Inkai

Production on a 100% basis was 1.7 million pounds for the quarter and 1.9 million pounds in the same period last year.

Based on an adjustment to the production purchase entitlement under the 2016 JV Inkai restructuring agreement, we are entitled to purchase 4.2 million pounds, or 50% of JV Inkai’s updated planned 2022 production of 8.3 million pounds, assuming no production disruptions due to the COVID-19 pandemic, supply chain disruptions or other causes.

Due to equity accounting, our share of production is shown as a purchase at a discount to the spot price and included in inventory at this value at the time of delivery. Our share of the profits earned by JV Inkai on the sale of its production is included in “share of earnings from equity-accounted investee” on our consolidated statement of earnings.

Presently, JV Inkai is experiencing wellfield development, procurement and supply chain issues, including inflationary pressure on production materials and reagents, which are expected to continue and could pose a risk to JV Inkai’s 2022 production volume, impacting its costs. In addition, JV Inkai’s costs could be negatively impacted by potential changes to the tax code in Kazakhstan, although this risk cannot be quantified or estimated at this time.

The geopolitical situation arising as a result of the Russian invasion of Ukraine is creating transportation risk in the region. Sanctions on Russia and the restrictions on, and cancellations of, some cargo insurance coverage create uncertainty about the ability to ship uranium products from Central Asia, potentially complicating the logistics for deliveries from those areas, including JV Inkai’s final product. For reference, Inkai is responsible for making all transportation arrangements and retains title on Cameco’s share of material until it arrives at our Blind River refinery.

While it is still possible to ship through Russia, due to insurance and other concerns, we are working with Inkai and our joint venture partner, Kazatomprom, to secure an alternate shipping route that doesn’t rely on Russian rail lines or ports. In the meantime, we have decided to delay a near-term delivery for our share of Inkai production destined for our Blind River refinery.

In the event that it takes longer than anticipated to secure an alternate shipping route, we could experience further delays in our expected Inkai deliveries this year. To mitigate this risk, we have inventory, long-term purchase agreements and loan arrangements in place we can draw on.