Quarterly Reports - 2019 - Q4
“As expected, we had a strong finish to 2019,” said Tim Gitzel, Cameco’s president and CEO. “We delivered 14 million pounds of uranium in the fourth quarter, and, in 2019, we generated $527 million in cash from operations, demonstrating our financial resilience.
“We continue to do what we said we would do, and our results and outlook for 2020 are a direct result of our deliberate, value-oriented strategy. We are executing on all strategic fronts; operational, marketing and financial. We added just over 36 million pounds of deliveries to our long-term contract portfolio, more than replacing what we delivered in 2019, while maintaining leverage to higher future uranium prices. In addition, we have more prospective long-term business in the contract pipeline than we have seen since 2011. We are responsibly managing our supply, and our balance sheet is strong. We are starting 2020 with $1.1 billion in cash and $1 billion in long-term debt with maturities in 2022, 2024 and 2042.
“Our optimism and confidence in a uranium market transition is growing, driven by the long-term fundamentals. The underlying fact is that uranium demand is going up, while supply is going down. Today, the market is failing to send the appropriate signals. Current prices are putting future supply availability at risk. This is not sustainable. The longer the transition takes, the greater the likelihood that the uranium price will go beyond what is required to incent tier-one production to return to the market. We expect this will provide the opportunity for us to capture additional value in our contract portfolio and support the restart of our tier-one assets.
“We are committed to identifying and addressing the environmental, social and governance (ESG) risks and opportunities that we believe may have a significant impact on our ability to add long-term value for our stakeholders. We have a vision to ‘energize a clean air world,’ which is clearly aligned with the world’s growing demand for energy, while helping to avoid some of the worst consequences of climate change. Thanks to our strategy, we have the financial resolve necessary to help us achieve our vision.
“We are a commercially motivated supplier, with a diversified portfolio of assets, including a tier-one production portfolio that is among the best in the world. We will continue to be disciplined and make the decisions necessary to keep the company strong and viable for the long term.”
Summary of 2019 results and developments:
- Net earnings of $74 million; adjusted net earnings of $41 million: Results were driven by a strong fourth quarter and execution on all strategic fronts, and were largely in accordance with the outlook provided in our third quarter MD&A.
- Federal Court of Appeal hearing scheduled: The Federal Court of Appeal hearing in our tax dispute with Canada Revenue Agency has been scheduled for March 4, 2020.
- Received dividend of $10.6 million (US) from JV Inkai: In December of 2019, we received a dividend payment from JV Inkai. As a result of the loan repayment in the third quarter, JV Inkai will now distribute excess cash, after working capital requirements, to the partners as dividends. Our share of dividends follows our production purchase entitlements. See Uranium – Tier-one operations – Inkai in our fourth quarter and annual MD&A.
- More than replaced volumes delivered in 2019: We added just over 36 million pounds of deliveries to our contract portfolio, resulting in total commitments to sell over 130 million pounds of U3O8.
- Responsibly managing our supply: Due to market dynamics, we decided to delay some of our spot purchases in 2019 and to draw our inventory down. Our total purchase volume, from all sources, was 19 million pounds, slightly lower than our outlook of 21 million to 23 million pounds. To meet our committed deliveries and achieve our desired working inventory, we plan to purchase between 20 million and 22 million pounds of uranium in 2020, the majority of which we expect will be drawn from the spot market. With the expected delivery pattern in 2020 heavily weighted to the last three quarters of the year and the timing of our purchase commitments, we are confident in our ability to meet our delivery commitments.
- Greater focus on technology and its applications: We are implementing an initiative intended to improve efficiency and reduce costs across the organization, with a particular focus on innovation and accelerating the adoption of advanced digital and automation technologies.
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