold’s interest in the Kumtor mine in exchange for shares in Centerra, with Kyrgyzaltyn initially receiving a 33 per cent common share interest. Centerra also entered into a new investment agreement with the Government of the Kyrgyz Republic relating to the operation of the mine and various investment protection rights, including tax and legal regime stabilization periods. On June 25, the remaining indebtedness of the Kumtor mine held by the International Finance Corp. (IFC) and the European Bank for Reconstruction and Development (EBRD) was also exchanged for a combination of cash and a 4 per cent common share interest in Centerra. In addition, concurrently with the closing of the IPO, Centerra acquired the remaining 44 per cent of AGR in exchange for an 8 per cent common share interest in Centerra.

On July 22, the underwriters exercised their full over-allotment option to purchase an additional 1,875,000 shares from treasury.

, the IPO and the closing of the over-allotment option, Cameco Gold will hold 52.7 per cent of Centerra, Kyrgyzaltyn will hold 15.7 per cent, EBRD and IFC each will hold approximately 2.1 per cent, with the remaining 27.3 per cent being held by the public. Based on the offering price of $15.50, Centerra’s market value is over $1 billion.

The offering was underwritten by a syndicate of underwriters jointly led by CIBC World Markets Inc. and BMO Nesbitt Burns Inc. and included RBC Dominion Securities Inc., Canaccord Capital Corp., GMP Securities Ltd., HSBC Securities (Canada) Inc., Scotia Capital Inc. and Salman Partners Inc.

On the IPO and restructuring, Cameco and Centerra were represented by Torys, under the direction of Cameco’s in-house team of Gary Chad (senior VP law), Sean Quinn (VP law and general counsel) and Caroline Gorsalitz and Larry Korchinski (senior legal advisors). Cameco Gold’s in-house counsel (now Centerra) was Gerda Bloemraad. The Torys team in Toronto consisted of Beth DeMerchant, Michael Siltala, Phil Mohtadi, David Seville, Jeremy Fraiberg, Andrew Prodanyk, Karen Shields and Jason Brooks (corporate), Christina Medland, Mitch Frazer, Nadine Côté and Danelle Parkinson (employment), Dennis Mahony and Sarah Gilbert (environmental), Cornell Wright (corporate governance) and Adam Delean (lending). The Torys team in New York consisted of Andy Beck and Natascha Feenstra (US securities).

On the Kumtor restructuring and the exchange of the Kumtor indebtedness held by IFC and EBRD, Cameco was represented by Sullivan & Cromwell, with a team of Fred Rich, Yuriy Kachuro and Anatoliy Bizhko. Sullivan & Cromwell acted for Cameco in the original Kumtor foreign investment contracts and project financing in the early 1990s and has represented Cameco with respect to Kumtor matters ever since.

Marina Stephens, international legal consultant, provided counsel to Cameco and Centerra throughout the restructuring and IPO process.

With respect to certain tax aspects of the Kumtor restructuring, Cameco was represented by Osler, Hoskin & Harcourt, with a team of Richard Tremblay and Kim Wharram.
Kyrgyzaltyn JSC was represented by Blake, Cassels & Graydon, with a team of David Glennie in London and Alisa Ruvinsky in Toronto.

The underwriters were represented by Borden Ladner Gervais, with a team of Paul Mingay, Fred Pletcher, Conor Fitzpatrick, Kathleen Keilty and Michelle Bau (securities/corporate), Rick Coburn (environmental) and Larissa Tkachenko (tax).