Cameco Corporation

Thank you for standing by. This is the conference operator. Welcome to the Cameco Corporation fourth quarter 2023 results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. Following the introductory remarks, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then 0. EDCAS participants are asked to wait until the Q&A session before submitting their questions, as the information they are looking for may be provided during the presentation. The Q&A session will conclude at 9 a.m. Eastern Time. I would now like to turn the conference over to Rachelle Girard, Vice President, Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to Cameco's fourth quarter conference call. I would like to acknowledge that we are speaking from our corporate office which is on Treaty 6 territory, the traditional territory of Cree peoples and the homeland of the Metis. With us today are Tim Gitzel, our President and CEO, Grant Isaac, our Executive VP and CFO, Heidi Schake, Senior VP and Deputy CFO, Brian Riley, Senior VP and Chief Operating Officer, Sean Quinn, Senior VP, Chief Legal Officer and Corporate Secretary, Alice Wong, Senior VP and Chief Corporate Officer, and Dominic Kieran, Global Managing Director of Cameco UK Limited. I'm going to hand it over to Tim in just a moment to briefly discuss the current nuclear market environment, our 2023 performance, and how it provides the basis for Cameco's plans and outlook for 2024. After, we will open it up for your questions. Today's call will be approximately one hour, concluding at 9 a.m. Eastern Time. As always, our goal is to be open and transparent with our communication, However, we do want to respect everyone's time and conclude the call on time. Therefore, should we not have time for your questions during the call, or if you have detailed questions about our quarterly financial results, we will be happy to follow up with you after the call. 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 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. 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 Cameco.com. Today's conference call is open to all members of the investment community, including the media. During the Q&A session, please limit yourself to two 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. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements, and we do not undertake any obligation to update any forward-looking statements we make today, except as required by law. Please refer to our most recent annual information form and MD&A for more information about the factors that could cause these different results and the assumptions we have made. With that, I will turn it over to Tim.

Well, thank you, Rochelle, and good morning, everyone. We appreciate you joining us for today's call and a belated Happy New Year. Our fourth quarter conference calls always provide a great opportunity to discuss the past year's developments in the uranium and nuclear fuel markets. It's also a good time to touch on a few annual highlights that demonstrate how well our strategy is performing and to provide some insights into our current expectations for the year ahead. So that's the outline I'll follow today. This past year we've been consistently talking about the positive market momentum, so I think I can be fairly brief on that side of things. We spent a great deal of time on our calls, in our presentations, and on our webcasts talking about our optimism and positive view of the constructive market conditions we've seen throughout 2023. And we are absolutely maintaining that enthusiasm moving into 2024. Those listening today that tuned in for a few of our calls and presentations prior to would be very familiar with the phrase positive long-term fundamentals. I say somewhat tongue in cheek that we use that message more than just a few times to reinforce our optimism through the lowest points of the market cycle. Back when we initially made that statement, we certainly couldn't forecast the timing of a market transition. But we remained convinced that once the excess, uncommitted primary supply and mobile inventories cleared the market, and as demand continued to grow, our industry would recover and our company would be stronger than ever. So now as we watch the uranium contracting cycle shift closer to a replacement rate level, I can say with confidence that we have entered the early part of that long-term window we've been talking about. And those fundamentals we were referring to, they are even more positive than we had anticipated. On the demand side, we used the term durable at every opportunity, as we believe it accurately describes and effectively differentiates today's fundamental demand picture from previous cycles. The previous peaks in our market have typically lasted for weeks, while the valleys have lasted for years. That was the case when the excitement about uranium and nuclear was driven by one or two discrete events. A mine shaft failure, the end of the megatons to megawatts program, a flooded mine in development, Chinese contracting that absorbed significant supply. Those types of events all added speculative, shorter-term, momentary pressure to supply and demand. However, in today's environment, the uranium market is certainly having more than just a moment. Instead, we're seeing full cycle growth in the near, mid, and long term, with broad interest in nuclear energy like never before. And it's being driven by global scale factors that are widely expected to persist for years to come. Geopolitical tension is prompting governments all over the world to reevaluate energy security and enact policies to reduce risk and eliminate reliance on unstable jurisdictions. And as they do so, climate change and electron accountability remain top of mind, which truly puts nuclear in the spotlight. There's a growing consensus that there is no net zero without nuclear, and 28 countries have now signed on to an international declaration that calls for a tripling of nuclear energy capacity by 2050. The EU, US, UK, Canada, France, and Japan are just some of the jurisdictions where bipartisan support is translating to political action, with a few already introducing financial incentives to back nuclear development. As a result of this support, we are seeing life extensions, reactor refurbishments, and a call for new builds to provide secure, reliable and clean base load power. And we have a technological evolution on the horizon as well, with SMRs and advanced reactors extending the use case for nuclear beyond just electricity, further strengthening the outlook for growing demand. So demand, it's durable and growing with more support than ever. So how does that stack up against the supply side fundamentals? Well, that's where significant uncertainty remains. The geopolitical tensions that are pushing the reevaluation of energy security are also adding negative pressure to supply. The resulting impact on mining activity, fuel cycle services, supply chains, and global transportation continues to create significant challenges. Last week, we saw a tangible impact on supply resulting from those challenges when our CAS Act partner, Kazatomprom, revised their expected 2024 production volumes down in response to limited access to acid and development delays. We're now working with Kazatomprom to determine the impact on our share of 2024 production from JV Incai. Supply chain challenges combined with ongoing mine depletion Declining and finite secondary supplies and a decade of underinvestment in exploration and mine capacity amid low market prices has led to what is a very tight market today, something that is expected to persist into the next decade. So considering both demand and supply, I think we can safely reiterate that strong long-term fundamentals is still a message that continues to resonate, creating the full cycle growth we've been talking about. Looking back at the very difficult supply discipline decisions we had to make and the strategy we put in place in the context of that persistent positive long-term view, I can now say it was all to prepare us for today's market and for the second half of this decade and beyond. We at Cameco have maintained a disciplined approach to managing the financial, contracting, and operational facets of our strategy during those tough times. we did what we said we were going to do, which positioned us well to capture full-cycle demand with a supply pipeline that was only going to respond to real end-user demand as it evolved. And considering customer fuel requirements into the future, we knew that the focus had to return to the long-term market because, as always, the total volume of requirements is far greater than what is available in the near-term spot market. It evolved quickly, just as we predicted it would. And our patience and our experience are paying off with positive results. We saw a significant improvement in our financial performance metrics in 2023, thanks to higher sales volumes and higher realized prices in our uranium and fuel services segments. This drove improved net earnings, adjusted net earnings, and cash from operations, which all more than doubled in 2023 compared to the year before and with a significant increase in adjusted EBITDA. And our continued discipline and our tried and tested long-term contracting strategy help to mitigate risks related to our capital decisions and mining plans. Our strategy is designed to allow us to align production decisions with our customer needs and the commitments in our contract portfolio and ensures we don't add excess supply and capacity when there's no demand in the market. We understand that to generate full cycle value, we can't be mining on spec. We must build a home for our pounds years ahead of time before we pull them out of the ground in order to avoid having to sell material into a thinly traded and discretionary spot market. That means in today's contracting cycle, we can link the pounds that we previously left in the ground to the long-term contractual commitments that are being negotiated today. And those contracts are being executed in the context of a significantly improved market environment, generating value for Cameco as we deliver into them now and in the years to come. We ended 2023 with a healthy contract book and total long-term commitments of 205 million pounds of uranium with 37 customers worldwide. That total commitment level of over 200 million pounds only represents about 20% of our current reserve and resource base, providing us with plenty of exposure to improving demand from our customers as they look to secure their long-term needs. To deliver on those commitments, we must continue to plan for the sourcing of the uranium we need well ahead of time. In the near and mid-term, we always start with our expected production from MacArthur River Key Lake, Cigar Lake, and Inkai. We can then draw material from our inventory, and with the licensed storage facilities that we operate, we have secured the ability to borrow product under the terms of some of our storage agreements. Additionally, we have the ability to pull forward long-term purchase arrangements that we put in place in a much lower-priced environment. Our marketing team can also source material for market purchases. While those purchases would be more expensive than our production and other available supply, our strategy and long-term portfolio positions us to benefit when there's increased near-term demand for scarce nuclear fuel supplies and services. However, when it comes to sourcing for the longer term, based on our existing contract portfolio and the contracting momentum that is building in the market, we do expect to need more than our current annual production volumes. That includes the more than 130 million Tier 1 pounds that we've left in the ground when we shifted into supply discipline from 2016 to 2022. As a major producer, we don't often discuss our pipeline of reserves and resources. But when we consider that pipeline in the context of the more than 200 million pounds we've committed under long-term contracts, that include escalated prices and escalated floors and ceilings, we have an exposure rate of about 80%. That means we have about 800 million pounds of current in-ground inventory that is not contracted or priced, representing future potential value. That's part of a very deliberate strategy. As a proven and diversified producer, Cameco is well positioned to add long-term value. And, since we are always adding to a contract portfolio that provides upside participation and downside protection, we expect development of future production from that in-ground inventory will be funded by the cash flow from product sales, not from dilutive equity raises or significant debt leverage. Thanks to our discipline and our improving financial performance, we can consider the next steps in our strategy and start to invest in our Tier 1 capacity. We now have an updated Cigar Lake technical report that we expect to release sometime in March, which includes the conversion of over 40 million pounds of our share of indicated resources to probable reserves, extending mine life at Cigar to 2036. And we're undertaking a study to evaluate the work, timelines, and investment required to expand the MacArthur River mine and the Key Lake mill from 18 million pounds of annual production today up to the license capacity of 25 million pounds, our share being 70%. If we took advantage of all Tier 1 growth opportunities, our annual share of Tier 1 uranium supply could be about 32 million pounds. But beyond our Tier 1 assets, we also continue to assess the future need and economic potential of our fully licensed and permitted Tier 2 assets. Those assets remain on Care and Mains today, but they provide another layer of optionality when it comes to sourcing material for long-term commitments. And remember that unlike a declared or untested asset owned by a developer making promises, our Tier 2 assets are demonstrated assets with an operational history and known costs. And they're in the hands of a proven producer, putting them in a much lower risk category. As one of the world's largest producers, we don't realize any benefit from the voluntary public disclosure of our advanced project work at Millennium, Yelleri and Kintyre, or from our ongoing exploration successes. But there too, we continue to make progress and evaluate future prospects that align with market demand and our long-term contract sourcing requirements. We've provided a bit more background on our exploration framework in our MD&A this year, because it's not widely known that we have discovered numerous greenfield prospects and deposits over the years. And those discoveries are underlying the very attractive land position on the most prospective trends, all right in our backyard of northern Saskatchewan, where we have well-established industrial and mine support infrastructure, and where our exploration activities continue. Beyond uranium mining, our contracting success and financial strength is also allowing us to grow and enhance the value of our fuel cycle assets and other investments. Similar to our mining assets, we won't increase fuel services production or capacity until we see customer commitments. Thanks to that disciplined approach, we have the capacity to grow at a time when customers are avoiding Russian supplies and services And the market has identified a significant need in the conversion and enrichment stages of the fuel cycle. To meet those growing commitments in our fuel services segment, we are increasing our 2024 UF6 production at Port Hope to 12,000 tons, which would represent a record production level for the facility, exceeding the record production levels we set in both 2022 and again in 2023. We've now contracted 75,000 tons of UF6 conversion with 33 customers worldwide, which we expect to underpin the operation of our Port Hope conversion facility for years to come. We also have a 49% interest in global laser enrichment, which holds the exclusive license to deploy a third generation uranium enrichment technology. Subject to its continued progress towards commercialization, if successful, GLE could have the ability to help meet the evolving enrichment needs of the industry. From re-enriching depleted uranium tails to producing commercial low-enriched uranium for the global reactor fleet in operation today, to delivery of high-assay low-enriched uranium for the SMRs and advanced reactors of tomorrow, GLE represents a significant opportunity for Cameco to participate in every stage of the fuel cycle. We're also excited to have added a 49% share of Westinghouse to our portfolio of investments in 2023. Westinghouse is a well-established and critical business to the nuclear power industry, which gives us more exposure to the light water side of the nuclear fuel cycle, while adding potential growth opportunities related to their conventional and advanced reactor sales. We expect our share of adjusted EBITDA from Westinghouse in 2024 to be between $445 million and $510 million. And we believe the business is well positioned for long-term growth, driven by the expected increase in global demand for nuclear power. Over the next five years, we expect Westinghouse's adjusted EBITDA to grow at a compound annual growth rate of 6%. to 10%. But even with the significant acquisition in Westinghouse, we have maintained the capacity for further investments should value-adding opportunities emerge. Our balance sheet remains strong with $567 million in cash, approximately $1.8 billion in total debt, and a $1 billion undrawn credit facility. In our uranium segment, we expect this past year's strong financial performance to continue in 2024. We will continue to transition to our Tier 1 cost structure and deploy the capital and other expenditures we believe are necessary to meet our commitments and position the company for continued sustainable growth, growth that will be pursued in the same manner that we approach all aspects of our business, strategic, deliberate, disciplined, and with a focus on generating full cycle value. with a continued focus on the environmental, social, and governance side of our business as well, where we are very proud of our track record. We integrate ESG principles and practices into every aspect of our business, from our corporate objectives and our approach to compensation to our overall corporate strategy, risk management, and day-to-day operations. As part of our low-carbon transition plan, we created tailored decarbonization pathways in 2023 for each site we operate to support the achievement of our 2030 greenhouse gas emission reduction targets. We also completed an analysis of climate change scenarios at our northern Saskatchewan and Ontario operations to better understand how changing climate conditions could impact our employees and our assets in the long term. I encourage you to read through our annual MD&A where we go beyond just performance highlights. In it, you will see a much more detailed picture of our strategy, how we operate, and importantly, insight into the uranium and nuclear fuel market, a market that is unlike any other. So thank you for your interest today, and we would be happy to take any questions.

We will now begin the question and answer session. In the interest of time, we ask you to limit your questions, one with one supplemental, If you have additional questions, you're welcome to rejoin the queue. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw from the question queue, please press star then 2. Webcast participants are welcome to submit questions through the box at the bottom of the webcast frame. Cameco Investor Relations team will follow with you by email after the call. Once again, anyone in the conference call who wishes to ask a question may press star and one at this time. The first question comes from Ralph Profiti of Aid Capital.

Please go ahead.

Good morning, chemical team. Thanks for taking my questions. Tim, in the evaluation of MacArthur River up to 25 million pounds, when will this work be completed? And assuming things being taken into consideration include issues from September 2023, including supply chain, skilled labor, as well as some of the special technical considerations, do you see a potential scenario where Tier 2, whether it be USISR or Rabbit Lake, may be more desirable than MacArthur River production? Because those production centers may not be as constrained.

Yeah, good morning, Ralph. Nice to hear from you. We're just starting the MacArthur Key evaluation work now. We're seeing a market that we think might need those pounds going forward. Those are probably the best pounds on the planet that are not in production yet. So, you know, we're starting our work on what we need to do to de-bottleneck at the Key Lake Mill. The mine's running well today, and we know it can produce at that level. So we're starting the work. Obviously, we're not going to produce on spec. Grant has said that a hundred times. we produce into contracts that we have. So we'll get that work going. And like I say, we're going after that before we go after any tier two, I think, project that we still have in care and maintenance. But don't rule those out either, Ralph, because those are on our batting lineup further down the list. But first, as we said in our quarter here, we're going to look at Debalt and King MacArthur and Key so we can get those to 25. And then that extension, don't under... underway that extension of Cigar Lake to 2036. That's a huge move and it really sets us up well for the future.

Okay, understood. Yeah, thanks for that color. I also noticed in the uranium sensitivity table that the leverage to 5% change in uranium to revenue is quite low this year. I'm just wondering what's going on with the contract book versus the realized price guidance and why we're seeing that sort of diminished leverage versus previous years. And it seems like this is a function of the contract books maybe perhaps hitting more of those ceilings or perhaps even up flexing on the part of customer discretion.

Yeah, Ralph, Grant's our very best expert on that. So, Grant, do you want to take that?

Yeah, it's a great question, Ralph. And let's be really clear that we set a strategy that supports short-term price discovery in order to create long-term value. And what I mean by that is it is categorically the wrong way to think about a uranium producer as saving production for the spot market in order to maximize near-term leverage to the spot market. And the reason for that, we said over and over again, and people really need to understand this, the spot market is small, it's discretionary, It's non-fundamental and it is low quality demand. If Cameco produced and showed up and tried to sell pounds into the spot market, it would not be discovering higher prices. The opposite would happen. The market would realize that we would be showing up with uncommitted primary production and the market would back up. And don't take my word for it. Look at what happened. in the days when Paladin, for example, was a spot market seller or Kazatomprom was a spot market seller. That strategy has been proven to be a colossal failure over and over again. So what matters is the non-discretionary, fundamental, high-quality demand of the term market. But make no mistake, Ralph, we don't miss these market moves. we just capture them and build them into the forward contract book. You have heard me say over and over again, we prefer market-related contracts right now. A move like this in the spot market, which we don't sell into because we don't want to undermine that move in the spot market, allows us to then price market-related contracts forward on a much more attractive basis than we did before the spot market move. And I'll just give you an example. When uranium pushed over $100 per pound, Cameco doesn't immediately go, how do we sell into the spot market? We go, how do we translate that kind of spot market quick move into forward value? So a market-related contract that we would write today and give to a utility probably has a floor tucked right up at today's long-term price, escalated, and probably has a ceiling in the 120s, escalated. That is how we capture the value of a spot market move. Those who want to play the spot market show up with uncommitted primary production. They put pressure on it. In a thinly traded market, it goes down, and they ride it back down. What we do is we take those moves, we build it into the contract portfolio going forward. It's a strategy that sustains near-term price discovery and helps bring that long-term price back up to a sustainable production economic level. So with all that context, no surprise, contracts that we entered into a number of years ago where if they were at a $70 ceiling a few years ago would have been a really attractive ceiling. We might be hitting those ceilings in a market related today, for example, or if there was some base escalated portion, It is good news that this is occurring. It means the market is going into a security of supply contracting cycle. It means our supply discipline strategy is working. It means the forward value capture is growing. And then, of course, I want to reference the comment Tim made, which, you know, folks, 20% of our portfolio of reserves and resources is contracted. 80% is not. That's 800 million pounds of uranium to be priced in a much better environment now. So we never miss these moves. We build these moves into long-term contracts, long-term cash flow and earnings. That's what's happening.

That's helpful, Tim and Grant. Thanks very much. Great context on the strategy. Thanks again. Thanks a lot, Ralph.

The next question comes from Andrew Wong. of RBC Capital Markets. Please go ahead.

Hi, good morning. Thanks for taking my questions. Can you just talk about your confidence level on production returning to nameplate in 2024? And just on the longer term projects for Cigar and MacArthur, I think previously the messaging was that those projects may not be looked at until the volumes start getting contracted and the demand was there. Now that work is starting on those projects, does that mean that those volumes are starting to get some contracting activity?

Thanks, Andrew, for the question. Yeah, so just how confident are we on production for this year? We put out 18 million pound forecast for each of those sites, and we're very confident that we'll make that. We have got some more operating experience at MacArthur and Quay every month that goes by. It gives us another view on how it's going, and I'd say the last few months have been very good. Looking at Brian Reilly, our production has been very good, very steady. We're working out some of the bottlenecks or kinks that you have with a restart, so we're really happy with the way things are going there. Same with Cigar. You know, well-established mine. We've been operating there for years. We moved into that new war zone. We're getting that under control. The mill... had some hiccups, and they've got that under control. So, yeah, we're very confident in our forecast for 2024. And going forward, yeah, as I said earlier, we won't produce on spec, but we will get those assets ready to go at MacArthur Key. And once Grant and his team have contracts signed, in front of us that call for that production, we will move those forward. We'll move the production up at MacArthur Quay. And so, you know, there's a timing thing. Things don't just happen overnight. We want to be ready when that happens. And the contracts we sign, those long-term contracts that Grant was referencing earlier, you know, they don't start deliveries for a number of years. So we've got time to get things ready and just we've got dry powder and we'll When the time comes, we'll be ready to go. So we really like our positioning.

Okay, great. And maybe for Grant, the contracting strategy makes a lot of sense. Could you maybe just talk about how the contract book and price sensitivity table would look like beyond the years that are in that table, maybe into the late 2020s and early 2030s, where you might get more of that leverage to the rising price environment that we're seeing today?

Yeah, absolutely designed for leverage to that rising price environment. I mean, really important to emphasize, we are still in supply discipline. We are not calling the top of the market. This is not peak demand going on in uranium yet. We're in the early stages of this contracting cycle. Early stages that suggests it's the right strategy to be very disciplined with our supply We're thinking about moving the Tier 1 to full capacity, like Tim talked about, but we haven't made that decision yet with respect to MacArthur Key, and we haven't even started talking about the Tier 2s. And if we put that all together and said, what would our annual capability be, that's about 38 million pounds of annual production. And you see in our guidance table, 22.4. So Cameco is not calling peak demand here or peak price discovery in the uranium business. We're still in supply disciplines. We're still in supply discipline because we think when we look at the uncovered requirements wedge, a lot of demand, non-discretionary fundamental demand needs to come to the market. We want to be exposed to that. So it isn't about selling out the volumes. It's about placing volumes under terms and conditions that make sense to us today. So that is that market-related exposure that I talked about. That is really dramatically improving floors and ceilings that are both escalated by the way. And of course, a long-term price that's now $72 US per pound. And that itself is base escalated if you agree to any of those contracts. So as you see going forward, we would look to move beyond that contract table, which only accounts for about 20% of our volume. In fact, that committed sales table is less than that. It's only about 13% of our volumes because it's just the next five years. So we have 80% of those volumes that aren't yet sold yet. It's a good thing. Prices are going up. We want that exposure to future prices. And when you think about our reserves and resources that aren't yet priced, that have that pure exposure to the uranium price, those are reserves and resources that are in the hands of a proven, proven producer. And many of those reserves and resources are adjacent to existing infrastructure and can take advantage of all those incumbencies. This is exactly where a responsible uranium producer wants to be, should be in a market that is entering a security of supply contracting cycle. So absolutely, we love our position. We love that exposure going forward. It would be foolish to say, well, we should just be trying to jam all of our material through $103 spot market because the spot market wouldn't be $103 if we tried to do that. That would be a really silly strategy. So that exposure going forward, nobody has a better position than we do.

Great. Thank you very much. Thanks, Andrew. The next question comes from of Scotiabank.

Please go ahead.

Hi. Good morning. A couple of questions on my end if I could. First of all, can you give us an idea of what kind of capital is required for to bring MacArthur up to 25 and to extend cigar? So, Brian, do you want to take that one?

Yeah, sure.

Yeah, great question. Certainly, Cigar Lake Extension, we are well advanced. We completed a pre-feasibility study that verified the economic feasibility of the extension. We've converted resources to reserves, so we're well down the track there. We'll produce a technical report next month, as Tim mentioned, with all the details. But what we have now, in terms of our share, for capital at Cigar Lake Extension, somewhere in the $250, $300 million range to extend it up to 2036. So Cigar Lake Extension is in good shape, and we'll produce a technical report with all the details. MacArthur Key Expansion, early days, very early days, as Tim mentioned. We've just commenced the assessment in terms of what's required at the mine and end-to-end study at the mill. So I would suggest just hang in there. We'll be better positioned later in the year, but still early days for MacArthur Key expansion.

Okay. But would it be fair to say it's less than a billion dollars, like we're talking in the hundreds of millions?

Oh, goodness. Yes. Yes.

Perfect. And then a quick question for Grant, if I could, just on the committed purchases, I guess you're, you've got 4.7 million pounds committed to acquire this year. Can you give us any kind of idea of how the cost, like how the pricing mechanism works on those contracts? Like, does it move with market pricing? Is it fixed? How should we think about that?

Yeah, thanks, Orest. So on page 51 of the MD&A for folks that are looking, we do have a bit of new disclosure actually on, Our purchase commitments in in previous markets where you know the spot was over supplied and we were in extreme supply discipline and wanted to be heavily over contracted. You know, we would put a big purchase number out there, because we wanted the market to know that demand was coming and start cleaning up the front end of the market and discovering better prices. But as we're at this phase of our transition, restoring our Tier 1 costs, bringing production back, we wanted to bring a bit more granularity between what purchases are we already committed to make and which ones might we go into the market to buy. And what you see when we cut it that way is very small exposure to the market. We said up to 2 million pounds that we might buy in the market, but we might. We don't have to. We have other options. in order to source our committed sales. Some of those other options include purchases that we make under a long-term purchase commitment, and I think that's what you're referring to. Generally, what happens in those long-term purchase commitments is we'll see a market where, you know, we might think the uranium price is low. And when we do, we might find a seller who's willing to fix a price for us, you know, subject to a carry trade for delivery out into the future. But for many of those contracts, we have the ability to take delivery when it makes sense for us. So we fix the price in a lower pricing environment. We take the delivery when it makes sense to meet our committed sales volumes. That's the best trading margin in the business. So many of those long-term contracting, long-term purchase commitments were made in that $30 uranium market. They've escalated a bit. You know, some of them in more recent years, but well, well short of today's market prices. So this is just part of how we think about sourcing material over the long run. So very small market exposure to be deployed if we want to, and then subject to the purchases that come in from NCI, the purchases that come in from the long-term purchase program. The final thing on NCI is always remember, we're never afraid of rising uranium prices. And INCAI is a perfect example. Yes, we'll buy the material from INCAI at a discount to the spot price. Those will be very expensive. But if those are expensive, then the dividend that comes back from INCAI is even bigger. So the economic value of those tier one assets is always ours. And we don't fear when prices go up. We don't miss these markets. We capture that value on the long term. So very attractive source of supply that really reduces our need to go into the market to purchase. But if we see the opportunity to purchase, we'll stick our nose in there. So if somebody decides they want to try to sell material through the spot market, we might be a buyer.

Thanks, Grant. So ultimately, I think if I understand your new disclosure, there's only up to 2 million pounds that you're planning to buy from the market at market pricing?

Yeah, that's right. You know, we saw that some folks were completely misreading our outlook table in the past. They were taking the overall purchases and they were assuming every one of those was going to be made in the spot market and trying to drive an incorrect narrative about financial distress. And, of course, we never run the company that way. If that were the case, the outlook table would be very different. So we wanted to put some granularity out there to, you know, lots of sophisticated folks understand what we do, but some don't. And so we just wanted to make sure we had that granularity and remind folks that actually it's up to 2 million pounds. We could source it directly in the spot market for immediate delivery. We could draw down our inventory. We could access loans. We could access more of the long-term purchases if that made sense for us. We could be engaged in a conversation with a customer to move deliveries around in a year for when production comes in. Ultimately, this is what a responsible uranium producer does.

Excellent. Thank you. Thank you, Orst.

The next question comes from Greg Barnes of TD Securities. Please go ahead.

Yep, thank you. Just a couple of questions for me and returning back to Cigar Lake extension. Would that be at the 18 million pound per year range or would it decline into 2036? And is there an extension beyond 2036?

Greg, thanks for the question. Our plan would be to remain at 18 million pounds per year to 2036. Is there an extension? We're just working on this one right now. So once we get under there, and you know, we're moving to the west. on that. And so as we get out there, who knows? We'll be poking holes all over down there. So we're hopeful, but we don't have anything to report yet, Greg.

Okay. And just on the Westinghouse guidance, the CAGR of 6% to 10% a year, does that only include, in terms of the AP1000 sales, the ones that have been under contract or under contract currently? Or do you make a forecast of potential AP1000 sales that build into that number as well?

Yeah, Greg, here's the good news. It's just the ones that you know about, the ones that Westinghouse has announced. So more upside to come as they, we believe, might have a huge opportunity in other markets that are evaluating that stable, proven AP1000 technology. But this is just capturing the beginnings of the contracts required to advance AP1000s in the markets that have already announced it.

Grant, quickly on Springfields, any decision on restarting that conversion plant or any support from the UK government to do that?

Lots of interest remains in the conversion plant at Springfields for the natural conversion line, but Springfields is also critical infrastructure for a lot of other ambitions as well. We're continuing to work through that process. Obviously, very attractive conversion prices right now in the market that put some wind in the sails for a restart, but it's got to be done responsibly. It's no different than the uranium market. You don't start a conversion plant and then start knocking on people's doors and asking if they want to buy conversion service because you're just going to push the conversion price down. You have to do this responsibly and in a disciplined way, and we're just working through that process now.

Thanks, Grant.

Thank you, Greg.

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

Thank you very much, operator, and good morning, chemical team. Thank you for taking my question. I just wanted to ask about Westinghouse, and it's fantastic to have the detailed disclosure in the notes. The G&A, effectively, the Marketing Administration and General Expense is a little bit of a larger number than I thought. Would you be able to provide any detail on what goes into that or what are some of the large numbers maybe in that or how that breaks down? And then any guidance for that going forward as well? Thank you.

I'll get Grant to answer that.

Yeah. You know, there are elements of the Westinghouse business that are pretty high touch. You know, when we think about the core of the business, which we define as nuclear fuel and operating plant systems, as well as the new build, there's a lot of offices, a lot of engagement, and a pretty high touch that goes on advancing those kind of contracts. And so right now, when they're at the stage of developing new markets like they are for VVER fuel, or developing new markets like expanding into BWR fuel, or examining LEU plus fuel, and even the question that Greg asked earlier about Springfields, You know, this is all captured in increased activity running through that line. And of course, the support required to advance new builds, whether that's AP1000s, AP300s, or Avinci. So, you know, a bit of a higher touch business than what Cameco is accustomed to, but totally appropriate given the position that Westinghouse is in and their ability to capture the tailwinds in the nuclear industry as well.

And then just going forward, is that 2023 level that, well, at least for the proportion of 23 that you guys have reported, is that a fair level going forward for 24, 25?

Yeah, it's Heidi here. I would say that they're a pretty stable business and maybe I would just add to what Grant said in terms of the other pieces that the that's really recognizing the fixed costs like that is all the costs that aren't directly related to operations so so it's maybe broader than just kind of G&A thank you very much no no for my follow-up question I had actually wanted to ask about the conversion market as well and Grant you had expressed some

a review in the investor call in December during the investor day that, you know, perhaps prices were sort of, you know, getting near a top. But, I mean, prices have continued to rise since then. I mean, have you changed your view at all? Do you think prices can continue to rise higher? Or, you know, are in fact we getting to a level where prices are sort of as high as they might go?

Yeah, well, you know, my comment earlier, Lawson, about Cameco's not calling peak demand or peak pricing I was referring to uranium, but perhaps in conversion as well. I mean, this market has not really reckoned yet with a couple of big risks. And one of them is obviously the risk that not only does the legislative efforts to restrict Russian supplies in Western markets become codified into law, but the risk that there's a Russian retaliation That would be a very constructive environment for conversion because, remember, that Russian enrichment service shows up attached to something. It shows up in a cylinder that already has the uranium, already has the conversion. So that will continue to add pressure to the conversion side of the business. And then, of course, this market, I don't think, really appreciates how difficult it restarting production can be, whether it's a uranium asset, whether it's a conversion asset. I think a lot of folks are just assuming these things are easy and they build in a perfection scenario. So between those two really big risks that there's a ban on Russian material that the Russians actually react to by saying, okay, well, you can't have it today. as well as the reality that's going to set in, that all these big promises about new supply, whether it's on the uranium side or the conversion side, are just going to take longer, that's further price formation in the industry that needs to come. It's why we don't want to call it off. It's why we don't want to rush. and secure all the contracts for conversion that would sell out Port Hope or encourage Westinghouse to do that for Springfield. There's more to come to this market. We've seen this story before. Now's the time to remain patient and let that price discovery unfold.

Thank you all very much. Thank you, Lawson.

Please note, we are at less than a 10-minute mark for questions. And any we don't get to can reach out to the IR team. Thank you. The next question comes from Alexander Pierce of BMO. Please go ahead.

Great.

Thank you.

Good morning, all. So I just wondered if you could build on some of the market commentary you've made, and in particular, just the changes that you've seen so far this year, and particularly, what's changed in terms of your discussions with utilities since the update from Kazatomprom last week?

Yeah. We've seen a market that has behaved exactly like we told you it was going to, Alex. When the market begins to enter a security of supply cycle, actually the importance of the spot market goes down and the importance of the term market goes up. And look at the data. The spot market was smaller in 2023 than it was in 2022. So utilities focus less on the spot market, they focus more on the term market, goes back to my earlier point about why we don't try to sell stuff into the spot market. It's thinly traded, it's non-fundamental discretionary demand. So as utilities are shifting over, we're seeing a market that hit about 160 million pounds of term contracting, It might be easy to conclude we're at replacement rate, Alex, but I would just say we're not quite there yet because there were two very, very big contracts that went through the market, one that Cameco had with Ukraine and one that Kazatomprom had with the Chinese. If you back those out and ask on a distributed basis across all markets are we at replacement rate, the answer is no. And so the good news is we're in the early innings of security of supply contracting cycle. We haven't yet hit a distributed replacement rate, and we've never been at this stage of the cycle at these prices before, which is why we want to continue to have that exposure going forward. But some of the common characteristics, tenors continue to go up. Utilities coming to the market for security of supply are looking for requirements covered on a longer-term basis. Tenors are going out. Volumes are going up. not just because more years are being added, but because utilities are taking a bigger bite out of each of their requirements contracts. And then, of course, timeframes are going out. There are utilities who, Alex, are really well covered for the rest of this decade. They're now worried about the next decade, and they're starting to look to contract into that window as well. So all of that very constructive for a view that the long-term demand is building, not peaking, but building, and that what we want to remain is very disciplined to capture as much of that price discovery as we can.

Great. Thanks, Grant. And then, Tim, you mentioned in your comments you have the ability to bring forward some of those purchase agreements if required. Are you able to kind of quantify if indeed that did happen for this year for guidance and how much you've kind of brought forward from future years into this year in these purchases?

Sorry, Alex, Grant again. Our plan in the outlook table was the plan all along on that 4.7 million. So we have that as an option to exercise more of those long-term purchase requirements if we want. It's why the disclosure on market purchases is up to 2 million pounds. That would be one of the levers. why it's not a hard 2 million pounds, because we may not buy it in the spot market. We don't have to, but if it makes sense for us, we will.

Okay, thank you. Thanks, Alex.

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

Good morning, and thank you for taking my question. It goes back to the last question. So in this table, and I appreciate now you giving the breakouts, Two things. Do you assume that you get your NCI purchases every year? Because, again, you also state right now we're not sure what we're going to get. And, again, those are, as you said, profitable pounds once you do the equity component. If not, how do you balance for that? Because, again, the question is you could be getting 4 to 5 million profitable pounds from NCI. And my third question on that is, I can't remember, are you getting 50% or 40% of the joint venture now under that agreement? Thanks.

Brian, let's just start with, yes, the table assumes that the volumes expected from NCI in 2024 arrive. But of course, as we saw in 2023, there can be sometimes timing differences. We got about 2 thirds of NCI's 2023 volumes in 2023, the remainder early 2024. This is something we can deal with as Cameco because we have other sources of supply. We have other mines. We have our inventory. We have all of the levers we've already been talking about. This is actually a much, much bigger problem for the front end of the nuclear fuel cycle because it's close to 50% of the global production of uranium that isn't arriving when it needs to arrive at Western markets. So for Cameco, it's something we can plan for, something we can deal with. We eventually get those pounds. and we can deal with the time issue associated with them. The overarching assumption is, yes, we're going to receive them. If we don't, we'll manage.

Grant, I'd just add to that that the sharing is 60-40 once you reach the nameplate capacity of 4,000 times per year, which is just over 10 million pounds. we've never hit that peak yet. And over the last number of years, we've basically received as a share of production what we would get at 40% of 10 million, so around 3.3 million pounds.

Great, thanks. But just so I can be really clear, you also, as you mentioned, got last year's shipments, or two-thirds of last year's shipments from Inc.I. So you presumably have those pounds in inventory and the other ones in the Canadian port. So would you not feel pretty comfortable that you're going to have a lot of pink-eyed pounds to sell this year because they've already arrived and that's embedded in those numbers?

Yeah, sorry. I hope my comments weren't viewed as being unconfident. We're very confident that that supply is going to show up. And if there are timing challenges, we deal with it within our inventory, within our other sources of supply. So extreme confidence.

No, no, I, yeah, great. That's all. But I, it's just, these pounds are very profitable. So, the fact, the finances, depending on when they come in.

Yeah. Indeed. Yeah.

Okay. Thank you very much. And one quick last question. Sorry. CRA, I don't want to go back to this at all, because I sort of figured that it's hopefully dealt with. But I do see you have to put some more money aside again. So, we've done 2017. Does that mean they can do 18 and 19? You might have to put money aside this year? Or letters of credit aside?

I was going to say thanks for the question, Brian.

No, I'm sure you're not.

No, Brian, I'll pass it over to Sean.

Sure. We did have the reassessments for 2017, and we put, I think, $70 million aside, which we expect we'll have to post in the form of a letter of credit. The problem does diminish... the problem with the CRA continues, but the size of the problem diminishes over 2018, 2019, 2020, as the pounds that were sold through our offshore trading structure diminish. So I don't have the exact size of the diminishment in front of me, but it does get smaller as we look forward.

Great. That's very helpful.

Thanks, John. Thank you, Brian. This concludes the question and answer session.

I would like to turn the conference back over to Tim Jentzel for any closing remarks.

Well, thank you, operator, and thank you to everyone who joined today. As Rochelle noted, if you have detailed follow-up questions related to the 2023 results or any questions that we didn't get to today, please send those in to us, and we're happy to address them directly. You know, we continue to believe that Cameco remains the best way to invest in the recovery of the nuclear fuel cycle and positive momentum behind nuclear energy. With 35 years of experience in this market, we've built a strong reputation as a proven and reliable supplier with a diversified production portfolio. Portfolio that provides us with the flexibility to work with our customers to ensure they maintain access to our reliable supplies to satisfy their ongoing fuel requirements. The world has put a priority on achieving net zero carbon emissions in the decades to come and it's become clear that there's no net zero without nuclear. And I would go a step further and say, in fact, there's no nuclear without Cameco and Westinghouse. So it's also becoming clear that there's no net zero without Cameco. We believe we have the right strategy to achieve our vision of energizing the clean air world and we'll do so in a manner that reflects our values. So thanks, everyone, again, for joining us today. Stay safe and stay healthy in 2024. Thank you.

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