Cameco to increase spot market purchases

Cameco President and CEO Tim Gitzel yesterday said most activity during the first quarter of 2019 had occurred in the "marketing" facet of the Canadian company's three-faceted strategy, with it planning to "ramp up" spot market purchases. It has already secured a portion of the material it needs to meet its 2019 sales commitments but has not yet taken delivery of it.

The first quarter of the year saw Cameco take delivery of a total of 7.2 million pounds of uranium of which some was material from the spot market, some as a result of existing long-term purchase commitments and some from its Kazakh operations through JV Inkai. The company also expects to begin purchasing material this year to meet 2020 sales commitments.

Gitzel said "meaningful" production cuts and reductions in producer inventories had led to increased demand for uranium in the spot market from producers and financial players creating uncertainty. Cameco was "starting to have off-market conversations with some of our best and largest customers about what it takes to support the operation of our tier-one assets longer term", he said. Such customers were "increasingly looking for stable, commercial suppliers with long-lived assets and a proven operating track record", he added.

Production at McArthur River/Key Lake - indefinitely suspended in July 2018 - will not resume until it can be supported by "acceptable" long-term contracts, the company said. "While we are encouraged by the contracting activity, make no mistake, there is still a long way to go before we decide to restart McArthur River/Key Lake," Gitzel said.

As of 31 March, Cameco held an inventory of 12.5 million pounds of U3O8 equivalent.

Tax victory

Cameco has also announced a decision by the Tax Court of Canada to award the company CAD10.25 million (USD7.63 million) for legal fees incurred in disputes with the Canada Revenue Agency for the 2003, 2005 and 2006 tax years, plus an amount for disbursements which is yet to be determined. Gitzel said the company was "optimistic" that it would recover all or substantially all of the CAD17.9 million in disbursements it had applied for. "While the timing of any payments is uncertain, this is certainly good news for Cameco," he said.