Energy utilities are beginning to pivot towards uranium procurement strategies that more carefully weigh origin risks, uranium major Cameco CEO Tim Gitzel said this week, a development seen as good news for the Canadian company.
He reported that this year had been a contracting success for Cameco, with more than 45-million pounds added to its portfolio of long-term uranium contracts.
“We continue to have a significant and growing pipeline of contract discussions,” said Gitzel, but added that the group was “strategically patient”.
“We have significant leverage to market improvements with unencumbered pounds in the ground. Additionally, we are focusing our efforts on capturing conversion business as conversion prices are at record-highs,” he said.
Many jurisdictions, which previously placed “too much focus on weather-dependent renewable energy” and are now “struggling with power shortages and spiking prices”, were also turning to nuclear for electricity.
But Cameco remained committed to its supply discipline and the company would continue to balance delivering low-cost pounds into committed sales contracts, while maintaining unencumbered supply for future years by preserving its tier-one assets.
Cigar Lake, in Saskatchewan, is a tier-one asset, which Cameco believes will benefit it for years to come and recently increased its ownership in the fully licenced mine.
Gitzel reported that Cameco had managed to catch up on Cigar Lake development work that had been deferred from last year, and that the mine would produce 18-million pounds (on a 100% basis) this year.
However, the company has encountered some challenges at the Key Lake restart, with respect to the availability of critical materials, equipment and skills for some of the critical automation, digitisation and other projects. In addition, after four years on care-and-maintenance, Key Lake has experienced some “normal commissioning issues”, Gitzel said.
Cameco adjusted its schedule to accommodate these delays and anticipate first production would be deferred to later in the fourth quarter. As a result, the miner expected up to two-million pounds production (100% basis) this year.
“Our overall production forecast remains unchanged at up to 11-million pounds our share, a benefit of being a multi-asset producer, as the increase at Cigar Lake largely offsets a slower ramp-up at the Key Lake mill due to some delays in our work schedule,” he said.
Meanwhile, regarding the Inkai joint venture with Kazakhstan’s Kazatomprom, Cameco said that it had not taken any deliveries from its share of the JV’s 2022 production that was destined for its Blind River refinery. The JV has not yet secured and alternative shipping route that did not rely on Russian rial lines or ports.
“While we work on enabling shipping via the Trans-Caspian route continues, we have no confirmed ate for when the first shipement with our share of Inkai’s production will proceed via that route. Should JV Inkai be unable to execute its sales transactions due to its inability to ship our share of its 2022 production, our 2022 equity earnings and our dividend may be impacted, depending on how and when the issue is resolved,” Cameco warned.
Q2 RESULTS
Cameco reported second-quarter net earnings of C$84-million and adjusted net earnings of C$72-million.
The miner produced 2.8-million pounds (attributable) during the quarter and delivered 7.6-million pounds at an average realised price 41% higher than the same period last year.
In our fuel services segment, the average realised prices were 8% higher than in the second quarter of 2021.
At June 30, Cameco had C$1.4-billion in cash and cash equivalents and short-term investments and C$997-million in long-term debt. In addition, the firm had a $1-billion undrawn credit facility.
