The purpose of our marketing strategy is to deliver value. Our approach is to secure a solid base of earnings and cashflow by maintaining a balanced contract portfolio that optimizes our realized price. Our extensive portfolio of contracts – and the long-term, trusting relationships we have with our customers – are among our core strengths.
Optimizing Realized Price
We try to maximize our realized price by signing contracts with terms between five and 10 years (on average) that include mechanisms to protect us when market prices decline, and allow us to benefit when market prices go up.
Because we deliver large volumes of uranium every year, our net earnings and operating cash flows are affected by changes in the uranium price. Market prices are influenced by the fundamentals of supply and demand, geopolitical events, disruptions in planned supply and other market factors.
We target a ratio of 40% fixed-pricing and 60% market-related pricing in our portfolio of long-term contracts. This is a balanced and flexible approach that allows us to adapt to market conditions, put a floor on our average realized price, reduce the volatility of our future earnings and cash flow, and deliver the best value to shareholders over the long term.
Over time, this strategy has allowed us to add increasingly favourable contracts to our portfolio that will enable us to participate in future market price increases.
- Fixed-Price Contracts: are typically based on the industry long-term price indicator at the time the contract is accepted, and escalated over the term of the contract.
- Market-Related Contracts: are different from fixed-price contracts in that they may be based on either the spot price or the long-term price, and that price is as quoted at the time of delivery (sometimes at a discount) rather than at the time the contract is accepted. These contracts sometimes provide for small discounts, often include floor prices, and some include ceiling prices, both of which are also escalated over the term of the contract
- Fuel Services Contracts: The majority of our fuel services contracts are at a fixed price per kgU, escalated over the term of the contract, and reflect the market at the time the contract is accepted.
Contract Portfolio Status
Currently, we are heavily committed under long-term uranium contracts through 2018, so we are being selective when considering new commitments. We have commitments to sell approximately 190 million pounds of U308 with 47 customers worldwide in our uranium segment, and commitments to sell approximately 65 million kilograms as UF6 conversion with 33 customers worldwide in our fuel services segment.
Supply & Demand
With more than 60 new reactors under construction, the long-term outlook for the uranium industry is strong.
Uranium does not trade on an open market like other commodities. Buyers and sellers negotiate contracts privately. Prices are published by independent market consultants Ux Consulting and TradeTech.
Caution about Forward-Looking Information
Please click here for additional information about the assumptions applied in making the forward-looking statements on this page and the factors that could cause results to differ materially.