Our strategy is set within the context of a challenging market environment, which we expect to give way to strong long-term fundamentals driven by increasing population, electricity demand and clean air concerns.
We are a pure-play nuclear fuel supplier, focused on taking advantage of the long-term growth we see coming in our industry, while maintaining the ability to respond to market conditions as they evolve. Our strategy is to focus on our tier-one assets and profitably produce at a pace aligned with market signals in order to preserve the value of those assets and increase long-term shareholder value, and to do that with an emphasis on safety, people and the environment.
Uranium production is central to our strategy, as it is the biggest value driver of the nuclear fuel cycle and our business. In accordance with market conditions, and to mitigate risk, we will evaluate the optimal mix of our production, inventory and purchases in order to satisfy our contractual commitments and in order to return the best value possible. During a prolonged period of uncertainty, this could mean leaving our uranium in the ground. As conditions improve, we expect to meet rising demand with production from our best margin operations.
In light of today’s oversupplied market and the lingering uncertainty as to how long the weak market conditions will persist, we are focused on preserving the value of our lowest cost assets, on maintaining a strong balance sheet, on protecting and extending the value of our contract portfolio and on efficiently managing the company in a low price environment. We have undertaken a number of deliberate and disciplined actions. We have reduced supply, resisted selling into a weak spot market, restructured our global marketing organization, streamlined our operations and reduced costs. In 2017, these actions resulted in lower:
- capital expenditures
- direct administration costs
- exploration costs
- uranium average unit cost of sales
Consistent with these actions, we have reduced our planned 2018 annual dividend to $0.08 per share and it will be paid annually instead of quarterly. In addition, we are temporarily suspending production at our McArthur River/Key Lake operation, which we expect will remove 18 million pounds of uranium from the market in 2018. Although these actions will have a cost in the short-term, they are intended to position us to be able to self-manage the risks we face and ensure our tier-one assets are available to us in a market that values them appropriately.
Our fuel services division is a source of profit and supports our uranium segment while allowing us to vertically integrate across the fuel cycle. Our focus is on maintaining and optimizing profitability.
We continue to explore opportunities in the second largest value driver of the fuel cycle. Having operational control of both uranium production and enrichment facilities would offer operational synergies that could enhance profit margins.
In 2017, we made changes to the way our global marketing activities are organized. To better co-ordinate our marketing activities and reduce costs, all future Canadian and international marketing activities have been consolidated in Saskatoon. These changes have a significant impact on the activities historically performed by NUKEM. We will continue to be active buying and selling uranium in the spot market when it makes sense for us and in support of our long-term contract portfolio. However, our marketing activities will now largely be undertaken by our new marketing entity, Cameco Marketing Inc., based out of Saskatoon.
Each quarter, Cameco's president and CEO, Tim Gitzel, provides his perspectives on the uranium fuel industry and our company's performance.
Supply & Demand
Long-term outlook for the uranium industry remains positive, despite current market uncertainty.
Caution about Forward-Looking Information
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