Gordon Johnson: Hi, guys. Thanks for taking my question. Just two questions. First up, can you guys let us know what happens to, I guess, your contracts when you contract it out and yet you have capacity issues? And with respect to that question, what happens to those guys who have contracted out, some of the other guys out there who have contracted out yet aren’t able to produce? And is there a price that potentially could hurt demand, if some of these capacities aren’t available? And then I have a follow-up? Thank you.
Tim Gitzel: I’m not sure I understood that question, Gordon. You’re asking, if there’s other producers that can’t fill their contracts, what will happen?
Gordon Johnson: Yes, but let me be very specific here. So, you guys have contracted out your capacity looking forward. But there’s some production issues. So, is there anything in your contracts that potentially benefit and, or not benefit you guys with respect to your, I guess, contracting capacity if those production issues persist?
Tim Gitzel: Well, let me be very clear. We will fill our contracts. We have multiple ways of filling contracts. I think Grant’s been pretty clear on that over time. We have production, of course, and we’re ramping that up. We have inventories, we have short-term loans. We have other purchases that, we’ve made in the past that we can draw forward. So, I assure you, we will fill all of our contracts that, we’ve signed with those different levers we have to pull.
Gordon Johnson: Okay. And then one last question, if I could. It seems like you guys have plans to buy around 13 million pounds of U3O8 this year, but it seems like so far you’ve brought 5 million. So, is the plan to buy roughly 8 million on the spot market? Can you just give us an update there? Thanks for the questions. Congrats on the results.
Tim Gitzel: Yes, thanks, Gordon. It is a mix. We have a mix. We certainly have a mix of purchases we make on an annual basis. Grant, you maybe want to break them down between our Inkai and long-term and spot?
Grant Isaac: Yes, Gordon, those are great questions and in many ways, they’re tied together. So as we’ve heard us say, over and over again, we don’t sell into the spot market. The spot market, is not capable of absorbing uncommitted primary production. Certainly of the scale that, we can produce and those who have done it in the past, it’s always ended in tears for their shareholders. That is not, it’s not a wise strategy, has not been in the past, it isn’t going forward. So what we do, is we layer in long-term contract commitments. And it is very typical for us actually to plan to produce less than we’re going to deliver. The reason is, we know how this market works. This market, there’s always somebody who’s willing to sell into the front end of the spot market, and we always like to have a bit of demand to deploy, to pick up that material.
Because quite frankly, it is very supportive of not just our portfolio of sales that are already contracted, but it’s very supportive of the negotiations we currently have going on to structure new contracts. And so, we like the fact that with demand in the market, there tends to be stronger pricing to achieve in both our portfolio as well as our pipeline. So then, we always have the issue of how do we source these committed sales. Production is an important source of it. We carry an inventory, to deal with any production shortfalls like we have today. We will make purchases in the near term of the spot market for immediate delivery. We will occasionally buy on the forward curve for delivery out into the future and we can take delivery, of that material sooner if we need it.
We have other tools in the toolbox including, as Tim said, folks have a lot of material parked, at our facilities and in some cases, we have the ability to borrow it. All of that to say that we think about these sourcing decisions years in advance, not just weeks in advance, but years in advance. So, we will buy material in the market that’s exactly, where we want to be at this point in the cycle. We are far from sold out from an overall contract portfolio point of view. We’ve got a lot of pounds that can be contracted out into that window that I talked about, late 20s to early 30s. We obviously want that material contracted at stronger prices, and one way to achieve that is, to actually have some demand to deploy in the near term of the market.
So this is exactly where we want to be. Nobody should be surprised by it. It is – an important part of that full cycle value capture that we talked about. So, I think great, great question, Gordon.
Gordon Johnson: Thank you, guys.
Tim Gitzel: Thanks, Gordon.
Operator: Our next question comes from Katie Lechapelle of Canaccord Genuity. Please go ahead.
Katie Lechapelle: Thanks, operator. And good morning, Tim and Grant. Most of my questions have already been addressed, but maybe just one quick one. Your team just returned from the NEI conference, I’m assuming, in Charlotte last week. And now we’ve got spot prices sustainably above $70 a pound. What was the chatter among the industry participants at the NEI conference? And how, if at all, have these conversations evolved since WNA as in September?
Tim Gitzel: Well, Katie, I wasn’t there. So what I – the information I got was from one of the weekly publications that comes out. But Grant had a team there, and I know some of his people, and I saw a report go through to Grant. So, do you want to give an update on what your marketing people saw, Grant?
Grant Isaac: Yes, that particular conference, Katie, really is dominated by U.S. utilities. So unlike, say, the WNA Symposium that has a lot more of the global utility base there, that is very much a U.S. utility focused conference. The U.S. utilities, I think as a whole, have been slower to respond to the energy security and the clean energy and the long-term contracting that you would want to start to put in place. And so I guess no surprise as a consequence at the NEI conference just recently, there was a strong sense of urgency that there, are many utilities who may have left it later than they should have. There’s a high expectation of demand to come to the market. This is a market that is experiencing a lot of off-market activity where utilities, are trying to quietly find material.
They don’t want to be putting RFPs in the market and having, a bunch of them all in at once sending a very strong demand signal. We’ve seen this before. This is all part of why we think we’re in the early stages of a contracting cycle. So, I would say if there’s a takeaway word, its urgency. It’s urgency of ensuring that the fuel supply, is there and all components of it, not just the uranium, to fuel what is a terrific demand outlook, for nuclear power in the United States.
Katie Lechapelle: Thanks, Grant. Appreciate the additional color.
Tim Gitzel: Thanks, Katie.
Operator: Our next question comes from Brian MacArthur of Raymond James. Please go ahead.
