TD Currently on their Action Buy List with an $82.00 target. GLTA
Cameco Corp.
(CCO-T, CCJ-N) C$64.65 | US$48.05
Cigar Extension/McArthur Expansion Planning Underway
Event
CCO reported adjusted Q4/23 EPS of $0.21, below TD and consensus at $0.25.
2023 adjusted EBITDA was reported at $831 million, including $101 million from
Westinghouse (WEC) vs. our forecast of ~$700 million, which did not include any
contribution from WEC. The company also provided 2024 guidance.
Impact: MIXED
We believe that CCO's production guidance for 2024 and its guidance
regarding in-market uranium purchases address recent concerns that the
company may have to purchase more uranium in an elevated price
environment - which is not the case, assuming production targets are achieved.
While 2025 WEC EBITDA guidance is lower than our forecast, the go-forward CAGR
forecast is higher than we estimated.
CCO expects to deliver between 32Mlbs-34Mlbs of uranium for 2024 and
expects to purchase up to 2Mlbs of uranium in the market and source up to a
further 9Mlbs (including from Inkai) under LT commitments. Management noted
that its LT purchase contracts (apart from Inkai purchases) would be executed at
prices well below the current market price.
Primary attributable mine production is forecast at 22.4Mlbs (TD 22.3Mlbs).
Both Cigar Lake and McArthur River are expected to produce 18Mlbs of uranium
this year, on a 100% basis. CCO converted 73.4Mlbs (100% basis) to reserves
at Cigar Lake, and plans to begin the work to extend the estimated mine life to
2036 (estimated capex $250-$300 million). At McArthur River/Key Lake, CCO will
undertake an evaluation of the work and investment necessary to expand production
up to its annual licensed capacity of 25 million pounds (100% basis).
2024 uranium production costs, including DD&A are forecast C$57-$60/lb (TD
~C$50/lb) and the company expects a realized price of ~US$55/lb (TD ~US$57/
lb). CCO has increased production volumes at the Port Hope conversion facility, to
between 13.5 million and 14.5 million kgU, including 12 million kgU of UF6.
In 2024, CCO expects its share of WEC adjusted EBITDA to be between $445
million and $510 million (TD forecast ~$580 million). Over the next five years,
CCO expects WEC adjusted EBITDA will grow at a compound annual growth rate
of 6% to 10% (TD ~6%).