Cameco Updates Status of Port Hope Conversion Plant

Market Wire, September, 2008

ALL AMOUNTS ARE STATED IN CDN $ (UNLESS OTHERWISE NOTED)

Cameco Corporation (TSX: CCO) (NYSE: CCJ) reported today that it has resolved the issue of leaks underground from its uranium hexafluoride (UF6) production plant last year.

In a presentation to Port Hope municipal council, the company said it has combined extensive groundwater control measures with major repairs and improvements to its UF6 plant that are intended to prevent uranium and other production-related chemicals from spreading further and to ensure there are no underground leaks in the future.

The company provided council with a summary of the final reports it recently submitted to the Canadian Nuclear Safety Commission (CNSC) regarding the investigation and formal risk assessment that were conducted after the July 2007 discovery that material had leaked through the floor of the plant into soil and groundwater. Cameco voluntarily suspended operations within the UF6 plant to investigate the cause of the leak and to develop short- and long-term plans to address that issue. Operations at the adjacent plant that produces uranium dioxide (UO2) were not affected.

Andy Oliver, vice-president of Cameco's fuel services division, told council members that the company was notified September 12, 2008 that CNSC staff has accepted Cameco's plans to restart UF6 production. He expects that this will happen within the next several days. The company will issue a news release once the plant has started to produce UF6.

"After the CNSC accepted our plan to restart production, we began the final phase of putting the plant back into operation," he said. "Since the plant has been shut down for over a year, we have been following a cautious, thorough approach to restart in order to ensure it happens properly and safely."

Cameco has sufficient hydrofluoric acid (HF) to resume operations at a reduced rate that will allow production to continue for about a month. Cameco's sole supplier of HF, which is necessary to produce UF6, has terminated its long-term supply contract with Cameco. Cameco believes the contract was wrongfully terminated. The supplier has offered to supply HF, but at a significantly increased price. Cameco is working to resolve the matter and is seeking alternate supply sources. HF supply on a spot basis is not readily available or deliverable without pre-approved transportation plans.

"We have carried out a broad series of corrective actions and other control and preventative measures inside and outside the plant to resolve the issue and to ensure leaks do not occur in the future," Oliver said. "Cameco has learned a lot from the experience and will apply those lessons to other areas of its Port Hope operations and right across the company."

Cameco expects total remediation costs to be $50 to $55 million of which approximately $20 million (including $17 million incurred in 2007) will be expensed and the remainder capitalized. These expenditures were used to investigate the cause and effects of the subsurface leakage, rehabilitate the plant and install a system of wells that collect impacted groundwater in the vicinity of the plant and between the plant and the harbour. The groundwater collected is then evaporated to remove and safely dispose of contaminants.

Inside the plant, Cameco has carried out a number of major improvements, including replacement of large sections of the ground floor and application of chemical-resistant coatings to all floors, as well as removal of some contaminated soil from beneath the building. In addition, the company has significantly increased its leak prevention and detection capability by using double containment around sumps and adding leak detection sensors to some in-ground structures. Trenches have been sloped to ensure liquids are drained immediately to sumps. All trenches will be inspected regularly as part of improved liquid management practices.

Oliver said he was pleased and reassured by the fact that the final risk assessment conducted by an independent third party shows that the level of contaminants that entered the soil and groundwater on the site do not pose a threat to human health or the environment.

The company also reported that it is developing a comprehensive program to address other subsurface contamination that is the legacy from about 150 years of various industries operating on the site that Cameco now occupies. Oliver said Cameco, in consultation with the CNSC and Ontario's Ministry of the Environment, is in the process of completing this program that will provide more details about contamination across the site, most of which pre-dates Cameco's ownership of the property. Documenting historic use of the site has been a key element in understanding the findings of the investigation.

"It's essential to understand the complex industrial history of this site in order to put the results of our investigation into the proper context," Oliver said. "Cameco is committed to developing a plan to deal with this issue in an environmentally responsible manner, regardless of who was originally responsible for the contamination."