TD Cameco Corp.
(CCO-T, CCJ-N) C$60.21 | US$44.72
Cigar Lake to be Extended; WEC CAGR 6-10%
Event
We have updated our forecasts to reflect 2024 guidance and the planned extension
of the Cigar Lake mine to 2036.
Impact: MIXED
We believe 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. Given the sell-off in the broader
uranium sector yesterday, we believe there was an expectation that CCO would lower
production guidance for 2024, further tightening the market and putting more upward
pressure on uranium prices.
CCO forecasts uranium sales between 32Mlbs-34Mlbs for 2024, while attributable
uranium production is projected at 22.4Mlbs from McArthur River and Cigar Lake.
We believe that CCO also expects to receive ~4 Mlbs from the Inkai JV this year,
could purchase up to 2Mlbs of uranium in the market, and has the potential to source
up to 8Mlbs under long-term commitments, if needed. In our view, CCO has multiple
sources of material to meet its sales commitments, without entering the spot market.
CCO also had 10.3Mlbs of uranium inventories.
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 is planning to begin the work to extend the estimated mine life to
2036. At McArthur River/Key Lake, CCO will undertake an evaluation of the work and
investment necessary to expand mill production up to its annual licensed capacity
of 25 million pounds (100% basis).
2025 WEC EBITDA guidance is lower than our previous forecast; however, the
go-forward CAGR forecast is higher than what we had estimated at 6-10% (TD's
previous forecast: ~6%) for the next five years. The forecast assumes a 4-6% CAGR
for the Core business and includes only signed agreements for new AP1000 reactor
projects.
TD Investment Conclusion
We are maintaining our ACTION LIST BUY recommendation; our target price has
declined to $79.00 (from $82.00). Our lower target price reflects lower EBITDA for
2025 than what we had previously forecast and our slightly lower net asset value.