Thank you for standing by. This is the conference operator. Welcome to the Cameco Corporation Second Quarter 2023 Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. [Operator Instructions] Webcast participants are asked to wait until the Q&A session is started before submitting their questions as the information they are looking for may be provided during the presentation. 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 second 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 MAT. With us today on the call are Tim Gitzel, President and CEO; Grant Isaac, Executive Vice President and CFO; Heidi Shake, Senior Vice President and Deputy CFO; Brian Reilly, Senior Vice President and Chief Operating Officer; and Sean Quinn, Senior Vice President, Chief Legal Officer and Corporate Secretary. I’m going to hand it over to Tim in just a moment to discuss how the improving growth outlook for nuclear power continues to drive an improving outlook for Cameco. After, we will open it up for your questions. As always, our goal is to be open and transparent with our communication. Therefore, if you have detailed questions about our quarterly financial results, or should your questions not be addressed on this call, we will be happy to follow-up with you after the call. There are a few ways to contact us. 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, Rachelle, and good day to everyone. We appreciate you joining us for today’s call. Hope everyone is enjoying the summer or winter months, depending on where you’re tuning in from. With many people vacationing and July and August is typically a quieter time in the business community. However, I can tell you with absolute confidence that business for Cameco has not slowed down nor has interest in the nuclear sector. Momentum that’s been building over the past 18 months continues. Our financial performance which reflects the expected quarterly variation in our contract deliveries this year is benefiting from our strategic decisions with gross profit improving as we transition to our Tier 1 run rate. And we've seen an uptick in the breadth of new investor interest in Cameco. It really surpasses anything I've seen in my more than 16 years at Cameco. In addition to interest from our traditional resource investors, we're seeing interest from energy investors, clean energy investors, infrastructure investors and generalists. We believe this increased interest reflects the recognition that Cameco is a proven reliable nuclear fuel supplier that supplements Tier 1 mining assets with critical fuel service capabilities. And it is an endorsement of our strategy to capture full cycle value. It's also an acknowledgement that Cameco has a deep understanding of how the nuclear fuel market works. And that we have the type of experience that gets us invited into the room when important policy decisions are being made about how best to support the nuclear fuel cycle. And of course, it's an appreciation of the compelling opportunity to invest in the growing demand for nuclear power, and a clean and secure energy future. In fact, that growing demand has placed security of nuclear fuel supplies at the top of our customers…

[Operator Instructions] Our first question comes from Ralph Profiti of Eight Capital. Please go ahead.

Thanks, operator, and good morning, Tim and Grant. Tim, you talked about this move to 100% replacement rate contracting and greater, and it seems as though you're also potentially speaking to this having a finite life where at some point it's followed by a quiet period. And just wondering how you reconcile this replacement rate ratio with the wedge of unfilled requirements in the context of how long you think this contracting cycle may last.

Well, Ralph, thanks for the question. Yes, we are, as you say, moving into the era of replacement rate contracting, we haven't been in for granted 10 years or so. And so how long will it last? I guess you just have to look at the uncovered requirements going forward. And there's a significant chunk of material yet to be covered over the next few years. But I'll move it over to Grant, our expert to -- Grant, why don’t you answer Ralph's question.

Yes. Ralph, we would absolutely characterize the term market as very constructive right now, for the reasons that Tim was articulating. You've got a durable demand profile, a demand that is reactors being saved, reactors going through life extensions, obviously, new builds. And now the real prospect of adding to the uncovered requirements, of course, small modular reactors and micro modular reactors. And this is all creating a very durable demand outlook. We are just growing the uncovered requirements. So no surprise, we are starting to see more contracting. To date, year-to-date, we are already at more term contracting in the uranium business than we've seen in at annual rates in the last decade. You have to go back to 2012 to see a number higher than this. So obviously, the security of supply urgency of demand cycle is underway, we would still call it early because despite all that contracting, it isn't making a marginal dent in that uncovered requirements curve. We are adding more demand to the curve faster than we're taking it away through contracting across the industry. So to your question, when these security of supply cycle set in, they typically last several years. If you go back and you look at the various points of strong contracting through the decades of the commercial uranium cycle, when these cycle set in, they do last a number of years. Utilities cover their run rate requirements, but it is true that then at some point, a bit of complacency steps assess and they step back, they don't have as much immediate demand. We think there's more demand coming. And this is going to be the feature of the market for a while. We're not even contemplating what that step back looks like yet, because of the growth of the uncovered requirements curve.

Quite helpful, very, very much. Thanks. And, Tim, does any of the Niger source material get processed in any of the downstream conversion facilities of Cameco operations, where now you're sort of faced with a sources and uses of supply decisions where you may have to move material around?

Yes, that won't affect us, Ralph. There might be a bit that comes in, but mostly it goes into France, as you can imagine through the French entities, yes.

Okay. Thanks. Understood. Thanks everyone.

Yes, thanks, Ralph.

Appreciate it.

Yes, thanks, Ralph.

Our next question comes from Orest Wowkodaw of Scotiabank. Please go ahead.

Hi, good morning, and nice to see the continued momentum here. In the -- for the past several quarters, you've disclosed the amount of pounds that you added to the long-term contract book. I didn't see that disclosure this quarter. Can you give us any update there?

Yes, Orest, I think we said we weren't going to be reporting on a quarterly basis. But Grant, you can speak to the [multiple speakers]?

Our normal process, Orest, you've been around this story for a long time. So you know that we would just add on an annual basis, talk about the uranium and conversion services that we had brought into our portfolio. And we do that in sort of February in Q4. We undertook the practice of doing it quarterly, because we were seeing demand before others were and we just thought it was important for as we talked about demand coming to the market, we had to prove it. And we were proving it by talking about our accepted and executed contracts. But now we're seeing more broadly across the industry, that's -- and I just referenced it to Ralph, the 118 million pounds that have been contracted already across the industry in the term market. So the contract is already across the industry in the term market. So the proof is out there. It no longer requires us to be showing that leading indicator and the market is in a very constructive spot. And we think that demand is only going to continue to grow. So we just stepped back from being the ones who were constantly showing what the demand formation was because the evidence is now there for everybody to see.

Okay. But clearly your book [ph] has increased again, just given that your 5-year average sales was increased to 28 million pounds from 26?

Yes, absolutely. We always think about it, as you know, with respect to our portfolio, which is the committed sales we've already captured and our pipeline, which is the negotiations we have underway to capture value out into the future. And I've been saying for some time now that pipeline is big. And despite the fact we've taken a lot of demand, translated into executed contracts, we still have a big pipeline. So the replenishment of the demand into the pipeline continues to be very strong. That's what our marketing team is focused on. And those folks just do an incredible job negotiating the type of contracts that provide us with great upside participation in the market, really strong downside protection, should there be any macro headwinds, and that long tail of cash flow and earnings that come from having such a robust contracting portfolio, which we can then serve as we resume our Tier 1 costs from our Tier 1 infrastructure, so that margin improvement flows through to our owners. We're very excited about how constructive it is.

Thank you. And can you give us maybe just a quick flavor of where current floors and ceilings are on new contracts?

Yes, I can sort of speak to what our experience is, I don't know where others are. But our preference right now in the term contract space is for market-related volume. So we're willing to commit volumes out into the future, but we just want to price them out into the future, we're not looking to price them today. Those would be called fixed contracts or base escalated contracts. On market related, they're often collared [ph]. They’re collared in part because utilities have lived through price cycles before and they've seen spikes. And so they'll ask for ceilings and if they ask for ceilings, we'll ask for floors, both floors and ceilings are escalated. So that's another important dimension to remember. For Cameco, in today's market, mid 50 spot, we can drive $50 escalated floors and we can drive $80 escalated ceilings. I'm assuming others would be somewhat close to that, but probably not quite as attractive. And then with each contract, we just like to turn those indicators higher with every contract that comes to the market and secures future supply, well there's less future supply for the next slice of demand, which then makes for an even more constructive conversation. And that's how we go and build that contract portfolio with good upside protection and incredible downside protection.

Thank you, Grant.

Thanks, Orest.

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

Yes, thank you. I'm wondering if at this point you can get a little more granular on the timing of the closing of the Westinghouse deal. Any comments on the U.K comment period they announced today on their regulatory approval process would be helpful, too.

Yes. Greg, thanks for the question. Nice to hear from you. We -- Bruce as you know [indiscernible] standard practice. I think we've -- we had 30 to start over. Looking at Sean and we're down to just a couple. And one of what you've mentioned that I don't know if we have timing, I think we're still looking at Q3 before the end of the year for the closing on Westinghouse. And so we're working, I can tell you we've got a team of many working on it. And so we're hoping this fall to be able to close that, Greg, but I don't have a whole lot more detail for you right now.

Okay. Is the fact that U.K launched a contract now so far in this process unusual or is this standard practice for them?

No, we started them all off on the same foot and some reacted really quickly. I think we got the U.S and China right off the bat. And that's one of the ones we still have to get in the U.K. So pretty normal practice, Greg.

Okay, thank you. That's it for me.

Yes. Thanks a lot, Greg.

Our next question comes from Grace Symes of Energy Intelligence. Please go ahead.

Hi, Grant. My [technical difficulty] delay, and I was wondering if you could give any reason or detail on that?

Grace, you are cutting in and out on us, but I think you asked about the transportation roads out of Kazakhstan. And so we, as you saw from our -- the information we published in the MD&A that we're still working on that, we haven't had any shipments come through that passage way yet. This year we're hoping Q3 we'll be able to get one through. Again, we're working on that day-to-day. We're in touch with the different countries and governments involved. Kazatomprom, obviously is leading the charge on that. So we're hopeful that we'll see some deliveries come through there sometime this year.

All right. Thank you. And just one quick follow-up. Does Cameco shipped all of its material from Inkai through the Trans-Caspian route now, or does any of it gets sent to China?

We are sending it all, if we can through the Trans-Caspian route at this point.

All right. Thank you.

Yes, thank you. Thanks, Grace.

Our next question is a follow-up from Greg Barnes of TD Securities. Please go ahead.

Yes, thank you. Just for you Grant, the 118 million pounds contracted year-to-date, what kind of line of sight do you have on what the rest of the year holds in terms of long-term contracting for the industry as a whole, not just for Cameco?

Yes, great question. When we look at our own pipeline of negotiations, and I said earlier that it remains quite large. We've got a lot of pounds under negotiation, a lot of conversion service under negotiation. If I then sort of reflect that as it must be indicative of what others are seeing, I think we can expect quite a bit of demand to come to the market in the second half of the year. I'm not prepared to say we can just simply annualize 118 million pounds to simply double it. I don't know for sure. But I think this is a year where we can expect to see a material increase over last year's contracting rate. And as we know, in our industry, contracting begets contracting. I mean, as more and more of the known production is spoken for under long-term contract, it'll just increase pressure on those who have not contracted yet to get their hands on an even smaller slice of certain supply. And then obviously, attention will turn to the contracting and prices required to get real Greenfield moving. And that's all in front of us, and that's all value we intend to capture. But we are expecting a constructive term market to continue through this year. And if past is prologue, these last several years.

Great. And just a follow-up question regarding the operations themselves, McArthur and Cigar. The cash cost there in the last, Cameco reports was $16 to $18 a pound depending on which operation talking about. We've had inflation and other cost pressures and supply chain issues in the rest of it. What do you think the cost profiles look like now at each operation from this point?

Yes, it's a great question, Greg. There are two things going on simultaneously moving in different directions. Obviously, as we ramp up production at something like McArthur and Key, we're going to have the unit cost effect, and that'll be very positive, more production, lower unit costs, that will be offsetting. But then, of course, when you look at the -- just the challenges that have been in the market, the challenges on supply chains, the challenges on inflation, the challenges on finding skilled labor and appropriate contractors at the right time, that kind of offsets that improvement. But on balance, we would just kind of go back to our Annual Information Form numbers. That's the update to our technical reports. And we're looking at that $16 to $18 cash cost. And that's what we're negotiating towards. And we're very excited obviously about meeting the growth in this market, meeting the new demand, meeting our contract from already licensed already permitted existing facilities that we simply just have to get back up and running.

Okay, great. Thanks, Grant.

Our next question is a follow-up from Orest Wowkodaw of Scotiabank. Please go ahead.

Hi, thanks for taking the follow-up. Just, Grant, on the same lines as Greg's question, but maybe a little bit different. At what point do you need to see the contract book? Or I guess at what level do you need to see the long-term contract book before we start hearing more about life extensions at Cigar Lake, for example, and even potentially taking McArthur up to the full license capacity of 25 million pounds?

Yes, great question. It is one anywhere, we would say, whether it's the excellent work done by TradeTech, for example, [indiscernible] our team, where there is very clear urgency of supply building in the market, we just simply respond to that by saying, we need to see an urgency of demand. So yes, 118 million pounds year-to-date in the term market is a good indicator of urgency of demand. And, yes, a $55 U.S price is a much better price than the $17.75 per pound that it was when we brought McArthur and Key Lake into supply discipline. But it's not at the level, from a pricing point of view that is required to make serious investment in expansion, or quite frankly, in Greenfield. So we would need to see more urgency of demand as evidenced by more term contracting coming into the market and stronger price formation and then we would capture that in our contract portfolio. Those are the milestones to watch for. Those are what will determine our production decisions, the expansion decisions at McArthur River, the extension decisions at Cigar Lake. So the market is constructive right now. It has to be more constructive to incent us to grow that base of production.

Okay. And just as a quick follow-up, do you think are you happy with your current portfolio of growth options within uranium? Or do you see any opportunity for M&A in terms of adding undeveloped deposits?

We're really happy, Orest, with what we've got. We've got assets that are built and licensed and ready to go. And so we're just as you know, in the process of wrapping them up, and as Grant said, looking at whether we need to extend and expand those, we've got Tier 2 assets that are licensed and permitted on standby, but under the right conditions could go ahead. So we're not looking too far afield, and then our own house here, and we've got some great assets that we want to bring back in.

And, Orest, we might just juxtapose that a little bit with the last price cycle. People reflect on that '06, '07 window, a lot of contracting was done, a lot of strong price formation. But at that time, Cameco was looking to add a new mine, the Cigar Lake mine as a supply source in order to fulfill those contracts this time around because of our supply discipline. We left a lot of pounds in the ground, in a low price environment. Those pounds are now available in a much higher price environment. So we're meeting this new contracting cycle from, we think an extraordinarily strong brownfield leverage position, which gives us a very attractive capital profile. We're only talking replacement and maintenance capital, we're not talking greenfield capital in order to meet it. We just think it's a much different value proposition for investors in Cameco, in this contracting cycle than it was in past cycles. This is our deliberate execution of our strategy.

Thank you.

Our next question is a follow-up from Ralph Profiti of Eight Capital. Please go ahead.

Thanks, Tim and Grant, for the follow-up. We have seen a little bit of volatility in the in Inkai pounds, both from deliveries and a shipments perspective. And just wondering when it comes to delivering those pounds in this sort of uncertain market, are you making up those pounds in the spot market because the actual inventory situation at Cameco has been relatively stable, and the purchase commitments have actually moved lockstep with the sales guidance. So just wondering how you make up for that volatility?

Ralph, I'm just going to go backwards a little bit and provide some context because we just have to set our purchasing to meet our committed sales in the proper context of our strategy. So as you know, and a lot of caller, a lot of folks on this call now, what we do is we build the homes first through the contracting cycle. And then we sourced those commitments and we sourced them obviously from production, we've got production increasing with the ramp up of McArthur River, Key Lake. We've got production from Cigar, production from Inkai. We sourced through inventory, and we sourced through purchases, and occasionally we'll source through loans. But let's focus on the big three, the production, inventory and purchases. With respect to purchases, if we have a delay in production, remember, we set kind of quarterly and annual guidance on production. But if we missed that the pounds are still there, we get them a little bit later. So occasionally, we might have to go into the market and supplement with some purchases. When we purchase and say for example, if we had to purchase to replace Inkai pounds, just think about those in the proper context. We can purchase either in the spot market today and we'll do that occasionally. It's a very thin market and our presence, our demand would be noted and would probably create upward price pressure if Cameco showed up in the spot market. So sometimes we also purchase under long-term purchase commitments. Somebody might be offering pounds at a fixed price out into the future, and when we look at the dynamics in the construction, in the market, we might say those are cheap pounds today. And we always retain the right to harvest those contracts whenever we…

And, Orest, I might just add to that purchase volume does include our expected Inkai deliveries. So it gets moved out mainly because of the increase in the in-year sales and our desire for working inventory. So I would just note that as well.

Yes, got it. Thank you for that clarity, Grant and Rachelle.

This concludes the question-and-answer session. I would like to turn the conference back over to Tim Gitzel off for any closing remarks.

Okay. Well, thank you operator. With that, I just want to say thanks to everybody who's joined us on the call today. We certainly appreciate your interest and your support. I just say we were excited to see the positive momentum building for nuclear around the world. We, at Cameco, expect to play an important role in providing the solution for the existential problems of decarbonization, electrification and energy security. More than ever, we're being asked by countries, leaders and government officials to participate in discussions on where that world energy picture is going. And I can tell you that we, at Cameco, work hard to gain that kind of standing on the world stage to be recognized as a global company, making a difference on a global scale and providing something the world desperately needs. And as the interest continues to grow, last month we hosted a tour of our Cigar Lake operation for Ambassador Kirsten Hillman, the Canadian Ambassador to the U.S and just last week, Ambassador David Cohen, the U.S Ambassador to Canada toured McArthur River. The -- I could tell you the positive feedback from these officials and their teams following the tours was nothing short of flattering. And that's of course, thanks to the hard work of our people over the years. We built a reputation as a proven and reliable producer with key assets and stable jurisdiction with a long history of strong environmental, social and governance performance. We believe our vision of energizing a clean air world will allow future generations to thrive and to enjoy this beautiful planet. We'll continue to do what we said we would do, executing on our strategy and consistent with our values. We'll do so in a manner we believe will make our business sustainable over the long-term. So thanks, everybody, enjoy the summer. Stay safe and healthy.

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