What fun! I'm not a uranium expert, but I couldn't resist this challenge from the legendary Kevin Bambrough on twitter. Last Friday Kevin wrote, "Any CFA’s want to make $1000 doing a few hours of work? I will etransfer the first person to complete this a detailed will referenced model of cameco’s contract book." Nevermind the money, I love a good hunt for Where's Waldo? Surely this information is available publicly somewhere, right? Let's find out.
My source is the CCJ 2020 annual report. A single section from page 24 of 160 briefly gives me all the information I need,
"We have commitments to sell over 113 million pounds of U3O8 with 32 customers worldwide in our uranium segment, and over 53 million kilograms as UF6 conversion with 31 customers worldwide in our fuel services segment. The annual average sales commitments over the next five years in our uranium segment is around 16 million pounds, with commitment levels in 2021 and 2022 higher than in 2023 through 2025."
Where's Waldo? https://s3-us-west-2.amazonaws.com/assets-us-west-2/annual/cameco-2020-annual-report.pdf
Twenty million pounds is a lot of uranium!
The 2020 report notes that CCJ's obligations were larger in 2021-2022 than subsequent years. Have they been able to rise to meet the challenge? When I read the 2021 MD&A, I noticed that it said there was no change to future obligations to deliver uranium. There may be more to the story than that, but I'm willing to take them at face value. I can't imagine how complicated the world of OTC derivatives are for physical uranium.
When you think about a total of one hundred and fifteen million pounds of uranium and combine it with guesses at uranium price out past 2030, then what happens? Wild predictions are possible.
A simple example of $100/lb U3O8 spot price gives $11,500,000,000 eleven billion dollar value for uranium that must be delivered. Big number. How much does Cameco have covered from production, at what confidence level? Do they have a "naked short" at all or have they covered these deliveries multiple times over? Right now, CCJ only have the Cigar Lake Mine in operation in Canada and it has a Proven reserve of 103.8Mlbs U3O8. That's less than their delivery obligations in 2020? And they only have 50% of Cigar Lake?
And all this is just looking at the uranium segment, not including the extra 40-50% in the fuel services segment? Oh boy! What a fun exercise. Thanks for the challenge, Kevin.
