Cameco maintains positive long-term uranium outlook

Against a "megatrend" of increasing electrification, momentum is building towards non-traditional nuclear, such as small modular reactors and advanced reactors as well as recognition of nuclear energy's role in the production of low-carbon heat for the production of hydrogen and desalination, he said. This is occurring precisely at the same time countries and companies around the world are making net-zero commitments, including in the USA, where the new administration has expressed support for maintaining the existing domestic nuclear power fleet and the construction of advanced reactors, as well as recommitting to the Paris Agreement.

"Increasing demand for nuclear means increasing demand for uranium, which brings us to the second factor that is driving our growing optimism - demand for uranium is rising at precisely the same time that supply is becoming less certain. We know that utilities have not been replacing what they consume annually under long-term contracts," Gitzel said. "This has led to a growing wedge of uncovered uranium requirements."

Citing data from UxC, Gitzel said that, while uncovered uranium requirements are not particularly high in 2021, estimates show that by 2030 about two-thirds of utility requirements will be uncovered and this will reach 81% in 2035.

"In contrast, these growing uncovered requirements are occurring at a time when there are some big question marks about where the uranium will come from to fuel the world's expanding nuclear fleet," he said. Cameco's supply curtailments alone - both planned and unplanned - and its purchasing activities to fulfil sales commitments have resulted in a "swing" of almost 145 million pounds in supply fundamentals, he said.

UxC's base case projects an annual shortfall of almost 100 million pounds at 2035, Gitzel said. "That means the world needs to discover, develop, commission about six McArthur Rivers or Cigar Lakes in the next 15 years. Given the timelines it takes, we should be investing now," he said.

Production at Cigar Lake mine remains suspended due to uncertainties about access to qualified operational personnel caused by the COVID-19 pandemic, and production plans for 2021 are uncertain, Gitzel noted. The company expects to incur CAD8-10 million (USD6-8 million) per month in care and maintenance costs while the suspension continues, but its strategy of production discipline, marketing discipline and conservative balance sheet management, remains unchanged.

Gitzel said the company is taking steps now to allow it to restart its Tier 1 assets with greater flexibility in production rates, to eliminate the care and maintenance costs when production is suspended, and to benefit from improved life-of-mine economics. This includes a project to improve mine and mill efficiency at the McArthur River operation - where operations have been suspended since mid-2018 - through automation, digitisation and optimisation, he said. "There are 43 project in the works, and those that meet our investment criteria will be advanced to implementation in 2021," he said.