Cameco Corporation (CCO) Earnings Call Transcript & Summary

Thank you for standing by. This is the conference operator. Welcome to the Cameco Corporation Second Quarter 2026 Results Conference Call. [Operator Instructions] and the conference is being recorded. [Operator Instructions] The Q&A session will conclude at 9 a.m. Eastern Time. I would now like to turn the conference over to Cory Kos. Vice President, Investor Relations.

Thank you, operator, and good morning, everyone. Welcome to Cameco's Second Quarter 2026 Conference Call. I would like to acknowledge that we're speaking from our corporate office in Saskatoon, Saskatchewan, Canada, which is on Treaty 6 territory, the traditional territory of the Cree people and the homeland of the Matee. With us on today's call are Tim Gitzel, Chief Executive Officer; Grant Isaac, President and Chief Operating Officer; Heidi Shockey, Senior Vice President and Chief Financial Officer; [ Michele Gerard ], Senior Vice President and Chief Corporate Officer; and [ Dominic Haran ], Global Managing Director of Cameco U.K. Tim will provide some commentary to start the call, and we will then open it up for your questions. Today's call will be approximately 1 hour, concluding at 9:00 a.m. Eastern Time. Our goal is always to be open and transparent with our communications. So if you do not have time to get into your questions during this call, or if you would like to get into detailed financial modeling questions about the quarterly results, we'd be happy to respond and follow up to any inquiries. There are a few ways you can contact us with additional questions. You can reach out to the contacts provided in our news release, you can submit a question through to send us a message link in the Invest section of our website, or you can use the Ask a question form at the bottom of the webcast screen, and we will be happy to follow up after the call. If you join the conference call through our website event page, there are slides available, which will be displayed during the call. For your reference, our quarterly investor handout is also available for download in a PDF file on our website at cameco.com. Today's conference call is open to all members of the investment community, including the media. During the Q&A session, please limit yourself to two questions and then return to the queue. Please note that this conference call will include forward-looking information, which is based on our current assumptions, and actual results could differ materially. You should not rely on forward-looking statements, and we do not plan to update them after this call, except as required by law. For more information on the assumptions we've made and risk factors involved, please see our most recent annual information form and MD&A. And with that, I will turn it over to Tim.

Well, thank you, Cory, and good morning, everyone. Thank you for joining us to discuss Cameco's second quarter and first half 2026 results. While the year is flying by, it's the middle of summer here in Saskatchewan, Canada, which is really the inflection point where people here have stopped complaining about the past cold winter, and they start worrying about the upcoming cold winter. As we move past the halfway point of the year, I want to start by reinforcing the consistent message you've heard from us for a while now. Our strategy is built for long-term value creation, and our decisions and activities will be centered around that strategy. As a result, we are currently on track with our expectations for the year. Year-to-date, we've seen the support for nuclear energy not only growing, but becoming more tangible. Around the world, governments, utilities, energy-intensive industries and the public by recognizing that nuclear energy is essential to energy security, national security, economic competitiveness and decarbonization objectives. We see that recognition translating into policy support, new build discussions, life extension decisions, upgrades fuel security initiatives and improved public perception. Here in Canada, the federal government released its nuclear energy strategy in June. The strategy highlights the role that nuclear is expected to play in achieving national energy security and economic objectives while supporting emissions reduction. In the United States, the Department of Energy's conditional commitment to support deployment of AP1000 reactors is another very important indicator of the growing alignment between policy proven and deployment-ready Gen 3 plus technology and the need to execute. We've said many times that the next phase of nuclear growth will be defined by delivery. Ambition matters, but execution is what brings megawatts into the grid and important to us at Cameco brings fuel requirements into the market. That's why we continue to believe that the value of proven technologies, experienced operators and established supply chains will be critical to the equation as the sector moves from aspiration to implementation. For Cameco, that alignment is very constructive. We are positioned across the nuclear fuel cycle with Tier 1 uranium assets in stable jurisdictions, fuel services capabilities strategic investments in Westinghouse and Global Laser Enrichment and strong long-term customer relationships built over decades. On the uranium and fuel market side, conditions continued to improve in the first half of the year. The long-term uranium price strengthened to decade highs and we saw increased on-market and off-market contracting activity. Customers continue to focus on security of supply with notable interest from both sovereign and commercial fuel buyers. At the same time, our contracting discipline remains one of our key competitive advantages. We continue to be patient and selective in committing supply. We layer in volumes where we see contracts that support our strategy and where we believe we can incorporate an appropriate level of downside protection with exposure to improving future market conditions. That discipline matters because sustainable supply does not simply appear because demand is growing. It requires long-term contracts to back long-term investments planned by capable and experienced operators. Over the next 5 years, we have contracts in place for average annual deliveries of more than 28 million pounds of uranium per year. And as the market continues to improve, we expect to continue layering in volumes that capture greater future upside. We continued on a positive contracting trajectory in Q2. However, quarterly results in our business will always reflect the normal variability of customer delivery schedules, product mix and the timing of activity across the fuel cycle. The second quarter of 2026 was no exception. Our financial results were lower than the strong second quarter and first half that we reported last year, largely because 2025 included a significant contribution from Westinghouse related to its participation in the Dukovany reactor construction project in the Czech Republic. But looking past the impact of that payment, the underlying fundamentals of our business remains strong. A few of our outlook metrics changed as a result of the strength of the U.S. dollar, which drove a change to our exchange rate assumption. Average realized prices continued to improve in both our uranium and fuel services segments and our annual production outlook is unchanged. The Unchanged 2026 plan calling for our share of production to be between 19.5 million and 21.5 million pounds of U308 is important. That's because to date in 2026, we've been reminded that safely operating complex, heavily regulated uranium mining and milling assets in remote Northern Saskatchewan is never without challenges. Spring road conditions affected Northern supply routes during the quarter, contributing to temporary unplanned operational disruptions at Key Lake and McArthur River. And subsequent to quarter end, we also experienced operational challenges that had Cigar Lake production suspended for a couple of weeks. While we were able to address and overcome those unexpected developments with no impact on annual outlook, they were good reminders of why we have built flexibility into our supply strategy and why operating experience, risk management and credible teams matter so much in this industry. Our assets are world-class, but they are by no means simple assets. They require disciplined planning, technical capability and constant attention to safety and reliability, and that's what our teams across the company bring to the table every day. During the quarter, we closed our agreement to increase our ownership interest in the Cigar Lake mine. The high-grade Cigar Lake mine is one of the most important uranium mines in the world, and increasing our interest reinforces our commitment to own and operate the scarce, proven Tier 1 assets that we expect will be essential in supporting the growth of nuclear energy. In our Westinghouse segment, performance in the first half was strong. As I said, once you look past the benefit that we realized related to the Dukovany project last year. As an operating business with deep exposure across the nuclear power value chain, Westinghouse is embedded in the day-to-day needs of the global nuclear industry while also being well positioned to drive the next wave of new nuclear capacity through its AP1000, AP300 and [ EVinci ] Technologies. New nuclear capacity creates long-term demand for uranium and conversion and fuel fabrication and related services. That's why Westinghouse is so strategically important to our broader growth thesis. It gives us exposure to the full nuclear fuel cycle and to the technologies that can help shape the next era of nuclear deployment. So our message for the second half is straightforward. Our annual plan remains intact. The market continues to strengthen and Cameco's long-term strategic position is becoming even more compelling. We have flexible supply a strong balance sheet, disciplined capital allocation and decades of experience operating assets in jurisdictions that customers can rely on. We believe the risk to supply continue to outweigh the risk to demand, and we are not prepared to dilute the value of our assets by committing supply into contracts that do not appropriately reflect the durability of market fundamentals. With Tier 1 assets, strategic investments across the fuel and reactor life cycles strong customer relationships and a proven operating track record, Cameco is uniquely positioned to support the continued growth of nuclear energy, while creating sustainable long-term value for our shareholders customers and communities. So thank you for your continued interest and support. Before moving to questions, I want to recognize [ Dominique Miniere ] who has stepped down from Cameco's Board of Directors effective July 26, 2026, to focus on his other professional commitments. [ Mr. Miniere ] has served as a director since 2023 and has been a member of the Human Resources and Compensation Committee, the Technical Committee and the Safety, Health and Environment Committee since he joined the Board. On behalf of the Board and management team, I want to thank [ Dominique ] for his contributions to Cameco, and we wish him continued success in his many pursuits. So with that, operator, we are now ready to take questions.

[Operator Instructions] The first question today comes from Brian Lee with Goldman Sachs.

I appreciate a lot of this AP1000 pipeline disclosure in the MD&A. So I wanted to ask first on that. Looking at this, it seems like the DOE process with the $17.5 billion loan funding from EDF, toward the top of the stack in terms of timing potential? One, is that a fair characterization? And then two, can you describe kind of what milestones we could see on that process between now and, let's say, year-end? And then what kind of engagement you're seeing from the utility since that was launched or announced a few months ago. And I had a follow-up.

We have our Global Managing Director, [ Dominic Kieran ] here with us this morning. So I'm going to pass it over to [ Dominique ] to say a few words about Westinghouse.

So let me maybe just start with a comment that, as Tim mentioned, I'm very limited around what I can say about the offering that Brookfield that Westinghouse announced. But Brian, let me get into your question. So in June 2026 Westinghouse announced the USD 17.5 billion conditional commitment from the Department of Energy, energy dominance financing team. And this is really to facilitate the ordering of AP1000 long lead items. And why is this important because this is an opportunity to really accelerate the deployment of AP1000 in the U.S. So to your specific question around what are the next steps that you can see? Well the next steps are that we will move to definitive agreements, and that is really the next step that you should be looking for is news from us about progressing to definitive agreements, which will involve, obviously, specific utilities in the U.S. as well as the Department of Energy.

Brian, I should have mentioned is all that [ Dominique ] as probably everyone knows, is the chair of the Westinghouse Board. So I just want to put that into context. Grantors on the Board as well.

Yes, I appreciate the sensitivity around the different constituents involved. Fair enough. Second question, maybe just on the uranium segment. pretty encouraging to see the realized uranium per pound ASP increased a good bit here. Curious, was that all because of the stronger market pricing? Or did that have anything to do with restructuring of contracts? And then how should we think about pricing, the construct heading into next year? I know heading into 2026, your view had been mostly flat. So it's nice to see this uptick halfway through the year. Would this maybe not also be the sort of baseline to expect for trend line heading into next year as well? Just any thoughts there.

Yes, Brian, the uranium side of the market continues to move from strength to strength. So just in general, across the industry, I think what the most notable point to make is we are still not at replacement rate demand across the industry. We still don't have utilities coming forward and collectively buying at a volume that replaces what they consume under existing contracts. And yet, we found ourselves back into a mid-90s long-term uranium price on its way to 3 digits likely. And that's in the absence of replacement rate demand. And as I remind folks, we've never been at this kind of uranium price on the front end of a uranium contracting cycle. We've only ever found ourselves at these prices on the back end. So this is really super constructive for the uranium space that on very little demand that underlying long-term price continues to go up, and the reason for that is very simple. Utilities and those that are concerned about future production are starting to realize that they need to pay production economic prices to ensure that supply is there in the future. So that's a very good new story. Now you spoke about our average realized price. Of course, that's derived from contracts we've already captured from business that we've already captured for deliveries that were just simply making not new sales. And really, that increase in the price is a function of the contracts we're delivering into the stronger pricing in the market being reflected in the market-related components. As well as some exchange rate effect, the strong U.S. dollar relative to the Canadian dollar. But this is all part of our marketing strategy of being disciplined. Those old contracts are showing that upward leverage to the market that we said they would and new contracting going forward is being done in a very constructive stronger pricing environment, and we're not even at replacement rate contracting yet. It's a very exciting segment.

The next question comes from Orest Wowkodaw with Scotiabank.

Question around its disclosure around the Form S-1 with respect to IPO for Westinghouse. I realize there's not a lot you can say, but could you give us some idea of the strategic rationale for this. Is this -- sort of should we think about it as getting a market value for the business outside of Cameco or Brookfield? Or is this about the partners not having cash into the business in order to fund all the growth that's ahead. Just curious how to think about this.

Yes. First, consistent with the U.S. SEC rules governing the process, we are extremely limited in what we can say about the offering at this time. So I just -- we just can't provide any additional information on that.

Okay. Maybe shifting gears then. Grant, could you just give us an update, just where our current market terms are with respect to contracting in terms of floors and ceilings. And with the term price having parked up this year, I'm just curious if we're also seeing ceilings move out new contracts.

There continues to be upward movement in the floors and the ceilings certainly as we look to respond to utilities, either on market or off-market or you're familiar, and I think most people listening are familiar that there's the two components of the term contracting market, what shows up in RFPs and then what shows up bilaterally or exclusively, and we call that off market. From our perspective, when you look at this overwhelmingly favorable supply-demand dynamic, where you have a very durable demand building over 3 billion pounds of uranium that needs to be bought to run reactors on a requirements basis against a supply stack that is actually increasingly uncertain, uncertain in terms of the depletion of existing assets uncertain in terms of the restarts of existing assets that have been shut down. And of course, promises of greenfield, which seem to be sliding sideways, if not backwards. That's all very favorable for that supply-demand dynamic. And what it suggests is that there should be upward pressure on that pricing dynamic. And we just talked about it with respect to Brian's question on the underlying long-term price. Of course, when you think about market-related contracts, they don't reference the long-term price, but they generally have callers around them, floors and ceilings, as you've talked about. And we are seeing the floors and ceilings increase commensurate with that underlying long-term price. I think it's not unusual to see market-related contracts now where floor prices are in the high 70s escalated. And where ceiling prices are 160 escalated. I can't speak for everybody. There still seems to be some in the market willing to try to discount floors and ceilings in order to win business. But that's not what we do. We are in the business of being disciplined and looking forward to capture that long-term value with those utilities who have come to realize that security of supply is important. So as I said in my earlier answer, it is a very constructive uranium segment. And it hasn't even discovered replacement rate contracting yet. And that is something that I think everybody on this call and looking at the uranium space should be focused on. These are prices that we've never seen on the front end of a contracting cycle before.

The next question comes from Alexander Pearce with BMO.

Great. So in the spirit of continuing to ask questions that you may not be a answer. Is it fair to assume that the timing of timing going forward, sorry, would probably the next step would come after finalization of the DOE and DSC agreements?

Alex, I have to go back again to our compliance with the SEC rules governing the process. We really can't say anything about that at this point.

Okay. I'll ask a more technical question then. So -- you pushed up cost guidance a little bit for this year. Is it possible to just break down how much of that cost change is due to kind of on-site maybe cost inflation, et cetera? Or is there any of the cost change just because of the purchases you've made this quarter?

That's a good question that we can answer. I'm going to ask Heidi Shockey, our CFO, to answer that one.

The change in the cost going forward was really as a result of the impact of the foreign exchange. [ Meanwhile our ] purchases, as you noted. So it's -- any inflation we're seeing and whatnot would have been covered by the range and the big difference was really that FX rate.

The next question comes from Mohamed Sidibe with National.

Appreciate the additional color provided on Westinghouse and the outlook there. So maybe just on the new pipeline, our global AP1000 pipeline outlook or, call it, economics that you've shared with us with call it, the better share of revenue there. I just -- I was wondering if the 91 reactors pipeline included opportunities that you would take on with the Koreans or if that excludes that category?

[ Dominique ], do you want to answer that?

Yes, of course. The pipeline, the 91 that we've sort of spelled out in our MD&A is very specifically focused on deployment of just the AP1000 technology. So we have not included in that any opportunities related to the Koreans deploying their technology globally. So that is in addition to our list of Q1.

That's great. And maybe just a follow-up to that on the second question. When you disclosed the expected share of project value at 40% to 45%. Is this something you expect to be consistently applied across jurisdictions? Or does it vary drastically between, call it, Europe, North America or maybe the Middle East?

Yes. Absolutely. Maybe let me just answer that with a little bit more detail around where we're at with the AP1000. So we talk a lot about EPC to build reactors, engineering, procurement, construction -- of course, where we're really focused is on delivering a little bit of engineering that is site-specific engineering and the procurement of the parts to build the AP1000. So two comments on that, if I may. So firstly, we're very unique in that we have a finalized design for our reactor. And that allows us to have a very, very specific and fixed scope of procurement. So to answer your question, why we see real value and competitive advantage in the AP1000 is that there is no more design needed, and therefore, the procurement is fixed, which is the majority of that scope for Westinghouse that we've listed in the table. So in summary, we're expecting to see very similar percentages irrespective of what jurisdiction the AP1000 is deployed in.

The next question comes from Bob Brackett with Bernstein Research.

Thanks for all the Westinghouse disclosure again in the MD&A. I'd like to dig into the backlog numbers and new order numbers that you disclosed. But I think of that backlog as the amount of business pre 2025 that sort of flows through in sort of 10 years it becomes revenue. And then that new order line that you talked about there is a significant step-up, and that was business gained in 2025? And can you talk -- is that the new steady state for the level at which you're capturing the business?

Just you may hear in the background of beeping noise. We're just hearing an alarm, but we'll carry on until further notice. So Dominic, over to you.

So -- maybe let me do it in reverse order. Let me talk about new orders entered. So new orders entered, and this is a point in time at the end of last year is the cumulative number of orders entered into within last year. Now those orders, some of those and the smaller percentage will have been executed and taken to revenue in the year. The larger percentage of those orders that have not been delivered on will enter backlog. So backlog then is at a point in time of December 31 and how much contracted business does Westinghouse have for delivery and revenue recognition in the future. So I hope that explains just what do we mean by backlog and new orders entered. Your second question was then, are we expecting to see this as steady state going forward? What I would just maybe just draw your attention to is when you look at the list of AP1000 pipelines, the 91 identified opportunities for AP1000. You can see many of those are in the future, and we're at a pretty early stage with some of those projects. So while I can't give you any specific details on what we expect to happen to the backlog, I think what you can expect as we start to see the AP1000 being contracted and deployed, we are expecting to see a very positive trend on the backlog as we go forward through time.

Very clear. quick follow-up on your anti-a-kind unit economics for the AP1000, you've got a range for a two pack of USD 14 billion to USD 17 billion. Is that a conservative number? One could imagine that [indiscernible] economics could be lower than that $14 billion. How do you think about the range of outcomes of that number?

Well, thank you for your question. I think the honest answer is it's pragmatic, right? We've given a range because it is pragmatic. And why am I being a little vague because some of this also depends on sort of jurisdiction. So if we think about countries that are going to deploy multiple units, we're probably at the bottom end of that range. Where countries are maybe just deploying a single unit or a twin pack, we're probably towards the top end of that range. But as you said, at the moment, those are really estimates and depend on the situation. And I would say that is our best view at the moment of where we could get to.

Next question comes from Lawson Winder with Bank of America.

I echo those comments that I really appreciate the additional disclosure here on Westinghouse. When we look at the huge pipeline of 91 reactors, what percentage of those 91 units would you characterize as high probability opportunities? And then maybe being more specific on some of the different stages, like you have front-end engineering and design projects of around 11. If you look historically, what percentage of those more advanced discussions would typically convert to a full reactor build?

We have ordered the list in terms of how close the opportunities are to making what we call final investment decisions. And obviously, the closer you are to making a final investment decision there's a couple of things to bear in mind. One of which is there's been considerable effort to get ready for a final investment decision. So a huge amount of work preparing for that, but obviously, the probability increases as you get to find an investment decision. We haven't put specific probabilities on the list because quite frankly, it's very, very difficult to estimate that. But let me make a couple of comments. If we go to the bottom of the list and maybe some of our early stage opportunities that we've listed a number of countries there. It's not that we see them as a lower probability. It's just that we see them slightly earlier in the process of getting to a final investment decision. And the countries that are listed there, we are seeing very, very strong recognition of the need for nuclear in base load energy generation. And some very, very common themes around the need for decarbonization, the need for energy security the need for a decent proportion of baseload power on these countries grids, which gives us really quite a high degree of confidence we will convert a significant number of these opportunities into real projects and pass through a positive final investment decision. So we're not really in a position to give specific numbers, but I hope that gives a little bit of color as to how we think about these opportunities.

Yes. That is helpful, Dominic. And then AP300 and [indiscernible], again, the color there is very helpful. Obviously, a huge opportunity, particularly for the AP300, but just -- how would you characterize the CapEx remaining for Westinghouse internally and the time line for each of those two technologies to get to a commercial deployment level. .

Yes, absolutely. So let me start with the AP300. So just to be clear, what the AP300 is a scaled-down version of our very proven AP1000 technology. And while this is why do we think this is really unique and we're in a unique position is because we are basically taking the proven AP1000 technology. and really just adapting it for those customers in those markets that are looking for a smaller reactor. So what does that mean? That means the capital needed to bring that AP300 technology to a final design ready for deployment is actually pretty modest. And I think we've put the numbers in the MD&A. So they're there to read. I mean thereafter, of course, once you're into deployment, it is our customers, our utilities, our government CapEx as we move into deployment of that. So I hope that explains the AP300, as I say, we benefit from very, very modest amounts of capital, I'd say, quite uniquely modest amounts of capital to finalize that design because of the pedigree of the AP1000. And I would just draw your attention to this is not just about design. This is about ensuring there is a robust supply chain for the delivery of these reactors. And of course, the 8,300 has huge commonality with the AP1000 supply chain. On [ EVinci ], different technology. So this is what we call a generation 4 technology and we're really focusing the [ EVinci ] is a much smaller reactor. It is not 1.1, 1.2 gigawatts. It's not 330 gigawatts. It's in a small number of megawatts range. We're very focused at the moment on some opportunities with the U.S. government. And those opportunities currently are self-funding. And what this presents us where there's an opportunity to make decisions in the future to commit capital to these projects should we decide within our capital deployment process that they warrant additional capital.

The next question comes from George Eadie with UBS.

Yes. Just firstly on the duration piece for the AP1000. How does last month's DOE commitment change things? Has that sort of brought forward timelines much? Has that included sort of thoroughly in the 9 to 10 and 10 to 11-year guidance estimate?