So absolutely, we love our position. We love that exposure going forward. It would be foolish to say, well, we should just be trying to jam all of our material through $103 spot market, because the spot market wouldn’t be $103 if we tried to do that. That would be a really silly strategy. So that exposure going forward, nobody has a better position than we do.
Andrew Wong: Great. Thank you very much.
Tim Gitzel: Thanks, Andrew.
Operator: The next question comes from Orest Wowkodaw of Scotiabank. Please go ahead.
Orest Wowkodaw: Hi, good morning. A couple of questions on my end, if I could. First of all, can you give us an idea of what kind of capital was required to bring MacArthur up to $25 and to extend Cigar?
Tim Gitzel: So Brian, do you want to take that one?
Brian Reilly: Yes, sure. Great question. Certainly Cigar Lake extension. We are well advanced. We completed a pre-feasibility study that verified the economic feasibility of the extension. We’ve converted resources to reserve, so we’re well down the track there. We’ll produce a technical report next month, as Tim mentioned, with all the details. But what we have now in terms of our share for capital at Cigar Lake extension, somewhere in the $250 million, $300 million range, to extend it up to 2036. So Cigar Lake extension is in good shape, and we’ll produce a technical report with all the details. MacArthur Key Expansion, early days, very early days. As Tim mentioned, we’ve just commenced the assessment in terms of what’s required at the mine and an end-to-end study at the mill. So, I would suggest just hang in there. We’ll be better positioned later in the year, but still early days for MacArthur Key Expansion.
Orest Wowkodaw: Okay. But would it be fair to say it’s less than $1 billion, like we’re talking in the hundreds of millions?
Tim Gitzel: Oh goodness, yes.
Orest Wowkodaw: Perfect. And then a quick question for Grant, if I could. Just on the committed purchases, I guess you’ve got 4.7 million pounds committed to acquire this year. Can you give us any kind of idea of how the pricing mechanism works on those contracts? Like does it move with market pricing? Is it fixed? How should we think about that?
Grant Isaac: Yes, thanks, Orest. So on Page 51 of the MD&A for folks that are looking, we do have a bit of new disclosure actually on our purchase commitments. In previous markets where the spot was oversupplied and we were in extreme supply discipline. And wanted to be heavily over-contracted. We would put a big purchase number out there, because we wanted the market to know that demand was coming and start cleaning up the front end of the market and discovering better prices. But as we’re at this phase of our transition, restoring our Tier 1 cost, bringing production back, we wanted to bring a bit more granularity, between what purchases are we already committed to make, and which ones might we go into the market to buy. And what you see when we cut it that way, is very small exposure to the market.
We said up to two million pounds that we might buy in the market, but we might. We don’t have to. We have other options in order to source our committed sales. Some of those other options include purchases that we make under a long-term purchase commitment. And I think that’s what you’re referring to. Generally what happens in those long-term purchase commitments is we’ll see a market where we might think the uranium price is low. And when we do, we might find a seller who’s willing to fix a price for us, subject to a carry trade for delivery out into the future. But for many of those contracts, we have the ability to take delivery when it makes sense for us. So, we fix the price in a lower pricing environment. We take the delivery when it makes sense to meet our committed sales volumes.
It’s the best trading margin in the business. So many of those long-term contracting, long-term purchase commitments were made in that $30 uranium market. They’ve escalated a bit, some of them in more recent years, but well, well short of today’s market prices. So this is just part of how we think about sourcing material over the long run. So very small market exposure to be deployed if we want to. And then subject to the purchases that come in from Inkai, the purchases that come in from the long-term purchase program. The final thing on Inkai is always remember, we’re never afraid of rising uranium prices. And Inkai is a perfect example. Yes, we’ll buy the material from Inkai at a discount to the spot price. Those will be very expensive. But if those are expensive, then the dividend that comes back from Inkai is even bigger.
So the economic value of those Tier 1 assets is always ours. And we don’t fear when prices go up. We don’t miss these markets. We capture that value on the long-term. So very attractive source of supply that really reduces our need to go into the market to purchase. But if we see the opportunity to purchase, we’ll stick our nose in there. So if somebody decides they want to try to sell material to the spot market, we might be a buyer.
Orest Wowkodaw: Thanks, Grant. So ultimately, I think if I understand your new disclosure, there’s only up to two million pounds that you’re planning to buy from the market at market pricing?
Tim Gitzel: Yes, that’s right. We saw that some folks were completely misreading our outlook table in the past. They were taking the overall purchases and they were assuming every one of those was going to be made in the spot market and trying to drive an incorrect narrative about financial distress. And of course, we’ve never run the company that way. If that were the case, the outlook table would be very different. So, we wanted to put some granularity out there, to lots of sophisticated folks understand what we do, but some don’t. And so, we just wanted to make sure we had that granularity and remind folks that actually it’s up to two million pounds. We could source it directly in the spot market for immediate delivery. We could draw down our inventory.
We could access loans. We could access more of the long term purchases if that made sense for us. We could be engaged in a conversation with a customer to move deliveries around in a year for when production comes in. Ultimately, this is what a responsible uranium producer does.
Orest Wowkodaw: Excellent. Thank you.
Tim Gitzel: Thank you, Orest.
Operator: The next question comes from Greg Barnes of TD Securities. Please go ahead.
Greg Barnes: Yes. Thank you. Just a couple of questions for me and returning back to Cigar Lake extension. Would that be at the 18 million pound per year range or would it decline into 2036? And is there an extension beyond 2036?
Tim Gitzel: Greg, thanks for the question. Our plan would be to remain at 18 million pounds per year to 2036. Is there an extension? We’re just working on this one right now. So once we get under there, and you know, we’re moving to the west on that. And so as we get out there, who knows? We’ll be poking holes and holes all over down there. So, we’re hopeful, but we don’t have anything to report yet, Greg.
Greg Barnes: Okay. Just on the Westinghouse guidance for CAGR of 6% to 10% a year. Does that only include in terms of the AP1000 sales, the ones that have been under contract or under contract currently? Or do you make a forecast of potential AP1000 sales that build into that number as well?
Tim Gitzel: Yes, Greg, here’s the good news. It’s just the ones that you know about, the ones that Westinghouse has announced. So more upside to come as they, we believe, might have a huge opportunity in other markets that, are evaluating that stable, proven AP1000 technology. But this is just capturing, the beginnings of the contracts required, to advance AP1000s in the markets that have already announced it.
Greg Barnes: And Grant, quickly on Springfields, any decision on restarting that conversion plant yet or any support from the U.K. government to do that?
Grant Isaac: Well, lots of interest remains in the conversion plant at Springfields for the natural conversion line. But Springfields is also a critical infrastructure, for a lot of other ambitions as well. We’re continuing to work through that process. Obviously, very attractive conversion prices right now in the market that, put some wind in the sails for a restart. But it’s got to be done responsibly. It’s no different than the uranium market. You don’t start a conversion plant, and then start knocking on people’s doors and asking if they want to buy a conversion service, because you’re just going to push the conversion price down. You have to do this responsibly and in a disciplined way. And we’re just working through that process now.
Greg Barnes: Thanks, Grant.
Grant Isaac: Thank you, Greg.
Operator: The next question comes from Lawson Winder of Bank of America Securities. Please go ahead.
Lawson Winder: Thank you very much, operator. And good morning, Cameco team. Thank you for taking my question. I just wanted to ask about Westinghouse. And it’s fantastic to have the detailed disclosure in the notes. The G&A effectively, the marketing administration and general expense is a little bit of a larger number than I thought. Would you be able to provide any detail on what goes into that, or what are some of the large numbers maybe in that or how that breaks down? And then any guidance for that going forward as well? Thank you.
Tim Gitzel: Okay. Grant will answer that.
Grant Isaac: Yes. There are elements of the Westinghouse business that are pretty high touch. When we think about the core of the business, which we define as nuclear fuel and operating plant systems, as well as the new build, there are a lot of offices, a lot of engagement and a pretty high touch that goes on advancing those kind of contracts. And so, right now when they’re at the stage of developing new markets like they are for VVER fuel or developing new markets like expanding into BWR fuel or examining LEU+ fuel. And even the question that Greg asked earlier about Springfields, you know, this is all captured in increased activity running through that line. And of course, the support required to advance new builds, whether that’s AP1000s, AP300s or eVinci.
So, a bit of a higher touch business than what Cameco is accustomed to, but totally appropriate given the position that Westinghouse is in and their ability to capture the tailwinds in the nuclear industry as well.
Lawson Winder: And then just going forward, is that 2023 level that, well, at least for the proportion of ’23 that you guys have reported, is that a fair level going forward for ’24, ’25?
Heidi Shockey: Yes, it’s Heidi here. I would say that they’re a pretty stable business. And maybe I would just add to what Grant said in terms of the other pieces that that’s really recognizing the fixed costs. Like that is all the costs that, aren’t directly related to operations. So, it’s maybe broader than just kind of G&A.
Lawson Winder: Thank you very much. Now for my follow-up question, I had actually wanted to ask about the conversion market as well. And Grant, you had expressed some review in the investor call in December during the Investor Day that perhaps prices were sort of getting near a top. But I mean, prices have continued to rise since then. I mean, have you changed your view at all? Do you think prices can continue to rise higher, or are in fact we getting to a level where prices are sort of as high as they might go?
