Q4 2019 Earnings Call
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I would now like to turn the conference over to Rachelle Girard, Vice President of Investor Relations. Please go ahead mr.
Thank you operator, and good day, everyone. Thanks for joining US welcome to Camecos fourth quarter Conference call today's call will focus on the trends, we're seeing in the market and on our strategy not on the details of our quarterly financial results.
If you have detailed questions about a quarterly financial results. Please reach out to the contact.
Did in our news release, and we'll be happy to help you with those details.
With us today on the call our Kim gets old President and CEO Grant Isaac Senior Vice President and CFO, Bryan Riley Senior Vice President and Chief Operating Officer, Alice Wong Senior Vice President and Chief Corporate Officer and.
John Quinn Senior Vice President Chief Legal officer, and corporate Secretary.
Tim will begin with comments on our strategy and the market.
After we will open it up for your question.
If you joined the conference call through our website event page there are slides available which will be displayed during the call.
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In a PDF file through the conference call link that Cameco Dot com.
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During the Q way session. Please limit yourself to two questions and then returned to the Q.
Please note that this conference call will include forward looking information, which is.
On a number of assumptions and actual results could differ materially.
Please refer to our annual information form and Mdna for more information about the factors that could cause. These different result, and the assumptions we have made with that I will turn it over to Tim.
Well. Thank you were showing welcome to everyone on the call today.
I appreciate you taking the time to join us.
Happy New year, everyone at hard to believe another years come and gone in fact, we're into a new decade.
And despite the challenges the nuclear industry faced in the previous decade.
We continue to believe we have the right vision and strategy work company.
So just.
Why do we think we have the right vision and strategy.
First just because our vision, which is to energize a cleaner world is clearly aligned with the world's growing demand for energy.
While helping to avoid some of the worst consequences of climate change.
And second is because our strategy of production.
One marketing discipline and patient balance sheet management is working.
The 2019, we achieved replacement rate term contracting of 36 million pounds.
And we begin 2020 with over $1 billion in cash and negative net debt.
Also important is.
Over the past number of months, we're seeing the other segments of our industry transitioning.
As a result, we remain committed to our strategy.
I want to remind you of the long term fundamentals in our industry because they are central to both our vision and our strategy.
I think it's an important reminder, because as I read analyst and trade reports and watch the resulting d. today volatility.
I fear people are losing sight of the very positive long term fundamentals for our industry.
As they are caught up in the short term noise.
Our board in our stakeholders, including.
Employees communities customers governments and shareholders expect us to manage this company in a long term sustainable fashion.
We can and we won't get distracted by the noise and we can't and won't lose sight of the underlying long term fundamentals in our industry.
And the fundamentals are really.
Simple demand is on an upswing.
And utilities have a growing wedge of uncovered requirements precisely at the same time that supply is on a downswing at today's prices are insufficient to reverse this trend.
Our optimism and confidence in the uranium market transition is growing.
Well talk more about this later, but first I want to review our strategy.
Our strategy is to take advantage of the long term growth, we see coming by focusing on our tier one assets.
It's designed to add long term value.
We've taken a three pronged approach and the execution of our.
Operational marketing and financial.
We have cut production far blower committed sales, which requires we purchase material in order to fulfill those commitments.
And we have strengthened our balance sheet to ensure we able to financial capacity to execute on our strategy.
And self.
Manage risk.
So why is this our strategy.
Because we're optimistic about the drivers of long term growth in our industry.
There is increasing recognition by policymakers and some environmental groups. The nuclear power will be an indispensable tool for addressing what is being referred to.
By many as the climate change crisis.
And we recognize that today's low prices, creating tomorrow's opportunity for us.
The fact that we have tier one production shut down tells us this market needs to transition to ensure those pounds will be available to fuel growing demand.
The market needs to transition to one where prices set by the production cost curve.
Let's talk more specifically about our strategic actions, including our spot market purchases.
First let me be clear we continue to do what we said we would do.
Our operational decision to reduce.
Production well below our committed delivery volumes requires us to be active on the demand side.
In other words, we have to purchase material on the spot market.
There's a lot of speculation and in fact, some skepticism and criticism about our activity in the spot market.
Some market.
Try to capitalize on our need to buy material.
This speculation skepticism and criticism wont deter us.
We won't disclose exactly when and how much we're going to purchase annually.
Why do allow us to be more flexible and nimble in the market.
To allow us to capture more gross margin.
Well, we won't tell you exactly volumes and timing of our purchases we will share with you the purchasing framework we're using.
Remember our goal is to buy as cheaply as possible in order to maximize our gross profit.
This means we have to adjust our purchasing activity to what we see in the market.
Let me use.
<unk> 2019 to illustrate.
In 2019, we said we plan to purchase a total of between 21 at 23 million pounds to meet our deliveries and maintain our desired inventory.
Not all of this purchasing was bought material, but a large portion of it was.
In total we.
It just 19 million pounds of uranium more than double what we produced but a bit lower than the outlook we provided.
Given we made all of our delivery commitments you may wonder, how we bought less than plan.
Well, we drew down our inventory.
Why did we need to buy some material and.
Rarely draw down on our working inventory.
Because it made sense to do that.
As I said earlier, we saw some signals in the market that required us to adjust our approach to purchasing.
We are willing to be patient.
If others want to go out and suite the coverage for material, we will let them bring it to the market.
Where we will buy it as cheaply as possible.
This is entirely consistent with what we said we would do that is to responsibly manage our supply to meet our sales commitments.
This does not change the overall quantum of purchasing required.
Just the timing.
And let me be clear neither.
Other does it represent the departure from our strategy.
We have been upfront about the potential for variability in our sales volumes or production, our purchases and our inventory.
These are planned to purchase from the outlook, we provided because they make sense and the benefit our margins.
We will plan our.
Devotees to ensure we meet our delivery commitments, but they're not constrained by quarterly or annual deadlines.
We make business decisions based on our first hand knowledge and experience.
If we start to see end user demand in the spot market and signals 0.2 more expensive bounce tomorrow.
We will not only advance our.
Purchasing activity, we may actually build a bit more inventory to ensure we have the material where we needed when we need is and in the rate form.
Ultimately with Mcarthur River key lake on care, and maintenance and production well below our sales commitments, we still have a lot more purchasing ahead of US then behind us.
We were also active on the financial front in 2019.
In September we retired $500 million of debt or one third of our debt outstanding.
In addition, we extended the maturity date of our revolving credit facility to November 2023.
While also reducing it by 200.
$50 million. It now sits at $1 billion and remains Undrawn.
As well, Inc. I repeat itself standing loan with us and therefore began distributing cash dividends.
These two items added over $100 million U.S. to our cash balance.
As a result of these strategic actions we've taken as I noted earlier, we have about $1.1 billion in cash on our balance sheet.
The debt on our balance sheet sits at about $1 billion with maturities in 2020 to.
2024 and 2042.
So our balance sheet is strong.
We have the financial result, execute on our strategy and the ability to self managed risk.
And we believe the risks related to our CRM tax case has diminished based on the unequivocal ruling we received from the tax court in September of 2018.
Vision, we believe will be upheld on appeal.
Ill.
And the appeal hearing has now been schedule.
It will be held on March 4th this year 26 days from now.
We believe a decision could come from the federal Court of appeal this year.
If we were successful on appeal as we believe we will be we will be entitled to refund of about five.
$5 million and the payment of the cost award for the legal fees incurred of over $10 million plus disbursements of up to $17.9 million.
Now, let me remind you well the decision applies only to the tax years 2003 2005 in 2006.
We believe there's nothing in the decision that would warrant a materially different outcome for subsequent tax years.
Therefore, we can resolve the matter for all years being reassessed.
There is about $300 million of our cash and almost $500 million in letters of credit that could eventually be freed up which would further.
The increase our financial capacity.
You will see from our outlook for 2020 that based on current uranium prices committed delivery volumes and our plan purchasing activity from a gross margin perspective, 2020 could be a weaker year for us.
This is a direct result.
Both of our deliberate value oriented strategy.
We've made some decisions fully recognizing the cost in the near term because we expect over the long term the benefits of those decisions will far outweigh the costs.
Is why Weve shored up our balance sheet.
We have been unwilling to lock in.
Contracts at today's low prices and as a result, our current committed sales volumes for 2020 are lower than the deliveries you made in 2019 and our average realized price is expected to be about 9% lower.
However from a cash perspective, we expect to continue to generate solid cash flow.
Hello.
Exactly how much will depend on the timing and magnitude of our purchasing activity, which as I previously noted will depend on market dynamics.
Therefore, our cash balances may fluctuate throughout the year, but we do expect to maintain a significant cash balance.
Our total.
Purchases for the year, our between 20 and 22 million pounds.
On the cost side, our average unit cost of sales is expected to be about the same as in 2019.
It continues to be impacted by the greater proportion of purchase material compared to production.
We'll make up our supply.
And the ongoing care and maintenance costs.
Our expected care and maintenance costs have increased compared to 2019.
This is largely tied to an initiative, we have underway at Mcarthur River and key Lake.
We plan to fully assess opportunities to improve operational effectiveness.
Including the use of digital.
Oil and automation technologies.
It makes sense to look at these opportunities now if it means we can substantially reduce operating costs, an increase operational flexibility when it comes time to restart.
In our efforts to reduce costs. We will also look across the organization for these types of opportunities.
Entities.
Of course, we will rigorously assess any opportunities before an investment moves ahead.
Our planned capital expenditures in 2020 are up a bit compared to 2019 spending but still in line with the guidance we provided last year.
With our continued commitment to a clean environment, we will.
We'll be investing more in the vision in motion project in Port Hope.
While the government of Canada as long term waste management facility is available to us we want to take advantage of the opportunity to engage in some cleanup and renewal activities that address the legacy waste that we inherited at port hope.
In addition, we have rescheduled some of the expenditures we plan to cigar Lake in 2019.
To twentytwenty.
I will also remind you that we report our results and outlook based on a calendar year basis at a point in time.
However, as I pointed out earlier, you need to think about arse.
Sales inventory purchases and production all those variables that shouldn't be surprised to see as the year progresses variances from the outlook, we provided in our mdna.
We're not following a static recipe.
We operate in a dynamic market and we will adapt our activities accordingly.
We're confident in our ability to transition through this period and capture demand that will provide leveraged to higher prices.
The off market conversations, we're having with our biggest and best customers bolsters that confidence.
Our tier one customers recognize the long term fundamentals they want to.
Just a long live tier one productive capacity from commercial suppliers, who have a proven operating track record.
I understand that from a security of supply perspective, today's prices do not reflect production economics.
They recognize the first mover advantage gain from securing their future access to our.
Tier one pounds at the incentive price today as opposed to where prices might be in the future.
And we have some competitive advantages.
We have significant idled tier one capacity that is fully licensed and fully permitted that will be among the first bounce to meet growing demand in the market.
We are an independent commercial supplier and provide our customers supply diversity from state owned enterprises.
With substantial Canadian productive capacity, we can help de risk their future from trade policy exposure.
And emerging is the focus on.
S.G. matters.
Increasingly utilities are required to ensure their suppliers adhere to more stringent environmental social and governance performance standards.
I can tell you this is great news for us.
We integrate sustainability principles and practices into all stages of our activities.
From exploration to decommissioning.
We have over 30 years of experience building a comprehensive program aimed at ensuring the support of the stakeholders with whom we work.
And it's not only to the benefit of our customers.
It's a 100% of our products go to producing clean carbon free electricity.
We are growing part of the solution to the clean air and climate change crisis that the world is currently facing.
On the sales side as I said at the outset I'm pleased to report that over the course of 2019 and to date, we have placed just over 36 million pounds under acceptable new long term.
Correct.
That more than replaces the volumes we delivered in 2019.
These contracts provide us with some downside protection, while still maintaining exposure to improving prices.
And are expected to provide an acceptable rate of return on tier one assets for our owners.
Let me be clear.
We need more of them before a restart decision is made but with more prospective business in the contracting pipeline than we've seen since 2011, we're confident those opportunities will come.
We expect our conversations will lead to more contracts on the terms, we need to support a restart decision.
But keep in mind, the contracting process in our businesses lengthy.
So it may take this activity sometime to show up in our committed volumes.
We've been in this business for a long time, and we understand the commitment it takes to deliver long term value.
Current market dynamics are not unfamiliar to us.
We have seen them in past cycles.
Price is set by the most desperate seller, which leads to productive capacity being replaced by onetime finite supply.
This is not sustainable.
We've seen three different reports w., M&A, uxc and trade to all of which point to the growing.
Certainty of uranium supply.
These reports all recognize that current uranium prices are putting future supply availability at risk.
Today, we believe the market is failing to send the appropriate price signals.
As a result, we've seen a substantial loss in productive capacity that's not being.
Replaced.
We've seen the deferral of substantial productive capacity and we've seen significant destocking. In fact Uxc is laid this analysis shows that most utilities are at or below desired inventory levels.
We need only look to the conversion market to see the implication of these types of.
Faulty price signals.
The conversion price drops so low at destroyed primary supply and reliance on finite secondary supplies increased.
No one was concerned because we were hearing reports of large inventories many of which are in the form of you have six.
Then the market encountered some.
Production challenges, while it turns out that it's not the volume of inventory that's important it's the mobility of that inventory.
And then conversion the higher the price when the less mobile inventories became.
At the end of 2017 spot conversion price was about $6 use per kg you today.
Hey, it's over $20 use per kg, you an increase even the trade reporters never anticipated.
As in conversion, it's the end users, who will bear the risk of the faulty price signals.
The longer the transition takes the longer it is before the decision to restart idled tier one tier two production is.
Made.
The longer those decisions take the greater the potential there is for delays in startup plans and schedules.
And if it doesn't make sense to restart existing production capacity. It certainly isn't rational to invest in new greenfield capacity, which means those projects are pushed out even further.
As a result, there is a greater likelihood that the uranium price will go well beyond what is required to incent tier one production to return to the market and inventories will become less mobile.
When we look at utilities uncovered requirements and the success, we are having on the long term contracting front. We know there is acceptable business to be done.
In fact, this activity has been a leading indicator in past uranium cycles, which is the reason for our confidence that the uranium market will undergo the transition already seen in the conversion market.
And I can tell you we will be more than happy to contract our tier one pounds in that market scenario as we are now doing with conversion.
Brian.
The discretionary market, we see today is not sustainable.
As I said earlier, the underlying factors that the demand cycle is on an upswing, while the production cycle has swung down.
And like occurred and conversion the market transition will likely only be recognized once it is in the.
Rearview mirror.
However, if the uranium market transition takes longer than expected.
Thanks to our strategy, we will be positioned to meet the delivery commitments under our contract portfolio and still generate cash flow, while continuing to preserve our tier one assets.
Our strategy is.
Design to reward those who recognize the fundamentals as we do and patiently support our strategy to build long term value.
We are a commercially motivated supplier with a diversified portfolio of assets, including a tier one production portfolio that is among the best in the world.
Our decisions.
Our deliberate driven by the goal of increasing long term shareholder value.
Ultimately our goal is to remain competitive and position the company to maintain exposure to the rewards that will come from having low cost supply to deliver into a strengthening market.
So thanks for joining our call today, an operator.
With that we would be happy to answer any of your questions.
Thank you.
We will now begin the question and answer session.
And the interest of time, we ask you to limit your questions to one with one supplemental if you have additional questions you are welcome to rejoin the queue.
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Our first question.
Comes from Andrew Wong of RBC capital markets.
Hey, good morning, Thanks, probably on the call.
Tim Correct me, if I'm wrong, but you're.
Repair commentary sound and much more positive I think than maybe the past several calls over the past year or two.
It's a reflection of the conversations you're having.
Having those customers are you seeing a shift and maybe some of the behavior or maybe some signals that more demand is actually coming now.
Good morning, Andrew Thanks for the thanks for the question that to talk to you added.
I am I am.
Growing more optimistic I think those are our tag line somewhere.
Optimism.
If you just look at the if you just look at the long term supply demand fundamentals you have to say something's got to happen here at some point.
I think over the last seven years.
Consumptions outstrip long term purchasing by a significant margin, we see I think uncovered 800 million.
Pounds in the next 10 years and I think is almost doubled up if you go to another five years past that.
Supply coming off you know, who obviously we've got some.
Some suspended supply here 'cause extend but don't forget to our friends and Ranger in the last 10 months of that mine and that's gone I mean thats.
In my whole career that one has been running mid coming back used to look after that one news year. That's good about the 11 or 12 or 13 months and that's coming off and then so you've got supply going down and demand going up 450 reactors running you got 50 in the pipeline.
And then let me just at this point throw in.
The U.S.G. piece I mean, we every meeting we come to with fewer or others. It's almost the first topic DSG and we're on the right side to that one.
With that our past performance at all of our operations and all of this talk now about climate change and climate crisis, and keeping the temperature down in grad.
And Bergen you name it we're on the right side to that piece. So we're getting invited the parties will move into for a long time and organizations like the United Nations and he and the AG and others are putting nuclear back on the table. So if I sound a bit more optimistic it's because of those things Andrew I'm more optimistic.
We're patient we.
If anybody's patient we are we've had to be over the best.
Years, but I can tell your optimism is growing.
And from the customers are you noticing a change in the conversations like the tone that you're having.
Yes, I said on the on my comments is don't get confused.
By the noise of the spot market, which is a whole lot of churn not a much coming out.
The end of that we focus as you know we took on Mcarthur key instead, we wanted to refill our term contract portfolio and once we did that they are substantially we would turn it back on I can tell you we wouldn't have.
Some real good conversations with certainly are bigger long term loyal customers that don't want to play the game into this new decade than and they see the supply demand fundamentals as well, we put I think about 36 grand million pounds on the books last year, which was more than we sold that's good news.
News again until you we've got more in the pipeline and so yes. We're we're optimistic going forward do we think nuclear is going to play a role and we're going to be right. There. So.
Okay. Thanks, and then just a 36 million pounds that were added to the contract portfolio could you just maybe talk a little bit more about the timing of those deliveries.
Hey, what's the exposure on fixed versus market related terms. Thank you.
Thanks, Andrew So on a term contract obviously they start to a couple of years out and there are different durations.
Usually in the five to 10 year range. So that's.
Good news so you know we.
We like to have a mix in our pricing and base price escalated and market, we're certainly willing to take market exposure out into the into the new decade, and so thats what those contracts reflect.
Okay. Thank you. Thank you Andrew.
Our next question comes from Gordon.
One of paradigm capital.
Hi, good morning.
Hello, where are you willing to take your inventory levels and whats inventories as low as they are now.
What is your strategy to ensure that the spot market can continue to provide the gap.
Yes. Thanks.
Thanks Gordon.
So I think we pointed out in our materials that were pretty much at the bottom of our inventory levels are the comfortable inventory level. So we will obviously look at maybe replenishing that the during the year. So if you see the numbers and our Mdna, you'll know a last year. We we just laid off on a few purchases we.
What we might make and just went into our inventory and took the mode. There, but I would say, we're getting close to the bottom where we want to be on inventory.
Yes, you Doug just at Gordon to the question of our confidence that the spot market will be there to supply those volumes actually I would say, we're not overly confident I mean one of the.
But counterintuitive reasons, why we took down our inventory a little bit as opposed to push ahead with purchases it.
As we've said before on our call. We're really trying to redefine how people should think about spot for us spot should be whats available in a cat or in the canister Ed can vote traps rights and actually close in a very tight period of.
Hi, not whats available in the next six months and certainly not the next 12 months for us that that's not as spot transaction and so despite all of that churn in the market that's kind of out in that three months six month window for us when we go in and try to find stuff, that's actually in a cat or canister it becomes a little bit difficult and what we're not willing.
To do is base load somebody else's foolish production decisions. So we're only looking for the stuff Thats available right now we couldn't always find it had to drive down our inventory a little bit. So we're actually not overly confident that it's there, but thats actually part of the strategy because in order to I think convinced folks that.
That uncovered wedge of growing requirements as something that they need to pay attention to we have to remove the sets that the spot market is going to be there to support discretionary buying and one way to do that is to buy in the spot market.
Okay. Thank you very much.
Yes good.
Our next question.
One comes from Craig Barnes of TD Securities.
Hi, Thank you just Tim or a grant only 36 million pounds that you signed last year under long term contracts you said you get an acceptable.
Return on them and before you said you'd only.
Tony sign long term contracts, if they were getting your into that $40 U.S.
Realize range are you.
Going to realized prices close to that.
On these pounds.
Yes, Thanks, Greg Grant you want to comment on yes, so from a framework point of view, we've been very consistent with with say.
That we obviously have a high bias towards market related that's our preference and.
In fact.
That that for us as an important indicator that folks generally I understand the price uranium is going up because if you think about it we have a bias towards market related we signed a lot of term contracts that were market related if a fueled by our belief the price was never going to go up they would have no problem siding market related as well and.
Just transfer that risk over to us but of course, that's not what's going on you'll buyers are looking to lock in today's price and you do the same if you were in their shoes, but we're not willing to lock in at today's prices all of those volumes, we need that market leverage so for us it's about striking that appropriate balance where we have how's that.
We're going to be priced out into the future in a market dynamic that we think is going to be very favorable for price formation out there to the extent that will agree on on the fixed portion of it.
Today's prices are not sufficient we need that we need a better starting 0.1, where by the time you escalated to first.
Deliveries combine that with the market leverage we're hitting that at that level that we talked about before which we think it's appropriate for for tier one production. So.
But as far as will go but that framework I think its is we've been successful. We've talked also about this pipeline that is we've got more pounds.
Your disk discussion than we've had since 2011.
We're not going to be successful with all of that of course, because we're trying to say today's indicators are not representative of the future. So some will be able to bring across the line not all of it but as the transition begins and if we see an acceleration of it like we saw him to conversion.
End market, then we like that opportunity you know, we only like to do contracting.
In an up cycle or when it's trending up we don't like to do contracting in a down cycle. So the fact that we have this off market activity has been a strong leading indicator in the past and it gives us confidence okay.
And on the purchases.
Twentytwenty, the 20 to 22 million pounds.
Can you break that down a little bit how much of that is in Cai how much of that is private such as commitments you already have.
And then what is the balance off that.
Yes, sorry, Greg we can't LPL it much on that one we've we're not disclosing that information so sorry.
So can you give us an idea what their production you expect from in Kaiser your share will be this year.
Sean or production this year sure totaling guy production should be 8.3 million pounds, and we will class 4.9 million pounds of that.
Because of some adjustments we've made to the purchasing ratio with.
With a partner Okay. That's helpful. Thank you good thanks, Greg.
Our next question comes from Alexander peers of BMO.
Hi, Good morning, I'm, just going back to one of the question.
Purchases.
Yes, indeed the spot.
It doesn't have enough material for you in kind of you will define terms this year.
And therefore, you don't have enough inventory to really drill down a much more how flexible.
Delivery commitments in terms of let's say if you want.
If you couldn't quite hit the target for this year can you delay some of those into.
Yeah.
Yes, Alex I would just say.
Obviously meeting our committed sales as top priority for us. So when we think about our inventory when we think about our purchase plan, we think about access to materially it's always with that in mining. So while I would say that we don't think thats.
Spot market might always be able to support our are buying when we buy on those very tight terms.
We're not going to jeopardize those committed volumes those committed deliveries.
So you'll probably see us in a market where other demand starts to show up not just by for our own.
Out to meet committed sales, but also to to restock a little bit if we if we sensed that materials getting a bit scarce, but but ultimately that delivery commitment that we look at that we're committed to it it's part of our plans and so so we're not worried we're going to miss a delivery, but where where we source it.
From May may change, depending on the spot market availability.
So you are you will be more flexible on the purchasing side potentially.
Well in the scenario, you're describing we will be buying with extreme conviction and then looking for other sources in order to meet those.
Sales, so actually the purchasing conviction goes up not down in that scenario.
Okay and then.
Second question I was interested to hear the initiatives in Mcarthur River and I was hoping maybe you could give a bit more detailed in terms of what you think the opportunities.
But you're looking at.
Thanks, Alex I'm going to pass you over to Brian Riley, Our Chief operating officer is kind of got that under his control. So Brian just want to say few words about our lottery is the initiative at Mcarthur key as Paul that strategic and opportunistic as strategic because.
The mining industry has changed over the last.
Yes, 10 year, so we're looking at.
Employing technology and innovation that will help reduce our costs give us more flexibility and ultimately produce safer.
Production and its opportunistic because the all signs are going to care and maintenance mode. So this is the time to do that work and that.
It comes with a certain amount of that.
Commitment from the company that we've got 20 plus years.
Life of asset for these these two facilities. So instead, it's an important project that by both strategic and opportunistic.
Okay. Thank you.
Thanks, Alex.
Yes.
Our next question comes from Jason Gold of life time wealth management.
Hey, guys. Thanks for taking my question.
There seems to be a lot of confusion in the market regarded the long right capacity secondary supplies.
The W. May report showed.
Sorry supply run rate less than 30 million pounds. A year. Currently can you talk about your view of secondary supplies and how does that compared to the sub 30 million pound log rate number from the Wi Fi report.
Gratitude doing with secondary yes secondary supplies continue to play an important role that are.
Market, but it's the confusion about where they play that role that we think cat probably contributes to what you're alluding to so for example, folks will look at in richer Underfeeding and they will actually assume that under richer underfeeding is uranium that's available for the spot market and in fact our experiences.
Perhaps being the largest spot market buyer is that that's not where that under feed material is going that under feed material is going into contracts that enrichers, we're able to side, perhaps CDP based where they provide the uranium as well as the enrichment services. So we do see and richer underfeeding, but we see it largely.
We committed.
We do see sub.
Reprocessing of some form as part of the Russian system, but but largely committed those are the materials that were seeing.
Become available in the spot market in fact, what what I would point to in the spot market is not inventory and secondary supply per.
Hey, it's I'm committed production. It's it's those who are producing that don't have a home for those pounds that are either directly putting it into the market very small for direct but or passing it through a trader into the market. So secondary supply often get blamed for that role in the market, but we actually see it Mars.
Committed production problem in the spot markets a secondary supplies there it's come down a lot since the you agreement I mean, there was a time secondary supply was 50 million pass a year supply into our market, so and its role going forward will diminish, especially as demand picks up in the enrichment space end to end Enrichers are able to increase that.
Contract tails levels, so secondary supplies, there, but it's playing less and less of a role and certainly playing less of a role in the spot market than most people I think are appreciating.
Okay, and then just you said it used to be 50 million pounds. So I mean, you all have a ballpark estimate of what what you think it is right now.
We wouldn't coral a whole lot with the Uxc view, but again, it's a lot of people would take that view and then just imagine thats material available for the spot market and we think thats, where the confusion because it and probably along the way we're going to see a lot of a lot more scrutiny and maybe clarity on on some of the counting of that.
Gary supply because we wonder at times, if if in fact, there is a bit of a double cap going on for example, within an inventory mobilization, where perhaps one utility operator might deem that their target inventories come down a little bit and they have some excess material that they choose to consume rather than put demand in the market, but thats not also.
So supply because it's not available for anybody to buy so it. It does have a demand effect I already talked about and richer underfeeding I think sometimes that gets double counted in the market as both.
Contributing to turbine supply as well as spot, but it can only count once and I think the carry trade business, sometimes get double counted through secondary.
Supply.
Because carry trade represents past demand and supply that was then brought forward under a financial instrument and being delivered into but certainly not today's supply and demand. So we wouldn't coral I think with those overall numbers, but as we would apply some some downward.
Some some downward factoring on some of it just our experience we just don't see those materials available.
Also great. Thanks, guys. Thanks very much please.
This concludes the question and answer session I would like to turn the conference back over to Mr. goodwill for any closing remarks.
Well, thanks, very much and with that I, just want to say, thanks to everybody who joined US today on the call. We certainly all is always appreciate your your interest in your support to you know as I said earlier in response to that question then as we head into the new decade, our confidence in uranium market transition is growing companies in good shape, we're ready we're.
I will supplier strong balance sheet, we got great assets and a proven operating track record. So we are going to continue to do what we said, we do we're going to execute on our strategy and and navigate through all of the moving pieces in our industry. So thanks, everybody have a great day and have a great weekend.
This concludes.
This conference call you may disconnect your lines, thanks for participating and have a pleasant day.
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