Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Significant progress on the Rook I project, including nearing final federal approvals and provincial environmental assessment approval.
- Strong support from indigenous nation partners and alignment with Canada's critical minerals and decarbonization targets.
- Updated feasibility study shows an increase in NPV to CAD6.3 billion and a payback period of approximately 12 months.
- Positive exploration results at Patterson Corridor East (PCE), indicating a large mineralized footprint with remarkable continuity.
- Robust financial position with approximately CAD570 million in cash and CAD340 million in uranium on the balance sheet.
Negative Points
- Ongoing challenges in the uranium supply chain, including legislative impacts and geopolitical issues affecting production costs.
- Significant increase in CapEx to CAD2.2 billion, partly due to inflation and design enhancements.
- Uncertainty around the exact timing of federal approvals, which could delay the start of construction and production.
- High operational costs with an OpEx increase to USD998 per pound, related to inflation and enhanced environmental performance.
- Potential financial impact if there are delays in production, as contracts with utilities are tied to the start of commercial operations.
Q & A Highlights
Q: What are your thoughts on how the Patterson Lake area should be developed in the future? Could these areas be developed together to share infrastructure and capital?
A: Leigh Curyer, CEO: We are focused on our Arrow deposit and the Rook I project. While there are synergies for other deposits to access the Rook I mill, our primary focus remains on our own work. Discussions on accessing ore from other projects will be had at the appropriate time.
Q: Can you elaborate on your strategy around selling and marketing uranium? Has it evolved over time?
A: Leigh Curyer, CEO: We will sell under contracts with pricing mechanisms heavily weighted to market prices at the time of delivery. The number of inbound calls from utilities looking for offtake agreements from 2028 and beyond has increased, indicating strong interest in our strategy.
Q: Can you comment further on M&A interest in Arrow, especially as you near the end of the federal approval process?
A: Leigh Curyer, CEO: There is increased interest from various financiers and major companies in the energy and mining sectors. The federal approval process is a significant milestone, and interest may elevate post-approval. However, we continue to optimize the project independently.
Q: Does the CAD2.2 billion CapEx for Arrow include early works, and what are the enhancements that led to the CAD590 million increase?
A: Leigh Curyer, CEO: The CAD161 million budget for this year includes only approved activities. The CAD590 million increase is spread across various enhancements, such as increasing the size of the skip and power plant for flexibility and reliability, and improving processing equipment size for better plant availability.
Q: What is your best estimate for the timing of first production and the duration of ramp-up?
A: Leigh Curyer, CEO: We expect production to start 40 months post-federal approval. We anticipate a response from the CNSC regarding the remaining 49 aspects by the end of this month or early next. The earliest EIS can be deemed final is end of September, followed by a commission hearing date.
Q: How will you structure contracts with utilities to mitigate financial impact in case of delays?
A: Travis Mcpherson, Chief Commercial Officer: Contracts will be tied to the start of commercial production with specific tests around defining it. This approach mitigates financial impact due to timing uncertainties.
Q: Can you clarify the timing of approvals and when you expect to break ground? How do your financing plans factor into this?
A: Leigh Curyer, CEO: We expect a response from the CNSC by the end of this month or early next. The commission hearing date will follow, and the project is expected to be in production 40 months post-approval. Financing will be secured post-federal approval, with equity spent first.
Q: Is the CAD161 million budget for this year included in the new CAD2.2 billion capital estimate?
A: Leigh Curyer, CEO: Yes, some of the CAD161 million is for plant and equipment deposits that are part of the CapEx. The only activities at the site are fully approved ones.
Q: Are you capped at 30 million pounds per annum under the new economic study, or is it a cap per tonne per day?
A: Leigh Curyer, CEO: There is some flexibility in the design, but any material change would require a subsequent permitting amendment. New discoveries would likely add mine life at the 30-million-pound-per-annum capability.
Q: How do you deal with the uncertainty of production timing in your contracts with utilities?
A: Travis Mcpherson, Chief Commercial Officer: Contracts will be tied to the start of commercial production to mitigate financial impact due to delays. Utilities do not expect financial burdens due to timing uncertainties at this stage.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
