Our response to Coronavirus (COVID-19)

We continue to closely monitor the developments related to the outbreak of COVID-19. The situation continues to evolve, and our 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 pandemic, and in May we restarted production at Port Hope’s UF6 conversion plant and at the Blind River refinery. In September, we safely restarted the Cigar Lake mine, and as planned, it took about two weeks to achieve initial production.

Recently, in accordance with our operating protocols, a number of employees and contractors were placed in isolation at the Cigar Lake mine due to potential infection with or exposure to the COVID-19 virus. All individuals were tested, and results came back negative. Provincial health authorities have cleared all individuals to return to work. Orano confirmed that it has had positive cases of the COVID-19 virus at their McClean Lake mill. All of the cases originated outside the work environment and have been carefully managed to avoid onsite transmission and have not impacted the site’s operation and production.

We will continue to respond to potential future COVID-19 cases in accordance with our plans and established protocols, which are consistent with the guidelines of the relevant public health authorities. We do not currently expect any impact on the Cigar Lake operation and continue to target our share of 2020 production to be up to 5.3 million pounds in total. The continued operation will be dependent on our ability to maintain safe and stable operating protocols along with a number of other factors, including how the COVID-19 pandemic is impacting the availability of the required workforce, northern Saskatchewan communities and the ability of the McClean Lake mill to continue to operate.

In addition, we continue to implement a gradual return to the workplace plan for those employees of our corporate and division head offices who are currently working from home.

The COVID-19 pandemic has disrupted global uranium production adding to the supply curtailments that have occurred in the industry for many years. The duration and extent of these disruptions are still not fully known. Initially, the uranium spot price increased by more than 35% following the announced supply disruptions due to the COVID-19 pandemic in March and April. The average spot price to the end of September is more than 15% higher than the average uranium spot price in 2019.

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. Over time, we expect this renewed focus on security of supply will provide the market signals producers need and will help offset any near-term costs we may incur as a result of the current disruptions to our business.

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. Our deliveries to-date have not been materially impacted and we do not currently expect there will be a material impact on our remaining 2020 deliveries. Therefore, given the production interruptions at the Cigar Lake and Inkai operations, we expect an increase in our required spot market purchasing in 2020, compared to the outlook provided at the beginning of the year, to meet our delivery commitments and to maintain our desired inventory levels. In addition, we may begin purchasing material for 2021 this year. However, the exact extent to which our spot market purchases will increase will not be known until we understand the COVID-19 pandemic-related impacts on production at both the Cigar Lake and Inkai operations. To the end of September, we had purchased 26.2 million pounds of uranium and delivered 22 million pounds under contract.

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. As of September 30, 2020, we had $793 million in cash and short-term investments and $1.0 billion in long-term debt. On October 21, 2020, consistent with our conservative financial management, we issued debentures in the amount $400 million, bearing interest of 2.95% per annum and maturing in 2027, and we announced the redemption of our outstanding $400 million debenture bearing interest of 3.75% maturing in 2022, which is to be completed on or about November 20, 2020. In addition, we have a $1.0 billion undrawn credit facility.

We expect our cash balances and operating cash flows to meet our capital requirements during 2020, therefore, we do not anticipate drawing on our credit facility.

Our balance sheet remains strong, and we believe we are well positioned to self-manage risk. And, despite CRA seeking leave to appeal to the Supreme Court of Canada (Supreme Court), we remain confident in our position and believe our risks have been significantly reduced with the Court of Appeal’s unanimous decision in our favour in our tax case with CRA for the tax years 2003, 2005 and 2006. Furthermore, we believe that the principles in the decision apply to all tax years subsequent to 2006 and therefore, we expect to recover the $303 million in cash paid and $482 million in letters of credit secured with CRA in relation to this dispute.

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.