Our response to Coronavirus (COVID-19)
We are closely monitoring the developments related to the outbreak of COVID-19. The situation is evolving rapidly, and our first priority is to protect the health and well-being of our employees, their families, and their communities. We activated our Corporate Crisis Management Plan, which includes our Pandemic Plan, and our various Local and Corporate Business Continuity Plans. Our Pandemic Plan and Local and Corporate Business Continuity Plans continue to be in effect across our global operations.
Following the precautions and restrictions enacted by all levels of government where we operate, and considering the unique circumstances at each of our operating sites, we have proactively implemented a number of measures and made a number of decisions to ensure a safe working environment for all our employees. We have:
- asked employees at corporate office to work remotely from home
- asked that all meetings be conducted by phone or videoconference where possible
- suspended all business travel
- restricted non-essential contractors, visitors and deliveries at all locations
- put in place screening protocols for access to our facilities that align with the directives of government and public health authorities
- implemented a number of additional protective measures in the workplace, including increased sanitization and physical distancing
- suspended work on the Vision in Motion (VIM) project in Port Hope
- suspended production, in conjunction with Orano, at the Cigar Lake mine for an indeterminate period
- temporarily suspended production for approximately four weeks at the Port Hope UF6 conversion facility and at the Blind River refinery in April
- set up and awarded COVID-19 Relief Funds totaling $1.25 million to support our northern Saskatchewan and Ontario communities impacted by the virus
The proactive decisions we have made to protect our employees and to help slow down the spread of the COVID-19 virus are necessary decisions that are consistent with our values. The health and safety of our employees, their families and their communities continue to be the priority focus of all our plans, and they will align with the guidance of the relevant health authorities where we operate.
We continue to actively monitor the situation and as it is safe to do so, have begun carefully considered return to work activities:
- On May 11, 2020, we announced the restart of production at Port Hope’s UF6 conversion plant and at the Blind River refinery. Both operations were restarted the week of May 18, 2020 and achieved full production levels by the week of May 25, 2020.
- We are implementing a gradual return to the workplace plan for those employees of our corporate and division head offices who are currently working from home.
- Providing it is safe to do so, we also plan to restart the Cigar Lake mine at the beginning of September. The restart and continued operation will be dependent on our ability to establish and maintain safe and stable operating protocols along with a number of other factors, including the availability of the necessary workforce and how the COVID-19 pandemic is impacting northern Saskatchewan communities.
- While health and safety are the primary considerations for the timing of our Cigar Lake mine restart decision, there were also commercial considerations, including market-related factors and the impact on our cost structure.
- On the financial front, our strategy relies upon having Cigar Lake’s low-cost supply as part of our cost structure to help offset the costs on the operational and marketing fronts.
- We have seen a significant increase in the uranium spot price since unplanned supply disruptions were announced in March. However, Cigar Lake's shutdown has increased our care and maintenance costs and required increased purchasing activity at a higher cost than produced pounds. Both factors are expected to increase our average unit cost of sales for 2020.
- We also have experienced delays and deferrals in project work, including lower capital expenditures, which introduces potential risk to the production rate in 2021.
- With the uncertainty remaining about the September restart and continued operation of the Cigar Lake mine, the delays and deferrals of project work and therefore resulting production rate in 2020 and 2021, we believe the current plan represents an appropriate balance of the commercial considerations affecting our decision.
In addition to the operational changes we have made, on April 7, 2020, JSC National Atomic Company “Kazatomprom” (Kazatomprom), announced that to deal with the risks posed by COVID-19 it was reducing operational activities across all uranium mines in Kazakhstan for an expected period of three months with an estimated decrease in 2020 production of up to 17.5%. On July 6, 2020, due to an increasing incidence of COVID-19 in Kazakhstan, Kazatomprom announced a one-month extension to the reduction in operational activities across all uranium mines in Kazakhstan, including Inkai. The reduction in activity is expected to impact production at the Inkai mine, which we have a 40% minority interest in.
The COVID-19 pandemic has disrupted global uranium production adding to the supply curtailments that have occurred in the industry for many years. In this environment, we believe the risk to uranium supply is greater than the risk to uranium demand and expect it will create a renewed focus on ensuring availability of long-term supply to fuel nuclear reactors.
Our utility customers’ nuclear power plants continue to be part of the critical infrastructure needed to guarantee the availability of 24-hour electricity to run hospitals, care facilities, and other essential services. Our customers are going to need uranium. As a reliable, independent, commercial supplier, we will continue to work with our customers to help meet their delivery needs. So, despite the disruptions to our business because of the COVID-19 pandemic, we expect our business to be resilient.
Thanks to the disciplined execution of our strategy on all three fronts – operational, marketing, and financial – we expect to have the financial capacity to manage the disruptions to our operations caused by the COVID-19 pandemic.
For over 30 years, as part of our commitment to identifying and addressing the ESG risks and opportunities that could affect the long-term sustainability of our company, we have been working with our communities to improve the health and well-being of our employees and their families, and support local business development. In these uncertain times we will need to continue to work together to build on the strong foundation we have already established.
Please see our 2020 Q2 MD&A for more details.