Understanding the World's Most Unusual Commodity Cycle

One of the things that's really important to emphasize is that the uniqueness of uranium is summed up by the fact that it is a commodity with basically zero fundamental in-year demand. There is not a reactor on the planet that is loading a fuel bundle in the next 12 to 18 months that has not already procured the uranium. So what you have is you have a commodity for which In the next 12 to 18 months, your primary consumer doesn't need it because they've already procured it.

A warm welcome back to decouple. Today I'm joined by Grant Isaac, President and Chief Operating Officer of Chamico Corp. Um lustrious background has a PhD in economics at LSE. Um academic background, professor in Dean at Edwards School of Business. Uh Grant, it's a real privilege to have you on. Not a real privilege to be on. Thanks, Chris.

And and that was uh kind of the the short version. Uh I was just going through your bio, curious about who you were. Uh also see the author of I I believe Ag Agricultural Biotechnology and Transatlantic Trade. Is that correct?

Yeah, yeah, it is. And uh and actually towards the end of my academic career I was uh I spent a lot of time focusing on Canada US trade, which at the time uh nobody cared about'cause we were in a free trade environment, but I was warning that after nine eleven when um Homeland Security took over all of the the the trade uh elements in the US, I was warning that there was a a box of tools that was being assembled that if in the wrong hands

Uh could be used for trade disruption. And uh I was just twenty three years uh too early. How common is it for uh someone in academia, like a former dean of a economics department, to make that transition into the corporate world? It is not common in North America, but actually if you look in Europe, it's far more common for people to have spent time in academia, government and business and to move back and forth between

between those three solitudes as they're often considered in North America. Uh, you know, I I think it was um Jerry Grandy who hired me and I I think he's probably Maybe some people questioned his sanity when he hired a a a dean and a professor, but uh I I think it's worked out well and uh and really there's there's a lot um

Yeah, they're they're big organizations and you have to lead through persuasion, not authority. And uh and I think that's just the ultimate key to success. And and so it's been a good decision, a good change for me, and uh I've never looked back. It's funny you mentioning Jerry Grandy. Um he is uh like you now, a decouple veteran. I had him on the podcast. It must have been could have been four years ago. We're celebrating our sixth anniversary in May.

Um, so if people wanna dive back into the archives, they could do that. But it's really interesting. I mean, we're I think something like three hundred and fifty episodes in and You know, I was warned early on, like, Chris, tone it down. You're moving too quickly. Um, you're gonna run out of material. That has not happened. And I'm always astounded when there's an area that I'm you know, in the nuclear sector that I really haven't done much of a deep dive on.

And, you know, to my listeners, uh, particularly a lot of uranium bulls, um, they must be pretty disappointed with me'cause it's taken this long, um, to get someone on to you know, an economist uh above all, to get on and and You know, something I'm really excited to chat about today is is uranium as a pretty unique commodity compared to oil, gas, coal, or other metals. Um and to kind of trying to understand, um, I think as a lot of people are right now, um, the uranium commodity cycle. So um

I thought we could start out though with a little bit more in terms of um just getting some basics down and for some of my listeners, um this might be frustrating, but I think it's uh it's gonna be important for for me, my beginner's mind. Um, let's uh let's just start off quickly again. We've got your introduction. Um, just introduce us a little bit to Camiko, and if you don't mind stretching back in history a little bit.

uh because I think it's reflective of sort of there was a lot of state involvement in uranium mining early and and there's been a betr bit of a transition, uh at least in North America. So give us give us a bit of the background on Camico.

Yeah, the background of Camico is uh it's a bit unique. Camico was born out of two crown corporations, a provincial crown corporation that had uranium exploration, uranium mining, uranium milling assets. and a federal crown corporation that had fuel cycle assets and and that's why Camiko's always been uh an integrated nuclear fuel company. I mean, as as you know,

Our uh the product we sell to Bruce Power, fabricated fuel bundles for their can-do reactors. And we also sell reactor components and uh things like spacers and stuff like that. We've always been right across that fuel cycle. Most known obviously for our uranium production. And if you just kind of start from the beginning and work forward, largest exploration land package, uh, most of it in the prolific Athabasca basin.

We operate the two largest uranium mines in the world. We operate the current currently the largest uranium mill in the world. We have the largest uranium refinery, Western world's largest conversion capacity. Working on enrichment, obviously, not something we're in at the moment. On the fabrication side between what Camiko does in the pressurized heavy water reactors and what Westinghouse does.

In the light water reactors, something like sixty five percent of the Western world's fuel bundles go through either a kamiku or a Westinghouse facility. So it's a it's a it's a big footprint in some of the most strategic assets at a time when the world is realizing just how critical uh nuclear power is to climate security. energy security and national security. So we uh we have a big role to play.

The breakdown is is interesting. Um, from just some cursory research, it looks like uh probably the majority of the world's uranium mining is under some degree of state control, whether I believe it's Kazadprom or, you know, various entities in Russia and China. um joint ventures and a lot of ownership by by state controlled companies. So Camiko is uh not that model. I guess it came out of, as you mentioned, crown corporations.

Um, and from what you're describing, um, you know, really moving towards a lot of vertical integration. I for some reason I have uh you know, I'm by no means uh an economist at all, but I just I have a bit of a fascination with vertical integration and maybe a bit of a fetish with that kind of looking at Ford Motor Company or um, you know, some of what's happening in China right now and just the amount of scale they're able to get. But

Suffice it to say, um, Camico seems to be sort of well on that route towards vertical integration. As you mentioned, uh, some of the best mining assets in the world, milling, conversion, getting a foot in the door with uh global laser enrichment. And now with uh with Westinghouse engineering services, uh fuel fabrication addition to the can do stuff. uh vending reactors. I mean, um I guess there's some parallels uh again with more state ownership um like uh Orano and EDF for instance.

Um, you know, what the Chinese are up to, CNN C, there's a few different entities there. Not making the comparison with Rosatom here in any other fashion other than say that they've got a lot of vertical integration. Um but is this a relatively kind of new phenomenon that there's sort of a private sector company across the nuclear fuel cycle, reactor vending, et cetera, that's that's again uh uh it working within the the private sector?

The main reason why we find ourselves uh vertically integrated the way you describe it. I mean, it is part of our DNA. We we we were born vertically integrated when the two crown corporations were put together. And we always looked for opportunities to expand that vertical integration beyond uh the pressurized heavy water reactor space. Cause as you know, About eight to ten percent of the reactors globally are pressurized heavy water reactors, and the rest are forms of light water reactors.

Yeah. And so that's a a very big market that we weren't in from a vertical integration point of view, other than say, conversion. Uh so when the opportunity came to invest in Westinghouse, it really was investing in the the dominant player, if you will, in that light water reactor space. So it was just kind of adding another

swim lane, if you will, to a a swim lane that had already been created. Of course, one of the differences is Westinghouse is also a reactor vendor, as you pointed out. So it has an element of We put a a shoulder into building reactors. We're also putting a shoulder into building eighty to a hundred years of our core demand for our uranium, for our conversion, for our enrichment, for our fabrication services, as well as

Reactor services. So for us, the the reason we do this is simply because Unlike a lot of commodities. The you you are connected as a uranium producer to the end user. You don't sell to a a metals exchange. You don't sell to a smelter. You know, you don't sell just into a spot market and never think about where your commodity ends up, you you actually have a very long term

uh relationship with the person who buys the uranium, who also buys the conversion, who also buys the enrichment, who also buys the fabrication, who also is probably the team that plans the outages and the maintenance around the outages. And who obviously has a big role to play in future reactor decisions. So there is a really strong customer intimacy, and it is about.

Building the products and services that satisfy the needs of the customers in the time that they need it. And that really is the strategy. And to do that from a handful of really strategic assets. Assets that are best in class, assets that are in sovereign safe jurisdictions, assets that have high barriers to entry where you're just not gonna see competition pop up right away.

despite the hyper promotion of some that they're, you know, gonna build a new uranium mine in record time or they're gonna build a conversion plant in record time, uh most of those are not realistic claims. So there there's just a strategic

posture to all the assets that we've assembled. And we wouldn't trade our position for anybody's. We we love this industry uh w when the industry didn't love itself. And so now that there are all these tailwinds, we just been really validated for putting the strategy together.

Just tugging on a couple of the threads you just mentioned, um, you know, mori uranium is largely sold in these privately negotiated long term contracts. Spot markets, what, like ten or fifteen percent of uh of uranium sales? Um and so, you know, if you're a utility and you're um contracting for the actual yellow cake, but also the conversion, the enrichment, the fabrication, I guess if that's all under one roof um with Chemical Westinghouse.

uh that presents certain advantages I can imagine just as a utility, you know, buying fuel. Um but another thing that I I found very interesting um is again just I mean how concentrated production is. Um, you know, I was looking at the um the Gawar supergiant oil field in Saudi Arabia providing six percent of of global oil. I mean, that is a legendary um reservoir.

Um, but you know, just one mine, uh one of your two mines, you know, let's say um uh Cigar Lake, uh that's something like twelve percent of world demand out of one site. And when it flooded, that was a problem. So Um, you know, there's some I think really astounding things that we can sort of dive into here.

But why don't we start off again just on the production side with uh again, some of the differences with other commodities. Um I I I guess we're gonna get into a lot of things here, but we'll talking about kind of inelastic supply and demand. So let's focus on supply, concentration, And we'll we'll deep dive that for a while and then head over to the demand side. And let's remind ourselves exactly what kind of market uranium is sold into.

Uh, one of the things that's really important to emphasize is that the uniqueness of uranium is summed up by the fact that it is a commodity with basically zero fundamental in-year demand. As you know, there is not a reactor on the planet that is loading a fuel bundle in the next 12 to 18 months that has not already procured the uranium. So what you have is you have a commodity for which

In the next 12 to 18 months, your primary consumer doesn't need it because they've already procured it. So that's that's what creates this illusion of a spot market. You reference You know, the spot market being ten to fifteen percent. I I would unpack the spot market a little bit differently.

You know, it looks like about fifty million pounds of uranium gets tran uh traded or transacted in the spot market on an annual basis, just kind of in rough average numbers. And of that, utilities are only about a fifth of it. They only buy about ten million pounds a year. But that's not fundamental demand. When utilities go into the spot market.

They're not buying for their run rate requirements. They're doing that under long-term contract. What they're buying for is they might have an outage a couple of years from now and they need a bit more material to put in process. Or they might be looking at their reactors going through subsequent license renewals or up rates, and they may need a bigger strategic inventory. And so they'll come into the spot market for those one-time volumes.

And the key to that is while it's utility and user demand, it's not fundamental. It's actually quite discretionary. And if they don't like the price that persists in the spot market that day, they don't have to buy that day. And they step back. And so we have a a spot market that can be very volatile despite this overwhelmingly strong fundamental. For uranium demand, because you just have to remember spot is not the market. The market is that term market. The vast majority of utilities.

think of fuel as a long lead item and they contract for fuel as a long lead item. And they do that through a couple of mechanisms. They either put an RFP into the market, You know, and and if you were the utility, Chris, or you were the fuel buyer for the utility, you know, you might put a an RFP in the market, you're looking for material 2028 to 2036.

And you're looking for two hundred thousand pounds a year and then you ask us and Kazadam prom and Iranu and maybe send it to a few of the potential newcomers in our industry and ask them to to bid on it. Or You go directly to a producer and you have an off-market bilateral conversation. So we have on and off market turn contracting. And that's kind of the mechanism by which you start to

Figure out what the demand is like if you're a supplier or what the supply is like if you're a utility. And then when you think about how you price that, Um, you know, we have uh two book two bookends in our industry. You know, of that twenty twenty eight to twenty thirty six, two hundred thousand pounds a year, you might come to me and say, I want that to be base escalated. I I really want to know what the cost of my uranium is going to be in my fuel.

And if you did, we would just simply turn to today's long-term price, which is about$93 US per pound. And generally we would start there or close to there. Camico can drive a premium on that. Um, but that's essentially where we begin our discussion. And then what you and I fight over is how this contract escalates to first deliveries. And then how it escalates through the delivery window each year. And that's called the base escalated contract. The other end of the spectrum.

is a market related contract. You still want material 2028 to 2036. You still want 200,000 pounds a year, but you would rather have market price exposure. You want a market related contract. Now what we're fighting over is what price reference we use at time of delivery out into the future. You might look at the market and say it's usually in Cantango. The spot price is usually below the term price.

So you might want spot market exposure at time of delivery out into the future. I would say I would never take single day spot market exposure. Um I would want an average over a certain period of the spot price. You might also have enough experience in the industry to know we go through periods of incredible backwardation where the spot market runs out in front of the term price. So you might want a weighted average between.

spot and turn. But that's what we're negotiating. And then generally what happens with those market related contracts, Chris, is You're eventually gonna ask for a ceiling. Like most utilities. have a a value at risk model that they're running and and they have to have it capped. And so they ask for a ceiling. As soon as they ask for a ceiling, as soon as you ask for a ceiling, I'm going to ask for a floor. So generally those market related contracts are callers.

You know, if you think about today's market, collaring in the mid-70s escalated for a floor. Um, it's in the mid-150s, close to 160 escalated for the ceilings. Interestingly, the midpoint of those market-related contracts is just about$120 per pound of uranium. And and what we know from the evolution of our business is generally that long-term price that I referenced earlier, that$93, gravitates over time to the midpoint of the market related contracts. That is how our

our market typically works. And that's kind of the pricing dynamic that we're in in the market right now.

So in terms of like price discovery, it sounds like these are a lot of sort of bilateral negotiations. Um it's pretty opaque in terms of an investor looking at it, I guess in terms of different buyers. Um so how how does how does that work? Is there an element there that that makes things again even more obscure and hard to get your head around? Yeah you

use the term price discovery and and what we would what I would say as an economist is we don't have a discovered price in in the uranium market. We have a reported price in the uranium market. And there's actually not enough reactors around the planet to create enough volume and frequency. To be in a position where we can hit refresh on a Bloomberg page every 15 seconds and refresh the price like you can on oil. It takes us actually a week.

of of of negotiations and contracting to discover the spot price in our business. It takes us a month. To have enough volume and frequency to discover the term price in our business. And it's reported. Because the suppliers who agree to a sale, uh, the the utilities who buy typically have obligations to go to the price reporters and and say what we've concluded transactions for.

And so immediately you realize the uranium price is always in the rear view mirror. As a reported price, what you see today is always the contract that was done yesterday. It's not a windshield. It's not a through-the-windshield price. We don't really have good forward discovery. We have past price reporting, which is why our market tends to move. in fits and starts. You know, you have

A spot market where some financial buyers are raising money and you know they're gonna come in and they're gonna buy. Sellers in the spot market back up really quickly, spot price jumps, several dollars per day goes up quite a bit. But then as soon as that financial buying is done, spot price comes off and we're back into Kentango around the long-term price. There's a volatility that's created because it isn't a discovered price, because it is a reported price.

Okay, well let's uh let's get back onto the kind of production side of things, but I think we've got a nice jumping off point here, um, which is again the the hyper concentration of production, particularly in chemicals assets, um cigar lake and um and MacArthur River. Um and I think something that uh that's illustrative of um this spot versus long term contract dynamic is that, you know, in that post Fukushima trough

um where we had a real drop off of demand. Japan shut off, you know, fifty reactors. I think that tanked about ten percent of global uranium demand. Plus they'd already contracted for, you know, material and they were selling that into the market. It was a big confluence of factors.

um that suppressed price. And as a result, um I think Camiko's somewhat famous for uh having the discipline to shut down the MacArthur uh lake mine and buy on spot to fulfill contracts. And buying on spot, spot was pretty cheap at that point. So

Did that sort of help pay for the costs of, you know, I think it was something like, you know, many millions a month to kind of idle and keep that facility in in good order so it could be started up again ultimately in twenty twenty two as it was. Walk us through kind of that dynamic so we can get again um a window into the production side and and, you know, get a little more a little away from just kind of the theoretical into uh practically what that's looked like historically.

Yeah. If if we say theoretically, this is a market where you're always trying to capture forward demand because what really matters is long term contracts, then Practically speaking, you have to have a strategy that isn't just about producing and producing as much as you can to lower your unit cost as much as you can. You have to have a strategy that recognizes the interplay.

Between your marketing program, your production decisions, and having a financial strategy that allows you to be as patient as the utilities are. So go back to the window that you're talking about, the the early days. post Fukushima, a lot of doubt about the industry, a lot of doubt about, you know, when and if the Japanese fleet would come back again. A lot of doubt about are we going to see accelerated reactor retirement?

And so what happened was a bit of a buyer's strike. Utilities were not coming in uh to buy forward uh big volumes of uranium because they were unsure about their future. So as their long-term demand fell off, you ended up with some suppliers who were producing material but didn't have a home for, having to jam it into the spot market.

So very famously, the uranium price, which peaked at$136 a pound in 2007, got as low as$17.50 a pound when we shut down MacArthur River Key Lake. So the decision we made was It's more valuable to leave pounds in the ground as in ground inventory than it is to take it out of the ground and try to sell it into a market where there's no long term demand. And you're left being exposed to the discretionary spot market. That that didn't make any sense to us.

So, what we began to do was a series of supply discipline. It started in conversion in 2014. We started to toggle back. the Port Hope conversion facility. Then in 2016, we began in uranium to toggle back uranium. We put the rabbit lake mine in care and maintenance. We put the U.S. mines in care and maintenance and we slowed down the MacArthur River mine. That wasn't enough. By 2018, we put we found ourselves in a position where we actually had to turn off the world's largest mine and mill.

uh in order to see a rebalancing of the market. And so as you mentioned, we had 70% of our production sh shut in, leaving those pounds in the ground for better days, buying cheap material on the market. to feed into our committed sales portfolio, helping clean up that oversupply on the market. Still making a margin on selling it into a higher priced contract because we did such a good job negotiating those and having good floor price.

protection and and then ultimately starting to see the tailwinds build, demand come back to the market, and then found ourselves in a position where we could restart the MacArthur River mine and the Key Lake Mill. But at this moment, Chris, we are still in supply discipline. We still have 30% of our license. Permitted production capacity, either slowed down or still in care and maintenance, because ultimately we haven't seen enough long-term demand come back. It's been building.

But it hasn't built as much as it has in conversion or as much as it has in enrichment or fabrication. So we have to be patient and wait for it to come. The one thing we don't control. is when utilities collectively bring all their demand to the market. And because we don't control that, We have to make sure we're disciplined. We have to make sure we have the financial strength in order to be at least as patient as they are.

so that when their demand does come, we have pounds in the ground ready for them at more appropriate prices.

Okay, so zooming out on the production side um from the Athabascan Basin, um there's different ways to produce uranium, obviously. Um, we have inside shoe leeching. Um, Kazakhstan's famous for that. Um, I'd like to explain that in a little more detail. We also have open pit mining and we have really wacky, strange underground mining in the Athabaskan basin where you're freezing sections and I think uh using like water jets to to get ore moving.

Um and just absolutely insane differences in terms of or grade and concentration. So give us a little overview of the different ways in which um uh uranium is produced and I guess you know a little bit of of how that determines Um

uh other other features. I'm thinking of Kazakhstan, um, and I think saying a swing producer in uranium will probably get you laughed at in terms of how slow these cycles are. But from what I understand, um, you know, inside you leaching, you can bring supply in a little bit faster at a lower marginal cost, et cetera. So I've asked too long of a question, uh but take it away from there.

You hit the three modalities though, and uh and and I think he did a good job explaining them. The Athabasca Basin, and maybe I'll start with that one, is is really unique. Uh, you know, you think of that entire Athabasca Basin as a big stone bowl.

And that the the porridge in that bowl is sandstone, sandstone that's very rich in uranium on a parts per million basis. But the sandstone is very fractured, meaning All the water in that giant Athabasca lake, not just the lake on surface, but the entire body of sandstone, all that water communicates with itself.

You know, so if you have a mine and you pump the water to surface, that water is going to find its way back into your mine because of the fractures through all that sandstone. But the fractures is are actually what allowed after millions and millions of years. the erosion of the sandstone brought the uranium down to the stone bowl, the unconformity. So what puts the high grade deposits there?

is exactly what makes them really difficult to mine because they sit at the contact point between good, competent underground basement rock and the sandstone, which is fractured and rather incompetent. So what you have to do is come up with some pretty novel ways to mine. Yeah, MacArthur River, there's a particular geological anomaly in that the bow the bowl is fractured. So the uranium is actually tucked in under one of these fractures and it allows us for the most part

to be in competent basement rock adjacent to or above and below the ore. And when we can use more traditional methods like blast hole stoping at MacArthur River. Fifty-five kilometers away. It's only fifty-five kilometers is the crow flies, but fifty-five kilometers away is Cigar Lake. Completely different mining method because completely different geology.

The the uranium in Cigar Lake sits at at the top of a of a clay funnel, if you will. And and it's adjacent to the basement rock. We can't be above the ore. We have to be entirely below. And so we put all of our mine operations below and we poke up into the frozen ore body with a jet boring system. You gotta freeze it first though, yeah. Yeah, we bore out the cavities. Yeah. Uh and I'll I'll yeah. Freezing is a really key part of it.

And and then the uranium comes out through collection pipes into um uh a a bulk handler and from there we begin to process. And and the key to making this all work. is having to control the water that sits at the unconformity between the sandstone and the granite. And the way we do that is we freeze. At MacArthur River, w we stand in the granite and we freeze out into the sandstone and we create these freeze walls or freeze curtains.

At Cigar, because we didn't have the option of being beside or above, we just bulk froze the whole thing from surface. And freezing creates two benefits. One is it stops the water from moving around, but two Frozen ground is actually stable ground and it's easier to mine and creates better consistency. And so it's a very unique situation. It puts incredibly high grade

uh uranium deposits there, but it also makes them very, very challenging to mine. And, you know, I think about the the skill of our mining teams. They're second to none. They they they deal with some of the most complicated challenges in mining that you will ever come across. And they do that uh on a continuous daily basis. Um, and it just is so impressive for us how how innovative they are. And we'll see.

Just take a moment to uh kind of reflect on again the ore grades. I I understand like when people are prospecting or when you're mining, you'll occasionally find I mean what's the what's the highest ore grade pocket that you found and what's the kind of average uh between Cigar Lake and MacArthur? Right now, um, cigars probably about a fifteen percent or grade average, meaning about 15% of the rock that you mine is uranio. The global average would be less than a tenth of a percent.

Right. So it it is a couple orders of magnitude better in terms of overall grade. Cigar peaked initially at 18% grade. MacArthur would have been around sixteen. It's now down to around seven, eight percent grade. Because with all that infrastructure underground, we're able to go after slots of uranium that you wouldn't have built a mine for initially, uh, but make sense now that you can leverage all that existing infrastructure. But in terms of peaks, we've had

We've had ore passes that have been 70% uranium, just extraordinary, extraordinary resources, extraordinary reserves. We have exploration properties. Where we are seeing the average grade of those exploration properties are double what Cigar. Uh so there are, you know, we we have a saying in our exploration group, if if you want to ha hunt elephants, go where the elephants are. Uh this is why we're so focused in particular on the east side of the Athabasca Basin.

Because we think it remains a very prolific uranium zone.

So let's let's contrast that a little bit with uh Kazakhstan, as you mentioned, um, I think you were saying like 0.1% or even less. Um what makes the incredible mining challenges you're talking about in the Athabascan basin uh economic is the extraordinarily high ore grade. I guess conversely what what uh makes the Kazakhstani um production possible is is I guess the simplicity of that production method. We don't need to go into it in a ton of details, but it has a lot of relevance given

um some uh second and third order effects of the Straits of Hormuz closure. Uh we're gonna be talking a little bit about sulfuric acid. So just give us enough of an explanation on insight you leaching to uh again give us a s uh to to to give a sense of the economics of Kazakhstan production and and I guess foreshadow this uh sulfuric acid problem. You referenced earlier that you had on your show Jerry Grandy, who was of course

re remains a legend uh in in the uranium space. Another legend is Bob Steen, the late Bob Steen, who was Camico's chief operating officer for many years and I think worked on every uranium project around the planet. at one point in his career. And and he affectionately referred to in situ recovery as Plumbing, not mining. In fact, in fact, he would say that a bit disparagingly, because you don't you don't go underground. In situ recovery works on a parts per million basis.

as you say, because of its simplicity, because of its relatively low cost. You you're just you're putting in a bunch of injection wells. You're sending a luxiviant down into the ground, typically in formations that are bounded. You know, you have a sandstone formation. Think of it as the the beach. Uh of an ancient lake.

that has since been bounded by uh geological formations that create a natural aquitard. You put a uh an injection well down into there, you put a luxiviant into the ground, a caustic soda or or a sulfuric acid, you dissolve the rock, you bring up the solution, you precipitate out the uranium. And then you put the solution back in the ground. So it's it's very much a plumbing operation.

So it's drilling, it's piping, it's pumps, it's casing, and then it's some milling work. So a fraction of the capital that goes into putting in an underground mine. And and also it doesn't have the same upfront capital. When you put in an underground mine. You got to do all your excavations up front. Like it's a big, big investment up front. And your harvest comes later. But within situ recovery, your your well-field development or your infrastructure development is just ongoing.

as you mine. So it it generally comes on faster, uh, much lower capital, much lower costs, and therefore you can mine on a parts per million basis. In situ recovery is done in Kazakhstan. It's also done in the US, in that Wyoming high plateau in particular, a little bit into Nebraska. It's being tried in the Athabasca basin, but I I think we're gonna reserve judgment on how well it will work there.

But ultimately what makes Kazakhstan uh so important as a uranium producer is because, you know, you're talking about millions of pounds. Uh hundreds of sorry, hundreds of millions of pounds of resources in Kazakhstan versus in the US, you're talking about millions of pounds. Like a a a big project in the US is five million pounds of uranium producing, you know, two hundred thousand pounds a year.

And and just to put that in context, a hundred a hundred and seventy five million pounds is sort of what we consume every year. Yeah. So so these are really small projects in the US and mining is about denominator. You have to have a big denominator to spread those those costs across.

And uh and we just don't see that advantage. That's why, even though the US production is in situ recovery, like Kazakhstan, it doesn't have the same cost structure as Kazakhstan. It doesn't have the same scale and scope effects as Kazakhstan. And then of course you reference the third type, which is the open pit.

And the open pit are the ones that actually lend themselves to this notion of being more of a swing producer, Chris, you know, where you try to, you know, strip the ground and expose some veins or a calcrete deposit that might be the old delta of a riverbed that was was rich in uranium. And what you try to do with those open pit mines.

is stuff as many of your costs into a variable cost as you can, as few into a fixed cost, so that if the price isn't where you want it, you're just standing down some trucks and some shovels and some operators. and you don't have radiation protection and you don't have ground freeze and you don't have all this underground infrastructure or wells that are producing and flowing, you just you just turn it off. So those are historically the swing producers.

A lot of open pit mining is characteristic of of Africa as opposed to Kazakhstan or the Athabasca Basin. In fact, the last open pit mine in the Athabasca Basin probably would have been Key Lake. Independent analysis only works if it's independently funded. If decouple provides you with energy literacy on demand, please consider supporting it. Become a paid subscriber on Substack or make a tax-deductible donation on our website, decouple.media.

Join the community. Keep the lights on. Preferably nuclear. Now back to the show. Thank you.

You mentioned radiation, and obviously that's something special about nuclear and about uranium. I imagine it's a little bit more of a headache when you're dealing with pockets of ore that are sixty percent uranium. Um so how does how does that factor into these different production methods?

Um, I understand for an underground mine, you know, you gotta have a way in, you gotta have a way out for people, um, as well as for for product and there's gotta be some shielding, etc. Does that make uh underground mining even more complex or or how does it sort of uh how how does it settle up between those different production methods? Yeah, the higher the grade you're dealing with, the more of a challenge it is, for sure.

At MacArthur, we solve the radiation challenge by we have a lot of remote operations. So if we do blast hole stoping and we take a stop and the and the uranium falls down into a collection chamber. Actually the scoop tram that goes in to get it is remotely operated by an operator who stands well back. and goes into the chamber and gets it through a remote operation. Very, very easy technology to use and and obviously creates very, very safe conditions. At Cigar Lake, it's a little bit different.

High grade ore, we're below it, we're jet boring it. It comes down as a slurry and goes through steel collection tubes down into what we call the run of mine area. So all the ore falls into a water enshrouded basin. And from there we scoop it out and start putting it into

uh the various production circuits to turn it into a slurry to pump it up. I mean, this is just what we manage on a daily basis. And what we discover is everybody's tracked with a decimeter. We have very significant uh radiation protection um procedures and protocols and they work extraordinarily well in

We we adapt and we learn from the the the power generators and uh I would say the the different parts of the fuel cycle. And uh we're just very good at managing and we don't even think about it as a as a risk. There's a lot of hazards. in in all industrial mining and uh that wouldn't even be the top of our list anymore because it's so well managed.

Yeah, it's interesting. I I remember looking at a Canadian Nuclear Safety Commission report. They were doing a feasibility study on uh looking at radon exposure in uranium miners. And they decided not to do the study because they found that these miners were getting a higher dose of radon from their basements uh than in their workplace. Um so you must be doing s something right there in terms of uh the rad control.

Yeah, I mean if you think about it, our job is about collecting all the radioactive material to sell it. I mean, that's what we want to do with it. It's not a byproduct, it's actually the product we're focused on. So we're incredibly focused. on making sure we're controlling uh every element, every molecule of this stuff, because uh there's value to it. We don't want it.

to be someplace where where it's not supposed to be. And you know, if if you want to go to a place that has really low radiation exposure, go to one of our facilities or go to the Darlington plant or go to the Bruce plant because The whole thing is designed industrially to protect you from radiation.

Getting back again, just staying on this production side, something I'm a bit fascinated by is uh countries with big reserves and how that maps over to production. And I think this uh is illustrative of a couple of concepts. So Australia, I understand, has the largest reserves in the world. Then there's a smattering of countries that's, you know, have ten to fifteen percent uh of world reserves. And as you mentioned, when you go looking you find more, there's more elephants out there.

Um, but Kazakhstan, for instance, I I think is maybe third in the world in terms of reserves, but number one in production and and sort of like forty percent of world production. I think this is reflective um of a variety of factors. One would be the production and inside you leaching. Um but what el what else is at play there? Obviously I I've been to Australia a few times and there's lots of bans on uranium mining.

Canada seems to have some advantages. Just explore that concept with me again of reserves versus production. Yeah. I I'm actually gonna introduce another category. And and that is resources, reserve, and production. Because I think One of the things that a lot of people confuse is you'll see the IAEA's Red Book and it will talk about the enormous amount of uranium resources that are out there and it'll talk about Australia having the largest

resources on the planet. And it'll talk about where the resource position is. But but for a mining company, it's actually not resources that matter. It's reserves. And the difference between a resource and a reserve is that pesky economic model that you have to put in the middle of it. It isn't, is it theoretically there? Yes, it's a resource. Is it economically there? That's when it becomes a reserve.

And when you make that distinction, the world uh the the world supply stack changes dramatically. Then you see why the Athabasca Basin is so important. Then you see why Kazakhstan is so important because the conversion of resources into reserves can be done at today's prices. The other thing that you've alluded to, and it's really important, is

Uranium is a highly, highly trade dependent commodity. And this was just a feature of it being very, very globalized for a lot of years. So utilities were quite unconcerned about where their uranium was coming from. Could come from Africa, could come from Central Asia, could come from Canada.

could come from the US. They a lot of utilities for a lot of years didn't have any ESG concerns or or economic security concerns or national security concerns of where their uranium was coming from. So we ended up with a very funny Result where about 90% of the uranium in the world was coming from countries that didn't consume it. They had no nuclear power program. Bye. And and inversely, about ninety percent of the demand for uranium was coming from countries

that had no uranium production. The United States, or very little. The United States, France is a perfect example. No domestic uranium production. Japan, you know. China has a little bit of uranium production, but it's almost exclusively used for military purposes, which is the only stuff you can use for military purposes is domestic material. And so we had this highly trade dependent Commodity that nobody worried about, and we all took for granted, really, until the Russians invaded Ukraine.

Yeah. ESG standards were starting to buy for Kate the market a little bit. But really it was the Russian invasion of Ukraine that began to create a a multifurcation in the Iranian market where now we realize that The West and Western demand for uranium is net net down. And the countries that don't worry about where it comes from, the Russia's, the Indias.

China uh actually have probably access to more uranium than those who are worried about where so the market is fragmenting right now on a geopolitical basis. And that's being underestimated because when people look at supply and demand curves, they tend to be at the global level. And they tend to obfuscate the fact that Iranu, our our partner at Cigar and MacArthur, the French state owned enterprise, had a mine taken away in Niger. Yeah. A mine whose uranium is not coming into the West anymore.

That that uranium might still be in the global supply stack. It's not available to any Western fuel buyers anymore. And you're also seeing Central Asian supply out of Kazakhstan and Uzbekistan really being diverted to India, to China. to Russia as opposed to being available to the West. So net net, this bifurcation in the market uh has impacted the Western fuel buyers more negatively than the non-Western fuel buyers.

I think this is a really interesting question because I I read that um, you know, a structural deficit uh is in the cards for the twenty thirties. That's that sounds like a you know, a nice um clinical term. Um, but, you know, could could signify significant economic damage if reactors had to um, you know, shut down or go longer between outages. Um, you know, uh these plants like to run real steady and keep keep to their outage cycles.

Um and yeah, we are we're definitely seeing, you know, uh I grew up in this this uh unipolar world, um, the famous end of history. Um, the Washington consensus, uh, where the market was gonna take care of everything and allocate things efficiently, comparative advantage, the rule of the day. And, you know, that's just uh we're getting a whiplash here. And if we didn't get it from the Russian invasion, we're sure getting it now with this uh Iran war.

And so yeah, I'm interested in tugging at that thread a little more because on the supply side, it sounds like, you know, the Chinese, Russians, Indians um are in India, Kazakhstan. Um whereas the West has Canada and Australia um to sort of play off of and I mean there's significant

resources, reserves, uh, and production in in those places. Obviously the Australians could uh ramp it up a little bit, but also, you know, then the Athabasca, um, it sounds like, you know, you guys have more assets. I think millennium is something that you guys could put into operation a new mine.

Um, next gen has Rook One, which apparently could produce something like thirty million pounds a year, um, according to, you know, the investor details they provide. Um, so there is there is supply in the system, but just as you're saying, I mean You know, there's lots of talk in the West about we're gonna triple nuclear energy by twenty fifty. Lovely aspiration. I'll believe it when I see it.

But we are seeing significant um demand growth uh in places like China who, as you mentioned, uh don't really have uh domestic uranium for power generation. So how do you see that sort of playing out as the dynamic you're describing? uh continues maybe at warp speed. Um are are you concerned about, you know, Western or non Western reactors um running out of fuel in the twenty thirties? Or or is this just, you know, the sky's falling stuff? I'm

Certainly supportive of this idea that more uranium production needs to be incented. But I would not be in the camp that says reactors are about to shut down because people don't have fuel. Ultimately, when we start to see shortages of uranium, uh, our market corrects by bringing more long-term contracting to the market. And as uh as more long-term contracting comes and more suppliers capture those long-term contracts, you now have that investable book of business.

By which you can invest in your future production. So as long as utilities treat uranium and the subsequent services. conversion, enrichment and fabrication as a long lead item, like ordering a steam generator or a reactor pressure vessel. So long as you think about it as a long lead item and put it under contract, you're going to send a signal.

uh to the market to start investing in uranium. And then you have a built-in shock absorber, and that is, as you know, there isn't a reactor on the planet that's running on a just in time basis. They have fuel in the core right now, producing power. If it's a light water reactor that's just gone through an outage, it's going to run for 18 months until it has its next outage.

And it probably has one, if not two, uh strategic inventories at the reactor site already. So what's so wonderful about nuclear power is unlike gas, if somebody turns the tap. That power generating plant from gas is going cold right away. A nuclear power plant could run theoretically for 18 months. get fueled with a strategic o inventory, run for another 18 months without a single fuel delivery arriving at the front door. Like that's what's so wonderful about nuclear power. It's so hardened.

But it's also what creates these buyer strikes because the buyers know they have this built-in buffer into the industry as well. So ultimately what's going to happen here is more fuel buyers are going to become more confident in their forward demand. They're going to bring more demand into the market. That's going to lead to more long-term contracting. Long-term contracting is going to strengthen the prices. That will convert more resources into reserves.

And then ultimately we'll see the investment decisions and you always have that built in runway to get the supply ready. And I I would say, what would you look for for a signal? I I mentioned already we still have thirty percent of our production either slowed down or in care and maintenance.

When we make the decision to go to full production, that's probably because the market and the demand is strengthening. So I I'm not worried about it from that sense. The market just needs to bring more demand. There, there's no build it and they will come model in uranium. You produce after you've secured the forward demand just simply means more forward demand has to come. But to your point about the geopolitics, as that forward demand comes, we are seeing.

More preference for certain origins and more preference for certain suppliers. W at Camico, we benefit from the fact that we have multiple mines. So when when you sign a contract with Camico, you're not taking single mine exposure rates. Because we have multiple sources of uranium. Whereas If you're talking about a new project in the hands of somebody who's never done it before and has no other source of uranium, that's a big risk for a utility when they think about their future requirements.

So this is the shakeout that's happening in the industry right now. The incumbent advantage is strengthening, more demand is starting to come to the market. That demand is being more origin driven and energy security driven, it's a good time to be a uranium producer with existing assets.

So in terms of that uh like relative inelasticity of supply, it does take a while to, you know, permit uh go through the regulatory apparatus. Um, depending on the mining operation, as we heard, within Site Shoe leaching that can be fast. If it's underground mining. uh can take quite a while. Um, relatively inelastic supply compared to, you know, frackers going gangbusters in the Permian or the Saudis, you know, um, being a swing producer.

I guess what protects us against that is you're saying you're not super worried about, you know, the mid twenty thirties and us running into a crunch where reactors are going offline or anything like that. Um, so you mentioned you yourselves have something like thirty percent of your production laid up, so that can be surge. There's uh I I was a unaware of the degree to which utilities sort of stockpile, it's become very out of fashion to sort of stockpile anything.

Uh, you know, post World War Two, the US was very concerned about, you know, having tungsten and other critical minerals they found were important in World War Two. Um and so they had stockpiles which I think under Reagan they ended up selling off. There's kind of that neoliberal moment where we just moved to just in time system.

Um so it is interesting to hear that um many utilities are keeping more than just what's in the core, but having another eighteen months or even more um on uh on hold. Uh I'm curious on that front, has has that changed recently uh again in that neoliberal moment? Um or perhaps I would imagine places like I mean Taiwan's phased out, but places like Japan um and Taiwan historically would want to have a little more uh inventory um on on site.

Maybe we'll before I do another huge run on question, I'll just shut up and let you answer that. We it's always uh dangerous to generalize and I'll go ahead and do it anyway. W the North American utilities, if we used a rule of thumb, would have about a a year and a half or two years of forward inventory. as finished fuel. Uh the the European utilities would typically have had two to two and a half years of forward inventory, very little Western European production, obviously.

And to be clear, those are like fabricated fabricated fuel bundles, you know, available Okay. Gotcha. The Asian utilities would always sort of be three, three years plus. And so that inventory is in the system to help stabilize the fact that it's not a just-in-time model.

That's different than the government's strategic inventories, like you re The government strategic inventories were things like the Russian uh megatons to megawatts program where all of that five hundred metric tons of highly enriched uranium Downblended to low-enriched uranium and sold into the U.S. market as civilian power fuel. The U.S. inventory of UF6, sold by the DOE for many years. into the front end of the nuclear business, we don't see those government inventories existing. And in fact,

we're not a fan of them because they've been so damaging to the market because they come in and they buy aggressively and create um, I would say, distortions on the price going up. And then, you know, they have a policy change and decide to to sell off their inventory and do it in a very clumsy way. We just simply point out that governments should look at the inventory as inventory in the ground held by very reliable producers.

So the inventory that we look at and stare at is the inventory that's held by utilities. And remember they then work their way backwards. When they start to feel like Uranium is scarce, they don't start buying uranium. They first go and how many few fabricated fuel bundles do I have?

Okay, if I need more of those, the next place I go is to Westinghouse or Framatone or GE if it's a light water reactor or go to Camico if it's a pressurized heavy water reactor and and I secure more fabrication service. And then after that, if I need enrichment, I go and I I deal with Irano and Yorenko because I don't want to do deal with the Russians or or the Chinese at the moment.

And then after that, I turn to the converters, of course, which Camico is one. And then when all those services are lined up, then do I start looking earnestly. for the uranium because now I know where it's got to go to navigate that path to become a bespoke fuel bundle. So what we're seeing is utilities are dealing with this geopolitical challenge in a very predictable way.

Conversion or sorry, fabrication prices and contracting is up. Enrichment prices and contracting are up. Conversion prices have never been higher. It's a historic moment for conversion. And as those services all get filled up on an energy security perspective, then we're going to see more demand show up for uranium. We're just not quite there yet, which is why we remain in supply discipline.

So in the time we have left, I wanted to um go through some of the historical uranium uh cycles um to help illuminate and maybe structurally different about this one. So um as I've sort of figured it out in my own head, um, you know, there's a original sort of bull market in the sixties and seventies.

Um you've had a bunch of vendors do turnkey projects. They'd made the economics of nuclear look cost competitive with coal. Uh everything looks hunky dory. Um, you know, utilities order hundreds of reactors in the US. Um so lots lots of lots of demand forecasted. Um and uh you know it's it's pretty good times. The oil shocks hit, et cetera. So that's a real bull market.

Um, and then we get this bear as as again, those orders get canceled and obviously Three Mile Island and and Chernobyl don't help. Um, in the nineties we have megatons to megawatts, which just as you mentioned, kind of floods uh particularly the North American market with uh with this material.

um driving down prices. Um and then we get another kind of bull pre Fukushima. Um I'm not gonna go through the we'll get into the you know, the twenty tens and the twenty twenties, but just looking at that sort of nineteen sixties to nineteen nineties time. Um any sort of reflections on on those cycles um and uh and anything to learn from them and then we'll get into the two thousands. Yeah.

And I'll do it from the perspective of lessons learned, right? And how this time may or may not be different. And let's go back to the to the very first one. It all began with the very famous Eisenhower Too Cheap to Meter Speed. And that created an expectation that there were going to be not hundreds

But thousands of nuclear power plants and nuclear power stations operating around the world. And on the expectation of all of this nuclear power that was too cheap to meter, a lot of uranium was explored for. And it was discovered that But it wasn't just explored for, discovered, and cataloged, it was produced. You know, that mines were built, production was started, and uranium began to front run demand.

And this was the beginning of the big inventory build. And as a result of this, what characterized this industry for many years is this combination of primary supply and secondary supply. You know, it I think most people are interested and and find it interesting to know that primary production of uranium has not matched annual uranium demand for 30 years.

The world's been working through this big massive inventory that was built up as supply was front-running the notion of too cheap to meter. And of course, too cheap to meter didn't come to its full uh potential. We we ended up with four hundred and forty operating reactors around the planet, not two thousand reactors around the planet. So for many years it's been an inventory story. Primary production,

plus secondary supply balances the market. So through those windows you've talked about, you know, you had moments where uh primary supply was surging. And demand fell away. Secondary supply was very clumsy coming back to the market or came back in very big volumes that the market couldn't absorb. So even though the demand was there, it was being swamped by the supply. What's different this time is it's no longer an inventory storage.

That secondary supply of material, that historic shock absorber, is gone this time. And it needs to be replaced. by fresh production that is riskier than bringing secondary supply to the market. And risk just means there has to be a higher price to pay for that risk. So more contracting at a stronger price will convert more of those resources to reserves. And then we will replace that historic secondary wedge with primary production.

And going forward, uh, we will be fine with the supply of uranium, but it is very different this time because that historic shock absorber is gone.

So looking at the bull market of the early two thousands, um there was uh you know natural gas prices were getting high. Uh you know, George Bush was at Calvert Cliffs uh unleashing the new uh things the Energy Policy Act. Uh things were looking really good for nuclear. Um, you know, Japan was uh going gangbusters, um Gen three plus reactors were sort of being developed and on the horizon.

At that point, uh uranium prices really took off. I know a lot of investors are pretty excited at that point in history. Um, but you're saying at that point there was still a ton of secondary supply. So that was much more speculative than our current sort of structural moment, if I'm getting that correct. price spike that you saw kind of running two thousand and three to two thousand and seven.

certainly was over a strengthening demand perspective, but ultimately it was shock driven on the supply side. So in 2003, there was a water inflow at MacArthur River. It was very well contained and it was very well managed, but it was the beginning of the realization that mining has risk. That chewing through inventory doesn't have. Exactly, okay. And so that started to create a bit of concern in the market.

In 2006, the Saga Cigar Lake Development Project flooded. It wasn't a mine at the time. It wasn't producing at the time. But it was the combination of it was supposed to be producing by 2009. It had an inflow in two thousand and six. So at a minimum, it wasn't gonna start producing in two thousand and nine. But then there was this outlier worry that it would never be mined, that that those who believed Cigar Lake was too complicated.

It it was an extraordinary resource, but it was completely unminable, started to set into the market. And so even though Current supply wasn't affected at all. It was the expectation of future supply that created a demand rush. So that was a supply shock event that drove that price spike in 2007. If you look a little bit ahead in twenty ten, there was another Price spike that occurred. This one was demand driven. This one wasn't supply driven. This one was demand driven.

And it was the emergence of for the first time of the Chinese into the term market. The Chinese in the summer of 2010. showed up and contracted a hundred and fifty two million pounds of uranium with Camico, Kazatimprom, and Arano for deliveries kind of starting 2015 and going to the early 2020. And and what what this did? In twenty ten.

And what this did is it took It took all of the utilities, the traditional customers at the time, and then they realized the size of the sovereign demand that was coming out of places like China, now India. And and they all tried to go through the door at the same time. So then we saw another price spike that was was going really well. Contracting was building, prices were strengthening. And then a tsunami hit the shores of Japan.

And that caused demand to step back. And as demand stepped back, yet supply was coming on because it was incented by stronger prices. Demand stepped back, supply was still heading toward a peak, had no home for it. People like Kazadamprom were jamming it through the spot market where it couldn't absorb that. that relentless supply and down came the prices from I think

Yeah, just about eighty dollars a pound down to, as I mentioned earlier, seventeen dollars and seventy five cents a pound when we finally curtailed MacArthur River in Key Lake. So the the these cycles are exacerbated because utilities do not bring their forward demand into the market on a predictable annual basis. If I if I think about our friends at Nutrient, the other big publicly traded company here in Saskatoon.

They live in an industry where global demand shows up annually because you don't really inventory potash. We live in a market where global demand could be well, well below replacement rate for a decade. Before utilities all come back into the market and contract at the same time. And then we go through a period where they're contracting well above replacement rate.

So the only difference between our cycles and the potash cycles is ours are on average 10 to 12 years, 11 years, and theirs are like 18 months. They cycle many, many times within one uranium cycle.

So an interesting theme I'm seeing is uh you know, chemicals supply discipline uh in that period you're just describing. um that bear market. Um but Kazat prom as you mentioned were continuing to produce uh at scale. Um I guess they could produce at low marginal cost, flooding the spot market. It strikes me that, you know, producers um who are trying to get access to US dollar reserves, uh if indeed I don't know if there's a you know, there's a petrodollar, I don't know if uranium is largely

contracted and sold in US dollars. But one can imagine that those producers would say, Hey, even though the price is low, we need foreign reserves, we're gonna keep producing and maybe oversupply. Was that sort of part of the dynamic? I would say it was less to do with that and and more to do with um a national goal to be the largest producer of uranium without actually learning the lessons of how the market works.

And so you had the realization in Kazakhstan that congratulations, you became the world's largest producer of a commodity that you've completely devalued. And and as a state owned enterprise. You know, they their obligation is to pay a dividend to the state. And and when they realize that producing more led to a lower price and a lower dividend, it suddenly dawned on them that there must be a better strategy. And if you look at Kazadam's prompt strategy today, it's indistinguishable from Camiko.

It is you build a forward contract book. And then as you have that forward contract book, then you call for more production. You don't produce without having a home. So you cause Adam Prom today has figured out you have in the uranium space, you have to have a strategy for mining, you have to have a strategy for milling, and you have to have a strategy for marketing. Because if you don't have all three functioning well.

you're just giving away value of a very, very important national asset. And and the added dimension in Kazakhstan now is they have an ambition to be a nuclear power producer themselves. Yeah. Yeah. Did we just basically give away all of our good uranium resources when we weren't producing nuclear power and exhaust and deplete these great resources? And then when we become a nuclear power, we're gonna have to buy from somebody else at a much higher price.

So now you see them knocking the top off of their production targets. You see them dragging out their supply in a much more rational basis. You see them with a a contracting strategy that says capture those homes, then produce. Very different than last time. Very, very different.

Interesting. Interesting. So we saw revision uh from Kazakhstan, I think down initially ten or fifteen percent, now down twenty five percent in terms of their uh production projections. And that was, I think, largely based on this issue of sulfuric acid availability. They have uh

the Kazargan oil field out in the Caspian, I think it's just choked with nasty, sour crude. Um so they get a lot of sulfur off that, but they're also uh a I believe a phosphate fertilizer producer. They've got to use sulfuric acid for that. Um global mining uses sulf I mean, sulfur gas is just a it's a mainstay of so many different industries as a precursor we don't think about.

Was that an excuse for them to just be a little more disciplined in terms of production or um are they are you expecting that they're gonna have gen genuine constraints? And, you know, Camiko as well, I think, uh co owns a an insight you leeching operation in Kazakhstan. So what's what's your take on the sulfuric acid question and and how that's gonna impact um and potentially put a further sort of primary production supply squeeze on on the market. I would probably describe it as

the type of industrial decision making that you would see consistent by their value maximization strategy. And what I mean there is the solution to the sulfuric acid problem is easy. Uh build a new sulfuric acid plant. You know, two 200-300 million dollars US uh contract with an Italian firm, just like they did in 08 and 09 when they when they built up their first. uh wave of expansions. Just just repeat that.

But ultimately, I think they're looking at their capital allocation much like Kamiko would, and say, is the market telling us today that it wants us to build? Um a new Sulfuric acid plant. encouraging us to do that. Has the amount of demand that's come into the market from utilities sent the signal?

that we should be deploying this capital in a new sulfuric acid plant. And and I think ultimately they're looking at the answer and saying, no, we'll we're gonna be patient. We're gonna continue to be supply disciplined and we're gonna wait. for the kind of contracts that allow us to truly underwrite that investment decision. So I think it's just an industrial consequence of the strategy that they're now on, which is these resources are worth something.

And and we have to be really responsible stewards of the national value of these resources. And that means let's be patient and let's wait for better contracts and let's use those better contracts. To underwrite the expansions that are necessary. So I don't think anybody should look to Central Asia as repeating what it did.

through the early two thousands into the mid teens when it suddenly came out of nowhere with huge amounts of uranium production. That is not the future going forward. Be far more disciplined. far more value driven because that makes far more sense for the national value of Kazakhstan.

So this is a like multi multi million dollar investment question. Um, but how do you foresee this current uranium bull cycle uh playing out? Do you think we're gonna start to see a little bit less volatility? I mean, this has been a market that's just so characterized by these um you know, I guess longer um duration cycles, um, but kind of really violent swings.

Um, do you think with the kind of maturing of this industry and more supply discipline, um, we're gonna see something a little more predictable, a little less friendly to, you know, speculative investors? If you look at that underlying long-term price that we talked about, not the spot price, the underlying long-term price has just been steadily moving up and to the right. Not huge jump.

But it hasn't been moving backwards. It's not sawtoothing. It is slowly moving up. And what that reflects is this transition. Demand is becoming more durable. Uh, reactors that are being brought back from being in care and maintenance, reactors that are being saved that we thought we were going to shut down.

reactors going through subsequent license renewals and being proposed for significant upgrades. And of course, nearly 70 of them under construction globally right now, including some very exciting projects right there in in your home province. And so utilities are becoming far more confident in their need for uranium going forward. And as they bring more demand to the market, they're just hitting a supply group that is being is saying, we've lived through these before.

We we've seen these cycles before. Here's what we need in order to invest in more supply. So this is looking a lot more durable and a lot more steady. Of course, the big tail risk is always An event in our industry. You've already mentioned Three Mile Island, Chernobyl. We've talked about Fukushima. We all know what those events are. But I would also add that even if there was a nuclear event, I think you'd probably agree with me, it's a different context.

this time. You know, when when Fukushima happened, let's face it, nobody was nobody cared about climate security at the time. Nobody was talking about energy security. Nobody was talking about energy national security. They just weren't talking about those things.

Now you cannot have a conversation without those being three pillars of a power decision. So even in the face of an event, I think the nuclear industry and it's overwhelmingly Positive safety case, environmental case, resilience, robust case, 24-hour baseload case. It is more resistant to the type of overreaction that we've seen in the past. And as long as I'm right about that, we're going to see demand continue to come into the market and continue to send that.

Steady signal to invest in supply. And this might be the moment we can escape some of the big volatility that we've seen in the past.

All right, we only have a few minutes left and it's kind of not fair to ask you um to give us a bit more of a sense of sort of where Camiko's going. Um I guess you have three minutes to do so. Um but uh you know your market cap is quite healthy. Um you've made this acquisition of Westinghouse.

You know, is there any appetite to acquire um some of the emerging producers uh in the Athabascan Basin? Is there any kind of big I mean, I you c obviously you can't share m materially protected information, so I don't even know what I'm asking you this question, but I guess I'm just feeling around the edges Um, any any uh you know, beyond this I think quite visionary to acquire Westing elements. Any any well, I don't know. Tell tell me what's next for Camiko, whatever you can, Grant.

We have the opportunity to deploy capital every uh from from exploration all the way through to power generation, you know, every stage of it. is available to us to invest in. And so we have various frameworks. And I've already tipped my hand on one of them. We love strategic assets. We we love to be able to acquire things. that are, you know, already key to either the reactor cycle or the fuel cycle, um, that are sovereign safe, have brown field expansion capabilities.

Yeah, we love those. We love existing capabilities. You you asked about uranium. Our pipeline already has a billion pounds of resort reserves and resources in it. Those are already on our balance sheet. We already own them. We already know them. And most of those pounds are adjacent to our existing infrastructure. You know, our mines, our mills, our roads, our workforce.

can leverage this enormous endowment of uranium we already have. And what that means is when we look at somebody else's project, it ends up being a really high hurdle because they've got to be more attractive than investing in what we already know. And what typically happens at this point in the uranium cycle is many of those projects that are outside our portfolio kind of have a promise halo. you know they

This is it's not unlike what I've heard you talk about, the advanced nuclear reactors. They have a promise hay halo around them, right? Where, you know, they're gonna do this better and they're gonna do this in a way that's never been done before and they're gonna be cheaper and they're gonna be faster. And people call for that and they drive the valuations really high.

And then generally what we see in our industry is is someone then takes that promise and goes into the valley of development. And that generally is a really long and painful process.

But what what it means for us is that's when real valuations start to start to emerge. So we never buy at the top of the promise curve and we're certainly not gonna start now. It doesn't make any sense. So Certainly some existing projects that are are interesting, but nothing that beats what we already have on the uranium side. So we look to

opportunities and conversion. We want to be in enrichment. We will be in enrichment someday. We look at fabrication opportunities that are tied to all the tailwinds around nuclear power generation. And of course We used to own a chunk of Burst Power. We're not afraid to invest in power generation if that opportunity presented itself.

So it's an all of the above strategy for us. We just continue to follow. We love this industry. We we just want to continue to be exposed to it. And uh we have no limits on where in that chain we're we're prepared to invest. All right, Grant. Well this has been uh a really fascinating interview. We've run it right down to the line of your hard stop, so appreciate you doing that for us. Um and uh hope to uh make a part two out of this at some point in the future.

That would be great. Really appreciate it and look forward to seeing you next week at the CNA event. Alright, until then, my friend. Today's episode was made possible through a generous donation from the Xerxes Foundation and from listeners like you making pledges on our Substack. If you'd like to join the tribe, please do head over to our Substack.

Smash that pledge button, or if you would like a tax-deductible receipt, you can hit the donate button and make a contribution to our fiscal sponsor. We genuinely appreciate your support. It is only through your generosity that we are able to continue to offer energy literacy on demand.