Cameco Corp (CCJ) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Cameco Corporation fourth-quarter results conference call. I would now like to turn the meeting over to Ms. Rachelle Girard, Director Investor Relations. Please go ahead, Ms. Girard.

Thank you, Mark, and good morning everyone. Thanks for joining us. Welcome to Cameco's 2014 fourth-quarter and year-end conference call to discuss the financial results.

With us today on the call are Tim Gitzel, President and CEO, Grant Isaac, Senior Vice President and Chief Financial Officer, Ken Seitz, Senior Vice President and Chief Commercial Officer, Bob Steane, Senior Vice President and Chief Operating Officer, Alice Wong, Senior Vice President and Chief Corporate Officer, and Sean Quinn, Senior Vice President, Chief Legal Officer, and Corporate Secretary. Tim will begin with comments on our financial results and the industry, followed by Grant who will comment on our tax cases.

Then we'll open it up for your questions. Today's conference call is open to all members of the investment community including the media.

During the Q&A session please limit yourself to two questions and then return to the queue. Please note that this conference call will include forward-looking information which is based on a number of assumptions and actual results could differ materially.

Please refer to our annual information form and MD&A for more information about the factors that could cause these different results and the assumptions we have made. With that, I will turn it over to Tim.

Well thank you, Rachelle, and welcome to everyone who has joined us on the call today to discuss Cameco's annual and fourth-quarter results. We appreciate you taking the time to join us, and I wish you a happy new year if we haven't had the chance to do that already.

This is the time when we sum up the previous year and look forward to what we think this year will bring. I would sum up 2014 as being another challenging year for the industry, but again another solid year for Cameco.

This may sound familiar to those of you who have been on past calls. I said it last year and the year before because it's true. Despite the difficulties in the uranium market we have continued to achieve strong results and deliver on our guidance.

If you recall in 2013 we reported record annual revenue, record revenue from our uranium business, and record average realized price. In 2014 we were just shy of 2013's overall record revenue and achieved new records once again in our uranium business, including revenue and average realized price.

That shows that we're doing the right things. We're keeping a close watch on how the market continues to evolve, we're staying flexible to the respond to the conditions we see, we're focusing on the assets that return the most value, and we're continually striving to be more efficient.

So we're finding ways to do what we've always done, remain a profitable, low cost producer, but in a much more challenging environment. Of course that's thanks in large part to our portfolio of assets.

This year I'm happy to say we operate the two largest high grade uranium mines in the world, McArthur River and our newest operation at Cigar Lake. Production from the mine and first packaged Cigar Lake pounds were certainly big highlights of 2014.

Today we're continuing with our plans to ramp up production there to 18 million pounds by 2018 and expect between 6 million and 8 million pounds this year, half of which is our share. So it's exciting times for Cigar Lake.

And McArthur River Key Lake performed very well in 2014 as well, exceeding our annual production expectations on the heels of a record month of production at Key Lake in December. As a result our fourth-quarter production was 9% higher than in 2013, and overall we beat our annual production guidance by 2%.

I'm delighted to say that those results were achieved safely and responsibly. In fact safety milestones were achieved across the organization.

Blind River is the star, having achieved eight years without a loss time injury, with Crow Butte just behind at seven years. Those are exceptional results. So positive financial, operational and safety performance for the fourth quarter and for the year.

But that's not to say there weren't challenges. There's no denying market conditions remained depressed.

Reactor restarts in Japan are taking longer than anyone thought, even the utilities. The two Sendai units are the front runners of the 21 reactors that have applied for restart.

Those two have received the go ahead from the regulator as well as all of the public approvals, and they are now going through the final safety checks. And just recently Takahama Units 3 and 4 received preliminary approval from the regulator for restart.

So there has been movement and we will continue to watch that process closely in 2015. But overall the industry is still suffering from decreased demand and the supply overhang that has caused low uranium prices. In fact prices reached a nine-year low last July before recovering somewhat at the end of the year. So today it's tough.

For that to change we need to see the needle move on some key catalysts. We need to see reactor restarts in Japan, the return of long-term demand, and continued progress on new reactor construction. Of course new reactor start ups are occurring now. In 2014 five new reactors joined the grid.

There are around 70 continuing construction today, and we expect about 80 net new reactors to come online over the next ten years. When we translate that to expectations for uranium consumption it means 4% annual growth over the next decade.

So the growth story for nuclear over the long term has not changed. It remains incredibly strong. In fact the question is becoming we think will supply be able to keep up when the market turns.

Continued low uranium prices means there's no incentive to invest in new production, so it's not surprising that what you see today are projects being delayed or cancelled. Ours is a long lead time industry. The mine can take up to 10 years to bring on when things go well.

So in our view the market will be calling for more uranium at a time when it could be difficult for primary supply to keep up, and that is what we continue to plan for. We are maintaining flexibility to respond not only to the near-term challenges but also the long-term growth.

We continue to prepare for expansion at McArthur River, Key Lake and we're ramping up Cigar in order to be ready for the increasing demand we see coming. And in the longer term we have an excellent pipeline of projects to draw on as well.

So what you can expect to see from us in 2015 will be very similar to what you saw in 2014. Working hard at our operations, staying efficient, operating safely, and looking to return another year of strong results.

So with that, I'll turn it over to Grant Isaac to take you through the CRA and the IRS piece. Grant?

Thank you, Tim. I just wanted to make a few remarks. You've heard us talk about our dispute with the Canada Revenue Agency several times now, and as we've said before it is challenging for us to effectively communicate what this dispute is about because it's complex and it's before the courts.

And adding to this challenge you will have read in our news release and MD&A that we recently received a notice of proposed adjustment from the US Internal Revenue Service relating to our 2009 tax year. We do realize that our tax disputes are of interest, so I wanted to provide you with an update of where we are at on the CRA case and walk you through what the IRS notice covers.

So what is new on the CRA front? Well, actually not a lot. There are a couple items I would like to draw your attention to however.

First we have determined that we have another tool at our disposal in order to satisfy the 50% we are required to pay at the time of reassessment. As an alternative to paying cash we may instead provide security by way of letters of credit.

We have not yet received the CRA's reassessment on our 2010 tax return, but continue to expect to see that shortly. Keep in mind we have already factored this reassessment into the estimated future amounts owing that we have disclosed.

The other item you will note is that the total of the amounts paid and estimated future amounts owing has increased from what we recorded previously. This is simply because we now know our 2014 earnings and are able to apply the methodology we think the CRA is using to estimate the expected impact of a reassessment on our 2014 tax return.

You will see similar updates in subsequent years. I should point out that the expected amounts owing and timing are estimates only since actual amounts will depend upon the income reassessed in each year, the availability of elective deductions and tax loss carryovers, and the timing of reassessments.

If we are successful in our case, as we believe we will be, we expect to recover all amounts paid to the CRA related to this case. It's important to note that there have been no changes to our view of the case since we first disclosed the issue in 2008.

And as far as timing goes the 2003 assessment is expected to go to trial in 2016 with a decision expected 6 to 18 months after the trial is complete. As I mentioned earlier we have received a notice of proposed adjustment from the IRS for our 2009 tax year.

The IRS position is that a portion of our non-US income taxed in non-US jurisdictions should be taxed in the US. In particular they propose that income earned on sales of uranium by our US mines to Cameco Europe is inadequate, and compensation earned by Cameco Inc, one of our US subsidiaries, is inadequate.

We believe the assertions of the IRS are incorrect and we plan to contest them in an administrative appeal. During the appeal process we are not required to provide security or make any cash payments.

Also keep in mind that the income the IRS is proposing to tax in the US is a portion of the same income we pay tax on in non-US jurisdictions and which the CRA is proposing to tax. Bilateral international tax treaties contain provisions that generally seek to prevent taxation of the same income, and we are considering our options under these treaties.

I want to emphasize that we do not believe that the ultimate resolution of these matters will be material to our financial position, results of operations, and cash flows in the years of resolution. And with that I'll turn it back to Tim.

Well thanks, Grant, and with that we'd be happy to answer any questions you might have.

Thank you

(Operator Instructions)

Our first question is from David Talbot from Dundee Capital Markets.

Good morning, good quarter here. Focusing on the assets that return the most value.

You had some write-downs at Rabbit Lake, either cancellation or deferral of certain capital programs. Could perhaps we get a little bit of color on what capital projects might have been impacted here?

Could we perhaps read through the Rabbit Lake as one of those assets not necessarily returning that value? Maybe assuming status quo, would you rather focus elsewhere and allow production to decline at Rabbit? Is that something that we could see in the next couple of years?

David, thanks for the question.

Regarding Rabbit we did -- you saw took a write-down on Rabbit. Rabbit continues to produce for us; they had a very good year the last year.

As you know we sell between 31 million and 33 million pounds a year. We produce less than that in the 23 million- to 24 million-pound range. So those Rabbit pounds are important for us.

We also have some constraints going forward. Our tailings capacity is limited going forward, so we've got some decisions to make there. We're looking at the potential of expanding tailings extending that out, but that's really market-driven to a large extent. So we'll continue to look at that.

We did take a small provision on some other assets, and I'm just looking at Grant. Do you want to just touch on those?

Yes, certainly. Just to circle back to the impairment on Eagle Point, as Tim was describing obviously there are times when the accounting treatment may differ from operational or strategic intent. So all we've done is some analysis on this asset from an accounting perspective and just came to an impairment charge.

But yet Rabbit Lake had a great year in 2014, and you've seen its production forecast for 2015. So it continues to be a part of our stable obviously. And then there were a few other assets that we looked at.

We've come off a Double U obviously. We mentioned that quite awhile ago, and as part of that process and revisions to our capital allocation process we've gone through and looked at all of our projects that we have and determined there were a few of them in particular that were linked to our growth plans, growth plans that we're no longer on. And so we also took a write-down at year end on some of those assets pertaining to Key Lake and McArthur River.

Okay perfect, thank you. Just one more quick question. Cigar Lake.

How's the ramp up proceeding right now from the mining point of view? Have you found that that additional freezing time has really helped the development for this year? And has it impacted I guess development for this year at all?

David let me pass you over to Bob Steane.

Yes, David, Bob Steane.

That pause increasing absolutely took freezing out of the picture. So that's not an impact on our development, our plans coming up in this year and going forward. And overall our development is progressing along the lines of the technical report; we're ramping up to the 18 million by 2018. And we're on track for that.

Thank you. Our next question is from Greg Barnes from TD Securities.

Yes, thank you. Grant, the tax recovery this year of 60% to 65%, does that entirely trace back to the transfer pricing issue, or is there something else going on behind that?

Yes, it's the same analysis we've been doing every year when we put out that outlook table. We look at our consolidated effective tax rate, which is just the accumulation of the activities we have in our global structure. The recovery this year just recognizes greater activity in Canada, obviously, as a result of Cigar Lake coming online and more Canadian production. So no change in the methodology.

Okay. Second question then, on -- back to Cigar Lake. You're pretty vague about when commercial production is achieved. You say consistent or sustainable increasing production levels.

What guide is going to tell you that you're there? Is that three jet boring machines operating, or is there some other trigger that's going to tell you you're at that level to hit commercial production or announce commercial production?

So Greg that has to do with the IFRS interpretation. Grant has been studying that meticulously. So Grant do you want to answer that?

We obviously have to build a bit of a framework for coming up with when commercial production can be declared. Gone are the days when you pick a notional capacity factor and say 75% of nameplate or 80%.

Those days are gone now, really it comes down to a determination of is the asset producing in accordance with its mine plan? So looking at that, we've developed a series of markers that have to be achieved. You hit on a good one.

I mean we've said that we need a certain level of productivity from that jet boring system. We need to see it producing reliable and sustainably over a certain period of time.

We also would like to see, obviously, more than one jet bore in operation reliably and sustainably. And so that kind of gives you an idea of some of the factors that go into it.

Obviously there's an ore specification that we want to hit and hit that reliably, and then ultimately wrapped into a sustainable production rate right through the entire mining process. So those become a framework for declaring commercial production, because you no longer have the ability to simply say well 70% of nameplate. So we're working towards those milestones, and when we get there, obviously, we'll be very happy with that declaration.

Thank you. Our next question is from Brian MacArthur from UBS.

Good morning. My questions relate a little bit back to David going forward on some of the other plans since you got rid of Double U. You talk about lower well field development, Crow Butte is down year-over-year, one time you're going to have big ISR production, which I think has probably been pushed out.

How should we think about the well fill declines on the US operations over the next few years? Because it doesn't look like massive amounts of capital is going to be in there.

Well Brian, it's Tim. We're watching the market really and where we have flex in our production we're watching to see where we can use that.

We haven't been putting a lot of capital -- you see our capital spending is down overall forecast for this year and even going forward. So we're watching the market.

Those well fields are continuing to produce. We're waiting to see like I say if the market improves and if we will, if they do, we may put some more capital into the ground there, but at the moment we're just letting them run. Bob, do you have anything to add to that?

No.

No. That's about where we're at Brian.

But would they last another three years or do they -- ? I just don't know well enough how those wells decline.

Bob Steane here, Brian.

They'll carry on a decline for a number of years. And there are still -- we go to Crow Butte there are no new well fields to put in at Crow Butte deposit. There are additional deposits around there, but the Crow Butte deposit is declining. There are additional well fields that we continue to develop, but nothing on adjacent properties.

Thank you. Our next question is from Steve Bristow from RBC Capital Markets.

Congratulations on the quarter. I just had a question on Cigar Lake. If you can give anymore color on the ramp up you're seeing in 2016 and 2017, up to your full capacity in 2018.

Steve, it's Tim.

We haven't guided on that yet. What we've done is just for this year to say that we're looking at 6 million to 8 million pounds and then we take you out to 2018 and say we'll be at 18 million, in 2018. We haven't said in those two other years, is it two or three other years, 2016 or 2017 where we're at.

We're just being cautious, I think prudent on where we want to go with that. And so as they say you can take 6 million to 8 million. Will it be linear? Probably not exactly, but our plan is to go from 6 million to 8 this year to 18 million by 2018.

Okay, thank you.

Our next question is from Raymond Goldie from Salman Partners.

Thank you and good morning, gentlemen. You said Rabbit Lake's tailing capacity is limited. I wonder if you could remind us when the tailings dam is filled up?

But perhaps more important since you said that the extension of the tailings capacity is market driven, could that market include doing on behalf of a third party doing custom milling? Have you been approached by anyone wanting to do custom milling at Rabbit Lake?

Well custom milling is an option. That's about all I would say on that. Nothing in the hopper at the moment.

We'd say that we have space in the tailings facility now with production to 2018. And as they say you're going to hear this refrain from us. We're watching market conditions.

We wanted to be flexible as to where we were at. We wanted to get off the Double U track where we said we were going from 20 million to 40 million.

We didn't think that was a good idea pinning that up on the wall for all of the customers to see and giving great assurance to the market. So we pulled back on that to where today we're operating our assets with some flexibility in them now.

We're watching closely the future because we believe it's going to be better, and so we want to have our timing down on that. We think Cigar Lake is going to be -- the timing is going to be good as we ramp up to 18 million by 2018.

We think those will be great pounds and needed pounds. McArthur we've got a little bit of flex there that we're working on that, just preparing for that. And Rabbit we're watching as well.

We know that we've got capacity in the tailings until 2018, and we're looking at what kind of approvals and capital would have to go into extending that. So all of our facilities as we say we're watching very closely, and it's going to be the market that will dictate what we're going to do with some of those facilities.

Thank you very much for that. I admire your increased dedication to supply management and watching what your clients really want.

Thanks.

Thank you. Our next question is from Daniel Rohr from Morningstar.

Thanks a lot. What sort of currency assumption underpins the expectation of a 5% to 10% unit cost increase for 2015? Is it the same 1.1 cross rate underpinning the revenue forecast?

It is, yes, we haven't changed that.

And then just as a follow up to that you had mentioned the high unit costs for Cigar in the ramp up phase being part of that 5% to 10% increase. Excluding any impact from Cigar what sort of unit cost increase are you looking at for the rest of the portfolio?

Oh, gosh, I don't have that number at hand. I would tell you that on a cash cost basis the Cigar Lake pound coming in on a non-fully utilized basis are the main driver to why the cash costs would be up.

And of course once commercial production is declared you have the non-cash cost of Cigar Lake hitting in. If I back those out, and I hate to take a flier like this, I would expect our guidance would be very similar to the last few years where up to 5% average unit cost of sales increase but no more. I can certainly go back and do a little more work on that and we can take it offline.

Thanks. And if we were to say hold the spot cross rate, what sort of -- hazard a guess at what sort of unit cost increase we would be looking at?

If we were to hold the spot? Yes I won't hazard a guess on that one, thank you.

Thank you very much.

Thank you. Our next question is from David Snow from Energy Equities.

Could you give us a little more color on inventories, what they look like versus demand, how many whatever it is years or whatever of demand? And what would it be to get normal, when you might expect it to get more normal?

Are you talking about, David, inventories around the world?

Yes.

Oh, I'm sorry, okay. I'll ask Ken to speak to that.

Yes David.

If you look around the world in different jurisdictions, different regions, people are holding different levels of inventory. And certainly a place like Japan there's a lot of inventory at the moment.

The Chinese are probably reasonably well covered. That said we find them always in the market. And so the Chinese continue to plan for, I would say, a pretty big new build program.

If you look at the balance of our traditional customers, we are seeing that over time now inventories are starting to deplete and uncovered requirements are opening up. And I will say that even first quarter this year we're seeing some emerging long-term demand, utilities wanting to put material under contract, which is a strong indication that some of those requirements are opening up.

Okay on a macro basis how many year supply do you see out there? The total?

Well, I don't think I would venture a guess at that, because, again, region to region it varies so much that to put it altogether in one global number is, I don't think it's terribly useful.

Okay, all right, thank you.

Thank you. Our next question is from Fai Lee from Odlum Brown.

Hi, it's Fai Lee here.

I'm just wondering if you could possibly just walk us through what your capital structure would possibly look like if you win the CRA dispute, and if you possibly lose the CRA dispute. And I'm talking maybe debt-to-capital I guess.

Sure, Fai, I'll ask Grant to touch on that.

Well I'm hoping you've had a chance to look at the disclosure that we've had out there for some time. We have an enormous amount of voluntary disclosure to actually address some of those issues. We've only been technically assessed by the CRA, reassessed for the 2003-2009 years. And then we go on to add the years which we haven't been reassessed to the current period. So that's 2010 to 2014.

What we do is give you a sense of what the maximum exposure would be under their methodology, which we don't agree with, by the way. And that's putting things into three buckets: the income adjustment back in Canada, the income tax expense that we would face, and then the cash tax impact. So we have those numbers out there.

There is quite a bit of detail in our MD&A. All of that to say that the profile of this isn't where even in a worse case it all hits in one year. We have a situation where 2003 is actually the year that's technically before the courts right now. That's what we're looking at going to trial. And so obviously the trial outcome will affect how subsequent reassessments are done. That would be quite a prolonged process.

So it's hard to give you an answer, because the process is one where there's no sudden change in the capital structure. We would have time to adjust, but the numbers are there for you. And what might be easiest is for you to just have a good look at that disclosure and then we can take it off line if you'd like.

Maybe if I can just ask, just clarify my question.

I'm aware of the numbers and I know the profile, I just look at your balance sheet like it looks like there's relatively very low levels of debt. It certainly seems like there's room to accommodate even a negative decision into the debt portion. Wasn't sure if you consider financing with equity.

I guess the alternate is more if you win this scenario I'm wondering: you have a relatively low level of debt. Would you consider increasing of debt and buying back shares? That's sort of my question.

Okay. Thank you for the clarification.

So on the tools in the tool box question, we do have a lot, and I appreciate the perspective that you just brought to that. We do have a relatively low level of leverage. We have credit facilities that are undrawn. We have a lot of opportunity there. We were sitting on a very nice cash position, not doing that because we're worried about a negative outcome but just because we're running the business flexibly and prudently as Tim said.

In the event that this dispute goes our way, which is our belief, and that cash is returned to us, we will look at those proceeds from the perspective that we look at all of our cash. And that's through a very rigorous capital allocation process. So when we look at our needs we evaluate them and say really our cash from operations when you take out our dividend commitment and when you take out our financing costs leaves us with an investable amount of capital. That investable capital can go in one of two directions. It can go into investing in the uranium space, or it can go back to our owners. And we'll just continue to use that kind of framework for making those decisions.

By the time this dispute is decided, and our guidance is 6 to 18 months at the end of the trial, and the trial part happens in 2016 now, who knows what kind of uranium market we're going to be in. And therefore I can't even begin to imagine what those capital allocation decisions would look like. But that's the framework under which we would look at it.

Thank you our next question is from Oscar Cabrera from Bank of America Merrill Lynch.

Thanks, Operator. Good morning, everyone.

Just with respect to your capital guidance for 2015 to 2017, I noticed that the sustaining capital and capital replacement, it's increasing to 2017. Could you comment on that? And by the same token your growth capital is still about CAD80 million to CAD90 million. Could you comment on that?

Yes, thank you for the question, Oscar.

Our CapEx profile and the plan that we have out there for 2015 and the estimates for 2016 and 2017 really reflect what we've been talking about for some time now, which is the focus on our Tier 1 assets, putting ourselves in a position where the best assets in the world are ready for a market that's going to need pounds.

But that our other assets just aren't getting the attention. We've already talked about it with respect to Rabbit Lake for example, and the US operations as a prudent response to a market that I think the uranium price on a spot basis was down 13% year on year, 13% to 14%.

So what you're seeing in that CapEx profile is simply the consequence of that strategic direction. Now sustaining will tick up a bit and that's really because you have, if you look in those outer years, 2016 and 2017, you have a Tier 1 asset in Cigar Lake that's ramping up to full production. It's producing a lot of pounds on an annual basis. And then the sustaining capital will have to kick in like it does at McArthur and Key Lake. So that's the dynamic you're seeing there.

Okay, great. So if I can follow up on that, so does that mean that the sustaining levels that you have there with your new assets would be tantamount of production of about 26 million, or sorry 30 million pounds going forward?

Well because we don't have a production forecast to follow in that 2016 and 2017 year, I certainly don't want to confirm that too starkly. But the high grade mines that we run do have a sustaining piece to them, and that's why we broke out that CapEx table a few years ago to sustaining capacity, replacement, and growth. To give you some line of sight of what that harvest rate of capital actually looks like, we're pretty conformable that's a pretty fair range.

Thank you. Our next question is from Graham Tanaka from Tanaka Capital.

Hi. Nice quarter.

I just was wondering if you could maybe describe for us as you ramp production to 2018 what kind of layers of costs could we estimate being added in? And I know it's complicated because you've got purchased and produced, but given your ramp and what you have in terms of the new assets, what average price would that new production be coming on at, say every ex million pounds or whatever?

Graham, I'm not sure we can fine tune it to that extent. Obviously from a bigger picture point of view.

We are -- people have asked us why are you ramping up Cigar Lake at this point in time? And we say we'd ramp up that asset at any point in time in just about any market. When you have world-class assets that are going to see average unit costs across the life of the mine in the CAD20 or less range, those are good assets. And so that is the Cigar Lake story.

McArthur/Key continues to be the premier asset in the space by some margin so we like that one. Our Kazak production is very strong. So we're looking at those three assets at least. I think we've been clear and that you can go back to our technical reports. Those have average unit costs in the CAD20 or under range. And so if that gives you any help as to what we're doing with those assets going forward that's what you'll see from those assets.

In the meantime we're ramping up Cigar Lake. So you don't -- the first pounds coming out aren't at that level. It will take us some time to get up there, but once we do that's where we'll be.

I'd say for example, in the out years demand does increase significantly for China, Japan, et cetera. I'm just wondering if you have a higher calling for more production, can we assume that the incremental production costs would be in that same range you've been experiencing or would it be higher or lower?

Well I'll tell you unless you, Graham, have assets like that, they'll be higher. That's pretty much guaranteed. And you can if you watch this space see some of the competition and some of the numbers they're putting out to incentivize new production.

Even our own cases we've come out I think on the Kintyre Mine, that was some years ago already, probably three or four years ago, we said we needed north of CAD67 three or four years ago. It will be well north of that now.

And so yes, there's not many mines like the Cigar Lake project left out there. Anything new coming on is going to we've heard others say CAD70 plus and we haven't, we have no reason to quibble with that number.

And you're hitting at something that obviously gets us very excited, because if there's that emergence of demand as you articulated that hits as Cigar Lake is actually achieving those Tier 1 operating costs. So that combination, we like the effect that that has.

Thank you. Our next question is from David Wang from Morningstar.

Hi, thanks for taking my call. I just wanted to see if you had a view on the long-term percentage of Japanese reactors that would be restarted? And then also if you have a view on what the load factor would be in your long-term projection for 2024?

I can tell you on the Japanese front from talking -- and Ken was just over there not long ago, we have agents over there, we supply all ten utilities, we're in constant contact with them. We have them as partners at Cigar Lake. So we're forever probing them, I would say, for information on what they think: not only when do the first restarts happen, but how many and when. We still are sticking to the two-thirds of the fleet coming back on over the next few years.

And that's not really, really specific, but because we're trying not to be, we have misfired on a few of those. But that -- we were still holding to that number. That's the best information that we're getting from the Japanese utilities and from our own insight. So today I think there's 48 operable units, reactors in defense. So somewhere in the two-thirds range. I'm not sure about the second question, that I understood what it was.

Yes, I was wondering -- so you have projections for the amount of gigawatts in 2024 as well as uranium consumption. And I was wondering what sort of load factor assumption that you're using?

I can jump in on that one, David. If capacity factor is what you're after, we would assume that certainly out in 2024 the world's nuclear reactors just keep getting better at this, and so we would have an assumption across the board of greater than 90%.

All right, thank you.

Our next question is from Fai Lee from Odlum Brown.

Thanks. Just wanted to clarify something.

The tax court decision that's expected, it refers to the 2003 reassessment in the disclosures. I'm assuming that once you get a decision you'll cover off 2003 to 2009. Is that your assumption, as well?

Yes, so you can imagine one year goes before the courts and a decision is finally made. And what will obviously have to happen is the results of that decision would then be imputed into any reassessments that follow.

And so, we would just expect that to take the time required to do that. In the event that it's a decision that goes against us, well then that will have to be reflected in those reassessments. And if it's one that goes for us well then the basis for those subsequent reassessments is lost. And so 2003 is just a very good analog for the structure.

Okay. And with reference to the IRS, also one of your assumptions is that they could propose adjustment for later years, I'm just wondering how far out can these adjustments go on for? Or is there a termination date?

So the adjustments always follow your filing. And what we said in our disclosures is 2009 we received a notice of proposed adjustment. Of course that's not the official documentation.

In keeping with our recent practice we're being quite voluntary here on our disclosure and decided to disclose at the NOPA stage rather than the official stage, which is the revenue agent's report. 2010 to 2012 we know they're asking about right now; we filed for those years.

2013 and beyond we haven't filed for those years in the US. So hard to propose an adjustment for years we haven't filed in.

In a broader sense, and this is tied to some disclosure we've had out there for awhile, the underlying structure that is being looked at benefited from intercompany arrangements that were signed in an earlier period in the uranium market. And what we said is that a lot of those agreements come due and new agreements have to be put into place.

And so as we layer into those new agreements that are if you will more trued up to the market at the time, then we expect, obviously, the magnitude of questioning to go away. So there is a bit of an end to this and we think it's in that 2016 period, and that's tied to our view on our consolidated tax rate going forward.

Okay. I just wanted to confirm that was related to the IRS portion, as well. Thanks.

Thank you. Our next question is from Fraser Phillips from RBC Capital Markets.

Sorry, good morning, everyone.

I just wanted to check a couple of things. Grant, in your presentation you said that, or maybe I'll say it the opposite way around.

In the press release it looked like or said that you were going to try and use letters of credit or are exploring the possibility of using letters of credit instead of cash. The CRA seemed more certain in your presentation.

Yes, we're certainly exploring it. There are provisions under Canadian Income Tax Act and dispute policies that would allow us to do that. We're looking into it.

We think that there's no reason why we wouldn't be able to do that for the reassessments. And so we're just locking down that process. We just think that that's a better use of our balance sheet during this dispute phase than parking cash with the CRA.

Thanks.

And then the other thing was a guidance with respect to operating costs with most of the increase, or a big portion of the increase for the year expected to be because of Cigar. What assumption have you made in terms of when you start running Cigar through the income statement, vis-a-vis that increase in costs you're guiding for?

Well, we have an idea obviously internally on when commercial production would be achieved. If I told you what that date would be and we didn't hit it then you'd ask me why we didn't hit that date for commercial production, which is why we haven't forecast it. So obviously the plan includes some declaration of commercial production along the way, then it starts running through the P&L statement for Cigar Lake. But I don't have a date out there.

Thank you. This will conclude the questions from the telephone lines. I would like to return the meeting back to Mr. Tim Gitzel for his closing remarks.

Well thanks, Mark.

I'll just close this morning by saying that, and this won't come as a surprise to anybody, that conditions have been challenging since Fukushima. And as we look at the calendar now we're coming up next month on four years post Fukushima.

So continuing to -- we continue to find ways to remain a profitable low cost producer in that tough environment, and that has certainly been our top priority. That means having a realistic view of what the market is doing and where it's going.

And we believe it's important to share that view with our investors, what we're seeing, what our plans are, and how we plan to return value. That remains a high priority for us.

And we know we may have been considered overly cautious at times, for example with our view that 2014 was not the year of uranium. We're watching for the inflection point just as closely as anyone but last year just wasn't it as much as we would have liked it to be.

We were frank I think about that, and we will continue to be about all aspects of our Business and the market whether the news is good or bad. So in 2015 you can expect to see the things I've already talked about, focusing on our Tier 1 assets, running our operation safely and efficiently, but also providing what we think is credible insight into what's happening in the market.

So with that thank you for your continued interest in Cameco and have a great day. Thank you.

Thank you.

The Cameco Corporation fourth-quarter results conference call has now ended. Please disconnect your lines at this time. We thank you for your participation, and have a great day.