Cameco Corp (CCJ) 2020 Q4 法說會逐字稿

Thank you for standing by. This is the conference operator. Welcome to the Cameco Corporation Fourth Quarter 2020 Conference Call. (Operator Instructions) And the conference is being recorded. (Operator Instructions) I would now like to turn the conference over to Rachelle Girard, Vice President, Investor Relations, Treasury and Tax. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Cameco's annual and fourth quarter conference call.

Today's call will focus on the trends we are seeing in the market and on our strategy, not on the details of our quarterly financial results. There has been a lot going on, both for the company and the industry, and we recognize there is significant interest and limited sources of information for our investors.

As always, our goal is to be open and transparent with our communications. Therefore, if you have detailed questions about our quarterly financial results or should your questions not be addressed on this call, we will make ourselves available to speak to you after the call.

There are a few ways to contact us: you can reach out to the contacts provided in our news release; you can submit a question through the contact tab on our website; or you can use the Submit Question tab on the webcast, and we will be happy to follow up after this call.

With us today on the call are Tim Gitzel, President and CEO; Grant Isaac, Senior Vice President and CFO; Brian Reilly, Senior Vice President and Chief Operating Officer; Sean Quinn, Senior Vice President, Chief Legal Officer and Corporate Secretary; and Alice Wong, Senior Vice President and Chief Corporate Officer.

I'm going to hand it over to Tim to talk about the growing demand for nuclear power, the uranium market fundamentals and about Cameco's strategy to add long-term value. After, we will open it up for your questions.

If you have joined the conference call through our website event page, there are slides available, which will be displayed during the call. In addition, for your reference, our quarterly investor handout is available for download in a PDF file on our website at cameco.com.

Today's conference call is open to all members of the investment community, including the media. (Operator Instructions) 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 on the call today. We appreciate you taking the time to join us. I hope it's not too late to wish all of you a happy New Year. As we head into 2021, I have to tell you, we're excited about the future for our industry and about our ability to support the transition to a net zero-carbon economy through both traditional and nontraditional uses of nuclear power. And we are excited for our company as we execute on our Tier 1 strategy that includes production discipline, marketing discipline, and conservative balance sheet management.

So what's driving our optimism? Well, if you remember anything from this call, remember this, that there are really 3 main drivers for our optimism: first, demand for nuclear power is becoming more certain as the fundamentals improve.

Second, uranium supply is becoming less certain as years of persistently low prices have led to planned production curtailments, lack of investment, the end of reserve life for some mines, shrinking secondary supplies and trade policy issues. Finally, remember that our long-term strategy positions us very well to sustainably deliver long-term value. Let's dig into each of these factors a bit deeper.

Around the globe, we're seeing a clear megatrend emerge. That megatrend is focused on increasing electrification while phasing out carbon-intensive sources of energy. The increasing focus on electrification is for various reasons: there are those that are installing baseload power; those who are looking for a clean, reliable replacement for current sources; and finally, there is new demand for things like the electrification of transportation.

The drive for increased electrification is occurring precisely while countries and companies around the world are fixated on reducing their carbon footprint. Many have announced net zero-carbon targets and many more are expected to follow.

Country after country recognize that in a world where 80% of our electricity still comes from fossil fuel sources, 80%, nuclear will be needed in the toolbox to sustainably achieve both electrification and decarbonization. The country of China, for example, which has a goal to have 25 million electric vehicles on the road by 2030, recently stated that its objective is to become carbon neutral before 2060.

A follow-on study from a climate scientist in that country predicted that to achieve this goal, we will require an estimated 380% increase in nuclear power capacity from 2025. And that would be about 200 reactors for China alone, double that of the U.S. fleet, which is currently the largest in the world.

In addition, we expect nuclear will do well under Covid recovery plans, where increased government infrastructure spending will support broader policy goals to achieve net zero-carbon targets. And then there's the U.S., where the new Biden administration has expressed its support for maintaining its domestic nuclear power fleet and the construction of advanced reactors. In his first day in office, the President also recommitted to the global Paris Agreement and committed the United States to reestablish its position as a global leader in the development of commercial nuclear technologies.

Furthermore, we're seeing momentum building for nontraditional commercial uses of nuclear power, such as the development of small modular reactors and advanced reactors. Nuclear is also the only low carbon source that can produce low carbon heat that, along with its traditional uses, can be used to produce clean hydrogen and fresh water.

In addition to countries, we're seeing company after company announce net zero-carbon targets. They recognize there is increasing scrutiny on their environmental performance. Investors are beginning to price climate-related risk into their capital allocation decisions. As a result, there's a significant reallocation of capital occurring that will create opportunities for those companies who can assist with the transition to a low-carbon economy. So this is another very positive development.

Investors will not only look to invest in those companies that can demonstrate improved environmental performance, they will look for those companies that are positioned to do it profitably and sustainably. Unlike countries, companies will have to make decisions that are economically sound to attract investment. And based on a joint report published by the International Energy Agency and the OECD Nuclear Energy Agency in 2020, when you look at levelized costs of nuclear compared to other low carbon sources, nuclear energy is the most cost-effective way to provide low carbon dispatchable 24/7 electricity.

I think Michael Shellenberger illustrates this point well in his book, Apocalypse Never. He talks about Germany's support for renewables over the last 20 years. How it's nearly $500 billion investment in wind and solar by 2025 will provide only about half of German electricity and that it will continue to be reliant on natural gas and coal as a backup. The same investment in nuclear would mean it would be generating 100% of its electricity from zero-emission sources, and it would have sufficient zero-carbon electricity to power all of its cars and light trucks as well.

So the outlook for nuclear is very bright. Increasing demand for nuclear means increasing demand for uranium, which brings us to the second factor that I said is driving our growing optimism. Demand for uranium is rising at precisely the same time that supply is becoming less certain. We know that utilities have not been replacing what they consume annually under long-term contracts.

Based on UxC data, over the last 5 years, approximately 815 million pounds of U308 equivalent have been consumed in reactors and only about 390 million pounds have been locked up under long-term contracts. This has led to a growing wedge of uncovered uranium requirements. UxC estimates show that global cumulative uncovered uranium requirements are about 1.4 billion pounds to the end of 2035, with the largest uncovered requirements in the U.S. and Asia. While uncovered requirements are not particularly high in 2021, by 2025, they reach 33%; by 2030, about 2/3 of the utility requirements are uncovered, and that number hits 81% in 2035.

In contrast, these growing uncovered requirements are occurring at a time when there is some big question marks about where the uranium will come from to fuel the world's expanding nuclear fleet.

Cameco's supply curtailments alone, both planned and unplanned, have left a lot of pounds in the ground and kept them off the market, about 95 million pounds in total. And our purchasing activities to replace the pounds needed to fill our sales commitments have taken more than 50 million pounds off the spot market and placed that material into long-term contracts. The total adds almost 145 million pounds swing in the supply fundamentals from just one producer. That's a lot of heavy lifting.

In its base case, UxC projects annual uranium demand will grow from about 170 million pounds in 2021 to about 210 million pounds by 2035. In contrast, it estimates annual primary production will go from about 130 million pounds in 2021 peaking in the late 2020s at about 155 million pounds, which will of course be subject to the appropriate price signals, before dropping to about 95 million pounds in 2035. And in the same timeframe, it estimates that annual secondary supply will decrease from about 45 million pounds in 2021 to about 17 million pounds for a total supply of about 112 million pounds in 2035. That's an annual shortfall of almost 100 million pounds by 2035. That means the world needs to discover, develop, commission about 6 McArthur Rivers or Cigar Lakes in the next 15 years. Given the timelines it takes, we should be investing now, but at today's prices, that makes zero sense.

In addition, as a highly trade-dependent commodity, government driven policies can be particularly disruptive for the uranium market. As I said earlier, due to persistently low prices, we've seen planned supply curtailments, lack of investment, the end of reserve life for some mines, shrinking secondary supplies and trade policy issues which have been amplified more recently by unplanned supply disruptions due to the COVID-19 pandemic. As a result, primary supply has become concentrated. It is concentrated geographically with about 80% of primary supply coming from countries that consume little to no uranium and nearly 90% of consumption occurring in countries that have little to no primary production. And it's highly concentrated by producer with about 70% of primary production in the hands of the top 5 producers and about 80% in the hands of state-owned entities.

So we believe, and we've said this many times before that in the current market, the risks to uranium supply are far greater than the risks to uranium demand. These are the fundamentals that get us up in the morning and why we remain a pure-play supplier of uranium fuel needed to produce clean carbon-free baseload electricity, which brings me then to the final factor driving our optimism, our strategy and why we remain committed to doing what we said we would do.

Let me remind you what it is that we said we would do. First and foremost, and this is where it all starts for us, we are focused on protecting the health and safety of our workers, their families and their communities. We're doing that every day, we make decisions about how to best manage our operations and protect and support our workforce through the pandemic.

It is unacceptable to put production targets ahead of health and safety as we have recently watched some companies do. That's why we took the precautionary measures last spring to suspend production at the Cigar Lake mine, the Port Hope UF6 conversion plant and at the Blind River refinery.

And it's why production at Cigar Lake was suspended once again in December and currently remains so. Although it comes with a significant cost, we wanted to prevent the spread of the virus within our workforce and the risk that they could take it home to their families and their communities.

Pandemic or no pandemic, the health and safety of our employees will always be our priority. Second, we've not wavered from the execution of our strategy. There are 3 fronts on which we are executing our strategy: operational, marketing and financial. On the operational side, we've implemented planned supply discipline, cutting our production well below our delivery commitments. This includes the curtailment of production at Rabbit Lake, our U.S. assets and of course, at the McArthur River/Key Lake operation. As I said earlier, these actions have left a lot of pounds in the ground and have kept them off the market. As a consequence, we've been purchasing material on the spot market to meet our committed deliveries.

In addition, we've shown sales discipline, sticking to our value strategy. We've been strategically patient, not committing our Tier 1 pounds under long-term contracts that don't provide an appropriate return and not exhausting them in a low price environment.

And we're seeing our patience pay off. We successfully added 12.5 million pounds to our long-term contract portfolio during the year. And our pipeline of uranium business under negotiation continues to be larger than we've seen since 2011. In fact, we continue to see off-market interest growing, and historically, it has been a leading indicator of broader demand for long-term contracting. We're having conversations with our biggest and best customers. These customers recognize the long-term fundamentals.

They want access to long-lived Tier 1 productive capacity from commercial suppliers who have a proven operating track record. They understand that from a security of supply perspective, today's prices do not reflect production economics. They recognize the first-mover advantage gained from securing their future access to our Tier 1 pounds today as opposed to in the future. And we have some competitive advantages.

We have significant idle Tier 1 capacity that is fully licensed and fully permitted that will be among the first pounds to meet the growing demand in the market. We are an independent commercial supplier, provide our customers with supply diversity from state-owned enterprises. With substantial Canadian productive capacity, we can help de-risk their future supply from trade policy exposure.

And emerging is a focus on ESG matters, which is great news for us. In 2020, we saw the COVID-19 pandemic as well as a number of other significant issues like racial injustice and inclusion and diversity, place a magnifying lens directly on the environmental, social and governance performance and commitment of many companies.

And despite all the disruption, the world certainly didn't take its eye off the global threat of climate change. Tackling these issues requires a concerted and coordinated effort. As companies, we all have to evaluate our purpose in how we serve the interests of all our stakeholders. At Cameco, serving the interests of our stakeholders has always been at the heart of what we do long before there was a focus on ESG issues because it's the right thing to do, and we recognize the significant business value it adds. Our Board and our employees, contractors, communities, suppliers, customers, governments and shareholders expect us to manage this company in a long-term sustainable fashion.

We're very proud of our over 30-year commitment to protect, engage and support development of our people and their communities and to protect the environment. The uranium fuel we supply plays a significant role in contributing to greenhouse gas mitigation efforts in Canada and abroad. In Canada alone, this uranium fuel provides greater than 30% of the province of Ontario's electricity every year, avoiding more than 5 million tons of carbon dioxide from being emitted. Considering only the Canadian emissions avoided resulting from the use of nuclear power in Ontario, we like to think of ourselves as Canada's first net zero mining company. So we are well positioned to meet our customers' needs.

However, market prices in our business take time to impact contracting decisions. Historically, demand has come in waves, which has led to past price spikes. As an industry, we rarely see annual replacement rate contracting whether typically well above annual consumption or well below.

Many of these contracts are big, chunky agreements that take time to negotiate. Let's look at the conversion business, for example. Conversion prices began to transition in about 2017 after significant supply curtailments due to prices below production economics, and then there were some unplanned disruptions. Does it sound familiar? In 2020, we successfully replaced the pounds delivered under our UF6 contracts, and we added another 17.1 million kilograms of UF6 to our long-term contract portfolio.

We expect these contracts will allow us to continue to operate profitably and consistently support the long-term fuel services needs of our customers. All of these agreements took time, but the reward was worth the wait. And finally, on the financial side, we've been very deliberate in shoring up our balance sheet. You can see the resiliency our strategy affords us in our 2020 balance sheet.

Despite the unprecedented global challenges and the significant costs we incurred as a result of the disruptions to our business caused by the COVID-19 pandemic, we finished the year with about $940 million in cash and a $1 billion undrawn credit facility.

As such, we have the financial capacity to self-manage risk and maintain our strategic resolve. So I'm happy to say we're performing well on all 3 strategic fronts. However, there are costs to our strategic decisions, which are reflected in our 2020 financial results. But the good news is, this does not represent the run rate of our business, and it won't go on forever.

We're taking the steps today and incurring the costs we expect will allow us to restart our Tier 1 assets with more flexibility in the production rate to eliminate the care and maintenance costs incurred while our Tier 1 production is suspended and to benefit from the very favorable life-of-mine economics they provide.

One of those steps is the project we were working on at our McArthur River Key Lake operation. We have assembled a team of internal experts who have been tasked with assessing, designing and implementing opportunities to improve mine and mill efficiency through application of automation, digitization and optimization.

There are 43 projects in the works, and those that meet our investment criteria will be advanced to implementation in 2021. We're confident in our ability to transition through this period and capture demand that will provide leverage to higher prices.

And we've concluded that we have the right vision, strategy and values to deliver long-term sustainable value. Our vision, which is to energize a clean-air world recognizes that we have an important role to play in enabling the vast reductions in greenhouse gas emissions required to achieve a resilient net zero-carbon economy.

As we seek to achieve our vision, we are committed to doing it in a manner that reflects our values. Those values have not changed. They've always guided our actions, and they place a priority on safety in the environment, on building and supporting a flexible, skilled, stable and diverse workforce, on behaving with integrity and leading by example, on promoting equality and acting to eliminate racism wherever it exists and on pursuing excellence in all that we do and inspiring others to do the same. Our decisions are deliberate. We are a responsible, commercially motivated supplier with a diversified portfolio of assets, including a Tier 1 production portfolio that is among the best in the world.

We are well positioned to take advantage of a market where demand for nuclear power, both traditional and nontraditional is growing where we believe the risk to uranium supply is greater than the risk to uranium demand and where we believe our strategic decisions and strategic patience provide us with resiliency in the face of unprecedented challenges and will result in the rewards that will come from having low-cost supply to deliver into a strengthening market.

So thanks for joining the call today. And operator, with that, we would be happy to answer your questions.

(Operator Instructions) Our first question comes from Andrew Wong of RBC Capital Markets.

Happy New year to you guys, too. So there's been a lot of focus recently on clean energy, and you've mentioned potential nontraditional uses of nuclear energy. Could you just talk a little bit more about that? And then also, how does that impact your demand outlook for, say, the next 10 years versus maybe what you had expected previously?

And on the regulatory side, have there been any changes that might be more supportive for nuclear growth?

Well, thanks, Andrew. So yes, thanks for that question. We're excited -- as I said in my comments, we're excited about the future. I think in the last -- and I can't think of how many years, certainly the last 10 years, since 2011, but even more than that, I don't think I've seen more positive indicators for the nuclear industry than we're seeing today.

I mean, the most recent one came just last month in the U.S., a change of administration down there, the Biden government comes in. What is the first thing he does, he signs an executive order saying that we're signing on to the Paris Accord, and that climate change is going to be at the center -- I think he said at the center of U.S. foreign policy and national security, I mean. So the U.S. is in, China is in. And so now we're on this track to meet the Paris commitments.

I think President Biden said in the U.S., he wants the electricity industry to be fossil fuel free by 2035. We'll think about that. I mean today, it's 2/3 fossil fuels. And in 14 years, it's going to be fossil fuel free. I can tell you that's a signal that all roads are going to have to go buy nuclear plants, I think, if you're ever going to get there. And so we're seeing that in the U.S., which is a big driver in the world. China continues on its pace. Now 50 reactors.

Every time we have one of these meetings, we always check the numbers, is it 46, 47, it was 50 now, and I think there's another dozen under construction, and we've seen numbers from Ux and others that they're not stopping at all on their pace to get to 100 or more reactors. They'll be the biggest nuclear country in the world, probably within the next decade.

Our friends in India continue to build. They're building some of their domestic technology there, a good friend and customer of ours.

And just the talk now, the SMR talk, the accident tolerant fuel. The U.S. even before President Biden, there was by bicameral, bipartisan support for nuclear. They passed last year, 2 or 3 bills supporting nuclear. And so we see that as a good sign. The more people talk about it, the more people get comfortable with it and see it as absolutely necessary if you're going to get anywhere near reaching those Paris targets. And I was just reading an article this morning how the language has changed from global warming to climate change to climate emergency and now it's climate crisis.

And so this world is going to have to move fast. So we see that as positive. We see, I think, 52 new reactors being built in a variety of countries around the world now, 2 new players came on -- 2 new country players, UAE and Belarus came on last year. That's good news. Lots of countries talking about it again. So all of that added to, say, really positive vibes, if you like, in the nuclear industry, which we think will translate then to the rest of your question, demand for uranium. Already, there's -- already, we see the uncovered requirements, take your pick to 2030, 700-plus million pounds to 2035, 1.4 billion.

I mean that's on the pace that we've -- a very conservative pace that we've laid out, never mind the SMRs, never mind countries that might want to get in the game to reach their goals. So we see that super positive for nuclear. We're enthused here at Cameco about our role that we're going to play going forward.

And we say all this in the context of supply that is shaky. I would say, shaky in several senses. We're -- in the short term, we've got Cigar down for Covid reasons. We don't want it to be down, but it is, and we'll keep it down until further notice. We've got McArthur down. Kazakh is holding back on production. And then just the pure losses.

And I can tell you, we weren't thrilled to see our friends at ERA go down last month. That's a mine. We've dealt with them for years, great people. That mine has gone; 4 million pounds that used to come every year. We competed with them, gone. The Cominak mine that I was responsible for a decade ago when I was looking after Niger for Areva, next month, gone. It's gone. And I mean, there's lots of social pieces that go with that, but that's another 3 million pounds. It's just gone from the market. BHP, we worried about them for 20 years. But them bringing on, doubling their production out of Olympic Dam, pulled back on that. So it doesn't make sense. They're not going. Our own Cigar Lake within that time frame I talked about, is out.

If we run it at 18 million pounds, it makes it to the end of the decade. And so all of that to say, I mean, those are just your basic supply demand fundamentals. Demand, I think, has got -- if not an actual boost, a moral boost for sure, and supply is trending downwards. So that was a long answer to your question, Andrew, but that's what we're seeing today, and that's what gets us up and running every morning.

That's great. And maybe just like a more near-term question just on the operations. The guidance for 2021 calls for 8 million pounds to 10 million pounds of purchases. What does that assume for the start-up at Cigar Lake?

Yes. Well, we don't know. To be honest with you, we don't know. We took it down. Well, we took it down in 2020. I think we're down from March till kind of end of August; September, we fired it back up again. And then we got into the same jackpot with our workers not being able to come to the site. We had so many restrictions on the flights up north. Our good GM up there, Lloyd Rowson was struggling to find qualified workers for the shifts and so we had to go down again in December. We didn't want to, but safety and health of our employees will always be #1. We don't want to yo-yo with that place like that. We don't want to start it up again and then have to shut it down.

We're like everyone else in the world and especially here in Canada, waiting to see the vaccine rollout. Our government rolled out a plan for vaccination, but this -- the only catch was we don't have any vaccine, which is a bit of a stumbling block. So we're waiting for that. All of those things will be in close contact with the public health authorities, population Health of North with the chiefs and leaders of the communities and with our site management. So I can't tell you when it's coming back up, but we will always protect the health and safety of our workers.

Our next question comes from Orest Wowkodaw of Scotiabank.

You mentioned earlier that your pipeline in terms of discussions with utilities on recontracting are at the highest level still since, I guess, since Fukushima. Can you give us a bit of color on why we're not seeing more contracts added to the portfolio? Like, is it still a bit as spread that's too wide? Or can you give us some color on what the issue is in terms of why we're just not seeing that kind of contracting starting yet?

Yes. Thanks, Orest, for the question. I just -- I'll start and then I'm going to pass it over to Grant, and maybe, Grant, you can touch on that and give a little color on the market while you're at it. But I mean, 2020, I mean, for all of us, everyone -- all of you that we know who are on the call, it wasn't a normal year. 2020 was Covid, we started battling Covid in March and went through the whole year. And I mean, it was the same for our operations, and it was the same for our customers, and the utilities; and focused on Covid, focused on keeping their plants going, keeping their people safe.

Long-term contracting and signing big multiyear deals probably wasn't at the top of their priority list, I would say. And we know that because we talk to them. We talk to them right through it, and the last thing the fuel buyer was going to do was go to a CNO, Chief Nuclear Officer, and say, well, we should really focus on a long-term contract with Cameco, while they're trying to keep their plant open and their people safe. So that, I think, weighed in. I can tell you, I just talked to a couple of our customers earlier this week, big ones from other countries, and the discussions are still on. And we are still holding to our -- we've got a good pipeline full of contracts that we're working on with our customers. So I'd just say, be a bit patient. We're being a bit patient on that. So Grant, sorry, I'll stop there, but I asked Grant just before the call, if you give a bit of an update on the market or -- so if you don't mind us intervening a little bit, I thought you would want to hear from our resident expert on what we're seeing in the market. Grant, do you want to just give a few words on that?

Yes. Happy to do that. With respect to the specific question, Orest, and then I'll step out a little more broadly. But with respect to the question on the uranium side of our marketing efforts, certainly, 2020 did not achieve the replacement rate contracting we saw in 2019. And I think the reason that Tim identified is the primary reason. As we worked with our customers and talked about their future demand, we just discovered that in a Covid world, many of them are saying, look, I've got to focus on, do I have the fuel bundle ready for the reactor? And then I've got to focus on the in-process material I have at the fabricator to make sure there's another fuel bundle coming, and then maybe some time with the enrichers, maybe some time with the converters. And we just saw the uranium piece get paused, if you will.

But here's the good news: it's not demand that's disappeared, it's demand that has just been delayed, it's just been deferred, it's now pushed out. And we're seeing more uranium demand in a tighter future window. And so that's how the uncovered requirements curve grows as a result of that. But I would have to just distinguish between uranium and our experience in conversion this year. In conversion, we had a contracting rate well above replacement rate. In fact, a historical amount of contracting volumes. And so what it tells you is that utilities are figuring it out. We see contracting is picking up in enrichment. We've seen it already pick up and a full transition occur in conversion. We are seeing this delay in uranium for sure. There's no doubt about it. But as I say, good news is, none of this has dropped out of our pipeline. It's just redouble our efforts and continue to negotiate with our customers off market.

We've been making a big deal about this kind of off-market versus on market distinction for a while. And it is important to say that, that continues as we start into 2021. We are seeing our pipeline. Our exclusive bilateral negotiations with customers continue to be robust and a lot of volumes under discussion. But we continue to see the on-market stuff. The competitive RFPs where a customer comes out and is asking for competitive bids from a variety of suppliers, that's continuing to underperform. That is not hitting the levels where it needs to be. When you look at the uncovered requirements going forward, think Covid has something to do with it.

Term volumes in 2020 were only 53 million pounds of uranium contracted. That's a tiny amount, down from nearly 100 million pounds the year before. In fact, we haven't seen levels this low since immediately after Fukushima. So clearly, there are some delays there. There's going to be some pent-up demand to come into the market. We just haven't quite seen that trigger yet. And a lot of times, we sort of explained that by what's going on in the spot. Because remember, the spot market is taking on a new role since -- in the last decade since Fukushima, just a bit of a look back. Our market was always one where the term price was really the production economic price required for future production. And the spot price was simply the discount for material available today that had no operating risk attached to it because it didn't have to be produced. It was already produced.

And of course, we went through a period of demand collapsing after Fukushima, where uncommitted primary production, in particular, was coming into the spot market. It didn't have a term home, producers weren't leaving it in the ground like they should have, and they were trying to find a home for it, and it was going through the spot market. And enough material went through the spot market. It ended up sort of breaking the pricing dynamic. Term just became the forward carry trade price on the spot market. And right now, our -- that hasn't completely corrected. I mean if you look at the spot market through 2020, it started kind of in the -- it was in the lows of the 23s. It got into the 33s after some of the Covid shutdowns. And then it's kind of fallen back to the 30-ish level with a little bit of downward pressure, and it still is uncommitted primary production. There still are producers out there that have material, doesn't have a home, and they put it in the market. And then once in the market, it gets in the hands of, say, the intermediaries or the traders who then take that 100,000 pounds and then churn it 3 or 4 times, creating the illusion, there's 400,000 or 500,000 pounds in the market, which simply isn't the case.

And I would say just this has been having the effect of creating a little bit of complacency for some of the fuel buyers who just don't think it's time to worry yet because they see the volumes or what appeared to be the volumes going through the spot market.

But here's the good news about the spot market situation. This isn't sustainable obviously. Tim talked about how many pounds have been left in the ground because of the planned and unplanned supply discipline plus the amount of purchasing producers have done to put into a committed sales portfolio. So really that available material to just churn around the market is getting picked away.

As term market demand picks up, primary production will find term contract homes, and it won't be forced through the spot market. Some of the expected future production that you might have expected in the spot market is going away.

Cominak, Ranger were good examples, Olympic Dam expansion. And then ultimately, we have that intermediary group; they're not backed up by productive capacity. So if these sources start to dry up, so does the churn. And ultimately, the market will transition back to the term price reflecting the production economics required to meet that uncovered wedge relative to where the demand is going.

So a way longer answer than you wanted, but I just kind of wanted to set our activity on the uranium and conversion side in the context of what we're seeing on the broader market on term and spot.

I appreciate the color. And just as a follow-up separately, can you give us some color on the CapEx guidance for '21? It looks like it's up significantly from what we've seen in the last couple of years. What's driving that?

Yes. Orest, a couple of investments that we just think are really prudent right now. Tim talked a little bit about the work we're doing at McArthur and Key. While these best mine mill complex on the planet sitting idle right now. And we just made the determination that now is the time while we have the qualified workers there, and they're not running the facility to embrace as many of the automation, optimization, digitization opportunities that we possibly can. So when these extraordinary assets come back, they come back even better than they were in 2017 when we brought them down. So that's a big investment. It's countercyclical, but now it's just the right time to do it.

We have some other investments in our fuel services group, our Vision in Motion project, which is kind of a cleanup modernization project going on in that group, which again, makes sense right now, especially with the robustness of the conversion market and the forward look of the conversion business because of how much contracting we've been able to do, and how much we think we're going to do make sense to go on that modernization effort as well.

And then, of course, once Cigar Lake does restart, there'll be some underground development that we'll have to begin again, which shows up as a CapEx number. Some countercyclical investments, plus the normal investments that we would make once Cigar Lake is back up and running.

And I would just add to, Orest, is some of that is deferred CapEx from 2020 as well.

Our next question comes from Gordon Lawson of Paradigm Capital.

Uranium inventories in China have been increasing steadily over the past several years. It's now estimated to be around 0.5 billion pounds. Could you comment on what this means for the spot market availability and utility term contract pressure?

Yes. Thanks, Gordon. It's a good question, and we've been watching that really closely. They have been building their inventory, and they started actually 10 years ago or so with us. I think it was June of 2010 when they came to the market, and which really kicked the market into gear, and they bought 150 million pounds in 1 month. They bought 152. They bought 52 from us, 50 from Areva at the time and 50 from the Kazakhs to build an inventory because they play the long game. I mean -- so they said in their 13th 5-year plan that they have 58 reactors going by now, while they only have 50, but they have 12 under construction. They continue to build. And so they consume 25 million pounds a year now, but going very quickly to 50 and above.

And just to keep whatever their inventory policy is 3, 4, 5-year inventory, you need to keep adding. So the number seems big at the moment, but it's not something -- I assure you, they're keeping it for themselves. They're keeping it for their plans going forward.

We haven't seen it come back onto the market. They have a strategy, buy uranium, produce some. They pretty much own Namibia now. And so they're producing some pounds out of Namibia and produce some domestically, which they have very little of, and they use for other reasons.

So Grant, I don't know if you have anything to add on the Chinese inventory, but it's not something we're concerned about.

Yes, not necessarily because of the strategic view of it. And then if you look at the Chinese fleet going forward, that inventory number actually is quite small relative to where they could be. And Tim referenced earlier, the 2060 net-zero target requiring essentially 200 nuclear reactors. That's a rule of thumb, 100 million pounds of uranium consumption in 1 year, if they achieve that number, and now you're talking about kind of a 4 to 5-year inventory, which wouldn't be unusual if they had that size of a fleet. So we see that it really is tied up in a strategic objective there. When we look ahead into the middle of the decade, those original contracts that Tim talked about roll off kind of in that 2024, 2025 window.

And in that window, you're -- I think you're going to have a nation -- a Chinese nation that's going to be consuming probably somewhere close to 50 million pounds of uranium a year. And once those fall off, there'll be some Namibian supply, probably 15 million pounds a year. There'll be some Kazakh supply, probably 20 million pounds a year, but you've got 25 million pounds to 30 million pounds that will be uncovered in that year alone and then growing after that.

So when you say, what does it mean for term contracting, I think there are those in the market probably reflected in our off-market term contracting that are keeping an eye on this dynamic. And remembering what happened last time, China stepped into the market as a big new entrant and signed big forward commitments and tied up a lot of future production themselves, it forced other utilities into the market. And they kind of all came through the door at the same time.

So I think the off-market activity is the utility saying, I don't want to be behind that this time. I'd better start planning my procurement in advance. So it does take on a role here. And what's interesting about today's outlook is, it's not just China; along the way, India has made a very significant commitment to their nuclear, both their heavy water reactor program plus a light water reactor program with other vendors.

And so it's not just China as the big new entrant coming into the space and looking for material, you've got to keep an eye on India as well. And so I think that's shaping up the dynamic a little bit here, too, and convincing us that remaining strategically patient is the right thing to do at the moment.

Our next question comes from Greg Barnes of TD Securities.

Just your commentary in the MD&A about you're anticipating that contracting in 2021 to remain largely discretionary. Do you mean on the market discussions or off-market discussions? And is that anticipating that contracting will remain slow in 2021, again just because of the Covid restrictions? Or is there something else digging into that commentary?

Yes, thanks for that question, Greg. Just -- yes, obviously, we weren't clear about that. What we mean is that we are not expecting a big rush of on market RFPs that we've seen triggered by supply shocks in the past, for example. That is not to say we don't expect our pipeline discussions to continue. We do expect them to continue, we do expect them to be quite robust. But we're just saying that on-market piece, where you see an RFP once every couple of weeks and more focused on kind of the near term, that's the part that our expectation, at least for the first half of the year is we're not going to see a big push on those. Now of course, that comment is absent of further unplanned supply disruption, for example, or a demand shock. Somebody steps into the market in a big way, whether it be India or whether it be China that's just not anticipated at the moment, that could change the game completely. But as it stands right now, we're really talking about the on-market piece, not our pipeline.

Okay. And just a more fundamental question. In the guidance, you say sales for this year are going to be 23 million pounds to 25 million pounds, the range. When I try and read off the chart on Page 37 in the MD&A, it looks more like 27 million pounds. Just trying to rationalize or get to the bottom of what the difference is?

Yes. Greg, I think you're catching an error. 23 to 25 is the guidance.

Thank you for reading.

Thank you for reading it so closely.

Our next question comes from Alex Pearce of BMO.

Grant, you've touched on the conversion market a moment ago. I just wonder whether maybe you could provide an update on how you think the recently announced restart of Metropolis has impacted your outlook there? And really, does it have any impact on the wider uranium chain?

Good questions. I'm not sure that the decision to restart the ConverDyn Metropolis facility was a huge surprise. In fact, as you know, there had been talk going around about them successfully landing some contingent contracts with utilities, contingent upon a restart.

And of course, the restart plan is out to 2023 and quite a bit of capital that is required to go in. So a bit of a road there still to go down before that's productive capacity. But I think they probably committed a bunch of it already. That was likely a condition on having Honeywell agree to a restart. So for us, anybody looking for spot material over the next 2 years are going to still be tight because that's not going to be a source of it, for example. And then I think conversion will remain a bit of a focus for utilities.

I think there's still some opportunities for additional term contracting. Now what that means for the uranium, for example, it's a bit of an open question. I've heard one particular perspective to say, well, now that there's a little more certainty about where conversion production is going to be in the future, maybe don't have to worry about that as much as a utility and now attention can shift to uranium. And so we might see actually more focus on uranium as a result and less focus on conversion going forward. I think it's too early to make that call. But I thought it was an interesting perspective that really -- the push in the last couple of years in the conversion space was really a concern about where capacity was at. Well, that concern has got to find its way into the uranium space at some point. So we'll be watching that closely.

Thanks, Alex.

Our next question comes from Ralph Profiti of Eight Capital.

2 questions from me, please. First one is, Tim, you talked about supply and demand. Just wondering, the rule of hedge funds seems to have played less of a role in 2020. Would you agree with that statement? And in this sort of positive and rising nuclear sentiment under Biden, do you think sort of the financial players will likely be more buying related or more sort of liquidation related in terms of their strategy for, say, the next 1 to 2 years?

Yes, those are good questions. I think you're -- on the first one, the hedge funds have played less of a role under Biden, I'm not sure what will happen. I think it's a little bit early yet. We're hearing a lot of good language out of there. We want to see some action in what they're going to do. And one of the first tests, I think, is going to be, there's 4 units that are scheduled to go down this year in the U.S. I think Exelon has got 2 of them, and there's another company in Ohio that's got another 2 units that could go down. I mean, that would be the biggest mistake the U.S. could make if they're on any path to get to zero fossil fuel in the electricity sector. So we'll watch those. So I don't know, Grant, you have a thought on the financial sector and how the...

Yes. And I might just make the distinction that the role of funds in the uranium space, some financial players, some special purpose vehicles, you're right, Ralph. 2020 was a rather quiet year with a bias towards the negative, not the positive. And what I mean there, of course, is that 2 of the funds, either sold or loaned material throughout 2020. And that was a negative because you saw the uranium price respond from the unplanned supply disruptions, as I talked about earlier, kind of going from the 23s to the 33s. And then suddenly funds were willing to part with material or loan it. It set the signal that, that's all they need for a return. And so it fed into the narrative that well, the funds are holding material that's going to be available for me as a fuel buyer someday, and this is just proof of it.

So obviously, we're going to watch that space carefully. Hopefully, the funds find the resolve that brought them into the nuclear space in the first place. And we see much more of a committed hold as opposed to a sell and loan because that material is just going to end up in the hands of traders, which is going to churn the market, which is then probably going to have a price off, which is then going to hurt their NAV, and you sort of say, "Well, did you not see this effect coming?"

Going forward, though, the fundamentals, the way they shape up, these are the types of times when we do see interest in physical uranium. So 2020 could look much different. 2021 could look much different than 2020 from a fund point of view.

Okay. Yes. Yes. And Tim, you talked about your contracting discussions and sort of the patience is needed. Is there a -- in these discussions, is there a congruency and a like-mindedness with respect to how far out these contracts will go and on, say, the pricing terms and flexibility terms, or is there something more structurally at odds with the nature of contract discussions?

Yes. Ralph, these off-market discussions we have, as Grant has mentioned many times, they're not -- they're quick hitters for a small amount of uranium. They're big, chunky, long-term contracts with big utilities or countries that have a big fleet and don't fool around, to be honest with you, with uranium and are not going to rely on the spot market, and hope every year they can pick up enough material on the spot market to cover there.

I mean, take -- I mean, Bruce Power is the example we always use, a deal we signed a couple of years ago. They've got 8 units there. They're refurbing them. They're going to run them into the 2040s, 2050s; signed a 10-year deal with them to 2030 because they just didn't want any uncertainty on where their uranium was coming from. They like our ESG metrics. They like the fact that we've never missed a delivery in the history of the company, the certainty that, that brings. And they just said, we don't know what the uranium market is going to be in 2022, 3, 4, 5 and especially as you get every year farther out, more uncertainty. And they just said, we're not playing that game.

And so we were able to negotiate a great deal with them that gives us upside, but covers the downside. And that's what we really look for. And that's not incongruent with what our customers are looking for. I'd say, if they could, they'd look for more fixed pricing today, love to lock in today's prices out into the rest of the decade. We're looking at more market related because we think the price only has to go higher from here. And so it's those type of discussions that we're having, Ralph.

And -- I mean, we obviously -- there's back and forth on everything, but they need uranium, we have it. We have the certainty they want. And I think they want and perhaps need to have Cameco in their portfolio, and it's the same for us.

Our next question comes from Lawson Winder of Bank of America Securities.

Just first, maybe on the contracts. So to what -- so first of all, for what years do both the 17 million pounds in conversion and the 12.5 million pounds in uranium, contracts cover? I mean how far out are we looking? And what sort of range of years? And then secondly, back to something you've spoken to in the past, to what extent has the 12.5 million pounds of uranium contracting been the result of leveraging those conversion contracts?

Yes, Lawson, I'm going to pass that over to Grant, but I'll just say, we read with great interest your report on the U.S. market and just talking about those units that Exelon and Energy Harbor has and what that might mean to the market going forward. I found it very, very interesting. So Grant, I'll pass it to you.

Yes. Thank you. The uncovered requirements wedge kind of provides a bit of guidance on where the interest is. So with the -- both the conversion service as well as the uranium, and it goes for the uranium from 2019 as well, we're sort of looking in that kind of 2023, 2024 to the end of the decade window. That is where we're placing the most amount of our business, more heavily weighted to the middle of the decade.

Usually, a price transition in the market or a stronger price transition pushes the tenor out. You can lock in for longer periods of time. But that's the window that we're looking at right now. So not completely inconsistent with what we're seeing with some of the competitive on-market RFPs. It's just those are largely going on the uranium side on a fixed or base escalated basis, and that's not attractive to us. So that's the window we're looking for, where the uncovered requirements really do drive the business our way.

And then the second part of my question was just to what extent were you able to leverage the contracting in the conversion space in order to add the uranium contracts?

Yes. Certainly, that helps. There's no doubt about it. When there's essentially no commercial conversion available, you end up with a little bit of bargaining power in the market. But remember that in our industry, it's not uncommon to kind of see utilities working their way backwards through the chain. So we've got enrichment contracting that seems to be picking up and conversion contracting has already hit replacement rate, in fact, above. And it's almost as though once you've lined up your conversion service and your enrichment service, you now have homes for your uranium when you go and you contract for it.

So we're seeing a bit of that, too. And that's the argument that I mentioned a bit earlier to another question that says, okay, well, now if ConverDyn is coming back up and you're not concerned as much about conversion capacity out into the future, maybe you can take that final step and start finding the uranium and then have the homes to plug into.

So certainly, some leverage for us, obviously, and we -- whenever we have it, we take it. But we just have not seen that replacement rate uranium contracting yet and that erodes a little bit of our leverage, of course, on the uranium side.

Yes. And so my second question, I just wanted to ask about the SILEX deal. First of all, what are sort of the ongoing expenses associated with that? And then where do you see that business going, specifically in terms of like time line?

Yes. Well, we're pretty excited about our GLE project. We just picked up as you will have seen in January, an additional share, we are partners with SILEX now. We really think it's got potential. That technology has been has been studied now for decades. I remember 20 years ago, there were different countries and companies working on that. But we've been able to move it along, and it's at a good spot. Look, we're going to pace it along with the market obviously.

It's not a big expense for us at the moment. We'll pick it up as we see the markets start to evolve. But the potential for us, we think, is enormous. I mean the big driver, of course, is those DOE tails that we have access to through our agreement with the DOE to reenrich depleted tails in the U.S., that's a big deal. And so as I say, the market doesn't need it now, but that could be the next uranium mine. We'll see how that goes. With all the talk about SMRs, you'll know, of course, that SMRs use a special type of fuel called HALEU or high-assay low-enriched uranium.

This GLE technology, the enrichment technology could make that, combined with our fuel services facilities and knowledge and technology, we could play in that game. And then just making simple LEU for PWRs is another possibility.

So lots of possibilities there. We've been in the game now for over 10 years. I think we've been involved watching the technology grow and develop and advance. So we're pretty excited about it.

Maybe not for tomorrow morning, it's not a quick move, but in our industry, nothing moves particularly quick, but we think we're well positioned. We're happy to be in GLE.

Our next question comes from [Philip Tracy] of Energy Intelligence.

I just had a really quick question. If you have any reaction to the announcement yesterday from Honeywell about restarting the Metropolis? You have 6 planned in the next 2 years. And what sort of impact you envision from this on both UF6 conversion and the U308 markets?

Thanks, Phil. I'd say we weren't surprised by it. I mean there's been rumors of it for many years. I think they've been down for about 6 years. And I saw a presentation that one of their people made about 2 weeks ago that was strongly hinting towards that. I think the slide I saw said that production could be in 2023. So a couple of years from now.

And I think they had USD 100 million plus of capital put in to get things rolling. So yes. I -- we would certainly wish them well. With that, Grant spoke a little bit about what he thought the effects could be on the market. There's certainly not much in the near term, but over time, with the conversion price moving the way it did, it didn't surprise us.

I think they've wrapped up a few contracts. I think their restart was contingent on having some business and they have that, Phil. So yes, we look forward to having them back in the conversion business.

Our next question comes from Gordon Johnson of GLJ Research.

I guess 2 questions I have. Number one, have you guys started to hear from the ESG investors of the world, have they started to poke around about the prospects of nuclear and I guess, seeing nuclear as more renewable based energy source?

Gordon, we start almost every meeting with every investor or analyst that we talk to with ESG. I haven't seen anything come like with such a title wave like we've seen with ESG.

And it's here for the long run. It's here to stay. And I can tell you we're only too happy to talk about it. Because we think it's a real competitive advantage for us. As we said a little earlier, I said in my comments, sustainability has always been at the heart of our business. Our vision is to energize a clean air world.

So on the E part, our product does not produce any CO2. And we always use the Ontario example, which is closest to home that our uranium avoids about 5 million tons per year of CO2 going up into the air. So we think that's a real advantage, but it's not only that. And it's -- we don't take the S and the G lightly either. On the social side, we have been a leader for 40 years on hiring indigenous people at our operations. Our northern operations, 50% our employees are indigenous people from Northern Saskatchewan. A huge majority of our spending in the north goes to these northern contractors, which are indigenous owned.

We've got people policies. You hear me and you'll hear all of us in here talk about the health and safety of our employees being top shelf. And finally, on the governance side, I'd say we stack up very well. We just came out of board meetings this week, the Chair of our Governance Committee is Anne McLellan, former Deputy Prime Minister of Canada. And I can tell you, you might have seen her comments in the Globe and Mail this weekend. But she is driving Cameco forward on governance matters, and so we're very proud of our record there.

So we think we stack up well, and you hit the nail on the head, that is the topic now that we talk about, and every meeting has an ESG expert in the audience that we go to.

Okay. That's very helpful. And then separately, I mean, you guys are probably aware of this, clearly, you're aware of this, but there's this kind of dark cloud around nuclear and fears. Have you guys talked to governments -- government officials, local, global, et cetera, about the prospects of nuclear. And I say that because there was a report out on Germany today that there's some issues associated with the snowfall and the solar panels not producing the power they need and them having to export in -- or import in rather energy from natural gas and nuclear and that pushing up the cost of energy.

But it seems like this isn't widely known. It's dynamic. Do you guys believe that government officials are increasingly starting to think about this dynamic with respect to nuclear, have you heard about that? Any comments there would be helpful.

Yes, absolutely. We sit on the World Nuclear Association Board of Directors. We sit on the NEI, the CNE, all of the -- and very clearly, governments are recognizing today the role that nuclear will play.

And I mimic the -- or repeat the words of our own Energy Minister, Seamus O'Regan, who said there is no path, no path to carbon neutrality in Canada or anywhere else that doesn't drive by a nuclear plant, like we're not going to get there without nuclear.

And so you can -- people apparently don't like oil and gas any more, fossil fuel. So you can put that out. That's like 60-some percent of the -- 80%, I think, in the world, but 60% and 66% in North America of the energy that comes forth. You've got to replace that with something.

Hydro, try damming up a river. These days, yes, that works out for you. I mean that is fraught with the controversy. Wind, there's some physics realities that you have to deal with on wind. It's 45% efficient. Physics reality on solar, 26%. The Japanese, ask them how they made out this winter when temperatures went down and the wind mills weren't turning and the solar panels had snowpack. I mean they had to import LNG at $20 or $30 MMBTU.

I mean -- so yes, yes, you've got to look at everything. You've got to look at all your options, and we're getting a lot more notice from governments. We talk to them all the time, either directly through Cameco or through those agencies, and they're getting warmed up on the nuclear file.

So Grant, do you have?

Yes. I just want to add, Gordon, this is an absolutely important topic and one that we need to emphasize because when we get asked, what's different this time, when we look at nuclear going forward, what's different this time is exactly what you're talking about. It's that there's a greater sense of the accountability of where the electrons are coming from these days.

And Tim talked about at the outset, it's no longer just the countries that have net-zero targets and that are going to be held accountable for whether they achieve them or not, it's this company involvement too. Big companies having net-zero targets that used to just be energy takers. They used to just be able to take whatever the energy was that was coming down the line. And now they're being driven to be accountable for where that power is coming from. And so it's that very important voice being added to it that we think makes the demand dynamic different this time. So yes, we're involved in the traditional conversations with those who look at nuclear and maybe have a little more fiction than fact built into their nuclear perspective, but it's also working on the company side as well and saying, when you're buying clean carbon credits and yet, the sun is shining for a couple of hours, the wind is blowing for a couple of hours, and it's a 24-hour clean credit, it's probably being backed up by fossil fuels, not emissions-free power.

So you should really think about where those electrons are coming from. So you'll see us do more and more in this area. Even though it's kind of not part of our business, we're not a power producer, but we have to be an important voice there and have to join the voices of others like the environmentalists like Michael Shellenberger, for example, who are making this point loudly and frequently. But you're absolutely right that it is a different dynamic shaping up on the demand side this time.

Okay. And then one last one for me, if I can. The Chinese contracts, maybe you guys have answered this, I didn't catch it, but those contracts are pretty long in the tooth. Typically, those contracts are 10 to 15 years. I think they were signed up roughly 10 years ago. Some expectations that they were going to be renewed this year, some expectations they are going to be renewed last year. Do you guys have any insights with respect to when the Chinese nuclear players may look to renew those contracts?

Congrats on the quarter.

Yes. Thank you. Grant?

Yes. We talked about this a little bit earlier, but I'll just go through it again. The -- those initial contracts were obviously quite out in front of what their requirements were in China. So they contributed to the strategic inventory build that we saw happen. And so we -- earlier, we wanted to set that strategic inventory build in the context of where we think that Chinese fleet is going.

And when you look out over the longer-term with their country net-zero targets, it ends up being quite a modest strategic reserve, if you will. So then it raises the questions, what do they do with 2025 comes around. And those initial contracts have rolled off. Well, they're going to have some foreign sources of uranium.

Tim talked earlier about Namibian production all being in the hands of the Chinese right now, and that goes back to China. They'll probably develop some assets in Kazakhstan, just recent announcements about involvement there. That might give line of sight to about 20 million pounds of foreign production coming into China. But it's going to be against 45 to 50 million pounds of consumption in that 1 year alone, 2025, and then growing every year after that.

So the term dynamic that we're watching and others are watching is, with some of these big players with big programs and big buying needs, when they're going to step into the market, you'll have those utilities who will just be happy to follow, but you'll have those utilities that want to be in front of that because you'll remember that the Chinese triggered a bit of a price run last time they stepped into the market. So it is an important thing. Our sense right now is probably that 2021 could be a constructive year for conversations about renewing those contracts. That's not to suggest they'll be completed.

But we think when you kind of back up from 2025 to today, we're within that window of when you would normally see contracting for big volumes like that.

Our next question is a follow-up from Orest Wowkodaw of Scotiabank.

Are you on mute, Orest?

Sorry about that. Yes, I was on mute. In your MD&A, it speaks to the issue that there's risk to your Cigar Lake production in 2022 based on the current suspension and delays and deferrals.

Can you give us a sense of like, with Cigar Lake temporarily suspended now, at what point does that start to trigger some of that reduced production in '22? Like, if it stays down to midyear, will that have an impact for next year? Or does it need to stay down longer than that? I'm just trying to get a sense of when do we have to start worrying about '22?

Yes, that's a good question, Orest. I guess it will depend on how long we're down, and it will also depend on whether we can come back kind of in stages up there, and maybe you can't go back to full production right away, but you could bring a crew up to work on some development to prepare the mine for when you can bring the whole crew up and start jetting again and doing all that. So a lots of question marks there.

Right now, we're pretty much down. It's the care and maintenance crew looking after the place, we'll watch. And I don't think it's an all or nothing. We're just going to restart, and 2 weeks or a month later, we start. I think you'll see more of a phased approach as we can do some, as I say, some development work underground in the mine and just prepare it, so when we do bring the whole team back that we can -- our ramp-up will be smooth. So not a real specific answer for you, Orest, but that's the best we have today.

Okay. Maybe I could ask another way then. Have we already reached the point where you would anticipate that Cigar Lake will produce below nameplate next year? Or is it too early?

I can't say that, Orest, I wouldn't say that, no. I can't say that yet. We're -- we want Cigar Lake to run. We -- that's -- we have it on the books. We need those pounds to put into our portfolio that we wanted to run. And so every day, we come in and we weigh the likelihood we can restart, the risks around restart, the risks around having enough qualified workers to run all the circuits. And so as I said, we don't want to yo-yo the thing back. So we'll make sure we're in good shape, and we have good certainty and clarity when we bring it up. But it's too early to say that there would be an effect in 2022.

Okay. And then just separately, can you give us your latest timing expectation for when we could hear whether the Supreme Court will hear the appeal on the CRA case?

Yes, absolutely. We know there's a trio, I think, of judges looking at it now. And so we're hoping to hear sometime here in the first quarter as to whether they'll give leave to appeal, but that's about the best information we have now. And so we -- another piece we get up and watch for every day. And as I say, the first quarter is still our best estimate.

Thank you. This concludes the question-and-answer session. I would like to turn the conference back over to Tim Gitzel for any closing remarks.

Yes. Thanks very much, operator. And with that, I just want to say thanks to everybody that's stuck with us today on the call. We certainly, as always, appreciate your interest and support. I'd just say that as we head into 2021, we're excited. As I said earlier, we're excited about the future, we're excited about nuclear power generation going forward, and we're excited about the fundamentals of uranium supply and demand and the role our company is going to play. And we always end by saying we're a responsible commercial supplier with a strong balance sheet, long-lived Tier 1 assets and a proven operating track record. So we're going to continue to do what we said we'll do. We'll execute on our strategy. We think 2021 is going to be a good year for us, and we will always, always put the health and safety of our workers, their families and their communities at the top of our list.

So with that, I'd just say thanks, everybody, stay safe and healthy, and have a great day. Thank you.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.