Q1 2025 Cameco Corp Earnings Call
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Welcome to the Cameco Corporation first quarter 2025 results conference call.
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Speaker Change: I would now like to turn the conference over to Cory Kos, Vice President Investor Relations. Please go ahead.
Speaker Change: Thank you operator, and good morning, everyone welcome to chemicals first quarter conference call.
Speaker Change: I like to acknowledge that we are speaking from our corporate office, which is on the treaty six territory. The traditional territory of the creep people in the homeland of the May team with US today are Tim gets old President and CEO Grant Isaac Executive VP, and CFO How're, you Shockey senior VP and Deputy CFO and Rachelle Girard Senior V.
Speaker Change: P and chief Corporate Officer.
Speaker Change: I will hand, it over to Tim will materially you to briefly discuss the continued positive momentum across the nuclear energy market and our strong Q1 performance alongside our solid financial position.
Speaker Change: We will open it up to your questions today's call will be approximately one hour concluding at nine a M eastern time.
Speaker Change: As always our goal is to be open and transparent with her communication. However, we do want to respect everyones time and conclude the call on time, therefore should we not get to your questions. During this call or if you would like to get into detailed financial modeling questions about our quarterly results, we'd be happy to respond to any follow up inquiries there.
Speaker Change: There are a few ways to contact us for additional questions you can reach out to the contacts provided in our news release you can submit a question through the send US a message link in the Investor section of our website or you can use the ask a question form at the bottom of the webcast screen and we'll be happy to follow up after this call.
Speaker Change: If you joined 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 on our website a chemical dot com.
Speaker Change: Today's conference call is open to all members of the investment community, including the media.
Speaker Change: During the Q&A session. Please limit yourself to two questions and then return to the queue.
Speaker Change: 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 Change: You should not place undue reliance on forward looking statements actual results may differ materially from these forward looking statements and we do not undertake and New York.
Speaker Change: Before looking statements, we make today, except as required by law.
Speaker Change: As required by Securities laws. We also have to make you aware that during todays discussion the company will make a number of references to non ifr us and other financial measures chemical believes these measures provide investors with useful perspective on underlying business trends and a full reconciliation of non <unk> financial measures is available at cameco Dot com slash invest.
Speaker Change: Please refer to our most recent annual information form in MD&A for more information about the factors that could cause different results and the assumptions we have made.
Speaker Change: I'll now turn it over to our President and CEO, Tim gets all 10.
Tim: Well, thank you Cory and Hello, everyone. We appreciate you joining us on our call today.
Speaker Change: I hope, everyone is doing well and enjoying spring or autumn, depending on where you're listening from.
Speaker Change: Here in Canada. The snow is gone this spring and we just wrapped up a federal election earlier this week.
Speaker Change: I'd like to personally congratulate Prime Minister Mark Carney and the Liberal Party.
Speaker Change: We're excited to begin working with the newly elected Canadian government and look forward to Prime Minister Carney has strong leadership in navigating the current uncertain environment of global tariffs.
Speaker Change: Balding fiscal policy and complex geopolitics.
Speaker Change: Our hope is that we can work together to advance the development of the nuclear fuel cycle and expand the use of nuclear energy in Canada and abroad.
Speaker Change: As a country, Canada is blessed with a rich uranium resource base that makes this country a key player in the global nuclear fuel supply chain.
Speaker Change: But like Cameco when it comes to the nuclear energy, Canada is much more than just mining.
Speaker Change: Beyond our resources, we have a long deep history in the nuclear sector.
Speaker Change: So when combined with our advanced technology and generational nuclear expertise are supportive and collaborative government will be key in helping put Canada on the map as the nuclear industry leader in support of global energy National and its climate security objectives.
Speaker Change: As we get started I first want to encourage stakeholders to focus on our long term strategy in the long term industry outlook discussions in our disclosure beyond the near term geopolitical and trade policy distractions.
Speaker Change: That said there is no doubt that those distractions have created new and unexpected risks that must be carefully monitored and diligently managed.
It is extremely difficult to operate the world's nuclear fleet, if the movement of uranium fuel is restricted.
Speaker Change: Because those who need it most tend to have the least.
Speaker Change: At the outset of the quarter in January the U S threatened to impose a 10% tariff on Canadian energy products.
Speaker Change: But amid the flurry of tariff changes retaliatory tariffs and ongoing negotiations.
Speaker Change: Energy products that are compliant with the Canada, United States, Mexico Free trade agreement are currently exempt.
Speaker Change: That means for the time being there are no tariffs on our natural uranium U F six and enriched uranium products preserving the flow of nuclear fuel imports into the U S market.
Speaker Change: But regardless of the current exemption, we know that a lot can change overnight.
Speaker Change: For example in April the U S launched a new section 232 investigation to address the risks of reliance on foreign sources of processed critical minerals.
Speaker Change: Notably the executive order outlined uranium in the definition of critical minerals.
Speaker Change: Directing agencies to assess the national security risks stemming from U S dependence on foreign imports.
Speaker Change: We went through a similar section 232 investigation covering steel aluminum and uranium under the previous Trump administration and at that time uranium was spared.
Speaker Change: However, we take nothing for granted that was a different time in the different trade environment.
Speaker Change: Following that first investigation in 2019, we proactively took steps to minimize potential future impacts such as adjusting and clarifying our contract terms and positioning material well ahead of expected deliveries.
Speaker Change: Those preemptive actions helped us prepare for the more recent threat of tariffs on Canadian nuclear fuel products, and we will continue to adapt accordingly, and mitigate such risks in the future.
Speaker Change: I'm sure there will be more to come this year as negotiations continue and policies evolve, but two things are certain.
Speaker Change: There's no substitute for uranium in our nuclear fuel bundle.
Speaker Change: And there's no elasticity to the demand for nuclear fuel.
Speaker Change: Needed to run your reactors and power your economy, regardless of tariffs or higher costs.
Speaker Change: Looking at the future picture for nuclear beyond the near term noise. It continues to be more positive than we've ever seen.
Speaker Change: You've heard us consistently expressed a positive long term demand, though look quarter after quarter for a few years now so I won't spend much time reiterating the strong industry tailwind.
Speaker Change: I would say, it's not a regular occurrence to see news and announcements of significant positive industry developments with nations reaffirming commitments to nuclear extending reactor lives and saving those that were to be shuttered and planning new reactors.
Speaker Change: We've recently seen the World Bank announced plans to lift its decades old ban on funding nuclear projects.
Speaker Change: And we've had more announcements of reactor operating licenses being extended in the U S. Pushing some reactor lives to 80 years.
Speaker Change: This week 10, new builds were approved in China, marking the fourth consecutive year that China has approved at least 10 new reactors.
Speaker Change: And just yesterday, Poland signed an agreement with Westinghouse Bechtel and Polish utility P. J launching the next phase of preparatory and engineering work for its three unit AP 1000 project. The first commercial nuclear plant in the country.
Speaker Change: Those are just a few of the headlines that support our unwavering view that full cycle demand is durable and stronger than ever.
Speaker Change: The World remains focused on energy security National Security climate security and sustainability all in the context of growing clean energy demand.
Speaker Change: But as we keep emphasizing the risks to supply are far greater than the risks to demand.
Speaker Change: Despite the long term uranium price remaining near its highest level in over a decade. The industry is still not seeing the level of long term utility contracting necessary to support both brownfield expansion plans and the significant investment in new projects that will be required to meet growing future demand.
Speaker Change: And to meet the total fuel requirements of the world reactors between now and 'twenty 45.
Speaker Change: <unk> world's utilities still have a lot of uranium to buy.
Speaker Change: In fact, 70% of their needs through 'twenty forty-five remain uncovered.
Speaker Change: That's about $3 2 billion pounds that remains to be contracted and for roughly one third or about 1.3 billion pounds. The source of annual primary production is not yet known.
Speaker Change: With each passing quarter that long term contracting remains below replacement rate the uncovered requirements line continues to steepen.
Speaker Change: Long term contracts must be in place to support mining economics, and underpin ongoing investments in supply.
Speaker Change: But with the continued uncertainty driven by global trade policies and unclear market axis fuel buyers have remained focused on adapting procurement plans under the threat of tariffs.
Speaker Change: In securing downstream conversion and enrichment services before buying the natural uranium.
Speaker Change: Looking ahead, we believe a move upstream to focus on security of uranium supply is inevitable and unavoidable.
Speaker Change: Shifting to briefly highlight chemicals first quarter as always normal quarterly variability in customer deliveries impacted our results.
Speaker Change: However, under our strategy, which remains consistent and centered on operational marketing and financial discipline, we delivered strong results.
Speaker Change: We saw notable improvements across all key financial metrics with revenue up 24% gross profit up 44%.
Speaker Change: Adjusted net earnings of 52% and adjusted EBITDA up 5%.
Speaker Change: And with our first quarter average realized price increasing year over year at a time when the average uranium spot price fell 30%.
Speaker Change: It remains clear that value creation in our industry requires a long term contracting strategy.
Speaker Change: And we are clearly well positioned.
Speaker Change: As expected our Westinghouse segment reported a net loss in the first quarter of 'twenty 25, due to the normal quarterly variations in customer requirements.
Speaker Change: And the ongoing amortization of the intangible assets related to the acquisition.
Speaker Change: We continue to expect an annual net loss of 20 million to 70 million U S dollars for Westinghouse in 2020 five.
Speaker Change: We focus on adjusted EBITDA as a key performance measure for Westinghouse as it adjusts for non operational or noncash items like amortization costs.
Speaker Change: Okay.
Speaker Change: In the first quarter. This year, we saw a 19% improvement in westinghouse's adjusted EBITDA compared to the first quarter of last year.
Speaker Change: Beyond Q1, Westinghouse's first half results are expected to be weaker with stronger performance in higher cash flows expected in the fourth quarter.
Speaker Change: For the year, our share of adjusted EBITDA is still expected to be between $355 million and 405 million U S dollars.
Speaker Change: And needless to say with all of the growth opportunities that have materialized post acquisition. We continue to be pleased with the performance and excited about the potential of our investment.
Speaker Change: Our operational performance across all segments continues to improve and our outlook for the year remains strong and consistent with our expectations.
Speaker Change: In our uranium segment, our share of production from our two northern Saskatchewan operations was 6 million pounds in the first quarter of 2025 slightly higher than the 5.8 million pounds in Q1 last year.
Speaker Change: We continue to expect 18 million pounds of production on a 100% basis at each of our Mcarthur River key Lake and our cigar Lake operations.
Speaker Change: We also continue to evaluate the optimal mix of production inventory and purchases to retain the flexibility to deliver long term value.
Speaker Change: The first source of supply is our tier one primary production, which always has a home under a long term contract. The Ford has pulled out of the ground.
Speaker Change: The next sources, our purchase material in our inventory, including our share of production purchase from JV income.
Speaker Change: Following the unexpected suspension of production for most of January JV, Inc. I updated its plans to adjust for the suspension is targeting 8.3 million pounds of uranium for 2025 of which are purchase allocation is 3.7 million pounds.
Speaker Change: The team is still working on our delivery schedule based on the new production plan, but we do not expect to receive any deliveries from JV incur until at least the second half of 'twenty 'twenty five.
Speaker Change: And with ongoing acid and other supply chain challenges.
Speaker Change: The updated 20 twenty-five production target is certainly not without risk.
Speaker Change: And the fuel services segment production also started the year strong up 5% over the first quarter of last year.
Speaker Change: Our annual production expectation for fuel services remains between 13, and 14 million K G. You have combined products for the year.
Speaker Change: In the uranium market long term contracting activity is expected to continue to gain momentum.
Speaker Change: The long term price increase from $68 U S per pound in January 'twenty, 'twenty, four holding now around $80 U S per pound for several quarters.
Speaker Change: Our marketing team continues to be very busy with a large and growing pipeline of business under discussion that is expected to further grow our long term portfolio.
Speaker Change: As contracting picks up we continue to be selective in committing our uranium inventory and you have six conversion capacity.
Speaker Change: In order to maintain our contract book that preserves exposure to the rising prices, while maintaining downside protection.
Speaker Change: Maintaining financial balance and balanced liquidity to execute on our strategy remains a priority.
Speaker Change: Our balance sheet is strong and we continue to expect strong cash flow generation in 2025.
Speaker Change: Thanks to a risk managed financial discipline and strong cash position in January 2025, we made the final repayment of 200 million U S dollars to fully repay the 600 million dollar U S term loan we used to finance the acquisition of Westinghouse.
Speaker Change: As previously disclosed we received our first cash distribution from Westinghouse.
Speaker Change: Our share being 49 million U S dollars of the 100 million U S dollar distribution paid in February.
Speaker Change: And in April following the end of the first quarter, we received a cash dividend of 87 million U S dollars net of withholdings from JV income based on its 2024 financial performance.
Speaker Change: So from a financial perspective, we continue to be in excellent shape.
We remain diligent in managing the capital resources and tools required to deliver on our strategy maintaining a strong balance sheet guided by our investment grade rating.
Speaker Change: Amid the intensifying geopolitical challenges in complex international trade relationships, it's more important than ever to procure nuclear fuel from responsible reliable experienced in sustainable suppliers like cameco.
Speaker Change: Fuel that supports a future energy supply that is secure reliable and carbon free.
Speaker Change: We believe cameco as premier tier one fuel cycle assets complemented by our investments across the reactor lifecycle puts us in a unique position to power a secure energy future.
Speaker Change: So I think everyone on the line and on the webcast for your interest today, and we will now take your questions.
Speaker Change: We will now begin the question and answer.
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Speaker Change: Once again anyone on the call who wishes to ask a question star one at this time.
Speaker Change: The first question.
Speaker Change: Alright.
Speaker Change: Well first of all thanks.
Speaker Change: Go ahead.
Speaker Change: Hi, good morning.
Speaker Change: We see the balance sheets in great shape here with paying down the remaining term log data on the Westinghouse acquisition I'm, just wondering given the forecast or the outlook moving forward in terms of.
Speaker Change: Solid free cash flow and no real material uses of cash that we're aware of.
Speaker Change: Can you really talk about what the priorities are for capital allocation moving forward here and I'm wondering whether increasing capital returns or returns to shareholders either via dividends or could we see a buyback coming from cameco. It really seems like you're in a strong financial position moving forward.
Grant: <unk>. Thanks for the question, we got the CFO and Deputy CFO here. So grant why don't you start yeah happy to do that maybe a bit of a tag team if if necessary.
Grant: <unk>, Thanks, and thanks, everybody for joining we're always excited to talk about [noise] cameco and it's a really critical role in this nuclear fuel cycle in reactor cycle.
Grant: There is no doubt that our strategy is playing out we've simply delivered on what we said we would deliver on and you're seeing that in the financial results and you're seeing that in the outlook.
Grant: But I would remind folks that we remain in supply discipline as cameco for a very specific reason and that is we have yet to see the uranium segment, a hit replacement rate or above replacement re contracting so while and supply discipline in there that always reminds us that we must remain at <unk>.
Grant: Financially conservative because you have to design a strategy that's got the right mining plan the right milling plan the right marketing plan and it has to be backed up by a balance sheet that allows you the patients the patients that utilities can show at has to be matched on the supply side, so with that backdrop, we remain.
Grant: <unk> are very conservative in our focus we are seeing strong cash flow strong earnings build but while we're in supply discipline, we always want to make sure. We can self manage the risk of say a prolonged delay in the contracting cycle. So that there are no awkward lurches to the capital markets.
Grant: Because we mistimed. It for example that would be that would be and inappropriate thing for us to do as we look ahead, what are the things that we might spend capital on well no doubt that our position in a recovering nuclear fuel cycle is an important one we have opportunities are with through our cameco asset.
Grant: I saw on the uranium side, we have opportunities on the conversion side are obviously opportunities and enrichment and then of course through Westinghouse and we have opportunities for further investments, but we have to we have to be very careful with making those decisions. Because there is some uncertainty that we're trying to navigate I would just point to for exam.
Grant: Poe at making sure we have clarity and certainty over the role of Russia going forward in the nuclear fuel cycle, because we've all seen what's happened in the past. So we have not abandoned our conservative financial discipline, yet as we go forward, we will look for appropriate risk adjusted growth opportunities.
Grant: After that we would then be looking at you.
Grant: You know, maybe it's appropriate to return capital to our owners, maybe that's appropriate through enhancing our dividend growth strategy, which we have out there right now maybe it's appropriate through as shrinking the outstanding denominator of our shares through our share buyback, but I would just say that the strategy is paying off.
Grant: Off, but it's paying off in a market that hasn't yet fully come with its demand we remain in supply discipline and that's what's driving our conservatism. We will obviously keep this group up to date on any plans on capital allocation, but I just wanted to provide that strategic backdrop and the worst is certainly something our board has at the top of their agenda.
Grant: Every meeting as well so we're looking at it closely.
Grant: Thank you.
Grant: Follow up if I could can you speak to what the implications are for Westinghouse with respect to the recent IP legal settlement with Korea.
Grant: Could that mean to that five year outlook for Westinghouse if there are.
Grant: Material builds outside of Korea.
Grant: That is done by that organization.
Speaker Change: Yeah. Thank you worst at the time of acquiring Westinghouse there was an outstanding intellectual property dispute between the Koreans and between Westinghouse over over the use of what what is essentially Westinghouse technology in the Korean reactors.
Speaker Change: There was a very important government to government agreement that was signed between the U S and the Korean government and following that was a commercial agreement between Westinghouse and the Koreans.
Speaker Change: There is a confidentiality agreement wrapped around that for the moment, but let me just step back in effect and then say what it would effectively means it means that you.
Speaker Change: You know a Westinghouse and the Koreans have gone from potentially you know being competitors in markets four gigawatt scale newbuild to be important collaborators, reflecting in fact, what is the the shared contribution each makes to our Newbuild program and so as markets.
We're Westinghouse may not have been competitive for example, where I utilities or or states were looking for a fixed price turnkey solution, which of course, everybody knows you've heard us say westinghouse's not in in the market offering fixed price on a turnkey reactor.
Speaker Change: <unk> Ah that would those were markets that the Korean Koreans were very competitive in.
Speaker Change: But now instead of being excluded from those markets Westinghouse has an opportunity to participate in the scope of those new builds and so if you want to think about it from an energy systems point of view remember that's a segment that we valued at zero at the time of acquisition for Westinghouse and a P. One thousands we've since seen positive.
Speaker Change: <unk> in Poland, Bulgaria, and Slovenia Ukraine.
Speaker Change: And now there are markets, where Westinghouse was not successful like the Czech Republic check here, where Westinghouse will now participate so it actually just grows the scope of the energy systems business at its very exciting, but but but ultimately there are some steps that we have to still go through with the agreement at <unk>.
Speaker Change: Before we can say more but but when we can where we're going to be very excited it's an agreement definitely to the mutual benefit of Westinghouse and the Koreans.
Speaker Change: Just finally, how quickly could it impact Westinghouse performance.
Speaker Change: The.
Speaker Change: The trigger if you will for impacting Westinghouse performance is win.
Speaker Change: The announcement of a new build or a vendor selection into newbuild gets to the point, where our final investment decision is made by the country. That's considering it and as we've been talking about from the Poland example, you know once a reactor is chosen you still go through a series of front end engineering and design.
Speaker Change: Work not to not to design, the reactor, but but but to engineer the reactor in it in a novel location. That's all part of leading towards that final investment decision, which is usually a which usually coincides with a an EPC contract.
Speaker Change: So if you look at the markets, where the Koreans have been successful in bidding their reactor offering in our check here is a market that is well ahead Ah.
Speaker Change: With respect to going down that process. It is a nuclear market, they're very familiar with operating at building nuclear reactors.
So really the trigger becomes when a final investment decision is made and at an EPC contract is signed now those are incredibly hard to predict and I'm not going to try to predict them.
Speaker Change: But but that process, let me just say is well underway in the Czech Republic.
Speaker Change: Thanks, Craig Thanks, Tim.
Speaker Change: Thanks sourced.
Speaker Change: The next question.
Speaker Change: With people.
Speaker Change: Bob.
Speaker Change: Thanks, operator, and good morning, everyone, Tim I wanted to come back to your comments.
Speaker Change: About fuel buyer procurement emphasis upstream versus downstream and from your comments. It doesn't seem like we are in a phase of normal buying prioritization.
Speaker Change: Just wondering what the industry markers, you're looking for that will mark more of a transition how far are we away from that type of market and what are the indications that we can look to look to to see that changing.
Speaker Change: Yeah, Ralph Thanks for the question I think you also heard me say that are you know between now and 'twenty 45, I think there's over 3 billion pounds on and procured via 3.2 billion pounds in over <unk> billion of those they're not sure where they're where they're coming from yet what source is going to provide.
Speaker Change: Those so we're not we're not seeing the panic, yet you've heard grant probably many many times say a fuel buyer start at the back end and they worry about their fuel bundles and then work backwards from there, whereas your enrichment coming from he sees an enormous pressure on the enrichment space in the last couple of years, especially since the Russian move into <unk>.
Speaker Change: Ukraine conversion same thing enormous pressure there is no reason why that's not going to come to the to the uranium space that just hasn't got there yet and so you know we're we're being patient we were saying I think to our board yesterday that you can run, but you can't hide I mean people need uranium to make this whole.
Speaker Change: <unk> work and so you can defer and and wait and hope for better times, but they have to come to the market. We have not yet seen replacement rate contracting are really in the last 10 years and so there's a deficit out there that's going to have to be filled and you know as grant said in his comments. So we're patient we make sure our production as patients.
Speaker Change: Our marketing station, we have a very strong financial position that were ready and we can wait it out but it's coming a we're sure of the so.
Speaker Change: Yeah, Tim if you if I, if I could I'll jump in and Ralph Theres always a risk trying to call a turning point, but let me go ahead and tried to do it anyway at the recent <unk> W. N F C conference in Montreal, Our Vice President of global marking marketing lease Aiken was on a panel and that she made a couple of observations that I think are really important and if I.
Speaker Change: Can point you to a slide in point everybody to a slide at slide six in Tim's comments, our slide 16 in the Investor Handout for Q1 of 2025, and what I, what it feels like it's starting to happen in the long term contracting market for uranium. It is the challenge that's depicted in that.
Speaker Change: That slide is really starting to.
Speaker Change: To to impress upon fuel buyer. So if you look at the left hand panel at the shaded area is good just think of that as if you see a shaded area. That's good that's the wedge of uncovered requirements. That's the wedge of demand that Tim was referring to it now goes out to 2045 and it now equals <unk>.
Speaker Change: 3.2 billion pounds of uranium that needs to be procured over the next 20 years that 70% of the requirements over the next 20 years that have not yet been bought and you look to the panel on the right hand side and you say well how worried should we be.
Speaker Change: You see after a decade of underinvestment due to low prices and a decade of harvesting inventories and secondary supplies you see a primary supply stack that's falling over the same period, you see a secondary supply stack, that's falling you layer in some.
Speaker Change: Known proposed production the kind of stuff that's been hyped for many many years well, let's let's assume it's going to come into the market and even under the base case demand you see that red wedge there of 1.3 billion pounds of uranium.
Speaker Change: We're not sure where it's coming from and and I would just echo the comments that Lisa made on the panel.
Speaker Change: Until we see stronger demand in the market until we see utilities, calling for that the investments simply won't be made to fill that red wedge that feels really good to an incumbent uranium producer who has yet to run at full capacity, who hasn't even got its tier one assets at full capacity.
Speaker Change: Let alone the contemplating restarting our tier twos. This is why we're patient. This is why we're still in supply discipline. Because this is an incredibly strong set up.
Speaker Change: Understood.
Speaker Change: All set thanks very much and.
Speaker Change: I could just ask a follow up on your recent meetings are in with the Kazakhs.
Speaker Change: And we've got some production visibility now for 2000 25 billion Cai just.
Speaker Change: Just wondering what what your meetings over the last several weeks and months since the production shutdown have have yielded in terms of our commitment going forward are you feeling on being able to meet those long term production targets your comfort around the long term viability of chemicals, Kazakhstan business.
Speaker Change: Yeah, Ralph it's Tim we are we have met with them several times here in Canada <unk> and in other places we've had teams go over I'll be heading over there in a couple of weeks for the foreign investors Council meeting with the President I'd say things are back on track thereafter, those twenty-three days in January this we weren't sure.
Speaker Change: What exactly was happening are you know they got the licensing back in place restarted operations were targeting $8 3 million pounds now a production for <unk> for the year 3.7, our share I think we've got just under a million pounds is sitting there that are will be coming over sometime this year as well.
Speaker Change: So I'd say there you know our relations are back on track. We are obviously have a great respect for the Kazatomprom team and Mr. Use ball, who runs the places as a good leader and a good friend of ours, and so I'd say a thing I mean, there there's always the risk that the asset risk hasn't gone away supply chain risk hasn't gone away, but our relations with.
Speaker Change: Them have stabilized and we're on a good track.
Speaker Change: And from our sulfuric acid availability improved procurement, what does that outlook look like.
Speaker Change: I'm going to ask Cory Kos, who's our Kazakh expert to the latest sun sulfuric acid.
Cory Kos: Yeah. The we haven't seen any indication that E. An agreement has been signed to actually go ahead and build a plant, but they've remained on that line. That's the I think 2027 is when they expect to have the plant in place.
Cory Kos: But again haven't even seen construction start and haven't seen agreements signed so no solution is in place yet.
Cory Kos: Okay.
Gordon: Thanks, Gordon answers thanks, Ralph.
Cory Kos: Thanks Ralph.
Cory Kos: The next question comes from Eric Frankel.
Cory Kos: <unk> Michael.
Cory Kos: Please go ahead.
Cory Kos: Good morning, all.
Cory Kos: A follow up question on <unk>.
Speaker Change: Tim you mentioned that you wouldn't expect them to get deliveries until things that at least 82. This year is it fair to say that you think the deliveries are more likely to be weighted in the back end of the kind of Q4.
Cory Kos: And could you see a situation where I see it as any more will delay to today's disagreed.
Cory Kos: Yeah, I don't have any specific information we know it's probably a second half of the year is what we said in the so Alex I really don't have any more specific timing on that yet and as soon as we do a litter bertino, but we're confident will come in the second part of the year.
Speaker Change: Okay. Thanks, Tim and then maybe I can ask a just a question on Mcarthur River.
Speaker Change: Can I exhaust waste and with some of the studies you're doing there for potential production upside and then as I mentioned in the MD&A. This time.
Speaker Change: Are you still looking at a.
Speaker Change: The potential upside with the solicitor unless in class vehicles.
Speaker Change: Yeah. Thanks, Alex no decision to expand our there were and supply discipline. As grant has has said many many times. We've said, we're not moving until our contract book calls for it and so no decision to produce anything more than 18 million pounds at our Mcarthur River key Lake I think helix.
Speaker Change: At the moment were under shutdown stem has stood the mine down to the mill down to do our annual maintenance on it. This month, so you'll see a little bit less production there, but are we no no change 18 million pounds at Mcarthur, we continue.
Speaker Change: To evaluate choudhary reduce risk and demos debottleneck the site in the event that at some point, we want to increase our production. We could go to 25 million phones, I think everyone knows that.
Speaker Change: Those are the best 7 million extra pounds, probably on the planet, but today no decision to to make any moves on that.
Speaker Change: Okay. Thanks, Tim.
Tim: Thank you.
Speaker Change: The next question from corn locked in that window with Bank of America. Please go ahead.
Tim: Hey.
Speaker Change: Thank you very much operator, and good morning, Tim and grant. Thank you very much for the update today.
Speaker Change: Was an interesting comment in your a N DNA.
Speaker Change: Just noting that prices for some fixed price contract had increased can you provide any color in terms of the direction of travel relative to the current 80 dollar per pound long term price indicator and.
Speaker Change: Describe the situation is one where the balance is shifting more towards fixed price contracting.
Speaker Change: Grant.
Speaker Change: Yeah, I'd say theres a lot to unpack in that question loss and let me just step back and talk about it from a market point of view when you look at the interest in long term contracting there would be some utilities that do have a preference for market related.
Speaker Change: There would be some utilities that have a strong preference for fixed and and then that preference tends to shift with where you are in the cycle for for those utilities that are looking at our slide six that shows there's 1.3 billion pounds of uranium, we don't know where it's coming from against the 3.2 billion that needs to be bought.
What that is that's a pretty shocking at risk that's been transferred to fuel buyers.
Speaker Change: We will see an interest in trying to fix the price because that that would be driven by a fuel buyer, who understands prices probably have to go out and have to go up significantly in order to scent incent supply to come to the market.
Speaker Change: So market related because you know suppose where in a market where you know they've agreed to fix the price, but the price happens to be below they just don't want to take that kind of risk. You know you don't want to be taken out behind the woodshed for trying to call a price around volatility so.
Speaker Change: Really it did it is it is specific to where you are in the cycle and then specific to the value at risk metrics of the utilities themselves for Cameco, We said in Q4, and we'll continue to say today. We just remain disciplined in this kind of market, we want market related exposure that is a.
Speaker Change: A requirement for us if we're going to commit long term pounds.
Speaker Change: And we want market related exposure at floors and ceilings that reflect the structural gap.
Speaker Change: Ahead, not not the softening of the spot market that we saw over the first quarter of this year. We don't believe that that has anything to do with what the appropriate price is under a long term contract that starts delivery a couple years out and then delivers into this window of the structural deficit. So we continue.
Speaker Change: To be very disciplined and we want market related and we want market related at escalated floors and ceilings that worked for us.
Speaker Change: And for those utilities that are aligned with the need to secure those pounds, we're still able to have productive.
Speaker Change: Conversations for those utilities that want a drag those floors and ceilings down because of the current b because of the spot softness that they saw in the first quarter I would note we've seen some recent strengthening.
They're the bid and ask is just too big for us to have a fruitful conversation. So we are I again, I'm going to use the term turning point it feels like.
Speaker Change: There is a growing awareness that it is time to start contracting we're starting to see some momentum around some rfps and momentum around on market. Rfps is always joined with increased momentum off market directly on a bilateral basis.
Speaker Change: Alright, Thats very helpful commentary.
Speaker Change: I think as a follow up it.
Speaker Change: Kind of like to get your sense of the transportation and logistics challenges that the industry might be facing today than it was actually something that came up at W. N F C quite quite a bit and it hasnt been a focus at our other more recent congresses.
Speaker Change: So things that were coming up where you know impact from a leftover impacts from the pandemic in Panama Canal constraints reshuffling of Ocean alliances I mean, there was a lot and then there's the U S. T. R section 301.
Speaker Change: <unk>.
Speaker Change: What are your concerns about potential transportation bottlenecks and are you seeing any in your supply chain.
Speaker Change: Well, Austin yourself, and others, who have been dialing in and listening to us for a long time know that we had been warning about falling asleep on uranium for years and we've been warning about it because we said look.
Speaker Change: Building, new uranium supply is hard.
Speaker Change: It's not as easy as some will tell you in a feasibility study restarting assets that are already licensed and already permitted is hard as you see from the efforts from some of the smaller producers to come back to the market.
Speaker Change: And we've always said this is a highly trade dependent commodity it is one where the vast majority of production occurs in nation.
Speaker Change: The supplier greater than the risks.
Speaker Change: The demand.
Speaker Change: So in our industry, we tend to have long lead times on the transportation requirements. So for example.
Speaker Change: You know when when somebody wants delivery, there's a nonbinding noticed that sent over a year in advance of delivery beginning to signal that it's time to start putting in place.
Speaker Change: I used the literal Ed and the actual transportation commitments can be made so unlike other commodities. We are not just in time for for your stumbling around and looking for transport options, having said that it.
Speaker Change: Is still challenging that the tariff overhang the uncertainty around who owns the Panama Canal. The the the transportation logistics of establishing new channels like we saw in Central Asia. These are all challenges for the industry that are now adding to that getting rather fold Buck.
Speaker Change: Net of risks to supply so I would watch the transportation piece I wouldn't fall asleep bought it at Cameco has never missed a delivery, we never will miss a delivery, but that doesn't mean, others arent going to struggle with the transportation challenges.
Speaker Change: Okay. Thank you very much.
Speaker Change: The next question comes from.
Bob Brackett: Bob Brackett with Brian.
Speaker Change: Please go ahead.
Speaker Change: Good morning, I'm struck by last week's announcement of 10, new reactors from China that 27 billion dollar number that you alluded to it in that context, how do you think of westinghouse's relationship with China.
Speaker Change: The tariff and trade disputes were having.
Speaker Change: Well, Bob Thanks for the question, Oh, who obviously, we watch with great interest as well China.
Speaker Change: Whether you deal with them or you don't they are a mighty force in the nuclear space in the 10 reactors a year.
Speaker Change: <unk> been announced over the last four years in a row and you do the math on that there'll be at 100 by 2030, and probably 200 by 2040, and then we start thinking about where the fuel on the chemicals side, where the fuel is going to come from to service those and in all of the rest of the reactors around the world.
Speaker Change: So that that's I mean, when we talk of optimism and a durable demand.
Speaker Change: <unk> and great agreed future China's a big part of it Westinghouse has a relationship with the China, obviously the C. A P. One thousands that they're building there now.
Speaker Change: Our of our Westinghouse origin, and I know Theres some are enduring agreements between Westinghouse and China on each of those units to perform work on those so I think the relationship is very strong.
Speaker Change: And chemical as well has a good relationship with China.
Speaker Change: And is there an opportunity there where the China doing more business with Westinghouse helps balance out some of the trade balance and what would the timing of that look like if the announcement of the reactors hits April 27th when do those turned into feed or when do those turn out in case ready capital commitments.
Speaker Change: Yeah. That's a good question. Your first question is the interesting one.
Speaker Change: And it's really a geopolitical questions with really what we've been dealing with over.
Speaker Change: The last number of months are you know the relations between China, and Canada, China, and the U S. China and the rest of the World, Canada U S. A we have a new prime Minister and government as you know in Canada as of this week and so we'll see how that goes with at the political level between Canada, and China on a b to B business the business.
Speaker Change: The level of the relationship has been strong and enduring and they'll just talk us granted deals anything dead yet they are.
Speaker Change: One of the common thread to all of the tariff discussion and a trade disruption is we want a better deal.
Speaker Change: And what we've discovered after spending a lot of time in Washington are ideal on energy is is a really compelling story. So anytime you have an opportunity for a a U S business to expand and project our U S.
Speaker Change: Energy strategy it tends to be favorably well received so we're delighted to see the C. A P 1000 become you know a a really important part of China's newbuild Westinghouse enjoys what Dan Littman and team call a phase two of their relationship with the Chinese there are.
Speaker Change: Mentation and control contracts, there, our fabrication contracts, which benefit the United States to be participant in that and and also let's just remind ourselves that for everybody out there who says we don't know how to build gigawatt scale reactors that the Chinese are building essentially the AP 1000 in 60.
Speaker Change: Months at a cost of about two and a half a billion dollars of reactor. So so the world knows how to do this and it it's done by starting and not stopping continuing that momentum getting to the Yankee unit.
Speaker Change: So I think there's two really important messages one and energy deal is always well received and sat and number two we see the benefits of a nation that starts to build and continues to build and in every country. The western countries included can certainly follow in those footsteps.
Speaker Change: Very clear thank you.
Bob Brackett: Thanks, Bob.
Speaker Change: The next question comes from Gordon Johnson.
Speaker Change: Oracle Research. Please go ahead.
Gordon Johnson: Hey, gentlemen, thanks for taking the question.
Speaker Change: I have a I guess a more general question.
Speaker Change: <unk>.
Speaker Change: I have a lot of clients asking us can you guys talk about the extent to which you are projected demand on your output is affecting your current investment new exploration and I ask because given the global slowdown in exploration we've seen over the past few years. After Fukushima you guys laid off a bunch of people and a number of people laid off it seems like the big gap in the <unk>.
Speaker Change: Nicole I'm, just trying to figure out how you guys.
Speaker Change: Yeah. Thanks, Gordon So obviously exploration very important to our strategy are we just put a new vice president.
Speaker Change: And then please Alexandra Obama is our new VP of exploration. We continue our efforts we've as we've said many times in the past we've held on to through those lean years. All of the we think are the best properties in the Athabasca Basin. We continue to work them, we've been growing our exploration budget over the last few years. So.
Speaker Change: Absolutely exploration continues to be a very very important part of our business. So we don't stand up and brag too much about it is the it's just something that we do a we try not to to blow too hard on it as are.
Speaker Change: But we do have some very good projects. So if you look at our report.
Operator tests, it's Tim gets Ola can you hear us.
Speaker Change: I can hear you guys now you guys have cut out a bit okay.
Speaker Change: Okay, sorry about that hopefully you got a the answer our bottomline exploration remains.
Bob Brackett: Hey, Bob.
Speaker Change: And.
Speaker Change: One moment, while we reconnect.
Speaker Change: Just it's Tim gets I'll, just keep speaking to see if people can.
Speaker Change: Can hear me, it's Tim gets a grant you want to draw your mind, Yeah, operator can you hear us.
Speaker Change: You are coming on Gladden Cornell.
Speaker Change: Okay. Thank you I'm not sure it up and thank you maybe we can move on to the next question.
Speaker Change: Our next question comes from Craig Hutchison with Cowen. Please go ahead.
Craig Hutchison: Hi, good morning, guys.
Speaker Change: Good morning.
Speaker Change: Hey, Tim.
Speaker Change: A question on our field services business, you realize very strong pricing in the quarter up year over year quarter over quarter and as I mentioned, a BOE mainly result of contracts were entered in an improved pricing environment could you just provide some context <unk> got a function of a mix of the products you are selling and is there or is there potential.
Speaker Change: Upside here to your guidance just given the strong environment for some of those services. Thanks.
Heidi Shockey: I'm going to ask Heidi shockey to provide some comments.
Heidi Shockey: Yeah, Hi, there at a it was a bit a couple of things going on really I have seen theyre rolling on of new contacts suggest them as you know we layer in contracts that over time sell slowly you see older contracts rolling off and improvement in our prices and I just in this quarter in particular, we.
Heidi Shockey: Had just the timing of of one particular contract that had a higher price less so on the on the mix of products, but but.
Heidi Shockey: Just really the mix of contracts in this particular quarter as we look ahead, Craig it's always important to remember that our strategy is about contracting.
Heidi Shockey: Forward you know if again, if I refer to that side six that was in Tim's comments or 16 are in the handout you remember that that spot sliver is no different for conversion than it is for uranium in that is there is no utility on the planet that's loading of fuel bundle in 2020 five that needs to buy the uranium and conversion in 2025. So we.
Heidi Shockey: We're always selling forward and why do I say that well to your question about what you expect the historic pricing that's come through the conversion business is not yet being realized by us. So all of that is in front of us from a pricing point of view so you're beginning to see the early days of strong performance as a result of that much stronger pricing in <unk>.
Heidi Shockey: <unk>, but but certainly more to come that's how we build our strategy and youre seeing it being executed in that and it just yet is another reason, we're delighted with our position in the nuclear fuel cycle.
Speaker Change: Great. Thanks, So maybe just the quick follow up question for me in the past you guys have given great color on floors and ceilings can you just kind of give some color on where those sit right now in terms of your discussions.
Speaker Change: Yeah happy to do that we continue to be very stubborn and Craig. We you know we you heard me say in Q4 that there is a bit of connective tissue between the spot market and the long term market with respect to market related contracts remember those are the contracts for <unk>.
Speaker Change: Which we're not trying to price them today.
Speaker Change: We're pricing them at time of delivery out into the future but.
Speaker Change: But many are.
Speaker Change: We tend to Orient that conversation around.
Speaker Change: Operator, do we still have you.
Speaker Change: So.
Speaker Change: Still there you're kind of coming in and out on my line.
Speaker Change: Okay, I'm not sure what's going on.
Speaker Change: Did the floors and ceilings, we orient around where the structural demand and supply is in the market on a forward basis, but no doubt. When you know you have primary producers, bringing small volumes of production to the spot market and putting downward pressure on.
Speaker Change: Or when you have a.
Speaker Change: Find like a fund out of Central Asia that was that was being dissolved rather clumsily it puts that.
Speaker Change: There are two where we should be with respect to floors and ceilings ink contracts out into the future. So we're still.
Speaker Change: Holding out for floors that are in the $70 escalated.
Speaker Change: In connection with our speakers.
Speaker Change: While we reconnect.
Speaker Change: Dealings band to come rather than try to chase it and we're liking the setup.
Andrew: The next question comes from Andrew <unk> with RBC capital markets. Please go ahead.
Andrew: Hey, good morning.
Andrew: So aside from China.
Andrew: India is the other country with pretty ambitious nuclear energy plans, and obviously, it's taking a little bit and get it going but.
Andrew: Seems like they've taken some actions to speed that up recently can you just talk about that nuclear growth opportunity in India.
Andrew: And the potential therefore, chemical Westinghouse specifically.
Andrew: I recall, a few years ago, there was a potential.
Andrew: Since the AP 1000 project was shelved because of liability issues, but it seems like those issues might be getting addressed so.
Andrew: Can you just talk about that thanks.
Speaker Change: Yeah. Thanks, Andrew you cut in and out on US I think the question was in India and in some of the recent announcements.
Speaker Change: It is a is a big stretch very ambitious AR, we have good relations with India, we've been.
Speaker Change: Supplying them since 2015 on the chemical side and so we continue to talk to them and hopefully the Canada, India relationship will at the political level will improve going forward, but then again, that's not stopped to set the business the business level. So from the Cameco point of view are we have a great relationship with <unk>.
Speaker Change: <unk> will be a big player in supplying their fuel needs going forward. The Westinghouse same I know they have teams over there working with the with the Indians are talking about future growth there and so I don't have any specifics yet are there was a site put aside for a Westinghouse units our biggest.
Speaker Change: Will exist so nothing really to report Andrew on that at this point, but.
Speaker Change: Yeah, we're still working in India is going to play a big role in the future in the world and in the nuclear market.
Speaker Change: Okay. Thank you maybe another question in your conversations with utility customers.
Speaker Change: Do you have a lot of those how much of the inventory that is held by the physical fundings come up in the conversation and just curious from your perspective is there still a view among the utilities at those pounds made.
Speaker Change: May be available in the future at some point or are there better understanding that those counts, mostly arent going to be available.
Speaker Change: Grant.
Speaker Change: Hi, Andrew it's a bit mixed you would if you would have picked up some of that messaging in Montreal, while you were there as well.
Speaker Change: You know I think we're in one of those markets, where folks are looking at that structural deficit and then they're clinging to hope of some thing and one of that areas of hope is well maybe if you can get your hands on uranium that's already in it in a can.
Speaker Change: Already in North America, well, that's my that's my hope that's going to bail me out from the fact that I haven't been contracting. So we've seen a lot of what I might call noise around the spot vehicle for example, or we've seen a lot of noise around the yellow cake vehicle and I would just say that it seems like it's.
Speaker Change: Noise I haven't heard anything from either of those two that suggests a you know theyre not in it for the long run.
Speaker Change: But more importantly, those are almost irrelevant volumes now and in the face of the structural deficit I mean, they they couldn't even begin to plug a one year gap just a few years out. So yeah. There are some who point to it and say well you know this material must come to the market at some point.
Speaker Change: Tell you, we worry about it less and less and less every day.
Speaker Change: That's great. Thank you.
Speaker Change: This concludes the question answer session.
Speaker Change: Ladies and gentlemen, we'd like to apologize for the quality of the audio.
Speaker Change: I would like to turn the conference back over to Tim Boyle for any closing remarks.
Speaker Change: I'd like to hand, the call back over to Tim Goodnow for any closing remarks.
Speaker Change: This brings to an end today's conference call. You may now disconnect. Your lines. Thank you for participating and have a pleasant day.
Speaker Change:
Speaker Change: [music].
Speaker Change: Great.
Speaker Change: [music].