Outlook for 2016
Our strategy is to focus on our tier-one assets and profitably produce at a pace aligned with market signals, while maintaining the ability to respond to conditions as they evolve.
Our outlook for 2016 reflects the expenditures necessary to help us achieve our strategy. We do not provide an outlook for the items in the table that are marked with a dash.
See 2015 Financial results by segment for details.
2016 financial outlook
|8 to 9
|Delivery volume 1||—||30 to 32
million lbs 2
up to 5%
|9 to 10
million lbs U3O8
|Revenue compared to 2015 3||Decrease
up to 5%
up to 5% 4
up to 5%
5% to 10%
|Average unit cost of sales
up to 5% 5
10% to 15%
|Direct administration costs
compared to 2015 6
5% to 10%
|Gross profit||—||—||—||Gross profit
4% to 5%
|Exploration costs compared to 2015||—||Decrease
15% to 20%
|Tax rate 7||Recovery of
25% to 30%
|Capital expenditures||$320 million||—||—||—|
Revenue, cash flow and earnings sensitivity analysis
- An increase of $5 (US) per pound in each of the Ux spot price ($34.65 (US) per pound on February 1, 2016) and the Ux long-term price indicator ($44.00 (US) per pound on January 25, 2016) would change revenue by $72 million and net earnings by $56 million. Conversely, a decrease of $5 (US) per pound would decrease revenue by $69 million and net earnings by $54 million.
- A one cent change in the value of the Canadian dollar versus the US dollar would change adjusted net earnings by $8 million and cash flow by $1 million, with a decrease in the value of the Canadian dollar versus the US dollar having a positive impact.
Price sensitivity analysis: uranium segment
The following table and graph are not forecasts of prices we expect to receive. The prices we actually realize will be different from the prices shown in the table and graph. They are designed to indicate how the portfolio of long-term contracts we had in place on December 31, 2015 would respond to different spot prices. In other words, we would realize these prices only if the contract portfolio remained the same as it was on December 31, 2015, and none of the assumptions we list below change.
We intend to update this table and graph each quarter in our MD&A to reflect deliveries made and changes to our contract portfolio. As a result, we expect the table and graph to change from quarter to quarter.
Expected realized uranium price sensitivity under various spot price assumptions
|Spot Prices ($US/lb U3O8)||$20||$40||$60||$80||$100||$120||$140|
The table and graph illustrate the mix of long-term contracts in our December 31, 2015 portfolio, and are consistent with our marketing strategy. Both have been updated to reflect deliveries made and contracts entered into up to December 31, 2015.
Our portfolio includes a mix of fixed-price and market-related contracts, which we target at a 40:60 ratio. Those that are fixed at lower prices or have low ceiling prices will yield prices that are lower than current market prices.
Our portfolio is affected by more than just the spot price. We made the following assumptions (which are not forecasts) to create the table:
- sales volumes on average of 27 million pounds per year, with commitment levels in 2016 through 2018 higher than in 2019 and 2020
- excludes sales between our uranium, fuel services and NUKEM segments
- deliveries include best estimates of requirements contracts and contracts with volume flex provisions
- is 2% in the US
- the average long-term price indicator is the same as the average spot price for the entire year (a simplified approach for this purpose only). Since 1996, the long-term price indicator has averaged 19% higher than the spot price. This differential has varied significantly. Assuming the long-term price is at a premium to spot, the prices in the table and graph will be higher.