September 27, 2018
Shares of Canadian uranium producer Cameco Corp spiked 18 per cent on Thursday, after the Tax Court of Canada ruled in its favour over a dispute with the Canada Revenue Agency (CRA) about how much tax it pays.
Cameco, which settled a U.S. tax dispute last year, came under scrutiny from Canadian tax authorities due to its offshore marketing structure, according to Reuters.
The Saskatoon, Saskatchewan-based company sells uranium to its marketing unit in Switzerland, which re-sells it to buyers, incurring less tax than the company would through its Canadian office. Cameco has said it has a marketing subsidiary there because most of its customers are located outside Canada.
The court has found Cameco to be in full compliance of Canadian laws in relation to reassessments for the years 2003, 2005, and 2006, the company said in a statement late on Wednesday.
“We hope CRA accepts the decision and applies it to other tax years in dispute,” Cameco Chief Executive Officer Tim Gitzel said.
The decision comes as Cameco and other large uranium producers have curtailed production, with prices for the radioactive metal mired in a seven-and-a-half year slump since the 2011 Fukushima meltdown led to shutdowns of all of Japan’s nuclear reactors.
Some Japanese reactors have since come back online, but global uranium inventories remain high.
Cameco shares jumped $2.35 to $15.14 in Toronto. The ruling could be worth as much as $5 per share and means Cameco could be repaid $303 million of the disputed amount that it deposited with CRA, pending possible appeal, BMO analyst Alexander Pearce said in a note.
Since 2008, the CRA has disputed Cameco’s corporate structure and the related transfer pricing methodology for certain inter company uranium sale and purchase agreements.
For the years 2003 through 2012, the CRA had issued reassessment notices for about $4.9 billion of additional income for tax purposes. The regulator had also issued notices for transfer pricing penalties for the years 2007 through 2011.