Q2 2020 Cameco Corp Earnings Call

Thank you for standing by because there's a conference operator welcome to the Chemical Corporation second quarter Twentytwenty Conference call.

As a reminder, all participants I didn't listen only mode and the conference is being recorded.

I would now like to try to compress over to Rachelle, Girard, Vice President Investor Relations Treasury and stocks.

Please go ahead Mr. Doug.

Thank you operator, and good morning, everyone welcome to Camecos second quarter conference call like last quarter, we're doing things a little differently again recently, we've been experiencing some challenges with our phone lines and have had a large volume of dropped calls.

As a result, we are against planning to conduct the Q a portion of the call in listen only mode. There's been a lot going on both for the company and the industry and we recognize there a significant interest and limited sources of information for investors. Therefore, we want to ensure that we were able to clearly and reliably communicate with the investment community.

We have been proactive with our communications during that period conducting numerous conference calls both with individual investors and via virtual road shows conferences and sell side hosted Investor calls, we've collected questions from or sell side analysts and have augmented that lift to include the common questions. We've been hearing during our outreach with him back.

My community.

To help with the understanding of the information that we have organized the questions to focus first on the market then the impact of the market on Camecos performance and then finally, some more specific cameco factor.

As always we will make or south available to speak to you. After the call should your questions not yet draft. On this call. There are few ways to contact US you can reach out to the contact provided in our news release you can submit a question through the contact cap on our website or are you can use that's amid a question cap on the webcast and we will be how.

To follow up after this call.

With us today on the call, our Tim difficult President and CEO Grant Isaac Senior VP and CFO, Bryan Riley Senior VP, and Chief operating Officer, Sean Quinn Senior VP, Chief Legal officer, and corporate Secretary and Alice Wong Senior VP and Chief Corporate Officer.

Tim will begin with comments on our strategy and the market. After we were moved to the Q and a portion of the call. If you joined the conference call through our website event page there are slides available which will be displayed during the call. The fly there are also available for download and a PDF file through the conference call link at Cameco Dot Com. Please.

Note that this conference call will include forward looking information, which is based 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 results and the assumptions. We have made with that I will turn it over to Tim.

Well, thank you Michelle and welcome to everyone, who has joined us today.

I Hope you and your families have been able to remain safe and healthy during these unprecedented in challenging times.

The Golden 19 pandemic has had a significant impact on people in economics around the world.

We had cameco have also felt the impact was the proactive shutdown of our operations, which have come at a significant cost to our bottom line in the second quarter.

That said, we had cameco are well positioned financially with a very solid balance sheet.

Further our strategy remains intact and we continue to meet all of our committed deliveries to our customers.

Our ability to do so was strengthened by the successful restart of the Blind River refinery and the Port Hope you have six conversion plant in May.

And we're happy to announce that providing it is safe to do so we expect our position will be further strengthened by the planned restart of cigar Lake in September.

Let me say a few words about our perspective on the uranium market.

First we believe that world uranium supply continues to be at risk as a result of the threat posed by the pandemic. Both this year and next and second that demand is beginning to emerge on market something we've all been watching and waiting for.

So the market is showing resilience and price seems to have reset.

Spot prices are up close to 35% since the start of the unplanned supply disruptions this year.

The trade techs production cost indicator sits at $44 at 50 cents U.S. per pound.

As you axes five year price is at $38.75 U.S. per pound.

And of course from a company perspective, I have to highlight though we had another victory in our Siri dispute.

The federal Court of appeal decided unanimously in our favor at the end of June.

So there's been a lot going on.

Let's dig into some of the details I want to start with our plan to restart cigar Lake in September.

It's our biggest news like the successful restarts of Blind River and in Port Hope.

It's an example of our success in proactively managing the risk of the covert 19 pandemic.

We're very pleased to be able to make this announcement.

It's good for cameco from a financial perspective from a risk management perspective.

And it's good for northern Saskatchewan.

Having cigar Lake running was always a part of our 2020 plan.

On the financial front, our strategy relies on having low cost pounds from cigar lake in our cost structure.

These low cost pounds help offset the cost of our strategy on the operational and marketing fronts. However, the covert related shutdown of cigar Lake has increased our costs.

Our care and maintenance costs are up $37 million as a result of the proactive shutdown of our various operations, including cigar Lake.

We're required to purchase more uranium than we had anticipated at the beginning of the year.

Given the 35% increase in the spot price of uranium. These additional purchases come at a higher costs that are produced pounds.

As a result, we expect our average unit cost of sales will be higher than we expected in the started the year.

From a risk management perspective, cigar Lake restart will allow us to continue to meet our deliveries in a market where prices have risen due to the increased demand in the beginning of available supply.

And it's good for the communities in Northern Saskatchewan, who depend on the operation for employment business development and community investment.

We will obviously continue to actively monitor the public health situation and we'll take a measured approach with all of our restart activities.

The health and safety of our employees their families in their communities continue to be the priority focus of all of our plans and we will align these plans with the guidance of the relevant health authorities, where we operate.

We expect it will take approximately two weeks to get back into production.

Well, it's good for count go to restart cigar Lake the restart does not change. The fact that there remains tremendous uncertainty about uranium supply as a pandemic continues to cause unplanned supply disruptions added to the plan to supply discipline that has already been undertaken.

So the restart of cigar Lake will not be the savior for the market, we will not make up lost production this year.

And while we are targeting our share production to be up to 5.3 million pounds. In total for 2020, there are risks to that target.

The restarted and continued operation will be dependent on our ability to establish and maintain safe and stable operating protocols.

Along with a number of other factors, including the availability of the necessary workforce and how the covert 19 pandemic is impacting northern Saskatchewan.

And the government related shutdown creates potential risk to cigar lake production rate in 2021, as well caused by delays and deferrals in project work, including lower capital expenditures.

Since the early production is for term contracts not for the spot market no additional spots supply will result from the restart.

Then consider that Cohmad has impacted JV income is production and all other Kazakh production in 2020.

We also expect that the cobot 90 related disruptions will impact the volume of material will purchase for me guys. This year.

Theres been a resurgence in the number of cases of Copel 19 in Kazakhstan, and then as having to reintroduce lockdown measures.

Guys item from making the health and safety of employees, a priority announced a one month extension to the already three month reduction in Wellfield development activities at all its uranium mines and Cadsix then.

Did expects to gradually increase mine site staff levels in August if it is safe to do so.

Until because Adam prompt and restart these activities is not clear to us what the impact on our purchases from Inc. I will be this year.

Also due to the importance of well field development and maintaining is our production levels. It has indicated that the longer the disruption continues the greater the likelihood the production impact could extend beyond 2020 to 2021 in cadsix them.

And don't forget that the Mcarthur River key Lake operation remains in an indeterminant period of shutdown, requiring mark purchases to make up the curtailed production.

So as a result of the planned reductions in our production from Mcarthur River key Lake combined with the unplanned reductions at cigar Lake an income side, we will have to rely more heavily on the spot market in 2020.

We were active on this front in the second quarter, we purchased a total of 14.7 million pounds at an average price of $31 of 30 cents us per pound.

The majority of these purchases were spot market purchases.

It also means we have some purchasing yet to do.

And depending on the ultimate production impacted the cobot 19 pandemic related disruptions on our 2020 supply potential 2021 supply and on how market dynamics develop we may also begin purchasing for 2021 this year.

Despite the disruptions to our business related to the covert 19 pandemic, we expect our business to be resilient.

We remain committed to our strategy, which is why on the operational front Mcarthur River key Lake remains shutdown Indeterminant Lee.

Our deliveries to date have not been materially impacted nor do we expect it will be.

It is true that as a result of our strategy, we have become reliant on market purchases of uranium to meet our delivery commitments.

But that is a deliberate choice we have made.

It potentially cost us more in the near term and we have been upfront about the impact our purchasing activity is expected to have on our margins.

Now the Govan 19 pandemic is magnifying that impact.

So why did we make the choice to rely on the market for supply.

Because we believe that over the long term it will add significant value for our shareholders and other stakeholders and it will allow us to operate in a sustainable manner for years to come.

It's true that as uranium prices increased purchases become relatively more expensive than production.

However, as long as the near term cost of purchasing is less than the added value. We expect to capture under our strategy, we are better off purchasing.

Where does that added value come from well first it comes from preserving our tier one assets.

As prices rise it comes from delivering into the market related contracts in our existing contract portfolio at higher prices.

And we believe higher prices set up the conditions necessary to allow us to layer in new long term contracts at prices that recognize the value of our tier one assets.

This is how we build long term value, we preserved tier one assets to deliver into long term contract portfolio.

The strengthen our strategic resolve we have been disciplined.

We have made prudent and deliberate decisions to shore up our balance sheet.

As a result, we have the tools, we need to deal with the current uncertain environment.

We are well positioned to self managed risk.

We have almost $880 million in cash and a 1 billion dollar Undrawn credit facility, which we don't anticipate we will need to drawn this year.

And we believe our risk has been substantially reduced with the unanimous federal court of appeal decision in our favor.

The decision is great news for cameco for our investors for our employees and for other stakeholders.

I once again want to thank our legal counsel, our expert witnesses consultants and the many people at Cameco, who worked hard on our case your efforts are appreciated.

And they want to thank our shareholders and other stakeholders for your ongoing support and trust throughout this dispute.

The court of appeal ruling further confirms that we fall of the letter and intent of Canadian laws ended up holds the cost award.

See from the tax court of Canada.

This case only applies to the 2003 2005 in 2006 tax years, where the total tax reassessed was $11 million half of which we have already paid and expect will be refunded.

Under this decision the.

Three years will now have to be reassessed in accordance with the ruling.

And remember we were awarded at $10.25 million for legal costs incurred and up to 17.9 million in disbursements.

However, the timing of the refund and payment of the cost award is still uncertain.

The Crown has the right to seek an appeal to the Supreme Court of Canada, but the Supreme Court must agree to hear the appeal.

If an appeal assault and granted we estimate it will take about two years from the date of the Federal Court of appeal decision for the Supreme Court to rule on the matter.

While the ruling only applies to the three years noted we believe the principles in the decision applied to all subsequent years.

Those principles do not give the crj the right to shift all of Cameco, Europe's income back to Canada and apply Canadian statutory tax rates interest and penalties.

We'll be asking the crj two except the ruling into applied to all subsequent tax years and to return our financial capacity.

Our position has prevailed at every stage of the legal process.

If the CRM feels the laws are not written in the way they want they need to approach the government to change those laws moving forward not continue to pursue the same flawed arguments.

As we noted in our Mdna CRC is currently holding 303 million in cash and 482 million in letters of credit that belong to us.

Let me be clear will be asking to have the liquidity return. So we can sustainably manage and invest in our business for the long term benefit of our stakeholders.

We want to continue to do our part to help rebuild the economy.

Some jurisdictions are slowly starting to open but given the human an economic effects of covert 19 globally, it's going to take a concerted effort to do so safely and to begin the recovery process in each one of US we'll have to do our part.

Governments and central banks around the world have put fiscal and monetary policies in place to help stimulate and rebuild the economy.

They recognize that financial flexibility and liquidity are vital to investment growth and recovery.

The impacts of Covance 19 are unprecedented but as I said before we expect our business to be resilient.

Why do I say that.

As you know for many years now in the face of an uncertain uranium market, we began implementing our strategy on three fronts.

Operational marketing and financial.

On the operational front, we have cut costs and in 2016, we began curtailing uranium production, reaching a point in 2018, where our annual production was well below our annual delivery commitments.

Therefore in our strategic planning activities.

Spent time thinking a boat and planning for different production scenarios.

We've modeled the potential impact of these scenarios on our business. So we are prepared to deal with this unplanned event.

There are a couple of other things I want to highlight that we believe strengthen the resiliency of our business.

On the demand side nuclear is very clearly back in the policy toolbox due to its carbon free attributes.

Since 100% of our products go into producing clean carbon free electricity, we are growing part of the solution to the clean air and climate change crisis.

And now in the face of a public health crisis. We believe nuclear is once again proving its worth due to some of its key safety and reliability attributes.

First and foremost it is base load it will run reliably 24 hours a day.

Allowing hospitals care facilities and other essential services to continue to operate uninterrupted.

In addition, nuclear reactors are designed to operate for long cycles without the need to refuel.

They carry strategic inventories to guard against supply disruptions.

We have a number of backup systems for safety and reliability and fewer people are required it's safe to run the operations.

In the current environment all of these characteristics make nuclear power logical choice.

And that is why the international Atomic Energy Agency recently reported that although electricity demand has declined in the near term the proportion of nuclear power has increased relative to fossil fuels.

So as I said earlier, our customers will need uranium.

In contrast on the supply side things are less certain.

Good 19 pandemic has disrupted global uranium production magnifying the supply curtailments that have already occurred in the industry due to the lack of production economics.

The industry is reliance on supply that has become highly concentrated both geographically and geologically.

This concentration has given rise to a number of trade issues over the past few years, including the section to 32 investigation in the US the nuclear fuel working group the review of the Russian suspension agreement and Iran sanctions.

Right now it's the Russian suspension agreement that is the trade issue, perhaps capturing the most attention, particularly that of our customers.

The Russian suspension agreement and poses an import quote on Russian uranium products equivalent to 20% of annual us reactor demand.

It is set to expire at the end of 2020.

You asked department of Commerce initiated negotiations to extend and amend the agreement to at least 2040 and to reduce U.S. utility dependence on Russian source uranium products.

The agreement is not extended by the deadline of October Fiveth 2020.

Apartment of Commerce may eventually play spinal anti dumping duties on imports of Russian uranium products.

In addition, their efforts being driven by the us domestic uranium industry that would impose limitations on the import of Russian uranium products to the us.

These trade issues of raise concerns over the role of state owned enterprises and placed an increased focus on the importance of supporting the regional supply of critical minerals, including uranium from independent commercial suppliers like cameco.

Therefore on balance we think the risk to supply our greater than the risks to demand.

Which is why today, the uranium spot prices up almost 35% since it started the cobot 19 supply disruptions.

Inventories, which have been blame for low prices in our industry are coming into greater focus as a result of the unplanned supply disruptions.

As a result of the disruptions to production, we're seeing an acceleration of the destocking that was already underway in our industry.

For years, we've been hearing about large inventories of uranium, but we will now get a sense for the mobility of these inventories.

As history has taught us and as we've seen in the conversion market, though inventory in our industry may appear high it's mobility tends to be inversely related to price, which can further exacerbated supply disruptions.

And even if there is a large destocking of inventory as a result of the production disruptions. These are onetime volumes that will be cleared from the market and in the meantime that may allow us to make our purchases more cheaply.

Overtime, we expect this will create a renewed focus on ensuring the availability of long term productive capacity to fuel nuclear reactors.

And we expect this renewed focus on security of supply will provide the market signals producers need and will help offset the near term costs. We may incur as a result of the temporary disruptions to our business.

As I said earlier in this uncertain time, we expect our business to be resilient.

Our decisions are delivered driven by the goal of increasing long term value.

We will continue to do what we said we would do executing on our strategy in a manner consistent with our values.

We are responsible commercially motivated supplier with a diversified portfolio of assets, including a tier one production portfolio that is among the best in the world.

I'm proud to say that a cameco, we're doing our part to make a difference.

Providing the fuel needed to power the nuclear reactors that are part of the critical infrastructure needed to ensure hospitals care facilities and other essential services are available to us during this pandemic.

But perhaps more important is our more than 30 year commitment to protecting the health and safety of our employees their families in their communities and supporting local business development.

And in these uncertain times it will be critical that we continue to work together to build on the strong foundation, we have already established.

So thanks for joining our call today and with that we will move into the question and answer portion of the call, which as Rochelle mentioned earlier is in listen only mode.

The first question comes from Andrew Wong at RBC.

Industrial demand is down globally in some countries like France, Sweden, or reducing nuclear generation due to cope with 19, how do you expect this will impact demand inventories and expect purchases over the next couple of years well the reduction in demand offset the supply disruption and are there any concerns that delays in construction for nuclear.

Good to covert 19.

Well, thanks, Andrew it's Tim ill take a shot at the this when I think Theres a couple of questions embedded in their first on the electricity demand side.

Yes, clearly covance had an effect on on electricity demand, we see it in the different reports, we get on a monthly basis, I'd say, especially right off the bat do we saw electricity demand dropped very quickly when the confinement.

Measures were put into place I'd say more on the industrial side than anything you've talked on on the risk residential side I think demand went up and so did the offset each other I don't think so but.

But it's been down what we're seeing now and I just saw an I.E.A. report today that showed its coming back.

It's still down from prequalified levels, but in many countries recovered significantly in fact I saw in China, I think there within 1% of of where they were a year previous to the coal would the level. So I think thats good news.

Piece of good news on that one is that as I said in my introductory comments.

Is that the nuclear share of the electricity be produce has gone up especially you.

In relation to fossil fuels so.

Hopefully that that's saying were.

We are getting recognition.

As is as we said safe reliable base load power to power all of those institutions that we need to continue running specialty healthcare facilities.

In these days and so nuclear still strong.

The effect on on demand, we haven't seen it.

We.

We book, while we still had guidance. So to think is said we were selling 20 to 30 million pounds. This year that hasn't changed.

We still have significant commitments our customers still are taking deliveries and still have to load their reactors with our uranium so.

I don't think Theres, a big big effect on demand I think the story you want to watches supply obviously.

You know.

Through the covert.

Disruption I think we've seen numbers in the 20 million and counting pounds that have been left in the ground I think I saw the uxc a presentation. The other day that corresponds pretty much with our numbers because we're we're the ones that have taken all of our production off.

Moment Kazakhs, we've been in touch with Mr Pyramid to off.

As to what's going on in Kazakhstan, and they're having to disrupt their production and drilling there. So so they're down a bit into maybe I think early on and so it's I see is $20 million accounting and that that goes with the production. We already took off starting back in 2016, and Rob the U.S. and we pulled back.

On Mcarthur and the Capex pulled back and so there was already but 40 million pounds, a year disrupted and left in the ground. So I'd say watch supply and watch it closely you've got.

Our friends at rancher, who have about five months left I think in in the life of their mine.

And mill there common act knees, you're used to be a responsible for that line I think it by the end of March next year that one's gone and Thats production that we've competed against I guess for for many many years and that's not a supply disruption Thats gone has gone from the market and so watch supply.

Construction I think your last the last part of your question was on construction delays I think.

I looked at our numbers today 54 units under construction around the world.

To add to the some 440 some that are that are in operation. That's a good number and I don't think thats changed in that.

I just see a word and then I'll stop but.

If you remember if people can remember and I know, it's hard five months ago, we weren't talking about Govan 19 were talking about climate climate change to a reduction gratitude and we're keeping the temperature the you're down and it was huge that hasn't gone away. It's been I think has been dormant a bit as we work through the pandemic, but I think it's going.

On to come back and I think we have miraculous opportunity here with the nuclear power as.

As we move forward and rebuild the economies and bring the world back to the stated should be in two really push nuclear power head and I think we're getting a good hearing on that.

Thanks Kim.

The next question comes from Brian Macarthur at Raymond James.

Iridium spot price increased substantially following the unplanned supply disruption announcement. However, it seems to have plateaued recently, what are you seeing in the spot market. How much material is available have you seen many utilities competing for the stock market material.

And if the price has plateaued is your activity holding.

So I'll start I know, just say I'm going to pass it over to grant who's in charge of as everyone knows our marketing in finance and other departments, but I would just say we have not been sitting around doing nothing during this period, our marketing teams have been extremely busy in the market as you've seen by her purchasing activity we've been in the market full.

Time everyday since the pandemic started and grant is the best expert to answer the market question. So Greg I'm going to pass it over to you VIP Great question that Brian raises and Plateau is award that we've heard a few times because the price.

Did respond quite quickly to the unplanned supply disruptions up 35% nearly $10.

It may in fact of reset the expectations of what a low uranium prices before cove at I. I think people believe below uranium price was in the low twentys another seems to be a sense that a low uranium prices in the low thirtys. So so that certainly good news.

Maybe I'll comment on our activity first before I characterize the spot market a little bit so year to date spot volumes are now at 62.4 million path thats outlets a lot of spot volume halfway through the year. There's no doubt about it. We now have have said that our year to date purchases or 19.3 million passive.

Clearly, we're not the only activity in the market, we're not holding the market up when we're only a small portion of it and in fact, even if you do you believe that 50% to the total volumes in the spot market or just meaningless trade or churn. It's still suggest that there's other demand in the market not just us and so where's that coming from what some of it has been you.

Realty discretionary purchasing in the spot market.

A lot of it seems to be producer purchasing to cover sales commitments due to the unplanned supply disruptions and probably it's important to remember that when when it when a producer is in buying to meet a sales commitment that is like fundamental demand that is utility buying thats material, that's going to go to a utility and not come back into the market to be.

To be turned around a little bit on on how the spot market looks I think for 2020, we're characterizing it as as a year, where there's just been a mismatch in the timing.

Inflows of material coming in this up mostly and committed produced material. We saw a lot of it destined for the market in the first half of the year and we think the outflows are really going to kick in in the second half of the year the normal material that needs to go up to meet deliveries plus any spot demand that comes into the March.

But.

In the second half as it typically does.

We've been pleasantly surprised to see that folks have been continuing to offer materials. Despite the market uncertainty and despite the fact that everybody knows we're going to buy because we have to buy.

To meet our committed sales of the fact that that though those have been willing to sell has been a bit of pleasant surprise for us because it allowed us to uptake prices somewhat less than the recent highs and of course, our goal is to always bye.

As cheaply as possible, but the other way to look at it is a plateau is also this notional floor. So we've also been surprised to see there's been some resistance.

After that our market, who have maybe had a tendency to be quite desperate sellers have been more resistant and more stubborn with their offers and thats. Good to see all all maybe maybe convincing us that maybe theres been a reset in the spot price.

Thanks Grant. The next question is also from Brian Macarthur at Raymond James can you comment where the supply in the spot market coming from.

Greg, Yes, I mentioned a bit earlier that.

That we sort of see the spot market. This mismatch between inflows and outflows that the inflows are uncommitted production, you'll recall that last year. We began to say this really isn't an inventory story, it's a story of uncommitted production.

The sources appear to be leaseback knee share in Namibia, and as well as some Australia. These are from producers that either have an off take arrangement to sell traders.

Or they have a deliberate strategy to sell directly into the spot market. These are suppliers that a lot of them our state owned or suppliers, who look at the uranium supply as a byproduct and so it's not a main driver for their production until we get this I'm committed production coming to the market. It's it's also the reason by the way that Theres been a.

This recent trade policy focus on state owned enterprises, and the role that they play and providing.

Material to the market.

In a way that might harm those who are trying to do it commercially. So we've been saying that this isn't a story of inventory mobilization. It's this uncommitted production, we've not seen any significant inventory mobilization. This is not a surprise for us.

Because typically inventories are less small while in the face of tightening supply and rising prices. So that is sort of where that I'd characterize the supplies.

This grant.

Your next question comes from Andrew Wong at RBC with stronger copper prices is there any concern that it could incentivized more uranium byproduct production from Olympic down now or in the future and how might that impact the market outlook.

Well, thanks, Andrew as Tim again.

So Olympic dam has been.

Competitors supplier producer of uranium for year decades, now and so we just assume that they're always going to be in the market and produce uranium and and that is going to show up there. So I see a we watch reports.

Of Australia that they're looking at increasing their copper production I think there and about 200000 tonne annually, they're looking at moving up into the 300 those through 50 level and then with a corresponding increase but.

I remember we saw this back in go to a decade ago and and there is lot of concern then and.

I'd say, we would have been more concerned then because now if they do decide to go ahead and I don't think they have announced new older Eas work and all of that we probably might need the uranium by the time they get going so I will tell you one thing. It does do is that it eliminates the need for any greenfield when you got the big horses shutdown camecos good all of its broad.

Suction shutdown cigar Mcarthur, Inc.

Mr. Paramount offs, good a bunch of his production.

The down in Kazakhstan, and Olympic Dam, perhaps of bringing on.

Some some some more production in the next with whatever period of time. This will be an income and recovery were those come up first and so we're not there, particularly looking at any greenfield and the world just doesn't needed right now.

Thanks, Tim The next question comes from Oscar Cabrera at CPC.

The trade reporting if they're showing elevated spot market volumes, yes. The term volumes seem relatively modest are you surprised let take could get utilities to sign long term contract.

Granting and took with long term contracting yeah, sure and to be a bit tell serving I would start with reminding folks that cameco has had some success in the long term market actually in 2019, and and and we also talked about in 2020 are off market activity and just as a reminder, this is when utilities come to us directly and im.

For either an extension of in existing contract or a new contract, but it isn't done through that competitive RFP process. So we've been characterizing it that yet the industry hadn't been achieving replacement rate Terra contracting.

The cameco had been enjoying it for a variety of reasons.

Having said that I think Oscar you probably focused on the competitive on market tight contracting and maybe it's helpful to break it into two perspectives that perspective of our customers as we understand and then of course, our perspective as a potential supplier looking to sell material. So when we think about it.

From the customers point of view.

We have to acknowledge they've also been impacted by the pandemic and we've seen them really focused on making sure that their plants are operating in a safe and reliable way and that they're meeting all the industrial protocols that they need to follow to keep people safe.

We know that a lot of the effort of our utility colleagues has been spent especially the us ones on the Russian suspension agreement to making sure that their position is well understood with the US Department of Commerce. So that's been taking up a lot of time that would otherwise probably be devoted to thinking about.

Procurement. So we think that Theres a number of factors there that maybe are bit distracting and legitimate factors that are a bit distracting from the longer term procurement, maybe maybe bit challenging for them to layer in those longer term financial commitments that are in fact, a supply agreement that said from the customers point of view it simply.

As a matter of time, we have started to see some recent interest in the mid term market that three to five year market as well is that the longer term market, which we kind of say as five plus.

We've seen a number of utilities issue RFP is in the last week or two so too early to tell if this is a start up a trend but in any event. It is absolutely positive and would make sense given all the supply uncertainty.

But think about it from our perspective as well spot prices up with planned and unplanned supply disruption.

This spot price increase which we talked about earlier, 35% increase it has pushed up forward prices.

In the term market, we we can see the uxc price for five to five year price at 38 50, Trey takes a long term prices at 39 Tradetech is introduced a new production cost indicator, which by the way. If you haven't seen at I'd encourage everybody to look at that this study that Tradetech has done there to arrive at a 44 dollar in 50 set production.

Cost indicator. All this means is that it's a more favorable environment for us to be negotiating the value of longer term contracts. So that takes a bit of urgency away from us we want to be patient and make sure worse, capturing as much of that value in those negotiations too. So those two things are perspective and their perspective I think.

Suggest that that.

We're not ready to go to worry about the turn contracting and where it's at it does take time and but we'll see it it's a matter of time and the conditions for us to be able to extract value to seem to be improved.

Thanks Grant.

Your next question comes from Lawson Winder at Bank of America Merrill Lynch.

The spot price from Uxc has closed the gap with a long term price indicator do you view this as a bullish or bearish.

Yes, Thats a very good question that I don't think there'll be any surprise you may now I look at this I view it as bullish I.

Let me fundamentally when when it.

When you can buy uranium today at the same prices it costs you divide into future. It's a lot easier to turn year procurement focus to your run rate requirements out in time Theres no benefit now to buying it on spot market versus the term market. So.

I think fundamentally that closure of that gap makes it more likely that okay. We'll now at the time start thinking about those run rate requirements, it's probably behind why we're seeing some competitive RFP come into the market Theres also an operational issue that we can't overlook here.

Spot market demand is simply more capable of reacting quickly to market developments that term demand term demand takes time. It takes time to figure out how much utility is willing to procure and what their financial exposure is going to be and and how they want a structure that that agreement.

And so it.

As I mentioned previously term demand is likely held up by a couple of other factors and and so between the two I would say, it's a it's a bullish signal as opposed to bear sick.

Thanks Graham. The next question comes from Greg Burns at QB.

How is activity in the mid term market holding up are you seeing last material coming from carry trade activity I understand that 'cause Adam from has stopped supplying material to the spot market and this could lead to reduce material material available to mid term market is that in fact happening.

Yes. Good question, Greg the with respect to give that a problem I think.

They have been very clear on their spot sales disciplined and from what we can see that discipline is real.

Of course, there's Kazakh origin material available, but I think it's made available through JV partners, who take possession of the material not not from 'cause Adam problem themselves. So I think I think they can be trusted when they say that that to that discipline is there.

With respect to the carry trade to some extent we are seeing less.

We had heard of a rapid decreasing care trade activity as a result of the tighter credit markets. When the pandemic any economic closures began to first roll around there's some of the end entities were not able to secure the financing that was to backup that carry trade. So we saw some carry trade offers.

Evaporate, which also contributed to spot demand in the early days at the pandemic unplanned supply disruptions more recently I would say, we're seeing some intermediaries attempting to reposition in this market segment, whether they're going to have success or not we'll we'll wait and see the closure of the spot.

Term gap that we talked about in the previous answer actually kind of old eliminates some of the need for that carry trade activity. So we'll watch this very closely but but so far is playing a less of a factor than it has in the past.

Great. Thanks Graham.

The next question is also from Greg aren't at TD utilities have had more pressing issues to deal with this year than long term teal procurement, but as the Coca crisis stabilizes.

Perspective utility to turn their attention to the term market.

Assumed that the W and eight symposium will be virtual this year well this have a negative impact on the typical uranium contracting cycle that happens around this time.

Greg.

It's Tim.

I think good.

Renting a bit but this will be the first time and 2700 28 years that who haven't gone to to London for the kind of the first week in September for the DNA conference. It's like it sounds like the nuclear uranium calendar year that starts in September and so you're right it's going to be.

It's going to be different the symposium will be virtual this year and not seeing 800 over best friends will be a bit tricky, but that said the life goes on and as I said earlier, we have been granted this team the marketing team have been in constant contact with our customers through this.

Hold pandemic piece, just staying in touch with them stand by their side the lending over there. The discussions that we had started before the depend demick of continued through its kind of a tough time when you're trying to look after your employees and keep your plan to open to be talking about a five to 10 year contract with that will come there.

I was looking at the uncovered requirements in this decade and were almost deeper into it now and both 742 million pounds by our numbers and others would be close to them I think if you go out another five years almost double that those pounds yet to be contracted and so that work is going to happen at a time when supplies declining so.

So yes, it's going to be different this year no w. enabled will find ways like we all are too to stay in touch with the with our customers and make sure business continues.

Thanks, Tim.

The next question comes from Brian Macarthur at Raymond James.

How much material do you think has been removed from the market as a result at the code at 19 pandemic related disruptions to production what is happening with.

Who said and Razzing lines in Namibia.

Yes, Thanks, Brian.

And I have to say, what we're not sure yet I think through a number of 20 million accounting.

As is what we've counted so far I guess, we'll see how things go going forward as CEO of cigar restarted goes.

How gallons able to manage things in cause extensive theres a second wave.

Comes down so what we have done is those pounds of not come onto the planet. So as yet the consumption is still going on so the goal of 20 million pounds of inventory somewhere because we won't make up the production and thats added to the supply that we already taken off the market.

Cameco and as I said the.

As I said earlier with Ranger and common act coming off in the next six to 60 months, even more coming off so.

What's happening in Namibia don't really know don't get a lot of information out of the Chinese folks on on those two operations. We know they were having issues right off the bat, but I understand their production.

Is coming back so.

Yes, there's there's a fair bit of material already coming off the market. There wasn't plan I mean, we plan supply disruptions and we took done Mcarthur for a reason to have done Robin Lake in the US. This one we didnt really see coming until it.

That hit us in the and so it's been.

Just added to the supply that's already been taken off the market.

Thanks, Tim.

Next question is one that we hear quite frequently what is behind the pricing differential for material that cameco contract and conradine.

Why would you not by the cheaper location and transport to the higher cost location to capture the arbitrage opportunity.

That's right rich outlets is a question we've been hearing.

Frequently and I think the simple answer is that the market is currently at Cameco I mean, there's some nuance to it but but what we would point out is that that's where the material that is being required to service committed sales contracts.

As being largely procured from.

When you look at the reasons why well you have a facility shutdown in the US you have a facility in a in France that is still in the process of wrapping up.

Some questions about storage capacity about the acceptance of new material.

So no surprise, there just tends to be a desire to to move material away from those locations and make sure. It's at cameco why at Cameco, well because the fundamental demand is there you know what happens to be our preferred location for all the purchasing we've been doing I said earlier year to date purchases of 19.3 million pounds, we prefer to.

By Camco, we prefer to buy a cameco because we're trying to meet our commitments. We have very specific product origin product form product location delivery timing requirements and it just so happens that these criteria are most often met at our own location and we don't have an equivalent need for material at conradine or calling your act so that.

That contributes to sort of the pressure at one location theoretically you could use physical transportation to capture the differential but it's difficult time consuming it has a direct cost many of the intermediate intermediaries in our business just to operate on the fact that this is largely been a book transfer market. So they actually have no expert.

Is that capability in the physical transported material. So it sounds easy to do it's not easy to do this is class seven new color material.

So when we see the opportunity to take advantage of location differentials, we absolutely do but first and foremost it's meeting the needs for our committed sales portfolio and they just so happens to be mostly Mehta cameco and it appears for others as well that are buying material for their committed sales portfolios.

Thanks Graham.

Again as another question, we hear quite frequently how significant is the amount extension to the reduced mining activities and Catholics, Dan if things turnaround there how quickly can production come back on.

Well I think is very significant obviously because extend represents at least student today, 40% of the world production. So any kind of disruption in production. There is significant for the for the world and world uranium market. After tell you.

I see the summed up the team that chemical we've been Super impressed with the leadership that don't pure went off and his team have shown in putting priorities on the workers in the health and safety of their workers and just making the rate decisions. We all have different pressures on us, but they have just absolutely focused on the and I can speak for.

JV income.

Our team or team of people are keeping them season healthy.

So you might have seen there were recent interviews that I think to reenter is via did one in nears on use of off.

Both saying that they will take a cautious prudent approach to restart it's going to be done slowly cautiously.

But the longer they're down the more challenging it becomes and I know that summer months are important and goes extend like they are here for us in Canada that.

Yes, our production is drilling and you go to drill drill drill and then certify the will fields and.

And if you can do with your drills going in the summer in early fall it could have a significant impact on your production not just in 2020, but also in 2012 on and then we've heard that from them. So we're watching that very closely obviously, we're in close contact with them.

As it pertains to our JV, Inc.

Operations, and we wish them the best there with their battle on the pandemic and yes, we'll see what comes out from them in August Thanks, Tim and maybe just to follow on from that question as Adam Prime recently indicated that it may have to buy uranium and in the spot market due to the production interruption.

Got it by Covance 19, it if they are in the market at the same time is you are you concerned that it will drive up pricing uranium.

Let's see this a bit of a Hollywood problem with because of them promise to buy in the perhaps around on us to buy and others that we're never concerned about the proceeds premium running up.

Is it will run through our long term portfolio and we hope to something like that wouldn't say to customers to come back and lock in contracts and so they have some certainty going forward. So we'll see what happens there, but we all have contracts in place in you know because unpromising done a good job putting some.

Long term.

Commitments in place that they have to fulfill either with production or if they don't production them to do some probably purchases somewhere else. So we'll see how the rules forward for the rest of the year.

Great. Thanks, Tim.

At this is another question. We've heard recently why do you think yellowcake and you PC or selling uranium buying back stock what is the significant growth until that you take the on well I probably should start by paying you'll have to ask them because we certainly can't speak for them, but maybe make a couple of observations.

We were.

Couple of years ago, and we were talking about what a market recovery would look like we said well tier one assets are going to have to come back and then tier one assets can probably expand and then tier two and as I built up that stack one of the things I said was will have keep an eye on the funds and I've got a lot of criticism for saying no. These are permanent capital funds they'll never sell material. This is precisely.

The kind of behavior I was thinking about so.

It's just a reminder, these are financial entities. There is no conviction necessarily in the uranium space. The conviction is on the value of the of the funding whatever backs. It up is whatever backs up so they will take actions like loaning material or selling material in order support their net asset value I mean, thats, they're not uranium supply.

Or so.

It's unfortunate to see them in a position of having to raise capital.

We understand that there is a broader environment of economic and market upset.

They have objectives from a valuation point of view at maybe reading into it a little bit.

Seeing them long material that might might actually indicates something quite positive. If traders are going to have to knock on the door of these funds and.

And offer them pretty good rates in order to two oral material that suggests that maybe the materialise drying up to the traders if that if that business is happening. So maybe there is some positive to be read into that and if I look down the road well, maybe buying back stock puts them in a position a better positioned to increase their uranium holdings.

As as a broader market improvement occurs and and that could be supportive in the future, but just.

It is frustrating.

Unfortunate to see I think there are reasons or theyre all.

We just try to look through what the impacts could be on the market and they're pretty minimal.

Thanks Grant.

The next question comes from Oscar Cabrera at Sea I'd be seen.

Lets significance does the review at the Russian suspension agreement have to the market and as cameco potential beneficiary.

Yeah sure. Thanks, I'd say, it's a big deal, it's a big deal and how it turns out and we're not sure how we've been living under the existing Russian suspension agreement any Sean Quinn Dolby for.

Well over 20 years now and it seems to have worked and so we are putting a lot of time and effort into this.

Theres a lot of parties and at the extremities on both sides of this issue done in the us and so we put our on the water I'm going to Sean Quinn, Sean Sean you to Sean and his team have been.

Really laser focused on this for the last months and I know nonstop teams meetings and calls the department of Commerce, and and others to do just want to comment on the process and the results will be what they are but just where we're at a shirt, Tim I'd be happy to do that.

As you mentioned already the vessel suspension agreement had been effect in one form or another since I think 1992 and came out of an anti dumping accident started by U.S. uranium produces back then.

Cameco U.S. uranium mining subsidiary, our resources in Wyoming, and Crow Butte resource in Nebraska have been active participants in the discussions and negotiations concerning the aerospace since inception back then and that continues today and under the current our AD say, which is scheduled to come.

On to an end.

At the end of this year brushing uranium products are subject to an annual quota.

Net add 20% of you asked reacted to that.

And that arrangement, which you mentioned has been around and people have gotten used to it it's been a fundamental part of the market in the us for question.

But over the past two year as we've seen the section to 32 review process blending into the nuclear fuel working group report and various legislative initiatives, all targeting the rocks and share the U.S. nuclear fuel market in the U.S Department of Commerce, which oversees the RF say on behalf of the U.S. government.

Announced in February of last year, its intention to see the Russian suspension agreement extended significantly extended term running out until at least 2040.

With an overall goal of reducing us utility dependence on Russian uranium products over that new extended term.

So as we participate in this process as you've mentioned.

We hope to see vehicle achieved over the period with perhaps even lower limits for the importation of Russian argenta uranium and costs and conversion service as part of that.

And and then have framework for the return of displaced feed associated with enrichment delivery than in the us.

The current deadline for completing negotiations is October pit planning 20, and if an agreement has not reached by that date the possibility exists that the importation aggression uranium product in the U.S. will be subject to revived anti dumping duties of a fairly significant amount.

So I think overall and you mentioned this is our view is that reaching an agreement on the vessel suspension of your an extension between the deal to and customer contracts would be beneficial for us and for you at nuclear industry as a whole so thats, what we continue to focus their itself for thanks.

Thanks.

The next.

Question comes from Lawson Winder at Bank of America American Merrill Lynch conversion price has moderated somewhat in 2020 after starting in 2018 and 2019 why is that fair increased competition Brent.

I appreciate the question because we actually were drawing an analogy between what conversion market was going through and what we suspect that uranium might encounter. Some good. Good reminder, to kind of close the gap on that what I would just say in general conversion spot price has moderated as some of the panicked spot buying is decreased so those.

Who were caught out on conversion.

Seem to have found the conversion they need so we don't have that kind of immediate spot pressure in the market. The conversion term prices really sustained these higher prices after languishing at a very low level way below production economics for many years, causing us to reduce our volumes, causing.

Probably causing the shutdown of the conradine facility.

We've now seen a term price correction.

That was absolutely required in order to ensure long term supply to meet run rate requirement is there increased competition not immediately.

Obviously, we still have a situation where port hope is the there's only convert western converter, that's up and running reliably right now at that at capacity or at its at target capacity.

Facility in France, Thats ramping up around on as recently announced plans to go from I think at target of 6000.

Hundreds of conversion this year to 15000 2022, so more capacity coming online in of course that the conradine plant coming back is it though is overhanging the market right now in terms of.

The supply that's available out into the future for that service, but what really expand the the correction in that term market. That's notable and then pressure coming off the spot market because the panic buying has gone away great. Thanks Grant.

Kim next question is one that we hear quite frequently what are your thoughts on small modular reactor technology.

Or big fence obviously.

It seems to be really catching on and Theres a lot of a lot of hope out there that the some ours are going to be kind of the next thing in the nuclear side, that's going to kind of curious forward not everywhere, we're still going to need in large countries with large developing populations, you're going to still need large.

These little electricity that come from bigger nuclear plants with where the sure Lotto interest in essence, including rate here in our home provinces. The scheduling were a premier Scott Moas been that has been advocating for for the SM our to have a strong look at it we have a joint venture I think schedule in Ontario, and New Brunswick.

We are working together.

Along with the Bruce Power's involved lpgs involved in just a lot of collaboration.

On SM ours, and we know that the nuclear regulator CNS see in middle. She is looking today and I think 11 or 12 different models, which might be if you too. Many I think we're going to up to kinda sorta down to one or two but.

It's exciting I think it's exciting for the future I think the Russians might be a bit ahead of us or the the Chinese might be a bit ahead of us, but we can catch up for cameco. Our interest is supplying the fuel for sure.

For these units over kind of watching to see takes the lead and with our fuel manufacturing facilities in in Ontario, and their ability to produce uranium we think theres rule for us to play going forward.

Great. Thanks, Tim.

The next question if it more towards Cameco typically the first one comes from Orest Wowkodaw at Scotia.

Why they decided to restart the garlic now in uranium market seems to be responding to the disruption do you expect uranium spot price to go down as a result at the restart.

Well first we knew that would be a question on the on the mines of many people. So thanks for asking it obviously is a big decision for us.

Fortunately, we never intended to take it down we we had planned to run cigar Lake. This year. We wanted a combination of pounds produced by US, which are very economic pounds and combine that with our purchases to fill our contracts will this scolded piece kind of disrupted our plans in that regard so.

We first and foremost made the decision driven by health and safety factors that was or driver.

And so we've had a down now for four would be five five months five to six by the time we.

Good going again and on the restart working with our partners, we look to all of the different options and we decided to it was in our best interest to to bring it back we need the low cost production as we said to put into.

Our contract portfolio.

We were what you don't see where we do everyday is we're incurring.

$8 million to $10 million in care and maintenance costs every month that it was down when we do bring it back it's not like we're spreading those bonds into the spot market. They have a home they're going under contract portfolio. So we had away all of those factors and we came out on the side. We thought September was a good time now let me be clear.

That will depend on.

And availability of workforce health and safety or ability to get our miners due to the site and work safely in all of those things are still out there they haven't gone away.

But.

That's a decision we've taken and so we'll keep everyone informed as to how the goes.

Thanks, Tim.

The next question has also from our swap that Scotia capital.

Yes, the restart process look like and what cost do you expect to incur so you have trouble finding the workforce and did you consider a phased approach to the restart yes or thanks, a lot for the question. Appreciate it's it's an important question for us So Brian Riley our Chief operating officer has been working with his team on this and I'm going ask him to just make a few comments on our reach.

Third loans, Okay. Thanks, Tim I'll take a question on workforce availability first we have retained our entire workforce at cigar Lake.

Payroll during care and maintenance period, we're talking about over 330 employees some have been required to.

To work at the site to carry out care and maintenance activities. Many have been sent home on a paid leave of absence in a smaller number have been able to work from home to support the care and maintenance activities. So our expectation is that our workforce will be available notwithstanding any cobot impact on the various community.

These were plays reside.

In terms of our restart plan, we have a maintenance period scheduled for the first two weeks of September. This is the time, we will recall most of the workers and contractors as required. This is routine maintenance activities. After five months shutdown. The first production is scheduled for mid September.

We anticipate slurry haul trucks transporting or from cigar Lake mine to rentals Mclean Lake Mill at this time, it's important to note that the cigar Lake asset that an interesting point and its life of mine plan as uranium grade decreases we must increase or tonnage to me.

Production targets. So upon restart the minus transitioning from three development headings to three new production tunnels and 2021. So this is not without some operational risk.

We have an ambitious production target schedule for 2020 at 10.6 million pounds.

And we don't anticipate any significant costs a bomb restart.

Good Thanks, a lot Brian.

Okay. Next question comes from Great aren't that TD.

Protocols will need to be in place for a restart at cigar Lake.

Our the community supportive of the restart.

Brigham and turn you over Dallas on this one so Alice and her team she said a cove and response team in place.

And probably for five months now.

Including coal would restart to team for cigar Lake and she has been leading the exercise just on the great job and so Alex can I ask you to just give a bit of an update on kind of the protocols reform.

Sure. Thanks, Im happy to do that so.

So since the pandemic has started we've put in a number.

Safety measures across chemical at all locations and we are updating them.

As we move to see situation involved and ensuring that our practices align with the latest guidance from government and public health authority. So across all council locations in general we ask people working from home if possible meeting our conducted remotely there's no business travel and less per by Tim.

Nonessential contractors visitors and leverage our restricted personnel undergo screening before entering to side physical distancing is required mass ppm barriers are used to physical distancing is impossible and then the increased disinfecting cleaning now there are additional perkins and for cigar Lake and all of our northern.

Gotcha site and this includes screening for all inbound and outbound flight, including temperature, Jack Spade seating and all common areas at the site and at the airport increased amortization on flight.

Purchasing faster out the sites to provide connections and reminder, staggered meal and break time heightened controls and services.

Limited sorry cast capacity limits and all vehicle in can dance is up and down the mine shaft. So while these measures have been in place for some time now they're being reviewed and adjusted adjusted as we need to reflect the larger workforce that's required for production and we will be unsteady communication with employees concern to their wallet.

Under the restart plan and their role and it employees will also be provided with an easy to fall Handbook enter this and training videos that they'll be Sean when they arrive at site. So we can also draw from our experience in the success of the start of Ontario plant. So can you lets me plant.

Currently we studied in move.

With regards to northern community support for restarting cigar.

We continue to have regular conversations that northern community leaders throughout the pandemic to ensure that we have there in.

Now there is some interest now in returning to work that community leaders like an opportunity to provide feedback on our planning process.

We'll be working closely with northern leader over the coming late to get their input as being from up our we start plan, we want to make sure that they understand and as comfortable as possible with our plan and we'll be working to address any potential concerns. The best we can so we also recognize as Tim as Barry said 15 situation around cobot 19.

Continues to evolve and we will move quickly to adjust our plan is thinking.

Thanks, Alex.

Okay. If next question is a follow on to the cigar Lake restart questions. What caused you to haven't really tap to delay the restart at cigar lake or not meet your production target is there are risks that you would have to suspend production again after it had three stars.

Well, obviously, the health and safety of or workers will be fair amount every day and so we'll be watching that closely we'll be watching the situation in northern Saskatchewan and consulting with the health professionals on that so we don't want to have a full start or restart do we want to restart and and ramp up.

Our production, but health and safety of our workers will be Paramount.

Great. Thanks, Tim.

This next question is one that we have heard a few times now and we just thought we would address that.

We've been hearing is that there isn't your shutdown Mcarthur River key late because you didnt have any or available to keep mining is that accurate and do you anticipate any problems or availability when you go to restart and character creator.

Well I would I would it's Tim I would just opened missing is absolute nonsense that we have securities laws in this country and others that we have to follow in our reporting we follow those laws meticulously we have to disclose everything we do and we have done that so as it is nonsense.

That's been out there, but Brian maybe I'll turn it over to you to give a little more technical answer than that and then thanks, Dan I won't get too technical I just want to say we have over 27.

Million pounds of uranium available for mining when we read commence operations and that includes 10 production areas available for restart. So we we have enough or supply for the first few years of operation any additional lower must be prepared or developed for future mining and thats just the normal course of business.

Yes, I would point to those who are keen to better understand our production schedule for Mcarthur River. When we return to mining I suggest you reference our most recent technical report one it's a great piece of work that was published in March of 2019 net outlines in some detail mine development.

And production for the life of mine and then summary, the first year as as planned.

Focused on activities in terms of recruitment training and commissioning of equipment.

And target of 2.5 million pounds, and the mill target of 4 million pounds packets and that's because we have an inventory of broken our year to other plenty of mine mining material available, but it will focus on development and particularly around zone for so long for its complexity.

Comprises about a 120 million pounds, we've mined out the lower portion and now spending more time and the upper portion. This is.

An area of about 80 million pounds, and we will approach this with a mass phrasing at technology at technology, we utilize at cigar we utilize at Mcarthur and we're quite confident that the technology will prepare zone four for future mining. So look I would suggest to you.

If interest at refer to our technical report and work off of that with the proper mine planning and the mine development that will be able to meet our production targets and production schedule as outlined in the technical report when it's time to recommence activities at Mcarthur River. Thanks, Brian.

The next question comes from Alex appears at the MLP can you provide an update on the situation at JV income given lower production than planned does this impact your share purchases Frank from Inc. I forget here.

Well I, Alex Yes, Tim.

So as we said earlier, we don't know yet I guess.

It's going to be impacted I guess, we don't just don't know by how much will see flipped.

Mr payment off in the teams able to do their re firing up the well fields, but we just don't have the numbers yet, but we know we wont to get the production that we thought we would this year great. Thanks, Ken. The next question is from Oscar Cabrera Etsy I'd be seen have you had any success in signing any of the perspective business and.

You're contracting pipeline since you announced a cigar lake shutdown and because Abercrombie now it's curtailment.

Due to covert 19, let take utilities to sign long term contracts and do you think the structure at the market is changing to be more spot.

Greg if you want to take that yes, sure it's a great.

And maybe I'm just going to draw on some of the observations I made a little bit earlier, so as I pointed out a few times now that camecos experience has been a little different than the general market experience in that we have been enjoying replacement rate level a contracting certainly in 2019 and then we are in early 2020 pre cobot, we talked about having more.

And negotiations underway in our pipeline than we've had since 2011 and this is still the case, it's not like cobot has caused a situation where.

One of our perspective customers, just come back and say well I no longer need to material, but there are some things that that cobot has created.

Maybe delaying that and I talked about that a little bit earlier fuel buyers focused on the near term, making sure. They shored up the material, making sure it's available that sort of tree arching.

Of their material for the plant sites are focused on the Russian suspension agreement.

As much time as we spent on it so so have our customer certainly in the us.

So that takes time away from some of these discussions and then I just mentioned earlier that it takes time to get to the point of contract execution. So.

I would say nothing to announce we or else. We should we would have probably taken that opportunity here in Q2, but we remain optimistic and especially because the conditions for us to be talking about long term contracts are more favorable with their with pricing dynamic in the pricing changes and referencing.

Term indicators that are more favorable than they were pre co bid. So I think that said that we're really in a good spot there continued to be in a good spot and we don't see an urgency because we want to make sure that are capturing as much value as you can as we can't on that if the question about is the market going to snap over to one.

Yes.

Our more spot exposed et cetera.

It's a good question, it's something we watched carefully because of course, you don't want to be the company that sales all your material forward into term contract and then maybe misses a spot market thats far more robust later in the future.

We still continue to see.

Desire from our customers to have the run rate.

Material procured maybe more spot exposure for discretionary volumes, maybe a bit more spot exposure for inventory.

But that run rate requirement under term contract seems to be remain an important driver when we're in a world where unplanned supply disruptions or adding to plan supply discipline.

We tend to see actually more of a focus on security of supply than than the last.

So again, it's probably one of the drivers that Thats brought some RFP is on market in the last couple of weeks.

So we watch for those dynamics, but so far we haven't seen anything that suggests there is a theres going to be a wholesale shift over now I suppose that doesn't rule out the possibility that one could be forced them and you could imagine a few buying team still very interested in making sure. The run rate requirements are covered but just being unable.

For financial reasons to layer in that type of obligation that a long term contract would require.

We'll watch that very carefully as well haven't seen it to any great extent, so we still continue to be on our strategy.

Fly disciplined buying in the market backed up by a strong balance sheet in order to see the return of those talk term contracts that that'll layering that value for us for the resumption of production at not just cigar Lake, but also Mcarthur River great. Thanks Graham.

The next question comes from Lawson Winder at Bank of America Merrill Lynch. What countries are the utilities that are interested in long term contracting coming from has this changed since you began curtailing production.

Lawson is Tim it's a bit of a trick question because if they tell you the country, you'll know the the utility and about 85% of the cases. So I would just say look its is Asia Europe, North America build narrowed down to that.

It's a customers it won't surprise you that we've been working with for many many years and we want to keep up.

Our regional diversity, so I'd say, it's it's across the board that that these utilities come from.

Hey. This next question is when we get quite frequently.

You've made a lot of purchases during Q2, how much purchasing activity do you have left for the year are you intentionally building in inventory Brent.

It's probably start with a last point there are no. We're not intentionally building an inventory part of that Mcarthur River initial shutdown was to work through.

And inventory built that it happened to because we were producing material event, we are unwilling to part with it at the prices that were persisting at the time and we discovered that it made our negotiations difficult because.

There was probably a bit of a stand off where we're somewhere.

Reviewing that our inventory was going to be was becoming too big and becoming a problem for us. So we said, while we can solve that by working through it we have no intention of rebuilding a big inventory and going back to that overhang. During Q2, we did purchase a lot we purchased a lot because with cigar lake coming down due to co bid plus some disruption that JV in Cai and the.

Uncertainty with no about knowing.

What the exact impacts would be against our committed sales portfolio, we had a need to buy material. So we felt that it was a good time for us to step in to biomaterial. It was there was still some available we're just.

Delighted that folks Didnt test, our resolve on that and hold off because we could have found ourselves in a much different pricing environment at folks said, well, let's just hold off and see how much cameco really does want to buyback, but happily traders were willing to compete with each other and sell material and we were willing to pick it up because we have deliveries coming.

And we want to make sure that materially there. So this is just the standard variation we see this buildup in the past it would happen on the production side, we have a buildup of inventory as production came in the door before the deliveries went out the door well. This year. It's just been replaced the buildup has been purchasing.

And then deliveries will take it out the door so no intention to build of inventory okay. Thanks Graham.

Your next question comes from Andrew Wong at RBC could you remind us on when cameco supply contracts with China around Intel and with strain relations between Canada, and China recently, you have any concerns about renewing contracts in the future.

Thanks, Andrew.

Obviously, we're watching the the situation between.

While China in Canada, China in the US everybody in China, very closely and yet so it's concerning.

Today, I think to everybody and so it's a 10 has been a big customer for us I remember back in 2010, I went to auto on and sign the contract in the prisons are the Chinese president and our Prime Minister of the day I think we signed for 52 million pounds in one month June 2010, remember the price went from 40.

$3 a data about 72 over the next couple of months and so those contracts ran through I think 2020 and 2025.

Our marketing team grant and company or in touch with the Chinese on a regular basis.

Had been a reliable customers on a business to business basis, we've been doing fine and we plan to continue doing business with them going forward. We just opened some of the political issues that are overhanging the relationship can get cleared up but that's outside of our outside of our per view.

Thanks, Tim.

The next question comes from Alex appears at the animal what are the next step in the CRM. When do you expect to get a refund cost award and financial capacity back.

Is that already included in the cash on your balance sheet.

Thanks, Alex Yes, we're pretty a pretty happy I can tell you there some pretty excited people around here when we got that decision unanimous decision from the court of Appeals, So thats two cohorts for judges Noah.

On our side in a credit loss, Sean Quinn and his team.

Or legal counsel have done a really good job for us. So Sean do you do want to take this question just give us a little bit of view forward on the on the CRT tax case, yes, sure happy to Tim.

And the asked is there obviously and not surprisingly linked.

When we get our refund and our financial capacity that depends on what happens next in the dispute.

And in the first and since it's up to the Sierra in consultation with the department of Justice to decide whether they're going to seek leave to appeal. The federal court of appeal ruling to the Supreme Court Canada.

There is no absolutely right of appeal in the Supreme Court gets to decide what cases that we'll hear based largely on a public interest type test.

If this area decides to seek leave to appeal and they have until mid November this year to do so.

We estimate that the process of finding out whether they obtain leave or not we'll lap sometime into early 2021.

If they successfully.

Successful there and they obtain lead to appeal.

For the period to complete a hearing before the Supreme Court Cana and get a decision is two years and the data the federal court of Appeals.

Hi.

If the decision by the Terry is not to seek lead to appeal or are they.

Seek leaf appeal, our assets and our and successful.

Then the dispute for OTIPRIO five analytics as finally at an end.

And would it be disposed of in accordance with the federal Court of appeal the decision specifically.

Minister National revenue would be required issue, new reassessments to cameco for the three years in question.

We would expect fairly tightly refund of a $5.5 million, we've already paid to those years plus interest.

We'd also expect very timely fashion receiver cost award I think Thats 10.25 million and.

The disbursements up to 17.9 million.

So that that the process plays out and the Terry.

Makes a decision on its own in the meantime, we're obviously advocating with the CR rate that they should simply except the decisions as is and move forward and get to the same resolution.

Too early to tell how those discussions will play out obviously.

In regards to the specific question at the tail end of that.

Tail end, there about whereas the theyll be on our balance sheet.

Probably not a question I should be asking but I'm pretty sure it's not in cash.

It's carried as a receivable at this time so.

Okay. Thanks, Thanks, Sean.

The final question comes from Alex Peter that BMO, given your strong cash position what are your plans for the cash when you get it back under what circumstances, when you consider a share buyback special dividend or increased dividend or M&A.

Well I'll start with the M&A.

We certainly aren't.

Interest another.

The last thing we need is some more greenfield right now even the promise of the.

We think create a bit of a headwind. So we are laser focused on getting cigar lake back up and running and someday.

In regards to reverse still out there and as I said earlier, we are hoping Goldman is Stephen does extend can can get their production going and so we've got lots idle a tier one production.

At the moment to yes. So we are we have a super strong balance sheet at the moment a degree of about $870 million in cash.

Yes.

Then the Sean just mentioned.

The CRH pieces out there is another $303 million in cash and some letters of credit we'd like to wrap up the rate time. So yes, we could find ourselves in a very strong.

Position and at that time, I guess I'd us grant in the finance team to deliver the options.

So if we had a good project to invest in we.

We would do that we've got some good ones of our own.

Trillion here in Canada.

One look at but we will not be the bank account of our owners and I've learned that from Grand River say that many times and we agree with that so we look at options to return the money to our shareholders and.

Great and assume should come up with some options for us which of course the board would eventually decide what our best ROE was so that's kind of our thinking is evolving great. Thanks, Tim that concludes the Q and a portion of the call. So I'll turn it back to Tim for some closing remarks.

Well grades were shell. Thank you very much with that I just want to see thanks to everybody that's been with us on the call today. We always appreciate your interest near support to these are interesting times for all of us, but I can say the companies. We're in a strong position. We're excited about the future. We think the future looks really good and and as we Wade through.

This period of uncertainty, we're going to continue to execute on our strategy and and we'll do so in a manner that we believe we'll make or business sustainable over the long term. So thanks, everybody for joining us today us stay safe healthy and enjoy the rest of the summer. Thanks.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

[music].

And.

[music].

And.

[music].

And.

And.

[music].

And.

And.