Marten Transport Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 31, 2023

There are 13 speakers on the call.

Operator

Welcome to the Cameco Corporation Third Quarter 2023 Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. As the information they are looking for may be provided during the presentation. I would now like to turn the conference over to Rochelle Gerard, Vice President, Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, operator, and good morning, everyone. Welcome to Cameco's 3rd quarter conference Call. With a very busy international travel schedule this quarter, our quarterly board meetings were held off-site rather than at our corporate office in Saskatoon. With us today on the call are Tim Gitzel, President and CEO, joining the call from Vienna, Austria Grant Isaac, Executive VP and CFO Heidi Shockey, Senior VP and Deputy CFO Brian Reilly, Senior VP and Chief Operating Officer Sean Quinn, Senior VP, Chief Legal Officer and Corporate Secretary and Alice Wong, Senior VP and Chief Corporate Officer. I'm going to hand it over to Tim in just a moment to discuss the current nuclear market environment, After, we will open it up for your questions.

Speaker 1

As always, our goal is to be open and transparent with our communications. Therefore, If you have detailed questions about our quarterly financial results or should your questions not be addressed on this call, we will be happy to follow-up with you after the call. There are a few ways to contact us. You can reach out to the contacts provided in our news release. You can submit a question through the Contact tab on our website Or you can use the Ask a Question form at the bottom of the webcast screen, and we will be happy to follow-up after this call.

Speaker 1

If you join the conference call through our website event page, there are slides available, which will be displayed during the call. In addition, For your reference, our quarterly investor handout is available for download in a PDF file on our website at camoco.com. Today's conference call is open to all members of the investment community, including the media. During the Q and A session, please limit yourself to 2 questions and then return to the queue. Please note that this conference call will include forward looking information, which is based on a number of assumptions and actual results could differ materially.

Speaker 1

You should not place undue reliance on forward looking statements. Actual results may differ materially from these forward looking statements, We do not undertake any obligation to update any forward looking statements we make today, except as required by law. Please refer to our most recent annual

Speaker 2

Well, thank you, Rochelle, and good morning, everyone. We appreciate you joining us for today's call. I'm pleased to start We'll be joining Cameco as Global Managing Director of our subsidiary in the United Kingdom. Dominic brings extensive executive experience in the nuclear fuel, chemical and broader technology industries, which will enhance the skill set of our strong and experienced leadership Group. His wide ranging expertise will help facilitate Cameco's growth across the nuclear value chain.

Speaker 2

Dominic brings over 20 years of leadership experience to Cameco. Most recently, he served as Chief Executive Officer with Babcock Nuclear. Previously, he was with Durango for 15 years in increasingly senior leadership roles, including Chief Commercial Officer and gained a wealth of experience from his diverse responsibilities. We look forward to having Dominic join our Cameco team. As Rochelle mentioned, I'm joining today from Vienna, Austria, where tomorrow I'll be attending meetings of the IAEA's Standing Advisory Group on Nuclear Energy.

Speaker 2

Mr. Rafael Grossi, the IAEA's Director General, Appoints group members from governments, research institutions and the nuclear industry to advise the agency on nuclear power and fuel cycle activities and provide guidance on matters concerning capacity for long term energy security. This trip adds to what has been a very busy fall. Back in Canada, I met with Ukrainian President Zelensky and Prime Minister Trudeau in September, followed by a trip with a Cameco delegation in October to the Head Office and Operations of Energoatom in Kyiv, reinforcing our commitment and support for Ukraine's energy independence. We also joined the OECD's inaugural Roadmaps to New Nuclear Conference in Paris, where government and industry leaders to build leadership and cooperation in nuclear energy.

Speaker 2

These are all proud moments for us at Cameco that highlight the impact our work is having around the world. Our invitation to these types of influential meetings highlights our credibility as a company and our well respected position in the nuclear fuel market. And they provide us with unique insight and the opportunity to be in the room where important policies are discussed in support of the global nuclear industry. It's an industry that is getting significant attention today and that's being recognized for the numerous benefits and advantages it can offer to the global energy This past quarter, we saw players from all facets of the nuclear sector congregate in London For the World Nuclear Association's Annual Symposium, where the atmosphere was more optimistic than it's been for over a decade, maybe ever. With over 40 years in this industry, I feel well qualified in saying, yes, we've seen enthusiasm in past cycles.

Speaker 2

Over at the symposium this year, there was a sense of urgency that I can't say we've experienced before. Each time the market has entered a period of transition, stakeholders look back at previous cycles to highlight similarities and common threads In an attempt to predict the duration and durability of the positive momentum, if you follow the industry and Cameco through the 2000s or if you are one of the exceptional few that might have been paying attention even earlier than that, you would have heard us talking about things like potential long term demand growth or supply pressure building on the horizon or the level of financial interest in buying physical uranium. We are of course seeing those similarities right now, but with the added element of urgency, I think there is much more to the story this time. So for today's call, rather than our customary approach of highlighting industry developments in the context of Cameco's strategy, I thought we would provide our view of what sets the current industry environment apart from previous cycles, pulling the various factors together into one discussion. And in doing so, I want to emphasize how Cameco, as one of the leading suppliers in the industry, is also evolving to maximize value While addressing the urgent call to action, let's consider the durability of demand, first in the context of climate change.

Speaker 2

Some will argue that the climate crisis isn't new as it's been part of the conversation for decades now. But what's different today is that urgency. It's no longer just a model on paper with academics running computer simulations. Increasing average global temperatures and the fires and floods that are becoming more and more frequent can't be ignored. The evidence continues to point to our carbon based energy systems as a key contributor to the problem.

Speaker 2

This has led to Elektron accountability and proposals by countries and companies for achieving net zero targets taking center stage. And today, it's clear, Achieving those targets does not happen without nuclear power. That itself is a notable difference, but it goes even deeper. This time policymakers are not shying away from proposing nuclear as a key part of their energy mix, some even reversing The W and A sessions in London that I mentioned opened with U. S.

Speaker 2

Member of Congress, Chuck Fleischmann And the UK Under Secretary of State and Minister for Nuclear and Networks, Andrew Bowie on a panel where they discuss today's bipartisan support in government. That certainly differs from what we've seen in the past and it forms what might be considered a solid base of support for demand growth using clean, Reliable, secure and well established nuclear technology. It's growth that is starting to move beyond Asia, which has been the key component of the industry growth story since the late 2000s. Asia's nuclear expansion obviously remains very important today, But the broader interest and level of potential growth has expanded and is now much more global. Beyond that base of demand growth, another emerging difference in today's demand profile is the potential deployment of new nuclear reactor designs with a number of small modular reactors and small advanced micro reactors in development.

Speaker 2

These represent a clean energy source that would be more accessible in terms Output that better matches small or modest local demand. They're expected to have better cost and schedule control by way of factory production. And they can also address needs beyond electricity, such as applications for industrial heat, Desalination or hydrogen production. Big industrial energy consumers are not waiting for those government decisions and policies I just mentioned. They are moving much more quickly.

Speaker 2

A number of private companies are taking action and announcing their own plans to support the Another big difference that won't be news to anyone is on the geopolitical front. The tension and Certainty are increasing daily. Events like Russia's invasion of Ukraine and a coup in Niger leave Countries reevaluating their energy security and who they want to rely upon to supply fuels, avoiding dependencies such as Russian gas. That evaluation of security is being done in the context of their carbon footprint and electron accountability, which leads to consideration of nuclear to a degree we have not seen for nearly a half century. And while countries need secure and dependable energy supply, they also want it to be clean.

Speaker 2

Political views and policies We are seeing a social shift happening like never 4, nuclear energy is an undeniable part of the social conversation. There is vocal support from diverse and sometimes sources like social media influencers, Hollywood personalities and even long time nuclear protesters like Bono View 2, who just last month admitted that although he has campaigned against nuclear energy for a long time, His view has flipped to support nuclear amid the climate crisis. Taken altogether, the overarching differences we're seeing this cycle contribute to that Full cycle demand growth you've heard us talk about. Previous bullish cycles were typically underpinned by demand that was more or less out in the future And then the longer term segment of the forward demand curve. This time, we are really seeing that durable demand growth across the full cycle.

Speaker 2

In the near term, we have financial interest buying physical uranium in a way that is much different than in the past. Financial participants are not acting as a marginal buyer and seller purchasing today and selling tomorrow when the price rises by a few cents. Decommissioning due to the economics of broken electricity markets are now being saved for their significant low carbon and secure energy benefits. And it's coming from Reactor Life Extensions. Again, thanks to the security and low carbon advantages and recognition that there is no equivalent Clean baseload alternative.

Speaker 2

In the long term portion of the cycle, demand growth is coming from more traditional new builds, As well as the emergence of the advanced reactors, SMRs and micro reactors, which have the potential to add significant demand In the WNA's updated fuel cycle report released in September, demand is looking more robust than ever, Averaging growth of 3.6 percent annually compared to 2.6% in the previous 2021 report. Geopolitical tensions and energy security concerns are also changing the demand picture. A number of new markets seeking fuel from reliable suppliers in safe jurisdictions have opened up to create full cycle contracting opportunities, especially in Eastern Europe. So those are some significant differences in the context of demand. But what about supply?

Speaker 2

Well, the uranium market has had its share of supply challenges in past cycles, but the difference today is that the supply picture is more 1st and foremost is primary supply. As demand grows and the mines are depleted, there is No Kazakhstan equivalent source of supply waiting on the sidelines somewhere to meet that growing demand into the 2030s. Even the existing uranium coming out of Kazakhstan is not going to be splashing around in the market as it has in the past, Gazatomprom has stated that under their value strategy, production now has a home in their long term contract book. A big reliable supply source is simply not going to materialize and the pockets of potential production that could be added to the secondary supply, which have been filling the gap. But the shock absorbers of the past are not what they used to be either.

Speaker 2

So far this year, industry wide, there has been nearly £144,000,000 committed under long term contracts, which is a level we have not seen in 10 years, Indicating the market remains on track to replacement rate contracting. These signposts provide a signal that inventories In all forms have been run down and there is certainly no megatons to megawatts program in the works to ease the pressure. Also on secondary supply, there is an ongoing shift to replace Russian fuel supply services and create more capacity in the enrichment segment of the fuel cycle by moving from underfeeding to overfeeding. I won't get into the technical aspects of underfeed, overfeed, But the punch line is that it means less secondary supply going back into the market from enrichers. In fact, similar to the uranium needed at the very start of the fuel cycle is declining.

Speaker 2

Then there is the matter of actually moving that supply through the cycle. Nobody will say that moving Class 7 nuclear material around the globe has ever been easy, But it's clearly facing new risks and challenges as a result of geopolitics. However, the uranium supply Stakeholders have recognized that much more than natural uranium is needed to build a nuclear fuel bundle. The services, refining, conversion, enrichment, de conversion, pelletization and fuel fabrication are getting more attention than ever And the degree to which they are interdependent complicates the typical supply demand analysis of a commodity. And those other segments of the fuel cycle are also facing challenges.

Speaker 2

Based on lessons learned, we are seeing a new common theme across producers and services At all stages of the cycle, suppliers have been clear they are not going to front run demand with uncommitted supply. If they are going to add back, expand or build new production or processing capacity, they need contracts and commitments from end users to support their investments. That has not been a central consideration in the past. As we hold those contracting conversations with customers to lock in long It's also important to consider today's pricing environment. We have never been this early in the cycle with prices as high as they are today.

Speaker 2

That's a significant factor that some might be thinking could hamper the momentum, but it isn't. That's because of the improving electricity prices rising faster than front end fuel prices, which has rarely, if ever, been the case for us in nuclear. That means customers can better tolerate the realities of sustainable fuel pricing and focus on shoring up inventories to help ensure security of supply. So all those differences in today's nuclear fuel cycle from both the demand and supply perspective mean that Cameco, As a diversified nuclear fuel supplier, has more opportunities in front of us than ever. And compared to the Cameco of previous cycles, we are different as well.

Speaker 2

This time, we don't have big capital intensive greenfield mines under construction. As we see demand come to the market, we have multiple Tier 1 licensed, permitted and approved assets extensions at McArthur River and Key Lake, which is double the term of our previous license. And at Rapid Lake, we received a 15 year license extension. We believe that our commitment to protecting the health and safety of our people and the public and Folio for the delivery of uranium in the years to come, we also have several already built and permitted Tier 2 assets where costs and economics are established and proven. These are all sources of proven and reliable supply from a preferred jurisdiction.

Speaker 2

And of course, it doesn't end there. We have what we believe are some of the best advanced exploration projects and most prospective land positions in the business. Today, we are more focused on our core expertise, having divested interests in gold and power generation. And as a pure play nuclear investment, we are very well positioned to maximize value. There is improved recognition of the importance and interdependence As well as our investment in global laser enrichment and its next generation enrichment technology are being highlighted for their strategic importance.

Speaker 2

And I am not using the word strategic in place of economic. We have been invested across the fuel cycle Since inception, I think those assets are more valuable to us today from a financial perspective than they've ever been. Considering our uranium and fuel cycle assets together from an investment perspective, we offer exciting up Site exposure to an in demand commodity at a time when supplies have never been more uncertain. And at the same time, we offer the stability and Protection of an impressive long term contract portfolio, representing a stream of earnings and cash flow that provides exposure to rising prices And our pipeline of contract discussions continues to grow. And with our partner Brookfield, we continue to work toward closing our acquisition of With several parts of that business being more stable and less tied to the ups and downs of the commodity, it's expected to complement our high quality Tier 1 uranium and fuel services assets.

Speaker 2

Cameco's valuation should therefore reflect a scarcity premium. No other publicly traded uranium company offers similar exposure to that durable, full cycle demand growth across the fuel cycle that's occurring in the nuclear industry. So I think it's clear the drivers that supported the positive momentum of cycles in that past are important factors in today's environment. However, the urgency and the differences impacting demand and supply And the strategy Cameco has pursued over the past decade has made us a different company today than we've been in the past. Combined, these factors set up this cycle to be more exciting than ever.

Speaker 2

The improving market conditions coupled with our Strategic decisions are also benefiting our financial performance. We're seeing improvements in our earnings, gross profit and cash flow, which was evident again this And we expect our financial performance to improve further as we continue our transition back to a Tier 1 run rate. Cameco's strategy of contracting discipline, production discipline and risk managed financial discipline is set within the context of Our balance sheet remains strong. We will retain our conservative financial management to support our balanced And disciplined contracting and supply decisions, providing us with the ability to self manage risks and retain the capacity to pursue value adding investments Like Westinghouse. Before moving into our Q and A session today, It is with an enormously heavy heart that I acknowledge and remember Ian Bruce, a dear friend, valued colleague and Cameco's longtime Board Chair, Who tragically passed away at his cottage in Ontario on October 16.

Speaker 2

I've worked with Ian since he joined our Board more than a decade ago. And On behalf of the entire Cameco family, I extend our deepest condolences to Ian's wife, Darlene, and his family and many friends and loved ones. His business acumen, personal and professional advice, overall leadership and most importantly friendship We're absolutely invaluable to Cameco and his absence during yesterday's Board discussions was notable. Ian was excited about nuclear energy and the company's future and he was extremely proud to be part of the Cameco team. He will be profoundly missed.

Speaker 2

So thank you for your interest today and we are happy to take your questions.

Operator

Thank you. We will now begin the question and answer session. In the interest of time, we ask that you limit your questions Webcast participants are welcome to submit questions through the box at the bottom of the webcast frame. The Cameco Investor Relations team will follow-up with you by e mail Our first question comes from Orest Wowkodaw of Scotiabank. Please go ahead.

Speaker 3

Hi, good morning. Grant, I was hoping we could get some color on what's happening with contracting. Obviously, the uranium price has moved up a lot Even in the last 3 months. And I'm wondering if you're seeing, what kind of behavior you're seeing from your customers, Whether the higher price movement is actually engaging them to sign more contracts or whether you're seeing them pulling back? And alternatively, how is Cameco approaching this behavior?

Speaker 3

And are you continuing to pull back in terms of signing contracts In hopes of better terms with respect to higher floors and ceilings down the road. Just wondering sort of what that engagement looks like right now?

Speaker 4

Yes, Orest, great questions, great place to start. There have been a lot of opportunities to be with customers in the last couple of months, the WNA Symposium that Camica or that Tim referred to as well as the recent NEI Conference in Charlotte. There still is a very pervasive urgency in the market. That urgency is reflected in improving contracting rates. We now are looking at year Across the industry, excuse me, about £145,000,000 contracted, that is Much higher than it had been in each of the last 10 years, starting to approach that durable replacement rate contracting.

Speaker 4

I would say in general, it is a broad based demand recovery. It reflects demand from those who might have They've been shutting down a reactor early coming to the market. Those who are now pursuing life extensions for reactors that might have Been retired after their initial license extension and then of course its demand for those who are building new. It also is has a very important regional focus and that is the emergence of Central and Eastern European customers Into the Western supply piece, which is a demand that is new and is quite frankly competitive With the demand that we used to see from Western Europe, from North America, Canada, the U. S.

Speaker 4

As well as parts So it is broadly based. I would say that there are Some utilities that have been more aggressive than others in shoring up their longer term supply. Probably No surprise, those who are on the front end of rising electricity prices and energy security Have moved quicker. I would say that is characteristic of Western European utilities as well as Central and Eastern European utilities. The good news, Orest, is that some have yet to come to the market.

Speaker 4

And so when Tim refers to the situation where We're in the early innings of a contracting cycle. It is because we know there are pockets of demand, bigger utility customers yet to come. All of this suggests to us we are absolutely in the right position as Cameco to be strategically Positioning our contract portfolio for higher prices being biased towards market related long term contracting that will reference prices at time of delivery out into the future. We have been More selective in ensuring that we're getting that exposure to a rising price environment. We lead the market with respect to the construction of floors and the construction of ceilings.

Speaker 4

This is for us exactly where we want to be. Sorry for the long answer. I just wanted to cover it in its full dimensions.

Speaker 3

Okay. Thank you for that. And just as a follow-up, your the Catavax announced a pretty aggressive 2025 production target a few weeks ago, Going to £80,000,000 from somewhere in the £55,000,000 to £60,000,000 Should we anticipate Like how does Cameco think about that strategy? I mean, you obviously have a lot of curtailed capacity, both in terms of still Tier 1 expansion potential, But also with respect to your Tier 2, what do you need to see to further increase your production plants?

Speaker 4

Yes. Let me just make a comment on the Kazatomprom announcement because I think across the industry, Certainly on the uranium supply side, not a lot of surprise. I think just a general expectation that As ADAPPROM has pivoted to a strategy that's very similar to Cameco's, which is you build the homes under long term contract And then you call for more production. They've been successful in building long term contract homes. I think a lot of people had noted Some of the volumes that they had committed to, to go into China, for example.

Speaker 4

So it's pretty clear they need those pounds As part of commitments they've already entered into. So that is a very big departure from the Kazatomprom of the past, Which had produced a lot of material, held it as uncommitted primary production, and then was required to sell it through a spot market not So not a lot of surprise that those announcements were made and of course the backdrop For achieving those increased production numbers is performance. On the operating side, you see a lot of risks being raised Mike is out of problem with respect to challenges in their supply chain, the types of things, acid supply, for example, drilling, Availability, the types of things that make achieving those production targets difficult. So, I hope folks weren't Surprised by that announcement or weren't surprised to the negative because I think it's very consistent with the commercial strategy because Adamprom has been following. With respect to Cameco, we remain in supply discipline.

Speaker 4

We have seen these markets before. We believe these are the early innings of a robust contracting cycle. We've never been at this stage of a contracting cycle at these prices. It suggests that we want to be leveraged with our in ground production, our in ground inventory to higher prices. So what we need to see is an urgency of supply translate into an urgency of demand.

Speaker 4

We just need to see more demand in the market. That demand in the market is going to restore true production economic pricing, the type of pricing required to be considering in a meaningful way the restart of Tier 2 production for example, and then after that of course Real investment in greenfield. Because we've seen these markets before, we can be strategically patient. We are not in a rush To produce material that doesn't have a home requiring us to either build an inventory or sell it into the spot market, Neither of which have been supportive of value for our owners, and we just won't do that.

Speaker 3

Thanks, Grant.

Speaker 2

Thanks for your question, Orest. And sorry, I wasn't ignoring you. We got cut off for a minute, but we're back.

Operator

Our next question comes from Ralph Profiti of 8 Capital. Please go ahead.

Speaker 5

Thanks, operator. Good morning, Tim and Grant. Is there a specific window of time where you can refer us to With respect to your comments about sort of future demand being more near term, right? Is this equal across all tenors or is there a specific window say within 2 to 3 years Or sort of 3 to 5 years that may be of particular interest to highlight for us?

Speaker 2

Grant, why don't you carry on with the marketing piece in the market?

Speaker 4

Yes. When you think about that near term demand, we're often referring to those who are running reactors may have been planning to shut down early, but then the policy condition changes for them to be saved. And so if you just think in the recent past, Some examples would be the Diablo Canyon units in California or perhaps the Byron and Dresden units in Illinois. And why we call this near term demand is because the reality for the utility that's been operating those units is not only Have they not been procuring run rate material? They've probably been drawing down their inventory that was Signed to those units and so when those units are extended, we often see 2 very distinct types of near term demand.

Speaker 4

And the first is Those utilities stepping into the market and looking for run rate requirements now for the next 3 years, now for the next 5 years, and they Spot market in the form of restoring some inventory targets that had been drawn down. Now that is a Kind of in the next 5 year window, Ralph. And so that is really helpful demand with respect To price formation because what it effectively does when you see those announcements is those who might have Say uncommitted primary production or an offtake agreement with perhaps a state owned enterprise that is continuing to produce without a home. Those types of folks might step back from selling material in the spot market in anticipation of that demand to show up. So it tends to be Very constructive.

Speaker 4

That's a little distinct, I would say, from that medium term demand that Tim referred to, which is Really around life extensions. The U. S. Fleet pioneered life extensions, but now with a clean energy and energy security Crisis going on, a lot of jurisdictions are considering running their reactors for a lot longer and then that starts to extend the tenor of The term contracting and so for example, we are now seeing term contracting push through the end of this And into the early part of the 2030s, in a fairly significant way. So we often think of that near and the mid

Speaker 5

In the production update in September, Your team cited equipment reliability issues, availability of skilled labor and supply chain challenges. Just wondering, Are you seeing these as temporary and transitory? And how are you tackling that how are you tackling these issues?

Speaker 2

Yes. Ralph, we're working through those Issues, when you're down for 4 or 5 years, like we were at McArthur and Key, nothing's that simple and we put in a lot of automation and Robotics that we have to fine tune. So I think we're coming around now. I've seen some numbers in the last Little while and our production is running nicely and we hope to get it just at a steady state. So we're working through those issues that we mentioned, I think it was in early September 3rd September at both the McArthur Key and Cigar.

Speaker 2

And so we want to get back to steady state. Our plan is to get back up to 18 £1,000,000 a year at both of those sites next year and that's what we're going to do.

Speaker 5

Excellent to hear. Thanks, Tim. Thanks, Grant.

Speaker 2

Thanks.

Operator

Our next question comes from Lawson Winder of Bank of America. Please go ahead.

Speaker 6

Yes. Thank you, operator, and good morning, Tim, Grant and Rochelle as well. Nice to hear from you all. Thank you for the update. I would like to ask about Westinghouse, and first of all, just ask if you could confirm that the U.

Speaker 6

K. Is the final remaining Competition authority approval that is needed. And maybe if you could please comment on why the process has taken a little longer than expected?

Speaker 2

Yes. So it's Tim. I think we've worked our way through about 40 or 40 plus approvals so far. We do have the UK left to go and so we're still expecting to close the deal by the end of the year. So I think Everything is on track for that.

Speaker 2

Nothing too new there. We're super excited about closing the deal. When that day comes, we think we got the Right partner, the right target and the right timing. So more to come on that as soon as we get all the approvals in place.

Speaker 6

So U. K. Definitely is just the last one? Sorry, I just wanted to be totally clear on

Speaker 2

that. Yes, that's correct.

Speaker 6

Okay. Yes, fantastic. Well, that's exciting. And then the follow-up I would ask to that question would just be in terms of financing the US2.2 billion dollars required on closure. The MD and A spoke about a funding mix of cash, debt and equity.

Speaker 6

And I just wanted to ask whether the equity proportion refers to the equity Already completed in 2022 or is there some consideration for an additional equity raise on close?

Speaker 2

It was the one we already did, but I'll ask our CFO, maybe just to give a little bit of detail of how we're going to end up paying for our acquisition, Grant?

Speaker 4

Yes. The good news is Lawson, it's already in place, the financing. This is the action that we took last October 11. The equity that we raised is the only equity we intend to raise for this transaction. We also put in place 2 Syndicated term loans, one of a 2 year tenure and one of a 3 year tenure, both $300,000,000 Those are In place to be drawn at time of closing.

Speaker 4

And then of course, we would just work really quickly to pay those down. This is all occurring while the cash flow as you see is building in the uranium segments as well as the conversion segment and of course The financial contribution of Westinghouse will be added to it. So we're in a terrific position and Absolutely confirm there is no additional equity required.

Speaker 6

That's fantastic. I look forward to that deal closing. Good luck guys.

Operator

Our next question comes from Gordon Johnson of GLJ Research. Please go ahead.

Speaker 7

Hey guys, thanks for taking my question. Just two questions. First off, can you guys let us know what happens To, I guess, your contracts, when you contracted out that you have capacity issues, With respect to that question, what happens to those guys who have contracted out some of the other guys out there who have contracted out yet aren't And is there a price that potentially could hurt demand if some of these capacities aren't available? And then I have a follow-up. Thank you.

Speaker 2

I'm not sure I understood that question, Gordon. You're asking if there's other producers that can't bill our contracts, what will happen?

Speaker 7

Yes, let me be very specific here. So you guys have contracted out your capacity Looking forward, but there's some production issues. So is there anything in your contracts that Potentially benefit and or not benefit you guys with respect to your, I guess, contracted capacity if those production issues persist?

Speaker 2

Well, let me be very clear. We will fill our contracts. We have multiple ways of filling contracts. I think Grant's Pretty clear on that over time. We have production, of course, and we're ramping that up.

Speaker 2

We have Inventories, we have short term loans. We have other purchases that we've made in the past that we can draw forward. So I assure you, we will fill all of our contracts that we've signed with those different levers we have to pull.

Speaker 7

Okay. And then one last question, if I could. It seems like you guys have plans to buy around 13,000,000 pounds of V308 this year, but it seems like so far you've brought $5,000,000 So is the plan to buy Roughly $8,000,000 on the spot market. Can you just give us an update there? Thanks for the questions.

Speaker 7

Congrats on results.

Speaker 2

Yes. Thanks, Gordon. It is a mix. We have a mix. We certainly have a mix of purchases we make on an annual basis.

Speaker 2

Grant, you maybe want to break them down between our Enki and Long term and spot.

Speaker 4

Yes. Gordon, those are great questions and in many ways they're tied together. So As we've heard us say over and over again, we don't sell into the spot market. The spot market is not capable of absorbing Uncommitted primary production, certainly of the scale that we can produce and those who have done it in the past, it's always ended in tiers for their shareholders. That is not it's not a wise strategy, has not been in the past, it isn't going forward.

Speaker 4

So what we do is we layer in long term contract commitments. And it is very typical for us actually to plan to produce less than we're going to deliver. The reason is we know how this market works. This market, there's always somebody who's willing to sell into the front end of the spot market And we always like to have a bit of demand to deploy to pick up that material because quite frankly, it is very supportive of not just Our portfolio of sales that are already contracted, but it's very supportive of the negotiations we currently have going on To structure new contracts. And so we like the fact that with demand in the market, there tends to be stronger pricing to achieve in both Our portfolio as well as our pipeline.

Speaker 4

So then we always have the issue of how do we source these committed sales. Production is an important source of it. We carry an inventory to deal with any production shortfalls like we have today. We will make purchases in the near term of the spot market for immediate delivery. We will occasionally buy on the forward curve For delivery out into the future and we can take delivery of that material sooner if we need it.

Speaker 4

We have other tools in the toolbox including as Tim said, folks have a lot of material parked at our facilities and in some cases we have the ability to borrow it. All of that to say That we think about these sourcing decisions years in advance, not just weeks in advance, but years in advance. So we will buy material in the market. That's exactly where we want to be at this point in the cycle. We are far from Sold out from an overall contract portfolio point of view.

Speaker 4

We've got a lot of pounds that can be contracted out into that window that I talked about late 20s We obviously want that material contracted at stronger prices and one way to achieve that Is to actually have some demand to deploy in the near term of the market. So this is exactly where we want to be. Nobody should be surprised by it. It is an important part of that full cycle value capture that we talked about. So I think great question, Gordon.

Speaker 7

Thanks again, guys.

Speaker 2

Thanks, Gordon.

Operator

Our next question comes from Katy Leuchappel of Canaccord Genuity. Please go ahead.

Speaker 8

Thanks, operator, and good morning, Tim and Grant. Most of my questions have already been addressed, Maybe just one quick one. Your team just returned from the NAI conference, I'm assuming in Charlotte last week, and now we've got spot prices sustainably above $70 a pound. What was the chatter among the industry participants at the NAI conference? And how, if at all, have these conversations evolved since WNA in September?

Speaker 2

Well, Katie, I wasn't there. So what I the information I got was from one of the weekly publications that comes out. Grant had a team there and I know some of his people and I saw a report go through to Grant. So, do you want to give an update on what your marketing people saw Grant?

Speaker 4

Yes. That particular conference, Katie, really is dominated by U. S. Utilities. So unlike, say, the WNA Symposium that has a lot more of the global utility base there.

Speaker 4

That is a very much a U. S. Utility focused conference. The U. S.

Speaker 4

Utilities, I think, as a whole, Have been slower to respond to the energy security and the clean energy And the long term contracting that you would want to start to put in place. And so I guess no surprise as a consequence at the NEI conference Just recently, there was a strong sense of urgency that there are many utilities who may have left it Later than they should have. There's a high expectation of demand to come to the market. This is a market that is experiencing a lot of off market activity where utilities are trying to quietly find material. They don't want to be Putting RFPs in the market and having a bunch of them all in at once, sending a very strong demand signal, we've seen this before.

Speaker 4

This is all part of why we think we're in the early stages of a contracting cycle. So I would say if there's a takeaway word, It's urgency. It's urgency of ensuring that the fuel supply is there and all components of it, not just the uranium, To fuel what is a terrific demand outlook for nuclear power in the United States.

Speaker 8

Thanks, Grant. Appreciate the additional color.

Speaker 2

Thanks, Katie.

Operator

Our next question comes from Brian MacArthur of Raymond James. Please go ahead.

Speaker 7

Good morning. I just want to follow-up on the mix

Speaker 2

of

Speaker 7

sales. For your new guidance where you've increased your revenue forecast this year, you also talked about 2 thirds of Inktie shipments coming this year. Is 2 thirds reflected in your Forecast this year or how should we start to think about this as you mentioned you have a large number of sources?

Speaker 2

Yes.

Speaker 4

Brian, there's obviously a bit of a lag. Remember That our production out of Incai, we equity account for. So obviously, when we Take delivery of that material this year, we will pay for it. And remember, we have the right to buy it from the joint venture at a discount to market. And so that financial commitment of purchasing it will be booked this year.

Speaker 4

But then the big reward of course is the dividend that gets paid out from Incai to its owners and of course we're one of them which is the difference Between what you can produce for and what the material was sold for to its owners. And that will flow in next year. So there is a bit of A timing lag where we'll have dollars out the door to purchase the material, but the dividend will come usually in that April, May window So of next year, and so just a bit of a timing issue, but make no mistake, the economic value of that really good Tier 1 asset It is always ours.

Speaker 7

No, I get that. But just in your cost of goods Do you not have to make some assumption about what you're going to get?

Speaker 4

Yes, absolutely. So in the cost of goods Will be the purchase of the material that arrives this year. So that will be reflected in there.

Speaker 7

Right. So at the beginning of the year, it would have been 100%. Now it's 2 thirds. Is that fair? Is that the way you do

Speaker 9

It's Heidi here. So I guess, really, Incai shows in our cost of sales as a spot purchase. And so we kind of whether it's a purchase that we do through our long term Purchase commitments or through the spot or it's inkai. We have a we work into our cost of sales the amount that we need to purchase. So, Incai would be reflected as part of the £11,000,000 that we plan to purchase this year.

Speaker 7

Okay. This was a 5% discount on that

Speaker 2

Thank you, Brian.

Operator

Our next question comes from Alex Macpherson of All Saskatchewan. Please go ahead.

Speaker 3

Hi, everyone. Good morning. Thanks for taking my call. One of the previous callers asked about Northern Saskatchewan, but I was hoping you might be able to provide a bit more Color on the specific challenges you faced in terms of the announcement in September and sort of what steps you're taking and working on to resolve those issues. Thanks very much.

Speaker 2

Yes. Thanks, Alex. Nice to hear from I think we detailed in previous when we put out our press release in September that we were having Some short term issues regarding, I think at Cigar Lake, we're moving to the ore zone and that's never easy and so we just had to adapt to that. We're having a few issues getting some skilled labor. We're fixing that up.

Speaker 2

So reliability of equipment was another piece That's our business. That's what we do. Those are things we can fix. So as I said, in the last I've been watching, obviously, we get updates from I am every day, every week on how production is going and I'm happy to say it's going a lot better. And so we haven't changed our guidance that we put out September and our goal, Alex, as you know, is to get back to a run rate of £18,000,000 per year on 100% basis at both McArthur Key and Cigar and then we'll see what the future brings.

Speaker 2

If there is demand

Speaker 7

for our

Speaker 2

product that Shows up in the form of long term contracts from good customers, so we'll see if we can increase our production.

Speaker 3

Perfect. Thank you very much.

Speaker 2

Thanks, Alex.

Operator

Our next question comes from Grace Simes of Energy Intelligence. Please go ahead.

Speaker 10

Good morning. My question is just if there are if there's any

Speaker 2

I'm going to ask Sean Quinn, who Looks after our Kazakh interests to answer that one. John?

Speaker 11

Sure. Yes, the project continues great. It is moving fully, but we're hoping to get construction Completed, I would say, in the first half of next year now with conditioning to follow. It is well, it is behind schedule from But the project is continuing and it's still viewed as a very important objective for our Inkai joint venture that we can have a fully calcined product coming out of that operation.

Speaker 10

Okay. And just a follow-up, once that calcineder is Commissioned, would Cameco plan to transport material directly from Yinkai to China to fulfill some of its Chinese contracts?

Speaker 11

We might. We're looking to complete the Kala standard because it will create that sort of optionality for the production out of JV and Kai.

Operator

Our next question comes from Richard Hatch of Berenberg. Please go ahead.

Speaker 12

Thanks very much. Yes, thanks Tim and team, and good morning. Just a question on the purchase commitments. I see in 2024 and 2025, that's increased up to 1 100 and 17 £1,000,000 from £102,000,000 in the previous quarter. I think you kind of answered the question to an extent, I think, a bit earlier, but kind of add a little bit more meat to the bones, is that just a function of the fact that you're seeing more interest on those term contracts, Particularly over the next couple of years and therefore you're just covering yourself from a supply standpoint if the mines perhaps You know, can't ramp up as quick as you wanted to or just to give yourself a little bit of extra flexibility, because you're seeing more demand over those next couple of years?

Speaker 12

Thanks.

Speaker 4

Yes. Yes, sorry. I would just I would maybe characterize it a little different. We don't sell into the spot market. We don't sell into the sort of the trade or churn that goes on in that market.

Speaker 4

But occasionally, we'll have a customer that say we're in a long term contract discussion with who wants pounds out in a classic Term window and says open, but can you find some material in the near term as well? And occasionally for to purchase material tick up in that near term window. But I just I want to go back to a comment I made to Gordon's question, which is We didn't design this market, but we know how it works. When Cameco comes to purchase, those who have material to sell hang on to it, Prices strengthen and yes, we might make a purchase at a slightly higher price. But then don't forget, we have a portfolio that reference market And that improves.

Speaker 4

And more importantly, the long term contracting that we're actively negotiating is now negotiating higher price Measures. So the area under those later two curves is always bigger than the area under the curve of purchasing a bit of material on the front And that's just the way this market behaves. And we didn't design it this way, but we always intend to capture full cycle value with the way it's structured. So Don't think of that as spot sales to traders or spot sales into the churn. They are very much end user sales, But we just might have a customer with a slightly nearer demand.

Speaker 12

Okay. So, yes, I wasn't inferring it was into the spot market, but he is actually into So effectively that $1.02 to $1.17 increase is really to feed your utility customers just because they're Wanting a bit more material in the near term?

Speaker 4

Yes, great way to think about it.

Speaker 12

Cool. Thank you for that.

Speaker 2

Thanks, Richard.

Operator

Our next question comes from Kipp Keene of S&P Global. Please go ahead.

Speaker 7

Hi, guys. Thanks for taking my question and condolences for your loss of Ian Bruce. Thank you.

Speaker 2

Thank you.

Speaker 7

Yes. I wondered if you might talk a

Speaker 6

little bit about your cash cost expectations.

Speaker 7

I think they were 47% higher in the quarter over the same period a year ago, 34% for the year to date Higher than 2022. Do you think those will the cash costs moderate in Q4 and into 2024? Or Are these sort of levels where things will stay? How are you thinking about it? Brent?

Speaker 4

Yes. If I've said a couple of times on the call, but maybe I'll just reinforce it. We are still in transition. We've seen these markets before. We are never the company that tries to front run demand with supply.

Speaker 4

It always makes sense To let demand strengthen ahead of us making supply decisions. The consequence of that strategy though is that we're still in Supply discipline, we're still transitioning to those Tier 1 cost structures, which is great news, by the way. It means That the financial performance of the uranium segment is still in front of us as opposed to behind us. So when you're thinking about kind of a longer term trend, I'd encourage you not to look at any one particular quarter, especially a quarter where we've had an outage at Cigar Lake for a month, for example. And what I'd encourage you to do It's turned to our AIF, our annual information form.

Speaker 4

So on an annual basis, we are required to update The life of mine operating costs of our technical reports of our material Properties and what you'll see in our most recent one is that, MacArthur is at just over CAD16 per pound, Cigar Lake, just over CAD18 per pound and Inkai is below CAD8 per pound. So if you're trying to kind of get a sense of where that longer Term reversion is too. I would stay away from the quarterly numbers, which can be distorted by production outages or maintenance And I would just refer to back to that AIF. It's a much better marker for you, Kipp.

Speaker 7

Okay. Yes. Thanks a lot.

Speaker 2

Thanks, Kipp, for your question.

Operator

This concludes the question and answer session. I would like to turn the conference back over to Tim Gitzel for any closing remarks.

Speaker 2

Well, thank you very much, operator, and thank you to everybody who joined us today on the call. As always, we appreciate your interest and your support. There's a number of notable differences in the market's evolution and prospectivity compared And I can tell you at Cameco, we're certainly excited to see the positive momentum that's building for nuclear energy. One thing that will remain consistent is our vision of energizing a cleaner world, which keeps us focused on delivering long term value in a market Demand for safe, secure, reliable and affordable clean nuclear energy is growing. We will continue to do what we said we would do and execute on our strategy in a manner we believe will make our business sustainable over the long term.

Speaker 2

So with that, thanks everybody and thank you for your kind wishes With respect to Mr. Bruce, please stay safe and healthy. Thank you.

Operator

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

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Earnings Conference Call
Marten Transport Q3 2023
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