Supply risks trump demand concerns: Cameco CEO

Global utilities have their work cut out if they hope to secure enough uranium to meet demand over the next 20 years, Cameco (TSX: CCO; NYSE: CCJ) CEO Tim Gitzel said.

Some 70% of utilities’ uranium needs through 2045 – about 3.2 billion lb. – remain uncovered, Gitzel said Thursday during a conference call. This includes about 1.3 billion lb. for which the source of annual primary production isn’t yet known, he said.

“Full-cycle demand is durable and stronger than ever,” Gitzel told analysts. “But as we keep emphasizing, the risks to supply are far greater than the risks to demand. Despite the long-term uranium price remaining near its highest level in over a decade, the industry is still not seeing the level of long-term utility contracting necessary to support both brownfield expansion plans and the significant investment in new projects that will be required to meet growing future demand.”

Global uranium reserves could be exhausted by the 2080s if demand for nuclear energy – which is fuelled in part by the rapid growth of artificial intelligence-related power-hungry data centres – keeps expanding at its current pace, the Paris-based Nuclear Energy Agency and the United Nations’ International Atomic Energy Agency (IAEA) warned last month. Without major new investment in uranium exploration and mining, supply may not keep up, the agencies said. 

Second largest

With about 17% of 2024 global production, Cameco is the world’s second-largest producer, trailing only Kazakhstan’s Kazatomprom (LSE: KAP), which supplies about 20%. The companies are joint-venture partners in the Inkai project in Kazakhstan.

Sixty-one nuclear reactors are currently under construction globally, IAEA data show. Ten more were approved for construction in China this week, marking the fourth consecutive year that the Asian country has approved at least 10 new reactors, Gitzel said.

Gitzel spoke after Cameco reported adjusted first-quarter net earnings of $70 million (US$50.7 million), or 16¢ a share, compared with $46 million, or 11¢, a year earlier. Revenue soared 24% to $789 million.

Cameco reaffirmed its financial targets for 2025, which include uranium production of 22.4 million lb. and sales of 31 million to 34 million pounds. The company also confirmed that its uranium and nuclear fuel are exempt from U.S. tariffs because they are compliant with the Canada-United States-Mexico Free Trade Agreement.

“Given the solid first-quarter beat and no changes to guidance, we view the update as positive for the shares,” Scotia Capital financial analyst Orest Wowkodaw said in a note.

Shares of Cameco rose 2.9% to $64.84 in midday trading in Toronto Friday. That gave the company a market value of about $28 billion.

Kazatomprom lags

Cameco’s Kazakh partner, Kazatomprom, also issued results this week showing uranium production rose 11% on a year-over-year basis to 5,633 tonnes, while sales fell 7% to 2,560 tonnes. Its average realized price was US$54.69 per lb., 13% less than in the same period a year ago, the company said Friday.

After having suspended production for most of January due to supply-chain issues, Inkai now expects to produce 8.3 million lb. of uranium this year. Cameco probably won’t receive any deliveries from Inkai until the year’s second half, Gitzel said.

“And with ongoing acid and other supply chain challenges, the updated 2025 production target is certainly not without risk,” he added.

Kazatomprom’s operational update “was slightly below expectations overall,” BMO Capital Markets analyst Alexander Pearce said in a note. “While shipments were in line, they were booked at a lower realized price and production was a touch below expectations.”

For the full year, Kazatomprom still expects to produce between 25,000 and 26,500 tonnes of uranium. Its sales target is 17,500-18,500 tonnes.