Thank you for standing by. This is the conference operator. Welcome to the Cameco Corporation First Quarter 2018 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Rachelle Girard, Director of Investor Relations. Please go ahead, Ms. Girard.

Thank you, operator and good day everyone. Thanks for joining us. Welcome to Cameco’s conference call to discuss our first quarter financial results. With us today on the call are Tim Gitzel, President and CEO; Grant Isaac, Senior Vice President and CFO; Brian Reilly, Senior Vice President and Chief Operating Officer; Alice Wong, Senior Vice President and Chief Corporate Officer; and Sean Quinn, Senior Vice President, Chief Legal Officer and Corporate Secretary. Tim will begin with comments on our results and the industry. After that, we will open it up for your questions. If you joined the conference call through our website event page, you will notice there will be slides displayed during the remarks portion of this call. These slides are also available for download in a PDF file called Conference Call Slides through the conference call link at cameco.com. Today’s conference call is open to all members of the investment community, including the media. During the Q&A session, please limit yourself to two questions and then return to the queue. [Operator Instructions] Please note that this conference call will include forward-looking information, which is based on a number of assumptions and actual results could differ materially. Please refer to our annual information form and MD&A for more information about the factors that could cause these different results and the assumptions we have made. With that, I will turn it over to Tim.

Well, thank you, Rachelle and welcome to everyone on the call today. We appreciate you taking the time to join us to discuss Cameco’s first quarter results. I am going to start by saying that we remain cautiously more optimistic than we were a year ago. I want to spend the next few minutes providing a brief update on the current state of our industry and the drivers of both our caution and our optimism. I will then talk about our first quarter results and just how Cameco is navigating through these challenging times we continue to experience. On the demand side of our business since the beginning of the year, there have been several negative announcements, including in Belgium, where that country has announced its plan to phase-out nuclear by 2025. There has also been some negative news recently in the U.S. where additional reactor closures have been announced. This news was offset by more positive news in Japan where we have seen more reactors starting up. There are no 7 reactors that have restarted and another 2 or 3 that could potentially restart this year. Also on the good news front, China recently announced that it had approved the start of construction on another 6 to 8 units this year adding to the 19 units already under construction in that country. In addition, the Chinese regulator just approved fuel loading at the first Westinghouse AP1000 nuclear power plant. This is very positive and we think it will help clear the path for even more newbuild projects in that country. And India and the Middle East continue to move forward with plans for the construction of more reactors, including Saudi Arabia, where grant just returned from, which is moving forward with plans for 16 reactors by 2030. On the…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Greg Barnes of TD Securities.

Tim, I just want to understand this Orano agreement that you have reached to supply the uranium concentrate, I understand why you have to do that and potential for that to be extended?

Hi, Greg. Nice to hear from you. So, of course, McArthur is co-owned by both Cameco 70% and friends at Orano 30%, so their share is about 5 million and little over 5 million pounds and so when we together took the decision to take down production at McArthur and Key, they asked if we could lend them some of our inventory, they obviously have a sales portfolio like we do and we agreed to do that. So, it equates to their – pretty much their share of production from McArthur for the year.

And what about the potential to extend it beyond this year?

Well, today, our announcement back in November was to take down McArthur for 10 months, we haven’t changed off of that and so that was based on. So, I guess we will see going forward, but right now there is no discussions to extend.

And the follow-up question just on your uranium balance when I look at production such as this plus the 21 million pounds you have in inventory that effectively matches your required uranium deliveries I guess this year. What kind of inventory level do you want to maintain?

Well, I think actually, we are little light for the year given that agreement we have with Orano. So we are going to have to get out to the market. At some point – our policy has been over the year last many, many years to have kind of six months forward sales and inventory. And so we will see whether we maintain that that will certainly have to be just for logistical purposes, something like that. So, you don’t be surprised to see us holding 13 million, 14 million pounds in inventory at any given time, just because we needed located around the globe to fill our contracts.

Okay, great. Thank you.

Yes. Thanks.

Our next question comes from Andrew Wong of RBC Capital Markets.

Hi, good morning, so just going back to the Orano agreement, is there any payment that’s associated with that lending agreement or like I understand that helps them with their shipments, but obviously it means you have to drawdown your inventories faster which means you may have to go and purchase product and from a cash flow perspective it’s a little bit less favorable than using your own inventory?

Yes. Orano was a good partner of ours has been for many, many years and that’s just the back and forth agreement we have with them, you are right. We, Cameco for sure I can’t speak for Orano, but again have to go to the market to source some pounds this year and going forward, so that’s part of it. But between us it’s just a back and forth agreement.

Okay. So it builds some goodwill between you guys and I guess my other question will be just with the spot market today at roughly $20 per pound is now the right time for Cameco to step into the market, I know you said you might need that sometime this year, but the price looks like it’s right now is there maybe just no product available that you can source at $20 per pound or maybe just some thoughts around that? Thanks.

Yes. So we are – as we have always said we are always in and out of the market. You can probably see by our finances that we have used up some inventory between the end of last year and where we are today. But absolutely we will be in the market $20 a pound in the market as we said before cheaper to buy than produce. And so that is part of what we have been doing and part of the reason we took the major decision, it’s not an easy decision to suspend production at McArthur and Key. So yes, you will see us in the market for sure.

Okay. Thank you.

Thank you.

Our next question comes from Fai Lee of Odlum Brown.

Hi, it’s Fai here from Odlum Brown. I am just wondering about the tax years of 2007, 2008, would you go to trial before all the appeal process is done on the 2003, 2005 and 2006 years or will it just be on hold until that’s settled?

Fai, I am going to just ask Sean Quinn to answer that one.

Sure. Yes. It’s likely that those years will be put on hold pending the final resolution of the years that are currently before the court. So I don’t expect anything to be done with those years until we get it the current decision and then whatever will happens on the appeal process.

And would you anticipate that let’s say it’s goes all the way to Supreme Court and you get the final decision one way or the other would that ultimately – would there even be a need to go to court for the remaining years or it will just be solved at that point?

It will depend on what that decision says. It’s not necessarily bonding on those subsequent years, but it will clearly have some bearing on what our view is though, what to do with those years.

Okay. Now when you are saying that it’s the chance that you have different arguments if you really go back to trial for those years if they gave negative decision or how would that work?

Potentially, it’s hard to speculate, we will have to see what decision for that years and question says, see if it’s appeal, see what the appeal decision say and then see how they apply to the future years, so.

Okay, alright. Thanks.

Thank you so much.

Our next question comes from Orest Wowkodaw of Scotiabank.

Hi, good morning, I was hoping you gave us a bit of color on sort of the criteria with respect to how you are thinking about keeping McArthur down or restarting it and I am curious whether it’s certain price point on the uranium or other metrics that’s going to drive that decision. And also at given I guess the restart timeline when we could expect a decision based on the current shutdown of whether that would be extended or not?

Hi, Orest. Thanks for the question. I just caution everybody we are going to be down for 3 months here or so far and we were able to take the sites down safely and our people of course are on the sub-plant that we put in place for them. Obviously, we are watching the market, see what happens so far not much of response I would say, a $20 spot price. Still no change, if not a slight decrease in the term price. So, I would just say as I just said in my comments that no decision been taken yet on the restart something we discussed continuously with our good partner, Orano and with our board. Today, we can still buy pounds at $20 less than we can produce them and so we have some time here to decide, I think probably some time before the fall. We will have to take a decision as to what we are doing, but for now, we are just in warm standby. The site is safe and we are just continuing to evaluate the market everyday.

Are you getting any kind of response from customers in terms of interest level to read – to start recontracting?

I would tell you it’s really an interesting time with customers here in North America. I just came back from Spain, a big world nuclear fuel conference. It’s a lot of confusion out there I would say just because there is a lot of moving parts. I know we have talked about that in the past, but moving parts you have got the U.S. situation with that 232 trade expansion action that’s going on. Nobody quite knows where that’s going. Most people would say well, that does never open. So, you look at what they did with steel and aluminum and it did have a hope you have got the Russian suspension agreement being looked at in the U.S., you got the Russian Duma threatening to stop trade of nuclear products into the U.S., you have got our suspension, I think you heard from Paladin yesterday as to what they are thinking DOE barterers are out the window for the time being. So, just lots of moving parts, lots of noise and you see we are talking this morning, you just see the effect on the term market. I don’t think there has been currently any product moved on the term market like 10 million pounds in the first quarter, which is just really nothing. So, yes, we are talking with our customers all the time. They are trying to understand we have got out marketing team out there and I know they were very busy in the Spain meeting with all of the different customers from around the world trying to figure out this market and just where it’s going.

And is it – are you finding, is it more of an issue of the price or just the need for material?

Well, what’s really coming to light these days is this disconnect that we talked about between the where your aim is produced and where it’s needed, which is it seems to be a subject of some considerable discussion that and I know it’s been like that, but when you see these trade cases start to come forward, then you start to say, well, can the markets that need uranium get it and get it on time and so that that’s a big piece that everyone is trying to understand right now. Obviously, the supply demand fundamentals you can count the pounds there, there seems to be lots of inventory, well, I can tell you we have been doing this for almost 40 years, there has always been lots of inventory. It’s where it is and is it available and what’s the thinking going forward, is there going to be enough pounds, are there going to be enough pounds going forward in the right place. And so I think all of that is under discussion and contemplation at the moment. So, it’s a really – and then I mean, you can throw in our Cameco specific issues which we have a few, the old CRA case, 7.5 months now post trial and we are waiting and watching for a decision to come out on that TEPCO piece. So, we are going to be in front of the arbitration panel in about 9 months on that one. That’s a big ticket item. So, lots of moving parts I would say in the industry and in the space and we are trying to figure them out just like everyone else.

Okay, thanks very much.

Thank you.

Our next question comes from Oscar Cabrera of CIBC.

Thank you, operator and I guess it is good morning everyone. Tim, I was interested in your comments on your opening remarks with regards to sovereign entities that are producing uranium and this relates to the being a little bit more to ditches [ph] when they overproduce, have you seen anything out of Kazakhstan that would suggest they are not going to follow their cutbacks in production?

No, we haven’t seen anything in that regard and as there is opportunity they will speak with our Kazak partners last week. And they are still holding to their position and that came out and I think that Mr. Pirmatov clarified for everyone in December that they are back to 20% from the amounts that are in people’s subsurface use agreements that which equates to about 23,000 tons per year or 59 million pound for 2018, 2019 and 2020. And so some took that as not great news, I can tell you if they indeed hold to those levels, I think that is good news. And so we are watching that they will – to add to the moving parts thesis. Just in Kazakhstan, we are watching this IPO that I know Kazatomprom has been instructed by the President to move forward on that IPO or a portion of the company this year and so that will be really interesting for everyone. And then we are hearing some noise about uranium fund that they could be working on to sequester some uranium in a fund. And so we have heard that from different parties. So there are some moving parts there too that will be interesting and that are absolutely relevant to where this market ends up.

Yes. Thanks. And then as we are thinking about Inkai and the potential of increasing production, the technical report indicates production was up 10.4 million pounds by 2020, do you think in the current environment that’s realistic or should we be looking at that – getting at that peak production later in the decade?

Yes. That’s a good question and probably the answer is what you just said Oscar. I mean we have been working on this expansion for some time. And there is production volumes that are set out in our resource use contract agreement like for everyone else, so when you see our numbers and in our tech report, we just follow those numbers. But I can tell you budgets are set on a year-by-year basis in discussion with our partner. And the discussion this year was it’s not going to be what’s in the resource use contract. It’s going to be that minus 20% and that’s what we are following. So I wouldn’t be shocked to see the same discussion held next year when we are setting budgets. So we are preparing for that.

Okay. Thank you.

Thank you.

Our next question comes from Jim Ostroff of Platts.

Yes. Good morning, good afternoon. And thank you, Tim. I would – the question is important, I would appreciate if you can walk us through there is an outlook here for this year production, purchases and uranium required, like run through this rather quickly?

Yes. Jim thanks for the question. So this year we have and it’s all in our disclosure documents. Obviously, so we have sales commitments, pounds sold 32 million to 33 million pounds for this year. We just discussed the Orano deal we have where we are going to send that 5.4 million pounds in their way, so that leads us to having to come up with somehow 37 million to 38 million pounds. So how we are going to do that while we have production from Cigar Lake which is going very well with our partners there about 9 million pounds from there. We have purchase commitments including our share of JV Inkai, so about 8 million to 9 million total there, that’s about 3 million pound. So if you add the…

You got the increase in – share of Inkai is – and Cameco share is…?

I think it’s equal to 3 million pounds.

Thank you.

And so if you do 37 million or 38 million minus 17 million, so we are going to come up with somewhere in that 20 million pound range, now we have the three levers first that we talked about. We have our production lever, we talked about that. We have purchasing capability, we are in the strong cash position that we need to go and make some purchases. And then of course we have our inventory which we have been drawing down in Q1, you have seen that come down. I think our inventory at the end of Q1 is in the 21 million pound range. That will never go to zero I promise you that, it will stay in the 13 million to 14 million pound range here. So, yes, we are going to have to source some pounds for the next months.

Right. Is there – I would say here, is there any public guidance in offer as to a range much at Cameco is likely to have purchase X to Y million pounds?

No, we don’t have that, Jim.

Okay, got that. And let me do only one quick follow-up here just to come back to this again. We have talked about the issue at McArthur that the price still has a tool on it. If the price remains in the 20s come even early fall, how does that inform Cameco’s decision and partner’s decision on McArthur?

Well, it’s certainly one of the factors we would absolutely take into consideration. Jim, we are watching the market very closely.

Okay, thank you.

Thank you very much.

Our next question comes from Graham Tanaka of Tanaka Capital Management.

Yes, thank you. Just wondering if you could extend that last discussion is very helpful on for 2019 and 2020, what kind of contract commitments do you have for those 2 years in volume? And maybe if you could just sort of help us out with what you think some of the other producers, long-term contract runway is in terms of expirations? Thanks.

Yes, thanks, Graham. I can’t give you specifics on those years, but I can tell you what we disclosed is that we have average annual sales of 22 million pounds per year over the next 5 years and so that we have in place, I am sure our competitors at least some of them might have the similar portfolio. We know that some don’t and are having to try and live up to spot market, which isn’t easy. So, yes, we will see how that goes going forward.

What is your understanding of what Kazakhstan and Kazatomprom might have in terms of contracts and there in the out years? Thanks.

Yes, thanks. Again, we don’t have a view on that. That is something you could probably ask Galymzhan Pirmatov for someone there, but we don’t have a view on what their contract portfolio looks like.

And in this scenario hopefully we will never get to this, but if the Russian Duma does have some sort of a shutdown or restriction, what would be the kind of scenario that you might see in terms of how long there might be response in the markets either in contract spot? Thanks.

Just don’t know, it’s just one of those moving parts again that we don’t know what the effect would be. I mean, I can remember back in what might be the 80s, late 80s, early 90s when there was not the Russians restricting the materials, the Americans restricting the right material that could come in putting limits on that and we actually had a two tier pricing system. I am looking at Sean for a number of years there, this is kind of the reverse of that the U.S. still depends for a significant amount, I think it’s 20% of the material flowing into the U.S. to the utilities is probably coming from Russian sources. So, it’s significant for sure. So, we are watching – I think everyone is watching closely to see if that’s a serious threat and quite frankly with the players involved, we have a tough time knowing and speculating what is serious and what could happen, but that would be a serious effect on the U.S. nuclear energy suppliers for sure if that source was cut off.

The other thing more in terms of…

Graham, we are supposed to limit it to two questions. We have got a few people that haven’t come in. So if you wouldn’t mind, hop it back on, we would appreciate that. Thanks.

[Operator Instructions] Our next question comes from Alexander Pearce of BMO.

So, I just wanted to ask a question on the cash flow, you mentioned you expect a similar amount this year to the loss, did I assume anything for these additional purchases in the market where you were just discussing?

No, it doesn’t. Alex, Grant looks after cash. I will pass it over to Grant to talk…

Yes. So that’s a disclosure to give you an idea that 2018 cash flow could look like 2017, it’s just based upon the numbers that Tim went through, the committed purchases that we have to make as well as assumptions about the uranium price and the exchange rate as per our outlook table. If we did make discretionary purchases in the market if – in fact I shouldn’t call them discretionary, if we decide to purchase in order to meet some of our contract commitments instead of source some inventory, yes there would be a cash impact on that. But of course that comes back, because it’s sold back through our portfolio at a margin certainly relative to today’s price. So that would be one of the factors that would affect that forecast. But yes, we just wanted to get it out there for people to understand what 2018 currently looks like from an outlook point of view.

Okay. Thank you.

Our next question comes from Greg Barnes with a follow-up from TD Securities.

Yes. Thank you. Grant, there is a lot of talk about uranium inventories and the sizable volume is out there, but in your estimation how much of that is actually transactable or purchasable by players in the market?

Well, Greg I think it’s a great question. And I think we are going to be finding out with the actions taken. We will be in a position looking at our inventory, looking at purchases. We will be in the market, we are coming. And when we do we will see how deep that market actually is. And if it turns out its deep, we are buying materials very, very cheaply. And if the market is not deep guess that’s what’s happening, a very favorable circumstances is arising for us. So we are going to find out that will be a test this year and I will let you know.

So by that statement, Grant you said we are coming, you haven’t actually come yet that into the market, is that fair to say, any sizable way?

No, not any sizable way. We are in and out of the market all the time in small ways testing how deep it is. You hear stories about the supply of uranium that’s ready to be unleashed from Japan. So for example, we might go and poke around and see if we can find any, haven’t. We hear about all this uranium that’s going to come from enrichers underfeeding. So we might approach an enricher and say, do you have any material and it turns out we can’t find any. Now, maybe it’s just not them wanting to sell to us, but we are just not finding these volumes. So we haven’t gone in a big way, but we will have to in order to meet our sales commitments, so it will be interesting to see how the market responds.

Okay. Thank you.

Thanks Greg.

Our next question comes from Umang Majmudar of General American Investments.

Good morning. Thanks for taking my question. Often on these calls there is a lot of discussion that pertains to the customers and the flexibility that customers have under the contracts, looking at it from the other perspective, broadly speaking how are contracts structured with respect to flexibility Cameco may have and this is somewhat piggybacking off the back of the prior question, Greg’s question with respect to what if Cameco were unable to procure pounds that were necessary, what sort of flexibility does Cameco have. And then related with respect to something like the 232, potential 232 or oppression [ph] action, if those would come to pass, are those events that would constitute force majeure? Thank you.

Thanks for your questions. We don’t anticipate of not being able to deliver, Cameco hasn’t missed a delivery, you don’t think in its history and we don’t plan to start now. We have three levers that we can pull to have pounds available to us, production purchasing and inventory. And so that’s what we are going to be doing and it just as Grant mentioned on the purchasing side you will see us out there we are going to be purchasing. We have an inventory to drawdown and we have drawn it down a bit. But it still has ways to go. We still have production. We have production at Cigar Lake which is operating very well. We have production in Kazakhstan same thing. And we have McArthur River/Key Lake that can produce pounds for us when we need them. And so right now it’s down. And we plan to keep it down for now but we will see how things go until we have – we think we are in a good position to deliver on our contracts. The 232 piece, boy I don’t know we have been sitting around here talking about what effect that could have. The remedies to us being requested are a bit out there. In that, the U.S. consumes about 50 million pounds per year. The applicants are asking that 25% of that be retained for U.S. producers, so that equates to about 12 or 12.5 million pounds. I think production in the U.S. today is like 1 million pounds something like that. So and not like a bunch of sites are sitting there ready to turn on production in a hurry and even those that could it won’t be in a hurry and it will be expensive. We know that from experience. We just shuttered two of our operations down there, Crow Butte in Nebraska and our Smith Ranch operation. So, you will see how that turns out. I don’t know, like I say, in normal circumstances, with the normal players, you would think that wouldn’t go very far, but we saw a similar action with steel and aluminum just recently that they got traction and restricted. Now, there were some exemptions for certain countries, but we can’t say where that’s going I just don’t know.

Understood. Well, I appreciate the discussion. And the question was really just driven around the fact that there are various metrics or levers as you pointed out and involved here that are not necessarily just Cameco specific obviously even with the interest of doing something uneconomic in order to meet a purchase commitment vis-à-vis whatever may or may not be the depth of the spot market. So, that’s all of us.

Yes. No, you are absolutely right we don’t have the option of doing things uneconomic here. We are in business to build value for our shareholders by making profit. And so we are very conscious of that and so – and that’s what we are going to do.

Thank you.

Thank you.

Once again we have a follow-up question from Graham Tanaka of Tanaka Capital Management.

Yes, hi, thank you again. Just wanted to get a feel for what kind of conditions you need to see in the marketplace to bring back McArthur River/Key Lake and for how long and relative to that what would be the cost and the time to bring the production back on? I am just saying after this hopefully you get a successful hiatus here and a recovery in price. What kind of prices would you need to see and what kind of a time period before you are confident that you are not back to square one again?

Yes, Graham. Thanks for your follow-up question. Obviously, we didn’t take the shutting down of our McArthur/Key facilities lightly. That’s a huge decision to take, but we just in the circumstances that we have seen over the last number of years, we took the decision to leave our low cost pounds in the ground for better days and when you can buy pounds on the market at $20, we will do that all day, especially when you have a nice portfolio to sell them into. So, we are watching the market. I wouldn’t say the spot prices are leading indicator on that. The spot prices are going to move around hopefully or maybe and could go up. But if the spot price went up significantly and we said we are bringing McArthur back on, I think it would go down just about as fast. And so we are cognizant of that. What we are looking for is a change to the term price where companies, suppliers can go and perhaps refill their portfolio basket with some better priced long-term contracts and then that would be the way we would operate. They are bringing McArthur back into – feed into those contracts. We are not bringing McArthur to feed on to the spot market. We never have. We have never done that with any of our operations and we are not going to start now. So, we are going to need to see a bit of a sustained improvement in the term price in order for us to take that decision.

I am just wondering in terms of expectations, what kind of term price level might be needed to see for multiple customers not just 1 or 2, I mean, we are talking 50 or 60 I have heard many people talk about that, what kind of levels?

I would just say higher than today.

Okay, thank you.

Thank you very much, Graham.

This concludes the question-and-answer session. I’d like to turn the conference back over to Tim Gitzel for any closing remarks.

Well, thank you Ariel. And with that, I just want to say thanks to everybody who has been on the call with us today. We certainly appreciate as always your interest and your support. And just to confirm as we always do that we are doing our best to manage through this challenging market and really to position the company to benefit from a future where we know more uranium is going to be required to be growing demand. So with that, have a great day and have a great weekend. Thank you.

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.