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Cigar Lake Project

Water Inflow Incident Cigar Lake Uranium Mine – Shaft #2

April 5, 2006

Cameco’s Responses to the TapRoot® Investigation Report

& TapRoot® Investigation Report

August, 2006

May 1, 2007

Cameco’s Responses to the Corrective Action Recommendations (CAR’s)

Developed in the Shaft No. 2 TapRoot® Report

Cigar Lake Project, Responses to the TapRoot® Investigation Report Attachment 1 Water Inflow Incident - Shaft #2 April 5, 2006 Table Of Contents

Cameco Corporation i

TABLE OF CONTENTS

1.0 OVERVIEW................................................................................................................... 1-1

2.0 CAUSAL FACTORS..................................................................................................... 2-1 2.1 Causal Factor #1 – Shaft Location....................................................................... 2-1

2.1.1 Summary of Responses:........................................................................... 2-3 2.2 Causal Factor #2 – Inadequate Risk Contingency Planning Prior to Sinking ..... 2-4

2.2.1 Quality Management Program (QMP)..................................................... 2-5 2.2.2 Change Control Processes........................................................................ 2-6 2.2.3 Corporate Oversight................................................................................. 2-7 2.2.4 Summary of Response: ............................................................................ 2-8

2.3 Causal Factor #3 – Risks Contingencies Not Re-evaluated During Sinking....... 2-9 2.3.1 Summary of Response: .......................................................................... 2-12

2.4 Causal Factor #4 – Substandard Pipe Threads................................................... 2-13 2.4.1 Summary of Response: .......................................................................... 2-15

2.5 Causal Factor #5 – Inadequate Pressure Testing Protocols ............................... 2-17 2.5.1 Summary of Response: .......................................................................... 2-18

2.6 Causal Factor #6 – Substandard Valve Threads ................................................ 2-19 2.6.1 Summary of Response: .......................................................................... 2-20

2.7 Causal Factor #7 – Failure to Recognize Poor Connections.............................. 2-21 2.7.1 Summary of Response: .......................................................................... 2-22

2.8 Causal Factor #8 – Excess Manual Force Applied to Poor Connection ............ 2-23 2.8.1 Summary of Response: .......................................................................... 2-23

2.9 Causal Factor #9 – Inability to Slow or Stop Flow............................................ 2-24 2.9.1 Summary of Response: .......................................................................... 2-25

2.10 Causal Factor #10 – Not Enough Pumping Capacity ........................................ 2-27 2.10.1 Summary of Response: .......................................................................... 2-28

2.11 Causal Factor #11 – Not Enough Treatment Capacity ...................................... 2-29 2.11.1 Summary of Response: .......................................................................... 2-31

LIST OF APPENDICES Appendix A Mining Division Technical Oversight Appendix B Mine Water Treatment Plant – Management of Change Appendix C ITP Assessment Consultant Report Appendix D Summary Table of Causal Factors, Corrective Action Recommendations

and Management Responses

Cigar Lake Project, Responses to the TapRoot® Investigation Report Attachment 1 Water Inflow Incident - Shaft #2 April 5, 2006 Section 1.0 - Overview

Cameco Corporation 1-1

1.0 OVERVIEW

On April 6, 2006, while conducting a grout cover in the No.2 Shaft, a connection between the valve and standpipe through which the grouting was occurring failed. The water inflow that followed, ultimately proved to be unmanageable. As a result, as per the contingency plan, personnel were evacuated and the shaft filled to its equilibrium level of approximately 27 meters from surface.

At the outset, it is appropriate for Cameco to outline the rationale for commissioning the preparation of a TapRooT® investigation report for this incident. Cameco’s Incident Assessment Matrix governs the level of investigation that Cameco will undertake in response to an incident. For this incident, this matrix required a detailed investigation to be conducted by a team lead by a qualified analyst: more specifically, for this level of event, a TapRooT® or an acceptable equivalent investigation methodology should be utilized. Accordingly, Cameco’s corporate Policies and Systems department commissioned the investigation by an independent third party.

The objective of the process is to systematically identify causal factors, and in doing so identify what components of the system need improvement. A causal factor as defined in the TapRoot® literature2 is, “any problem associated with the incident that, if corrected, could have prevented the incident from occurring or would have significantly mitigated its consequences” The Root Cause Investigation Report1 identified eleven causal factors supported by associated root causes and corrective action recommendations. Causal factors, root causes and corrective action recommendations have been copied from the investigation report into this document to facilitate the management response structure for this document. Cameco’s responses follow immediately after the specified causal factor table, and a summary of actions is provided at the end of each section.

The responses in this document address the causal factors by describing what has been implemented and/or planned by the site and the corporate office to address the root causes associated with the causal factor to prevent similar reoccurrences. In the response, the corrective action recommendations (CAR) listed may no longer be fully applicable to the Cigar Lake Project (CLP) in all cases because of changes in the contract workforce, changes in the site activities, and proposed changes in the shaft sinking methods.

1Brian J. Locker (KnoW Problem Inc), “Water Inflow Incident CLP Uranium Mine – No.2 Shaft, April 5, 2006”, Cameco Corporation, July 2006. 2M. Paradies / L. Unger, “TapRoot®, The System for Root Cause Analysis, Problem Investigation, and Proactive Improvement”, System Improvements, Inc., 2000.

Cigar Lake Project, Responses to the TapRoot® Investigation Report Attachment 1 Water Inflow Incident - Shaft #2 April 5, 2006 Section 2.0 – Caual Factors


2.0 CAUSAL FACTORS

2.1 Causal Factor #1 – Shaft Location

Causal Factor #1: Prior to finalizing the site location for No.2 Shaft, Cameco did not identify and characterize the major water bearing feature prominent in the water inflow incident on April 5, 2006

CAR # Corrective Action Recommendation (CAR)

Associated Root Causes

CAR 1-1

Cameco needs to develop and issue a formal Standard (Policy and Procedure) on using pilot holes to assess the hydrogeologic characteristics associated with proposed shaft locations, including orientation of any features. The Standard needs to give consideration to the number of pilot holes needed, use of state-of-the-art tools & techniques (such as geophysics), levels of consultation and authorities, etc.

SPAC NI - There is no corporate Standard offering minimum requirements for drilling and interpreting shaft pilot holes along with procedural guidance on how to carry out an effective pilot hole study.

CAR 1-2 CAR 1-3

Cameco needs to carry out a comprehensive study as to what state-of-the-art techniques are available and being used by industry, which may have benefit in effectively assessing hydrogeologic characteristics. Cameco needs to incorporate the results of the above study into its Standard on hydrogeologic assessment.

Human-Machine Interface - Displays NI – CLP relied on packer data only to map the ground in the vicinity of Pilot Hole 233

Cameco agrees with this causal factor, however, it should not be interpreted to imply that Cameco selected a location for the No.2 Shaft without considering the potential of intersecting water. In locating of shafts and shaft sinking many factors are considered including, access, serviceability within the planned infrastructure, ground conditions, potential for water, and other factors. In this case Cameco was aware of the high potential for intersecting large volumes of water as evidenced by the recognition that grout holes and probe holes were required at preset intervals as the shaft sinking progressed. In fact, the water had been intersected while drilling a probe cover specifically for the purpose of



locating water-bearing features in order to control inflows by pressure grouting or other means.

Generally, prior to embarking on a project on the scale of shaft sinking, a multidisciplinary team of subject matter experts (SME) conduct assessments to understand the risks involved from a safety, environment, stakeholder and business perspective. The SMEs are selected based on their demonstrated level of knowledge of the issues related to the project. Through this process the location of the shaft is selected with due consideration to its feasibility given the available information. In 2006, Cameco’s Mining Division formalized this process with the implementation of a centralized project management office (PMO). The mandate is to ensure standard project management principles are applied to all projects in the division. Fundamental to this approach is the use of increasingly rigorous risk assessment processes, as required, as the project proceeds through the concept, feasibility, construction and closing phases.

The current shaft design example is at the Millennium Project, which in the context of the project management process has recently progressed to the feasibility stage. Planning conducted at the pre-feasibility stage identified, through a technological assessment, a relatively new 3-D geophysical mapping technique could have application at this project for identifying water bearing features in the underlying geology of the planned shafts. Subsequently a project report issued in February 2006 recommended the use of surface seismic surveying to determine unconformity profile and down hole seismic surveying of planned shaft pilot holes. This will require that additional holes be drilled in order to gather the necessary data to develop the 3-D representation used in the sighting evaluation. It is expected that results will help ensure, as a minimum, that the shafts are situated to minimize potential complications associated with water bearing features in the Athabasca sandstone. It is expected that experience gained in the application of this technique might have application at Cigar Lake in the future as well as other Cameco mining operations.

However, it is important to recognize, given the nature of mining, that even with the application of technologically advanced techniques for gaining insight into the geological and hydrogeological conditions as input into mine planning, there will always be uncertainty and inherent risk associated with underground excavation. Therefore, the use of techniques to actively manage risks during implementation is integral to managing uncertainty and inherent risk. Improvements in these areas were also identified in the investigation report and are elaborated on in this document

With respect to how the site will manage future risk associated with sinking activities, the assumption will be that the information used in developing the design (i.e. pilot hole packer testing), will require validation. This will result in a supporting procedure related to shaft sinking in the Mine Development and Control Program (MFPM-05) that calls for the conditions encountered to be compared to design assumptions. The procedure will indicate minimum measures to be taken when conditions vary unacceptably from a pre-determined design assumption. The dispositioning of the information will be formalized through reporting and clear ‘hold points’ will be defined to ensure the risk does not increase beyond a predefined tolerable point that might compromise the project. Depending of the significance of the risk mitigation recommendation from the SME consulting on the conditions found, acceptance/rejection will be in writing and the



responsibility of the Chief Mine Engineer, Chief Geologist or General Manager depending on the scope and implications of the recommendation.

2.1.1 Summary of Responses:

CAR 1-1:

• Mining division has established a project management office (PMO) that ensures consistent project management practices are implemented in the division, including the use of risk assessments in all project phases; concept, feasibility (including pre-feasibility), construction and closing.

• Cigar Lake Project is implementing a risk based project management work process mapping procedure. This will ensure ‘hold points’ are placed on project activities until such time as the necessary infrastructure (or information) is in place to support the activity. Constraints identified here will drive planning considerations

CAR 1-2:

• Supporting the MFPM-05, Mine Development and Control Program, a shaft sinking procedure will be developed. Minimum information requirements (geological and hydrogeological) to allow the safe development will be specified.

• Supporting the MFPM-05, shaft sinking procedure(s) will require clear statements in the design to be made with respect to allowable variations to design and design assumptions regarding geology and hydrogeology.

• Supporting the MFPM-05, shaft sinking procedure(s) will require contingency measures to be implemented, and personnel be trained on their responsibilities in the event the measures require implementation.

• Supporting the MFPM-05, a procedure is being developed that formalizes how the consultant terms of reference are to be defined; ensuring scope is specific with respect to an oversight vs. technical support role.

CAR 1-3:

• Supporting the MFPM-05, a procedure is being developed that formalizes how consultant (including internal SME) recommendations are managed.



2.2 Causal Factor #2 – Inadequate Risk Contingency Planning Prior to Sinking

Causal Factor #2: Cameco and MTM did not identify detailed risk scenarios, nor did they have the necessary controls in place to prevent shaft flooding, prior to beginning work on No.2 Shaft.



CAR 2-1 CAR 2-2 CAR 2-3 CAR 2-4

CLP needs to continue to bring their Standard(s) in line with corporate Standard(s) in the areas of detailed risk assessment, management of change and contingency planning, as required by corporate programs (ISHEQ). They need to clearly identify responsibilities for compliance with the Standard. The Standard(s) need to apply to the entire life cycle of a project (i.e. planning, construction, commissioning and operation). Cameco needs to develop and implement a corporate oversight process that will look for and identify gaps in mine site risk assessment, change management and contingency planning. Those individuals having a role in this Standard need to acquire the necessary competencies to effectively carry out their responsibilities. The above Standard needs to include a requirement to ensure all critical prerequisites have been met and that all designated stakeholders have reviewed and provided appropriate feedback and approvals.

SPAC NI – CLP do not currently have a Standard requiring them to do: - detailed risk assessment prior to a project beginning; - change management when plans are required to change; and - contingency planning to identify what needs to be done if the situation deteriorates; No Training - Task not Analyzed - No-one associated with the sinking of No.2 Shaft had the requisite knowledge or skill to carry out an effective detailed risk assessment. Accountability NI - No-one was specifically assigned accountability to ensure the detailed risk scenarios and effective controls were identified and plans in place in the event of a contingency. A & E Lack Depth - The Audits and Evaluations conducted from the corporate office did not identify any gaps in this area.



The risk of flooding the shaft and a plan to manage this risk was identified in the engineering packages submitted for licensing. (CLP Project, Construction Licence Application, Engineering Subpackage #1.2, p25, 2002). This consisted primarily of a pumping contingency, with the fall back to allow the shaft to flood. What were not identified were the potential failure modes and controls needed to prevent this from occurring.

2.2.1 Quality Management Program (QMP)

The associated root causes noted for this causal factor points to deficiencies in the site quality management program; in this case specifically how it was applied to the Mine Development and Control Program (MFPM-05). The weaknesses identified relate to risk assessment, change management, contingency planning, training with respect to risk assessment, roles, responsibilities, and accountabilities and oversight of the shaft sinking project. These issues are consistent with what had been identified not long before this event by the CNSC in their year 1 status report of the Cigar Lake Project. The Cigar Lake management team had only just begun implementing an action plan committed to the CNSC (Schmitke to Schryer, March 17, 2006) to address these similar issues when the Shaft flooding incident occurred.

Generally the approach of the action plan was to conduct gap analyses of existing license programs requirements and expectations to existing control processes, and then proceed to address identified gaps through the implementation of an operational quality management program. The development of the site quality management program is based on the requirements of Cameco’s corporate quality management program (QMP), designed to support Cameco’s SHEQ Policy. When completed, the site QMP is intended to replace the Quality Management System Linking Document of the current Mining Facility Program Manual (MFPM).

To date, roles and responsibilities and accountabilities related to the site programs have been clarified. SHEQ program coordinator positions were created and have been filled. The change management procedure, on a risk basis, as part of the QMP, now requires Job Hazard Analyses (JHA) to have been completed, with any necessary mitigating measures implemented, prior to initiating work and contingency planning is required to manage identified hazards. Corporate subject matter experts and external consultants have overseen the development and implementation of the QMP components. Formal verifications of their implementation will first be addressed through the site inspection and testing process (ITP), followed by SME audits. ITP’s will be initiated during the 2nd and 3rd quarter 2007 as revised programs are rolled out.

The implementation at Cigar Lake of the Cameco Systematic Approach to Training (SAT) was initiated in the first quarter 2007. This has consisted of the role-out of the SAP (software platform used to manage the Corporate training program) training and events module, standard Cameco wide training modules as well as the creation of site-specific training modules for identified training requirements. The QMP process risk assessment is one of the tools used to identify where training is required. JHAs are an example of an element that was identified in the SAT process. This training will be common for all Cameco operations and is currently being developed through the corporate office.



An example of where one of the fundamental elements of the QMP have been implemented was in the development of the No.2 Shaft underground freezing project, where 3rd party subject matter experts were used to facilitate the risk assessment process. That assessment included the detailed modeling of the anticipated freeze wall to support this inflow risk mitigation option. In addition, the risk assessment put a ‘hold’ (i.e. administrative risk control) on starting the drilling portion of the program until the necessary water treatment capacity could be demonstrated. Refer to the August 3, 2006 (Scissons to Jarrell) response to submissions made in this regard. It should be noted that this hold represented both a regulatory and a corporate constraint on the site.

Overall the implementation of the QMP has completed process mapping, program descriptions, and the identification and creation of procedural controls for the following processes: Safety and Health, Radiation, Environment, Quality (includes Human Resources and Administration), Project Management, Commissioning, Maintenance (includes Site Services), Warehouse, Transportation, Security, Public Information and Ore Processing. The Mine Operations program will include the mining, geology and engineering processes. Initial implementation of necessary elements to further support existing site activities will be implemented throughout 2007, on a priority basis, dependant on necessary levels of risk mitigation to support the activities.

One of the lessons learned through this process and from the October inflow TapRoot® investigations, is the need to better disposition consultant recommendations. As discussed in CAR 2-1 of the October inflow management response, the Mining Division will provide guidance to operations in this regard. Specific direction based on this guidance will be incorporated within MFPM-05.

2.2.2 Change Control Processes

Site operations personnel have revised the change management process to more clearly recognise the interface of new facilities with existing facilities as a change that requires additional coordination and management. At issue was that there existed two processes to manage change at the site. One specific to construction activities, the other related to operations. These procedures did not clearly identify implications to the other. Therefore changes occurring in construction conditions weren’t necessarily being captured by the management system. Consequently, for example, infrastructure limitations from an operational sense (i.e. water treatment capacity) were not always recognised in the construction process. This has been corrected in the latest revision to the site change control procedure (010-001).

The revised procedure for change management requires detailed risk assessments in the form of job hazard assessments (JHA). This has been implemented. Associated contingency planning has also been implemented to manage scenarios associated with identified hazards prior to implementation. Specific to shaft sinking, a procedure will be developed, in support of the Mine Development and Control Program (MFPM-05) which among other requirements, will require the use of the work process mapping procedure identified in CAR 1-1, to ensure adequate measures are implemented to manage the execution of the work on a preset frequency to be determined in consultation with the contractors. The commitment to following this change management process is based on the requirements of the QMP.



In addition, in support of MFPM-05, procedural direction is being developed which specifies how risks, which may be classed as low, but still carry a major consequence will be formally managed. This work is being driven off the management response to the October 2006 inflow investigation TapRoot®, CAR 1-1. Minimum to this direction is the requirement to have contingencies in place to manage the potential serious consequence associated with the risk.

Although early in implementation, the change management process was used to plan the water treatment plant mechanical tie-ins to the existing facility. Examples of these records are provided in Appendix B. The site has also developed an electronic system for managing the process more efficiently.

2.2.3 Corporate Oversight

A corporate oversight process has been developed and implemented to monitor the development of the Cigar lake management systems. An oversight committee meets every two weeks with site representatives to review progress. Gap assessments to the corporate standards have been conducted on the construction SHEQ programs.

Also, each SHEQ program has regular quarterly reporting forums where operations report on the status of their respective programs to expected criteria. This information is then rolled up and routinely presented to the corporate Management Committee. There is also an annual senior management review that includes a roll-up of all of the site senior management reviews. The management review process is described in the SHEQ management system program documents.

As well, the need to formalize the technical oversight process in a similar manner to SHEQ oversight, particularly in relation to the unconformity-hosted deposits of the Athabasca basin (i.e. McArthur River and Cigar Lake) and their associated operations risks, has also been recognized. In 2007, the mining division implemented a formal technical oversight process, which focuses on technical review and audit on mine plans within the division to ensure risks are being managed appropriately. Included in the process are regular technical review meeting where site subject matter experts have an opportunity to discuss issues with corporate subject matter experts, and ensures common understanding and use of experience is being applied in the division, specifically related to technical mining issues related to the Athabasca basin. These measures will ensure appropriate standards are followed, increase knowledge transfer from experts and between sites/projects, ensure plans are critically reviewed from multiple perspectives, and share best practices. Specifically, these enhancements will be carried out by:

• Expanding the technical audit role of the Engineering and Projects, Mining subgroup; and

• Introducing regular mine technical review meetings at each of the mines.

This was communicated recently (January 31, 2007) to the responsible people in the mining division by the Vice President, Mining, along with a supporting memorandum from the Engineering and Projects groups describing the details of the process. Refer to Appendix A for details on these commitments.



2.2.4 Summary of Response:

CAR 2-1

• Measures are being implemented through the implementation of the site QMP that ensures all change is managed through a common process, Change Management Procedure (010-001)

• The safety, health, environment and quality department has been reorganized to have coordinators assigned responsibility and accountability for the implementation of each respective program. All coordinator positions have been filled.

• JHA is a specified requirement in the change management procedure

CAR 2-2

• In the shaft sinking procedure supporting the Mine Development and Control Program (MFPM-05), third party assessments of engineering plans are a requirement prior to initiating work. As noted under the response to causal factor 1, the means by which recommendations from these assessments are dispositioned will be formalized in an additional supporting procedure.

• Technical oversight has been formalized in the mining division. This consists of routinely schedule audits of operations, technical reviews and divisional technical review meetings.

CAR 2-3

• SAT/SAP is being implemented. JHA training will be required for all supervisors.

CAR 2-4

• CIRS is to be used to manage formal dispositioning of 3rd party to the site recommendations (i.e. Mining Division technical oversight and/or technical consultants), as well, as required actions arising from JHAs.



2.3 Causal Factor #3 – Risks Contingencies Not Re-evaluated During Sinking

Causal Factor #3: Cameco and MTM did not identify detailed risk scenarios, nor did they have the necessary controls in place to prevent shaft flooding, prior to continuing work upon discovering significant water & sand on grout cover #8



CAR 3-1

There is considerable evidence that MTM miners working on No.2 Shaft at CLP were acutely aware of sand and water problems but their observations, concerns and suggestions may not have been sufficiently heard or valued by some Cameco workers. Consistent with the McArthur River inflow investigation recommendations, Cameco needs to determine how to better take full advantage of everyone on a critical project team such as shaft sinking. While it is necessary for MTM workers to formally raise concerns within their own organization, it is not sufficient. The system would be enhanced if MTM and Cameco could work more as a fully functional team rather than two separate organizations.

Oversight & Employee Relations - Employee Feedback NI - Cameco continues to consider the MTM miners as a labour pool, not being interested in their input, concerns and suggestions Supervision During Work – Crew Teamwork NI - At times, the workers (from the various workgroups involved in the project) worked at odds with each other

The increased scope of the change management system as described in section 2.1, captures the management of work at the stage prior to initiating the work. This is done through the use of the JHA process. As well, in the management response for the October 2006 inflow, related to CAR 2-3, a process for controlling deviation to design, modeled on a code of practice, is being developed for the mining cycle. Similarly, in support of a shaft sinking procedure (supporting MFPM-05), designed to ensure minimum controls are put in place by the contractor during sinking operations, a process to manage design variance will be implemented. This process will ensure timely reporting to Cameco personnel when conditions warrant. This information will be documented, and require addressing on a risk informed basis, so that senior management are made aware of any situations that carry residual risk with a potential major consequence. Actions requirements will be specific with clear timelines for reporting. Decisions to proceed, based on risk may require approval at the General Manager level. Triggers may include,



but not be limited to significant differences in water encountered to that expected, variation in geology, variation in shaft dimensions, lack of contingency measures etc.

To address the issue of communications with the miners, and engaging them to provide feedback to the work being completed, the JHA process will be a requirement of the shaft sinking procedure for any non-routine work, so that any supplemental mitigations to those required as a result of the JHA completed prior to recommencing the sinking project, are identified and implemented prior to proceeding. This involves workers in the evaluation of hazards for phases of planned work so that appropriate mitigations and/or controls can be put in place to minimize to the extent of possible consequence related to identified risks. As the contractor is selected based largely on their experience in shaft sinking experience, their input to the JHA is vital. In addition, Cigar Lake recently implemented in the first quarter of 2007, the 5-point safety system. This is a process that requires supervisor contacts with personnel to discuss safety concerns. The worker documents unresolved issues for the supervisor to address. Those beyond the immediate responsibility of the supervisor are escalated to the next level of management for resolution.

During shaft sinking Cameco dedicated skilled personnel to provide general oversight to the activity and as stipulated in the contract MTM provides the expertise, tools (including standpipes), labour and supervision for the shaft sinking activities. The MTM project superintendent for No.2 Shaft has a great deal of experience in sinking shafts through the Athabasca sandstone and is highly regarded throughout the industry for his knowledge and safe leadership of shaft crews.

Precisely because Cameco values the input of its contract workers, a number of mechanisms were in place to ensure that information, including the concerns of workers, was heard and considered by Cameco. The mechanisms in place prior to the inflow included:

• daily crew toolbox meetings between the shaft workers and their supervision attended by the Cameco shaft coordinator;

• daily safety and coordination meetings between contractor and Cameco; • contractor (MTM) safety meetings with formal minutes copied to Cameco; • weekly and monthly contract meetings to review safety and environment

performance, human resource issues, in addition to the standard contract issues of productivity, scheduling and cost;

• a shaft log book maintained by shaft crews (reviewed daily by Cameco personnel and the oncoming shaft crew);

• an MTM Occupational Health Committee (OHC) in which Cameco participates with formal minutes sent to Cameco and Saskatchewan Labour; and

• a formal process for notifying CLP construction management of changes in the workplace that affects the work, using Change in Condition forms (CIC).

The CIC form is used when a change in conditions related to a specific construction activity interferes with construction and the work cannot be completed as planned. For example, a change in soil conditions associated with an excavation. The intent of the CIC is to aid in the contract management and initiate clear communications on addressing the



change in conditions through an approved recommended action on the CIC or a separate written Site Instruction (SI). The SI is developed in consultation with the designer if a deviation from the design is required. Note it is anticipated that the process described here would follow any immediate measures taken to address any specific safety concerns related to identified design deviations as described earlier in this response section.

It is clear that MTM management, CLP technical staff, CLP management, Cameco corporate technical staff and Cameco management were aware that there was a major sand and water bearing structure of significant thickness and were trying to resolve the issue by developing plans to freeze around the problem area. However the question is “At what point should Cameco have recognized that the risk profile had changed substantially such that it should step back and review failure modes and mitigation measures?” This issue is dealt with in the discussion of identifying risk creep that follows.

It is evident from the event that the risk profile of the work changed with time but was not adequately recognized, and hence mitigated despite the reporting mechanisms noted above. To address the issue of ensuring working input with respect to changing risk profile or ‘risk creep’, Cameco management will raise this with the OHC committees and propose that they include discussions of ‘risk creep’ as a standard agenda item. As well, going forward, the regular meetings currently in place as a management tool between Cameco and contractors, will also have an agenda item added that requires the contractor to report on change management in this context. This will include the status of JHAs (i.e. planned, completed, issues), a review of change in condition reports and site instructions, and report on the discussions of the OHCs on issues of “risk creep”. An invitation is extended to a worker representative from the OHC to attend the weekly contractor meeting with Cameco. An example of potential ‘risk creep’ which has become apparent as a result of this review, although was not determined as a contributing factor in this event, is the consideration of defining a temporal limit for the use of a standpipe, that is a function of the wear caused by either grouting, or bailing in the sinking process. As was experienced, grouting through a particular standpipe can occur for an extended period of time. However it has since been recognised that the understanding of the rate of pipe deterioration in these conditions is limited. A consultant will be retained to evaluate this question. Any necessary measures will be implemented through procedural controls.

An example of better engaging the workers in the development of plans is with MTM and Boart Longyear and their involvement in the development of the No.2 Shaft freezing plan, and contingency plans to manage the associated risk scenarios as envisioned during the planning process for the No.2 Shaft freezing and continued development. The numerous communication mechanisms that were in place prior to the incident will be strengthened by the inclusion of the above described processes specifically designed to officially channel documented worker/contractor concerns to Cameco and also to trigger supplementary risk review and assessment by Cameco and contractors as appropriate.




CAR 3-1

• Development of a shaft sinking procedure to support MFPM-05, which requires operational control measures be specified for specific design deviations which are required to manage the risk of the activities, and define required reporting and investigation requirements to address those (e.g. similar to a code of practice).

• To ensure that risk creep is identified, Cameco requires contractors at the regular contract meetings to report on change management in this context. In addition the meetings will include a review of change in conditions reports and site instructions issued.

• A worker representative from the OHC will be invited to attend the weekly contractor meetings with Cameco to voice worker concerns related to “risk creep” that may exist.

• The change control and risk assessment process will be applied when issues of risk creep are identified that could result in increased risk or uncertainty related to the work.

• Implemented a formal process where workers together with their supervisors document the hazards associated with their planned work (5-point safety system).



2.4 Causal Factor #4 – Substandard Pipe Threads

Causal Factor #4: MTM used a standpipe with substandard threads on hole #7D



CAR 4-1 CAR 4-2 CAR 4-3 CAR 4-4 CAR 4-5

Cameco needs to examine its procurement policies and practices with MTM in light of what happened (i.e. receipt of standpipe with sub-standard threads) and make changes as necessary to ensure quality standpipe is received in future. Looking at a broader perspective, Cameco needs to examine other critical materials it has purchased to determine whether there are problems with quality. CLP needs to work with MTM to ensure all of the standpipes with sub-standard thread are identified, sent back and replaced with quality material. CLP needs to work with MTM to identify and take effective remedial action on any grout cover #8 standpipes with sub-standard threads. Cameco needs to reach an agreement with MTM such that MTM puts a Quality Assurance program in place for their critical materials, including standpipe for the probe and grout process. As part of that contract, provision needs to be made for Cameco to periodically audit MTM's QA process.

Equipment/Parts Defective - Procurement - Procurement practices need improvement Equipment/Parts Defective - Manufacturing - Manufacturing practices for standpipes need improvement Equipment/Parts Defective - Quality Control - Quality Control practices on critical materials need improvement No Inspection - Inspection not Required Standards, Policies, or Admin. Controls NI - No SPAC Oversight / Employee Relations - A & E lack depth

This causal factor relates to the quality assurance of materials. The management system implementation described in section 2.2.1 above identifies how materials can be systematically identified as an important factor in mitigating process risks. During a detailed risk assessment of site process elements, critical components and the level of quality verification is identified. This is dependant on the severity of the risk. A critical



component list is being developed following practices used at other Cameco operations to prioritise their preventative maintenance. The critical designation for equipment will include consideration of the outcomes of risk assessments, asset vulnerability, and failure consequence. The critical designation will be used to indicate quality management requirements such as the level of quality verification required upon delivery, maintenance requirements such as spares availability, and mitigation measures required in the event of a failure. This process will be formalized as a procedure supporting the Maintenance Program to be rolled out as part of the new QMP.

The quality of the materials used in a project, ultimately are verified through the commissioning process. Functional commissioning tests such as the standard standpipe pressure tests were routinely performed on site and the results recorded in the Inspection and Test Plan (ITP) records. From the event, it is evident that there were deficiencies with management of the function testing associated with No.2 Shaft materials; the function testing was not conducted every time the valve was reattached to the standpipe. The site has undertaken a complete third party review (refer to Appendix C) to determine if there were flaws with the general ITP process and identify if improvements could be made. It was noted that the ITP process was generally sound, with some opportunities to improve its practicality and efficiency in a dynamic construction context.

Addressing the issue of materials procurement, the SAP maintenance management system is an internationally recognized computer business software application that has sophisticated tools for materials management. With respect to project work the system has functionality to allow project managers to ensure controls on procured materials, even if purchased by third parties. The identification of particular material specifications, testing requirements or other controls (i.e. engineered or administrative) would be made as part of the procurement process. Once defined, the information to manage the risk from a materials perspective will either be captured in the site maintenance management system (e.g. preventative maintenance), the administrative controls for the process (e.g. test procedures) or communicated to the procurement manager for incorporation in contractual agreements (e.g. material specifications).

Essentially, Cameco’s purchasing and transportation department receives all the materials. The release of the material from their control to the contractor can now be made conditional in the system. A typical condition is quality verification by a qualified person as specified by the project manager. This functionality facilitates surety that the right materials are being procured and used. During implementation, it will be important to link the material specifications from the risk assessment to this SAP materials management process.

With respect to the various projects ongoing and anticipated for the remainder of the mine construction, critical equipment lists will be developed on a risk basis. This will be done prior to starting the implementation phase of a project during detailed design and reviewed at the start of a construction contract. This will ensure that third party supplied equipment contained in the list have appropriate QA controls on them.



For example, with respect to future underground drilling activities the risk assessment process and subsequent detailed risk assessments will be used to identify:

• The frequency of pressure testing and the level of quality verification required for the associated components identified having risk potential (e.g. valves or hoses).

• The elements of the process that require field verification and/or management review to ensure the efficacy of the QA process; and

• Appropriate quality assurance clauses in future construction and procurement contracts.

In addition, critical equipment lists will also be reviewed and verified during commissioning for inclusion in the Maintenance Management system. Procedural control on this will be developed in support of the MFPM-19, Maintenance Program. In managing critical components the objective will be to ensure multiple barriers are in place to ensure its functionality, but also to protect against the residual risks if the component were to fail. This will be achieved through a combination of, but not limited to, established minimum standards in design criteria, procurement quality assurance, procedural control and verification testing.


CAR 4-1

• Through the shaft sinking procedure, Cameco will require that standpipe lots received by the contractor at site be inspected (either by Cameco or contractor personnel) to confirm they meet the specifications defined in the contract. Inspection results to be reported to the mine department project engineer. The use of the ITP process will also be used to provide further confirmation.

• The corporate procurement and material receiving procedures are under review and will be upgraded in conjunction with the SAP procurement module to require that the quality of critical items are verified prior to use.

• A third party review of the ITP process itself was conducted and found that the process was sound.

CAR 4-2

• An operational site based critical equipment list is under development that identifies equipment that may require pre-use quality verification, critical planned maintenance, spares availability, and mitigation measures in the event of a failure. The list is being developed on a risk informed basis. This list will be expanded following commissioning of facilities.

• The risk assessment process will be applied to underground activities to identify quality management requirements, testing, field verification of quality, and where necessary contract language changes to include contractor quality requirements for critical equipment.



CAR 4-3

• Standpipes currently stored on site will be examined for substandard threads before use in water control applications such as pressure grouting or freezing and marked appropriately to avoid future equipment mismatch.

• See summary for CAR 4-1

CAR 4-4


CAR 4-5




2.5 Causal Factor #5 – Inadequate Pressure Testing Protocols

Causal Factor #5: MTM did not pressure test the valve and standpipe combination prior to drilling through to potential water



CAR 5-1 CAR 5-2 CAR 5-3

Cameco needs to formally request MTM to revise their Procedure to explicitly and clearly state that pressure tests must be done on the valve/standpipe combination and any time a valve is temporarily removed, the pressure test must be repeated if the valve is put on again. The Procedure should contain some rationale for WHY the valve must be on the standpipe when pressurized. MTM needs to formally and immediately communicate the new requirements (and rationale for them) to their shaft crews and supervisors and other monitoring staff in the shaft must audit compliance with the Standard on an ongoing basis. MTM needs to incorporate this new pressure-testing requirement into the shaft miner training program.

Procedures Wrong - Situation not covered Standards, Policies, or Admin. Controls Not Used - Communication of SPAC NI No Training - No learning objective

CLP makes extensive use of ITPs and commissioning to provide assurance of quality in construction and fabrication. The ITPs are developed based on the detailed design contained in the construction contract by the Quality department in consultation with the construction management office and the contractor. The ITP process has qualified personnel check the quality of work and often includes a test of functionality, prior to release for use.

With the No.2 Shaft water inflow an ITP was in place for pressure testing the valve/standpipe combination, but did not adequately identify the need for repeated pressure testing when valves were changed. In this situation it was only applied once to the standpipe/valve configuration when first set up. Had the ITP specified repeated testing, the poor thread connection between the standpipe and valve may have been identified. In the revised standpipe testing procedure, repeat testing is required on all standpipe/valve systems used to control water when drilling into areas that may require



inflow prevention. The detailed risk assessments will be used to identify any other necessary controls required.

Where Cameco requires the contractor to perform functions according to a Cameco standard such as pressure testing, Cameco will require that appropriate training for the workers be incorporated into the contractor’s training program. This will be verified through the JHA process prior to the commencement of the work.

Further to ensure these requirements specific to shaft sinking are maintained, the testing controls identified here will be documented in the shaft sinking procedure supporting MFPM-05. A review will be required of the layout and execution plan by the designer and contractor to ensure the practicality of the design from a safety and technical requirement perspective. Should a change to the design be required, due to unanticipated conditions, the change control process (010-001, Change control procedure) will be followed.


CAR 5-1

• Cameco has revised its pressure test standard for grout standpipe pressure testing. The technical specification requires that repeat testing be done any time the valves are temporarily removed and refitted or replaced.

CAR 5-2

• Where Cameco requires that a contractor perform activities according to a Cameco standard such as pressure testing, Cameco will require that the appropriate training for workers be incorporated into the contractor’s training program. This will be verified through the JHA prior to the commencement of work.

CAR 5-3

• Testing requirements to be captured in shaft sinking procedure to be developed to support MFPM-05.

• The shaft sinking procedure will define what minimum limitations the contractor and consultants are to respect with regards to standpipe density, and any variance to this will require approval of the Chief Mine Engineer.



2.6 Causal Factor #6 – Substandard Valve Threads

Causal Factor #6: MTM used a valve with substandard threads on standpipe #7D



CAR 6-1 CAR 6-2 CAR 6-3 CAR 6-4

Cigar Lake Quality Dept. needs to work with MTM to ensure an effective gate valve refurbishment and quality inspection process is developed and implemented. Standards need to be developed and implemented as necessary, including a detailed valve inspection procedure if required. Appropriate instrumentation and gauges needs to be acquired and used to examine the valves. Effective training needs to be given to those MTM personnel who are responsible for valve maintenance and refurbishment.

Not Used / Not Followed - No Procedure - there is no formal Procedure for inspecting Gate Valves QC NI - Inspection techniques NI Standards, Policies, or Admin. Controls NI - Not strict enough Human-Machine Interface - Displays NI - No Training - No learning objective

Where critical equipment requires refurbishment, inspection and verification of the quality of refurbished equipment is required prior to being released for use in high risk applications. The documentation supporting the ITP process will include gates requiring verification of the quality of refurbished critical components by competent personnel.

The inspection and verification of refurbished critical equipment may be done as part of the refurbishing contractors’ overall service package, and/or by organisations such as the drilling, grouting or shaft sinking contractors. Prior to any new work being undertaken, the critical equipment list will be reviewed and risks assessed as part of the pre-project risk assessments including the JHAs. This process will ensure that any equipment that is intended for reuse in other projects will be identified, risk assessed, and where appropriate have controls developed to manage the risk.

Similar to the measures to analyse wear limitations of standpipes as described in section 2.3, the valves will also be assessed. The scope of the consultants work will be to define an acceptable number of times valves can be reused, and any other recommendations to improve assurances on valve functionality. This level of assessment is because the valves



are considered critical components in the shaft sinking process. Conclusions, if necessary will be formalized in the shaft sinking procedure.


CAR 6-1

• The ITPs will include gates requiring verification of the quality of refurbished critical components by competent personnel. This requirement will also be specified in the shaft sinking procedure.

• The critical designation of the refurbished equipment (see response to CF#4) will indicate the level of certificate validation required including, where necessary, the type of instruments and gauges required to complete the validation exercise.

CAR 6-2

• See response to CF#4

CAR 6-3

• See response to CF#4

CAR 6-4

• See response to CF#1 and CF#4



2.7 Causal Factor #7 – Failure to Recognize Poor Connections

Causal Factor #7: The MTM Foreman failed to recognize the gate valve was not securely threaded onto standpipe 7D



CAR 7-1

Cameco-Cigar Lake Project needs to work with MTM to develop a simple but effective method of labelling/marking standpipe threads such that it is clear if the valves are or are not sufficiently engaged onto the end of the standpipe.

Procedures Wrong - Situation not Covered Human-Machine Interface - Displays NI Non-Fault Tolerant System - Errors not detectable

CAR 7-2

The revised method of attaching a valve to a standpipe needs to be communicated to miners as required and added to the MTM probe and grout procedure.

Procedures Wrong - Situation not Covered Standards, Policies, or Admin. Controls Not Used - Communication of SPAC NI

CAR 7-3

Supervisors, Shaft Miners and Cameco mine engineering staff need to have their accountabilities adjusted to include conducting periodic checks of valves and standpipes to make sure they have been securely attached.

Procedures Wrong - Second Checker Needed Supervision During Work – Crew teamwork NI

This causal factor essentially points to inadequate operational controls being in place for the drilling/grouting activity. Previous causal factors identified for this event were related to poor materials being used and the lack of controls in place to manage material quality effectively, whereas this causal factor points to the lack of formal controls to ensure that workers had sufficient knowledge to identify risk increasing situations in an already high risk activity. Cameco relied on the competency of the contractor, and their personnel to get the job done and manage the associated risk. Given the experience the contractor has with shaft sinking this practice was seen as the appropriate control, however Cameco has since learned otherwise as a result of the incident.

Going forward, specific operational controls will be systematically identified in the shaft sinking procedure to be implemented in support of MFPM-05. Where high risk activities are being undertaken, process controls as determined by the risk assessment will be applied. Mitigative measures such as pre-operability and ongoing checks of process are done and recorded. In addition whenever there is a recognised increase in risk while the activity is underway, verification of the operability of the system will be made.



Depending on the significance of this finding, the process developed as part of response to CF#3, will ensure the timely communication of the information to appropriate personnel in the organization.

Various simple standard methods can be used to ensure that valves and other threaded equipment considered critical have been fastened to the required depth. These methods include but are not limited to torque specifications, visible aligning marks, or a procedure that requires measuring the visible thread length after fastening. For critical equipment, instructions on the method to be used for verifying that the components have been securely screwed together will be provided in an appropriate Work Instruction (WI). This WI will be clearly communicated to the crews and shaft sinking supervision will be formally tasked with the responsibility of periodically checking the valves and standpipes. The premise for these controls is the fact that if there are problems developing with the valve/standpipe configuration, they may not be immediately identifiable by the miners, therefore the use of a multi-barrier approach in applying controls is seen to be reasonable given the major consequence of a failure.


CAR 7-1

• The process of attaching the valves to the standpipes will be evaluated with the contractor through the application of a JHA. The issue of defining if a procedure is required to ensure the components are attached in a consistent manner will be reviewed and incorporated in the shaft sinking procedure supporting MFPM-05.

CAR 7-2

• Mitigative measures such as pre operability and ongoing checks of process are done and recorded. Whenever there is a recognised increase in risk, mechanisms as defined in the shaft sinking procedure for specific risks will trigger timely responses, similar to code of practice responses.

CAR 7-3

• A standard for ensuring that grout standpipe and valve threads are sufficiently engaged will be developed before grouting resumes. Crew will be trained on this standard. Training will be managed through the new SAT/SAP system. Personnel will be instructed on their responsibilities with respect to ensuring and monitoring the integrity of the standpipe/valve system.



2.8 Causal Factor #8 – Excess Manual Force Applied to Poor Connection

Causal Factor #8: The Shaft Miners exerted excess force on the pipe-wrench & snipe



CAR 8-1 CAR 8-2

Cameco should consider contracting with a company like Metallurgical Consulting Services (MCS) to develop or search out a practical Standard for safely and effectively fastening equipment such as valves to pipes without damaging threads, over-torquing bolts, etc. Once the Standard has been agreed upon by Cameco and MTM, it will need to be implemented at all of the Cameco mine sites.

Standards, Policies, or Admin. Controls NI - Not strict enough Human-Machine Interface - Tools & Instruments NI Non-Fault Tolerant System - Errors not detectable

As previously stated in the response to Causal Factor #7, where appropriate, based on the JHA additional procedural controls, where required are now being applied to provide added assurance that the appropriate tools will be readily available during the work. Not withstanding this, as recommended Cigar Lake will enlist the support of technical experts to evaluate what means might be available to confirm a sound connection without unduly stressing the connection by mechanical means. For example, torque specification may be one means of defining this. In addition, the consultant will be asked to define other means by which the workers can confirm a sound connection has been made. These methods include but are not limited to torque specifications, visible aligning marks, or a procedure that requires measuring the visible thread length after fastening. Specifications will be captured in a work instruction supporting the shaft sinking procedure.


CAR 8-1

• In consultation with the contractor and the manufacturer a metallurgical consultant will be retained to assess current practices and if necessary develop specifications for fastening the valves to the standpipes. These will then be incorporated into the shaft sinking procedure as a supporting work instruction as necessary.

CAR 8-2

• Where appropriate, based on risk assessment of specific activities, procedural controls are now being applied to provide added assurance that appropriate tools are available to safely complete tasks. The JHA process has been implemented as described in responses to causal factor #2.



2.9 Causal Factor #9 – Inability to Slow or Stop Flow

Causal Factor #9: MTM and Cameco staff were unable to slow or stop the flow of water from standpipe 7D prior to the shaft bottom becoming inaccessible



CAR 9-1 CAR 9-2 CAR 9-3

Cameco needs to identify the specifications for and acquire or develop some special tools and processes that will effectively, quickly and safely mitigate a serious flow of water into a shaft or a heading in a mine. Any tools and processes developed will need to be able to address the type of incident experienced on April 5th in No.2 Shaft. Cameco needs to collaborate with MTM to put these new tools and processes in place at Cigar Lake and its other operational and future mine sites. Cigar Lake needs to develop and implement a contingency plan and procedures to cover situations where fast action response may be necessary. The plan and procedures should address communication requirements. Personnel need to be trained on the contingency plan and procedures as needed. When complete, the contingency plan and procedures need to be shared with and adopted by other Cameco mine sites as appropriate.

Human-Machine Interface - Tools & Instruments NI - no tool(s) existed or were present to shut off or limit the water flow No Training - Task not analyzed - staff didn’t know what to do in the first minutes and hours of the inflow Corrective Action - Corrective Action NI - lessons were not learned from previous inflows elsewhere Standards, Policies, or Admin. Controls NI - SPAC Incomplete- Contingency Plan did not cover specific risk scenarios Procedure Wrong - Situation Not Covered - the Contingency Procedure did not address detailed risk scenarios No Communication or Not Timely - Late communication - it took almost one hour to notify a senior Cameco person on site Complex System - Knowledge-based decision required



To ensure that appropriate preparations are made to deal with inflows, Cameco will assess the risks associated with various project activities as described section 2.1 and 2.2. Specifications on contingencies are driven from this process and the required communications and training will be facilitated through the process described in section 2.2.

With respect to the inability to slow or control the inflow, it is anticipated that the risk assessments previously described will trigger more effective mitigation of the risk and ensure that Cameco and the contractors are better prepared to deal with such unusual events by having the ability to:

• stop uncontrolled flow of water from a standpipe, • consider the risk of uncontrolled flow as a result of system failure to be a credible

situation when drilling into potential water inflow areas, • pre-plan, in conjunction with the contractors, means to stop and control the flow in

such situations and ensure any necessary special tools are available and associated procedures are developed and training provided.

• ensure this approach is applied consistently across all mine sites.

Cameco will address this issue, with the involvement of contract personnel prior to the resumption of shaft sinking. Ideally those involved will be the personnel that were involved in the management of the April 2006 inflow event. Procedures and process maps for water inflow measures and contingencies have been developed and will be revised accordingly based on the assessments described above.

The emergency response plan for water inflow scenarios associated with shaft sinking will undergo review, and incorporate any applicable best practices arising from lessons learned from Cameco’s other shaft sinking experiences (i.e. 3 shafts at McArthur River plus Shaft No.1 at Cigar Lake). These will be incorporated prior to the resumption of shaft sinking. Included will be the delivery of appropriate training to relevant personnel in the application of the mitigative measures.

Measures and/or solutions to eliminate or minimizes risks will be shared throughout the Corporation via established methods in the management systems. For example, regular technical reviews, meeting processes (i.e. mining division meetings, quarterly safety, environment and quality teleconference meetings/reports), subject matter expert reviews and system audits identifying best practices.


CAR 9-1

• Through the use of JHA, methods for managing uncontrolled inflow will be evaluated. This evaluation, where possible, will include the input of miners directly involved in this event.



CAR 9-2

• Based on the evaluations, the shaft sinking procedure will specify Cameco’s minimum requirements for contingency measures to be in place for this overall activity. This will include training and awareness on any methods to be implemented. The procedure will require that these tools be available at all times for miners to be able to promptly respond to mishaps related to inflow.

CAR 9-3

• Contingency plans have been formulated and implemented to reflect new potential water inflow scenarios.



2.10 Causal Factor #10 – Not Enough Pumping Capacity

Causal Factor #10: The shaft dewatering system (normal and emergency) was unable to pump out more water and solids than were coming into the shaft



CAR 10-1 CAR 10-2 CAR 10-3

Cameco needs to carry out a comprehensive assessment of the pumping capability associated with No.2 Shaft in light of the experiences from the April 5, 2006 incident. Particular attention needs to be paid to the questions of: a) solids content in water; b) piping bottlenecks that may restrict

the overall pumping capacity; c) power supplies; d) length of time needed to activate

the pumping system; and e) an updated estimate of the amount

of water that can reasonably be expected to flow into the shaft via the various credible risk scenarios.

Based on the results of the assessment, Cameco needs to take practical actions to modify the operational and emergency dewatering system in No.2 Shaft. Cameco needs to take the lessons learned from its dewatering pump review on No.2 Shaft and apply them to other sites (present and future).

Design Specifications -Specifications NI - the power supply could handle the emergency pumps or the Jumbo drill but not both Design Specifications - Problem Not Anticipated - Equipment Environment not Considered - no allowance was made for sand in the water Independent Review NI - Hazard Analysis NI - the design review of the dewatering system did not catch the problem

The shaft dewatering system for normal operations and emergencies was based on what was then considered to be a plausible inflow scenario based on the McArthur River experience and Cigar Lake’s assessment of the No.2 Shaft expected inflows. The contingency plan developed at the time was seen to be commensurate with the level of risk recognition and understanding. Since the No.2 Shaft inflow, under the Project Engineering and Design Program (MFPM-02), the design criteria for a plausible inflow scenario have been revised. This was issued by the Project Manager as a Project Directive (PD-030, June 8, 2006) In addition, the shaft sinking procedure being developed in MFPM-05, will refer back to those design criteria.



Contingency plans have been revised to reflect the results of a detailed third party risk assessment that was completed in support of the CLP application to the CNSC to remediate the No.2 Shaft by freezing. Those measures specific to allowing the revised No. 2 Shaft potential inflow scenarios were verified by site and confirmed by CNSC during site inspections. A site wide re-evaluation of the potential water inflow rates has also recently been undertaken to incorporate the new information learned from the subsequent October 2006 mine inflow. The findings, of the investigation into the October 2006 inflow, when available, will be taken into consideration when developing plausible inflow scenario for contingency planning purposes.

It is however important to recognise that given the physical constraints of a shaft, it may not be feasible to provide sufficient pumping to manage the worst-case scenario of a catastrophic inflow. Therefore, should the health and safety of personnel become compromised in such a scenario, the final contingency of allowing the shaft to flood will remain. The protection of the worker will be and always has been paramount. Therefore, given this real possibility, managements effort will not only be focussed on how to deal with potential inflow situations, but perhaps more importantly, on the quality of the controls in place to ensure successful completion of the design without the need to employ contingencies.


CAR 10-1

• Revised shaft dewatering scenarios to reflect the lessons learned from this and subsequent events.

• As was done in support of the shaft 2 underground freezing remediation plan and the development of the October 2006 inflow remediation plan and ongoing development of it, the use of third party design assessments will be a formalized requirement, on a risk basis, in MFPM-05.

CAR 10-2

• The water contingency measures specific to the revised No.2 Shaft potential inflow scenarios have since been verified by site and confirmed by CNSC during site inspections.

• A site wide re-evaluation of the potential water inflow rates has also recently been undertaken to incorporate the new information learned from the subsequent October 2006 mine inflow.

CAR 10-3

• Dewatering design criteria review is part of the mandate of the mining division technical oversight process. Best practices will be shared, formally, with other operations through this process.



2.11 Causal Factor #11 – Not Enough Treatment Capacity

Causal Factor #11: The water treatment system was unable to handle the volume of water and solids being pumped from No.2 Shaft




Cameco needs to develop a clear corporate Standard stating that construction and operations will only be undertaken if and when adequate storage and/or treatment capability is actually available on-line for the water that may reasonably be encountered. The Standard also needs to specify that sites must make explicit assumptions concerning whether water must be treated, the potential amount of water that could be encountered in various risk scenarios, etc. Once developed, the Standard needs to be communicated to and implemented at each of its sites. Cameco needs to periodically audit this item, as part of its corporate oversight program, to ensure sites are in compliance. Cameco Cigar Lake needs to expedite construction and commissioning of the upgrades to the Water Treatment and Storage facilities to ensure it has the capability to handle water equivalent to the flow rate that came into No.2 Shaft following the incident on April 5, 2006. Prior to continuing shaft sinking, Cigar Lake needs to obtain explicit authorization from the VP-Mining that their emergency pumping, storage and treatment systems are acceptable.

Standards, Policies, or Admin. Controls NI - Not strict enough - there is no corporate Standard regarding required WTP capacity Misunderstood Verbal Communication - Standard Terminology NI - confusing terms may have led to belief that WTP could treat 500 m3/hr Oversight / Employee Relations - A & E lack depth - corporate audits did not detect that Cigar Lake did not have 500 m3/hr WTP capacity Corrective Action - Corrective action not yet implemented



Although no written standard existed at the time of the inflow, the Engineering Packages submitted in support of the construction license and the written design criteria for the project made explicit assumptions concerning the water requiring treatment and the potential amount of water that could be encountered. Although Cameco stated in the engineering packages that if the water inflow exceeded pumping or treatment capacity, the shaft would be allowed to fill until a remedial action plan was developed, Cameco did not anticipate that the potential inflow could be as high as was experienced and therefore did not have installed the treatment capacity to treat an inflow event of that magnitude, at that stage of the project.

Interim measures meeting the regulatory requirements, commensurate with the activities occurring in the mine at the time and the perceived risk of inflow potential, were implemented during the summer months of 2006. The completion of the permanent water treatment facilities will follow in 2007. Given the October inflow the maximum probable inflow is being re-evaluated, the design basis for the planned remediation plans for recovering the flooded mine may change.

As part of the October inflow management response, the project scheduling procedure will be reviewed and revised accordingly to ensure that infrastructure constraints are clearly identified, additionally, changes to the schedule, should they impact a constraint related to safety, health or environment, will be processed through the site change management process. This is described in the October 2006 inflow TapRoot® management response for CAR 1-1, related to the evaluation of the decision making processes leading up to that event.

An internal site audit process is being implemented in 2007 in accordance with the requirements of the site quality management system. However, in addition a corporate audit program is in place to assess the application of the corporate SHEQ policy and supporting programs. As well, in 2007 the mining division has implemented a formal technical oversight process, managed by the mine sub group of the corporate engineering and projects department, with the mandate of auditing the technical aspects of the mining operations. Included are assessments of dewatering contingencies and geotechnical aspects of mine plans. The corporate audits are conducted on a predetermined frequency. In addition, Cameco has an enterprise risk management program that seeks to ensure risks significant to the corporation are managed..

Contingency facilities commensurate with No.2 Shaft observed inflow rates, as indicated to the agencies (Schmitke to Schryer, August 1, 2006), including emergency pumping arrangements, contingency water storage facilities, piping, and contingency treatment capabilities are complete. The Vice President, Mining has been apprised of this and will be kept abreast of any developments that may limit or diminish the capacity of the contingencies. Shaft sinking will not be resumed until authorization to do so has been obtained from the Vice President, Mining.




CAR 11-1

• Interim measures meeting the regulatory requirements, commensurate with the activities occurring in the mine at the time and the perceived risk of inflow potential, were implemented during the summer months of 2006.

• Decision making processes are being evaluated as part of the October Inflow TapRoot® investigation, management response related to CAR 1-1.

CAR 11-2

• Based on the reviews completed related to decision making processes and scheduling, site procedures will be revised accordingly, with associated training delivered to ensure personnel understand the implication of any revisions to their roles and responsibilities.

• Probable inflow is being re-evaluated (using information from the October 2006 inflow) so that it can be used as the design basis for the planned remediation plans for recovering the flooded mine.

• Based on the above evaluation, management will make a fundamental decision on potential inflow rates at CLP and install sufficient pumping, treating and discharging capacity for a maximum probable inflow.

CAR 11-3

• An internal site audit process is being implemented in 2007 in accordance with the requirements of the corporate SHEQ manual.

• The mining division has implemented a technical oversight process with the mandate to conduct technical audits of the mining programs at the operations.

CAR 11-4

• See CAR 11-1

CAR 11-5

• The Vice President, Mining is kept abreast of any developments that may limit the capacity of the water treatment contingencies. Shaft sinking will not resume until authorized by the Vice President, Mining.

MINING DIVISION TECHNICAL OVERSIGHT

MINE WATER TREATMENT PLANT MANAGEMENT OF CHANGE

ITP ASSESSMENT CONSULTANT REPORT

SUMMARY TABLE OF CAUSAL FACTORS, CORRECTIVE ACTION

RECOMMENDATIONS AND MANAGEMENT RESPONSES

Cigar Lake Project – No. 2 Shaft Inflow – August 2006 TapRoot Investigation Management Response Summary Table of Causal Factors, Corrective Action Recommendations and Management Responses Appendix D

CAR ID Description Response Summary

Causal Factor #1: Prior to finalizing the site location for No.2 Shaft, Cameco did not identify and characterize the major water bearing feature prominent in the water inflow incident on April 5, 2006

CAR 1-1: Cameco needs to develop and issue a formal Standard (Policy and Procedure) on using pilot holes to assess the hydrogeologic characteristics associated with proposed shaft locations, including orientation of any features.

The Standard needs to give consideration to the number of pilot holes needed, use of state-of-the-art tools & techniques (such as geophysics), levels of consultation and authorities, etc.

Mining division has established a project management office (PMO) that ensures consistent project management practices are implemented in the division, including the use of risk assessments in all project phases; concept, feasibility (including pre-feasibility), construction and closing.

Cigar Lake Project is implementing a risk based project management work process mapping procedure. This will ensure ‘hold points’ are placed on project activities until such time as the necessary infrastructure (or information) is in place to support the activity. Constraints identified here will drive planning considerations

Cameco Corporation Page 1 of 17



CAR 1-2: Cameco needs to carry out a comprehensive study as to what state-of-the-art techniques are available and being used by industry, which may have benefit in effectively assessing hydrogeologic characteristics.

Supporting the MFPM-05, Mine Development and Control Program, a shaft sinking procedure will be developed. Minimum information requirements (geological and hydrogeological) to allow the safe development will be specified.

Supporting the MFPM-05, shaft sinking procedure(s) will require clear statements in the design to be made with respect to allowable variations to design and design assumptions regarding geology and hydrogeology.

Supporting the MFPM-05, shaft sinking procedure(s) will require contingency measures to be implemented, and personnel be trained on their responsibilities in the event the measures require implementation.

Supporting the MFPM-05, a procedure is being developed that formalizes how the consultant terms of reference are to be defined; ensuring scope is specific with respect to an oversight vs. technical support role.

CAR 1-3: Cameco needs to incorporate the results of the above study into its Standard on hydrogeologic assessment.

Supporting the MFPM-05, a procedure is being developed that formalizes how consultant (including internal SME) recommendations are managed.




Causal Factor #2: Cameco and MTM did not identify detailed risk scenarios, nor did they have the necessary controls in place to prevent shaft flooding, prior to beginning work on No.2 Shaft.

CAR 2-1 CLP needs to continue to bring their Standard(s) in line with corporate Standard(s) in the areas of detailed risk assessment, management of change and contingency planning, as required by corporate programs (ISHEQ).

They need to clearly identify responsibilities for compliance with the Standard. The Standard(s) need to apply to the entire life cycle of a project (i.e. planning, construction, commissioning and operation).

Measures are being implemented through the implementation of the site QMP that ensures all change is managed through a common process, Change Management Procedure (010-001) The safety, health, environment and quality department has been reorganized to have coordinators assigned responsibility and accountability for the implementation of each respective program. All coordinator positions have been filled.

JHA is a specified requirement in the change management procedure

CAR 2-2 Cameco needs to develop and implement a corporate oversight process that will look for and identify gaps in mine site risk assessment, change management and contingency planning.

In the shaft sinking procedure supporting the Mine Development and Control Program (MFPM-05), third party assessments of engineering plans are a requirement prior to initiating work. As noted under the response to causal factor 1, the means by which recommendations from these assessments are dispositioned will be formalized in an additional supporting procedure.

Technical oversight has been formalized in the mining division. This consists of routinely schedule audits of operations, technical reviews and divisional technical review meetings.




CAR 2-3 Those individuals having a role in this Standard need to acquire the necessary competencies to effectively carry out their responsibilities.

SAT/SAP is being implemented. JHA training will be required for all supervisors.

CAR 2-4 The above Standard needs to include a requirement to ensure all critical prerequisites have been met and that all designated stakeholders have reviewed and provided appropriate feedback and approvals.

CIRS is to be used to manage formal dispositioning of 3rd party to the site recommendations (i.e. Mining Division technical oversight and/or technical consultants), as well, as required actions arising from JHAs.




Causal Factor #3: Cameco and MTM did not identify detailed risk scenarios, nor did they have the necessary controls in place to prevent shaft flooding, prior to continuing work upon discovering significant water & sand on grout cover #8

CAR 3-1 There is considerable evidence that MTM miners working on No.2 Shaft at CLP were acutely aware of sand and water problems but their observations, concerns and suggestions may not have been sufficiently heard or valued by some Cameco workers.

Consistent with the McArthur River inflow investigation recommendations, Cameco needs to determine how to better take full advantage of everyone on a critical project team such as shaft sinking. While it is necessary for MTM workers to formally raise concerns within their own organization, it is not sufficient. The system would be enhanced if MTM and Cameco could work more as a fully functional team rather than two separate organizations.

Development of a shaft sinking procedure to support MFPM-05, which requires operational control measures be specified for specific design deviations which are required to manage the risk of the activities, and define required reporting and investigation requirements to address those (e.g. similar to a code of practice). To ensure that risk creep is identified, Cameco requires contractors at the regular contract meetings to report on change management in this context. In addition the meetings will include a review of change in conditions reports and site instructions issued. A worker representative from the OHC will be invited to attend the weekly contractor meetings with Cameco to voice worker concerns related to “risk creep” that may exist. The change control and risk assessment process will be applied when issues of risk creep are identified that could result in increased risk or uncertainty related to the work.

Implemented a formal process where workers together with their supervisors document the hazards associated with their planned work (5-point safety system).




Causal Factor #4: MTM used a standpipe with substandard threads on hole #7D

CAR 4-1 Cameco needs to examine its procurement policies and practices with MTM in light of what happened (i.e. receipt of standpipe with sub-standard threads) and make changes as necessary to ensure quality standpipe is received in future.

Through the shaft sinking procedure, Cameco will require that standpipe lots received by the contractor at site be inspected (either by Cameco or contractor personnel) to confirm they meet the specifications defined in the contract. Inspection results to be reported to the mine department project engineer. The use of the ITP process will also be used to provide further confirmation. The corporate procurement and material receiving procedures are under review and will be upgraded in conjunction with the SAP procurement module to require that the quality of critical items are verified prior to use. A third party review of the ITP process itself was conducted and found that the process was sound.

CAR 4-2 Looking at a broader perspective, Cameco needs to examine other critical materials it has purchased to determine whether there are problems with quality

An operational site based critical equipment list is under development that identifies equipment that may require pre-use quality verification, critical planned maintenance, spares availability, and mitigation measures in the event of a failure. The list is being developed on a risk informed basis. This list will be expanded following commissioning of facilities. The risk assessment process will be applied to underground activities to identify quality management requirements, testing, field verification of quality, and where necessary contract language changes to include contractor quality requirements for critical equipment.




CAR 4-3 CLP needs to work with MTM to ensure all of the standpipes with sub-standard thread are identified, sent back and replaced with quality material.

Standpipes currently stored on site will be examined for substandard threads before use in water control applications such as pressure grouting or freezing and marked appropriately to avoid future equipment mismatch. See summary for CAR 4-1

CAR 4-4 CLP needs to work with MTM to identify and take effective remedial action on any grout cover #8 standpipes with sub-standard threads.

See summary for CAR 4-3

CAR 4-5 Cameco needs to reach an agreement with MTM such that MTM puts a Quality Assurance program in place for their critical materials, including standpipe for the probe and grout process. As part of that contract, provision needs to be made for Cameco to periodically audit MTM's QA process.

See summary for CAR 4-1




Causal Factor #5: MTM did not pressure test the valve and standpipe combination prior to drilling through to potential water

CAR 5-1 Cameco needs to formally request MTM to revise their Procedure to explicitly and clearly state that pressure tests must be done on the valve/standpipe combination and any time a valve is temporarily removed, the pressure test must be repeated if the valve is put on again. The Procedure should contain some rationale for WHY the valve must be on the standpipe when pressurized.

Cameco has revised its pressure test standard for grout standpipe pressure testing. The technical specification requires that repeat testing be done any time the valves are temporarily removed and refitted or replaced.

CAR 5-2 MTM needs to formally and immediately communicate the new requirements (and rationale for them) to their shaft crews and supervisors and other monitoring staff in the shaft must audit compliance with the Standard on an ongoing basis.

Where Cameco requires that a contractor perform activities according to a Cameco standard such as pressure testing, Cameco will require that the appropriate training for workers be incorporated into the contractor’s training program. This will be verified through the JHA prior to the commencement of work.

CAR 5-3 MTM needs to incorporate this new pressure-testing requirement into the shaft miner training program.

Testing requirements to be captured in shaft sinking procedure to be developed to support MFPM-05. The shaft sinking procedure will define what minimum limitations the contractor and consultants are to respect with regards to standpipe density, and any variance to this will require approval of the Chief Mine Engineer.




Causal Factor #6: MTM used a valve with substandard threads on standpipe #7D

CAR 6-1 Cigar Lake Quality Dept. needs to work with MTM to ensure an effective gate valve refurbishment and quality inspection process is developed and implemented.

The ITPs will include gates requiring verification of the quality of refurbished critical components by competent personnel. This requirement will also be specified in the shaft sinking procedure. The critical designation of the refurbished equipment (see response to CF#4) will indicate the level of certificate validation required including, where necessary, the type of instruments and gauges required to complete the validation exercise.

CAR 6-2 Standards need to be developed and implemented as necessary, including a detailed valve inspection procedure if required.

See response to CF#4

CAR 6-3 Appropriate instrumentation and gauges needs to be acquired and used to examine the valves.

See response to CF#4

CAR 6-4 Effective training needs to be given to those MTM personnel who are responsible for valve maintenance and refurbishment.

See response to CF#1 and CF#4




Causal Factor #7: The MTM Foreman failed to recognize the gate valve was not securely threaded onto standpipe 7D

CAR 7-1 Cameco-Cigar Lake Project needs to work with MTM to develop a simple but effective method of labelling/marking standpipe threads such that it is clear if the valves are or are not sufficiently engaged onto the end of the standpipe.

The process of attaching the valves to the standpipes will be evaluated with the contractor through the application of a JHA. The issue of defining if a procedure is required to ensure the components are attached in a consistent manner will be reviewed and incorporated in the shaft sinking procedure supporting MFPM-05.

CAR 7-2 The revised method of attaching a valve to a standpipe needs to be communicated to miners as required and added to the MTM probe and grout procedure.

Mitigative measures such as pre operability and ongoing checks of process are done and recorded. Whenever there is a recognised increase in risk, mechanisms as defined in the shaft sinking procedure for specific risks will trigger timely responses, similar to code of practice responses.

CAR 7-3 Supervisors, Shaft Miners and Cameco mine engineering staff need to have their accountabilities adjusted to include conducting periodic checks of valves and standpipes to make sure they have been securely attached.

A standard for ensuring that grout standpipe and valve threads are sufficiently engaged will be developed before grouting resumes. Crew will be trained on this standard. Training will be managed through the new SAT/SAP system. Personnel will be instructed on their responsibilities with respect to ensuring and monitoring the integrity of the standpipe/valve system.




Causal Factor #8: The Shaft Miners exerted excess force on the pipe-wrench & snipe

CAR 8-1 Cameco should consider contracting with a company like Metallurgical Consulting Services (MCS) to develop or search out a practical Standard for safely and effectively fastening equipment such as valves to pipes without damaging threads, over-torquing bolts, etc.

In consultation with the contractor and the manufacturer a metallurgical consultant will be retained to assess current practices and if necessary develop specifications for fastening the valves to the standpipes. These will then be incorporated into the shaft sinking procedure as a supporting work instruction as necessary.

CAR 8-2 Once the Standard has been agreed upon by Cameco and MTM, it will need to be implemented at all of the Cameco mine sites.

Where appropriate, based on risk assessment of specific activities, procedural controls are now being applied to provide added assurance that appropriate tools are available to safely complete tasks. The JHA process has been implemented as described in responses to causal factor #2.




Causal Factor #9: MTM and Cameco staff were unable to slow or stop the flow of water from standpipe 7D prior to the shaft bottom becoming inaccessible

CAR 9-1 Cameco needs to identify the specifications for and acquire or develop some special tools and processes that will effectively, quickly and safely mitigate a serious flow of water into a shaft or a heading in a mine. Any tools and processes developed will need to be able to address the type of incident experienced on April 5th in No.2 Shaft.

Through the use of JHA, methods for managing uncontrolled inflow will be evaluated. This evaluation, where possible, will include the input of miners directly involved in this event.

CAR 9-2 Cameco needs to collaborate with MTM to put these new tools and processes in place at Cigar Lake and its other operational and future mine sites.

Based on the evaluations, the shaft sinking procedure will specify Cameco’s minimum requirements for contingency measures to be in place for this overall activity. This will include training and awareness on any methods to be implemented. The procedure will require that these tools be available at all times for miners to be able to promptly respond to mishaps related to inflow.




CAR 9-3 Cigar Lake needs to develop and implement a contingency plan and procedures to cover situations where fast action response may be necessary. The plan and procedures should address communication requirements. Personnel need to be trained on the contingency plan and procedures as needed. When complete, the contingency plan and procedures need to be shared with and adopted by other Cameco mine sites as appropriate

Contingency plans have been formulated and implemented to reflect new potential water inflow scenarios.




Causal Factor #10: The shaft dewatering system (normal and emergency) was unable to pump out more water and solids than were coming into the shaft

CAR 10-1 Cameco needs to carry out a comprehensive assessment of the pumping capability associated with No.2 Shaft in light of the experiences from the April 5, 2006 incident. Particular attention needs to be paid to the questions of: a) solids content in water; b) piping bottlenecks that may

restrict the overall pumping capacity;

c) power supplies; d) length of time needed to activate

the pumping system; and e) an updated estimate of the amount

of water that can reasonably be expected to flow into the shaft via the various credible risk scenarios.

Revised shaft dewatering scenarios to reflect the lessons learned from this and subsequent events. As was done in support of the shaft 2 underground freezing remediation plan and the development of the October 2006 inflow remediation plan and ongoing development of it, the use of third party design assessments will be a formalized requirement, on a risk basis, in MFPM-05.




CAR 10-2 Based on the results of the assessment, Cameco needs to take practical actions to modify the operational and emergency dewatering system in No.2 Shaft.

The water contingency measures specific to the revised No.2 Shaft potential inflow scenarios have since been verified by site and confirmed by CNSC during site inspections. A site wide re-evaluation of the potential water inflow rates has also recently been undertaken to incorporate the new information learned from the subsequent October 2006 mine inflow.

CAR 10-3 Cameco needs to take the lessons learned from its dewatering pump review on No.2 Shaft and apply them to other sites (present and future).

Dewatering design criteria review is part of the mandate of the mining division technical oversight process. Best practices will be shared, formally, with other operations through this process.




Causal Factor #11: The water treatment system was unable to handle the volume of water and solids being pumped from No.2 Shaft

CAR 11-1 Cameco needs to develop a clear corporate Standard stating that construction and operations will only be undertaken if and when adequate storage and/or treatment capability is actually available on-line for the water that may reasonably be encountered. The Standard also needs to specify that sites must make explicit assumptions concerning whether water must be treated, the potential amount of water that could be encountered in various risk scenarios, etc.

Interim measures meeting the regulatory requirements, commensurate with the activities occurring in the mine at the time and the perceived risk of inflow potential, were implemented during the summer months of 2006.

Decision making processes are being evaluated as part of the October Inflow taproot investigation, management response related to CAR 1-1.

CAR 11-2 Once developed, the Standard needs to be communicated to and implemented at each of its sites.

Based on the reviews completed related to decision making processes and scheduling, site procedures will be revised accordingly, with associated training delivered to ensure personnel understand the implication of any revisions to their roles and responsibilities.

Probable inflow is being re-evaluated (using information from the October 2006 inflow) so that it can be used as the design basis for the planned remediation plans for recovering the flooded mine.

Based on the above evaluation, management will make a fundamental decision on potential inflow rates at CLP and install sufficient pumping, treating and discharging capacity for a maximum probable inflow.




CAR 11-3 Cameco needs to periodically audit this item, as part of its corporate oversight program, to ensure sites are in compliance.

An internal site audit process is being implemented in 2007 in accordance with the requirements of the corporate SHEQ manual.

The mining division has implemented a technical oversight process with the mandate to conduct technical audits of the mining programs at the operations.

CAR 11-4 Cameco Cigar Lake needs to expedite construction and commissioning of the upgrades to the Water Treatment and Storage facilities to ensure it has the capability to handle water equivalent to the flow rate that came into No.2 Shaft following the incident on April 5, 2006.

See CAR 11-1

CAR 11-5 Prior to continuing shaft sinking, Cigar Lake needs to obtain explicit authorization from the VP-Mining that their emergency pumping, storage and treatment systems are acceptable.

The Vice President, Mining is kept abreast of any developments that may limit the capacity of the water treatment contingencies. Shaft sinking will not resume until authorized by the Vice President, Mining.


Root Cause Investigation Report

Water Inflow Incident Cigar Lake Uranium Mine - Shaft #2

April 5, 2006

Brian J. Locker KnoW Problem Inc.

Kimm Barker

Cameco Corporation

August, 2006

Table of Contents

1.0 EXECUTIVE SUMMARY............................................................................................................ 3 2.0 OVERVIEW OF THE INVESTIGATION PROCESS .............................................................. 6

2.1 INVESTIGATION SCOPE................................................................................................................. 6 2.2 ROOT CAUSE ANALYSIS PROCESS................................................................................................ 6 2.3 INFORMATION COLLECTION (I.E. ‘WHAT HAPPENED’) ................................................................. 6 2.4 CAUSAL FACTOR (PROBLEM/ISSUE) DEFINITION ......................................................................... 7 2.5 ROOT CAUSE ANALYSIS............................................................................................................... 7 2.6 CORRECTIVE ACTION RECOMMENDATIONS ................................................................................. 7

3.0 EVENTS LEADING UP TO THE INCIDENT........................................................................... 8 4.0 CAUSAL FACTORS AND SUPPORTING INFORMATION ................................................ 13

4.1 CAUSAL FACTOR #1 – PRIOR TO FINALIZING THE SITE LOCATION FOR SHAFT #2, CAMECO DID NOT IDENTIFY AND CHARACTERIZE THE MAJOR WATER BEARING FEATURE PROMINENT IN THE WATER INFLOW INCIDENT ON APRIL 5, 2006 ........................................................................................................ 13 4.2 CAUSAL FACTOR #2 - CAMECO AND MTM DID NOT IDENTIFY DETAILED RISK SCENARIOS, NOR DID THEY HAVE THE NECESSARY CONTROLS IN PLACE TO PREVENT SHAFT FLOODING, PRIOR TO BEGINNING WORK ON SHAFT #2.................................................................................................................................. 14 4.3 CAUSAL FACTOR #3 – CAMECO AND MTM DID NOT IDENTIFY DETAILED RISK SCENARIOS, NOR DID THEY HAVE THE NECESSARY CONTROLS IN PLACE TO PREVENT SHAFT FLOODING, PRIOR TO CONTINUING WORK UPON DISCOVERING SIGNIFICANT WATER & SAND ON GROUT COVER #8 ................... 16 4.4 CAUSAL FACTOR #4 – MTM USED A STANDPIPE WITH SUB-STANDARD THREADS ON HOLE #7D 20 4.5 CAUSAL FACTOR #5 – MTM DID NOT PRESSURE TEST THE VALVE AND STANDPIPE COMBINATION PRIOR TO DRILLING THROUGH TO POTENTIAL WATER ............................................................................... 21 4.6 CAUSAL FACTOR #6 – MTM USED A VALVE WITH SUB-STANDARD THREADS ON STANDPIPE #7D 23 4.7 CAUSAL FACTOR #7 – THE MTM FOREMAN FAILED TO RECOGNIZE THE GATE VALVE WAS NOT SECURELY THREADED ONTO STANDPIPE #7D............................................................................................ 23 4.8 CAUSAL FACTOR #8 – THE SHAFT MINERS EXERTED EXCESS FORCE ON THE PIPE WRENCH AND SNIPE 24 4.9 CAUSAL FACTOR #9 – MTM AND CAMECO STAFF WERE UNABLE TO SLOW OR STOP THE FLOW OF WATER FROM STANDPIPE 7D PRIOR TO THE SHAFT BOTTOM BECOMING INACCESSIBLE ............................ 25 4.10 CAUSAL FACTOR #10 – THE SHAFT DEWATERING SYSTEM (NORMAL AND EMERGENCY) WAS UNABLE TO PUMP OUT MORE WATER AND SOLIDS THAN WERE COMING INTO THE SHAFT.......................... 27 4.11 CAUSAL FACTOR #11 – THE WATER TREATMENT SYSTEM WAS UNABLE TO HANDLE THE VOLUME OF WATER AND SOLIDS BEING PUMPED FROM SHAFT #2 ........................................................... 28

5.0 CORRECTIVE ACTION RECOMMENDATIONS ................................................................ 31 APPENDIX 1 - CAUSAL FACTORS - RELATIONSHIP TO EACH OTHER & THE SHAFT INFLOW ..................................................................................................................................................... 42 APPENDIX 2 - SNAPCHART® OF EVENTS & CONDITIONS SHOWING WHAT HAPPENED LEADING UP TO AND FOLLOWING THE SHAFT #2 INFLOW INCIDENT AT CIGAR LAKE ON APRIL 5, 2006...................................................................................................................................... 49 APPENDIX 3 - CIGAR LAKE SHAFT #2 WATER LEVEL READING DATA TABLE.................. 73

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1.0 EXECUTIVE SUMMARY The Cigar Lake underground uranium mine is situated in northern Saskatchewan, 70 km from McClean Lake and 660 km north of Saskatoon. Production at Cigar Lake is expected to begin in 2007. Ore at Cigar Lake will be broken with jets of pressurized water and removed in slurry form through steel piping. The ore will be pumped to surface and loaded into special containers and trucked 70 km to McClean Lake for processing. On April 5, 2006 two members of an MTM contract crew working in Shaft #2, attempted to tighten the gate valve on standpipe 7D to address a small water leak. The leak was observed to have started from the standpipe threads where the standpipe entered the gate valve housing. A twenty-four inch pipe wrench and a three-foot snipe (cheater bar) were employed to tighten the leaking standpipe and valve assembly. Upon initial pressure being applied to the gate valve, there was some resistance encountered, the gate valve turned a little (a half turn or less) and unexpectedly the gate valve fell off the end of the standpipe, landing on the floor beside standpipe 7D. Pressurized water flowed vigorously from the open standpipe, striking the shaft wall on the opposite side of the shaft about fifteen feet above the floor level. With the shaft having been sunk to the 390 metre level at this point, the estimated water pressure was between 500 and 600 psi. Shaft sinking operations immediately ceased and all efforts were directed towards dealing with the water inflow emergency. There were no formal contingency plans in place for this circumstance. The MTM crew made several attempts to manually re-install another gate valve on standpipe 7D but the water pressure prevented each attempt. In parallel, dewatering pumps were powered up in an attempt to control the water coming into the shaft. At some point the gate valve on the nearby standpipe 7E was opened, in an attempt to reduce the water flow through 7D and enable the re-installation of a gate valve on 7D. Opening 7E did not noticeably reduce the water pressure flowing through 7D. This attempt was also unsuccessful and 7E gate valve was closed. At about this time, water level in the shaft was rising and becoming a concern. The MTM shift supervisor called the hoist man and the MTM Shaft #2 captain and informed them of the situation. A plan was developed with the first priority being the safety of the men in the shaft. The second priority was to ensure key equipment in the shaft and the galloway work platform were free to be raised up the shaft in the event the water continued to rise. There were three direct eyewitnesses to the separation of the valve and standpipe:

• The two MTM miners attempting to tighten the gate valve; and • The MTM shift supervisor.

The two MTM miners using the pipe wrench to tighten the gate valve had the best opportunity to observe the gate valve and standpipe during the incident. One MTM

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employee thought the failure was the result of stripped threads on the standpipe and indicated he had observed damaged threads at the end of the standpipe after the separation. The other MTM employee thought the failure was the result of a portion of the threaded section of the standpipe breaking. This thought was based upon his observation of what may have been a section of broken threaded standpipe lodged inside the gate valve housing (threaded area) after the gate valve fell off. This investigation team believes that it is very much more probable that the gate valve separated from the standpipe by stripping off the threads of the latter than through the second possible scenario of failing the standpipe itself. There are four reasons for selecting this path to failure scenario:

1. MTM was using schedule 80 standpipe for grout cover #8. The standpipe on hole 7D

was relatively new and not likely to have been worn by sand. The scenario of a miner being able to fail the end of a good quality schedule 80 standpipe by tugging on it with a pipe wrench is not considered plausible;

2. The miner who believes the threads on the standpipe stripped off was very positive of

his observations. For all of his adult life, he described working around metal and threads. He indicated that “he knows damaged pipe thread when he sees it”;

3. This same miner also had the best opportunity to observe the standpipe and the valve

after they became separated. He was the individual who attempted to re-install the valve on the end of the standpipe (the other observer ran to start the water pumps). He described looking right at the threads on the standpipe during his repeated attempts to re-install the valve. He described seeing the tops of the threads curled over as if they had been stripped off;

4. The other MTM miner, in an interview with an earlier investigation team, indicated

his observation was made quickly and under duress resulting from the pressurized inflow of water through the open standpipe 7D. He pointed out that his thought regarding the separation of the gate valve and standpipe could be wrong;

Three standpipes from the same batch used to fit probe hole 7D were sent out for metallurgical analysis. The objective of this analysis was to verify the standpipes met the required technical specification. The standpipes and a document describing their technical specifications were sent for analysis to Metallurgical Consulting Services (MCS) of Saskatoon. The first MCS report of analysis was received by Cameco May 11, 2006 followed by a second report on May 24, 2006. The May 11th and May 24th reports of Metallurgical Consulting Services Limited (MCS) of Saskatoon point out the threads of the sample standpipes do not meet their technical specification. In addition to problems with the shape of the threads, the MCS reports also point out the threads on the sample standpipes do not match the threads on the sample gate valve. The threads on the samples of standpipe were measured at 11 threads per inch (TPI) while the threads on the gate valve measured at the North American Standard of

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11-1/2 TPI. MCS reports that these mismatched threads would lead to limited thread engagement. The report further points out that power tightening or wrench assisted tightening could result in a weaker than expected connection or failure. Examination of the 7D gate valve and standpipe assembly will be needed to verify, with 100% certainty, the actual cause of separation. At present, the 7D gate valve and standpipe remain at the bottom of Shaft #2. Following this incident and as a result of the decision to allow Shaft #2 to fill with water, no one, including the investigating team, has had the opportunity to inspect or analyze 7D gate valve and standpipe. When it became clear that Cigar Lake did not have the water treatment capacity to deal with the amount of water coming in, Cameco senior management made the decision to safely evacuate the employees from the shaft, shut down the dewatering pumps and let the shaft fill with water. The time dependent inflow rate was calculated using measurements of the rising water level in the shaft. At 04:00 hours the next day, 11 hours after the inflow incident began, the shaft inflow rate peaked out at roughly 413 m3/hr (1,817 gpm). Detailed data on water levels and inflow rates may be found in Appendix 3. At no time was there ever a danger of serious injury to workers. The water inflow incident caused some serious operational difficulty and financial loss for Cameco. The investigation identified several specific failures and a number of weaknesses in the management system, all of which contributed to the inflow incident. Two key factors became apparent during the investigation:

• It caught almost everyone by surprise. Similar to the McArthur River inflow incident three years prior, a shaft inflow incident of this magnitude had not been predicted by the experts working on the project; and

• Previous shaft sinking experience may have given Cameco and MTM a false

sense of security. Cigar Lake sank Shaft #1 through the water filled sandstone and had not encountered water flows it couldn’t handle. At McArthur River, some of the same workers had sunk three shafts through similar water filled sandstone and handled every issue they were faced with;

Typical of virtually all incidents, there is no one cause for the water inflow incident. Several problems developed as time progressed. They came together and resulted in the incident on April 5, 2006. A visual of the eleven basic problems (TapRooT® calls these Causal Factors) and their relationship to each other may be seen in Appendix 1. Root Causes for each of the eleven Causal Factors were identified and from these, a set of comprehensive Corrective Action Recommendations was developed. When implemented, Cameco will have a much increased level of confidence that a shaft related water inflow incident does not occur in future.

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2.0 OVERVIEW OF THE INVESTIGATION PROCESS

2.1 Investigation Scope The investigation examined all of the relevant events and conditions leading up to and following the water inflow incident at Cigar Lake on April 5, 2006. The team examined events as far back as 2002 when the pilot hole for Shaft #2 was drilled. It also considered both water pumping and water treatment capability and performance. Both basic and root causes of the inflow incident were identified, as well as corrective action recommendations to significantly lessen the chances of this type of incident occurring in future, either at Cigar Lake or at any other Cameco mining operations.

2.2 Root Cause Analysis Process The investigation was conducted using the TapRooT® Root Cause Analysis process. This process was developed in 1988 and is internationally recognized and used by organizations from many different industries. The investigation process consisted of four main steps, namely a determination of: 1. What happened (SnapCharT®); 2. Issues or Problems (called Causal Factors); 3. Why the incident happened (Root Cause Analysis); and 4. Corrective Action Recommendations;

2.3 Information Collection (i.e. ‘What Happened’) Over fifteen individuals from various levels of the organization were interviewed as part of the information collection process. Some of those interviewed were directly involved in the events leading up to the Shaft #2 water inflow incident. Others were more indirectly involved and interviewed for their technical & background expertise and knowledge. Also, numerous reports, detailed correspondence and photos were reviewed and considered. A visit was made to the Cigar Lake site. Relevant information from the above sources was assembled into a detailed SnapCharT® to create a time-ordered listing of relevant events and associated conditions. The complete SnapCharT® is detailed in Appendix 2 of this report.

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2.4 Causal Factor (Problem/Issue) Definition Eleven Causal Factors (CF’s) were identified for the water inflow incident. Causal Factors are general problems or issues. The Causal Factor numbering reflects their order in time sequence and NOT their relative priority. This time sequencing of Causal Factors may be observed in Appendices 1 and 2. In truth, there is no prioritization of Causal Factors. The premise is that if any one Causal Factor had been removed or significantly changed prior to the incident, there would be a good chance the incident would not have occurred or its consequences would have been significantly reduced. A written description of each Causal Factor appears in Section 4 of the report. A visual illustration of the eleven Causal Factors, and how they relate to each other and the water inflow incident, may be seen in Appendix 1. Each Causal Factor is associated with, or more accurately the result of, numerous Conditions. The Conditions comprise additional information and help to explain why the Causal Factor existed.

2.5 Root Cause Analysis The TapRooT® Root Cause Analysis process calls for each Causal Factor to be analyzed for root causes using the patented TapRooT® Root Cause Tree. The process requires the investigator to identify as many root causes as are supported by the information collected. It is important to note that there is no ‘root - root cause’ to an incident (or to a Causal Factor). Typically, there are several CF’s associated with an incident and for each CF, there are several root causes. The root causes detail why the CF was allowed to exist. The Cigar Lake water flow incident was typical in this regard. Identification of valid root causes permits the formulation of effective and practical Corrective Action Recommendations (CARs).

2.6 Corrective Action Recommendations A total of 36 Corrective Action Recommendations (CARs) were developed to address the root causes stemming from the 11 identified Causal Factors. These are detailed in a Corrective Action Matrix format in Section 5 of this report.

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3.0 EVENTS LEADING UP TO THE INCIDENT Preparation for the sinking of Cigar Lake project Shaft #2 had been undertaken prior to January 2004. The Shaft #2 head frame had been constructed, the shaft collared and the hoist building and hoist installed. Development work on Shaft #2 began in January of 2005 as allowed by the Cigar Lake construction licence from the Canadian Nuclear Safety Commission (CNSC). Cameco contracted the sinking of Shaft #2 to Mudjatik Thyssen Mining (MTM). Experience with shaft sinking in the Athabasca Basin generally, and on the Cigar Lake property specifically, pointed out that groundwater conditions for Shaft #2 would likely be similar to those encountered during the sinking of Shaft #1, where inflow of groundwater was a concern. A plan was developed to use a series of probe covers at regular intervals, as the second shaft was developed. The purpose of these probe covers was the detection of water in proximity to the location where the shaft would next be developed and to establish a low permeability curtain surrounding the shaft in advance of the excavation.

Each probe cover was to be made up of a number of probe holes; the number of holes in a given cover was to be determined by the volume of groundwater intersected. Prior to drilling any probe hole to depth, a five metre standpipe with gate valve assembly would be installed and grouted in place to ensure that any large inflow could be restricted or stopped. The plan called for probe holes to be drilled until more than 40 litres per minute (lpm) of water was intersected, or to the final design depth of the hole if no water was intersected. Where 40+ lpm of water were intersected, the holes were grouted to refusal and allowed to set prior to deepening the hole. This successive drill-grout-set sequence was used to grout all probe holes that encountered water. In this manner, grout covers would be installed, forming a grout curtain, to protect Shaft #2 from significant water inflow as the shaft was sunk. This is a standard shaft development technique and has been successfully employed in past shaft sinking activities. Shaft #2 was sunk to 392 metres below surface elevation by November 21, 2005. Probe holes had encountered no groundwater during the first six-grout covers. Water was encountered in the #7 probe cover and was readily dealt with using the grouting method outlined above. During the first seven grout covers, schedule 40 pipes were used as standpipes. The eighth grout cover employed schedule 80 pipe for probe hole standpipes, at the recommendation of grout consultant Steve Phillips. The decision to switch to schedule 80 pipe was due to increasing depth, and with that increased hydraulic head. During November 2005 water was intercepted in hole #7, grout cover #8. On or about January 18, 2006 MTM drilled probe hole 7C and encountered water. The water intersected in hole 7C had a high solids content when initially opened. This required significant bailing of sand laden water prior to grouting. Grouting of probe hole 7C started at about this time. Pumping of grout into 7C continued until about March 29, 2006 when the 7C standpipe was found to have a pinhole below the gate valve. The pinhole was likely caused by a sandblasting effect while bailing water. The sand was almost pure

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Note the threaded section at left and center, just above the yellow boots. The threads on the standpipe samples provided to MSC Consulting Services Limited do not meet their

technical specification. These standpipes are from the same batch as probe 7D standpipe. silica (very abrasive) and behaved exactly like sand in a sand blaster. It wore down components, failed hoses, etc. Hole 7C was capped off with a two-foot square of concrete and steel structure. Grout cover #8, probe hole 7D standpipe was successfully pressure tested on or about March 4, 2005. While there are some mixed views on how pressure testing was done, the standpipes were apparently always pressure tested by hooking the grout pump directly up to the standpipe threads using a coupler. On completion of pressure testing, the 7D standpipe was capped. Capping of the 7D standpipe was done to cope with localized, crowded conditions. There were 12 standpipes in a 2 metre square area (approximately) in this portion of the Shaft #2 bottom. On April 4, 2006, during the MTM day shift, the cap was removed from probe hole 7D and a gate valve installed. An interview with the individual who installed the gate valve onto 7D indicates the installation was routine. This interview was conducted by the initial

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investigation team. He recalled that it took about 3 turns to hand tighten the valve, then

A View of The Type of Gate Valve Used on Probe Hole 7D another couple of turns with a pipe wrench. Probe hole 7D was drilled out to 65 feet and intercepted significantly more than 40 lpm water. No flow measurements were taken due

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to the high volume intersected. The 7D gate valve was closed and the drill was removed from 7D then the drill moved to probe hole 7E where water was also intercepted. On April 5, 2006, the MTM day shift crew drilled probe hole 7F and intercepted water. In consultation with Cameco and their advisory group of experts, it was decided to flush and grout probe holes 7D, 7E and 7F then re-drill until 40+ lpm water or to design depth whichever came first. During the afternoon of April 5 the MTM crew bailed approximately one bucket from probe hole 7F and flushed it with water using the grout pump. The crew then moved the grout pump to probe hole 7D and pumped water into 7D using the grout pump. The pressure indicator on the grout pump did not move above the pumps normal head pressure, indicating that water being pumped into 7D was not encountering any resistance. The 7D gate valve was closed and the grout pump was moved to probe hole 7E. The grout pump pressure indicator showed that 7E was pressurized to about 750 to 800 pounds per square inch (PSI) indicating the water being pumped into 7E met resistance. At about this time the MTM crew noticed a fine mist of water leaking from 7D standpipe threads where the standpipe entered the 7D gate valve housing. Two MTM miners used a twenty-four inch pipe wrench and a three-foot snipe (cheater bar) to tighten the leaking standpipe and valve assembly. Upon initial pressure being applied to the gate valve, there was some resistance encountered, the gate valve turned a little (a half turn or less) and unexpectedly the gate valve fell off the end of the standpipe, landing on the floor beside standpipe 7D. Pressurized water flowed vigorously from the open standpipe, striking the shaft wall on the opposite side of the shaft about fifteen feet above the floor level. Calculations completed hours later by Cameco engineering personnel estimated water inflow at a rate of about 354 m3/hr (or 1,558 USGPM). There was no effective contingency plan in place for this circumstance. The MTM crew made several attempts to manually re-install another gate valve on standpipe 7D but the water pressure prevented each attempt. The gate valve on the nearby standpipe 7E was opened, in an attempt to reduce the water flow through 7D and enable the re-installation of a gate valve on 7D. Opening 7E did not noticeably reduce the water pressure flowing through 7D. This attempt was also unsuccessful and 7E was closed. Water in the 9 metre diameter shaft was rising at a rate of about 9 cm/min. The MTM shift supervisor called the hoist man and the MTM shaft captain and informed them of the situation. A plan was developed with the first priority being the safety of the men in the shaft. The second priority was to ensure the galloway work platform and key equipment in the shaft was free to be raised up the shaft in the event the water continued to rise. There were three direct eyewitnesses to the separation of the valve and standpipe:

• The two MTM miners attempting to tighten the gate valve; and • The MTM shift supervisor.

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One MTM employee present during the incident stated that he looked closely at the standpipe threads when attempting to reinstall the valve and it appeared as if "the threads were peeled off." While one MTM employee attempted to re-install the gate valve, another immediately proceeded to get the pumps going. It required approximately 5 minutes to get the 140 hp pump going as it needed to be plugged into the electrical receptacle normally used by the Jumbo drill. A small 30 hp pump was also on the bottom at the time of the incident. One MTM employee estimated he was up to his hips in water after 10 minutes. However, once the 140 hp emergency pump was going, the miners indicated it appeared to be maintaining the water height. One MTM employee stated the water was up to his chest when he was finally forced to leave the bottom of the shaft but that it stayed at that level for some time. However, the water began to steadily rise in the shaft. When the inflow began on April 5th, the pumps may not have pumped to their rated capacity because of sand coming out with the water. Another possibility is that the standpipe began to fail due to the very abrasive sand. This would have opened up the orifice, allowing water to come in at a faster rate. Measurement data indicated that the flow rate reached as high as 425 m3/hr (or 1,800 gpm) about 11 hours after the inflow began. Between 11:00 p.m. and midnight, 6 to 7 hours after the incident, the on-site emergency team realized they were not in a strong position to make a stand against the rising water. This was because of limitations in treating the high quantities of water being pumped from the shaft. At the time of the incident, the Water Treatment Plant (WTP) had a capacity of roughly 80 to 90 m3/hr and two or three day’s worth of storage pond capacity. Cigar Lake would have been capable to increase this rate to roughly 500 m3/hr, but to do so would have required two weeks to change over the WTP mode of operation. At approximately 04:00 hours on April 6th, Cameco senior management made the decision to remove the employees and the galloway from the shaft, shut down the dewatering pumps and allow the shaft to flood with water.

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4.0 CAUSAL FACTORS AND SUPPORTING INFORMATION

4.1 Causal Factor #1 – Prior to finalizing the site location for Shaft #2, Cameco did not identify and characterize the major water bearing feature prominent in the water inflow incident on April 5, 2006

Discussion of Causal Factor A single pilot hole (hole #233) was drilled by a contractor from Ontario in 2002 at the potential site for Cigar Lake Shaft #2. The hole was analyzed by Golder Associates Ltd. for appropriateness of the shaft sinking location. Cameco also requested Mr. Steve Phillips of Phillips Mining, Geotechnical & Grouting to assess the Golder Associates work. Consistent with the practice at the time in the industry, no advanced analytical techniques (e.g. geophysics) were used to assess the appropriateness of the potential shaft location. The assessment of the pilot hole data, while it did identify significantly increased permeability at depth, did not identify the major water bearing feature prominent in the water inflow incident on April 5th. Basis for Causal Factor

• A single pilot hole was the industry standard at the time it was drilled in 2002; • The hole was drilled and logged to the industry standard of the day; • The services of a well respected and experienced professional consulting engineering

firm (Golder Associates Ltd.) were utilized to advise and analyse the data; • The experience at Cigar Lake has been that you can have geotechnical holes very

close together and still miss significant geological structure (they even had a difficult time intersecting the structure from the last grout cover which produced the inflow);

• At the time of drilling the pilot hole, there may have been geophysical methods available to enhance the knowledge base for the interpretation and assessment of the pilot hole but none were none systematically utilized in the industry;

• It merits specific mention that one is dealing with mother nature and it is always difficult to know if there is additional information to support a decision. This is especially true for shaft sinking and underground development. There is always an inherent risk associated with shaft sinking;

• Most key advisors recognized that the water sources encountered could have a limitless supply, similar to McArthur River's inflow incident in 2003;

• Everyone recognized the permeability numbers were high where the inflow occurred but they all felt they could handle the water (i.e. grout it off);

• A corporate ground control expert acknowledged that it was recognized there was an unlimited supply of water that could come through if it was allowed to come through;

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• Several individuals suggested that geophysical techniques (including seismic) were being now being increasingly used elsewhere and could be useful in defining water bearing features. One specialist made reference to specialized geophysical studies that are increasingly being done in conventional mining to better characterize features;

• Two interviewees stated they would, in future, recommend drilling more pilot holes (e.g. one in each corner as opposed to one down the middle of the shaft) for future shafts and that the pilot hole data should be extensively analyzed;

• A ground control expert suggested that drilling additional pilot holes and doing more extensive interpretation and analysis of the data would help to locate and characterize significant water bearing features so they could be better dealt with;

• On page 12 of his October, 2002 report, Mr. Phillips wrote: “It could be interpreted from the hydrogeologic data from Hole 233 (the pilot hole for Shaft #2) that the groundwater encountered in Number 2 Shaft and the extent of grouting required could be less that was performed in Number 1 Shaft. However, it is prudent to bear in mind that the hydraulic conductivity data obtained from Hole 233 may be misleading and may not realistically represent the potential inflow conditions into Number 2 Shaft. The influence of both inadequate flushing of drill cuttings from the hole, and the presence of vertical fracturing and the associated limitations of using a vertical probe hole to gain representative data for shaft sinking in such conditions, cannot be sufficiently stressed.” This statement turned out to be accurate;

4.2 Causal Factor #2 - Cameco and MTM did not identify detailed risk scenarios, nor did they have the necessary controls in place to prevent shaft flooding, prior to beginning work on Shaft #2

Discussion of Causal Factor The investigation determined that a tremendous amount of planning, effort, resource was put into the probe and grout program for Shaft #2. While everyone the investigation team interviewed acknowledged that significant water could and would be encountered at depth, everyone also expressed complete confidence that the probe and grout efforts would eventually be successful in allowing the shaft to be sunk through the water bearing region. Cigar Lake was very clear on the plan of action if water came in and began to flood the shaft. The workers were to be pulled out and the shaft would be allowed to flood. However, there appears to be an absence of effort in identifying detailed risk scenarios and their potential consequences. One such risk scenario, a valve separating from the end of a standpipe, was the actual scenario experienced during the incident. As one result of the large inflow incident at McArthur River in 2003, the CNSC presently insist on seeing and accepting a formal risk assessment for all new developments at McArthur River. This requirement is incorporated in their Operating Licence. The risk assessment must include specific reference to engineering controls, administrative controls and contingency plans on what actions will be taken if and when things go wrong.

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There is no such regulatory requirement for Cigar Lake to carry out formal risk assessments for new development (including construction). The investigation team learned that Cigar Lake are actively working toward bringing the quality element of their management system in line with corporate expectations and when this is done, formal and detailed risk assessment will be covered under Quality Management. Basis for Causal Factor • MTM began to gear up for the shaft sinking prior to Christmas, 2004. Full blown

construction work on Shaft #2 began on Jan 1, 2005; • According to the Construction Manager, the Quality function on Shaft #2 was the

responsibility of Engineering; • A couple of individuals offered their view that the shaft sinking experience from

McArthur River was not used at Cigar Lake; • Cameco employed Steve Phillips, a recognized external consultant with 35 years of

experience, to provide probe and grout related advice & guidance during the sinking of Shaft #2. Virtually all persons interviewed agreed that the advice and guidance from Mr. Phillips was vital to successfully sinking shafts. His advice and suggestions on probe and grout appeared to be taken very seriously and followed;

• The external consultant, Mr. Phillips, was not given a specific terms of reference for his services but he indicated that his focus was on the probe and grout program;

• Mr. Phillips was not asked by Cameco to do carry out an overall risk assessment to determine possible threats/risks and necessary controls;

• Cigar Lake’s mine engineering consultant also sees his role limited to overseeing the technical aspects of probe and grout program on Shaft #2;

• Water inflow is one of Cameco’s explicit ERM Risks and as such, one senior interviewee felt the incident risk scenario should have been identified;

• Cameco corporate had done an independent review on inflow potential at Cigar Lake but it was described as high level and a paper review only. The review did not identify possible risk scenarios pertaining to an inflow into Shaft #2;

• Cameco relies heavily on the site management teams at each of its sites to do what is needed to be done;

• In the past three years or so, Cameco has added ground control and ventilation specialists to corporate mine engineering to provide advice, guidance, assistance, independent review and oversight;

• One interviewee suggested that because they started as Cigar Lake Mining Corp. and have only recently come into the Cameco fold, there are many new staff at Cigar Lake who do not understand the workings of Cameco and the extent of support it has to offer. Further, having come from gold mining operations, these new staff also do not appreciate the rigours of nuclear regulation in Canada. However, some interviewees suggest there are signs that is changing;

• One interviewee suggested that a mature project would have had the elements of a management system in place where a formal risk assessment would be done prior to starting to sink the shaft;

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• At the time of the inflow incident, more than one interviewee suggested that Cigar Lake was not at the level of management systems where they would have done a formal risk assessment on Shaft #2;

• While the incident details are different (i.e. fall of ground versus flow through an open standpipe), the average flow rate experienced during the McArthur River inflow of 2003 approached 4,500 gpm and the flow rate did not decline over time;

4.3 Causal Factor #3 – Cameco and MTM did not identify detailed risk scenarios, nor did they have the necessary controls in place to prevent shaft flooding, prior to continuing work upon discovering significant water & sand on grout cover #8

Discussion of Causal Factor There is significant evidence to support that the probe and grout related efforts were enormous. The plans were refined as necessary, people consulted when problems were encountered and new initiatives were attempted. From interviews and examination of documentation however, it is clear that the focus of everyone on the Cameco side, from Nov, 2005 to the incident in April, 2006, was on better identifying and grouting off the water bearing structure discovered in grout cover #8, hole #7. Basis for Causal Factor • Most people interviewed felt that the plan of attack for grouting off hole #7 was a

reasonable one, even though it was taking far more time and effort than had ever been previously required;

• Standard practice when you hit a sand seam is to let the water flush out the sand and then grout it (this is called ‘bailing’);

• In one instance, 500 tons of sand was removed from a 1/2" sand seam that ran for acres at McArthur River;

• There is no question that you cannot put cement grout into a feature that has sand in it. The sand must be flushed first;

• The quantity of sand encountered was absolutely huge at Cigar Lake. No-one interviewed had ever run into this before;

• Shortly before the incident, the group of advisors to the probe and grout operation began to question the cost effectiveness of grout and the negative effect on the shaft sinking schedule;

• No-one interviewed recalls any discussions around possible risk scenarios and controls during the five months or so when serious water and sand had been encountered;

• There are clear indications that MTM supervisors had a greater appreciation for the water related risks but their concern was primarily directed toward the safety of their men in the shaft (as opposed to flooding the shaft and slowing down the mine development);

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i. The MTM Shaft Superintendent remembers hitting one major water source before Christmas. This was in grout cover #8, hole #7;

ii. The MTM Shaft Superintendent recalls flows of 1,000 to 1,400 gpm being bailed out of hole #7;

iii. The MTM Shaft Superintendent recalls the 4 m3 (1,000 gallon) bucket filling up in less than 1 minute;

iv. The MTM Shaft Superintendent described the water encountered on grout cover 8, hole #7 as being "the wildest I have ever seen";

v. The MTM Shaft Superintendent stated that he told his men to shut the valves slowly and don't snap shut them for fear of sudden failure;

vi. The MTM Shaft Superintendent indicated that he told his men, on a daily basis, to NEVER to take this water for granted;

• At grout cover #7, Cameco took over responsibility for probe and grout design from MTM;

• Mine Engineering Consultant-A (MEC-A) saw his role and responsibility limited to technical expertise on the probe and grout process;

• MEC-A prepared daily reports on progress and activities related to probe and grout. These were sent to a fixed distribution;

• During grout cover #8, it was decided to go from drilling 60' holes to 40' holes as MTM didn't have the required accuracy using the Jumbo;

• The corporate ground control specialist had done some work on ground structure strength and had recommended they could safely sink another 10 metres without problems;

• One of the reasons for sinking another 5 to 10 metres was to get away from the congestion of the 7 a to g standpipes;

• The other reason the advisory team decided to sink another 5 to 10 metres was to better define the location and size of the water bearing structure causing all the problems;

• At the bottom of the shaft with the miners, MTM also had a lead hand (or Foreman). The MTM Shaft Superintendent was described as coming down into the shaft about once per day;

• After the incident, MEC-A calculated the maximum flow through a 2" standpipe at the pressures encountered at the inflow level and found it was about 1,800 gpm. This was exactly what was experienced as the max flow rate;

• As early as January, 2006 virtually everyone involved in the Shaft #2 project knew that the potential water inflow was significant;

• Most key advisors interviewed indicated their perception of the water inflow potential was in the order of 500 gpm (well within the pumping capability);

• On March 9, '06, MTM & Cameco measured and recorded a flow rate of 750 to 800 gpm on hole 7C with 20% solids;

• On March 10, '06, MTM & Cameco measured and recorded a flow rate of 700 to 750 gpm on hole 7C with 70% sand (solids);

• The buckets used to bail the water and sand with hold 4 m3 (or just over 1,000 gallons);

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• The investigation team found no information to suggest questions were raised about the ability of the emergency pumps to pump water with a high solids content for an extended length of time;

• There were a number of warning signs of serious potential problems but they didn’t result in a reassessment of risks:

i. Everyone knew about the extensive sand coming out of hole #7, grout cover #8 and concern was expressed regarding the integrity of the standpipe(s);

ii. The significant sand encountered in hole #7 caused serious problems to equipment and materials;

iii. The sand was almost pure silica (very abrasive) and behaved exactly like sand in a sand blaster. It wore down components, failed hoses, etc.;

iv. Experience showed that anytime the water changed direction, the sand wore that area down;

v. The knife gates on the valves began to wear down when they were operated in a partly closed position;

vi. When significant sand began to come out of the standpipes during bailing, MTM decided to add a second gate valve (in series with the first gate valve) to minimize the chance of losing control of the water;

vii. With the double valve arrangement, they ran with the lower valve wide open and the upper valve 'throttled'. The idea was that they could always close the gate on the lower valve if the upper valve failed;

viii. With the double valve arrangement, the turbulence was associated with the upper valve so that is where the wear occurred;

ix. Numerous top valves were described as having failed due to the effect of the large quantities of sand coming out when they were bailing water;

x. MTM made a switch to using high grade hydraulic hoses due to the sand damage. It didn't help. MTM indicated the sand ate through the best hoses they had;

xi. One of the shaft miners interviewed recalled a top valve blowing off during bailing of grout cover #8. The sand had eaten a hole in the pipe joining the upper and lower valves;

• It appears that challenges were dealt with as they arose. No-one appeared to have the accountability to step back and systematically examine the potential risk scenarios that could emerge as a result of hitting serious sand and water;

• As part of a mature management system, a Quality Management expert suggested that the Change Management element would have kicked in when serious water was encountered and sand began to damage standpipes, valves, etc. This did not happen in Shaft #2 at Cigar Lake

• At least one senior person on-site acknowledged during an investigation interview that "the risks of uncontrolled water coming in were high, no doubt"

• The MTM supervisors driving the Shaft #2 construction have extensive experience working with water in the Athabasca Basin

• MTM supervisors with extensive shaft sinking experience indicated they have never grouted on one hole for 5 months before

• As it turns out, there were good reasons for having the valves clustered so close together but MTM were not made aware of those reasons

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• MTM personnel interviewed all indicated that all decisions on probe and grout were made by the MEC-A on site

• When asked, the external consultant estimated the frequency of a valve coming off a pressurized standpipe to be "very infrequent but possible"

• Many interviewees had their own vivid recollections of at least one incident in their past where miners had lost control of water during drilling or probe and grout operations

• One experienced interviewee described an incident in 1986 where a valve came off a standpipe at 1,000 gpm and 1,200 psi of pressure. It took 4 strong men 3 or 4 hours to get it back on

• The experienced people supplying advice related to Shaft #2 indicated that you had to go on experience when it came to the flow rates you could expect from a shaft

• When sinking Shaft #1 at Cigar Lake, approximately 500 gpm was experienced coming into the shaft

• One senior person interviewed believed Cigar Lake was lulled into "comfort and complacency" due to the relative ease of sinking Shaft #1 in the late '80s and due to the fact they went problem free for the first few hundred metres of sinking Shaft #2

• The external consultant offered that one of the biggest challenges (and causes of problems) is when the driller does not line up the drill steel with the standpipe and so the drill rod is hitting on (and damaging) the side of the valve. No other person interviewed made mention of this risk

• One senior Cigar Lake person interviewed described construction as being “change by default.” He suggested that "change management" is more suited to Operations and not Construction

• The investigation team became convinced there were valid reasons for valves 7 a) to g) being bunched in a tight area, for drilling the three test holes (7D, 7E & 7F)) and for dropping down another 5 to 10 metres)

• It is clear that the MTM supervisors and miners did not understand the rationale for the decisions that were being made by Cameco from Nov, ‘05 to April, ‘06

• MTM supervisors and miners were party to all of the Cameco and consultant strategy discussions with the exception of the last one. However, they essentially did what they were told by the Cameco point of contact

i. The MTM Shaft Superintendent dealt with Cameco, primarily through their Mine Engineer Consultant (MEC-A)

ii. The MTM Shaft Superintendent assumed MEC-A dealt with Steve Phillips in Tucson and others in Saskatoon

iii. The MTM Shaft Superintendent's experience was that they always dealt ONLY with one open hole at a time

iv. The MTM Shaft Superintendent couldn't understand the logic of opening up more than one hole when the last open hole wasn't yet dealt with (i.e. grouted off)

v. The MTM Shaft Superintendent stated that he does everything possible for the safety of his men if he feels he is going to drill into water

vi. The MTM Shaft Superintendent indicated that MEC-A was aware they were getting 1,000 to 1,400 gpm from some holes in grout cover #8;

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4.4 Causal Factor #4 – MTM used a standpipe with sub-standard threads on hole #7D

MTM used a standpipe with sub-standard threads on hole #7D Discussion of Causal Factor Following the incident, Cameco contracted a company called Metallurgical Consulting Services (MCS) to examine a gate valve and three standpipes from the same batch as the incident standpipe following the incident. MCS found the threads on the gate valve to be 11-1/2 Threads Per Inch (TPI). This is consistent with the North American Standard for pipe thread. The thread on the three standpipes, however, was measured at 11 Threads Per Inch. MCS indicated that this would cause the threads on the valve to bind on the standpipe threads after only 3 or 4 turns. MCS suspect the reason for the sub-standard threading on the three standpipes they tested from MTM’s most recent batch (and likely on the incident standpipe) is because a single, unsharpened tool was used on a lathe which was not set up for American (11-1/2 TPI) pipe thread. MCS, when apprised of the details of the incident scenario, suggested that the mismatch between the threads on the gate valve and the threads on the standpipe likely caused the threads to be stripped off the standpipe when the two miners tightened the gate valve. This is consistent with one Shaft Miner's observations of April 5th.when he observed the threads while attempting to put the gate valve back onto the standpipe following the incident. Basis for Causal Factor • Standpipe has always been ordered from a company named Theissen; • The MTM Shaft Superintendent always orders the standpipes; • Standpipes were delivered in batches of 24 at a time; • Standpipe was manufactured in China and has a 'Made in China' stamped on each

one; • MCS found the threads on the gate valve to be 11-1/2 Threads Per Inch (TPI); • MCS measured the thread on three standpipe samples at 11 TPI; • MCS indicated that the thread mismatch would cause the threads on the valve to bind

on the standpipe threads after only 3 or 4 turns. This is consistent with the MTM employee’s experience when hand tightening a valve onto standpipe 7D;

• MCS also found the threads on the standpipe samples to be rounded on one side instead of the classic saw tooth shape;

• Senior MTM management acknowledged they do not do any QA tests on standpipes when they are delivered to ensure the threads meet specifications, etc. MTM rely on their supplier to deliver quality materials;

• When grout covers #7 and #8 were reached, MTM changed from Schedule 40 to Schedule 80 pipe as it better handles higher pressures associated with increased depth;

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• The MTM Shaft Superintendent had to have special drill bits made up to get them in the smaller inside diameter Schedule 80 pipe;

• The MTM Shaft Superintendent has no purchasing specifications for ordering pipe from Theissen. He has always just ordered schedule 40 or schedule 80 threaded pipe;

• The standpipe they ordered from China was 'seamless. It cost more money but the Shaft Superintendent believed they received top of the line standpipe;

• The MTM Shaft Superintendent indicated that most of the pipe was leak tight before the incident. They didn't even need to use teflon tape. MCS suggested this may have been an indication that the threads were mismatched;

• The general consensus is that the standpipes and high pressure valves used are generally good;

• The MTM Shaft Superintendent indicated he was very satisfied with the standpipes from China in that they seldom had to use Teflon tape on the threads to get them to seal for the pressure test;

• MTM kept a "thread chaser" down in the shaft and had to use it on some threads before putting on the valves;

• The MTM shaft miner present during the incident stated that he looked closely at the standpipe threads when attempting to reinstall the valve and it appeared as if "the threads were peeled off";

4.5 Causal Factor #5 – MTM did not pressure test the valve and standpipe combination prior to drilling through to potential water

Discussion of Causal Factor The investigation team received conflicting information as to whether the standpipes were pressure tested with or without the valves fitted on the ends. Those interviewees who had an indirect influence on the operation (i.e. were not present in the shaft during pressure testing) suggested that it was only common sense to test the standpipes with the valves fitted onto them. There perception (belief) is that the standpipes were pressure tested with the gate valves tightened on the end of the standpipe. However, one individual, Mining Engineering Consultant - A (MEC-A), was 100% certain that none of the standpipes pressure tested during grout covers #7 and #8 had valves fitted at the time. MEC-A indicated that the grout pump, used for pressure testing, was attached to the standpipe threads using a coupler. If the gate valve had been fitted onto standpipe 7D at the time of pressure testing, it may well have failed the pressure test due to reasons discussed in Causal Factors #4 to #6 above. Corrective action would likely have been taken which would have prevented the incident. There is one puzzling question around this scenario however. Since the threads on the standpipe were likely substandard (i.e. 11 TPI versus 11-1/2 TPI), how did the pressure test pass with the coupler for the grout pump screwed on the end of the standpipe?

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The term ‘common sense’ was used by several interviewees when expressing their views that the valves should be included as part of the pressure test. However, there is no procedural or policy requirement that valves are to be included as part of the pressure test. Basis for Causal Factor • The MTM Shaft Superintendent indicated that any time he has ever pressure tested

standpipes, he has done it with the valves on; • The MTM Shaft Superintendent stated, however, that he would NOT have pressure

tested again, once the valve was put on a second time; • The external consultant stated that pressure tests should be done with the valve in

place and that he was very surprised they were not done that way; • The external consultant indicated there were no international standards calling for the

valves to be pressure tested with the standpipes but that it was "common sense" to do it that way;

• MEC-A indicated that the standpipes were always pressure tested by hooking the grout pump directly up to the standpipe threads using a coupler. Others indicated the valves were attached prior to carrying out pressure tests;

• There is an MTM Procedure covering Probe Hole Drilling; • Whether a standpipe is tested with the valve on or off is NOT clearly defined by any

Procedure or Policy; • The corporate ground control expert suggested that another reason for having the gate

valve connected to the standpipe prior to pressure testing would be so you would have some control if the pressure testing caused a fracture through to a water source;

• MTM expressed serious concerns with the clustering of standpipes 7 a), b), c), etc. but they were unable to convince Cameco to spread them out;

• The close clustering of standpipes around hole #7 meant that it was difficult to get valves on and off the standpipes and that valves needed to be occasionally taken off and then put back on. This could well have impacted on whether the standpipes were pressure tested with the valves on or off;

• The Shaft Captain (sometimes called the lead hand) reviewed the work with the crew every morning prior to the crew going down into the shaft. The MTM Shaft Supt. was present at those daily briefings;

• One experienced MTM person stated they often had to snug the valve up with a pipe wrench in order to meet the pressure test requirements;

• To solidify the standpipe into the rock, the hole is filled with "fondue" prior to inserting the standpipe;

• Then a 1" impact wrench is used to tighten a nut to expand a rubber seal (packer) against the rock;

• The fondue is left to harden for 12 hours and then the standpipe is pressure tested to 800 or 900 psi (approx 200 psi more than ambient pressure);

• MTM indicated they had at least 28 valves in stock and operational so if there was room, they could have placed a valve on every standpipe in #8 grout cover;

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4.6 Causal Factor #6 – MTM used a valve with sub-standard threads on standpipe #7D

Discussion of Causal Factor When MCS examined a gate valve following the incident (see Causal Factor #4 above), they found that the tops of the threads were worn down in places (i.e. not a perfect ‘saw tooth’ shape). The threads may have been worn down by the extensive amount of sand flowing through the valve in the 5 to 6 months prior to the incident. While neither the incident standpipe nor the valve have been recovered at this time, it is quite possible that the combination of sub-standard standpipe threads combined with worn down valve threads resulted in the valve stripping off the standpipe. Basis for Causal Factor • The gate valves used on the standpipes are also used in the oil and gas industry and

can handle far more pressure than is present at Cigar Lake. This resulted in virtually everyone interviewed having a sense of real confidence in the valves;

• MTM shaft miners and supervisors recognize that the valves are "way overkill" for this type of pressure;

• When Metallurgical Consulting Services examined a gate valve subsequent to the incident, they found the threads to be wavy and the tops of the threads had been worn down, possibly by the sand flowing through the valve;

4.7 Causal Factor #7 – The MTM Foreman failed to recognize the gate valve was not securely threaded onto standpipe #7D

Discussion of Causal Factor The investigation team learned that standpipe 7D was successfully pressure tested some weeks before the incident. This was apparently done without a valve on the end of the standpipe. A cap was placed over the end of the standpipe following pressure testing. When it came time for hole 7D to be drilled through, the MTM Foreman hand tightened a gate valve on the end of the standpipe and then presumably tightened it as usual with a pipe wrench. When interviewed soon after the incident, the MTM Foreman stated that he placed the valve in question on standpipe 7D. He recalled that it took about 3 turns to hand tighten the valve and another two turns with the pipe wrench to snug it up. The MTM Foreman is now working elsewhere in the world at the moment but it is safe to assume he did not recognize the gate valve did not go onto the standpipe to the desired depth of thread. MCS indicate that you normally need about 6 good threads as a minimum on a pipe for it to be secure and that the first three threads carry most of the load.

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Basis for Causal Factor • The MTM Shaft Foreman stated he turned the valve 3 turns to hand tighten it onto

standpipe 7D. He then likely turned it another 2 turns using a pipe wrench; • Following the incident, interviewees generally recognized and acknowledged that

putting valves on standpipes and taking them off increases the risk of failure; • When asked, one shaft miner estimated that it required 8 to 10 turns to hand tighten a

valve onto a standpipe; • An experienced shaft miner stated with some confidence that he would know if a

valve was not going on the way it should be. Others who were asked were not so sure; • The gate valves weigh in the order of 70 lbs and are typically turned onto the

standpipe in a vertical orientation. Standpipe 7D, however, was more horizontal than vertical;

• Metallurgical Consulting Services (MCS) suggested that a bad thread match between the valve and the standpipe would result in better sealing in the short term;

• It is not probable that the valve was cross-threaded on standpipe 7D because it held pressure for a certain length of time before it began to leak;

• When asked, MCS indicated that marking a line on the standpipe threads to ensure that the valve is threaded at least up to the line is quite commonly done in industry;

4.8 Causal Factor #8 – The shaft miners exerted excess force on the pipe wrench and snipe

Discussion of Causal Factor When the Shaft Miners observed spray coming out of the valve/standpipe connection on 7D, they carried out their normal practice for tightening valves onto standpipes. One of the miners used a pipe wrench with a snipe on the end to try to snug it up further. The second miner was just getting into position to help the first miner when the valve came off the standpipe. Metallurgical Consulting Services (MCS), a company specializing in fasteners, threads, etc. believes that using a pipe wrench with a snipe on the end would place excessive stress on the threads, even when the threads were matched. Basis for Causal Factor • The miners were using a 24" pipe wrench and a 36” snipe at the time of the incident; • MTM’s standard practice, when tightening valves onto standpipes, is for two miners

to use a 36" pipe wrench with a 48" snipe. The miners would both exert force on the end of the pipe wrench to snug up the valve;

• Senior MTM management indicated their miners have used pipe wrenches up to 48” in length in the past without problems;

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• MCS, when apprised of the details of the incident scenario, suggested that the threads were quite likely stripped off the standpipe by the threads on the valve. This is consistent with the Shaft Miner's observations immediately following the incident;

• MCS suggested that MTM's practice of putting two miners on the end of a 36" pipe wrench with a 48" snipe would place excess stress on the threads, even if the threads were matched and in good condition;

• MCS described a common Standard for the Construction Trades - “hand tighten until it is snug. Then take it another half turn (or whatever the number is)”;

4.9 Causal Factor #9 – MTM and Cameco staff were unable to slow or stop the flow of water from standpipe 7D prior to the shaft bottom becoming inaccessible

Discussion of Causal Factor When the gate valve came off the end of standpipe 7D, there was no pre-planned, practical method in place to stop, or even slow, the flow of water. The incident caught everyone by surprise. Several individuals interviewed suggested the Jumbo drill should have been lowered to plug the standpipe. However, if an attempt had been made to use the Jumbo to plug the standpipe, the dewatering pump would have needed to be unplugged to power it. This would have had very serious and negative implications to the water inflow rate The large amount of water coming into the shaft very quickly caused personnel to retreat up the shaft and the pumps and treatment facilities to be overwhelmed. This, in turn, necessitated the decision to allow the shaft to be flooded. Basis for Causal Factor • Virtually all persons interviewed agreed that very little, if any, thought was given on

how to stop an uncontrolled flow into the shaft from the water bearing feature encountered in late 2005;

• There were no formal or informal contingency plans in place to deal with a sudden inflow of water into Shaft #2;

• There is universal agreement that the April 5th inflow needed to be stopped within a couple of hours or it wouldn't be stopped;

• One very experienced interviewee stated that it was "always, always, always common sense to keep a packer handy in that there was no security when you first drilled in";

• It has never been Cameco's or MTM's practice to have a packer handy. There was no plan in place for what to do if pressurized water became uncontrolled;

• One Cameco executive questioned whether the consultants were asked appropriate risk scenario and contingency planning questions up front;

• Several individuals suggested that the workers present should have quickly lowered the Jumbo and plugged off the hole;

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• The MTM Shaft Superintendent suggested the 4" reamer bit could have been put on the Jumbo and held up against the standpipe to slow the flow;

• Most people estimated it would have taken about one hour to get the Jumbo down to the shaft bottom;

• However, virtually everyone agreed that it would not have been practical to keep the Jumbo at the bottom of the shaft in the event things went wrong;

• MTM indicated that the pressure of the water was stalling the Jumbo while drilling and so there is serious doubt about whether they would have been able to get it lined up with the standpipe to insert a steel stopper;

• If an attempt had been made to use the Jumbo to plug the standpipe, the dewatering pump would have needed to be unplugged to power the Jumbo. This would have had very serious and negative implications to the water inflow rate;

• One individual described, in detail, a simple design to block off the flow from an open standpipe. He thought of this idea after the inflow;

• The MTM miner present when the valve came off stated that 20 minutes after the incident, he had an idea for a levered device to reinstall the valve on the standpipe. He estimated it would have taken 2 hours to make it up in the shop;

• The Mining Engineering representative on duty at the time of the incident was on his way up to the top in a bucket when the inflow incident occurred. He was trapped there for over 30 minutes;

• The external consultant believed there had to have been other measures that could have been taken to mitigate the sudden flow;

• McArthur River used 'packers' to stem a serious water inflow during shaft sinking. The 'packers' were made up AFTER the inflow began. In the McArthur River shaft inflow incident, it required 12 days to stop the inflow;

• MTM and Cameco did not have anyone with significant shaft sinking experience on-site at the time of the inflow. However, MTM management feel that their senior staff would not have added anything had they been on-site at the time of the inflow;

• The MTM Shaft Captain was on duty at the time of the incident and MTM management feel he did whatever could be done;

• MTM management feel that the situation could not have been rescued no matter who was on site at the time;

• There was a significant delay between the time the incident occurred (5:00 p.m.) and the time that the senior Cameco person on-site was notified (6:30 to 6:45 p.m.);

• There is a feeling among some senior Cameco personnel that had they known about the inflow right away, there may have been something that could have been done to fight it and stop it before losing the shaft;

• All communications from the bottom of the shaft to the outside go through the hoist operator. This is standard practice;

• The MTM Project Manager (who was off-site at the time) apparently knew about the incident before the senior on-site Cameco representative;

• Cameco's contract with MTM calls for MTM to "immediately notify Cameco of any incident ……." This did not happen;

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4.10 Causal Factor #10 – The shaft dewatering system (normal and emergency) was unable to pump out more water and solids than were coming into the shaft

Discussion of Causal Factor As it turned out, the limitation in water treatment capability, not pumping capability, was the deciding factor in allowing the shaft to flood. However, the investigation determined there were inadequacies with respect to shaft dewatering capability. The electrical connections at the shaft bottom were limited. They could power the Jumbo OR the 140 hp standby pump but not both at the same time. One of the Shaft Miners needed to plug the 140 hp emergency pump into the electrical receptacle normally used by the Jumbo drill. If an attempt had been made to use the Jumbo to plug the standpipe, the dewatering pump would have needed to be unplugged to power the Jumbo. This would have had very serious and negative implications to the water inflow rate. Further, it appears that no allowance for solids was made in estimating the necessary pumping capability. While the water level was maintained for a while with the 140 hp pump at the bottom of the shaft, it may have started to fail due to sand coming in with the water. Another possibility is that the standpipe began to fail due to sandblasting effect, resulting in water coming in at an accelerated rate. Basis for Causal Factor • Measurement data indicated that the flow rate reached as high as 425 m3/hr (or 1,800

gpm) about 11 hours after the inflow began; • One MTM miner present when the valve came off estimated he was up to his crotch

in water after 10 minutes; • One MTM miner estimated that it took about 5 minutes to get the 140 hp pump going • Once the miners had the 140 hp standby pump going, they felt that it maintained the

water height for a while; • One MTM miner stated the water was up to his chest when he left but then it stayed at

that level for some time; • MTM's contract with Cameco called for a minimum of 1,000 gpm pumping capacity

from Shaft #2; • The Construction Manager indicated that 1,000 gpm was felt to be a reasonable

number for shaft pumping capability but recognized that it had no firm basis; • The pumping design for Shaft #2 was designed to pump 1,000 gpm and was

essentially based on McArthur River's design; • Most people felt that 1,000 gpm pumping capacity was sufficient to handle the water

potential; • Most people, when asked, agreed that the 1,000 gpm pumping capability was "an

educated guess." They indicated that there were engineering limitations in the shaft; • Several interviewees indicated that the design for the dewatering pumps for Shaft #2

came from the McArthur River specification of 1,000 gpm;

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• There was no test run of the pumps to confirm they would pump at least 1,000 gpm. One interviewee indicated it would be impractical to test the pumps;

• One senior person interviewed indicated that engineering always searches for the practical solution. He described it as always a trade-off;

• One interviewee suggested that it was important to ensure that what we think we have (i.e. pumping and water treatment capacity) is, in fact, what we actually have;

• It does not appear that anyone looked at the Shaft #2 pumping capacity requirements in any depth. One senior person involved in the project made the statement that "I assume the specs came from somewhere";

• The external consultant indicated he was never part of any discussions regarding pumping capacity or water treatment;

• Virtually all experienced personnel interviewed were very, very surprised when they learned that a peak flow rate of 1,800 gpm was experienced during the Shaft #2 inflow incident;

• When the inflow began on April 5th, the pumps may not have pumped to their rated capacity because of sand coming out with the water. It doesn’t appear that sand was a consideration prior to the inflow incident;

• On a few occasions in the months leading up to the incident, one of the Cigar Lake management team had requested verification of shaft pumping capacity;

• Shaft Miner B plugged the 140 hp standby pump into the electrical receptacle normally used by the Jumbo drill;

• The MTM Shaft Superintendent stated that the small 30 hp pump was also on the bottom at the time of the incident;

• One shaft miner stated it would have been nice to have 2 X 6" lines coming out of the shaft for pumping;

• Between 11:00 p.m. and midnight, 6 to 7 hours after the incident, the on-site emergency team realized they were not in a strong position to make a stand against the rising water;

4.11 Causal Factor #11 – The Water Treatment System was Unable to Handle the Volume of Water and Solids being pumped from Shaft #2

Discussion of Causal Factor It is clear that management at Cigar Lake were aware they did not have the water treatment capacity to handle a serious inflow into the shaft during construction of the shaft. Construction was underway to upgrade the WTP capability and the hope was that they wouldn’t need it until construction was complete. However, senior corporate Cameco staff believed Cigar Lake had the immediate capability to treat in the order of 500 m3/hr if and when anything went wrong in the shaft or in the mine. When shaft sinking began in January, 2005, there was a perception among some senior staff at Cigar Lake that they wouldn’t need to treat the water from Shaft #2. However, it was clear from November, 2005 onwards that there were measurable Radium levels in the water from Shaft #2. The investigation team found no indication that this new

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information triggered any ‘red flags’, discussions or actions with respect to Shaft #2 water inflow potential and the lack of WTP capability to handle it; Basis for Causal Factor • At the time of the incident, the Water Treatment Plant (WTP) had 80 to 90 m3/hr

though-put to Monitoring Pond A (MP-A) and 65 m3/hr to MP-B; • According to Site Services at Cigar Lake, the basic restriction to greater flow-through

is the piping at the back end of the WTP; • WTP upgrades are expected to be complete in the winter of 2006/2007; • The management team at Cigar Lake always recognized that the water treatment

capacity was minimal and followed behind the shaft sinking schedule; • Construction was underway to upgrade the water treatment capacity at the time of the

incident. A capacity of greater than 500 m3/hr (2,200 gpm) would have been available by mid-July, 2006;

• Two members of Cigar Lake’s management staff admitted they were hoping there would be no need for water treatment beyond 80 m3/hr until the upgraded WTP facilities were in place;

• The Construction Manager at the time indicated that Cigar Lake's plan, during the Construction phase, was to harmonize the water treatment capability with the potential for inflow. Harmonization was to be complete by the end of construction. It was recognized at site that if significant water treatment was required during construction, it would not be available;

• Cameco's executive mistakenly believed the water treatment capacity at Cigar Lake was in the order of 500 m3/hr at the time of the incident;

• The executive was very surprised to discover the water treatment capacity was actually only 80 m3/hr and that a build-up period was needed to approach the 500 m3/hr capacity;

• One interviewee indicated that the Joint Venture Steering Committee for Cigar Lake reviewed and approved the construction schedule and therefore should have known that the Shaft #2 construction was proceeding ahead of Monitoring Pond and Water Treatment Plant development;

• The 80 m3/hr water treatment capacity not only impacted Shaft #2. It also meant that Cigar Lake was vulnerable to other problems in the mine;

• Construction of Shaft #2 began in January, 2005. At least two senior staff interviewed believed that water treatment capacity to handle potential inflows should have been in place at that time;

• In one senior person's opinion, Cigar Lake should never have been allowed to begin sinking a shaft without having water treatment capacity to handle the potential flow-rate into the shaft;

• In contrast, one interviewee stressed that McArthur River had twice as much treatment capacity as they had shaft inflow potential when they sunk their shafts;

• McArthur River had a serious inflow incident while sinking a shaft. A key difference from Cigar Lake was that they had storage and treatment capacity for the pumped water during the 12 days it took to fight it;

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• Most people interviewed did not recall any discussion concerning water treatment limitations at Cigar Lake;

• There was no official or explicit approval given for MTM to begin work on the shaft sinking. They had already been given authority to sink the shaft by way of contract and therefore had implicit approval to begin work whenever they were ready;

• All construction work on the site is formally scheduled; • It was pointed out to the investigation team that the risk of water coming into the

shaft does not begin right away. The shaft sinks roughly 10' per day; • One key and implicit/unspoken assumption during the early phases of Shaft #2

drilling may have been that the water coming out of the shaft would not need treating. That is, the water could be free released, similar to Shaft #3 at McArthur River;

• The investigation team was told that the implicit assumption that Shaft #2 water would not need treatment was never explicitly stated or discussed and it was never written down;

• In the months prior to the April 5th inflow, a few spills had been experienced in Shaft #2 which showed the presence of Radium and its daughter products. This meant that all water coming from Shaft #2 would need to be treated prior to release to the environment;

• One senior person at Cigar Lake confirmed that it was clear from Nov, 2005 onwards that there were measurable Radium levels in the water from Shaft #2. However, he wasn't sure how many other people were aware of this;

• Further, the investigation team found no indication that this new information triggered any ‘red flags’, discussions or actions with respect to Shaft #2 water inflow potential and the lack of WTP capability to handle it;

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5.0 CORRECTIVE ACTION RECOMMENDATIONS

Corrective Actions Matrix Causal Factor #1: Prior to finalizing the site location for Shaft #2, Cameco did not identify and characterize the major water bearing feature prominent in the water inflow incident on April 5, 2006 CAR # Corrective Action Recommendation

(CAR) Associated Root Causes

CAR 1-1

Cameco needs to develop and issue a formal Standard (Policy and Procedure) on using pilot holes to assess the hydrogeologic characteristics associated with proposed shaft locations, including orientation of any features. The Standard needs to give consideration to the number of pilot holes needed, use of state-of-the-art tools & techniques (such as geophysics), levels of consultation and authorities, etc.

SPAC NI - There is no corporate Standard offering minimum requirements for drilling and interpreting shaft pilot holes along with procedural guidance on how to carry out an effective pilot hole study.

CAR 1-2 CAR 1-3

Cameco needs to carry out a comprehensive study as to what state-of-the-art techniques are available and being used by industry which may have benefit in effectively assessing hydrogeologic characteristics. Cameco needs to incorporate the results of the above study into its Standard on hydrogeologic assessment.

Human-Machine Interface - Displays NI - Cigar Lake relied on packer data only to map the ground in the vicinity of Pilot Hole 233

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Corrective Actions Matrix Causal Factor #2: Cameco and MTM did not identify detailed risk scenarios, nor did they have the necessary controls in place to prevent shaft flooding, prior to beginning work on Shaft #2 CAR # Corrective Action Recommendation

(CAR) Associated Root Causes

CAR 2-1 CAR 2-2 CAR 2-3 CAR 2-4

Cigar Lake needs to continue to bring their Standard(s) in line with corporate Standard(s) in the areas of detailed risk assessment, management of change and contingency planning, as required by corporate programs (ISHEQ). They need to clearly identify responsibilities for compliance with the Standard. The Standard(s) need to apply to the entire life cycle of a project (i.e. planning, construction, commissioning and operation). Cameco needs to develop and implement a corporate oversight process that will look for and identify gaps in mine site risk assessment, change management and contingency planning. Those individuals having a role in this Standard need to acquire the necessary competencies to effectively carry out their responsibilities. The above Standard needs to include a requirement to ensure all critical prerequisites have been met and that all designated stakeholders have reviewed and provided appropriate feedback and approvals.

SPAC NI - Cigar Lake do not currently have a Standard requiring them to do: - detailed risk assessment prior to a project beginning; - change management when plans are required to change; and - contingency planning to identify what needs to be done if the situation deteriorates; No Training - Task not Analyzed - No-one associated with the sinking of Shaft #2 had the requisite knowledge or skill to carry out an effective detailed risk assessment. Accountability NI - No-one was specifically assigned accountability to ensure the detailed risk scenarios and effective controls were identified and plans in place in the event of a contingency. A & E Lack Depth - The Audits and Evaluations conducted from the corporate office did not identify any gaps in this area.

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Corrective Actions Matrix Causal Factor #3: Cameco and MTM did not identify detailed risk scenarios, nor did they have the necessary controls in place to prevent shaft flooding, prior to continuing work upon discovering significant water & sand on grout cover #8 CAR # Corrective Action Recommendation (CAR) Associated Root Causes CAR 3-1

There is considerable evidence that MTM miners working on Shaft #2 at Cigar Lake were acutely aware of sand and water problems but their observations, concerns and suggestions may not have been sufficiently heard or valued by some Cameco workers. Consistent with the McArthur River inflow investigation recommendations, Cameco needs to determine how to better take full advantage of everyone on a critical project team such as shaft sinking. While it is necessary for MTM workers to formally raise concerns within their own organization, it is not sufficient. The system would be enhanced if MTM and Cameco could work more as a fully functional team rather than two separate organizations.

Oversight & Employee Relations - Employee Feedback NI - Cameco continues to consider the MTM miners as a labour pool, not being interested in their input, concerns and suggestions Supervision During Work – Crew Teamwork NI At times, the workers (from the various workgroups involved in the project) worked at odds with each other

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Corrective Actions Matrix Causal Factor #4: MTM used a standpipe with substandard threads on hole #7D CAR # Corrective Action Recommendation (CAR) Associated Root Causes CAR 4-1 CAR 4-2 CAR 4-3 CAR 4-4 CAR 4-5

Cameco needs to examine its procurement policies and practices with MTM in light of what happened (i.e. receipt of standpipe with sub-standard threads) and make changes as necessary to ensure quality standpipe is received in future. Looking at a broader perspective, Cameco needs to examine other critical materials it has purchased to determine whether there are problems with quality. Cigar Lake needs to work with MTM to ensure all of the standpipes with sub-standard thread are identified, sent back and replaced with quality material. Cigar Lake needs to work with MTM to identify and take effective remedial action on any grout cover #8 standpipes with sub-standard threads. Cameco needs to reach an agreement with MTM such that MTM puts a Quality Assurance program in place for their critical materials, including standpipe for the probe and grout process. As part of that contract, provision needs to be made for Cameco to periodically audit MTM's QA process.

Equipment/Parts Defective - Procurement - Procurement practices need improvement Equipment/Parts Defective - Manufacturing - Manufacturing practices for standpipes need improvement Equipment/Parts Defective - Quality Control - Quality Control practices on critical materials need improvement No Inspection - Inspection not Required Standards, Policies, or Admin. Controls NI - No SPAC Oversight / Employee Relations - A & E lack depth

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Corrective Actions Matrix Causal Factor #5: MTM did not pressure test the valve and standpipe combination prior to drilling through to potential water

CAR # Corrective Action Recommendation (CAR) Associated Root Causes CAR 5-1 CAR 5-2 CAR 5-3

Cameco needs to formally request MTM to revise their Procedure to explicitly and clearly state that pressure tests must be done on the valve/standpipe combination and any time a valve is temporarily removed, the pressure test must be repeated if the valve is put on again. The Procedure should contain some rationale for WHY the valve must be on the standpipe when pressurized. MTM needs to formally and immediately communicate the new requirements (and rationale for them) to their shaft crews and supervisors and other monitoring staff in the shaft must audit compliance with the Standard on an ongoing basis. MTM needs to incorporate this new pressure testing requirement into the shaft miner training program.

Procedures Wrong - Situation not covered Standards, Policies, or Admin. Controls Not Used - Communication of SPAC NI No Training - No learning objective

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Corrective Actions Matrix Causal Factor #6: MTM used a valve with substandard threads on standpipe #7D

CAR # Corrective Action Recommendation (CAR) Associated Root Causes CAR 6-1 CAR 6-2 CAR 6-3 CAR 6-4

Cigar Lake Quality Dept. needs to work with MTM to ensure an effective gate valve refurbishment and quality inspection process is developed and implemented. Standards need to be developed and implemented as necessary, including a detailed valve inspection procedure if required. Appropriate instrumentation and gauges needs to be acquired and used to examine the valves. Effective training needs to be given to those MTM personnel who are responsible for valve maintenance and refurbishment.

Not Used / Not Followed - No Procedure - there is no formal Procedure for inspecting Gate Valves QC NI - Inspection techniques NI Standards, Policies, or Admin. Controls NI - Not strict enough Human-Machine Interface - Displays NI - No Training - No learning objective

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Corrective Actions Matrix Causal Factor #7: The MTM Foreman failed to recognize the gate valve was not securely threaded onto standpipe 7D

CAR # Corrective Action Recommendation (CAR) Associated Root Causes CAR 7-1

Cameco Cigar Lake needs to work with MTM to develop a simple but effective method of labelling/marking standpipe threads such that it is clear if the valves are or are not sufficiently engaged onto the end of the standpipe.

Procedures Wrong - Situation not Covered Human-Machine Interface - Displays NI Non-Fault Tolerant System - Errors not detectable

CAR 7-2 The revised method of attaching a valve to a standpipe needs to be communicated to miners as required and added to the MTM probe and grout procedure.

Procedures Wrong - Situation not Covered Standards, Policies, or Admin. Controls Not Used - Communication of SPAC NI

CAR 7-3 Supervisors, Shaft Miners and Cameco mine engineering staff need to have their accountabilities adjusted to include conducting periodic checks of valves and standpipes to make sure they have been securely attached.

Procedures Wrong - Second Checker Needed Supervision During Work - Crew teamwork NI

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Corrective Actions Matrix Causal Factor #8: The Shaft Miners exerted excess force on the pipe-wrench & snipe

CAR # Corrective Action Recommendation (CAR) Associated Root Causes CAR 8-1 CAR 8-2

Cameco should consider contracting with a company like Metallurgical Consulting Services (MCS) to develop or search out a practical Standard for safely and effectively fastening equipment such as valves to pipes without damaging threads, over-torquing bolts, etc. Once the Standard has been agreed upon by Cameco and MTM, it will need to be implemented at all of the Cameco mine sites.

Standards, Policies, or Admin. Controls NI - Not strict enough Human-Machine Interface - Tools & Instruments NI Non-Fault Tolerant System - Errors not detectable

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Corrective Actions Matrix Causal Factor #9: MTM and Cameco staff were unable to slow or stop the flow of water from standpipe 7D prior to the shaft bottom becoming inaccessible

CAR # Corrective Action Recommendation (CAR) Associated Root Causes CAR 9-1 CAR 9-2 CAR 9-3

Cameco needs to identify the specifications for and acquire or develop some special tools and processes that will effectively, quickly and safely mitigate a serious flow of water into a shaft or a heading in a mine. Any tools and processes developed will need to be able to address the type of incident experienced on April 5th in Shaft #2. Cameco needs to collaborate with MTM to put these new tools and processes in place at Cigar Lake and its other operational and future mine sites. Cigar Lake needs to develop and implement a contingency plan and procedures to cover situations where fast action response may be necessary. The plan and procedures should address communication requirements. Personnel need to be trained on the contingency plan and procedures as needed. When complete, the contingency plan and procedures need to be shared with and adopted by other Cameco mine sites as appropriate.

Human-Machine Interface - Tools & Instruments NI - no tool(s) existed or were present to shut off or limit the water flow No Training - Task not analyzed - staff didn’t know what to do in the first minutes and hours of the inflow Corrective Action - Corrective Action NI - lessons were not learned from previous inflows elsewhere Standards, Policies, or Admin. Controls NI - SPAC Incomplete- Contingency Plan did not cover specific risk scenarios Procedure Wrong - Situation Not Covered - the Contingency Procedure did not address detailed risk scenarios No Communication or Not Timely - Late communication - it took almost one hour to notify a senior Cameco person on site Complex System - Knowledge-based decision required

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Corrective Actions Matrix Causal Factor #10: The shaft dewatering system (normal and emergency) was unable to pump out more water and solids than were coming into the shaft



CAR 10-1 CAR 10-2 CAR 10-3

Cameco needs to carry out a comprehensive assessment of the pumping capability associated with Shaft #2 in light of the experiences from the April 5, 2006 incident. Particular attention needs to be paid to the questions of: a) solids content in water; b) piping bottlenecks that may restrict the overall pumping capacity; c) power supplies; d) length of time needed to activate the pumping system; and e) an updated estimate of the amount of water that can reasonably be expected to flow into the shaft via the various credible risk scenarios. Based on the results of the assessment, Cameco needs to take practical actions to modify the operational and emergency dewatering system in Shaft #2. Cameco needs to take the lessons learned from its dewatering pump review on Shaft #2 and apply them to other sites (present and future).

Design Specifications -Specifications NI - the power supply could handle the emergency pumps or the Jumbo drill but not both Design Specifications - Problem Not Anticipated - Equipment Environment not Considered - no allowance was made for sand in the water Independent Review NI - Hazard Analysis NI - the design review of the dewatering system did not catch the problem

Page 40 of 74 40

Causal Factor #11: The water treatment system was unable to handle the volume of water and solids being pumped from Shaft #2




Cameco needs to develop a clear corporate Standard stating that construction and operations will only be undertaken if and when adequate storage and/or treatment capability is actually available on-line for the water that may reasonably be encountered. The Standard also needs to specify that sites must make explicit assumptions concerning whether water must be treated, the potential amount of water that could be encountered in various risk scenarios, etc. Once developed, the Standard needs to be communicated to and implemented at each of its sites. Cameco needs to periodically audit this item, as part of its corporate oversight program, to ensure sites are in compliance. Cameco Cigar Lake needs to expedite construction and commissioning of the upgrades to the Water Treatment and Storage facilities to ensure it has the capability to handle water equivalent to the flow rate that came into Shaft #2 following the incident on April 5, 2006. Prior to continuing shaft sinking, Cigar Lake needs to obtain explicit authorization from the VP-Mining that their emergency pumping, storage and treatment systems are acceptable.

Standards, Policies, or Admin. Controls NI - Not strict enough - there is no corporate Standard regarding required WTP capacity Misunderstood Verbal Communication - Standard Terminology NI - confusing terms may have led to belief that WTP could treat 500 m3/hr Oversight / Employee Relations - A & E lack depth - corporate audits did not detect that Cigar Lake did not have 500 m3/hr WTP capacity Corrective Action - Corrective action not yet implemented

Page 41 of 74 41

APPENDIX 1 - CAUSAL FACTORS - RELATIONSHIP TO EACH OTHER & THE SHAFT INFLOW

Page 42 of 74 42

Prior to finalizing Shaft #2 site location, Cameco did not identify & characterize the major water bearing feature prominent in the water inflow incident

Cigar Lake decides to sink Shaft # 2 beneath pilot hole #233 Decision made to drill

additional pilot holes and to use more state-of-the-art methods of analyzing the pilot hole data

Major water bearing feature identified and mapped. Decision made to move the location of Shaft #2

Cameco and MTM did not identify detailed risk scenarios, nor did they have the necessary controls in place to prevent shaft flooding, prior to beginning work on Shaft #2

Cameco and MTM identify the potential risk scenarios and put the necessary controls in place, prior to beginning work on Shaft #2

Cigar Lake is well prepared for any serious water that may enter Shaft #2

A

Causal Factor #1 Causal Factor #2

Page 43 of 74 43

Cigar Lake is well prepared for any serious water that may enter Shaft #2

The valve would thread easily and securely onto the standpipe. The chance of losing control of water would be much lower

B

A

Cameco and MTM did not identify detailed risk scenarios, nor did they have the necessary controls in place to prevent shaft flooding, prior to continuing work upon discovering significant water & sand on grout cover #8

Risk Scenarios WERE identified prior to continuing work when significant water was discovered

MTM used a standpipe with sub-standard threads on hole #7D

MTM used a standpipe on hole #7D with quality threads that were 11-1/2 TPI

Causal Factor #3Causal Factor #4

Page 44 of 74 44

Non-secure valve on standpipe is identified during the pressure test

B

MTM did not pressure test the valve and standpipe combination prior to drilling through to potential water

Valve and standpipe pressure tested as a unit. Problems in the connection are apparent prior to drilling through to water

Causal Factor #5

Excellent and tight fit between the valve and standpipe. Valve screws onto standpipe at least 6 threads

MTM used a valve with sub-standard threads on standpipe #7D

MTM uses a valve with standard threads on standpipe #7D

Causal Factor #6

C

Page 45 of 74 45

Valve does not pop off the standpipe due to the threads being stripped

DThe shaft miners exerted excess force on the pipe wrench and snipe

The shift miners place appropriate force on the pipe wrench so they do not damage any threads

Causal Factor #8

MTM Foreman trouble shoots the situation and ensures that valve is securely on the standpipe

The MTM Foreman did not recognize the gate valve was insufficiently threaded onto standpipe #7D

MTM Foreman recognizes the valve is not on to the degree it needs to be

Causal Factor #7

C

Page 46 of 74 46

Large water inflow into Shaft #2 is stopped or significantly slowed

D Uncontrolled

Inflow of Water into

Shaft #2

MTM and Cameco staff were unable to slow or stop the flow of water from standpipe 7D prior to the shaft bottom becoming inaccessible

April 5, 2006

Workers in the shaft at the time of the incident execute a pre-planned series of actions and plug off inflow

Causal Factor #9

E

Page 47 of 74 47

The fact that the pumps can keep ahead of the inflow buys some time for the workers to fight and stop the water flow

The WTP treats the water from the shaft prior to its release. This allows Cameco & MTM to fight the water inflow

E

The shaft dewatering system (normal and emergency) was unable to pump out more water and solids than were coming into the shaft

The shaft dewatering system (normal and emergency) is able to pump out more water and solids than were coming into the shaft

The Water Treatment System was unable to handle the volume of water and solids being pumped from Shaft #2

Water Treatment System can handle the flow rate of water coming into Shaft #2

Causal Factor #10Causal Factor #11

Page 48 of 74 48

APPENDIX 2 - SNAPCHART® OF EVENTS & CONDITIONS SHOWING WHAT HAPPENED LEADING UP TO AND FOLLOWING

THE SHAFT #2 INFLOW INCIDENT AT CIGAR LAKE ON APRIL 5, 2006

Page 49 of 74 49

Part of Cameco'sprepatory work forsinking shaft #2

26/06/2002

Contractor begins to drillvertical hole #233 to adepth of 510 metres

Af ter 07/07/2002

Several technicalanalyses were carried

out on hole #233

Hole drilled 95.6 m south of#1 Shaft to act as a pilot hole

for future excavation of theShaft #2

Location chosen tooptimise the ventilation

in the mine

Location will also reduce theamount of initial

underground development toget to the new shaft location

Diamond drill hole #233 was thethird in a series of holes drilled aspilot holes for alternate sites of a

proposed Shaft #2

Pilot hole #233completed on July 7,

2002

Cameco geologists loggedthe core, both geologically

and geotechnically

Packer testing was done in theopen hole by Golder Associates

to check for intervals of highhydraulic conductivity

An in-hole gamma probesurvey was conducted by

Cameco Exploration

Golder Associates was contracted toproduce a separate stand-alone reportfor the geotechnical & hydrogeological

assessment of the pilot hole

Drilling contractor wasBoart Longyear Inc. of

North Bay, Ontario

A

Page 50 of 74 50

of 74 51

Phillips Mining, Geotechnical & GroutingInc. issues report concerning water

inflow into Shaft #2

1) "an assessment of the extentand optimum means of grouting

the shaft prior to excavation"

2) "Comparison of the conditionsfound in #1 Shaft compared with

those anticipated in #2 Shaft,including a comparison of water

inflows into the two shafts"

3) Recommendations for the typeof concrete lining to be used that

would be most appropriate for theintended shaft service"

Cameco requests Phillips Mining,Geotechnical & Grouting Inc. to review

the Golder Associates report and toprovide recommendations on grouting

the shaft prior to excavation

Report was issued inOctober, 2002

"It could be interpreted from thehydrogeologic data from Hole 233 (the pilot

hole for Shaft #2) that the groundwaterencountered in Number 2 Shaft and theextent of grouting required could be lessthat was performed in Number 1 Shaft"

"However, it is prudent to bear in mind thatthe hydraulic conductivity data obtained

from Hole 233 may be misleading and maynot realistically represent the potentialinflow conditions into Number 2 Shaft"

The influence of both inadequate flushing of drillcuttings from the hole, and the presence of

vertical fracturing and the associated limitationsof using a vertical probe hole to gain

representative data for shaft sinking in suchconditions, cannot be sufficiently stressed."

Deliverables include:

One prophetic paragraph from themiddle of the report states:

A B

Prior to finalizing the site location forShaft #2, Cameco did not identify andcharacterize the major water bearingfeature prominent in the water inflow

incident on April 5, 2006

Cameco makes decision tosink Shaft #2 below pilot hole

#233

Most key advisors recognized that thewater sources encountered could havea limitless supply, similar to McArthur

River's inflow incident in 2003

Everyone recognized the permeabilitynumbers were high where the inflow

occurred but they all felt they couldhandle the water (i.e. grout it off)

Several individuals suggested thatgeophysical techniques (including

seismic) are increasingly being usedelsewhere and could be useful indefining water bearing features

Two interviewees stated they wouldrecommend drilling more pilot holesfor future shafts and that the pilot holedata should be extensively analyzed

A ground control expert suggested that drillingadditional pilot holes and doing extensive

interpretation and analysis of the data wouldhelp to locate and characterize significant

water bearing features so they could be betterdealt with

The assessment of the pilot hole data,while it did identify significantly increasedpermeability at depth, did not identify themajor water bearing feature prominent in

the water inflow incident on April 5th

CF#1

B C

Page 52 of 74 52

One risk scenario would be thesudden inflow of water into theshaft due to loss of control of astandpipe/valve combination

A second risk scenario wouldbe insufficient pumpingcapacity out of the shaft

A third risk scenariowould be insufficient

water treatment capability

Cameco continues tomove forward in its

preparations to sink #2Shaft at Cigar Lake

According to one senior person,the Quality function on Shaft #2is responsibility of Engineering

Unclear as to who isaccountable for ensuring the

appropriate risk assessmentsare done

Cameco and MTM did not identifydetailed risk scenarios, nor did

they have the necessary controlsin place to prevent shaft flooding,

prior to beginning work on Shaft #2

Phillips Mining was not asked byCameco to do carry out an overall

risk assessment to determinepossible threats/risks and

necessary controls

Cigar Lake's mine engineeringconsultant also sees his role

limited to overseeing the technicalaspects of probe and grout

program on Shaft #2

Water inflow is one of Cameco'sexplicit ERM Risks and as such,one senior interviewee felt the

incident risk scenario should havebeen identified

Cameco relies heavily on thesite management teams at

each of its sites to do what isneeded to be done

One interviewee suggested that amature project would have had theelements of a management system

in place where a formal riskassessment would be done prior to

starting to sink the shaft

At the time of the inflow incident,more than one interviewee

suggested that Cigar Lake was notat the level of management systemswhere they would have done a formal

risk assessment on Shaft #2

CF#2

C D

Page 53 of 74 53

Probe & Groutprogram required aspart of sinking shaft

Contract indicates thatMTM is responsible

for grout cover design,

Cook engineeringcompleted originaldesign of Shaft 2

Cameco contractsMudjatik Thyssen

Mining (MTM) to sinkShaft #2 at Cigar Lake

Contract iscomprehensive and

comprises two binders

The major focus of the Phillipsand Golder work is to ensureShaft #2 is protected/shielded

from excess water flow

Contract calls for MTM to ensurethat they provide a minimum of1,000 gpm of pumping capacity

out of the shaft

As allowed by the Cigar Lakeconstruction licence from the

Canadian Nuclear SafetyCommission (CNSC)

Preparation for thesinking of Cigar Lake

project Shaft #2 had beenundertaken prior to

January 2004

Development workon Shaft #2 began in

January of 2005

MTM constructs the headframe, collars the shaft

and installs the hoistbuilding and hoist

D E

Page 54 of 74 54

About 15/11/2005

Cameco takes overGrout cover designon grout cover #8

MTM finds thefirst 6 grout

covers to be dry

MTM interceptswater on grout

cover #7

Switched to Schedule80 pipe (fromSchedule 40)

On grout cover #8, astandpipe failed and

water came in

A Cameco seniormanager suggested thatMTM were doing excellent

work in shaft #2

Shaft was wellconstructed. No safety

incidents even with delays

Consistent withpilot hole data

E F

Page 55 of 74 55

04/12/2005

MTM raise concernsregarding wear of hole #7

standpipe and valves

Many MTM interviewees reportedhigh wear from sandblasting

effect while bailing

Consultant Engineer conductedmicrometer readings on pipe

indicating little wear

MTM made decision touse additional valve when

bailing

No formal assessmentcarried out by Cameco toidentify risks & adequacy

of water controls

Shaft crew interceptsmajor water on grout

cover #8, hole #7

Bailed lots of water/solids.Solids consisted of high

grade silica sand

MTM personnel do not feel theirconcerns were really heard by

Cameco. This was similar at McArthurRiver prior to their 2003 inflow

All indications are that the shaftsinking proceeded as normal.Focus was on probe and grout

F G

Page 56 of 74 56

Cameco and MTM did not identify detailed risk scenarios,nor did they have the necessary controls in place to

prevent shaft flooding, prior to continuing work upon thediscovery of significant water and sand on grout cover #8

Most people interviewed felt thatthe plan of attack for grouting offhole #7 was a reasonable one,even though it was taking a very

long time

No-one interviewed recalled anydiscussions around possible riskscenarios and controls during thefive months or so when serious

water and sand had beenencountered

The MTM Shaft Superintendentrecalled the 4 m3 (1,000 gallon)

bucket filling up in less thanone minute

The MTM Shaft Superintendentdescribed the water encountered

on grout cover #8, hole #7 as being"the wildest I have ever seen"

At least one senior Camecoperson on-site acknowledged "therisks of uncontrolled water coming

in were high, no doubt

The external and contract MineEngineering Consultants saw their

role and responsibility limited totechnical expertise on the probe &

grout process

As early as January, 2006virtually everyone involved in

the Shaft #2 project knew thatthe potential water inflow

was significant

Most key advisors interviewedindicated their perception of the

water inflow potential was inthe order of 500 gpm (well

within the pumping capability)

On March 9, '06, MTM & Camecomeasured and recorded a flow

rate of 750 to 800 gpm on hole 7Cwith 20% solids

It appears that challenges were dealtwith as they arose. No-one appeared tohave the accountability to step back and

systematically examine the potentialrisk scenarios that could emerge as aresult of hitting serious sand and water

The MTM Shaft Superintendentindicated the Cameco point ofcontact was aware they were

getting 1,000 to 1,400 gpm fromsome holes in grout cover #8

Probe & grout operationsproceed in Shaft #2

CF#3

MoreCF#3

G H

Page 57 of 74 57

There were a number of warning signsof serious potential problems but they

didn't result in a reassessment ofrisks. For example:

The knife gates on the valves beganto wear down when they were

operated in a partly closed position

Numerous top valves weredescribed as having failed due to theeffect of the large quantities of sand

coming out while bailing water

MTM made a switch to using high gradehydraulic hoses due to the sand

damage. It didn't help. MTM indicated thesand ate through their best hoses

One of the shaft miners interviewedrecalled a top valve blowing off during

bailing of grout cover #8. The sand hadeaten a hole in the pipe joining the

upper and lower valves

One interviewee described construction asbeing "change by default." He suggested

that "change management" is more suited toOperations and not Construction

When asked, the externalconsultant estimated the

frequency of a valve coming off apressurized standpipe to be "very

infrequent but possible"

Many interviewees had their own vividrecollections of at least one incident in

their past where miners had lostcontrol of water during drilling or probe

and grout operations

One experienced interviewee describedan incident in 1986 where a valve cameoff a standpipe at 1,000 gpm and 1,200

psi of pressure. It took 4 strong men 3 or4 hours to get it back on

MoreCF#3

H I

Page 58 of 74 58

18/01/2006

MTM drill hole 7C in#8 grout cover

21/01/2006

MTM beginGrouting Hole 7C

Extensive grouting &bailing of 7C carried out

MTM grout hole 7,and inspected the

standpipe

Found insignifcantwear

Wear was measured by miningengineering consultant using a

micrometer

I

Some question as to whetherthe micrometer used could

accurately measure any wear

Began to flush and bailonce the hole was

drilled through

'Bailing' consists ofallowing the water &

sand to flow out of thestandpipe and valve

Purpose of bailing is toget rid of the sand so

that grouting is possible

J

Page 59 of 74 59

04/03/2006

MTM drill collars forholes 7 D, 7E & 7F

All indications suggeststandpipe itself was newand in standard condition

MTM used a standpipewith sub-standard

threads on hole #7D

CF#4

J K

04/03/2006

MTM install standpipes7D, 7E & 7F

Standpipe has always beenordered from a company

named Theissen

MTM do not do any QA testson standpipes when they are

delivered to ensure thethreads meet specifications

MTM rely on theirsupplier to deliverquality materials

MTM have no purchasingspecifications for ordering pipe

from Theissen. They simplyorder Schedule 40 or Schedule

80 threaded pipe

Standpipe ordered from China was'seamless. It was more expensive

but MTM believe the standpipe itselfwas 'top of the line'

MCS also found the threads onthe standpipe samples to be

rounded on one side instead ofthe classic sawtooth shape

MCS suspect that a single,unsharpened tool was usedon a lathe which was not setup for American (11-1/2 TPI)

pipe thread

Metallurgical ConsultingServices (MCS) found the

threads on the gate valve to be11-1/2 TPI (Threads Per Inch)

MCS measured the threadon three standpipe

samples at 11 TPI. This issub-standard

MCS indicated that the threadmismatch would cause the valvethreads to bind on the standpipe

threads after only 3 or 4 turns

This is consistent with theMTM Foreman's recollection of

hand tightening a valve ontostandpipe 7D

Advisory groupdecision after ateleconference

Poor thread cuttingtechniques apparent. Onethread at a time instead of

all threads at once

Page 60 of 74 60

Standpipes arepressure tested to

approximately 900 psi

Standpipe and valve are primaryand ONLY real barrier against the

significant water volume andpressure in the formation behind

04/03/2006

MTM pressure teststandpipes

K

MTM did not pressure testthe valve and standpipe

combination prior to drillingthrough to potential water

CF#5

Cameco mining engineering consultantwas 100% insistent the standpipes wereALWAYS pressure tested by hooking thegrout pump directly up to the standpipe

threads using a coupler

Others indicated the valveswere attached prior to

carrying out pressure tests

The MTM Procedure does notspecify that a standpipe is to be

tested with the valve on

There is an MTM Procedurecovering Probe Hole Drilling

MTM supervisors indicatedthat any time they have everpressure tested standpipesin the past, they have done it

with the valves on

The external consultant statedthat pressure tests should be

done with the valve in place andthat he was very surprised they

were not done that way

The external consultant indicated therewere no international standards

calling for the valves to be pressuretested with the standpipes but that it

was "common sense" to do it that way

If the gate valve had been fittedonto standpipe 7D at the time of

pressure testing, it may well havefailed the pressure test due to

the substandard threading issue

Additional ratonale for having the gatevalve connected to the standpipe priorto pressure testing would be to have

control if the pressure testing causes afracture through to a water source

L

Failing the pressure test at thistime would likely have identified

the valve was not securelyattached to the standpipe

Page 61 of 74 61

MTM places threadedcaps on the ends of

standpipes 7D, 7E & 7F

Highly congested area dueto number of standpipesrequired so were trying to

minimize extra equip. in area

12 holes within 2m x2m area.

29/03/2006

MTM abandons hole 7Cdue to pin-hole in

standpipe

Significant bailing andgrouting created wear

Capped with a 2ftsquare concrete and

steel structure

Pin hole in the threadsbelow bottom valve

MTM drills hole 7Gpacker

In an attempt to interceptwater near hole 7C

Did not interceptwater but hit hole 14

No formal assessmentcarried out to identify risks

& adequacy of controls

L M

Page 62 of 74 62

MTM used a valve withsub-standard threads on

standpipe #7D

CF#6

M MTM Foreman selects gatevalves to place on

standpipes 7D, 7E and 7F

N

Gate valves used on the standpipesare also used in the oil and gasindustry and can handle far more

pressure than is present at Cigar Lake

This results in virtually everyoneinterviewed having a sense ofreal confidence in the valves

When Metallurgical Consulting Servicesexamined a gate valve subsequent to the

incident, they found the threads to be wavy andthe tops of the threads had been worn down,possibly by the sand flowing through the valve

Quite possible, even likely, that thecombination of sub-standard standpipethreads combined with worn down valve

threads resulted in the valve strippingoff the standpipe

No 100% way of determining theextent to which gate valve 7D threads

were damaged until it is recovered

The threads were not aperfect 'sawtooth' shape

Threads may have been worn downby the extensive amount of sand

flowing through the valve in the 5 to 6months prior to the incident

Page 63 of 74 63

The MTM Foreman did notrecognize the gate valve

was insufficiently threadedonto standpipe 7D

N

CF#7

OMTM Foreman installs and

tightens gate valves onstandpipes 7D, 7E and 7F

MTM Foreman removesthe threaded caps from

standpipes 7D, 7E and 7F

Some weeks after thestandpipe waspressure tested

An experienced shaft miner statedwith some confidence that he

would know if a valve was not goingon the way it should be. Others who

were asked were not so sure

The gate valves weigh in theorder of 70 lbs and are typicallyturned onto the standpipe in a

vertical orientation

It is not probable that the valve wascross-threaded on standpipe 7D

because it held pressure for alength of time before beginning to

leak/spray

When asked, MCS indicated thatmarking a line on the standpipe

threads to ensure that the valve isthreaded at least up to the line isquite commonly done in industry

The MTM Shaft Foremanstated that he turned the

valve 3 turns to handtighten it onto standpipe 7D

He further recalled that, tosnug it up, he turned the

valve another 2 turns using a24" pipe wrench

When asked, one shaft minerestimated that it required 8 to

10 turns to hand tighten avalve onto a standpipe

MCS indicate that you normallyneed about 6 good threads as aminimum on a pipe for it to besecure and that the first threethreads carry most of the load

The cluster of standpipesin the series of #7 holes

required valves to betaken on and off

Page 64 of 74 64

About 04/04/2006 5:30 PM

MTM drills hole 7D to65 ft

Intercepted water soclosed valve and moved

to 7E

About 05/04/2006 12:00 PM

New Shaft #2 crewarrives

MTM Foreman isaware of status of 7

series holes

About 05/04/2006 1:00 PM

MTM crew drillshole 7F to 56ft

InterceptedWater

About 04/04/2006 7:00 PM

MTM drills hole 7Eto 62 ft

InterceptedWater

Did not measureinflow

O P

Page 65 of 74 65

About 05/04/2006 4:05 PM

Cameco miningengineering consultant

returns to the shaft

MTM moves thegrout pump to 7D

and begins topump water

Pressure did notbuild past static

About 05/04/2006 3:00 PM

Cameco probe & groutadvisory/expert group

conduct video conferenceto discuss options

Decided to flush and groutholes 7D, 7E & 7F, thenredrill to design depth

Discussed getting groutin place to move on

P

MTM supervisors did notparticipate in thisconference call

MTM supervisors werenormally participants in the

conference calls

MTM bails onebucket from 7Fprior to flushing

Q

Page 66 of 74 66

MTM moves groutpump to 7E andpressurizes to750-800 psi

Noticed water sprayingfrom valve on 7D

One MTM miner begins totighten valve on 7D using a

24 inch pipe wrench

Moved minimalamount and still

leaking

MTM miner places a 3 footsnipe over the pipe wrench

and tries to turn valve

Very hard to getleverage due to poor

footing andcongestion

Increase in pressure to 7Emay have caused the

pressure in 7D to increase

The shaft miners exertedexcess force on the pipe

wrench and snipe

There is no MTM policy againstusing snipes to increase

leverage on pipe wrenches

It is common practice forMTM to use snipes on

pipe-wrenches

Q

Second miner positionshimself to help 1st miner

R

CF#8

The miners were using a 24"pipe wrench and a 36" snipe

at the time of the incidentMTM's standard practice, when

tightening valves onto standpipes,is for two miners to use a 36" pipe

wrench with a 48" snipe

Sr. MTM management indicatedtheir miners have used pipe

wrenches up to 48" in length inthe past without problems

MCS suggested that MTM's practice ofputting two miners on the end of a 36" pipe

wrench with a 48" snipe would place excessstress on the threads, even if the threads

were matched and in good condition

MCS described a common Standard forthe Construction Trades - "hand tightenuntil it is snug. Then take it another half

turn (or whatever the number is)

Page 67 of 74 67

The connectionbetween the valve andthe standpipe fails on

hole 7D

05/04/2006 5:00 PM

Uncontrolledinflow of

water intoShaft #2

One eye witness claims thepipe had sheared. Two

others believe the threadsstripped off the standpipe

Poor thread cuttingtechniques apparent. Onethread at a time instead of

all threads at once

Gate valve requires 11.5threads/inch, Pipe testedis cut to 11 threads/inch

The rounded backsallowed the valve threadsto strip the pipe threads

The valve metal isharder than thestandpipe metal

At least one example of a previousprocurement problem included

pipes with a left hand threadfinding their way into the shaft

R

MCS, when apprised of the detailsof the incident scenario, suggested

that the threads were quite likelystripped off the standpipe by the

threads on the valve

S

The MTM shaft miner present during the incidentstated that he looked closely at the standpipethreads when attempting to reinstall the valve

and "it looked as if the threads were peeled off"

A strong gusher through theopen standpipe, spraying off

the far wall of the shaft

Page 68 of 74 68

MTM miners andsupervisors respond

to inflow of water

MTM and Cameco staff were unableto slow or stop the flow of water

from standpipe 7D prior to the shaftbottom becoming inaccessible

S

CF#9

There is universalagreement that the April 5thinflow needed to be stoppedwithin a couple of hours or it

wouldn't be stopped

Several individuals suggestedthat the workers present

should have quickly loweredthe Jumbo and plugged off the

hole

If an attempt had been madeto use the Jumbo to plug the

standpipe, the dewateringpump would have needed to

be unplugged to power it

MTM management feel that thesituation could not have beenrescued no matter who was

on site at the time

There were no formal orinformal contingency plans inplace to deal with a suddeninflow of water into Shaft #2

It has never been Cameco's orMTM's practice to have a 'packer'

handy. There was no plan inplace for what to do if pressurized

water became uncontrolled

One very experienced intervieweestated that it was "always, always,always common sense to keep apacker handy in that there was nosecurity when you first drilled in"

One individual described, in detail, asimple design to block off the flow from an

open standpipe. He thought of this ideaafter the inflow and estimated it would havetaken two hours in the shop to make it up

All persons interviewed agreed thatvery little, if any, thought was given

on how to stop an uncontrolled flowinto the shaft from the water bearing

feature encountered in late 2005

McArthur River used 'packers' to stem aserious water inflow during shaft sinking.The 'packers' were made up AFTER theinflow began. McArthur River needed 12

days to stop the shaft inflow

One interviewee questioned whetherconsultants were asked the right riskscenario and contingency planning

questions up front

T

Page 69 of 74 69

TOne MTM miner

attempts to re-install thegate valve

Another MTM minerimmediately proceedsto get the pumps going

Communications aremade to the Hoist

Operator

Required about 5 minutes to getthe 140 hp pump going as it

needed to be plugged into theelectrical receptacle normally

used by the Jumbo

Hoist Operator informsothers of the incident

Senior Cameco person onsite did not know ofincident for roughlyanother 90 minutes

U

Estimated he was upto his hips in water

after 10 minutes

There is some thinkingamong Cameco that if theyhad known immediately,

they may have been able todo something

Page 70 of 74 70

The shaft dewatering system(normal & emergency) was unableto pump out more water and solids

than were coming into the shaft

U Water begins tosteadily rise in the

shaft

MTM's contract with Camecocalled for a minimum of 1,000gpm pumping capacity from

Shaft #2

The pumping design for Shaft#2 was designed to pump 1,000gpm and was essentially based

on McArthur River's design

Most people suggested the1,000 gpm pumpingcapability was "aneducated guess"

On a few occasions in the monthsleading up to the incident, one of

the Cigar Lake management teamhad requested verification of shaft

pumping capacity

One interviewee suggested it wasimportant to ensure that what wethink we have (i.e. pumping and

water treatment capacity) is, in fact,what we actually have

Virtually all experienced personnelinterviewed were very surprised

when they learned that a peak flowrate of 1,800 gpm was experiencedduring the Shaft #2 inflow incident

When the inflow began on April5th, the pumps may not have

pumped to their rated capacitybecause of sand coming out with

the water

It does not appear thatsand was a considerationprior to the inflow incident

One MTM miner present when thevalve came off estimated he was up to

his crotch in water after 10 minutesand that it took about 5 minutes to get

the 140 hp pump going

Measurement data indicated thatthe flow rate reached as high as425 m3/hr (or 1,800 gpm) about11 hours after the inflow began

V

CF#10

Page 71 of 74 71

The water treatment systemwas unable to handle the

volume of water and solidsbeing pumped from Shaft #2

VSenior Cameco & MTMpersonnel fly to CigarLake to take control of

response efforts

06/04/2006 4:00 AM

Cameco seniormanagement makedecision to remove

workers and equipmentand allow the shaft to flood

Investigation effortsbegin

Between 11:00 p.m. and midnight, 6to 7 hours after the incident, the

on-site emergency team realizes theyare not in a strong position to make a

stand against the rising water

One interviewee stressed thatMcArthur River had twice asmuch treatment capacity as

they had shaft inflow potentialwhen they sunk their shafts

When shaft sinking began inJanuary, 2005, there was a

perception among some senior staffat Cigar Lake that they wouldn't need

to treat the water from Shaft #2

There is no indication that the Nov,2005 discovery of Radium in Shaft #2

water triggered any 'red flags',discussions or actions with respect

to inflow potential and the lack ofWTP capability to handle it

At the time of the incident, theWater Treatment Plant (WTP)had 80 to 90 m3/hr capacity

Cameco's executive believedthe water treatment capacity atCigar Lake was in the order of

500 m3/hr

The management team at CigarLake always recognized that the

water treatment capacity wasminimal and followed behind the

shaft sinking schedule

Two members of Cigar Lake'smanagement staff admitted they

hoped there would be no need forwater treatment beyond 80 m3/hruntil the upgraded WTP facilities

were in place

WTP upgrades are expectedto be complete in the winter

of 2006/2007

At least two senior staff stronglybelieved that water treatmentcapacity to handle potential

inflows should have been in placewhen Shaft #2 construction began

in January, 2005

CF#11

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APPENDIX 3 - CIGAR LAKE SHAFT #2 WATER LEVEL READING DATA TABLE

Page 73 of 74 73

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