Cameco Stock Skyrockets After Canada Tax Court Ruling

Energy Investing
NYSE:CCJ

After a battle spanning nearly a decade, the Tax Court of Canada has ruled in favor of uranium producer Cameco.

After a battle spanning nearly a decade, the Tax Court of Canada has ruled in favor of uranium producer Cameco (TSX:CCO,NYSE:CCJ). At issue was the reassessment of company tax returns from the 2003, 2005 and 2006 calendar years.

The case was first launched by Canada Revenue Agency (CRA) in 2008. The CRA had taken issue with pricing methodology and corporate structure, questioning Cameco’s practice of selling uranium for lower fixed prices to its European subsidiary. The smaller offshoot then sold the product at a higher world price, resulting in European profits being higher than in Canada.

In 1999, Cameco opened its Swiss-based operations, Cameco Europe. It is well known that Switzerland has a more lax and favorable tax protocols and laws.

However, contrary to the CRA’s claims, the Tax Court ruled that Cameco’s marketing and trading structure involving its foreign subsidiary and the related transfer pricing methodology used for certain inter-company uranium sale and purchase agreements are in full compliance with Canadian laws for the three tax years in question.

“We are very pleased with the Tax Court’s clear and decisive ruling in our favor,” Tim Gitzel, Cameco’s president and CEO, said in the press release. “We followed the rules, yet this dispute has caused significant uncertainty for our investors during a period of prolonged weakness in markets for our products.

He continued: “Now we hope CRA accepts the decision and applies it to other tax years in dispute, so we can focus on managing our business for the benefit of all our stakeholders.”

Following the September 27 ruling from the Tax Court, the matter has been referred back to the Minister of National Revenue so a new reassessment for the 2003, 2005 and 2006 tax years can be issued.

The CRA has 30 days to appeal to the ruling to the Federal Court of Appeal. If the CRA decides to appeal, it could take an additional two years until the matter is heard there.

In the meantime, Cameco, the leading uranium producer globally, plans to apply to the court to recoup the substantial legal costs incurred over the decade-long process.

Cameco shares shot up 15.72 percent following the announcement on Thursday (September 27), closing at C$14.80.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

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