Right, so next up today, I have the pleasure of welcoming Grant Isaac, Executive VP and CFO of Cameco, one of the world's leading producers of uranium conversion and also via fuel services and nuclear via its recently acquired Westinghouse acquisition. Sorry, struggling to talk. Anyway, welcome, Grant.
Thanks very much, Alex. Appreciate it. What we're going to try to pull off here today is a couple of minutes' worth of comments, and then I'm going to sit down and Alex is going to ask me everything that I dodged during the presentation. So hopefully we can get through this rather seamlessly. Obviously, I have the usual forward-looking information slide that I know everybody's familiar with, so we'll move on. A little bit of a snapshot of who we are, but I want to do this from the context of why this is our snapshot. So obviously, a lot of folks know us about our position in uranium, a leading position through some of the best Tier 1 assets on the planet, through leading joint ventures, including with Orano, as well as our partners at Kazatomprom for an asset in Inkai.
We talk about this as our Tier 1 uranium properties. What we tend not to talk a lot about is how much more uranium upside we currently have. We actually are still sitting in supply discipline. We have another 30% of our licensed, permitted, already built capacity in care and maintenance because the market's not there yet for it. But we're not just a uranium company, and we're deliberately not just a uranium company. We've always been integrated across the fuel cycle in the heavy water space. We fabricate fuel bundles for Bruce Power. That's what we provide them, fully fabricated. Where we find ourselves now with the Westinghouse transaction is completely across not just the light water space for fabrication as well, but we're also in the reactor cycle at this point too. So this is exactly where we want to be.
The reason is, once you have uranium, you're just at the very beginning. You're at the very beginning of a very long journey to become a bespoke fuel bundle for a reactor. Being across all of those points drives a tremendous amount of value, and we're very proud of it. We talk about our Tier 1 assets. We talk about our advanced exploration projects. We talk about our position across uranium refinery. The biggest conversion plant in North America is ours, 100% owned by Cameco. Of course, the Westinghouse and an asset we have in enrichment. We do have an ambition to get into that space, and I'll talk about that in a second. The key to this slide is remembering that fuel buyers have a very small handful of strategic assets for which they navigate their fuel bundle build.
And now, in a world where Russia isn't an option and increasingly China's not looked at as the replacement, it's an even smaller handful. And these are strategic assets. These are assets that are not going to face a lot of competition suddenly overnight. They're too big to fail. If these assets are not running, lights go out and factories shut down. It's as simple as that. That's our McArthur River mine, our Cigar Lake mine. It's the Blind River refinery. It's our Port Hope conversion facility. And of course, it's all of Westinghouse's fuel fabrication piece. The other thing about being across the reactor cycle is it's not just via Westinghouse.
Some of you may have seen in the last couple of weeks, Westinghouse announced a resolution to a dispute with Koreans, with KEPCO and KHNP on their reactor technology and how they deploy it, which effectively means that Westinghouse now participates in every new build the Koreans are embarking on. So all of this was not part of the acquisition case for Westinghouse. It's all upside. So that's who we are and why we are that. So let me just kind of narrow in a little bit more, close the aperture a bit on just the fuel cycle. So what's going on in the fuel cycle? We have never seen the fundamentals stronger than they are today in the nuclear fuel cycle. And it all begins with a fuel cycle demand. We are talking about bringing back reactors that have already been shut down.
That was not part of the conversation a year ago, 18 months ago. We're talking about subsequent license renewals on reactors we thought we were going to shut down. We're talking about extending the life of operating plants, and we're talking about new build over 60 GW scale reactors currently under construction, so gone are the days of looking at the uranium market, and the fuel cycle is one where it was pretty flat until the new builds happened. Reactors that are restarting are bringing near-term demand. Reactors going through license renewal are bringing mid-term demand. And that's connecting to the higher demand that's coming from the new builds. Now, an important thing to remember about the nuclear fuel cycle is our customers buy backwards. They start downstream and they work upstream. And they do this for a couple of reasons.
Number one is the scarcity of the fuel services that I talked about earlier. They have it in their minds that it's more scarce to find the fabrication service and the enrichment service and the conversion service than it is to find uranium. They have it in their mind. There's more sources for uranium. There's more choices. So they tend to focus downstream. They work their way upstream. And then when they do procure the uranium, they know where it's got to go as it navigates the world to become that bespoke fabricated fuel bundle. So they start downstream, work their way upstream, but eventually they have to show up upstream because uranium is the product for which there is no substitute. So you line up the services, and then you eventually need the product to go through it.
Second reason why there's so much attention downstream is because of the Russian ban. So fuel buyers have a lot of reason to be focused on the enrichment space right now. And as a consequence, putting pressure on the conversion space. They are trying to replace 40% of the global capacity with other sources. So a lot of attention downstream, and now it's a bandwidth issue. It's the same fuel buying team that's buying the enrichment service and the conversion service that is buying the uranium. So they're focused more downstream today. You can see the prices, historic prices in conversion, nearly historic prices in enrichment. This is a leading indicator for what's coming. We've never had a delinked nuclear fuel cycle recovery, and we're not going to have one this time.
The demand that's built downstream works its way upstream for the reason I said earlier. Uranium is the product for which there's no substitute. I'm going to go one more level deeper, and I'm going to talk just about uranium for a second, although the analog is pretty strong for the rest of the fuel cycle. If you start with the left panel, the most important thing to understand is we have never been at a moment in time with this big of an uncovered requirements gap in front of us. Utilities today, between now and 2040, have to buy 2.1 billion pounds of uranium in order to meet their run rate requirements. Here's the really important part. The requirements curve does not factor in SMRs and AMRs.
It does not factor in data and AI and all of those super high cases on nuclear power and electricity generation. This is just the requirements of the reactors being saved, the reactors being extended, and the new reactors that are being built, so all of that other stuff is upside to this story. If all of that other stuff doesn't happen, you still have 2.1 billion pounds of uranium that needs to be bought between now and 2040, so I don't want anybody to think that that requirements curve is an exaggeration. It's actually a conservative underestimation of the way demand could work out if we do see SMRs truly making a bold step into the demand part of the business, and if we do see the hyperscalers backing nuclear in a really big way, that is all upside.
This is the conservative run rate requirement, and it's a fairly substantial gap. This slide also has a really important other piece to it, and that is the demarcation of what is the spot market and what is the term market. You hear Cameco constantly say that the spot is not the market to focus on. Uranium is not sold on a spot basis to a smelter or a metals exchange. Uranium is sold under long-term contract. And this picture on the left-hand side tells you why. Utilities do not have in-year demand for uranium. They don't run their reactors that way. They don't have requirements in 2025. They have very few requirements in 2026 because they're buying forward. They have to make sure that fuel bundle is there at their reactor. So this is the lesson.
For those who build a mining plan and a milling plan but don't do the hard work of building a marketing plan, they're creating their own price headwind because they're trying to jam volumes into a discretionary, non-fundamental market where utilities last year bought 26,000 pounds per week or sorry, per day, 132,000 pounds per week in a world where they consume 185 million pounds. So if you're a producer and you have a little asset and you're producing a couple hundred thousand pounds, and you show up on any given day in the spot market and try to sell 100,000 pounds, you're bringing 4x the volume of fundamental demand on a daily basis. It is not the market to focus on.
What you need to focus on is where the term market is going, that growing wedge of uncovered requirements where utilities need that material or their reactor shuts down. So requirements are conservative. It doesn't include all that upside case, and there's a lot of demand that has to come to this market. It can be delayed. It can be deferred, but it ultimately cannot be avoided. On the right-hand panel is putting those requirements against the known supply stack, and here, I'm being really aggressive. In that known supply stack, secondary supplies, we're assuming they continue to flow into the market. In that known supply stack, we're assuming all of the existing T ier 1 assets are running at full capacity, which they're not. McArthur River, Key Lake's not running at full capacity. The assets in Kazakhstan are not running at full capacity.
So, we have a very conservative primary supply stack. And you see, pick your demand case, the conservative-based demand, put it against the high demand, put it against the tripling of nuclear. There's a very significant gap that's forming, a gap that already formed in conversion. It's why conversion pricing is at historic levels. That same gap is building in the uranium space. This feels like a pretty good time to be an incumbent producer with strategic assets in the uranium space. Final slide. So, what does this mean from a strategy point of view?
Because we don't produce for a spot market on the uranium side, because there's no in-year demand you can really count on, the strategy in the uranium segment always must be to build the market first, to capture that demand, and then once that demand is captured, to then call for production so that when you produce, you're producing for a home, and homes that you've built to have appropriate market leverage to market-related contracts at appropriate floors and appropriate ceilings, the kind of contracts that give you the exposure to the much rosier future that we're looking at that is coming into uranium, so you've got to strategically align your contracting discipline, then you have to call for your productive capacity. Front-running demand with supply is simply a value transfer from the pocket of the owners of uranium assets to the owners of utilities. It's as simple as that.
And you have to be able to manage your balance sheet to show the patience that's required because we do not control the pace at which term demand comes into the market. Utilities will go through very prolonged periods where they're out of the market together, and then they'll go through these periods where they all enter the market together. They don't come with normal replacement rate demand on a predictable basis. So you have to design your strategy to be patient. As I showed you on the first slide, we're not just uranium. So right now, when patience is required in the uranium sector, we're busy capturing historic value in conversion, capturing historic value in fabrication, and participating in the enthusiasm around new builds and where those are going.
And we can wait and be patient to watch the uranium demand form and remain in supply discipline because we manage our balance sheet to be able to bridge through that in order to capture maximum value for our owners. The final point on that is we've never been rewarded for front-running the market. The maximum value we create for our owners is always from being slightly delayed because when we're slightly delayed in matching supply with demand, the market tightens. And when the market tightens, our market-related contracts are doing better. But more importantly, everything we're negotiating forward is being negotiated under higher pricing terms and conditions. So our strategy is designed this way. We didn't build the market like this. We did not build a market that had a small little spot and an unpredictable term, but we figured out how to maximize value in it.
We would say the uranium market would be in a lot better shape if others learned that lesson as well. With those comments, Alex, hopefully that gives you lots of ammunition.
Great. Thank you, Grant. Just assuming I can actually make this coherent rather than unlike my introduction. First question, you've identified in your presentation those uncovered requirements. Now, like you suggested, there's some nuances to this, spot versus term. But I think most people would be in agreement with a demand curve that we see, which is growing, and those uncovered requirements increasing. Why haven't we seen as much pressure on term contracting as this would suggest? I appreciate there's probably a lot of ways of answering that.
Yeah, there is. It's tied to the comment I made earlier about fuel buyers working downstream and working upstream. So one of the things that's going on is there's a lot of concern with enrichment capacity absent Russia. There's a lot of concern about conversion capacity because the Western conversion facilities are not all up and running. Ours is, ConverDyn's is, Orano's is, but Westinghouse's Springfields plant is not running. So that's creating a lot of focus downstream, which distracts from showing up as demand in uranium. And that's happening at the same time there's overhang going on in the spot market, right? And that overhang really is in two forms. One is a fund that was set up over the last couple of years started to divest in June of last year.
As that fund, 2.5 million pounds, so if I go back to my earlier daily volume, two orders of magnitude more than the daily fundamental volume in the spot market kind of overhung the spot market through the fall as people weren't sure where that material was going to end up. And then what's also different in the spot market this year, 2025, 2024 compared to 2023, is we've had some restarts. We've had a few small projects that have restarted and have done exactly what we say you shouldn't do, which is show up and sell material into the spot market. And that creates an overhang, right? They're not big volumes. The world consumes 185 million pounds a year, and 50,000 pounds, 100,000 pounds, 200,000 pounds showing up in one day has an outsized impact.
If you're a producer of uranium and you show up selling spot, you create multiplicative negative impacts. The first is you probably told a couple of people. So if you phone three intermediaries and you say, I have 200,000 pounds to sell, the market now thinks 600,000 pounds is available for sale in the market, right? And the second multiplicative impact you create is that people go, well, if it's a producing asset, this is going to be recurring. So I can expect more of this to show up in the spot. But the key is the spot, from our perspective, has nothing to do with where appropriate floors and ceilings should be in a long-term price and a long-term contract that's starting delivery out in 2027. It's why we ignore the spot market as a place to sell material.
Quite frankly, we'll stick our nose in occasionally and buy in the spot market because if people want to give uranium away in this fundamental market, we're happy to be a buyer. The spot is disconnected from the term fundamentals for very good reason. They're all poised to correct.
So there's another nuance within the contracting market, which is obviously different pricing mechanisms. And I know you've spoken publicly about more market-related in your mix probably currently than you have done in the past. So maybe you just talk about how that has changed. Is that still the case, and how do you think it would change going forward?
When we look at a market that has the fundamental that we walked through on those slides, we ask ourselves, do we think today's uranium price reflects the reality that if nothing changes, the Cigar Lake mine is done in 2036 and an 18 million pound per year hole in the supply stack is created? Do we think that's reflected in today's prices? Or if you look at our friends at Kazatomprom and look at the depletion curves of their assets, do we think the market is reflecting the production economics and the production economic pricing to deal with that? And the answer is no. The market is not pricing in these big supply challenges that are coming. So we're not afraid to contract in this window, but we have a preference in this dynamic to be market-related, right?
And a market-related contract. Alex wants material 2027 to 2035, wants 100,000 pounds a year. We're not negotiating the price today. We're negotiating the price reference at time of delivery out into the future. And then he's going to come back to me and he's going to say, oh, but I need a ceiling because I have my own value at risk calculation. And I'm going to say, well, if you want a ceiling, I'm putting in a floor. So a lot of people are looking at those market-related contracts, and they're looking at how the floors and ceilings are coloring. Those are all escalated as they build. Last year, last summer into early last fall, there was a lot of momentum. We were driving mid-$70 escalated floors in an $80 term market.
We were driving close to $140 ceilings, which means market-related contracts are already signaling three-digit uranium because the midpoint between the floors and the ceilings is already three digits. But as the spot market softens because of really poor commercial strategies, utilities step back and they go, well, wait a second. Shouldn't the floors be coming down with the spot market? And at that point at Cameco, we just step back and we say, nope, the floors are set for where the prices need to be 2027 to 2035, not in February of 2025. That's not the case. So we will pull back from the market. We've got a book of business that allows us to be patient.
We can focus on the other parts of the fuel cycle and let this material wash out of the spot market and let the fundamental demand start to build towards replacement rate and get above. That's when real price formation begins. And we will wait for that to happen. We've seen every commercial cycle, and we know what's coming.
So maybe we can switch gears a little bit and just talk about tariffs. So uranium is not alone in a potential tariff coming. How does that impact Cameco and perhaps also the wider market?
Let's start with the wider market first. If we all think back to our early economics classes, there was always the two-by-two box that was built on when industrial policy and tariffs made sense, right? And we were always told that the worst time to put a border tax in place is when your demand is inelastic and your substitution effect is low, meaning you can't get a domestic response. Well, that's uranium. The demand is inelastic because these are contracted volumes. They were contracted for many years, and utilities are going to buy that material. It's absolutely inelastic demand, and there's no substitution effect. You're not going to get U.S. production covering the gap of the Canadian uranium production, period. I'm not even going to put a time frame on it, period. We were the U.S.'s biggest producer of uranium till we put our mines in care and maintenance.
The base is not there. So then they say, oh, well, non-tariffed countries to the rescue. Well, non-tariffed countries will simply increase their price to just below the tariff. That's why when the demand is inelastic and substitution effect is low, that's the wrong strategy to put tariffs in place. So if there's a 10% tariff on Canadian uranium, then the price of uranium is structurally going up 10% or just under 10% as everybody takes advantage of it. That's what's going to happen. For Cameco, we learned a really big lesson with the first Trump administration and the Section 232 investigation. We learned at that time that we could no longer assume North American free trade, that those days were probably over. So we started writing contracts that made it very clear that tariffs belonged in the tax clause of a contract, right?
A cross-border contract, the tax clause is super simple. Taxes in a seller's country are the responsibility of the seller, and taxes in the buyer's country are the responsibility of the buyers. Under the previous free trade assumption, we weren't always so clear that a tariff is a tax. But look up a tariff in the dictionary. It's defined as a border tax. Since the Section 232 investigation, it's pretty clear it belongs in the tax category. So all of those new contracts, as they grow and grow and grow, just make it the responsibility of the party of import, which is the utility.
For the older contracts where it isn't clear and we probably could have a dispute, but picking a fight with our customers is not something we do on a regular basis, we just are reminded it's an integrated global North American market, and we just pre-positioned material inside the tariff wall already. So that's why we're saying there would be no material impact upon Cameco if there was a tariff on Canadian uranium. The market impact cannot be overlooked, but the Cameco impact is immaterial.
So maybe we can talk about Westinghouse. Now, you reiterated your five-year growth range in your recent update. We've seen essentially nothing but good news now for a while in nuclear. And Westinghouse seems to be a key what could be a key component of profiting on that good news. And recently, you also had the resolution you touched on it with KEPCO and KHNP. So maybe you can just frame how confident you are in that growth rate and what are the drivers there. And also, is there actually some upside to that?
Yeah. I think the punchline is there's a lot of upside to it. Remember when I put up the uncovered requirements curve? I said, this is a very conservative requirements. It doesn't include data AI. It does not include an SMR revolution or an ANR revolution. That same conservatism also is behind our disclosure on Westinghouse. I mean, if you look at the energy systems business of Westinghouse, so that's the building of new reactors. And you look at the gigawatt scale AP1000 reactor, what's exciting about it is it's a reactor that has no technology risk, no fuel risk, no licensing risk, no regulatory risk. It just has project development risk. Not that that's not a big risk, but it doesn't have the other four risks as well. And as a consequence, you've got Westinghouse looking to participate with Poland for six reactors, Bulgaria for two reactors.
You've got South Carolina looking to restart the construction program at the V.C. Summer plant. You've got other jurisdictions looking at gigawatt scale new build. But for us, what we require is final investment decision on those projects. If we started putting in the potential, those numbers go silly really quickly. So to be conservative, all that's in the growth range at the moment are the front-end engineering and design work that's being done in Poland on its way to an FID and in Bulgaria. Nothing else is built into the upside on the energy systems. Alongside that now is the Korean deal.
Every Korean project that goes to FID also adds value to Westinghouse, but none of those are at FID yet, whether it's the four in the Czech Republic, the two additional units in the United Arab Emirates at the Barakah plant, or potentially in Saudi Arabia, two plants. None of that is in the business case. We require the discipline of a final investment decision, but once it enters, those growth rates are all going to have to be adjusted upwards. On the downside, sorry, not the downside. The lower growth rate, that's the core of the business. That is just the recurring fuel fabrication reactor services business outperforming the growth rate of the market, new customers in Central and Eastern Europe.
The upside there would be things like if we found the right conditions to restart the conversion plant at the Springfields facility that Westinghouse owns in the U.K., that would be upside to the core. If we really began to penetrate the BWR fuel market in a bigger way or LEU+ fuel in a bigger way, that would all be upside to the core. We remain conservative, but even at those growth rates, Westinghouse is still poised to basically double the industry rates right now. We're extremely excited about this acquisition.
Great. Well, time is up, but thank you very much, Grant.
Yeah. Thanks, Alex.