Q1 2025 Cameco Corp Earnings Call
Thank you for standing by this is the conference operator.
Speaker Change: Welcome to the Cameco Corporation first quarter 2025 results conference call.
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Speaker Change: The Q&A session will conclude at nine a M eastern time.
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.
Tim gets: I'd like to acknowledge that we were speaking from our corporate office, which is on the treaty six territories. The traditional territory of the creep people in the homeland of the May team with US today are Tim gets all president and CEO Grant Isaac Executive VP and CFO How're, you Sharkey 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 on 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 will be happy to respond to any follow up inquiries there.
Speaker Change: There are a few ways to contact us with 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 will 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: 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.
Speaker Change: As required by Securities laws. We also have to make you aware that drink 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 and MD&A for more information about the factors that could cause different results and the assumptions. We have made I will now turn it over to our president and CEO, Tim gets all Tim.
Tim: Well, thank you Cory and Hello, everyone. We appreciate you joining us on our call today.
Tim: Hope, everyone is doing well and enjoying spring or autumn, depending on where you're listening from.
Tim: Here in Canada. The snow is gone this spring and we just wrapped up a federal election earlier this week.
Tim: I'd like to personally congratulate Prime Minister Mark Carney and the Liberal Party.
Tim: We're excited to begin working with the newly elected Canadian government and look forward to Prime Minster Carnies strong leadership in navigating the current uncertain environment of global tariffs evolving fiscal policy and complex geopolitics.
Tim: 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.
Tim: 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.
Tim: But like Cameco when it comes to nuclear energy, Canada is much more than just mining.
Tim: Beyond our resources, we have a long deep history in the nuclear sector.
Tim: So when combined with our advanced technology and generational nuclear expertise are supportive and collaborative government will be key in helping put camera on the map as a nuclear industry leader in support of global energy National and climate security objectives.
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.
Tim: That said there is no doubt that those distractions have created new and unexpected risks that must be carefully monitored and diligently managed.
Tim: It is extremely difficult to operate the world's nuclear fleet, if the movement of uranium fuel is restricted.
Tim: Does those who need it most tend to have the least.
Tim: At the outset of the quarter in January the U S threatened to impose a 10% tariff on Canadian energy products.
Tim: But amid the flurry of tariff changes retaliatory tariffs and ongoing negotiations.
Tim: Energy products that are compliant with the Canada, United States, Mexico Free trade agreement are currently exempt.
Tim: 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.
Tim: But regardless of the current exemption, we know that a lot can change overnight.
Tim: 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.
Tim: Notably the executive order outlined uranium in the definition of critical minerals.
Tim: Directing agencies to assess the national security risks stemming from U S dependence on foreign imports.
Tim: 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.
Tim: However, we take nothing for granted that was a different time in the different trade environment.
Tim: 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.
Tim: 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.
Tim: I'm sure there will be more to come this year as negotiations continue and policies evolve, but two things are certain.
Tim: There's no substitute for uranium in a nuclear fuel bundle and.
Tim: And there's no elasticity to the demand for nuclear fuel he needed to run your reactors and power your economy, regardless of tariffs or higher costs.
Tim: Looking at the future picture for nuclear beyond the near term noise. It continues to be more positive than we've ever seen.
Tim: 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.
Tim: I would say, it's now 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.
Tim: We've recently seen the World Bank announced plans to lift its decades old ban on funding nuclear projects.
Tim: And we've had more announcements of reactor operating licenses being extended in the U S. Pushing some reactor lives to 80 years.
Tim: This week 10, new builds were approved in China, marking the fourth consecutive year that China has approved at least 10 new reactors.
Tim: 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.
Tim: Those are just a few of the headlines that support our unwavering view that full cycle demand is durable and stronger than ever.
Tim: The World remains focused on energy security National Security climate security and sustainability all in the context of growing clean energy demand.
Tim: But as we keep emphasizing the risks to supply are far greater than the risks to demand.
Tim: 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.
Tim: And to meet the total fuel requirements of the world reactors between now and 'twenty forty-five.
Tim: The world's utilities still have a lot of uranium to buy.
Tim: In fact, 70% of their needs through 'twenty forty-five remain uncovered.
Tim: 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.
Tim: With each passing quarter that long term contracting remains below replacement rate the uncovered requirements line continues to steepen.
Tim: Long term contracts must be in place to support mining economics, and underpin ongoing investments in supply.
Tim: But with the continued uncertainty driven by global trade policies and unclear market access fuel buyers have remained focused on adapting procurement plans under the threat of tariffs and securing downstream conversion and enrichment services before buying the natural uranium.
Tim: Looking ahead, we believe a move upstream to focus on security of uranium supply is inevitable and unavoidable.
Tim: Shifting to briefly highlight chemicals first quarter as always normal quarterly variability in customer deliveries impacted our results.
Tim: However, under our strategy, which remains consistent and centered on operational marketing and financial discipline, we delivered strong results.
Tim: We saw notable improvements across all key financial metrics with revenue up 24% gross profit up 44% adjusted.
Tim: Adjusted net earnings of 52% and adjusted EBITDA up 5%.
Tim: And with our first quarter average realized price increasing year over year at a time when the average uranium spot price fell 30%. It remains clear that value creation in our industry requires a long term contracting strategy and we are clearly well positioned.
Tim: As expected our Westinghouse segment reported a net loss in the first quarter of 'twenty twenty-five due to the normal quarterly variations in customer requirements and the ongoing amortization of the intangible assets related to the acquisition.
Tim: We continue to expect an annual net loss of 20 million to 70 million U S dollars for Westinghouse in 2020 five.
Tim: We focus on adjusted EBITDA as a key performance measure for Westinghouse as it adjusts for non operational or noncash items like amortization costs.
Tim: In the first quarter. This year, we saw a 19% improvement in westinghouse's adjusted EBITDA compared to the first quarter of last year.
Tim: Beyond Q1, Westinghouse's first half results are expected to be weaker with stronger performance in higher cash flows expected in the fourth quarter.
Tim: For the year, our share of adjusted EBITDA is still expected to be between $355 million and 405 million U S dollars.
Tim: 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.
Tim: Our operational performance across all segments continues to improve and our outlook for the year remains strong and consistent with our expectations.
Tim: 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.
Tim: 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.
Tim: We also continue to evaluate the optimal mix of production inventory and purchases to retain the flexibility to deliver long term value.
Tim: The first source of supply is our tier one primary production, which always has a home under a long term contract before it has pulled out of the ground.
Tim: 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 and 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 2025.
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 kg 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 our 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.
Speaker Change: 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 and 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 session.
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Nathan Star: <unk> wishes to ask a question Nathan Star one at this time.
Speaker Change: The first question today comes from Alright.
Speaker Change: With Scotia Bank.
Speaker Change: Go ahead.
Speaker Change: Hi, good morning.
Speaker Change: Obviously, the balance sheet is 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 I am wondering whether increasing capital returns.
Speaker Change: Turns to shareholders either via dividends or could we see a buyback coming from capital. It really seems like you're in a strong financial position moving forward.
Speaker Change: <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 I asta, thanks, Ann and thanks to everybody for joining we're always excited to talk about cameco and it's a really critical role in this.
Speaker Change: Nuclear fuel cycle in reactor cycle.
Speaker Change: 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, but.
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 hit replacement rate or above replacement re contracting so while and supply discipline in our that always reminds us that we must remain a fan.
Speaker Change: Naturally 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.
Speaker Change: A 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.
Because we mistimed. It for example that would be that would be an inappropriate thing for us to do.
Speaker Change: 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 base on the uranium side, we have opportunities on the conversion side are obviously opportunities in in.
Speaker Change: Rich meant 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 example, making sure we have clarity and certainty over the role of Russia going forward in the nuclear fuel.
Speaker Change: 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. After that we would then be looking at.
Speaker Change: Maybe it's appropriate to return capital to our owners may be 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.
Speaker Change: 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.
Speaker Change: Pre meeting as well so we're looking at it closely.
Speaker Change: Thank you.
Speaker Change: As a 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, what could that mean to that five year outlook for Westinghouse if there are material builds outside of Korea.
Speaker Change: 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 are there 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.
Speaker Change: Means it means that.
You know a Westinghouse and the Koreans have gone from potentially.
Speaker Change: Being competitors in markets four gigawatt scale newbuild to be important collaborators, reflecting in fact, what is the shared contribution each makes to our Newbuild program and so as markets, where Westinghouse may not have been competitive for example, where.
Speaker Change: There are utilities 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 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.
Speaker Change: 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 announcements 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 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.
Speaker Change: Once a reactor is chosen you still go through a series of front end engineering and design work not to not to design the reactor, 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.
Speaker Change: Which usually coincides with 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 with.
Speaker Change: Back 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 then in an EPC contract is signed.
Speaker Change: 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: Correct.
Speaker Change: Thanks, Dave.
Speaker Change: Thanks sourced.
Speaker Change: Our next question.
Speaker Change: Yes.
Speaker Change: With Stifel.
Speaker Change: Go ahead.
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: 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, well. Thanks for the question I think he also heard me say that are you know.
Speaker Change: Between now and 'twenty 45, I think there's over 3 billion pounds on and procured via 3.2 billion pounds in over billions of those.
Speaker Change: We're not sure where they're where they're coming from yet what source is going to provide those so we're not we're not seeing the panic yet you've heard grant probably many many times 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 <unk>.
Speaker Change: Pace in the last couple of years, especially since the Russian move into Ukraine conversion. Our same thing enormous pressure. There is no reason why that's not going to come to the to the uranium space. It just hasnt got there yet and so you know we're being patient we were saying I think to our board yesterday that.
Speaker Change: You can run, but you can't hide I mean people need uranium to make this whole thing 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.
Speaker Change: As grant said in his comments so we're patient we make sure our production as patients are marketing's patient, 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 marketing marketing lease Aiken was on a panel and 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 is the challenge that's depicted in that.
Speaker Change: Slide is really starting to.
Speaker Change: Two two.
Speaker Change: 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 three point too Bill.
Speaker Change: <unk> 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.
Speaker Change: 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 that 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 I would just echo the comments that Lisa made on the panel and 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.
Speaker Change: Producer, who has yet to run at full capacity, who hasn't even got its tier one assets at full capacity, 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 setup.
Speaker Change: Understood.
Speaker Change: All set thanks, very much and if I could just ask a follow up on your recent meetings in with with the Kazakhs.
And we've got some production visibility now for 2000 25 billion Cai.
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.
Tim: Yeah, Ralph it's Tim.
Tim: We are we have met with them several times here in Canada P deck 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 23 days in January this we weren't sure what exactly was happening are you know they got there.
Tim: 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 will be coming over sometime this year as well and so I'd say there you know our relations are back on.
Tim: Truck, we are obviously have a great respect for the Kazatomprom team and Mr use Bob who runs the place is 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 them have stabilized and we're on a good track.
Tim: And from our sulfuric acid availability improved procurement, what does that outlook look like.
Tim: I'm going to ask Cory Kos, who's our Kazakh expert to the latest on sulphuric acid.
Cory Kos: Yeah, 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.
Ralph: Thanks, Gordon answers thanks, Ralph.
Cory Kos: Thanks Ralph.
Cory Kos: The next question comes from Eric Handler.
Cory Kos: <unk> Harper Michael.
Speaker Change: Please go ahead.
Cory Kos: Good morning, all.
Cory Kos: A follow up question on <unk>.
Speaker Change: Tim you mentioned that you weren't expecting to get deliveries until I think 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.
Speaker Change: And could you see a situation where actually there's any more we will delay to today's disagreed.
Speaker Change: 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 we'll interbody no, but we're confident will come in the second part of the year.
Speaker Change: Okay. Thanks, Tim and then maybe I can ask just a question on Mcarthur River.
Speaker Change: Can I exhaust waste on with some of the studies using them 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 Doctor.
Speaker Change: What's the lesson trustee levels. Thanks.
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 down.
Speaker Change: At the moment are we're on the shutdown stem has stood the mine down to the.
Speaker Change: 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.
Speaker Change: At Mcarthur, we continue to evaluate out Erie 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 pounds 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.
Speaker Change: Thank you.
Speaker Change: The next question comes from Lawson Winder with Bank of America. Please go ahead.
Lawson Winder: Thank you very much operator, and good morning, Tim and grant. Thank you very much for the update today.
Speaker Change: Interesting comment in your and DNA.
Speaker Change: Just noting that prices for fixed price contract had increased can you provide any color in terms of the direction of travel relative to the current $80 per pound long term price indicator and would you describe the situation is one where the balance is shifting more towards fixed price contracting.
Speaker Change: Grant.
Speaker Change: Yeah. It did 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.
Speaker Change: When you look at the interest in long term contracting there would be some utilities that do have a preference for market related 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 those utilities.
Speaker Change: 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 that's that's a pretty shocking at risk that's been transferred to fuel buyers. We will see an interest in trying to fix the price because of that.
Speaker Change: That would be driven by a fuel buyer, who understands prices probably have to go up and have to go up significantly in order to scent incent supply to come to the market.
Speaker Change: <unk>.
Speaker Change: So market related because you know suppose where in a market where they have 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 re.
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.
Speaker Change: 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 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: Had 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 of years out and then delivers into this window of the structural deficit. So we continue to.
Speaker Change: Very disciplined and we want market related and we want market related at escalated floors and ceilings that worked for us and for those utilities that are aligned with the need to secure those pounds, we're still able to have productive conversations.
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.
Speaker Change: They're the bid and ask is just too big for us to have a fruitful conversation. So we are 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.
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.
Speaker Change: Actually somebody they came up came up at WNS secret it quite a bit and it hasnt been a focus it.
Speaker Change: Other more recent congresses.
Speaker Change: So things that were coming up or impact from <unk>.
Speaker Change: Over impact from the pandemic in Panama Canal constraints reshuffling of Osha and alliances I mean, there is a lot and then there's the U S. T. R section 301.
Speaker Change: What are you what are your concerns about potential transportation bottlenecks and are you seeing any in your supply chain.
Speaker Change: The loss in it.
Speaker Change: 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 <unk>.
Speaker Change: Building, new uranium supply is hard it's.
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: 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 that.
Speaker Change: Risks to 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 non binding notice 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.
Speaker Change: We are not just in time for for your stumbling around and looking for transport options, having said that.
Speaker Change: It is still challenging that the tariff overhang the uncertainty around who owns the Panama Canal 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.
Speaker Change: <unk> 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 with Brian.
Speaker Change: Please go ahead.
Bob Brackett: Good morning, I'm struck by last week's announcement of 10, new reactors from China that 'twenty 7 billion dollar number that you alluded to it in that context, how do you think of westinghouse's relationship with China.
Speaker Change: Amidst the tariff and trade disputes were having.
Speaker Change: Well, Bob Thanks for the question.
Speaker Change: 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 have 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.
Speaker Change: 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. So that that's I mean, when we talk of optimism and a durable demand and great agreed future China's a big part of that Westinghouse has a relationship with the China, obviously the C. A P. One.
Speaker Change: 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.
And is there an opportunity there where China doing more business with Westinghouse helps balance out some of the trade balance and what would the timing of that looks 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: It's really a geopolitical questions with really what we've been dealing with those.
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 the at the political level between Canada, and China on a b to B business the business.
Speaker Change: Level of the relationship has been strong and enduring and I'll just talk to US a grant if he has anything to add yes I did.
Speaker Change: They are.
Speaker Change: One of the common thread to all of the tariff discussion and trade disruption is we want a better deal.
Speaker Change: And what we've discovered after spending a lot of time in Washington.
Speaker Change: A deal on energy is is a really compelling story. So anytime you have an opportunity for a U S business to expand and project.
Speaker Change: U S energy strategy it tends to be favorably well received so we're delighted to see the C. A P 1000 become.
Speaker Change: A really important part of China's Newbuild Westinghouse enjoys what Dan Littman and team call phase two of their relationship with the Chinese there our instrumentation and control contracts, there are fabrication contracts, which benefit the United states to be participant in that and and also.
Speaker Change: 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 months at a cost of about $2 $5 billion of reactor. So so the world knows how to do this and it's done by <unk>.
Speaker Change: Starting and not stopping continuing that momentum getting to the Yens unit.
So I think there's two really important messages one on 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.
Bob Brackett: The next question comes from Gordon Johnson with <unk>.
Bob Brackett: It's all research. Please go ahead.
Speaker Change: Hey, gentlemen, thanks for taking the question.
Bob Brackett: I have a I guess a more general question.
Bob Brackett: <unk>.
Bob Brackett: 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>.
Bob Brackett: Fecal.
Trying to figure out how you guys are planning for that.
Speaker Change: Yeah. Thanks, Gordon So obviously exploration very important to our strategy are we just put a new vice president in place Alexander 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 <unk>.
Speaker Change: Think of 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 yeah, absolutely exploration continues to be a very very.
Speaker Change: Important part of our business. So we don't stand up and brag too much about it at a 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.
Speaker Change: Port.
Speaker Change: 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.
Speaker Change: Okay, sorry about that hopefully you got a the answer our bottomline exploration remains.
Bob Brackett: Hey, Bob Canadians and weaker.
Speaker Change: One moment, while we reconnect.
Speaker Change: Just it's Tim gets I'll, just keep speaking to see if people can.
Tim gets: Can hear me, it's Tim gets will grant do you want to draw your mind, Yeah, operator can you hear us.
Speaker Change: You are coming in Gladden Cornell.
Okay. Thank you I'm not sure it up and thank you maybe we can move on to the next question.
Speaker Change: The next question comes from Craig Hutchinson with Cowen. Please go ahead.
Craig Hutchinson: Hi, good morning, guys.
Speaker Change: Good morning.
Speaker Change: Hey, Tim quite ask a question on the field services business, you realize very strong pricing in the quarter up year over year quarter over quarter and as I mentioned about mainly result of contracts were entered an improved pricing environment can you just provide some context right.
Speaker Change: Function of a mix of the products you are selling and is there or is there potential upside here to your guidance, giving a strong environment for some of those services.
Heidi Shockey: We'll ask Heidi shockey to provide some comments.
Speaker Change: Yeah, Hi, there it's a it was a bit a couple of things going on really I have seen theyre rolling on of new contracts suggest.
Speaker Change: As you know we layer in contracts out overtime. So slowly you see all their contacts rolling off and the improvement in our prices and I just in this quarter in particular, we 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.
Speaker Change: 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.
Speaker Change: Forward.
Speaker Change: Again, if I refer to that side six that was in tim's comments or 16.
Speaker Change: 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 2025 that needs to buy the uranium and conversion in 2025. So we're always selling forward and why do I say that well to your question about what you expect the historic price.
Speaker Change: 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 and conversion, but certainly more to come that's how we build our strategy and youre seeing it being executed in that.
Speaker Change: 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 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 which.
Speaker Change: 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: Okay.
Speaker Change: Still there you're kind of coming in and out of my language.
Speaker Change: Okay, I'm not sure what's going on.
Speaker Change: The the floors and ceilings, we orient around where the structural.
Speaker Change: 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 it 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: Counter to 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: Thanks, a lot.
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.
Speaker Change: Hey, good morning.
Speaker Change: So aside from China.
Speaker Change: It is the other country with pretty ambitious nuclear energy plans, and obviously is taking a little bit to get it going but.
Speaker Change: They've taken some actions to speed that up recently can you just talk about that nuclear growth opportunity in India.
Speaker Change: And the potential therefore, chemical Westinghouse specifically.
Speaker Change: I recall, a few years ago, there was a.
Speaker Change: Sometimes the AP 1000 project was shelved because of liability issues, but it seems like those issues might be getting addressed so.
Speaker Change: 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 chemicals 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: We're in 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 there was a site put aside for a Westinghouse units our biggest.
Speaker Change: <unk> exists 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 and you have a lot of those how much of the inventory that is held by the physical fundings come up in the conversation.
Speaker Change: Just curious from your perspective is there still a view among the utilities that those pounds may.
Speaker Change: May be available in the future at some point or are there better understanding that those accounts, mostly aren't 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 and already in North America well. That's my that's my hope that's going to bail me out from the <unk>.
Speaker Change: 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.
Speaker Change: Or we've seen a lot of noise around the yellow cake vehicle and I would just say that.
Speaker Change: It seems like it's noise I 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 yes, there are some who point to it and say well you know this material must come to the market at some point.
Speaker Change: I'll tell you, we worry about it less and less and less everyday.
Speaker Change: That's great. Thank you.
Speaker Change: This concludes the question and answer session.
Speaker Change: Ladies and gentlemen, we'd like to apologize for the clarity 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 default for any closing remarks.
Speaker Change: It 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: [music].
Speaker Change: Okay.
Speaker Change: [music].