Cameco Corporation (CCO) Earnings Call Transcript & Summary

Go ahead, Greg.

Okay. Grant, you can hear us this time?

I sure can.

Good. That's good. Let's get going. On news in the uranium space, we've got Grant here with us, Grant Isaac, CFO of Cameco, to talk about the uranium market and Cameco's position in it. I think we'll try and avoid discussions around specific issues with nuclear plants in Ukraine. Again, we want to focus on the market itself. And if you do have a question, raise your hand, and we'll try and get to you as best we can.

So let me kick this right off, Grant, and ask about what's going on in Washington first, with the potential that the Biden administration could sanction Rosatom, which was the news yesterday afternoon. And it sounds like the events over the past week, given what has happened in Ukraine, pushing the administration in that direction. What are you hearing?

Yes. This is probably a good place to start with. These are uncertain times, and we don't have a crystal ball. So exactly how this all plays out, I can't say with any confidence. But one thing that's pretty certain to me, and that is, we are extraordinarily well positioned for the things that are happening in this market with our already licensed and already permitted Tier 1 production, with our Tier 2 production already licensed, already permitted on the right side of a geopolitical line. And our investments in GLE in a world where everybody is talking about enrichment, again, which is pretty exciting. So I don't know how it's all going to play out, but I know that our strategic positioning over the years has put us in a great position to deal with the risk and the uncertainty that we're seeing on the nuclear fuel side, for sure. I guess it was probably inevitable to start talking about the nuclear fuel supply coming into the U.S. from Russia. It is a very big pipeline as well, as everybody on the call, I'm sure knows, 25% of the enriched uranium product used in the U.S. comes in from that source. When oil and gas were sanctioned, I think it was only a matter of time to ask the question about what -- where the nuclear fuels fall in. So no surprise to see that news come out in the market. I don't think this has ever been a more likely time to see real sanctions. There's bicameral, bipartisan support for banning the nuclear fuels, even though it will create challenge. The industry association, the Nuclear Energy Institute has already been signaling that this is the time to invest in more domestic or certainly, more western supply of nuclear fuels and move away from the reliance upon the Russian fuel supply and ask, what does that transition look like? So there is a real conversation going on. But it's not a one tail risk. A lot of people are looking at it, what will happen if nuclear fuels are sanctioned coming out of Russia and going into the West, in particular, the United States? But don't forget, there's also a presidential decree in Russia talking about important export industries, and we don't know which ones are included yet, but the other tale of the risk is that Russia itself recognizes that the nuclear fuels are a pinch point or a potential pain point for the Western markets and decides to enact voluntary export restraints. And so on either side, there's just a lot of risk and a lot of uncertainty, and you see that, that's what's creating a rapid price response in the thinly traded spot market, as folks are trying to get their head around what this risk means. And certainly, we're watching it very closely.

So Grant, given the inventories that utilities typically carry, how quickly could this become a problem for utilities, both on the SWU side and on the actual physical uranium side?

Well, I think an important message to start with is that unlike, say, a gas pipeline, a natural gas pipeline, if you shut off that pipeline, you pretty much shut down the power generation right then and there. Nuclear utilities do carry an inventory, so it's not like if there were sanctions and material wasn't coming in immediately, that the lights would go out, because the reactors would have inventory that they can tap into. What we would see is a very rapid destocking going on. And as that very rapid destocking occurred, we would see a procurement cycle. And then if history is any indication, that isn't just a procurement cycle to come in and cover run rate requirements. It's a procurement cycle to come in and also cover the inventory that's being destocked and oh, by the way, the inventory target has probably now grown in a world of uncertainty. And that's the times in our market where we've seen those real backwardation. The run rate requirements drive the long-term price discovery, but then, the spot demand really takes off, because that's the demand to rebuild the inventories, and then rebuild them at a higher level. So it's not like the lights go off, but we go through a rapid destocking, and that's what's going to drive the procurement.

So U.S. utilities, in particular, carry, I think, the lowest levels of inventory among utilities globally. So I think somewhere around 2 years, possibly maybe, a little bit below that. Could you see a scenario where they say, "Oh, we should be carrying 3 to 5 years now, " given what's going on globally? And it looks like Russia isn't going to be back in this market for a long time, frankly.

Yes. That would be, I think, a really rational response to this type of event to say that it is important to rethink inventory targets and to build the appropriate pipeline of inventory and in process material. And maybe, a real challenge to the just-in-time modeling that some, I think, we're trying to move to in our industry. So we would expect to see a procurement cycle that really kicked off the run rate requirements to replace what was coming, but then, of course, the rebuilding of the inventory. So that's a good scenario for price discovery.

And the enrichment market is not a subject I know a lot about, but that seems to be even more of a pain point than perhaps, physical uranium. How quickly can the market adjust to losing 25%, 35%, whatever the number is, of global enrichment capacity in the West? How -- is there a [indiscernible] that can they ramp up? Can others ramp up? Can the Chinese step in to help? What do you see the scenario developing here?

Yes. This is an interesting part of the chain, and it's one where they're -- when we were talking about enrichment over the years, Greg, you and I and others, we've been talking about underfeeding. And underfeeding is basically the idea that, if you're in the enrichment space, you have a belief that the uranium and the conversion are just abundant and will always be abundant. And so you actually never have to worry about the product and the feedstock coming into an enrichment plant. And as a result, with the underfeeding, we saw a lot of enrichers, not only layer in SWU contracts, but they were also selling natural uranium that was a product of their underfeed into those contracts, with the belief they would always be able to go and cover it, because the uranium market was so well supplied. And now, what we're seeing is that this is coming home to roost. I mean, just the existing enrichment books are probably short. I mean, there's probably a need for uranium in UF6. And then that's what gives rise to the other side of the coin, which is overfeeding, that's taking your plant and actually, getting your hands on not less uranium, but more uranium, in order to feed in, in order to get more SWU and more enrichment out of it. But I talked earlier, this is going to lead to destocking. It will lead to destocking because somebody will go without. There isn't an ability, right now, to ramp up the enrichment space fast enough to replace all of that Russian need. And so someone is going to have to be drawing down their inventory or all are going to have to be drawing down their inventory. And we're probably talking several years, probably in the order of 5 years, before you can imagine existing capacity to grow enough, to offset what would be lost. So again, this is what leads to the destock. And you think about it from our point of view, as enrichment contracting goes up, that capacity is called for, for a very long period of time. And as that capacity is called for, for making SWU for the service of enrichment, it eliminates the future temptation to underfeed. And the overfeeding is what helps destock even further, and it just helps tighten that overall market. And so it just sets up the fundamentals even more nicely going forward. So living under the assumption that uranium and the converted uranium was always going to be plentiful, has led us into this risk as an industry, and now, we're seeing the worry being translated into price pressure.

Just so people understand, Grant, overfeeding means putting more uranium into the enrichment plant to produce more enriched uranium than you...

Yes. When you have a plant, you have a certain amount of capacity that you can use to create the enrichment that's necessary. When you have excess capacity, you can deploy that capacity to produce more enriched product from less uranium. That's underfeeding. And then you're left with as an enricher natural uranium, which then you can sell in the natural uranium market. Overfeeding is the opposite problem. Now, you have a limit on your capacity, you can't actually deploy more centrifuges, so you've got to actually add more UF6, natural UF6 into getting the same level of SWU out. So you go from a world of underfeeding to very quickly, a world of overfeeding, which is just, I mean, let's call it what it is, more demand for UF6.

Yes. I want to come back to that in a little bit and get your potential ability to benefit from the SWU market. But there's been a lot of questions about Kazakhstan's position in this market. Now, how they get the uranium out of the country, the routes they have to get it out, whether they would be impacted by potential sanctions against Rosatom. And eventually, you're positioned with Inkai and how you're going to deal with that situation. So a multifaceted question, but maybe, we can start with how does Kazakhstan get the uranium out of the country?

Yes. The question about Russia's role in the nuclear fuel cycle is already a big question, driving a lot of uncertainty. When you layer in the fact that the central Asian sources of supply, Kazakhstan and Uzbekistan, are actually highly integrated with the Russian logistics. You're absolutely right in asking the question, what does it mean going forward? A lot of the uranium that comes out of Central Asia goes up into Russia then out of St. Petersburg, for example. And we know carriers don't want to sail into that port. We know that once it's in the Russian system, it could be subject to the sanctions that we're talking about. The material that goes out, the other side of the country to China, well, there are challenges once it goes into China getting the export licenses from China and getting that into Western markets. So it's sort of a sense that once it goes in there, it's kind of sequestered material. The transport and logistic challenges aren't just the port of St. Petersburg. We're hearing that shippers are not thrilled about sailing into the Black Sea right now, while there's military operations going on. And so the third route, which was across the Caspian through, I think, Azerbaijan, Armenia and into the Black Sea is also probably problematic at least from a logistics point of view, I'm not talking a sanctions point of view, but certainly, a logistics point of view. So we're already seeing the concerns about the logistics and what they're actually going to look like. And so disentangling that Central Asian supply from the Russian supply will just -- it will take time. And as it takes time in a market that's quite thin and there's lots of demand, we expect to see quite a focus on diversifying away from that risk at the moment. So it is a challenge. And boy, the Central Asian question takes this question of Russia and just puts it into a whole another category of risk for utilities.

And what about your situation with Inkai, the JV you have with Kazatomprom? You get about 4 million pounds to 5 million pounds a year from the JV Inkai. I don't know if you'd do any shipments now, but if you are, are they delayed? If they're not, when are they coming? Are they coming? And how do you feel about Kazakhstan? I don't think you said anything officially about their support of Russia or not support of Russia. What decision points do you have to make around Inkai?

Yes, that's a great question for us. And as you know, we've been invested in Kazakhstan for a very long time, and we've been partners with Kazatomprom for a very long time, and we have a deep and enduring relationship with our Kazakh partners. And obviously, what goes on there is super important to us, and we watch it very closely. But there is a question of alignment with what's going on here that needs to be addressed. And boy, I have a lot of sympathy for the predicament that I imagine, the Kazakh government must find itself in. I mean, I'm no expert on it, and I'm not pretending to be, but just from my simple perspective, you had some unrest in Kazakhstan that the Russian has played a big role in stabilizing. And so that would sort of suggest that maybe, there's pressure to align with what Russia is doing. And of course, that wouldn't be well received in the West and probably, would put Kazakhstan in the same category as Belarus and therefore, subject to sanctions. And so -- I mean, that's not a great direction to go in. On the other hand, you could see the Kazakh government go the other way and align with the West. But in which case, Russia would be very displeased and they've got a disentangle from the Russian nuclear fuel supply, while they've displeased Russia. So I mean, it is really a tremendous predicament, and I don't -- Boy, I would never want to be in that position. But for us, we need to know what that alignment is to make a decision on our joint venture. So I guess, we would look at it that we navigate by our values, we always have. And our values have been aligned with where the Kazakh government has been over the years. But if the choice is to say they support what Russia is doing in Ukraine, then we would be in conflict from a values point of view. And we would have to look at our investment in Kazakhstan accordingly. I mean, that would be a very difficult decision. But I think there's 2 really important considerations when you think about making any decisions about an investment in that part of the world in the event, and I'm not saying where the alignment is, I don't know. But the first is we'd be talking about a scenario where we would have a very important asset that would be on the other side of the line, if you will, and that would be a problem. But that would be 40% to 45% -- 50% of the current primary production of uranium would be on the other side of the line. And so from a Cameco point of view, we've always wanted and always had a strategic balance. We've had -- we've never wanted to be overexposed to any one particular jurisdiction that might face sociopolitical economic challenge. And I guess, we would have to say any value loss from Kazakhstan would be more than offset by the value gain. McArthur River and Cigar Lake would be the only Tier 1 assets, bona fide Tier 1 assets on the planet, if all that Kazakh production was on the other side of the line. So from a Cameco point of view, our strategic balance always thought about scenarios like this. And so we would be unafraid to make a value-based decision. And we think that the value transfer back to our existing asset base in Canada and the United States and Australia would more than offset any challenge we have. But the second consideration is also important. Countries can be misaligned from a policy point of view, but then, realigned over time. And so it's been a long-standing relationship in that country. We plan on having a long-standing relationship in that country. We wouldn't make a hasty decision. We would weigh it very, very carefully depending -- based upon all the information we have about where Kazakhstan is sitting, vis-a-vis Russia and Ukraine. So the value transfer equation works in our favor in the event of the misalignment. And we wouldn't be hasty because we wouldn't want to forgo the option that alignment could be reestablished later on down the line. And so for us, it's a challenging situation, but the values come first.

So Grant, let's talk about -- you do have a very unique position in the uranium fuel cycle. One, you have made the decision to ramp McArthur River backup, but curtail Cigar. How flexible are you on those kind of decisions? How quickly can you ramp McArthur up? And would you, given what's going on, not curtail Cigar Lake, I assume you would. And obviously, the next step is bringing back the U.S. ISR operations. What's entailed in doing that?

Yes. Great, great question. And let me start with the usual line I give, that this is the uranium market. It's not a spot-driven market. It's not like the challenge our friends down the road in the potash industry have, which is how fast can you ramp up production to meet spot demand in potash. We wouldn't ramp our production quickly just to meet spot demand. What we would do is say, are these higher prices translating into better prices for multiyear contracts? That's what drives our planning decisions, and should be for anybody who's actually looking at uranium production in this space. But those planning decisions are predicated on building those homes. If this is a true security of supply-driven contracting cycle, if we start to see the long-term price start catching the spot price, then we absolutely would revisit the decision of where to bring McArthur back and where to bring Cigar back. Those current levels of production are based upon where the market was at, at the time. So that flexibility and that leverage is something that we've always wanted to retain. So we built the homes for some of the production, and if we start to see a really robust contracting cycle, we would respond accordingly. But what we won't do is say, full speed ahead on McArthur because spot price hit $60 and we want to sell spot material because this is the uranium market. The second we showed up with McArthur production in the spot market, the spot price starts coming down. It's a foolish way to run uranium assets and we wouldn't do it.

But our sub utilities going -- we we're talking earlier on about some utilities are going to have to move into the spot market to fill near-term needs, if some of these contracts are not fulfillable. And they're going to be -- I would think, turning to you...

So there will be some spot opportunities, but we wouldn't meet those by ramping up production necessarily. Remember, when we went through our extreme supply discipline, we bought a lot of material. We bought 56 million pounds of uranium. And about 43 million pounds of that, we bought for immediate delivery into our contract portfolio. But remember, we've got about 13 million pounds under long-term contract. And we bought them under long-term purchase arrangements when the price was a lot lower. And that's material that's sitting at our facility. We're committed to buying it at fixed prices back when the price was a lot lower. That might be material that we could access today to take advantage of some of those spot opportunities and then make the planning decisions when the contract homes are being built, and we can translate those higher prices into multiyear contracts. So a lot of people -- we often see this really false narrative in the market that Cameco is short. As you know, Greg, we've always been over contracted. We've always held the tools in the toolbox to deal with it. And Cameco doesn't fear a rising uranium price. Like, this is the don't throw us in the briar patch scenario, right? This is what we wanted to see because as the price goes up, the contracting environment is improving, and we're locking that value in for a longer period of time. That's what a responsible -- that's how a responsible uranium producer creates full-cycle value. A uranium producer that targets production for the spot market starts taking the momentum out of the market. And that just doesn't make any sense.

So to be clear, that 13 million pounds you have under long-term purchase agreements, you're purchasing, you still have all of that available to you? You can hit that [ button ] whenever you want?

Yes. And it's not unlike what you saw some of the juniors do, except the juniors paid cash for it and put it on their balance sheet. We entered -- we acted like utilities. We said, hey, the price of uranium looks low and there's some people willing to sell it at fixed prices out onto the curve. That looks like cheap uranium from our estimation, cheap uranium against the production cost curve. Cheap uranium against the fundamentals. Cheap uranium against the geopolitical risks. And therefore, we're going to buy some of it. We haven't paid for it yet. It's sitting on somebody else's account. It -- physically, it's sitting at our facilities, and we can access that material. It gives us wonderful exposure to higher spot prices if an end user is looking for spot material, we wouldn't sell it to a trader who's just going to try to turn it back into the market, but that's what gives us spot leverage as we then see the market translate into better long-term contracts, which are the homes for our Tier 1 production, where real value is created.

Got you. Okay. That's good to know. I didn't know that. So in terms of your ability to swap material and help grease the flow of material through the nuclear market. I know you have, obviously, warehousing material, you hold a lot of material for a lot of different people. Can you help some utilities out by swapping and location changes and things like that, that might ease some of the pain for [ utilities ]?

Yes. I mean you can, to an extent, obviously, subject to making sure you're not offside any emerging sanctions that are coming, that you're not -- you're not dealing with counterparties, who are subject to sanctions, especially from financial transactions. But this is why we've always been more than mining, Greg. This is why we've been involved in the fuel cycle. This is why we have the licensed facilities because it gives us a unique role to play. And as the utilities first turn to destocking, which is what's going to happen for -- there's going to be a need to kind of move material around and access it here versus there. And make no mistake, operational stability will be a priority for us. What we wouldn't want to see is the lights go out at any one utility because then that would undercut nuclear's role as a secure and reliable source of baseload power. So what we want is the best of both worlds, where nuclear steps up and shows its true value on all 3 legs of the energy [ policy stool ]. Low levelized cost of electricity over the life cycle, great emissions profile, zero carbon and secure and reliable, while we're here to address the needs of a rebalanced market at prices that are more representative of production economics. So operational stability would matter for us. And we will do what we can, given that we're more than mining to support that, capturing the value that we deserve along the way.

Do you see a scenario where uranium gets decommoditized, i.e., uranium from McArthur or Cigar Lake commands a premium versus uranium from, perhaps, other regions of the world?

Yes, I would say that this is already happening, but it's a little bit different in our market. Because ours is a market that's price reported, not price discovered, it's almost the opposite. There are certain origins that seem to have to offer a bigger discount to make a sale than we do. I mean, we've seen some terms with respect to some of the RFPs that have been in the market in the last year that we certainly -- we didn't win the business, but yet off market, we were able to get the terms we wanted. So we think there's already a premium, if you will, built in for reliable, licensed, permitted, certain origins, but it's really reflected in others are having to discount to win the business as opposed to a premium price. But now, with the market reaction that we're seeing, it is possible that not only will you see a bifurcated market, where you have buyers on 2 sides of a geopolitical line, but the question about decommodifying is really about will we start to see nuclear being pitched as a fully integrated kettle, if you will, right? Like, I mean, all the nuclear power plant does is boil water. I mean, it's a kettle, right? But we don't sell it as a kettle. One person sells the element and the next person sells the vessel and somebody sells the electrical cord, and then all the fuel is sold separately. So you could start to see more strategic partnerships from uranium through conversion, through enrichment and fabrication and reactor building. And by the way, the SMR market is starting to evolve, kind of, in this way anyway. So you might see that angle emerge as well, which moves away from the idea that the plant is one thing, but the fuel is all a commodity and subject to global markets. We might see a shift away from that view, and obviously, we love our position if that shift happens.

So that's a good segue into Global Laser Enrichment and the steps you have taken, Cameco has taken to, I think, build a position, obviously, the way you, where Cameco and Global Laser Enrichment are the next stage in what enrichment looks like via the laser method versus the centrifuges, is my understanding of it, very limited. This, obviously, if Russian SWU is sanctioned and unavailable or morally not, you can't do it, Global Laser Enrichment certainly becomes more viable, more valuable and more real, and how quickly can you commercialize that technology?

Yes. It becomes more valuable from a couple of different perspectives. When we first got into laser enrichment back in 2008, it really was about the third generation of commercial SWU production. So first generation, gaseous diffusion; second generation, [ centrifuge ], third, laser enrichment. But along the way, actually, another purpose came up for GLE. And that was not so much producing commercial SWU or LEU, low enriched uranium, but actually re-enriching depleted UF6 that was a liability of the U.S. government. So we actually shifted direction. And we're in a partnership with the Department of Energy to take depleted UF6 tails and re-enrich them up to natural uranium. It's perfect in a world where conversion is bottlenecking. The feedstock for enrichment is what's going to go through a crisis here as we destock and then need to replace it. Well, GLE is actually in its first iteration. It's a U.S. UF6 mine, is what it is. So the purpose that we've been focusing on for the last number of years is exactly what's needed in this type of environment. So that's great for GLE. But that first purpose of re-enriching the depleted UF6 tails and producing natural UF6 was also the stepping stone to a commercial SWU facility, so it kind of restores the original purpose of it. But then, along comes advanced nuclear reactors that need high assay LEU or HA–LEU. And of course, all of that, essentially, the commercial HA–LEU would have come from Russia. And so now, all 3 purposes of GLE are on the table right now with what's going on. So it's actually -- its value proposition has only gone up markedly since that original investment in 2008. It's why we continue to be very excited about it. There are technology development steps that we have to work through, but I would say the appetite for, certainly, the western customer base and maybe western governments, including the United States, to support it directly has just gone up remarkably, given the current situation.

Right. So can you pull it forward, Grant? Or is there still a late 2020s...

It operates on the same principle as the uranium mines, and that is you don't pull it forward to meet spot needs. You pull it forward if the utilities are prepared to support it under multiyear contracts that provide the return that's required. So we would obviously have to see that level of engagement. Investment would have to go up, but that investment would follow the fact that the homes are being built. And then, of course, the need to partner with the U.S. government on the depleted uranium tails. But the pathway for it has never looked better.

Grant, I want to go back to the very beginning and just talk about, are we actually seeing a point now, where you -- I know it's early in this crisis, relatively early, but are we seeing stresses already appear in the nuclear fuel cycle? Or utilities actually coming to you and saying, we've got a problem here that we need to address?

Yes, no question. We've been engaging a lot with our customer base over the last days and weeks. We only expect that to go up. The stresses are in the form of precautionary challenges. The shippers, are you going to be able to get material out of Russia, for example. So even if there aren't any sanctions, is anybody going to sail into a Russian port to get material. Material that's already seaboard, is it going to find a home. By the time it gets over to North America, will there be actually anybody to take it. We're seeing challenges at ports. Dock workers saying they don't want to offload Russian material. I mean, this is all in the rumor mill, but it leads to the precautionary, maybe, step back. And so we are seeing folks looking for alternatives. There's no doubt about it. Some of it is acute and it's spot demand. And like we said earlier, if it's an end user looking for spot material, we can accommodate. But spot demand being driven by financials or traders, well, we won't respond to that with any of our planned production. That doesn't make sense. But I would say, we are expecting a very busy year.

You had a busy start with the 40 million pounds in January. And I know that's not a run rate, but I assume that level of discussion has continued from what you're saying.

Yes. We still continue to have a big pipeline as we talk about of pounds under discussion, kilograms of conversion under discussion, that's only going to grow.

Right. Just a little off topic, but there was a new President of South Korea elected yesterday, and I believe he is extremely pro-nuclear. It's like a 180-degree turn from the previous administration. I assume now that has to be positive for the nuclear market over the medium to longer term.

Yes. In just about every country -- and I would actually throw Germany in this mix with some of the announcements made -- they've made. What we've seen over the last number of years with the Texas weather event or the snowstorms in Japan, which really challenged the renewables. And now, the energy security issues that are at play in Western Europe with respect to the Russian invasion of Ukraine, the climate realists have stepped forward. And they've kind of pushed the climate idealists out of the way, the people who believe that good thoughts and windmills and solar panels, were just going to run everything. And as the climate realists have stepped forward in every country, energy policy has gone back to what it always should have been, and that's balancing 3 things at the same time. Levelized cost of electricity over the entire life cycle, that's economic; an emissions profile that doesn't contribute to climate change and extreme weather event; and energy security and reliability that doesn't make you beholden to somebody who might not be aligned with your values. And in country after country, as energy policy has gone back to that balance, policymakers have said, "Hey, there are 2 things that fit right in the middle of that balance. One is nuclear and one is hydro." And so in jurisdiction after jurisdiction, folks have gone back and they've said, "Well, we've got to have a relook at the clean energy we already have." And here's a really good idea. Let's support the stuff we already have versus throwing it out of the toolbox and then trying to find another way to achieve this secure balance. South Korea, actually, it was their current President who began to change his view. When he initially came in, he was quite anti-nuclear. And then as he was confronted with the fact that energy policy is a 3-legged stool, he started to soften his view, and then, of course, we've seen quite a change, even Germany. Now, is Germany likely to continue the operation of the remaining reactors? I don't know. But they're no longer standing in the way of other European countries saying that nuclear has to be part of their toolbox. And that's what gave rise to nuclear's inclusion in the EU taxonomy. And we can just go through country after country where the climate realists have taken over, the energy realists have taken over, and we're seeing nuclear take its place in the toolbox where it always should have been.

Right. So Grant, I wondered about this, that the supply dislocation that we saw in 2005, 2006 and the resulting impact that, that had on the uranium market was staggering, right? Obviously, it's the [indiscernible] time. You could argue that the supply dislocation in this market is facing today is worse than what we saw 15 years ago. Is that your view?

Yes. Yes. It certainly is. If you think about the supply shock that was driven by Cigar Lake as a development project, flooding. You've got to remember 2 really important differences. One was Cigar Lake wasn't producing material in 2006. It actually wasn't to be producing until 2009, 2010. So it wasn't like current supply was being lost to the market. It was the potential of future supply not coming to the market. We're talking current supply right now. We're talking about current supply coming out of the market and needing to be filled from some place. So that's acutely different than what we saw with that supply shock. And secondly, there were still a lot of shock absorbers in the market back in 2006, 2007. There was still a lot of HEU material left come to the market. That's gone. The DOE was still sitting on a very big inventory. That's gone. Producers were carrying bigger inventories back in that window. Utilities, we're carrying bigger inventories back in that window. You had the ability to underfeed in order to shock absorb a little bit back in that window. Secondary supplies were a bigger share of the market back in that window. And all of that has changed now. This market, after years of persistently low prices has a primary production base that's not poised to respond quickly to the increased demand. It's got a secondary supply source base that's just been falling over the years, by definition, because if you're not in the market, replacing through new contracts, what you've consumed, it's coming from some place. And so it's current supply that's being affected and the shock absorbers aren't there, like they used to be. So you could make a pretty compelling argument that this is very different than what we saw back in that window and actually, should have a more lasting effect on the market.

Right. Grant, I think I've exhausted my questions. I'm not seeing any on the line. We still have a lot of attendees on the line, but no one's taking their hand up. So I assume I've touched as much the issues that people wanted to hear about it. Are there any closing comments you would just want to make, Grant?

Yes. The one comment that I do want to make, and we've already touched on this issue of Cameco being short material, and how we're actually not short. Rising prices is actually what we've always wanted to see, and we've got ways to deal with that very effectively, and that are quite margin improving. The other piece that I wanted to touch on a little bit, Greg, is where leverage comes from for Cameco. Because we're in a funny situation because we reported a lot of contracting through 2021 and into the beginning of 2022. And of course, our world kind of breaks into people who say, "Why are you contracting anything right now?" To others who are saying, "Why aren't you contracting more? That's not enough," right? And so really, the question is about leverage and the leverage that we hold. And I just want to remind you that our leverage as Cameco comes from 3 sources. It obviously comes from the market-related portion of our committed sales. Price goes up, the market-related terms go up in those contracts. But also, there's a secondary effect in there. In a rising price environment, utilities and their flex are pro-cyclical. They actually flex up their volumes in a rising price environment. They don't flex them down, right? So we actually get more market capture out of our market-related contracts. And I think people kind of understand that as an important source of leverage. Number 2 is the pounds we haven't sold. When we came out in Q4 and said the market has -- we've seen enough contracting to be able to restart McArthur, but we're going to be disciplined with McArthur and we're going to bring down Cigar. That means we got a lot of pounds we haven't sold, still leveraged to better markets. And so that opportunity is all in front of us. But the third part of leverage is what is unique to the uranium space, and we call it incumbents leverage. And that is when utilities start to panic and they're looking for material, and it's an acute need, they don't start a brand-new contract with a counterparty. Like they don't go and begin a brand-new discussion with nobody they've ever bought from before. What they typically do is turn to the existing supplier base and say, we've got a purchase order, can we add more volumes to it? And can we add more volumes to it quickly. All that leverage is still in front of us as Cameco. So for us, when I say, there's a lot of uncertainty and I don't have a crystal ball, and I don't know how this is going to end, but the one thing I can be certain of is that we're very well positioned for this type of risk in the market. That's what I mean. We've got assets that are leveraged to an improving market and a market that realizes it's probably going to need a lot more of the supply that we have.

Grant, I'll leave it there. Thanks for your time, and thanks for everybody for attending. I think it was very educational. And I guess, this is going to be an exciting market for quite some time.

Great. Thanks, Greg. Really appreciate this.

Thanks, everybody. Bye.