Cameco Corporation Q1 2023 Earnings Call
Speaker 1: Also and F su pro that.
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Speaker 2: I would now like to turn the conference over to Rachelle Girard, Vice President Investor Relations. Please go ahead.
Speaker 3: Thank you, operator, and good morning everyone. Welcome to Cameco's first quarter conference call. I would like to acknowledge that we are speaking from our corporate office, which is on Treaty Six territory, the traditional territory of Cree peoples and the homeland of the Metis. With us today on the call are Tim Gitzel, President and CEO .
Speaker 3: Grant Isaac, Executive VP and CFO , Heidi Schake, Senior VP and Deputy CFO , Brian Riley, Senior VP and Chief Operating Officer, and Sean Quinn, Senior VP, Chief Legal Officer and Corporate Secretary.
Speaker 3: I'm going to add it over to Tim in just a moment to discuss how the improving growth outlook for nuclear power is translating into an improving growth outlook for Camaco. After this, we'll open it up for your questions.
Speaker 3: As always, our goal is to be open and transparent with our communication. Therefore, if you have detailed questions about our quarterly financial results or should your questions not be addressed on this call, we will be happy to follow up with you after the call. There are a few ways to contact us. You can reach out to the contact provided in our news release.
Speaker 3: You can submit a question through the contact tab on our website, or you can use the ask a question form at the bottom of the webcast screen and we will be happy to follow up after this call.
Speaker 3: If you join the conference call through our website event page, there are slides available, which will be displayed during the call. In addition, for your reference, our quarterly investor handout is available for download in a PDF file on our website at www.camaco.com.
Speaker 3: Today's conference call is open to all members of the investment community, including the media.
Speaker 3: During the Q&A session, please limit yourself to two questions and then return to the queue.
Speaker 3: 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.
Speaker 3: You should not place undue reliance on forward-looking statements, actual results, made different materially from these forward-looking statements, and we do not undertake any obligation to update any forward-looking statements we make today except as required by law.
Speaker 3: Please refer to our most recent annual information form in MDNA for more information about the factors that could cause these different results and the assumptions we have made. With that, I'll turn it over to Tim.
Speaker 4: Well thank you, Rochelle, and good morning everyone. Hope everyone is doing well. We appreciate you joining us on our call today.
Speaker 4: Let me start today by seeing how excited we are about the opportunities for growth ahead of us.
Speaker 4: with demand for clean, reliable, secure and affordable base load electricity coming from across the globe.
Speaker 4: In fact, I'm not sure there's ever been a better time to be a pure play investment in the growing demand for nuclear energy.
Speaker 4: And that is exactly how we have positioned camoco.
Speaker 4: From the results we published earlier today, which are clearly beginning to demonstrate the strength and purpose of our strategic decisions, to the continued support we see developing for nuclear power around the world, our optimism just continues to grow.
Speaker 4: I have to tell you about an event I attended about a month ago, the Prime Minister Trudeau President Joe Biden-Dinner, which took place in Ottawa. I think the related meetings and public statements that followed exemplify with little doubt the scale and scope of the opportunity that's in front of us.
Speaker 4: At the dinner, the two leaders talked about among other things, the critical role of nuclear energy.
Speaker 4: and the importance of nuclear collaboration between Canada and the US.
Speaker 4: It was almost hard to believe like a dream come true.
Speaker 4: Nuclear energy would never have made top billing at a meeting between our countries even a few years ago.
Speaker 4: So it gives you a sense of just how important nuclear power and the fuel cycle to support it have become.
Speaker 4: and how critical chemicals roll is to achieving this North American vision. In fact, I sat between Canadian Natural Resources, Minister Jonathan Wilkinson.
Speaker 4: and U.S. Secretary of Energy Jennifer Granholm, where we continue to discuss and around Camaco's role in North America nuclear energy security.
Speaker 4: The dinner was followed up by the joint statement between the U.S. Department of Energy and Natural Resources Canada on nuclear energy cooperation.
Speaker 4: I don't know if you've read it yet, but I can tell you it is really positive and puts nuclear power front and center.
Speaker 4: It's the kind of signal from government that our industry has been waiting for for a long time.
Speaker 4: And while the statement was largely focused on North America, it went even further.
Speaker 4: To address the need to work together globally as the world grapples with providing clean, reliable, affordable and secure energy.
Speaker 4: Furthermore, at the recent G7 meeting in Japan, five of the G7 nations, Canada, the United States, the United Kingdom, Japan and France, have created an alliance to leverage their respective civil nuclear sectors. This agreement will support the stable supply of nuclear fuels.
Speaker 4: as well as the nuclear fuel needs of future advanced reactors.
Speaker 4: Almost every day in the news you will find more examples of that same sentiment being expressed.
Speaker 4: whether it's the improving public opinion for nuclear power.
Speaker 4: Changing policy decisions in support of nuclear.
Speaker 4: For market-based solutions being pursued, there is increasing evidence of the strong momentum for nuclear. Evidence that supports full-cycle demand growth for nuclear power and the Iranian fuel required to run the reactors.
Speaker 4: So the positive fundamentals you've heard us talking about for nearly a decade are no longer just a long-term story, they're right in front of us, and the picture is stronger than ever.
Speaker 4: We're seeing the reversal of early reactor retirement decisions, which represents unexpected near-term demand. And as some utilities look to replace Russian fuel in their supply chains, we're seeing new markets opening up.
Speaker 4: markets where our company was previously unable to compete such as Central and Eastern Europe .
Speaker 4: This is adding further pressure to the already tightening near-term market.
Speaker 4: In the medium term, additional demand is coming from life extensions for existing reactor fleets.
Speaker 4: Although today's focus is on energy security and fuel diversity, governments are not losing sight of their clean air and net-zero carbon targets.
Speaker 4: Those who are lucky enough to count operating and fully depreciated nuclear plants as part of their base flow generation are recognizing that those assets are more valuable than ever.
Speaker 4: And then there is growth in the long term, which is coming in the form of new builds.
Speaker 4: Expansions to existing reactor programs and higher nuclear energy policy targets?
Speaker 4: It's construction plans for small and advanced nuclear reactors.
Speaker 4: plans that are becoming more concrete every day. All of which is pointing to what we believe are truly transformative tailwinds for our industry.
Speaker 4: Tailwinds driven by the focus on clean energy, by an energy crisis and by the geopolitical realignment of energy markets.
Speaker 4: In the past quarters, we spent a lot of time focusing on the vital aspects of supplying the man because about 95% of the questions we have been getting were focused on the market.
Speaker 4: There seemed to be little interest in what Camico was up to because we had almost everything shut down.
Speaker 4: However, those fundamentals characterized by durable full-cycle demand growth against the backdrop of an uncertain supply picture are now pretty well understood. Now that we are restarting some of our operations and expanding it others,
Speaker 4: We're seeing the interest shift back to understanding how we're positioning calma co to benefit from the tail winds that are developing.
Speaker 4: What a difference a year has made.
Speaker 4: The question on everyone's mind now seems to be how quickly can you respond with more production?
Speaker 4: However, I think we've been very clear for us, it's not about volume, it's about maximizing value.
Speaker 4: The key to our production planning and potential future growth decisions is long-term utility procurement.
Speaker 4: Contracting comes first in all segments of our business.
Speaker 4: As we've said time and time again nuclear is a long-term market and spot activity is discretionary.
Speaker 4: That said, price and availability of Uranium products and services in the near term does have an impact on the market's assessment of how much Uranium is available across all time horizons.
Speaker 4: A near-term scarcity makes everyone think longer term, setting the right context for a new contracting cycle, which is now well underway.
Speaker 4: Once we have finalized contracts in hand and know when and where our material is needed, we will then make the appropriate sourcing decisions to satisfy those delivery commitments.
Speaker 4: We have over three decades of experience operating in this industry.
Speaker 4: We understand that to create long-term value and provide supply and reliability for our customers, we must build homes for our production under long-term contracts before we pull it out of the ground.
Speaker 4: A bit unusual for a mining company, but then again, we're more than mining.
and a bit unusual for a commodity. But then again, uranium is unlike most other commodities.
We continue to be balanced and disciplined in layering in contract volumes where it makes sense for us while building a diversified customer base.
For the past couple years, the volumes we have placed under long-term agreements have exceeded our annual delivery volumes.
The most recent supply agreements we finalized in new markets in Eastern Europe are great examples of the type of contracting opportunities we are seeing.
We are incredibly proud of the pivotal role that we at Kammico will be able to play in helping these countries gain energy independence.
As a result of our contracting success today we have about 250 million pounds of uranium and more than 70,000 tons of UF6 conversion under long-term contracts.
Delivery under these contracts spans more than a decade. Some contracts up to 2040.
The average annual delivery volume in our uranium segment over the next five years is 26 million pounds.
and many of these contracts are market-related, providing us with exposure to an improving market. In addition, we have a large and growing pipeline of business under discussion, which we expect will help further build our long-term contract portfolio and guide our future production planning.
This contracting success is expected to allow us to sustainably operate our assets and generate full cycle value for our chemical, writing our customers with access to the fuel they need to operate their reactors.
However, while Camaco was enjoying replacement rate contracting, the nuclear industry overall has not yet achieved that milestone.
So, utilities uncovered requirements continue to grow.
With our experience in every commercial cycle, we believe this indicates we are still in the early stages of the market transition that is underway, and we know that additional demand must come to the market.
Therefore, we are remaining patient in order to capture as much long-term value as possible.
We remain very selective in committing our unencumbered Tier 1 in-ground uranium inventory and UF-6 conversion capacity under long-term contracts.
We want to maintain additional exposure to future improvements in the market. As a commercial supplier, our decisions have uniquely positioned the company to capitalize on the increasingly undeniable conclusion that nuclear power must be an essential part of the clean and secure energy transition.
And with heightened security of supply concerns and geopolitical uncertainty stemming from Russia's ongoing war in Ukraine, Kamako's nuclear fuel supplies are highly coveted.
with demonstrated Tier 1 assets, strategic Tier 2 assets, and investments across the fuel cycle.
We've taken a balanced and disciplined approach to our strategy of full cycle value capture.
We believe there is significant opportunity for Cameco to grow as we help new and existing customers de-risk their fuel supply needs.
But what's really exciting for us is that we do not have to build new capacity to compete for this business.
We have Brownfield expansion capacity.
In the context of significant growth opportunities for nuclear power, we're also excited about our strategic partnership with Brookfield Renewable to jointly acquire Westinghouse Electric Company.
Our excitement stems from being able to extend our reach in the nuclear fuel cycle at a time when there is tremendous growth on the horizon.
Our planned investment in Westinghouse is an investment in assets like ours that are strategic, that are proven, that are licensed and permitted, and that are located in geopolitically attractive jurisdictions.
Assets that we expect will be able to participate in the growing demand profile for nuclear energy and downstream services from their existing footprint. Team here is working toward closing the Westinghouse investment, which is still expected to occur in the second half of this year.
Once it closes, we will be able to provide more details on the exciting prospects we see for that business. This brings us to our production decisions.
Our production plans are balanced with our contract portfolio and where we think the market transition is currently at. We will not front-run demand with uncommitted supply and risk being exposed to a discretionary spot market.
We've seen other companies pursue a spot market strategy many times in the past and every time it failed.
It only served to transfer value from shareholders' pockets into the pockets of utilities, traders, or other intermediaries.
Any company that understands our industry has learned the lessons of the past.
They understand that in the near term there is very little uncovered demand. You just have to look at UXC's uncovered requirements in 2023 and 2024. They're very small.
Contracts being signed today aren't for in-year demand, they're generally for requirements starting in 2025 and beyond when uncovered requirements start to grow.
However, if you wait until then to contract, you'll miss the contracting cycle.
The demand will already be covered under long-term contracts that are being signed today and your production will be exposed to a small discretionary spot market.
So, Camico won't ramp up production to meet spot demand. We align our production plans with our long-term commitments, and I think we've shown we can be trusted when we say we will maintain our discipline.
Let me just take a minute to discuss where we're at with the next phase of our supply discipline.
As we announced last quarter with the contracting success we have had, we have changed our production plans from a year ago.
We now plan to round up at MacArthur River Key Lake to produce 15 million pounds this year and 18 million pounds in 2024.
At Cigar Lake, we plan to produce 18 million pounds this year and to maintain production at 18 million pounds in 2024.
But that's not the extent of our Tier 1 supply growth. As we see uncovered requirements translated into additional contract commitments,
We also maintain the ability to expand and extend production from our existing Tier 1 assets. If we took advantage of all of these opportunities, our annual share of Tier 1 Uranium supply could be about 32 million pounds. As for our Tier 2 assets, we plan to keep those on Karen maintenance, unless we can secure long-term contracts.
are a growing book of long-term business at a time when conversion prices are near historic highs, we're targeting annual production of 12,000 tons by 2024.
But as is the case across all industries and jurisdictions right now, there are challenges.
Inflation, the availability of personnel with the necessary skills and experience.
The impact of supply chain challenges on the availability of materials and reagents.
and global transportation challenges all contribute to elevated risks.
which we must continue to carefully manage. With improving market fundamentals plus our growing contract portfolio for both the uranium and fuel services and our plans for increased production,
Our strategy is set us on a path that provides line of sight to a significant improvement in our financial performance.
as we return to our Tier 1 cost structure.
And you can see this is starting to play out in our first quarter results as we expected it would.
Our strategic decisions are translating into better earnings and cash flow. This higher uranium prices flow through our existing market-related contracts.
And as we begin to deliver into higher priced UF6 conversion contracts, we are no longer incurring care and maintenance costs or operational readiness costs at MacArthur River Key Lake.
And as our production increases and our purchased volumes decrease, we're relying more on our lower cost production to meet our delivery commitments.
We will retain our conservative financial management to support our continued balance and discipline contracting and supply decisions.
As you know, the financial aspect of our strategy is to ensure we have a solid balance sheet and the ability to self-manage risk. At the end of the first quarter, including the proceeds from an equity issue to support our planned acquisition of a 49% share of Westinghouse,
We had $2.5 billion in cash, about 1 billion in long-term debt, and a $1 billion under on credit facility.
And this doesn't include the $79 million US dividend we just received from JV Inkai or the $86 million cash refund CRA just sent us on account of its revised reassessments for the 2007 through 2013 tax years. The refund from CRA was cash we had to pay on account of taxes previously re-
They informed us that they apparently made an error in their calculations that was not in our favor.
Unfortunately, this is a serious business, which is what makes it so frustrating.
We still expect them to return $211 million in letters of credit.
Of course, that assumes their calculations were correct, which I'm not sure is a safe assumption, but it's all we have.
So while we're happy to be getting some of our cash and security back, our broader tax dispute saga with the CRA does continue and you can dive further into the details on that in the Q1 MDNA.
Our decisions at Camico are deliberate. We're responsible, commercially motivated supplier with a diversified portfolio of assets, including a Tier 1 production portfolio that is among the best in the world. And we're more than just mining with investments across the nuclear fuel cycle.
We're committed to operating sustainably by protecting, engaging, and supporting the development of our people and their communities, and to protecting the environment, something we've been doing now for over 30 years.
Our strategy, which includes contracting discipline, supply discipline, and financial discipline, will allow us to achieve our vision.
A vision of energizing a clean air world and thereby delivering long-term value in a market where demand for safe, secure, reliable, and affordable clean nuclear energy is growing.
So thanks for your interest today and we are happy to take any questions. Thank you. We'll now begin the question and answer session.
In the interest of time, we will ask you to limit your questions to one and one supplemental. If you have additional questions, you are welcome to rejoin the queue. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request.
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Webcast participants are welcome to submit questions through the box at the bottom of the webcast frame. The Chemical Investor Relations team will follow up with you by email after the call.
Once again, if you have a question, please press star then one at this time.
Our first question is from Greg Barnes with PD Securities. Please go ahead.
Thank you, operator. Tim and everyone else on the phone. I'm just trying to understand the jump from the 180 million pounds you had at a long time contract. But you're reported with a Q4 results to a 250 million pounds. You're reporting today. Does that include the Ukraine contract?
and the Bulgarian contract or what is the composition that jumped from 180 to 215?
Pardon me, this is the conference operator. I made an error with the, I just needed the presenters by mistake. I'll be joining you now.
Pardon me, please go ahead. Greg, are you there? Can you hear us? Yes, we can hear you now. I apologize. Thank you. Sorry about that. Greg, we got your question and I'm going to ask the market expert grant to to answer that on our sales portfolio. Yeah, thanks. Thanks Greg. Great question. So we have.
added in those contracts, Ukraine at the lower volumes without the Zephyritia unit and the Bulgaria volumes into those volume limits. But going forward, we're going to go back to what we've done in the past, which is wait till they're executed contracts, and then it lines up with the...
with proven Tier 1 producers with proven Tier 1 assets.
Tier 1 producers with proven Tier 1 assets. Did you catch that?
One moment please let me just assure that his line is open. Thank you. Mr. Barnes, I apologize your line is open again.
One moment please let me just assure that his line is open. Thank you. Mr. Barnes I apologize your line is open again. Okay, I think we sort it out.
So grant the 180 million pounds didn't include Ukraine and Bulgaria, but I combine those two that's up to about 41 million pounds The jump is only 35 such as
trying to understand the potential. We'll talk about what we've delivered to date.
Right, we all can pull off what we've delivered to date.
Okay, just as a follow-on, can you give us an idea on the approval that you've actually received on the Westing House today and what's required from this point forward?
Yep, we sure can and Sean Quinn has been following this file meticulously obviously it's a top priority report so Sean can you give Greg an update on that? Sure, Greg. There's over 30 approvals required in total. There are in three different buckets.
the nuclear regulatory approvals.
including some of the lead US approvals that we're working on the competition lot of approvals and the Foreign Direct Investment approvals. I don't have a schedule of the expected recovery. We seek dates for each of those in front of me, but they're all on time at this. They're all on schedule at this point and we're not anticipating.
Gordon Lawson with Paradon Capital. Please go ahead.
Good morning, everyone. I just have a generic question here. So you've got your two keystone assets now running ad or near your targeted rates and the outlook is looking significant and we're promising. So what would be the required catalyst for you to start talking about quarterly financial results and providing preview calls to...
We're wrapping up to 15 million pounds this year on our way to 18 and 24, so we're staying at 18 in both of those years. And we'll see what happens going forward. I think we've been very, very clear that we're not going to front-run any demand. And we will wait until we have...
contract portfolio that calls for more pounds and then we'll look at our assets to see which ones will move forward. So I'm not sure I get the part on the quarterly reporting
It's just more currently not, we're not supposed to not allowed to talk about say you're even a result or the quarter. But with things now running much.
much more smoothly and much better position than they were a few years ago. I'm just wondering when you expect or what would be a key catalyst for us to start getting back into that.
Yeah, Gordon, I don't think that we've ever really done that. We've always maintained that we don't think about this business on a quarterly basis. It's not how our business operates. And so our focus is really on sort of our performance.
For the year, not just on a quarterly basis, and that's why, you know, if you've got detailed questions on the quarter, we're happy to address those. We just feel that this isn't the right form for that because we just don't think about our business on a quarterly basis that way.
Okay, thank you. Thanks, Gordon. Our next question is from Ores to Wacadal with Scotiabank. Please go ahead.
Hi, good morning. I wanted to ask another question about your contract book. I was sort of pleased but surprised to see that jump in your average sales delivery over the next five years going up from 26 million pounds versus 21 at year end.
Does that suggest that the majority of the volume you've added for the book is all front-end loaded? If it's showing up in that five-year guidance? That five-year guidance is an average and you can always think about it as being more front-end loaded. So think about our leverage to the market coming from...
window. Those committed sales, many of them are market related in the uranium segment. So we get what we call portfolio leverage. Then the second piece is actually pipeline leverage and that's the pounds or is that we haven't sold yet. So as you point out, in the outer years of that five-year average,
We wouldn't be at the same level of sales as we are today. It's exactly where we want to be. We see a market where uncovered requirements are growing. We think we're in the early innings of a contracting cycle. We're far from sold out of our tier one production. We're not even planning on running out of tier one production at full capacity at the moment as we're still in supply discipline. So you're thinking about it the right way because we want to retain that leverage to improving markets. It comes from both our existing portfolio.
as well as our pipeline, the pounds we haven't sold yet. Great, I don't know if I've ever seen a 5 million pound average five-year jump in your book, ever.
of supply-driven contracting. So for us, there's a couple of dimensions to think about. One obviously is that fundamental story. I always want to point people to the growing uncovered requirements and then reference the fact that the market is not yet even replacing what it consumes on an annual basis.
Then we add to that new market opportunities we haven't seen before. You've seen our press releases about Central and Eastern Europe , a region, if you will, looking to pivot away from historic sources, historic dependence on Russia. Camphor is in an incredible position in order to satisfy the U.S. of six demand in that market. So tie that to our...
replacement rate yet. So if you look at it from historical terms, we've never been at this stage of a contracting cycle at this high of a uranium price before. We've seen the enrichment price recover. We've seen the conversion price hit historic levels. We haven't seen that kind of demand that's gone through those two parts of the fuel cycle.
fully hit the Uranium side yet and so we're obviously pretty excited about it. Tie that back to my earlier comment. It's why we want to remain leveraged in both our Portfolio and our Pipeline. Thanks Grant and just as a quick follow up can you give us a flavor of contracting behavior right now with respect to how the floors and feelings.
the market and because we know that the market isn't even at replacement rate contracting yet. Market related contracts are very often call or utilities will often for example ask for a ceiling. They've lived through price spikes before and if they do we will want to insert a floor.
It's the coloring that is improved markedly on the market-related contracts over the last year. You know, not uncommon to see $45.50, escalated floors, $75.80, escalated ceiling. So inflation-linked colors.
that give you a lot of upside participation, incredible downside protection as well. That is a very much an improving scenario. I just want to tie it back to the term price because what we see often is a misunderstanding. Where people don't sort of remember that the term price that is posted.
is only influenced by base escalated prices in the market. So actually as we sign market related contracts, we're having less price formation influence than say another producer willing to base escalate their contracts. So what we obviously want to see over time is a
perhaps improvement to the price reporting in our industry, whereby the price reporters will look at their own price forecast and maybe even take their own base price forecast. And say if you sign a market related contract, you're really pricing it at these levels, bring that forward to today. What does that mean for the term price? So think of that term price at 53 ish today really as...
the bottom of the market, the absolute floor from which the leverage is possible on top of that. Again, pretty exciting position to be and given the growing uncovered requirements and the fact we haven't even hit replacement rate contracting. That's a pretty good level to be at this stage of the cycle in.
Thanks Grant, appreciate the color. Thanks for your question, Oris. The next question is from Lawson Winder with Bank of America Security. Please go ahead.
Hi, thank you operator and good morning, Tim and Grant. Thanks for the update today. Just a couple of questions for me. I wanted to ask if you could help us think about the contract with Ukraine and Bulgaria and how that sets up in terms of your targeted 60-40 split market versus fixed price contracting.
And generally, directly, where the pricing, if there's any fixed price component, where that pricing sits for that contract, thank you very much.
Yeah, thanks Lawson for the question first. I just say we're delighted on both those fronts Both with the Ukraine we've been working hard with them. You saw all the details of our contract with them It's a big big ticket item for them and for us and
You know, it of course carries a bit of risk with it, but risk that we were prepared to take. There's more than just the commercial side to that one. We wanted to stand with Ukraine in their efforts on turning away from the Russians. And so that was an important one. Bulgaria was just there last week and signed that up. That's another new market for us that had never been there before, never dealt with them before. And there's more of those countries to come for us. So that's where we're going to go.
Grant, do you want to talk about how those two contracts fit into our portfolio?
You referenced loss in our 60-40 marker-related, base-escalated balance, and I just would remind everybody that that is not a target per contract. It's not a target per year. It's something we think about full cycle. So you think about an entire commercial cycle of uranium prices.
There are times where we want actually a lot more market related exposure and we would want less space escalating That time is right now
because utilities have not even been contracting at a replacement rate yet. They've not even been coming to the market to buy forward what they consume in a given year. So for us, that suggests this market still has upward price momentum and we want to be market exposed to that. Now, there are times where our market hits replacement rate and goes above. And when we start to get into that though, we are inclined to think more about the base escalated prices in order to lock those moments in for a long tail of cash flow and earnings. But that's not where we are today. So don't think about 60-40 with respect to anyone contract or any one year. So right now we want to be market related. So I would just say on a framework level.
No surprise, those contracts are very consistent with the type of preference we have in this market today, which is market related references for the uranium portion of those US-6 contracts. For the conversion portion of those contracts, well conversion is at historic pricing.
So we are happy to see some of that locked in and escalated over the life of the deliveries. Again, taking those moments where you have unique demand points that are pushing one part of our segment above replacement rate and capturing that. But never think about 60-40 as pertaining to any one single contract or even one single year.
Okay, thanks for those comments. Thank you. Could I maybe ask one follow-up then? Sure. Just with the market purchasing that you've guided to of 9 to 11 million pounds.
To kind of help us think about how active chemical might be in the spot market this year, first of all, have you been active in the spot market and to what extent?
year to date 2023 and then what proportion of that 9 to 11 million pounds would be pre-contracted purchase commitments from yourselves and
And obviously, what proportion do you expect will be, because Adam from, or in guy, sorry. Yeah, yeah, so great, great, great, great, great, great set of questions. Let me just unpack it a little bit. So 9 to 11 million pounds is what we guided for purchases and...
here in 2023. Remember our plan production or our share from JVNK is 4.2. So that means we need somewhere between nearly 5 and nearly 7 million pounds of purchasing. Remember our purchasing comes from a couple of different sources. We can buy...
in the spot market today for delivery right away. We could do that, that's at our discretion. We've also entered into contracts to buy in the past when the price was a lot lower. We like to operate like a utility when we see a low price of uranium. If somebody wants to fix that price, we're willing to enter into a long-term commitment. We have some of those available that we could bring forward at today's,
requirement to purchase. We will be buying in the market. To date, we've only bought about 400,000 pounds. You can see that in our quarterly uranium table. So we do have a need to buy. And we're watching really closely as we see additional interest in physical funds built.
as we see some utility step into the spot market to support it, even in the absence of the very...
familiar spot vehicle that everybody keeps an eye on that really hasn't done a lot in the last couple of weeks Little bit over a month There's been a real resistance to the Iranian price so for us. We're just gonna be very opportunistic We don't telegraph what our purchases are or when we're gonna make them but
We will be a buyer in the market for sure. Thank you both very much. Thanks, Lawson. Once again, if you have a question, please press star then one. You'll hear a tone acknowledging your request.
Our next question is from Grace Simon with MUG and intelligence. Please go ahead. Hi, this is Grace Simon with Energy Intelligence. So I have two questions. One is about the Extending Conversion at Port Hope. How many times did Port Hope Produce in 2022 and do any special needs to be taken or have already been taken to get to 12,000 times by...
just over 10,000, 10,600 tons. I believe in we are in the process of ramping up to 12,000 by 2024. So that's on track. Nothing really knew the report there. And maybe I'll as Brian Rally just to give an update on the key Lake MacArthur ramp up and the work that's going on there. And we're excited about that project coming back.
Thanks, Sam, and thanks. Great for the question. Look, it could quarter for my car to river mine and key lake mill. And our objective is, and it's very clear, wrap up our production safe, orderly fashion, to achieve our production target. So today we have over 800 workers at the sites.
That includes our chemical employees and long-term contractors. The mine's in good shape. They're over 100 million pounds behind freeze walls, available for mining, and we have five active headings. I would share that we commenced underground mine development and freeze drilling.
in the corridor as well, preparing new mining areas for future production. Specific to your question about the Key Lake Mill, production is ramping up as planned. We made significant changes to the site.
I think you referenced that and I can tell you the new operating system and the various digital and automation projects are all working well. The normal commissioning challenges, they're fewer and fewer in number, so we expect to achieve our target of 15 million pounds in 2023.
All right. Thank you. Thank you. Our next question is from Orist Walkadal with Scotia Bank. Please go ahead. Oh, thanks for taking the follow-up.
Just curious if you continue to see good demand in terms of filling up the contract book, should we assume that
the expansion of the Carthor River is likely the next source of your supply growth. I mean, taking it up to the 25 million pounds license capacity. And then I was also wondering on when we could anticipate getting the market to get details on what's entailed with respect to the
Yeah, clearly MacArthur is a tier one asset that we are just delighted with our partners to have. And so our first move is to 15 this year and then to 18 next year. And then we'll see what the contract book looks like after that. We do have...
room to go up to 25. We've got licensing approval. So yeah, that would be our first and best source of additional production. I mean, it's unbelievable that we've got that capacity. Cigar, we're looking at that going forward. Brian , do you want to give an update on cigar? Yeah, sure.
We know there are additional measured and indicated mineral resources located to the west of the existing pods. This defines the Cigar Lake ore body. But we would have to do some work. We would have to do surface delineation drilling. We would have to do underground geotechnical drilling. And that would be required to convert those resources.
to reserves. So that work has not been completed in the final investment decision has been made, but that's the optionality that would extend production beyond 2031.
Just as a follow up, when would that decision have to be made in order to secure sort of continuous production at cigar? Yeah, look, we've got, you know, runway out till 2031, we have time, but, you know, given the feasibility studies required and long lead procurement, I mean, that's a decision we would have.
have to take sooner than later. But we have time at the moment because our runway is out until 2031. OK, get it straight. Of course, sorry, 30 jump in. I would just tie it to our contracting as well, because remember the decisions on the production side follow.
the procurement. Follow the success we have in building the contract portfolio. And just as we've said in the past, we enter into a new term contract today. Well, we typically don't start delivering into that term contract for two years. So that actually gives us an enormous amount of...
time to plan the production and to line up the studies and line up the work that Brian was talking about. It's a very advantageous position for us. We don't have to try to turn on production rapidly to jam it into a spot market. We get this long lead signal so that we can very responsibly, rationally develop up the production. So as you mentioned in the outset, as the procurement starts to build, as we layer in more contract, we then have a...
if I could grant, is there much capital required to take MacArthur from 18 to 25? The really exciting part of our story is the ability to benefit from an improving market with those points of leverage that you asked about earlier. So we have leveraged to rising prices.
against the falling cost structure. As we bring on assets we already have licensed, already have permitted, already have built, and run them at a higher unit cost, we get OpEx improvements. And then on top of that, as Tim mentioned, a lot of brownfield leverage. That brownfield leverage means, what we're really talking about is replacement.
maintenance capital, not Greenfield capital. So we have a very steady capital profile. It's not the type of capital that you would expect to see if somebody was building a mine in the milk, especially in today's market of supply chain challenges and inflationary pressures. So I would say
No, it's not a lot of capital relative to the extra pounds because it is for outfield expansion. You see a very steady capital profile in our forward guidance. We're very excited about that. That's margin improvement. That's return for our owners.
Thank you very much. Thanks, Source. The next question is from Lawson Winder with Bank of America Securities. Please go ahead.
Hi, thank you for taking the follow up. I wanted to ask about SILEX and whether Cameco is in the running for the
several hundred million dollars of money from the DOE for how you and and also ask in your conversations with your customers when you're when you're talking contracting on conversion and naturally uranium are they also asking for silo to rest of the capacity and could there be increase involvement involvement from your customers to sort of help accelerate the rollout thanks yeah thanks for the question we're obviously quite excited about there
the GLE project and its potential going forward. Sean is overseeing that one from our side. So Sean Quinn, maybe I'll ask you the answer. Sure. I'll take the first question about the IRA funding in the US, the $700 million that was referenced. Yes, GLE is poised to pursue that money.
and are still waiting but it's imminent is all we're told.
Then on the marketing question, what you're hearing from your customers, maybe I'll turn that over to you, Grant. Yeah, absolutely. Just like in the uranium segment or the conversion segment, you don't build productive capacity and then start knocking on people's doors and saying, you want to buy it because that will be value destructive.
The support case needs to be made, just like it does for a mining investment in the uranium space. That support case for GLE would include the type of government support that Sean is talking about, but it would also include customer support. You've seen GLE have success signing some MOUs with some fairly large US utilities who were excited about that as both a supply.
So we would have to build up that support case. You know, the best way to bring on a uranium asset, of course, is to stream it into a well-developed contract portfolio. The same would go for an enrichment asset. So we would treat it with the same strategic discipline that we would developing a new mine.
But ultimately we're very excited about that project and the supply source it can be and the solution it can be to global utilities looking for more enrichment.
Okay, thank you very much. Have a great day, Lawson. Thanks. This concludes the question and answer session. I'd like to turn the conference back over to Tim Getsl for any closing remarks. Okay, well thank you very much, operator. With that, I just want to say thanks to everybody who joined us on the call today. As always, we appreciate your...
These are exciting times for Camaco. We're excited about the increasing recognition of the critical role nuclear power is going to play in helping address these challenges. We're excited about the fundamentals in the nuclear fuel market. And we're excited about the prospects for Camaco as we continue to build our long-term contract portfolio, which allows us to further expand production from our brownfield capacity and to invest in opportunities.
across the fuel cycle. We, as you know, are a responsible commercial supplier with a strong balance sheet, long-lived Tier 1 assets and a proven operating track record and line of sight to return to our Tier 1 cost structure. We will continue to do what we said we would do, executing on our strategy and consistent with our values, we will do so in a manner we believe will make our businesses stable.
a pleasant day.
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