Q4 2024 Cameco Corp Earnings Call

Thank you for standing by this is the conference operator.

Welcome to the Cameco Corporation fourth quarter 2024 results conference call.

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Okay.

Paul.

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I would now like to turn the conference over to Cory Kos, Vice President of Investor Relations. Please go ahead.

Yeah.

Thank you operator, and good morning, everyone welcome to chemicals fourth quarter and annual conference call.

I'd like to acknowledge that we are speaking from our corporate office, which is on treaty six territory. The traditional territory of the Cree people on the homeland.

With us today are Tim gets all president and CEO.

Isaac Executive VP and CFO.

Any shock <unk> senior VP, and deputy CFO, and Michele Gerard Senior VP and Chief Corporate Officer.

I'll hand, it over to Tim more materially briefly discuss the current market fundamentals, which we believe are stronger than they have been for decades as well as our progress with the continued execution of our strategy, which in 2024, so off to a strong marketing operational and financial performance.

After we will open it up to your questions.

Today's call will be approximately one hour concluding at nine a M. Eastern time as always our goal is to be open and transparent with our communication.

However, we want to respect everyones time and conclude the call on time, therefore should we not have time to get to your questions. During this call or if you would like to get into detailed financial modeling questions about our results we'd be happy to respond to any follow up inquiries.

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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.

Should not place undue reliance on forward looking statements actual results may differ 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.

Please refer to our most recent annual information form and MD&A for more information about the factors that could cause these different results and the assumptions we have made.

With that I'll hand, it over to Jim.

Well, thank you Cory and good morning, everyone. We appreciate you joining us for today's call.

Earlier. This morning, we released our fourth quarter and annual 2024 results in a word from both a quarterly and an annual perspective those results were strong and I will touch on them shortly.

We expect our strong performance to continue in 2025 supported by our long term contract portfolio.

Tier one assets and our strong financial position.

The reason for our optimism is relatively simple.

We continue to see supportive market conditions throughout the fuel cycle and across the nuclear sector.

Those support appeal wins continue to improve the outlook for existing nuclear reactors.

The reactors returning to service after previously being slated for decommissioning.

And so the nuclear new builds that are underway and those on the horizon.

That positive outlook for the installed reactor base and for new growth is expected to benefit both chemicals as well as our investment in Westinghouse.

In fact, we believe the outlook for nuclear power and nuclear fuel fundamentals is more favorable than it has been for decades.

Global geopolitical uncertainty continues to bring energy security and national security into focus.

Alongside the need to ensure that energy is clean.

As you've heard us say for over a year now we believe that is putting nuclear into a durable growth mode.

And as we see that growth translate into demand and evolved into a cycle of replacement rate contracting.

He is a significant supplier of nuclear fuel and nuclear fuel cycle services.

Got to have the ability to durably grow from our existing assets.

Any additional supply will therefore have a home in our long term contract portfolio, which does not expose us to a discretionary spot market and provides upside potential and downside protection from geopolitical changes in trade policy decisions.

Positive market conditions that we expect to benefit our core uranium and fuel services businesses are also presenting significant future growth opportunities for Westinghouse with continued interest in their technology and expertise for newbuild opportunities, the nations, including Poland, Bulgaria, Ukraine and <unk>.

Slovenia just to name a few.

We continue to believe that the risk to uranium nuclear fuel supplies and services are far greater than the risk to that durable demand and the growth we see coming.

That belief is anchored in how we've seen the nuclear fuel market evolved over the past couple of years.

Fuel buyers tend to work backwards across the fuel cycle, starting downstream and working their way up to the uranium.

In 2024, there was a lot of downstream focus.

And with good reason.

Whether it was the U S legislation to ban Russian enriched uranium imports or Russia reacting within export restrained a lot of attention remained on western sources of fabrication enrichment and convergent services.

That makes sense for a global market that is diversifying away from the Russian fuel cycle.

And even if those geopolitics were to change the sell sanctioning by many western utilities. This translated to long term contracts that will now be in place for years to come.

However that downstream focus has also meant that there has been a persistent distraction from our focus on the natural uranium the.

The product, which those services are applied and for which there is no substitute.

When those downstream bottlenecks are resolved utilities do not rely on the spot market for the uranium needed to meet their fuel requirements.

Producer with an unhedged strategy that expects to see that kind of near term demand to absorb uncommitted supply has not spent much time at all buying and selling uranium.

We have now.

And I can tell you the spot market is not where utilities go to meet their annual run rate requirements.

Is completely discretionary and it's not fundamental.

Of the 46 million pounds of uranium that transacted in the spot market last year only about 15% was bought by utilities.

As is the case every year a great deal of the spot activity was churn.

Traders brokers and financial players passing around 100000 pounds, five times, which becomes 500000 pounds of reported volume.

That's not a reliable source of supply for the more than 175 million pounds, a year needed to fuel the global nuclear fleet annually.

And that's not a source of supply that can underpin the long term operation of a nuclear reactor for 60 or more years.

Instead utilities are buying uranium in the fuel cycle services in the long term market years ahead of time, sometimes even for the decade to come or longer.

Despite relatively muted long term contracting volumes in 2024, which remained below 120 million pounds, well below the replacement rate contracting level.

<unk> continued to successfully negotiate off market contracts selectively adding to our long term portfolio.

Start 2025, we have commitments to deliver an average of about 28 million pounds of uranium over the next five years.

With commitment levels higher than average in 2025 through 2027.

And lower than average in 2028 and 2029.

Our long term book of business in the uranium segment now totals approximately 220 million pounds of uranium with a large and growing pipeline under negotiation.

The pounds, we were adding a pricing terms that provide downside protection.

Allowing us to retain exposure to improving demand.

And then the 220 million pounds. It only represents about a quarter of our current reserve and resource base.

Meaning we can be strategically patient in our contracting as that demand forms.

We're already seeing demand in the conversion segment driving prices to historic levels.

And we also added to our fuel services long term contract book last year, which now totals approximately 85 million kg. You have you have six supporting our fuel services operations for years to come.

We expect the strength we are currently seeing in the other segments of the fuel cycle to continue moving upstream to uranium because there is no way to avoid buying uranium for a nuclear fueled Budd.

We've heard the negative bearish views of those concerned about the pace of long term contracting.

But we don't share those concerns in fact, a delay only serves to enhance our optimism.

That's because demand is being pushed into a shorter contracting window, where supply is tight and requirements are growing.

And those requirements are only tied to high confidence demand such as the current operating reactor base and the 62 reactors under construction today.

The industry growth story to date does not rely on the blue sky potential demand from jurisdictions that are only thinking about adding nuclear or from data centers in the tech sector or from a meaningful build out a small advanced reactors.

Those potential developments only add to the positive outlook for nuclear energy, which is already strong.

Based on global fuel requirements utilities have bought less than 40% of the uranium they need to operate through 2040.

That translates to about $2 1 billion pounds of uranium that is yet to be purchased and is putting an awful lot of pressure on supply in the mid 2000 Thirty's.

Time, when several major global primary supply sources are thinning out in.

And the investments in construction of new mines required to replace them.

Not even started.

In fact, our own cigar Lake mine is expected to reach the end of its mine life in 2036.

We plan our supply accordingly, with our tier two assets in our pipeline of potential future projects in mind.

But cigar lake satisfies 10% of global demand.

That's an 18 million pound hole in supply that the market has not yet fully appreciated.

And bringing on new production of that scale is incredibly challenging.

So we continue to see exciting times ahead for us in the nuclear sector, and we positioned ourselves to benefit while remaining protected should not evolved as expected.

We have more than 35 years of experience operating across the fuel cycle and we've designed our strategy of full cycle value capture to be resilient.

We have good visibility into when and where we need to deliver material, allowing us to carefully plan and prudently invest in our existing and potential supply sources well into the future.

When we consider the supply tools and flexibility we have in place to work with our customers and satisfying their ongoing fuel requirements, we can be selective and opportunistic with our sourcing of supply.

And we can be disciplined when considering future investments in our primary supply pipeline.

We will continue to align our production with our contract portfolio and market opportunities demonstrating that we are responsibly managing our supply in accordance with our customers' needs.

We will also continue to look for opportunities to improve and operate our assets with more flexibility and efficiency, while working to improve our safety performance and reduce our impact on the environment.

Our balance sheet is strong and we expect it will enable us to self manage risks, including risks related to global macroeconomic uncertainty and volatility as well as uncertain trade policy decisions.

Looking briefly at 2024, our disciplined strategy has delivered a number of highlights worth noting.

We delivered strong fourth quarter and annual net earnings and adjusted net earnings which reflect a return to our tier one production level as well as higher sales volumes and an improvement in average realized price.

Those earnings incorporate the expected full year net loss from Westinghouse, which was primarily due to the impact of purchase accounting.

So we view adjusted EBITDA as a measure that better reflects westinghouse's strong underlying performance.

And Westinghouse is adjusted EBITDA was indeed very strong.

In our uranium segment, we delivered just under 34 million pounds of uranium in 2024 and produced about $23 4 million pounds.

Production was slightly higher than our expectation as a result of very strong production from the Mcarthur River key Lake operation.

The operations 23 million packaged pounds last year sets, both a new annual production record for the key Lake mill as well as a world record for annual production from any uranium mill.

The increased run rate at the mill was made possible by our off cycle investments in automation Digitization and optimization projects to improve the key Lake mill during care and maintenance <unk>.

Supported by our access to stockpiled ore.

It's critical to remember that when you see higher tier one primary production from cameco. It has a home and does not flow into the spot market as some like to speculate.

The additional pounds are not only positive for our bottom line, but they have a home in our portfolio and merely serve to offset a draw from our other sources of supply such as inventory long term purchases being pulled forward or product loans.

In addition in 2020 for the production flexibility from Mcarthur key offset lower production from our other tier one sources.

Uranium production net income continued to be impacted by the ongoing supply chain issues in Kazakhstan, most notably related to the stability of sulfur acid deliveries.

As a result total 2024 production from ink Island, 100% basis was $7 8 million pounds about 600000 pounds lower than in 2023.

Cigar Lake also came up a bit short of its planned due to some challenges earlier in the year at the Mcclean Lake Mill.

In 2025 with the long term contract book, we've put in place and an ongoing pipeline of both on and off market contracting discussions.

Our plan is to produce 18 million pounds on a 100% basis at each of Mcarthur River key Lake and.

And cigar Lake.

At API production plans for 2025 and subsequent years remain uncertain.

And we remain in discussions with J D and our partner because Adam from to determine our purchase allocation for 2025.

Over the coming years, we are undertaking capital projects to help ensure reliability and sustainability of our existing operations.

Including projects to address ageing infrastructure and potential bottlenecks at key Lake.

And the advancement of freezing in Mcarthur River.

And while no decision has been made on changes to future production levels, we will continue to position ourselves for future production foot flexibility in alignment with our contract book.

And if our contract book supports it.

We expect to be in great shape to take advantage of that flexibility thanks to our financial discipline.

Our balance sheet is strong.

And we expect strong cash flow generation in 2025.

Successfully refinanced $500 million in unsecured debt in 2020 for extending the maturity to 2031 and of note we.

We did so with credit spreads that reflected a higher credit rating than we have currently been assigned.

As of January 2025, we are also fully repaid the $600 million U S. Floating rate term loan that was used to finance the acquisition of Westinghouse.

Although we are only about 50 days into the new year now there are already a few key developments subsequent to 2024 at year end.

<unk> are worth highlighting.

To start off the year, a JV income production was halted on January one as the direction of <unk> Adam from the controlling partner in the JV due to the delayed submission so certain regulatory documents to the ministry of energy.

Production resumed on January 23rd, but we are still working with Kazatomprom in JV ing tie to determine the impact of the production suspension as well as the continued issues with sulphuric acid supply on the operations 2025 production plans.

Also in January Westinghouse reached a resolution and its technology and export dispute with KEPCO Encage N P, which establishes a framework for additional deployments to the mutual and material benefit of all parties.

And we've now received our first distribution from Westinghouse.

<unk> hundred million dollars U S was paid out to the partners of which our share was $49 million U S.

Before going to Q&A, a quick comment on the topic. That's on everyone's mind as we approach March the threat of U S tariffs on Canadian energy.

It's been a focal point ever since the new U S Administration took office in January.

And it's an area we are carefully monitoring.

However, keep in mind that our industry faced a similar thread several years ago related to a section 232 investigation in the U S related to critical minerals, including uranium.

And any cases, where there is a change in policy that could potentially impact our operating environment.

We manage risks and plan accordingly to optimize the value of our portfolio.

In the past, we've taken actions such as positioning material ahead of expected deliveries and revising our contract terms to protect us from unexpected future implementation of taxes or tariffs.

The U S threatening the imposition of a 10% tariff on Canadian energy products.

We have proactively taken some steps to minimize the potential impact.

While we currently do not expect that a direct 10% tariff would have a material impact on chemicals financial results. In 2025, there continues to be uncertainty around the exact details of how any potential tariff may be applied.

So with that I'll stop there and we are happy to take your questions.

Okay.

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The first question today comes from Adam <unk> with Goldman Sachs. Please go ahead.

Adam: Yeah, Good morning, Tim and grant and team. Thank you for taking my questions wanted to first start on contracting activity. In 2024, we spent a lot of time on the year over year decline in our reported contracting activity, but wanted to get your updated views on what you're seeing in the term market right now.

Adam: Near and medium term are you seeing utilities and fuel buyers really stepped back into the market to secure longer contracts with more volumes or do you think theres really anything keeping fuel buyers sideline for now thanks.

Tim: Good morning, Adam. Thanks for the question is Tim I'm going to pass it over to Dr. Isaac for sports granted yes, Thanks, Tim Adam Great place to start.

Tim: I think the first message I just wanted to emphasize.

Tim: Is actually to me, they're really telling story for 2024 with that yes churn volumes were down year over year $1 60 in 2023 versus 120 last year, but term prices were up quite a bit year over year, and if that isn't a signal for the understanding that we're not at production economic pricing for <unk>.

Tim: Future supply.

Tim: I'm not sure what else that would signal I mean that seems to get lost a little bit in the noises people are watching the spot market, but I think I think the term market is really.

Tim: Area that we have to emphasize so not at replacement rate, yet, obviously 120 million pounds contracted in 2024 as Tim pointed out that means that the utilities need to buy a heck of a lot of material on a go forward basis, and you think about that demand out of minutes being pushed into a window.

Tim: Where not only are you looking at the end of cigar Lake Youre looking at very significant depletion curves in Kazakhstan.

Tim: This just sounds super constructive for pricing AD and for US It is about being patient in the uranium segment, we've got a lot of time.

Tim: Devoted to conversion right now and too heavy water and Lightwater fabrication at all the opportunities for Westinghouse and we can be a little bit patient with respect to waiting for the market to truly price in the challenge that's coming with respect to uranium. So when we look at the term market I would say there.

Tim: There is no doubt that across the industry.

Tim:

Tim: There has been some downward pressure on not the term price of uranium, which remember really focuses on base escalated, but a little bit of downward pressure on the floors across the industry at the spot prices come down you know.

Tim: Folks have tried to pull the floor price down, but interestingly those ceiling prices have helped so.

Tim: Floors were across the industry, we're in the $70 theres a bit of a push to try to get them down into the 60 escalated, but we're still seeing those ceilings holding one mid <unk>, maybe even a little bit higher again, reflecting that there is there is a cliff coming for uranium supply if we don't start sending.

Tim: Stronger price signals now for Cameco. The final thing that I would say with respect to the term market is these are the kind of markets. We step back you see we have a big book that book represents about a quarter of our future reserves and resources for us to even begin to contemplate going after those additional pounds, we need to see stronger price form.

Tim: Nation, we've got good contract protection, so when we see the spot market kind of pull down those longer term market related indicators, we simply step back we're in a position we can do that and we focus our attention on the historic conversion price and the historic for inversion or the historic prices that are that are now starting to build downstream of uranium.

Tim: We will capture that value and we'll just be patient waiting for the term market to evolve, but make no mistake. We're we're pretty excited about this dynamic and the way it's setting up for an incumbent producer like us.

Speaker Change: Got it that's super helpful. Thanks, guys, maybe switching gears over to ink I understand that youre in discussion with Ankang, because Adam problem to determine how the recent production suspension could impact the 2025 production levels and then the subsequent purchases, but maybe can you just tell us how these conversations have trended thus far and then maybe more broadly is there.

Speaker Change: Any fundamental change on how you guys are thinking about chemicals relative position in Kazakhstan going forward. Thanks.

Speaker Change: Yeah. Thanks, Adam It's Tim listen we've been we've been working with the Kazakhs now for I think it's 25 or 30 years that anyone who they're 30 years ago and so you know our relationship is still strong.

Speaker Change: They're good partners, yes, we have some hiccups from time to time, we've had some acid hiccups. There has been some changes in personnel over there that we have to adapt to it and now this piece on January one that came as a surprise to us I have to say, but we're on it right away and we did get a result by.

Speaker Change: January 23rd we're back in production. So you know what it's a long term relationship our lease extends out to 2045, there we intend to stay there and worked with the Kazakhs and so no change really you will be meeting with them next week.

Speaker Change: We'll be seeing next week and spend some time with them. So so no change to our strategy at this point.

Speaker Change: Thanks, Tim Thanks Grant.

Joe: Thanks, Joe.

Speaker Change: Okay.

Speaker Change: The next question comes from Andrew Wong with RBC capital markets. Please go ahead.

Andrew Wong: Hey, good morning, I'd like to ask a few questions regarding 1000 belts.

One the Westinghouse deal close I think you provided a framework on the value capture of the Newbuild can you maybe just update us on that framework if anything's changed.

Andrew Wong: And then regarding the Westinghouse and <unk>.

Andrew Wong: <unk> opened the door for future cooperation.

Andrew Wong: And while white and the opportunities that potentially for new builds.

Andrew Wong: And then just lastly, if you can provide an update on some of the major 1000 project milestones that we should be watching for the next 12 months or so thank you.

Speaker Change: Yes, great questions all of them Andrew I'd, just say, we're super excited about our Westinghouse deal and just the the way SBA and operated in the first year and change that.

Speaker Change: Our share of the ownership with Brookfield and the potential there is just outstanding and the results are strong.

Speaker Change: We predicted so but grant's on the board.

Speaker Change: Listen for Us So Greg maybe you want to comment on those three pieces, yes, Andrew. Thank you for your questions is about three hours worth of answer so I'll try to be as Super brief about it on a 1000.

Speaker Change: No change no fundamental change to the kind of that value flow. The way, we look at it. It's obviously about finding a utility or quite frankly.

Speaker Change: Utility user.

Speaker Change: We have to contemplate those models going forward now with the Hyperscale is looking at nuclear and a very very significant way.

Speaker Change: But it begins with choosing the design. It then it then falls into a period of finalizing the engineering and the design of the technology to.

Speaker Change: To make it fit for purpose for the location. So if I use as an example, the Poland models. The first three reactors in Poland are going through this feed one process to figure out how to properly deploy the technology at the chosen location in Poland that then gives rise to the second feed contract that feed.

Speaker Change: Again, a lot of engineering and design work also begins to trigger.

Speaker Change: The final investment decision and with that comes the procurement part of the nuclear island, which is a very important scope for Westinghouse.

Speaker Change: Then gives rise to the broader construction program and of course Westinghouse doesn't participate in that broader construction program. Another constructor, what and then ultimately as that kind of seven year process peaks and comes down then you have an asset that's just been built to run for 80 years and now will be part of the core of Westinghouse in terms of fuel.

Speaker Change: Acacia and reactor services going forward. So every AP 1000 is a unique step change in value for the energy systems and then it gets pulled into the core of the business. It's a model that we obviously are very very attracted to when you think about the AP 1000 opportunities we talked.

Speaker Change: The six reactors in Poland.

Speaker Change: Two in Bulgaria.

Speaker Change: Slovenia is looking at reactors already running Westinghouse reactors.

Speaker Change: There is obviously opportunities in places.

Speaker Change: Hey, perhaps Sweden, but make no mistake. The Doe lift off report was very very clear of the role that AP 1000, the only gigawatt scale reactor out there American design technique.

Speaker Change: Technology is locked down fuel cycle is locked down doesn't have regulatory risk doesn't have licensing risk. It's just big project deployment risk. So for the five boxes are already checked the lift off report from the D. O. It was very clear on the powerful role 81, thousands can play in helping the U S achieve its tripled.

Speaker Change: Nuclear pledge 200, gigawatts of additional nuclear power. So those opportunities just continue to grow and don't fall asleep on Canada.

Speaker Change: Thank the announcements in Canada are really poised to deliver the benefits of nuclear quickly rather than wait for a new design that doesn't yet exist. This is a deployable design that somebody can go down to Georgia today, and see one operating and see it performing yet.

Speaker Change: Really industry, leading operational standards I'm going to I'm going to bridge over to the Korean deal I mean, the Korean deal is more to come on this but really it's taken Westinghouse and team Korea and move them from being competitors to potentially very powerful collaborators to provide solutions to countries that.

Speaker Change: <unk> energy security they want in the National Security that comes from these 80 year assets, a baseload durable hardened.

Speaker Change: Power that that only really nuclear can offer so watch that space is now expanding westinghouse's energy systems business into where the Koreans have a lot more access at United Arab Emirates, potentially considering two more reactors, the Czech Republic already choosing the Korean reactors.

Speaker Change: Two plus two at the company and the.

Speaker Change: The Tamil insights.

Speaker Change: And they are very active in pursuing other markets and know Westinghouse participates in all of that.

Speaker Change: Andrew are really important to emphasize all upside to the acquisition case everything I. Just described was not valued as part of the acquisition of Westinghouse. So we're very excited at the opportunity that's being created we're very excited about westinghouse's position with the leading technology and we're very excited about the new models that are.

Speaker Change: Our emerging that we can take full advantage of to really achieve the tripling nucleolar pledge.

Speaker Change: Great. Thank you for that maybe.

Speaker Change: Maybe just switching over a little bit on to some of the Russian sanctions and.

Speaker Change: There's been a lot of discussion on what might happen if theres a peace settlement.

Speaker Change: Obviously, we don't know how it will all play out but maybe if you just upon your hypothetical half like.

Speaker Change: How does lifting sanctions on Russia impact the uranium market.

Speaker Change: And I'm also curious how your utility customers are thinking about this given that some of these contracts are much longer dated and we don't really know how that philosophy green situations play out in four plus years from now like how does that impact your decision making.

Tim: Well, Andrew it's Tim.

Speaker Change: I'll start on this at least.

Speaker Change: Let's wait and see what happens.

Speaker Change: <unk> seen the sanctions being lifted yet.

Speaker Change: U S has worked and I see bipartisan bicameral support to put in place all of those sanctions all of the restrictions on Russian uranium.

Speaker Change: And rationale EU that are still in place and our legislators prohibitions that would take a take a long time.

Speaker Change: Move to the side.

Another point is that just living Russian material.

Speaker Change: Flow into the U S runs completely counter to the new administrations goal of onshoring in energy dominance.

Speaker Change: They just to establish that.

Speaker Change: The National Energy dominance Council.

Chris Right: Led by sector of energy, Chris right and energies are Doug Bergum that.

Chris Right: Clearly included nuclear in the nuclear fuel cycle and has plans to to be the dominant player in the world. So you don't wait and see we'll see what happens but.

Speaker Change: As grant said earlier, our growth plan that cameco it doesn't depend on any of those things just the pure supply demand fundamentals in the market now.

Speaker Change: You will see us doing very well going forward. So I don't know if you want to add to that I do want to just go back to risk is basically a function of likelihood and consequences and I think Tim covered the likelihood piece really well. It is fair to ask if ending the Russian ban is consistent with the U S energy dominance in the answer is clearly no. It was quite the.

Speaker Change: Opposite Russian fuel in the U S created energy dependence it undermined energy and National security and it undermined U S. Nuclear leadership. The facts are are really clear and it's hard to imagine.

Speaker Change: When when when the energy dominance Council was created.

Speaker Change: Part of the objective was actually to become dependent.

Speaker Change: Not an ally, but an adversary or state sponsored adversary, so that doesn't really make sense.

Speaker Change: On the HEU notion or a new HEU.

Speaker Change: We just find this in the very slim chance category remember chemical was party to that agreement.

Speaker Change: We were part of the time and effort required to put an agreement in place and and I would just point out two things one.

Speaker Change: That was a very long period of time that it took to put the agreement. So there is no quick solution and secondly, the conditions that existed then in order to essentially for the west to take advantage of Russian nuclear materials and purpose them for the commercial market those are not the conditions that exist today.

Speaker Change: From a real Politik point of view or from an international relations point of view. So on the likelihood side. We're seeing all of this right really really low you did ask about consequence.

Speaker Change: If Russian materials showed up let's face it there have been significantly greater tailwind for global nuclear there's just simply more demand than there was before so it's not like the Russian material.

Speaker Change: It doesn't have a whole mode in the future we are talking about a very significant structural deficit.

Speaker Change: Uncovered requirements in uranium has continued to grow and quite frankly, the Russians are not a big uranium supplier. So it really really doesn't change that dynamic at all <unk>.

Speaker Change: Primary supply has continued to face challenges and depletion new capacity is not at replacement rate and then the final piece from a consequence point of view, we didn't go into any markets to replace the Russians on a spot basis or a short term basis, we did it under long term contracts and we did it with <unk>.

Speaker Change: Utilities that had absorbed the switching costs to go to cameco fuel to go do westinghouse's fabrication.

Until these that won't be eager to to bear those switching costs again, so there's a durability to what's been set up here that it really insulates from a consequence point of view any impact. So we see likelihood low we see consequence, low we're watching this space closely but I think some of the narrative.

Speaker Change: Our route.

Speaker Change: The peace talks in the Ukraine, which by the way everybody hopes for peace have been absolutely overblown with respect to the uranium in nuclear fuel segment.

Speaker Change: Okay. Thank you very much.

Andrew Wong: Thanks, Andrew.

Andrew Wong: The next question comes from Alexander Pearce with Bank of Montreal. Please go ahead.

Great Good morning, all.

Speaker Change: So Tim you mentioned, obviously some of the mitigating.

Andrew Wong: We are taking to try and reduce the impact from tariffs, but I was wondering maybe you can just talk about some.

Andrew Wong: Have you seen more opportunities you see within the portfolio and also does your existing contract book.

Andrew Wong: Terms.

Andy within.

Andrew Wong: Contracts good addresses potential Paris.

Andrew Wong: We've essentially pays for these.

Andrew Wong: The tax rate thanks.

Alex: Yes, Thanks, a lot Alex Great question that we learned a lot of lessons I think.

Alex: The 2017 2018 to 32.

Alex: Move on uranium moves aluminum steel and uranium at the time and we manage to.

Alex: A lot of time ground.

Alex: Did you see you talking to the elected officials in the white house to explain to them how.

Alex: How much the U S needs Canadian uranium and I think we were successful.

Alex: Withdrew uranium from the 232, so we're hoping for that result.

Alex: Again this time they are talking about a 10% tariff, but I mean, we've taken other measures out of that we learned a lot of lessons. There I think <unk> would tell you our contracted portfolio has added some new clauses in that regard since then any new contracts signed since then with the wood.

Alex: Would displace any of those costs back on the on the customers.

Alex: Buying the.

Alex: The material, we were able to position material around the world in different jurisdictions and preposition materially.

Alex: Certainly have done that.

Alex: Don't ever forget we have production resources in the U S. At some point that we're holding on care and maintenance right now because they're just not.

Alex: Where we want them to be but certainly those are extremely valuable. These days and so we think we can we think we can manage it Alex had been grant and I were down in D. C last week with some other commodity producers, where it's going to be a whole lot worse story of those things go through but that for us.

Alex: We think it wouldn't be really financially material and that we could manage it. So yeah that final point, Alex we really important we're saying no material impact because of the contracting provisions we've taken as well as what we've done in anticipation of tariffs and if they don't emerge fine we.

Alex: No consequence on us at all but I think what's lost in the tariff discussion a little bit is what the uranium market impact would ultimately be and mean.

Alex: It's not hard to figure out.

Alex: <unk> kind of Econ 101 to figure out what the impact of tariffs are in this situation. So think about the uranium market. A temper said proposed tariff from a major supply source like Canada will effectively raise the uranium price by.

Alex: 10%.

Alex: Because if you think about it U S. Domestic demand is inelastic for contracted volumes domestic supply substitution is low.

Alex: Would still need imports from tariff and non tariff countries to meet the inelastic demand and what does history tell US history tells us non tariff countries will simply increase their offer prices to just under 10%. So this is a structure. This will be a structural increase in the price of uranium because tariffs are.

Alex: <unk> very clearly.

Alex: Our sales tax on imported goods.

Alex: That sales tax will be ultimately passed on and those who arent subject to it we will take advantage of it so <unk> well mitigated the market is just going to face more structural challenge, which will be priced supportive.

Alex: Great. Thanks, and then maybe if I can ask.

Alex: Second question, just around Macarthur, Brazil production.

Alex: Obviously it is a touch lower this year in terms of guidance than it was last year.

Alex: Is this a sign that it's going back to 18 million pounds indefinitely or was that just pop.

Alex: Obviously, you've increased the capex too, but is that just part of it is getting on top of Capex spend again, but we could see it back to <unk>.

Alex: And beyond 'twenty six.

Speaker Change: Alex I guess I'd start by saying we are still in supply discipline.

Alex: No change to that.

Speaker Change: <unk> had an exceptional year in 2024, all the conditions were right to the mill ramp very very well and we had some excess inventory or available to push through and so we did that I can tell you now we're back down.

Speaker Change: 2018 at Mcarthur key 18 at cigar and we will never produce upon that doesn't have a home and one of our contract portfolio. So that's our plan you mentioned capex.

Speaker Change: We're going to invest we always have to just ensure the reliability and the sustainability of our of our assets and that's what we're doing there now there is some that need some fixing up we want to optimize our production. So that's that's the story there is nothing more worry back to 18 18, and we will stay there until further notice.

Speaker Change: Great that's very clear thank you very much.

Alex Grant: Thanks, Alex.

Speaker Change: The next question comes from Oren <unk> with Scotia Bank. Please go ahead.

Speaker Change: Hi, Good morning, I, just wanted to delve in a little bit more on the tariff issue.

Speaker Change: I guess if.

Speaker Change: If I understand correctly, you are saying your contract book is a mix of contracts, where how long are the contracts cameco is responsible for tariffs and then the other part is that customer importing the uranium or fuel would be responsible to do I understand that correct.

Speaker Change: Yeah, Let me go into a little bit more detail.

Speaker Change: So a tariff which is a border tax.

Speaker Change: Is paid by the party of imports.

Speaker Change: And what what we recognized with the section 232 investigation.

Speaker Change: Is that the assumption that North America is a free trade zone is probably over our neighbor to the south <unk> discovered that the hammer in the toolbox, which is tariffs add and we began to prepare for a future where they might use it a good thing. We did so we wrote a number of contracts that effectively moved.

Speaker Change: Tariffs into the tax clause of the contract rate and if you think about cross border contracts Theyre very clear taxes in the cellar country or the seller's responsibility of taxes and the buyer country or the buyers responsibility. So when we saw the section 232 investigation, we've hired to very powerful lesson to be crystal clear.

Speaker Change: That a tariff is attacks at a tariff in the buyers country is the buyers responsibility. So we'd have a bunch of older contracts less than half of our U S deliveries, where we were still in a presumption of free trade, where we might not been quite as clear. So there would be certainly an interpretation.

Speaker Change: Which we're not hey look our goal is not to fight with our customers about what our old contract said, but there would be a discussion around whose responsibility that border tax now is but rather than sort of prepare for a big fight. There. We just said look it's a highly integrated market we can move.

Speaker Change: All around and we can get it inside a tariff wall. If there is one so we will just go ahead and we'll do that now so that there is no material impact on us and then going forward as our older contracts roll off and our newer contracts become the bigger a bigger share of our deliveries. This just becomes less and less of an issue for us to do.

Speaker Change: So you know it's.

Speaker Change: It's a common refrain you hear from US we positioned ourselves for a reward and we manage risks and this is a perfect example of how on a forward looking basis, we manage future uncertainty in future risk and as a result, we're saying no material impact on us or let me add just a little bit of context that we have.

Speaker Change: Use when we're done on the hill talking to the legislators and the way those new rules. The U S of course as about 94 operating reactors that consume somewhere 45 million pounds.

Speaker Change: 46, 47, moving up to 50, a year. So the consumed 45 to 50 million pounds a year of production in the U S. Today is less than 1 million pounds a year the medium words so.

Speaker Change: The 27% or so from from Canada. So that's just some of the arguments and some of the facts we have to lay on the table when we're down there so.

Speaker Change: Gives you a bit of context for what we're talking about.

Speaker Change: Thanks, So just a follow up to that are you noticing any change of behavior in terms of your U S utility customers as they as you talk about negotiating new contracts like has this.

Speaker Change: Our proposed 10% tariff is that impacting.

Speaker Change: Contracting activities at the moment or is that irrelevant.

Speaker Change: I would say, it's largely irrelevant at the moment because it's a threat.

Speaker Change: It's not in place right now and I'll go back to the point that I made earlier that the demand is in a lasting for certainly for the contracted volumes. The ones that are already committed to that demand is absolutely an elastic, but but our customers down there also realize that theres, a very low domestic supply substitution they still need to import.

Speaker Change: A lot of material in order to meet their needs. So future contracts are really focused on incumbent producers with multiple sources of assets a demonstrated history of risk managing and providing lots of options for those utilities. So we don't see any diminishment in.

Speaker Change: Our pipeline with respect to U S demand.

Speaker Change: I could I could say, though that with all of the demand opportunities in other markets.

Speaker Change: We are evaluating.

Speaker Change: What the right diversification strategy is going going forward.

Speaker Change: If we constantly have a market that threatens to these kind of trade actions versus markets that don't so this is the luxury of being diversified in our marketing portfolio and this is also the luxury of having all of these new customers in central and Eastern Europe that we never had before.

Speaker Change: Broader based market recovery than it's ever been and I think the U.

Speaker Change: The us puts.

Speaker Change: Puts these threats out kind of at the apparel to the security of their supply, which then goes back to my original point. This this isn't very consistent with an energy dominant strategy.

Speaker Change: Right. Thank you very much.

Speaker Change: Thanks.

Speaker Change: The next question comes from Lawson Winder with Bank of America. Please go ahead.

Speaker Change: Yeah.

Lawson Winder: Thank you operator, and good morning, Tim and grant nice to hear from you and thank you both for the update.

Speaker Change: Okay.

Speaker Change: Maybe as to what the conversion market and.

Speaker Change: There is this narrative about.

Speaker Change: Overfeeding enrichment piece of the fuel cycle being limited by a lack of conversion and I mean, there is no argument that the fact that conversion prices or multiples of prior cycle highs right now.

Speaker Change: It does not incentivize either further expansions at port hope or a restart of <unk>.

Speaker Change: CCA is 49% on Springfield's conversion facility.

Speaker Change: Grant.

Speaker Change: Yes, there is no there is no doubt that theres a lot of pressure on the conversion market right now and there is no mystery why it exists.

Speaker Change: After.

Speaker Change: After many many years of utilities globally banging on the table and saying to cameco and to convert dine in Toronto.

Speaker Change: They will not pay $15 a kg you in an $8 kg EU market, while they succeeded theyre not paying $50 $15 a kg either paying $50. Okay. If you let prices stay low for too long they destroy their own supply and therefore, a violent correction has too.

Speaker Change: Occur there is a very powerful analog building in the uranium space on exactly this principle now what does it take them to restart remember it isn't a price point loss. It. This is really important to emphasize what we require our two things from a term supply point of view number one.

Speaker Change: Is clear market access rules, and especially now you've heard a couple of questions that have already hit this table about Russia, we need to make sure that this talk of Russia coming back into the Western market is only talk and it's not reality, because we know that Russian capacity for a rich Smith.

Speaker Change: It comes with the ability to convert it's all an integrated system. So we need clarity on that we need to make sure. The Russians aren't back in because they were a big contributor to conversion prices that destroyed western supply. So we are looking for clear market access rules, Tim spent been clear about that.

Speaker Change: As he has been in Washington, and other places, we're not asking for money, we're asking for clarity on market access rules and then number two as we always say, it's not about price. It's about long term contracts and we would need to see utilities come to the table and commit for the type of long term.

Speaker Change: Tracks that support the restart of facilities in and let me just draw parallel Ah.

Speaker Change: Very exciting news announcement came out.

Speaker Change: Installation working with Microsoft to restart unit one at three mile Island, the Crane clean Energy Center, and what's really important about that is constellation didn't decide to restart and spent $1 8 billion U S. On spec they did it because they had a 20 year contra.

Speaker Change: <unk> with Microsoft This same logic that a utility requires to bring back an idled reactor is the exact same logic a supplier requires to bring back supply. So it's not just about price it's about the quality of the demand and the quality of demand just hasnt been there.

Speaker Change: Yes, and the reason you know that is we haven't made any announcements when.

Speaker Change: When we do make announcements you know the quality of demand has already been through the market because we never front run demand with supply.

Speaker Change: Okay. Those are very helpful comments.

Speaker Change: You've made several comments as well on the call today on Westinghouse.

Speaker Change: Wanted to follow up on the guidance there.

Speaker Change: First of all.

Speaker Change: Is there any purchase accounting rules factoring into the EBIT guidance for 2025, just in the context of the impact that those had in 'twenty four and then when you think about the 6% to 10%.

Speaker Change: Growth in EBITDA guidance for the next five years.

Speaker Change: What.

Speaker Change: What would it take to be at the 10% level versus the 6%, what's the differentiator between those ranges because on a compounded six.

Speaker Change: Five year basis.

Speaker Change: Different thank you.

Speaker Change: We're growing at 6% or 10% and then.

Speaker Change: What.

Speaker Change: What about getting outside of that range, particularly on the higher Ed.

Speaker Change: Yeah, Thanks laws, and so I'm going to ask Heidi maybe to tackle that first point that you've made and then grant on the six to 10 going forward. So do you have any comments on the first part sure Hi Lawson.

Speaker Change: In terms of the purchase accounting either there's really two parts to that affected us in 2024. So we had to mark the inventory to fair market value. So that was a big piece, probably the bigger piece that impacted it.

And that's the inventory has kind of worked its way through so there's not a lot of inventory. If you look at the outlook table. There is just a small adjustment now for that.

Speaker Change: But we also had yet.

Speaker Change: Ignite is the purchase price across all of the assets and so that resulted in higher depreciation and amortization and that will continue on for a number of years and it is still impacting the results, which is a big reason why we had a net loss so there.

Speaker Change: There is a piece that's ongoing.

Speaker Change: He said.

Speaker Change: 2024 own study on our group and the way to look through that loss and as we have that adjusted EBITDA number out there and so we take that effect out and that gives you a way to look at what the operational performance is there. So we would encourage you to do that on your second question. It's a good one.

Speaker Change: And it really does require a bit of explanation.

Speaker Change: As everybody who has been following us for some time knows we are very conservative in our forward disclosures we require.

Speaker Change: Evidence based triggers in order to go to say for example, higher growth rates in Westinghouse. So let me let me give you. An example on the 6% side.

Speaker Change: That really reflects the core of the business growing into new markets like eastern and Central Europe for fuel fabrication and reactor services and it really reflects our reactors being saved in reactors going through subsequent license renewal. There is some upside to the core U you began by asking about bringing back the natural <unk>.

Speaker Change: <unk> line at Springfield, If we did that and if we brought back a rescue line at Springfield, that's upside to the core that would take you beyond the 6% growth rate from the core alone when you drift over the 10% that's really starting to see the early days of the energy systems uptake, but but.

Speaker Change: Again, it's conservative all of that's in there right now is the.

Speaker Change: The front end engineering and design work being done in places like the first three reactors for Poland or the first reactor in Bulgaria. The one of two so as those progress to final investment decisions that will then trigger the guidance required for the broader scope around the nuclear island. It's just.

Speaker Change: We don't get out in front that decision Hasnt been made it would be wrong to included in the growth, but you need to understand those decisions alone would be upside to the growth case and now we have to add and the opportunities with the Korean collaboration now keep your eye on every project. The Koreans are working on like in check for example.

Speaker Change: Our units five and six in the United Arab Emirates, If those go ahead.

Speaker Change: That will add upside to the 10%. So it is we are conservative we wait for those triggers to come but when they do come that is upside to the Westinghouse story and it really puts Westinghouse basically double the industry growth rate as we see it which we think is a very very strong story and NPR.

Speaker Change: On the underwriting cases part of why we continue to be so excited about this acquisition.

Speaker Change: And you haven't mentioned <unk> hundred one hundreds or a R. Vinci.

Speaker Change: Vince you reactors in that in that 10%, so that would be beyond the 10% as well it would be odd like it gets silly really fast so I've tried to keep it into sort of what is the basis for our conservative disclosures, but again that is all upside if you see good news on the Vinci reactors, if you see our utility working with Westinghouse on.

Speaker Change: <unk> 300 that is all upside to what I just talked about.

Speaker Change: Thank you very much.

Lawson Winder: Thank you Lawson.

Speaker Change: We have time for one more question today. The last question comes from Craig Hutchison with TD Cowen. Please go ahead.

Craig Hutchison: Hey, good morning, guys.

Craig Hutchison: So on Westinghouse's, it's good to see you guys get your first inaugural dividend have you guys established a formal return of capital challenges at Westinghouse and can you. If you have can you give us some kind of framework around what we can expect going forward.

Craig Hutchison: Okay.

Craig Hutchison: I will only give you a framework because it's been evolving it's an evolving situation, but for the right reason and what I mean there is.

Craig Hutchison: I'll send our partner Brookfield.

Craig Hutchison: Look at Westinghouse in the same way and that is.

Craig Hutchison: Westinghouse brings forward.

Craig Hutchison: Strategy and a business plan that fully funds its opex fully fund its capex fully funded G&A expense fully funds its debt obligation.

And provides a dividend.

Craig Hutchison: So it's not something where we intend to put money into its something where we intend to continue to get distributions out of.

Craig Hutchison: But I would say for very good reasons westinghouse's enjoying all the tail winds that cameco is enjoying and this is giving rise to opportunities to invest so the previous question was about investing into natural conversion line at a time when the conversion price is at historic levels.

Craig Hutchison: So what we obviously do is we asked the question about does it make sense to leave money with Westinghouse for them to invest to capture some of these really good opportunities or does it make sense to take it out of Westinghouse and deploy ourselves as owner so it's a live.

Craig Hutchison: Question, but it's a live question for absolutely the right reasons, because whether it's the core looking at <unk>, plus fuel, our VW or fuel or getting into the natural conversion business again or the rescue business or investing in more market development for AP, one thousands or collaborating with the Korean.

Craig Hutchison: Those are all investment decisions.

Craig Hutchison: <unk> really weren't part of the conversation at the time of the acquisition, but they are for the right reason because they are just going to make the future growth a multiple higher than what we underwrote as part of the acquisition. So that's the framework. We look at we expect the distribution unless we can be absolutely convinced.

Craig Hutchison: It makes sense to leave money with Westinghouse.

Craig Hutchison: But I have I have many things I want to do with that distribution. So it has to be pretty darn convincing.

Speaker Change: Okay, Great and maybe just one quick follow ups stomach human capital.

Craig Hutchison: Expenditures this year, obviously up quite a bit year over year.

Craig Hutchison: Most of that just sustaining growth sustained capital story or is there any of that growth capital.

Craig Hutchison: Okay.

Craig Hutchison: I would look at it as.

Craig Hutchison: <unk> Asian for Optima Optimate optimization.

Craig Hutchison: It's no surprise, we're pretty bullish on the structural deficit, that's coming to the uranium space and we see a market yet that quite frankly has not priced in the end of cigar Lake and it has not priced in the depletion in Kazakhstan and in a market that that believes perfection is going to be achieved with some of these new project.

Craig Hutchison: That are at the feasibility stage and don't even have a license and the permit yet and that is all going to lead to stronger price discovery in our industry. We're strategically patient we're waiting for that demand to show up but it feels like for US. This is a time to prepare our assets for maximum exposure.

Craig Hutchison: <unk> to those higher prices. So this is a period, where just like we were counter cyclical with respect to the Digitization and automation spend we want to be for award voted with respect to preparing our assets for when we need to call for more production because the demand has been there and do it for better.

Craig Hutchison: <unk>.

Craig Hutchison: Start deploying some of this capital and doing this work at a time when there arent a lot of resources available in northern Saskatchewan. So I don't know, what others, who were going to do.

Craig Hutchison: Theyre going to bring projects forward I don't know, where theyre going to find the skilled labor and the contractors to deliver on their project when we're delivering on our revitalization and optimization projects, it's prudent and it's based upon our fundamental view that that's very supportive, but we haven't yet made a decision to grow it.

Craig Hutchison: Just about being prepared.

Speaker Change: Alright, great. Thanks, guys.

Craig Hutchison: Thanks, Greg.

Craig Hutchison: This concludes our question and answer session I would like to turn the conference back over to Tim Goodnow for any closing remarks.

Craig Hutchison: Thank you very much operator, and thanks, everyone on the call. Today are these are certainly a busy but exciting times for cameco. So chemical as you know is a responsible commercial supplier with long lived tier one assets and a proven operating track record. We are invested across the nuclear fuel cycle and we believe we have the right strategy to help achieve.

Craig Hutchison: Secure energy future in a manner that reflects our values embedded in all of our decisions is a commitment to address the risks and opportunities that we believe will make our business sustainable over the long term. So thanks again to everybody have a great day.

Craig Hutchison: This brings an end to today's conference call you may now disconnect your lines.

Craig Hutchison: Thank you for participating and have a pleasant day.

Craig Hutchison: Okay.

Craig Hutchison: Okay.