Our Strategy

Our strategy is to increase annual uranium supply to 36 million pounds by 2018, subject to market conditions, and to invest in opportunities across the nuclear fuel cycle that we expect will complement and enhance our business.

Uranium: Growing Production

The focus of our growth strategy is our uranium segment. Over the next 10 years, we expect annual consumption to increase by 50 million pounds as new reactors come on line. Deliveries under the Russian HEU commercial agreement will end in 2013, and the industry will need new uranium production. Lead-times in our industry are long, so we are preparing our assets today to make sure we can be among the first to respond when the market signals new production is needed. However, our production decisions will always be made with a focus on profitability.

Given the current challenging market environment, we are pursuing our growth with an increased focus on execution. The projects we are pursuing to contribute to our target of 36 million pounds of annual supply by 2018 are those that provide the most certainty in the near term, and are primarily brownfield development. Our growth will come from operating properties, expansions at operating properties and our development projects.

We plan to achieve our growth with a focus on enhancing our nearer term financial picture by spreading our capital spending over a longer period and decreasing project-related expenses. Of course, all of our project decisions will depend upon market conditions and profitability. We continue to monitor the market closely, and will adjust our plans in response to market signals.

Stage Gate Process

We advance each project through a stage gate process that includes several defined decision points in the assessment and development stages. At each point, we re-evaluate the project based on current economic, competitive, social, legal, political and environmental considerations. If it continues to meet our criteria, we proceed to the next stage. This process allows us to build a pipeline of projects ready for a production decision and minimize expenditures on projects whose feasibility has not yet been determined.

Operating Properties

Our current sources of production are McArthur River/Key Lake, Rabbit Lake, Smith Ranch-Highland, Crow Butte and Inkai. We expect about 60% of our total 2018 annual supply will come from mines that are already operating.

Brownfield Expansions and Development Projects

We expect the rest of the 36 million pounds to come primarily from brownfield expansions and development projects, which provide the benefit of existing infrastructure, workforce and positive relationships with communities, governments and regulators. These include:

  • bringing Cigar Lake into production
  • expanding production at McArthur River and our US operations
  • refurbishing and expanding the Key Lake mill
  • working to extend the life of the Rabbit Lake mine
  • advancing the process for extracting uranium from the Talvivaara mine in Finland

We previously estimated capital costs on development projects and projects under evaluation to be between $200 and $400 million per year for the next three years. However, we adjusted our strategy down from 40 million pounds to 36 million pounds of annual supply by 2018, and we now estimate capital costs for our brownfield expansions and development projects to be about $310 million in 2013, and between $140 and $190 million per year in growth capital for 2014 and 2015. See Capital Spending.

Maintaining Optionality

We will also continue to advance our other projects at a pace measured to market opportunities in order to respond should the market reflect the need for more uranium. These projects are:

  • increasing production at Inkai
  • the Millennium project
  • the Kintyre project
  • the Yeelirrie project

We previously expected to spend between $20 and $25 million per year on average for the next three years to assess the feasibility of projects under evaluation. We expect to spend about $24 million in 2013 to preserve optionality for these projects. Based on market conditions, we currently expect to spend less than $5 million per year in 2014 and 2015.