Okay, good morning. Our next presentation is gonna be Cameco Corporation, which we believe is a very unique investment for those wanting exposure to the nuclear cycle. That's simply because it gives you exposure to a large part of the nuclear fuel chain. It gives you exposure to uranium mining, conversion, an option on GLE, and of course, an interest in Westinghouse as well. It is kind of a very unique investment out there. Today from Cameco Corporation, we're very pleased to have Rachelle Girard, who's Senior Vice-President and Chief Corporate Officer. I'm gonna turn it over to Rachelle now to go through the different parts of Cameco. Then we're gonna have a fireside chat and open it up for questions. Rachelle?
Great. Thanks, Brian. Brian and I were just talking. I said, "Brian probably knows the story better than I do. He's been around since the IPO. I've only been around for 20 years." If you have questions, you can direct them to Brian 'cause he can probably answer them. you know, it's a pleasure to be here today, obviously. If we can get out of Saskatoon into a warmer climate at any time, we'll jump on the opportunity. These are exciting times for Cameco and for the nuclear power industry. you know, we believe the fundamentals have probably never been better in our industry. We're seeing this durable demand growth and the industry's really gone from one of a global demand growth narrative to a global demand growth execution now.
We're seeing countries and companies around the world that are really focusing in on nuclear power 'cause they're recognizing the critical role that it's gonna play in achieving a number of objectives, those being, you know, energy security, national security, and climate security. We believe the demand profile today is probably more durable than it's ever been in the, at least in the 20 years that I've been with Cameco. We're starting to see that play out as a number of countries now have focused on new build and making new reactor announcements. If we just touch on demand for a moment, and when we look at that demand, when you look at industry estimates that are out there today, we think those are understated from what the actual demand is.
Why I say that is most of the industry estimates today only include those reactors that are currently operating. Those 430 reactors around the world that are operating today, it includes demand coming from reactors that are being returned to the grid, reactors that are being saved from early retirement, the life extensions on existing reactors and the uprates, and then the 60 reactors that are currently under construction around the world. What it doesn't build in yet is, you know, all of the demand that we see coming in the announcements and the planning for new nuclear reactors to support things like onshoring and manufacturing capabilities, AI and data center demand, naval propulsion demand, you know, SMR demand. None of that's baked into the demand estimates that we currently see.
We think, as I say, demand very much understated, and I'll just give you an example. We announced this arrangement with the U.S. government and Westinghouse to invest $80 billion in new reactors in the U.S. If you think about that as eight to 10 reactors, that's 65 million lbs of demand over a 10-year period that's kinda showed up overnight, and you have to think about the uranium. You know, you can say, "Well, yeah, but those reactors won't be built for a number of years." You need to think about the uranium as a long lead item when you think about those reactors.
That demand will come much sooner, along with the, you know, the procurement of some of the long lead items for the construction because nobody's gonna build a reactor without knowing they've got fuel to load into it at the end of the construction program because it's a billion-dollar, billions of dollars asset, too expensive not to have that uranium procured. That demand starts to come very early in the cycle. This is at a time when we think supply is probably more vulnerable than it's ever been and really overstated in the industry estimates. The reason that is because, you know, we've had this underinvestment in supply for over a decade because of the low price environment. We've drawn down secondary supplies, so they're no longer the shock absorber they were in past cycles.
If you think about Russia, it's been the largest source of those secondary supplies. You know, that supply is not coming to the West post-2027, and in fact, we've seen utilities already self-sanctioning in many cases away from Russia. Not the same shock absorber. We think this industry is probably more vulnerable to a shock than it's ever been. We've got, you know, geopolitical uncertainty also creating supply uncertainty and risks in certain jurisdictions. When we look at the projects that, you know, are being talked about, that are being developed, we just know that they're gonna take longer, they're gonna cost more than those feasibility studies would suggest. They haven't figured out anything that the rest of the mining industry hasn't figured out. It's just gonna take longer, and it's gonna cost more.
We know that it's gonna take higher prices in order to incent more supply to come to the market. When you think about the industry, there's 3.1 billion lbs of uranium that utilities have not yet contracted for to meet their needs out to 2045. Of that 3.1 billion, there's about 1.3 where there's no identified source for it today. We know that there's more price discovery to come because we have to discover the prices that are gonna transition those resources into reserves and bring that supply on. We just think that there's more to come. We're not yet at replacement rate contracting. What I mean by that is utilities are not replacing what they're consuming on an annual basis under long-term contracts.
That also tells us there's more price discovery to come yet. When we're truly at sort of those incentive prices, we're typically at or above replacement rate contracting. The good news is, though, that we've never been at this stage in the cycle at this high a price before. For Cameco, that's extremely exciting. We think we're extremely well-positioned. As Brian said, we're fully invested across the fuel cycle. We've got, you know, this suite of unparalleled assets that allow us to participate in all segments of the cycle with today the exception of enrichment. These are scarce, fully licensed, permitted assets that are existing and have brownfield expansion capacity. We think we're extremely well-positioned in this environment. We have, you know, the largest exploration portfolio, 700 hectares in Saskatchewan's Athabasca Basin.
We've got some great advanced exploration projects. We've got the world's two largest uranium mines, the world's largest uranium mill, the world's largest uranium refining capacity. We've got the world's largest conversion capacity. Between our heavy water fuel fabrication and Westinghouse's light water fuel fabrication, we're supplying probably about 65% of the fuel for Western reactors today. We just think we're extremely well-positioned this environment. We've been disciplined. We've, you know, balanced sort of exposure to the upside with managing that downside risk, and we built this suite of unparalleled assets at a time when the focus on nuclear power has probably never been greater. Maybe I'll just stop there, Brian, and we can move to your questions.
Maybe I'll start with the demand side. One of the things that comes up is we haven't built a lot of reactors over the last 15 years. What gives you confidence there's actually supply chains out there to actually go ahead and build all these new reactors that people are talking about? Because maybe I could argue demand's a little slower as well as supply being slower, which we can discuss in a minute.
Well, I think, you know, if we look at the announcement that we made with the U.S. government, Cameco, Brookfield, and Westinghouse, that was exactly part of that, Brian, is. You know, the U.S. government looked around, and they sort of got impatient waiting on utilities, and they said, "Listen, you know, we put all of these incentives in place, and still nobody's building. What is it that we need to do in order to get this construction going? Because we're seeing other countries. We don't wanna get left behind. How do we really get this going? How do we stimulate that supply chain so that we can, you know, start building and building at scale, not just sort of ones and twos here and there?" You know, it's always a first-of-a-kind cost.
That was sort of the driver for that $80 billion investment is let's invest in, you know, a, a fleet of reactors where we can really stimulate that supply chain to build up in order to support the growth that we need to see going forward. You know, the focus will be on that long lead items. Let's get those long lead items ordered and really start building that supply chain out. The key to it after that is, you know, let's sequence, simplify, and standardize. We need to choose the model. We need to build it over and over again and get really good at it. That's really the Vogtle 4 model today. Build it. Don't make changes. Like, just keep building that same reactor over and over again.
Sequence it appropriately, so you're not trying to start all 10 at once. You know, the supply chain can probably handle about four at a time, so you're gonna sequence them much like they did in the UAE in their construction program. Then simplify. Take the learnings from each program and drive those into the next program so that you're continually improving that process. That's how you get from those first-of-a-kind costs to those nth-of-a-kind benefits.
That's what I would call the large reactors. Maybe can you comment a little more? You mentioned in all those supply and demand, you don't really have SMRs in there. Maybe talk a little bit about the advantage of SMRs, where we are with those and why they could be a game changer and if you feel like it, potential numbers over the next 30 years.
I would say for us, you know, we're excited obviously SMRs and interesting, but what the role they've really played is they got nuclear power back into the conversation. They've kind of acted like a bit of a Trojan horse. You know, a lot of people were nervous about large scale reactors, and, you know, but could get their head around small modular. It really got nuclear back in the conversation. We think the use case for SMRs is maturing a bit. Where you've got grid replacement or, you know, replacing coal-fired power, that's where those SMRs are really coming into play, hydrogen production, maybe remote locations.
Where you're adding capacity to the grid, the focus now is really shifting in, particularly like data centers, is shifting back to the gigawatt scale because, you know, if you're gonna build three Small Modulars, you're actually better off building a gigawatt scale reactor. We think they have a defined use case and, you know, a very good use case. We think it's really created a catalyst for nuclear power in general and, you know, bringing gigawatt scale back into the conversation.
You mentioned the demand looks pretty good. If we maybe switch to the supply for a minute, you've said many times, you haven't brought back your excess capacity because the price is not high enough for incentive for Western producers to go out and build new mines. Can you maybe talk about what that price is and how you think about that going forward? Not only on price, but how you structure contracts with duration because I think another thing that comes up is people look and they say you're not realizing the spot price today. I know there's a lot in that question, but it's kind of the crux of the problem here when we go through things.
Sure. Maybe I'll start, Brian, just by reminding folks and, you know, that in our industry, of course, the spot market is not the fundamental market. It is a very small discretionary market, not where utilities go to buy their run rate material. If you think about consumption last year, about 190 million lbs, I think there was about 50 million lbs traded in the spot market. Most of that was trader to trader, so very little utility demand. Utilities don't reserve in-year demand to run their reactors. The fuel they're putting into the reactors is fuel that they procured years in advance because it's just too critical a piece for them to leave that to sort of just in time. Utilities buy under long-term contracts for security of supply purposes.
They don't reserve in-year demand for the spot market. You don't wanna target the spot market with your supply because there just isn't enough fundamental demand to pick it up, and small volumes can move price quite dramatically. We build a long-term contract portfolio. We layer in volumes over time, much like you would build a hedged portfolio. You know, the prices under each of our contracts will reflect the terms and conditions at the time that we sign those contracts. Each turn of our contract, we'll try to push floors and ceilings on market-related contracts higher or, if it's a base-escalated, pushing that base-escalated price higher. Always trying to construct those prices up as we go. As I say, we don't reserve in-year, production for the spot market.
We don't target the spot market because it just isn't a good strategy for us. We sell under long-term contracts. When you think about our contract portfolio, we'll be delivering in any given year into a range of contracts signed at various price points in the industry. Our preference today, if we're signing long-term contracts, is to sign a market-related contract. If you think about contracting in our industry, there's sort of two ends of the spectrum for a long-term contract. What we have at one end is a base-escalated, where if we're negotiating it today, we would set the price, we would set the volume, and the price would be based on generally the long-term price indicator, which today is about $90 U.S. per pound.
Then we would negotiate how that price is gonna escalate to time of delivery under the contract as well as the term of the contract. Our preference today, though, is at the other end of the spectrum, which is a market-related contract, where we set the volume, we set the duration, but we don't set the price today. We set the pricing indicator we're gonna use at time of delivery to price those pounds. Most utilities won't sign 100% market related. They have a Value at Risk calculation they have to do, so they're gonna ask for a ceiling, in which case we'll ask for a floor. Today, those floors and ceilings in the sort of, $150-$155 range probably or the. Then the floors would be in that $75 range.
And then those floors and ceilings would also escalate to time of delivery. That's where our preference is. It gives us that upside exposure, but maintains some downside protection in our portfolio. And then if you think about the prices today, when I said that base-escalated price, $90, it's only set by folks that are signing base-escalated contracts, which is about 30% of the volumes today. About 30% of the volumes are really what's driving that price. It, you know, and ours is not a price discovery in our market, it's a price reporting. I would just say today we're very optimistic, but we're very disciplined. We know that prices need to go higher.
When you think about our floors and ceilings and where they're sitting, the midpoint between a $75 floor and a $150 ceiling is $115, $120. We think prices typically will sort of move towards that point, and we think that's probably more indicative of where that long-term incentive price needs to go. We don't have greenfield mines, so we don't know exactly, but we're not seeing a lot of development or a lot of investment happening at today's prices, so it tells us we're not there yet. Utilities aren't at replacement rate contracting yet, which also tells us that we've not reached sort of that inflection point where utilities security of supplies become paramount to them. Once we hit that stage, that tells us that might be a better time to be starting to look at locking in more volumes.
Today we'll be very discretionary. If a utility comes to us looking for instance, maybe they're looking for 500,000 lbs, we might bid into, you know, half of that, and we'll ask them to come back later and they're gonna have to pay higher prices for the other half. We'll be very disciplined in how we contract those volumes.
Maybe you mentioned something key there, and it might be worth re-emphasizing. We're not at replacement contracting yet. You might just be clear about exactly what it means, because historically it's when you get to that level that prices tend to do really, really well.
If you think about consumption, utilities typically consume about 190 million lbs per year, at least last year. In terms of long-term contracting last year, they contracted for 116 million lbs. You've got 190 million lbs of consumption, 116 million lbs of long-term contracting. That tells us that they're obviously drawing on inventories in the interim. We know that once they're at sort of that replacement rate, they'd be contracting at the same level they're consuming. Typically, when we're in a full-blown contracting cycle, they're at or above that sort of replacement rate, that 190 million lbs. When we go back to sort of the previous price spikes, if you go back to 2012, I think, contracting was over 200 million lbs in any given year.
That's when we were seeing those, you know, $120 prices is when utilities were sort of well above that replacement rate contracting.
Maybe the final question before we switch to the Westinghouse side of the equation. Just you've got a lot of idle capacity or options. Can you maybe just go through how you look at bringing back that capacity and what your flexibility is to do that if you start to get all this demand? The other thing is, typically you under contract, i.e., you sell more than you produce. Why do you do that, and why do you set it up that way?
Sure. If we think about our assets, the really exciting thing for us is that this cycle we have brownfield expansion capacity. We don't have to bring on greenfield mines in order to benefit from this cycle, which is not something we've enjoyed in the past. If we go back to the last price cycle, we were just in the process of developing Cigar Lake Mine. This is exciting for us. We've got brownfield expansion capacity in a market where we think demand is growing. You know, at McArthur River, we, you know, we've got license capacity to 25 million lbs. This year we're expecting to produce from that mine 14.5 million lbs-16 million lbs. Typically produced about 18 million lbs.
You know, there is some investment we need to do and we haven't pulled the trigger on that full expansion because we've not seen that replacement rate contracting. We're being very disciplined because we don't wanna front-run demand with supply in our market, that doesn't add value. As I said, we don't have this sort of fundamental spot market. We've got this long-term contracting market, so you don't wanna have spot exposure. We'll wait for that demand to develop, and then we'll produce into it. We build the contract portfolio first, then we, um, produce into it. We've got expansion capacity on our tier- one assets, about 7 million lbs. You know, 70% of that is ours, so we own 70% of that mine.
We've got our tier- two assets in Rabbit Lake in northern Saskatchewan and our U.S. ISR assets, which between the two of them we can probably bring on about another 6 million lbs- 8 million lbs on an annual basis. Those we think about a little bit differently than our tier- one assets. We kinda look and we say, you know, what do we think is needed to incentivize greenfield investment in greenfield? We're quite happy to take greenfield incentive prices on our tier- two assets. When we start to see, you know, sort of those greenfield investments in earnest starting to move forward, well, that might be a good time to start contracting that supply.
We can offer utilities a really simple choice is you can contract with a greenfield mine that's, you know, got all of these risks ahead of it, or for the same contract, you can sign with Cameco, and we'll bring back a brownfield asset that's, you know, fully developed, it's fully permitted, licensed, it's operated before. If you sign the contract today, it gives us a two-year runway to bring that supply back on, because typically deliveries don't begin under a new contract for a couple of years. We think it's a really simple choice. Then we have, you know, some advanced exploration projects that can leverage brownfield infrastructure. So in northern Saskatchewan, milling infrastructure, which is really critical. Then our GLE project, you know, in its first iteration, that's our laser enrichment project.
In its first iteration, it's re-enriching tails material coming out of the gaseous diffusion enrichment programs that the U.S. government had, that could bring on a uranium mine of about 5 million lbs, up to 5 million lbs, and conversion capacity as well. We just think we've got a lot of levers we can pull in this environment without having to bring on greenfield projects. Brian, what was the second part of your question on that?
just quickly, why you always tend to sell more than you produce?
Yes. We're always over-contracted and folks say, "Well, you know, doesn't that concern you? Aren't you concerned about getting forced into the spot market?" We actually like to have demand that we can deploy in the spot market, the reason being is that we know that there are various producers that don't sign long-term contract portfolios and aren't as disciplined as Cameco, and we can see those pounds come into the spot market. We know that they can have a, sort of a depressive impact on price.
If we have a market-related contract that's pricing in a particular window when those pounds might be coming to market, we like to have demand that we can deploy into the market at that time to pick those pounds up, prevent price from dropping on a few volumes when we have a whole bunch more volume that's pricing in that window. We like to have demand that we can deploy in the market, so we always over-contract. During the low price environment, we just went into an extreme over-contract position. By design, we took our supply down in order to help clean up the oversupply that was in the market. We're still coming out of that a little bit, but historically, we probably have been over-contracted by about 10% of our sales portfolio.
Maybe switching to the other part of the equation, Westinghouse. Again, you know, probably it's not always known. I mean, Westinghouse is actually owned by two Canadian companies, even though it's an American icon. Can you go through, there's a lot of excitement now about the potential AP1000. How that will be deployed? You've obviously managed to get the U.S. administration to effectively do a deal with you to provide money, with obviously they get an option to IPO that potentially at a certain value over the next number of years. Maybe just a quick overview of how that works and how you see potential revenue coming from that going forward.
Yeah. Really excited obviously. We think Westinghouse. We've always known Westinghouse. We've watched it, and we got the opportunity to get a piece of it, we jumped on that opportunity. You know, at the time we valued it, and this is a really exciting thing for us, we gave no value to the AP1000 new build projects. We valued the core of the business, which is its operating plants services business. It's the outage and maintenance work that it does. It's the fuel fabrication. It's the instrumentation and controls that it does. All of those sort of pieces that you need to keep a reactor running, that's Westinghouse. The core of its business, very strong, very stable, long-term contracts, much like Cameco, takes us across the fuel cycle.
We've always had it on the heavy water reactor side, which is about 10% of the reactor fleet. It takes us into the other 90% on the light water reactor side. We're really excited, but we gave no value to the AP1000 because these are big binary decisions on a new build project that we just said we can't put a value on this at this point. There's no final investment decisions that have been made, we're not gonna give any value. Well, since that time, we've now got Poland that's committed to three with a potential for three more. Bulgaria, two. We've got the Ukraine with nine. Obviously, those will be a little longer. We've got the U.S. government now putting this big investment in. Canada's looking at them for a potential of up to probably 14.
The U.K., Slovakia. The growth opportunities have just increased enormously since we bought that asset. We don't build it into our growth profile that we put out because as I say, these are big binary decisions, and you can be 100% wrong or 100% right and those numbers get pretty big pretty quickly. We have given a bit of a framework as to how to think about them. Each new build project, it's depending on jurisdiction, but the range of sort of EBITDA that it would add is probably $400 million-$600 million per reactor that would come to Westinghouse out of that project. That's really exciting for us.
The other piece that's really exciting is, you know, at the time that we bought it, in the market, you had the Russians, you had the Chinese, you had the South Koreans, the French, and they could all bring a full package, a construction package. Westinghouse, Grant Isaac, our Chief Operating Officer, always used to say, "It's kinda like the IKEA. We bring you all the parts, but you have to assemble them." They were a bit of at a disadvantage. Since that time, you know, in the West, nobody's building Russian reactors, nobody's building Chinese reactors. The French have really focused back in on France because they're building reactors at home. Now you've got the South Koreans and Westinghouse.
Well, there was an IP settlement with the South Koreans and Westinghouse in January of last year. Now the South Koreans no longer are a competitor. They're actually a collaborator because Westinghouse benefits from any new build that the South Koreans are involved in. We also benefit there. We just think that that opportunity has increased immensely for Westinghouse, and we're really excited about it.
I might stop this just for a minute. Are there any questions in the audience?
Yeah, I have a question. On the eight-10 reactors that could get built, I mean, what is it that gets the utilities to actually build them? Because I think so far, they just haven't found the right financial model to do it.
Yeah. I mean, the U.S. government has basically said, "Listen, on this group, we're gonna put this $80 billion in to really get it going, and what we need to do is stimulate that supply chain," right? Nobody wants to take that first-of-a-kind cost on to their own balance sheet. You know, they're looking at new models. I think what we could see with this U.S. government deal is we could see where the U.S. government actually builds, owns, and operates these first reactors, on a federally owned land, perhaps for, you know, naval propulsion reasons or data centers. We could see where there's a build, own, and transfer. The U.S. government builds, owns, and then transfers to a utility or anything in between there.
The U.S. government's focus right now is really getting that order in for those long lead items to really stimulate that supply chain, even in advance of site selection. Typically, you go through site selection, final investment decision, long lead items. The U.S. government is kinda going, "No, we don't wanna do it in that order because we're looking to stimulate the supply chain.
Let's get that long lead item order in, then figure out where we're gonna put them, and then figure out the model of how we're gonna, you know, whether we're gonna build, own, and operate or whether we're gonna do it in conjunction with a consortium of utilities or a utility. 'Cause they really wanna stimulate that supply chain and get from those first-of-a-kind cost to those nth-of-a-kind benefits, where then utilities have confidence that the supply chain's in place, that we've got those, you know, that sort of sequencing down, we've got that standardization, and we've got a model that we're just building over and over again.
I'm just curious about, like competing technologies. Like, you know, when there's a tender and the AP1000 is one of the, you know, potential, you know, bidders, like what else is out there and how competitive is it?
That's sort of back to my other point is, you know, as I said, prior to sort of, our purchase of Westinghouse, you had the Russians, the Chinese, the French, the South Koreans, and Westinghouse. Today, we've, you know, Chinese and Russia are out in the Western market. The French are really focused at home because they've got a big, construction program going on there. South Korea, we're actually kind of indifferent between whether it's South Korean technology or Westinghouse technology because Westinghouse benefits in both situations. It really comes down to is it South Korea or is it Westinghouse in most jurisdictions.
Can I just ask. I'll speak loud. A couple questions is just, is there today like a bifurcated supply chain? Two, just like I've been in uranium forever and it's worked out well, but I was wrong on just the amount of pounds that were out there. I'm surprised we're not at a replacement rate last year. Just kinda, you know, when do you expect that to happen? What gets us there? Is it just price going up and people getting nervous, or is there just so much pounds out there and we'll keep finding them somewhere? Those two I think are interesting.
Yeah. I wouldn't say there's a lot of pounds out there. What we have seen is a number of things happening that have taken utilities' focus on uranium and taken it downstream. You know, the Russian invasion of Ukraine, well suddenly everybody got nervous about, well, where are my Russia not a big supplier of uranium, but a big supplier of enrichment and conversion. Really focused on those segments of the fuel cycle, not taking the focus off of uranium, but ultimately that demand has to come back to uranium because uranium is the product to which those services get supplied. As I said, there's 1.3 billion lbs between now and 2045. There's no identified source of supply for that. We need to incentivize the investment, and it just takes contracting. You're right, we're not at replacement rate contracting.
Folks downstream, there's been enough uncertainty around trade policy, utilities waiting to see how some of that comes through. Now what we're starting to see, and you saw overnight, we announced a big agreement with India, Kazatomprom just announced a similar. If we go back to past cycles, you know, what has driven that replacement rate contracting has typically been a shock in the market, and in one instance, it was a supply shock where we flooded a development project we had underway, Cigar Lake. Utilities got nervous about their long-term supply, everybody started long-term contracting to ensure that they had line of sight to their long-term supplies. The other shock that we saw was a demand-driven shock in 2010 when the Chinese came into the market and started locking up a lot of long-term supply.
We're starting to see that sovereign interest come back into the market today. India's a good example. You know, we said over 22 million lbs, or up to 22 million lbs for Cameco. I think Kazatomprom, similar volumes. We're seeing the Chinese looking for supply again. You know, I think the Bannerman deal recently. We're starting to see that sovereign supply. The rest of the utilities have been, I would say, somewhat complacent because they've been able to. You know, there's been supply available. There hasn't been a lot of demand in the market, but as we start to see that demand pick up, utilities watch each other, and nobody wants to be left out of a contracting cycle.
I would just say we've never been more vulnerable to a shock than we have been in the past, and because those secondary supplies that we've been reliant on in the past just aren't there in the same way that they have been in the past.
I'm sorry, we're gonna have to cut it off there, but the breakout session is in Cordoba four for those who have more questions. I just wanna thank Rachelle for taking time and updating us today. Thank you.
Great. Thank you.