Cameco optimistic about uranium market

The company has not seen the current level of prospective business in its pipeline since before 2011. Since the beginning of 2019 it had added just over 36 million pounds of uranium deliveries to its contract portfolio, more than replacing the volumes delivered in 2019, while maintaining leverage to higher future uranium prices.

"Our optimism and confidence in a uranium market transition is growing, driven by the long-term fundamentals. The underlying fact is that uranium demand is going up, while supply is going down," Gitzel told analysts, but the market is failing to send the appropriate signals. "Current prices are putting future supply availability at risk. This is not sustainable. The longer the transition takes, the greater the likelihood that the uranium price will go beyond what is required to incent tier-one production to return to the market."

Cameco indefinitely suspended production at Key Lake/McArthur River in 2018 as part of its long-term strategy to focus on its so-called tier-one assets and align production to keep pace with market signals, purchasing uranium on the spot market when necessary to meet its sales commitments. It produced 9 million pounds U3O8 in 2019 from Cigar Lake, 2% lower than 2018 production. It plans to produce a similar quantity in 2020. It purchased 19 million pounds U3O8 in 2019, including the company's 3.3 million pounds share of production from the Inkai joint venture in Kazakhstan.

During 2019 it added about 36 million pounds of deliveries to its contract portfolio, resulting in total commitments to sell more than 130 million pounds U3O8, Gitzel said. Annual uranium segment sales commitments over the next five years average around 19 million pounds U3O8. These will be met from Cameco's existing production; purchases under the JV Inkai agreement, from under long-term agreements and in the spot market; and existing inventory. Cameco bought NUKEM, a trader and broker of nuclear fuel products and services, in 2013.