Cameco(CCJ)2024-11-07 16:23Financial Data and Key Metrics - Adjusted EBITDA for the first nine months reached nearly 0.12 in 2023 to 0.24 by 2026 [28][29] - Production at the Key Lake Mill exceeded expectations, with 2024 production now expected to reach 19 million pounds, up from the previous estimate of 18 million pounds [31] - Production from JV Inkai is expected to be 7.7 million pounds, down from the previous estimate of 8.3 million pounds due to sulfuric acid supply challenges [35] Business Line Performance - Uranium segment: Production at Key Lake Mill exceeded expectations, with automation and digitization projects contributing to improved performance [31] - Fuel services segment: Production was 60% higher than the third quarter of the previous year, driven by the commissioning of a new closed-loop water system at Port Hope [40] - Westinghouse investment: Adjusted EBITDA outlook remains positive, with a 6% to 10% growth rate expected over the next five years [55] Market Data and Key Metrics - Long-term uranium prices have reached their highest level in over a decade, but significant investments in new projects are still lacking [19] - Long-term contract volumes increased from 50 million pounds at the end of September to 90 million pounds by early November, driven by larger contracts signed in October [24] - The conversion segment of the fuel cycle remains tight, with prices at historic highs [24] Company Strategy and Industry Competition - The company is focused on optimizing Tier 1 assets and returning to a Tier 1 cost structure, with strong production performance and a solid financial position [5][28] - Cameco is well-positioned to leverage opportunities in the nuclear industry, with a strategy centered on full-cycle value and investments across the reactor life cycle [27] - The company is selective in committing uranium inventory and UF6 conversion capacity to maintain exposure to rising prices while protecting against downside risks [23] Management Commentary on Operating Environment and Future Outlook - Management highlighted the growing demand for nuclear power, driven by decarbonization, sustainability, energy security, and rising energy demand [17][18] - The U.S. ban on Russian uranium imports has created supply challenges, but the company is well-positioned to meet demand from responsible and reliable suppliers [20][27] - The company expects long-term contracting activity to gain momentum, with increased utility interest and off-market negotiations [22][23] Other Important Information - The company repaid 400 million, with plans to repay the remaining 200 million [46] - Cameco is finalizing an updated National Instrument 43-101 technical report for the Inkai mine, which will include updated reserves, production profiles, and cost information [37] - The company appointed David Doerksen as Senior Vice President and Chief Marketing Officer, and Lisa Aitken as Vice President Marketing [48] Q&A Session Summary Question: Long-term contracting and procurement behavior - Management noted that utilities are starting to shift their focus upstream in the fuel cycle, with uranium demand expected to increase as enrichment and conversion markets tighten [51][53] Question: Westinghouse's long-term EBITDA growth rate - The company maintains its 6% to 10% EBITDA growth rate for Westinghouse, with potential for upward adjustments as new projects reach final investment decisions [54][55] Question: Inkai production challenges and Tier 2 assets - Production at Inkai is impacted by sulfuric acid supply issues, but the company remains committed to the project. Tier 2 assets remain on care and maintenance, with potential for future reactivation [61][63] Question: Conversion market and Springfield restart - The conversion market remains tight, and the company is strategically patient in restarting the Springfield facility, waiting for stronger contracting cycles and pricing [66][71] Question: New nuclear builds and AP1000 role - The company sees significant opportunities for new nuclear builds, particularly with the AP1000 reactor, which is well-positioned to meet future energy demands [74][78] Question: Uranium pricing and cost inflation - Management emphasized the structural gap between uranium supply and demand, with higher prices needed to incentivize new production. Cost inflation is being managed through automation and digitization investments [89][102] Question: Westinghouse's Q4 performance - Westinghouse is expected to have a strong Q4 due to seasonality in its business, with higher margin work typically occurring during the fall outage season [105][107] Question: Long-term contracting and price negotiations - The company is disciplined in its contracting approach, with floor and ceiling prices for long-term contracts remaining at 70 and $130, respectively. Higher prices are expected as demand increases [119][125] Question: Uranium price seasonality - Uranium prices typically show seasonality, with stronger demand in the fall and winter months. The company expects higher prices to address the structural supply-demand gap [135][142]