Cameco Corp (CCJ) Q1 2021 Earnings Call Transcript

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Cameco Corp (CCJ -0.50%)
Q1 2021 Earnings Call
May 7, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by. This is the conference operator. Welcome to the Cameco Corporation First Quarter 2021 Conference Call. [Operator Instructions]

I would now like to turn the conference over to Rachelle Girard, VP, Investor Relations, Treasury and Tax. Please go ahead.

Rachelle Girard -- Vice President, Investor Relations

Thank you, operator, and good morning, everyone. Welcome to Cameco's first quarter conference call. Today's call will focus on the trends we're seeing in the market and on our strategy, not only details of our quarterly financial results. As always, our goal is to be open and transparent with our communications. Therefore, if you have detailed questions about our quarterly financial results or should your questions not be addressed on this call, we will be happy to follow up with you after the call. There are few ways to contact us. You can reach out to the contacts provided in our news release, you can submit a question through the contact tab on our website or you can use the submit a question tab on the webcast, and we will be happy to follow-up after.

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; Sean Quinn, Senior Vice President, Chief Legal Officer and Corporate Secretary; and Alice Wong, Senior Vice President and Chief Corporate Officer.

I'm going to hand it over to Tim to talk about the growing demand for nuclear power, the uranium market fundamentals and about Cameco's strategy to add long-term value. After, we will open it up for your questions. If you've joined the conference call through our website event page, there are slides available, which will be displayed during the call. In addition, for your reference, our quarterly investor handout is available for download in a PDF file on our website at cameco.com.

Today's conference call is open to all members of the investment community, including the media. During the question-and-answer session, please limit yourself to two questions and then return to the queue. 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'll turn it over to Tim.

Tim Gitzel -- President and Chief Executive Officer

Well, thank you, Rachelle, and welcome to everyone on the call today. We appreciate you taking the time to join us. I hope you and your families are doing well.

Last quarter, I talked to you about our excitement for the future of our industry and about the opportunity for nuclear power to play a pivotal role in the transition to a net-zero carbon economy through both traditional and non-traditional uses. I also talked about the excitement we have for the role that Cameco can play in that future, as we executed on our Tier-1 strategy, which includes production discipline, marketing discipline, and conservative balance sheet management. I have to say that over the course of the last few months, there has been nothing to dampen our enthusiasm, and in fact, there have been a number of developments that continue to support our optimism. I'll get into those in a bit, but I'm going to provide a recap of what I said were the three main drivers for our optimism.

First, demand for nuclear power is becoming more certain as the mega trend of increasing electrification while phasing out carbon-intensive sources of energy continues to take hold around the globe. Second, uranium supply is becoming less certain as years of persistently low prices have led to planned production curtailments, lack of investment, the end of reserve life for some mines, shrinking secondary supplies and trade policy issues. And finally, that our long-term strategy positions us very well to sustainably deliver long-term value.

Let's start with the macro view, the fundamentals for energy. As I said previously, we are seeing today a megatrend focused on increasing electrification, while at the same time achieving massive decarbonization goals. This mega trend has led to a mega challenge, that challenge being threefold. First, bring safe, clean, and reliable baseload electricity to about one-third of the population who currently have no access or limited access to electricity. Second, to clean up and replace our existing sources of electricity with a safe, clean, reliable, affordable, and carbon-free option. And finally, to transition away from the current use of thermal sources of energy for things like transportation and heating. This mega challenge of increasing electrification is occurring precisely while countries and companies around the world are fixated on reducing their carbon footprint, many of announced net-zero carbon targets and many more are expected to follow.

Country after country is recognizing that in a world where 85% of our electricity still comes from fossil fuel sources, there is no clear pathway to sustainably achieve, both electrification and decarbonization, without nuclear in the toolbox. As I noted earlier, over the last few months, there has been further support for nuclear's role in the clean energy transition. In Europe, we've seen nuclear move another step closer to being included in the EU Sustainable Finance Taxonomy. A rigorous scientific full-lifecycle assessment from the joint research center concluded that there are no scientific arguments supporting the exclusion of nuclear energy from the taxonomy. The European Commission then proposed to supplement to current legislation that if passed, will confirm nuclear as sustainable.

In addition, in France, The French Nuclear Safety Authority granted a 10-year extension to the operating lives of 32 of EDF's nuclear power plants. Conservatively, this could equate to at least a GBP100 million of additional uranium demand not previously accounted for. Over in China, The Nuclear Energy Association confirmed that the country's 14th 5-Year plan targets 70 gigawatts of nuclear power operating by 2025, an increase of approximately 20 gigawatts from 2020 with another 50 gigawatts under construction. Also indicated China could reach up to 120 gigawatts in operation by 2030 as part of its plan to be carbon-neutral by 2060. This would translate into annual consumption of about 60 million pounds of uranium per year. In Russia, Rosatom announced a target of 24 new reactors that will be needed by 2045 to increase Russia's share of nuclear to 25% of the energy mix, this would add another GBP12 million of annual demand to Russia's requirements. And at the recent Global Leaders Summit on Climate hosted by the United States, aggressive plans to reduce carbon emissions and achieve net-zero carbon goals over the next 30 years were discussed and many commitments were made.

For example, in the U.S., where nuclear energy is increasingly recognized as a major source of carbon-free scalable energy, the President announced a goal to cut up to 52% of U.S. greenhouse gas emissions by 2030, leveraging existing nuclear energy and advanced reactor technology in its clean energy initiatives, and these promise to make the electricity system fossil fuel-free by 2035. Japan has revealed plans to cut carbon emissions 46% from 2013 levels by 2030, maintaining its target for nuclear to provide 20% to 22% of its generating capacity.

Furthermore, we're seeing momentum building for non-traditional commercial uses of nuclear power, such as the development of small modular reactors and advanced reactors. Nuclear is also the only low carbon source that can produce heat that along with its traditional uses can be used to produce clean hydrogen and fresh water. We're also seeing company after company announce net-zero carbon targets. They recognize there is increasing scrutiny on their environmental performance. Investors are beginning to price climate-related risk into their capital allocation decisions. Investors are not only looking to invest in those companies that can demonstrate improved environmental performance, they will look for those companies that are positioned to do it profitably and sustainably. Unlike in the past, companies will be accountable for where the energy to fuel where operations comes from. We like to think of it as electron accountability and we'll have to make decisions that are economically sound to attract investment.

When you look at levelized cost of nuclear compared to other low carbon sources, nuclear energy is that solution. It's the most cost-effective way to provide low carbon, dispatchable, 24/7 electricity. So the outlook for nuclear is very bright. Increasing demand for nuclear means increasing demand for uranium, which brings us to the second factor that I said is driving our growing optimism, demand for uranium is rising at precisely the same time that supply is becoming less certain. One of the indicators we look at to illustrate the opportunity is uncovered requirements. We know that utilities have not been replacing what they consume annually under long-term contracts. This has led to a growing wedge of uncovered uranium requirements. That wedge is now bigger than it was back in the early 2000s, which was another period of complacency.

There are only a couple of sources for this information and if we look for example at UxC, which tends to be the most conservative view, they show the global cumulative uncovered uranium requirements are about GBP1.4 billion to the end of 2035. If we back that up to when it's needed to be contracted, produced and delivered, the challenge is to by GBP1.4 billion by 2030. That would require GBP140 million of long-term contracting per year starting in 2020. Last year, we saw GBP50 million placed under long-term contract, so that demand is piling up in a future window. Keep in mind, this is just traditional demand we're talking about, it does not consider any of the alternative uses of nuclear I talked about earlier. We're also seeing increased demand for uranium from financial players. The junior uranium companies recognize that statistically, the current uranium price has a much greater likelihood of going up than down and this view is supported by the fundamentals. The growing uncovered requirements are occurring at a time when there is some big question marks about where the uranium will come from to fuel the world's expanding nuclear fleet.

Cameco's supply curtailments alone, both planned and unplanned, along with our purchasing activity have resulted in at least a GBP145 million swing in the supply fundamentals since 2016. Since the end of 2020, we've seen two long-term producing mines come to the end of their reserve life. The loss of the Ranger mine in Australia and the Cominak mine in Niger, will further reduce supply by about GBP7 million per year. And our Cigar Lake mine is done about eight years from now. So right in that 10-year contracting window we're talking about, that's another GBP18 million per year gone. Given the timelines it takes, we should be investing now to replace that lost production, but at today's prices, that makes zero sense.

In addition, as a highly trade-dependent commodity, government-driven policies can be particularly disruptive for the uranium market. Due to persistently low prices, we've seen planned supply curtailments, lack of investment, the end of reserve life for some mines and shrinking secondary supplies, all of which have been amplified more recently by unplanned supply disruptions due to the COVID-19 pandemic. Consequently, primary suppliers become concentrated. It's concentrated geographically with about 80% of primary supply coming from countries that consume little to no uranium, and nearly 90% of consumption occurring in countries that have little to no primary production. And it is highly concentrated by producer with about 70% of primary production in the hands of the top five producers and about 80% in the hands of state-owned entities.

So we believe that in the current market the risk to uranium supply are far greater than the risk to uranium demand. These are the fundamentals that get us up in the morning and then why we remain a pure-play supplier of the uranium fuel needed to produce clean, carbon-free, baseload electricity, which brings me to the final factor driving our optimism, our strategy and why we remain committed to doing what we said we would do. Let me remind you what it is that we said we would do. First and foremost and this is where it starts for us, we're focused on protecting the health and safety of our workers, their families and their communities. We're doing that. Every day we make decisions about how best to manage our operations and protect and support our workforce through the pandemic.

In December, the trends we were seeing in the COVID-19 pandemic caused us to proactively pause Cigar Lake production for a second time. This concerns about the availability of workers in critical areas was increasing. During the temporary shutdown, we put further COVID-related protocols in place. Combined with our on-site testing facility and the vaccine rollout in the province, we have the confidence to restart the mine in April with greater certainty that the mine will be able to operate safely and sustainably. We will continue to monitor the situation in our communities and will have regular dialogue with public health authorities. Pandemic or no pandemic, the health and safety of our workers will always be our priority. We will not hesitate to take further action if we feel our ability to operate safely is compromised.

Second, apart from the COVID-19 disruptions to our operations, we have not wavered from the execution of our strategy. There are three fronts on which we are executing our strategy, operational, marketing and financial. On the operational side, we have implemented our planned supply discipline, cutting production well below our delivery commitments. This includes the curtailment of production at Rabbit Lake, our U.S. assets, and of course, at the McArthur River/Key Lake operation. As I said earlier, these actions have left a lot of pounds in the ground and kept them off the market. Consequently, we've been purchasing material on the spot market to meet our committed deliveries.

In addition, we've shown sales discipline, sticking to our value strategy. We've been strategically patient. We take a portfolio approach to building our contract book, and much like building an investment portfolio, it's a balanced approach that manages risk and return. We like to layer in contracts where appropriate. We want to ensure we support the operating cost of our assets while not committing our Tier 1 pounds too far in the future under contracts that won't generate an appropriate portfolio return and we do not want to exhaust our Tier 1 assets in a low price environment and we're seeing our patience pay off.

In April, we successfully finalized and executed a number of sales contracts which have been under negotiation, adding GBP9 million to our long-term contract portfolio, which together with recent long-term contracting totals almost GBP60 million and we continued to have a large pipeline of uranium business under negotiation. In fact, we continue to see off-market interest growing, and historically, it has been a leading indicator of broader demand for long-term contracting. We're having conversations with our biggest and best customers. These customers recognize the long-term fundamentals. They want access to long-lived Tier 1 productive capacity from commercial suppliers who have a proven operating track record. They understand that from a security of supply perspective, today's prices do not reflect production economics. They recognize the first-mover advantage gained from securing their future access to our Tier 1 pounds today as opposed in the future. And we have some competitive advantages.

We have significant idle Tier 1 capacity that is fully licensed and fully permitted that will be among the first pounds to meet the growing demand in the market. We are an independent commercial supplier and provide our customers' supply diversity from state-owned enterprises. With substantial Canadian productive capacity, we can help de-risk their future supply from trade policy exposure, and emerging is the focus on ESG matters, which is great news for us. At Cameco is serving interests of our stakeholders has always been at the heart of what we do long before there was a focus on ESG issues, because it's the right thing to do, and we recognize the significant business value it adds. Our Board, our employees, contractors, communities, suppliers, customers, governments and our providers of capital expect us to manage this company in a long-term sustainable fashion. We're very proud of our over 30-year commitment to protect, engage and support development of our people and their communities and to protect the environment.

The uranium fuel we supply plays a significant role in contributing to greenhouse gas mitigation efforts in Canada and abroad. In Canada alone, this uranium fuel provides greater than 30% of the province of Ontario's electricity every year avoiding more than 5 million tons of carbon dioxide from being emitted. Considering only the Canadian emissions avoided resulting from the use of nuclear power in Ontario, we like to think of ourselves as Canada's first net-zero mining company. So we are well-positioned to meet our customer needs. And finally, on the financial side, we've been very deliberate in shoring up our balance sheet. At the end of the first quarter, we had negative net debt with $1 billion in cash and a $1 billion undrawn credit facility. As such, we have the financial capacity to self-manage risk and maintain our strategic resolve.

Before I move on from the strength of our balance sheet, I do want to address what the Supreme Court of Canada decision means for us. First and foremost, it means that this dispute is fully and finally resolved for 2003, 2005 and 2006. And that Cameco's marketing structure and behavior through this period were in full compliance with the Income Tax Act. In other words, Cameco followed the law and it was the CRA and its reassessments that were offside. And as stated many times with this decision, we believe CRA should move quickly to resolve all subsequent years and return to us the $303 million of cash they are holding and release the $482 million in letters of credit that are tied up a security for all years. While these disputes been before the courts we've been accused of not paying our fair share of taxes. Now that this matter is no longer before the courts, it gives me great satisfaction to know that the court system in Canada has unequivocally confirmed that we did pay our fair share of taxes, but there are elements of this that are not fair. It's not fair that we have to continue to wait for an indeterminate period for the CRA to make the decision to return our cash and credit capacity. And it's not fair to see Cameco desperates in the recent federal budget document as engaging in inappropriate profit shifting in light of what various court judgments actually say.

Cameco has contributed to the health and safety of individuals around the world. We participated in the Megatons to Megawatts program which saw the dismantling of more than 20,000 nuclear weapons, converting 500 metric tons of highly enriched uranium into low enriched uranium for use as fuel in nuclear reactors, and we're proud to be part of the venture that makes Cameco the world's leading supplier of Cobalt-60 for medical applications and other gamma technologies demonstrating the tremendous benefits the nuclear industry delivers to Canadians and others around the world. Cameco has contributed millions of dollars for community and infrastructure projects in Northern Saskatchewan, including schools, housing, recreation facilities.

Since 2009, we've invested nearly $10.5 million in support of infrastructure improvement projects in local communities, which have been targeted at youth, health and wellness, including mental health, education and literacy and community development. We're leading industrial employer of indigenous peoples in Canada, providing well-paying jobs in Northern Saskatchewan for over 30 years and we hope to establish and grow businesses in Northern Saskatchewan by a procuring almost $4 billion in services since 2004. We've reinvested billions of dollars in Canada, building mines and mills and filling voids and programs for some communities. So we take great exception to any claim that what we have done is in any way unfair when it is in accordance with the law. The facts show that Canada has benefited greatly from the profits we have generated and this distraction should be resolved immediately.

Setting this issue to the side, I'm happy to say that we're performing well on all three strategic fronts. However, there are cost to our strategic decisions which are reflected in our financial results, but the good news is, this does not represent the run rate of our business and we expect much better days ahead once we return to a Tier 1 cost structure. We're taking the steps today and incurring the cost we expect will allow us to restart our Tier 1 assets with more flexibility in the production rate to eliminate the care and maintenance costs incurred while our Tier 1 production is suspended and to benefit from the very favorable life of mine economics they provide. We are confident in our ability to transition through this period and capture demand that will provide leverage to higher prices and we have concluded that we have the right vision, strategy and values to deliver long-term sustainable value.

Our vision which is to energize a cleaner world recognizes that we have an important role to play in enabling the vast reductions in greenhouse gas emissions required to achieve a resilient net-zero carbon economy. As we seek to achieve our vision, we're committed to doing it in a manner that reflects our values. Those values have not changed, they have always guided our actions and they place a priority on safety in the environment on building and supporting a flexible skilled stable and diverse workforce, on behaving with integrity and leading by example, on promoting equality and acting to eliminate racism where it exists and on pursuing excellence in all that we do and inspiring others to do the same.

Our decisions are deliberate. We are a responsible commercially motivated supplier with a diversified portfolio of assets, including a Tier 1 production portfolio that is among the best in the world. We are well-positioned to take advantage of a market where demand for nuclear power, both traditional and non-traditional, is growing where we believe the risk to uranium supply is greater than the risk to uranium demand, and where we believe our strategic decisions and strategic patience provide us with resiliency in the face of unprecedented challenges and will result in the rewards that will come from having low-cost supply to deliver into strengthening market.

So, thanks for joining our call today, and operator, with that, we would be happy to answer any questions.

Questions and Answers:

Operator

[Operator Instructions] The first question is from Orest Wowkodaw from Scotiabank. Please go ahead.

Orest Wowkodaw -- Scotiabank -- Analyst

Hi, good morning. I'm wondering if we can get some color on your -- the new contract that you disclosed in the results, the GBP9 million and I realize some of this information is probably sensitive, but can you give us an idea of perhaps what region the customers from, what time period, the deliveries are over? And also on the pricing mechanism, we haven't seen any movement in the reported term price, call it by UX and others, can we assume that the contracting price was done at a premium to that or any color here would be really helpful? Thank you.

Tim Gitzel -- President and Chief Executive Officer

Well, thanks, Orest. Thanks for the question. So, I think you said contract, I would say contracts, with an S on the end of it would be a better description of what we've done. I'm going to ask Dr. Grant Isaac, our expert on the market to just give a bit of an update on those pieces that we'll tell you what we can, and then, just maybe grant a little overview on alternative market and what we're seeing today?

Grant Issac -- Senior Vice President and Chief Financial Officer

Yes, sure. Happy to do that. Thanks. Thanks for your question, Orest. As Tim noted in his opening comments that the GBP9 million that we are announcing now add to what we announced in 2020 and in 2019, nearing about GBP60 million under contract now since we started this supply discipline strategy. And what I think it reflects is a -- couple of things that we've been saying and that is, yes, on one hand, the term market especially the on market RFP side of the business is not at the level it needs to be in terms of the demand coming to deal with that uncovered requirements wedge. But as we've been saying for a while now, there are some utilities who get it. They see the demand outlook improving. They see the supply outlook becoming more uncertain because today's prices are not incenting the investment in capacity.

In the past, they relied extensively on secondary supply capacity and they see that falling too through the same cycle. So there are some utilities who get it and I would say the common denominator there is these are the bigger utilities, the bigger company or country programs, more reactors and more certainty about how long they're going to run for us. So that tends to be the common denominator in this GBP60 million. I think it also reflects that there has been an easing, not in elimination, but some of them the easing of the COVID concerns that we saw in 2020 that we're delaying the completion of some of the negotiations. I think it also reflects the fact that some of the trade policy distractions have been cleared up, utilities have a better sense of the origins that they ought to be buying in a world where critical minerals and the role of state-owned enterprises is just taking on a bigger role in sourcing decisions.

It also reflects the role of ESG in procurement decisions going forward and making sure that supplies have a good chance of meeting the criteria that utilities are also going to be responsible for. I think for Cameco, this success reflects. We are in the pole position when it comes to layering in new contracts for all the reasons we've talked about in the past, the incumbency factors that we have, permitted licensed facilities that are proven and are reliable, and meet ESG criteria that we're a commercial supplier that our -- we have a high proportion of Canadian origin, which is a sought after origin in the market for sure at the moment. So I think it tends to reflect all of that.

Just a quick reminder about the portfolio as Tim said also in his comments, we try to build a contract portfolio that isn't dissimilar to our owners trying to build an investment portfolio. We have a number of criteria we try to meet. You asked about price, and of course, price is central to us building a contract portfolio. But what is central to us in the pricing discussion right now is the price mechanism. Well, we look at a market where we believe that today's price is insufficient to generate the supply needed to meet the improving demand outlook. So, right now, we're not really anxious to lock in today's price. In fact, we would prefer market-related price indicator.

So those utilities who get it and who are willing to give us more market-related exposure those are where we're having success in these off-market contracts. So, for us, it really is a function of getting the pricing mechanism right so we have exposure to what we think is an improving market. And of course, price matters but so does volume, certainly volume with respect to the timeframe in which we'd be making deliveries and the duration, how long that contract is for. So, you asked about the window, I would say in that nearly GBP60 million, some of it is near term in the next three to five years, some of it is longer-term outside 2025 and beyond, which is really interesting. It's a reminder to all of us that those folks that are planning their supply decisions believing there's going to be this gap in the market in 2027, 2028 that won't be filled, well, it will be filled. It will be filled by this type of contracting over the next couple of years. So if you're not involved in it now, you're going to end up with supply that doesn't have a home in the future.

So volume certainly matters to us, and then, remember within volume there is flex in deferrals that we build into our contract portfolio to give us opportunity for more value. Product form matters, because we're not just a uranium supplier we have a fuel services group and we like to obviously underpin that activity. The customer matters as I think we discovered with our dispute with TEPCO, not all customers are the same in terms of their commitment to contracts that they sign and so making sure that those high-quality Tier 1 customers are well represented in our portfolio. And regions matter to us. So like our owners, we're building a contract portfolio. The opportunity is the nearly GBP60 million that we've signed so far since we've embarked on this strategy reflect a balance of those criteria and very much in our interest when we look at it from a portfolio point of view.

Orest Wowkodaw -- Scotiabank -- Analyst

Thanks, Grant.

Operator

The next question is from Lawson Winder from Bank of America Securities. Please go ahead. Lawson Winder, your line is open.

Lawson Winder -- Bank of America Securities -- Analyst

I was needed, I apologize. Good morning, guys, and thank you for the update today. I hope you all are well. So did the high level of producer buying in late March and early April factor in at all to your decision to restart Cigar Lake?

Tim Gitzel -- President and Chief Executive Officer

Good morning, Lawson. So, no, no. We -- Cigar Lake is something we had always planned to run this year, we've been very clear about that what to set us back on that. In December it was COVID and the COVID that was sweeping the world in Saskatchewan as well and we didn't have a huge problem at Cigar but we could see a wave coming and we were having people have to sit out because they were a close contact for instance. And then we'd be short of operators and our good GM Lloyd Rowson was every day looking to see what does this roster look like and whether you could put a team on the field at Cigar Lake to run the assets. And so, no, that didn't factor into it at all, that was certainly interesting. I think we saw the juniors take about GBP10 million, a little bit more maybe GBP10.5 million of the market in the first quarter but that was just added pressure on the market and wasn't related to our Cigar Lake decisions.

Lawson Winder -- Bank of America Securities -- Analyst

Great, thanks for that. And then my follow-up would just be on the first question on the contracting. You gave us a lot of detail in your answer there, Grant. Thank you for that. No, I wasn't entirely clear though, if those GBP9 million on average line up with your overall portfolio target of 60% market related and 40% base escalated?

Grant Issac -- Senior Vice President and Chief Financial Officer

What we caution you -- Yeah, in -- they would largely. So when we think about not just the 9 but the overall nearly 60, we're staying consistent with those goals at that framework that we put out. It hasn't changed, and if it does, we'll change the framework for you to reflect that. Maybe we will have a different pricing balance going forward. But the key is to remember that, the responsible producers are those that are building homes for their production and they're building homes now for their production and the idea that somebody is going to sit on a bunch of material and they're not going to put it into the term contract homes they're just going to dump it into the spot market at a later date. Well, that's exactly what some fuel buyers want to hear because they understand that the spot market is not capable of absorbing that level of uncommitted primary production and so really what you want to see is the building of the term contract homes, creating a market alignment with the production decisions.

Lawson Winder -- Bank of America Securities -- Analyst

Thank you very much.

Tim Gitzel -- President and Chief Executive Officer

Thanks, Lawson.

Operator

The next question is from Ralph Profiti from Eight Capital. Please go ahead.

Ralph Profiti -- Eight Capital -- Analyst

Good morning. Thanks for taking my questions. [Indecipherable] Grant, it's been a while since Japan has been sort of top of mind and sort of a topical issue the pace of restarts continues so I guess lag expectations but now we've had news recently that they're looking at bringing on or passing critical phase on three new reactors. Where does Japan stand on inventories and are they -- are their material legacy contracts to which they continue to honor, is that a significant part of the market?

Tim Gitzel -- President and Chief Executive Officer

Well, I think Japan is becoming a good story, I mean, yeah, it's taken way longer than we ever thought it would. I remember back in 2011 them talking about -- right after the accident, they talked about reviewing all of the units and then bringing them back on, here we are 10 years plus, 10 years later, and it's slowly coming back. But I can tell you they showed up at the earth, the summit in the last week with President Biden. They're making commitments to carbon reduction that are very aggressive I would say, and so, I think politicians are clear that they're never going to get there without nuclear. So we're seeing it come back. We haven't seen a whole lot of Japanese material over those 10 years come into the market, and now we think they're holding onto it because they are restarting and they are going to need their fuel going forward. So we see Japan as an improving story, it's been a long time but we're pretty positive. Do they have long-term contracts? Well, it's been 10 years, so most of them at least I could speak for Cameco have gone away and they haven't signed a whole lot of new ones but we have seen them in the market from time-to-time. So, Grant, I don't know if you have any...

Grant Issac -- Senior Vice President and Chief Financial Officer

Well, I would just say Ralph, you're right and that the Japanese fleet was a major theme and narrative in the market, quarter-to-quarter, year-to-year for a while, but that's kind of died away and it died away as the new regulatory authority really took root and started making approval decisions. And then that once that's sort of created the impression that, yeah, Japan's got some material that they need to work through, but everybody kind of just lifted up that market and moved it to the side and focused on China and India and everywhere else.

So Japan's kind of over on the side. Nobody expects the Japanese fuel buyers to be at the front of the line in the next buying cycle because of the inventory positions that you've talked about, but we don't see it as a risk of huge amounts of material coming to the market from Japan anymore either because of the restarts. Because there seems to be a pathway and a renewed commitment to that baseload power that's absolutely fundamental to an economy that's an export-driven industrial growth economy. It needs cheap baseload power and increasingly clean cheap baseload power to make that economic model work and so nuclear is kind of back in the toolbox in a really important way.

If we take a one-level down look at Japan, remember, it's kind of the tale of two worlds. You've got a couple of utilities, Kyushu, Kansai, Shikoku approved reactors to run and have been running and have been consuming inventory and consuming material, and in fact, we've seen some new buying from that group. And then you have the others, primarily with the boiling water reactors, the first-generation reactors, there hasn't been one of those restarted yet, there has been a couple now approved. That group is sitting on an excess inventory relative to what they're producing today in terms of power output, but they also have an expectation that their reactors are coming online. It's why they've made the investments that they have to prepare for the new regulatory measures that are required in Japan. As the largest spot buyer of material in the market, you can imagine we've asked, is their material available from those customers and we get the same consistent message. Why would we sell it today in a low price to market only to have to buy it back in a higher-priced market and it will be a higher-priced market when their reactors are running. So, we look at that is probably the most mobile source of utility inventory but I can tell you we see no indication that it has been mobile.

Ralph Profiti -- Eight Capital -- Analyst

Right, right. No, that's good color. Thanks. I want to come back to the 60% market-related. What would you need to see in the market to push that higher, right? In previous uranium cycle, Cameco wasn't able to fully capture that uranium price rise because of those legacy fixed-price contracts. What you going to need to see in the market to be able to push that to 70% to 80% and is that potentially part of the strategy?

Tim Gitzel -- President and Chief Executive Officer

Yeah, Ralph, I would say that balance is actually an important learning from exactly the scenario that you described. So since Fukushima, and especially with some folks who are kind of new to the uranium space, people will ask us about why would you have a 60/40 portfolio split, why wouldn't it will be a 100% market related because the price seems to be low right now. We seem to be at P10 or P15 price, it's got a 10% to 15% chance of go in down, and not very far, 85% to 90% chance of going up and probably a long way.

But remember that ours is a market that moves more on sentiment than on I would say fact, because if our market moved on fact, there would be a lot more contracting today. There would be a much more rational view of -- hey, the demand outlook is improving, the supply outlook is far less certain if price is low now would be a good time to buy, but instead we actually see a slightly different psychology. We see a psychology for some fuel buyers not the ones that we've signed nearly GBP60 million worth of new business with, but for others, they look at a low price of uranium and they say well uranium price must be low because it must be everywhere. And if it's everywhere, I don't need to worry about buying it today instead of saying a low price is not incenting the investments in the capacity that's needed to match the demand out into the future.

So for us, knowing that that psychology hasn't changed, it reminds us that ours is a market that can go through some fairly significant price transitions and go through them quite rapidly. We saw it in 2010 in uranium, we saw it in 2016 uranium, we saw it in the last 18 months in conversion if you want a more recent data point that psychology is still there. So for us it's important to make sure that we have the exposure to those moments where you see a rapid transition in the price, but then at some point you want to lock in some of that value recognizing that if there is a period of low below replacement level contracting followed by an exuberant period of above replacement level contracting, utilities will then kind of fill up their requirements again and they will feel complacent, they'll step out of the market and the price will consolidate. It will come off and you want to be protected for that.

So right now we look at a price that it's got to go up to incent future production, we want to be exposed to that. At some point, we then want to lock in value, and when we lock-in that value and think about it is giving us the zip line protection that we've enjoyed since Fukushima, so that's 60/40 balance is actually the learning from where we were in the 2006 price spike, as you say, uranium gets to $136 a pound, I think our average realized price at the time was $36 a pound. And so 60/40 has come out of that learning to say we've got to lock-in value when we think we're in the right price range, but until then, we want to be market exposed, that's the better play for us.

So, Ralph, I think it actually reflects better the dynamics in the market and reduces the likelihood of the outcome that that you were describing and we want to learn from that. We've been on that side of the trade and it was very painful.

Ralph Profiti -- Eight Capital -- Analyst

Understood, well said. Thanks, Tim. Thanks, Grant.

Tim Gitzel -- President and Chief Executive Officer

Thanks, Ralph.

Operator

The next question is from Andrew Wong from RBC Capital Markets. Please go ahead.

Andrew Wong -- RBC Capital Markets -- Analyst

Hey, good morning. Thanks for taking my questions. I just want to ask for Cigar Lake. So when with development of Phase 2 need to be accelerated to ensure production or is Cameco considering other options to maintain production later this decade and I guess like also how does the Cigars longer term decisions factor into some of the contract discussions that you're having with your customers?

Tim Gitzel -- President and Chief Executive Officer

Yes. Thanks for the question, Andrew. As Cigar is an interesting piece. As we said, by the end of the decade, if we continue to run it at normal rates, we will run out of or there in Phase 1, Phase 2 is available, but we're in that exact dilemma that I mentioned earlier that there is no incentive price to be looking at new projects and making that 8-year investment, 10-year investment that you need on -- Well that won't take that long because it's a brownfield, you can imagine on a greenfield, it's 8 to 10 years before you're up and running. But if you walked into your Board of Directors, I can tell you for ours and we said, well, we're going to start a new greenfield project today, they'll probably run you out of the boardroom. And so, it's just no incentive pricing there to put the large amounts of capital in to start a new project.

So, for Cameco, I mean we're looking at Phase 2, we're doing studies on it and doing the math on it and doing projections but there is no incentive today to move that forward. So I'd say the same with our Yeelirrie, and Kintyre, and Millennium and some of the other projects we have, they're not at the same level as the McArthur is and the Cigars and some of the Kazakh production, new projects just aren't there. And the unproven ones, you'll see some pretty interesting numbers coming out of some feasibility studies, but I can tell you, after more than 30 years here it's not an easy game building a new project. So that's a concern, I think about that, we think about that. All the time we think about that GBP1.4 billion that needs to be procured in the next what 9 years, 10 years and where that's going to come from and yet the market is not giving anyone a signal to move ahead on the new project. So it's a dilemma we're going to face and I think there's got to be a realization of the urgency of this in the market at some time in the near future.

Andrew Wong -- RBC Capital Markets -- Analyst

Okay. Maybe I'll just ask about some of the recent purchasing activity, would Cameco consider making strategic purchases somewhere to what the juniors have done recently and I guess what's just -- what's your view on that strategy that's being employed to purchase access material to help push prices higher? Thank you.

Tim Gitzel -- President and Chief Executive Officer

So, Andrew, thanks. I mean the purchasing we've been doing is to fill the contracts that we have in our portfolio, having shut in most of our production, McArthur, the U.S., Rabbit Lake, Cigar has been due to COVID. We still have a very nice contract portfolio that we have to fill. So our purchasing has been in that regard and not on speculation, but Grant, do you want to chip in?

Grant Issac -- Senior Vice President and Chief Financial Officer

Yeah, that's absolutely right. So we continue to purchase with. Where, Andrew, rather than buying on spec or buy the whole, we're the most inelastic buyer in the market if you think about it because we have to buy to meet our committed sales portfolio in some ways and I don't mean to make this a cheeky comment. Bbut we actually owe that the trader community in the uranium space, a big thank you, because instead of restricting pounds and holding them back and watching us chase the price up because we got to buy anyway, they've been very willing sellers. And so, we've been able to help clean up the market to meet our committed sales portfolio but not at really punitive prices for us under our strategy.

But having other steps in like this is an important fact change, you're absolutely right. I won't make a comment about whether it's wise or not for an advanced exploration company to buy material and hold on to it, I've heard the reasons, and their reasons are theirs and their investors seem to buy and large to agree with it. I think the buying showed what we've been saying and that is -- that the spot market, the true spot market with. The material that's available in the can or in the canister today is very thin and the reason I think it proved it is because many of these purchases by the advanced exploration companies were out on the curve, because they simply couldn't find the material available today.

So on one hand, that's quite positive. Isn't it, Andrew? Because we've been saying a problem in our market is uncommitted primary production from producers who should be leaving it in the ground, because they don't have a home for it, but they haven't been. Buying along the curve basically creates homes for the uncommitted primary production and that's great, because it won't be dumped into the market 6 months out, 9 months out, 12 months out. On the other hand, I wonder if there is a bit of regret though on a missed opportunity. And the missed opportunity is it if that GBP10.5 million stay dedicated to true price formation in defining what really is a spot market, we'd be in a much different price formation right now, there would be a much different spot price if folks were holding out for what's available today.

So on one hand positive, on the other hand probably a bit of a missed opportunity, Andrew, just bear with me for a second, I want to take a step and distinguish two between the funds and the advanced exploration companies buying. Because I think there is a really important development in our market recently with the folks at Sprott taking over the management of UPC. I think there is just tremendous potential upside there and it really comes in the form of bringing in an experienced professional manager in the physical metal space to bring active management truly into this. I think they've involved a group very credible market liaisons, some folks that Cameco knows, used to work for us and so we think that brings instant market credibility to what they're doing.

I think that that will bring access to a broad base of investors. But in terms of this price formation piece that I was talking about, I think there is real potential upside there too because if you see a very active management from a fund, not a passive fund, but an actively managed fund, we could get into a situation very quickly where the spot market isn't five traders offering against one person with a bid to buy. We could see some balance there where the amount of bids equal the amount of offers and it would really create transparency in the spot price and get us away a little bit from this ability of the intermediaries to offer down the market without actually making a transaction because there would be this present and persistent bid.

So I think there is tremendous upside here and we'll watch it really closely. Obviously, we have some views on how to maximize it and we're going to be happy to share those at every turn and that would be really to focus on the spot market and not buyout. And if there are redemptions have a very credible and value generated way to deal with the redemptions. And there's very little downside to it as far as I'm concerned, because at -- if they acquire and sit on it, well that's what it was before, so that's no different. So we think that combined with some of the other demand has been a pleasant surprise to the market and is proving some of the things we've been saying about just helping the front end of the spot market actually is.

Andrew Wong -- RBC Capital Markets -- Analyst

Okay. Thanks for your comments.

Tim Gitzel -- President and Chief Executive Officer

Thanks, Andrew.

Operator

The next question is from Greg Barnes from TD Securities. Please go ahead.

Greg Barnes -- TD Securities -- Analyst

Thank you. Grant, I think you just answered my question but I was surprised if you have this spot price digging to more with all that buying coming in which suggests there is excess supply still out there and I think that's the fundamental question everybody has, how much excess supply truly sits up willing to meet this demand when it comes in?

Grant Issac -- Senior Vice President and Chief Financial Officer

Yes. Great question, Greg. And so I just say, just to go over the ground again, I think the missed opportunity and the real proof would have been, if that buying can stay restricted to what's truly available today, you would have seen a much greater impact. But I think there was just a desire to lock in some material to take advantage of these financings, take advantage of the window that these companies we're looking at and they were willing to buy forward. And as soon as they bought forward, they took the pressure off the spot market, didn't they? They just went out along the forward curve. In fact, I think, one of them didn't buy anything within the next 12 months and was actually buying in the beginning of the term market and so that took the pressure off, Greg. And if had been focused on the front end it really truly would have proven how thin the spot market was. What it did do though as I said and this is good news is it's created homes for the problem as we've been identifying it, which is those producers who are producing material and they don't have a home for it, well, now homes are being built. So think of it instead of pushing the near-term of the spot price, they've supported the forward price of uranium because now we're not going to see material coming into the market 6 months, 9 months, 12 months with the same weight for the same churn with traders than just offering the market down ahead of pricing those purchases. So it really created a stronger floor if you will as opposed to pushing the front end of the spot market.

Greg Barnes -- TD Securities -- Analyst

Okay. Just want to investigate Europe purchases a little bit. You've raised the guidance range to GBP11 million to GBP13 million, so that includes GBP5 million you get from incline?

Tim Gitzel -- President and Chief Executive Officer

Yes.

Greg Barnes -- TD Securities -- Analyst

And you know you're going to buy some material and I guess it's internally shifting from new Canon excess inventory into what we require. So how much actual net buying is there from Cameco in the market?

Grant Issac -- Senior Vice President and Chief Financial Officer

Yes. And that's -- we don't have that disclosure out there. So once again we're in a partial outlook world and we're in a partial outlook world because of Cigar Lake. So we have it sense Cigar Lake was down for the first quarter of the year and it was ramped up through the first month of the second quarter but that gives a sense of what we're short because Cigar Lake wasn't producing for us. Going forward, we have question marks about Cigar Lake's run rate. So while the date is now clarified of restart, the run rate isn't. That creates uncertainty about how much production we're going to have to our account and that uncertainty actually impacts our planned purchasing activity. So our partial outlook has stayed away from making those determinations but, Greg, it's not just the Cigar Lake story, McArthur is also down. So as long as we have that asset and care and maintenance for strategic reasons, we will be -- I think, probably the biggest spot buyer in the market. Once again, timing is something where we have more control over but we will need those pounds, and as I said to Andrew, we are the inelastic buyer in the market and we will buy but we just have shied away from guidance at the moment because we have this partial outlook scenario.

Greg Barnes -- TD Securities -- Analyst

Quick follow-up, how much will you transfer from new Canon from their excess inventory?

Grant Issac -- Senior Vice President and Chief Financial Officer

It's just a couple of million pounds, Greg. So there's still a going concern in terms of some legacy contracts, so it's just the intercompany management of that.

Greg Barnes -- TD Securities -- Analyst

Great, OK. Thank you.

Grant Issac -- Senior Vice President and Chief Financial Officer

Thank you.

Operator

The next question is from Ben Hatchett, a private shareholder. Please go ahead.

Ben Hatchett -- Private Shareholder -- Analyst

My question was mainly with Sprott, it was somewhat answered. With the new trust and your knowledge with your relationship with because that are from -- do you think that's going to influence you guys to buy your pounds quicker before they establish their trust?

Tim Gitzel -- President and Chief Executive Officer

I don't think it changes our behavior at all. I guess, we'll watch to see what they do I think they have a bit of time in front of them just to set the whole thing up. I don't think it closes for a while yet and this grants us we're pretty inelastic in our buying. We have to buy the contracts that are out there to meet them. So we'll watch what they're doing and what happens but I don't think it will influence our behavior?

Grant Issac -- Senior Vice President and Chief Financial Officer

Yeah, it's important to remember that because we're buying, not to hold uranium, but we're buying to meet our committed sales portfolio. Our number one priority is actually making sure we have the product to deliver into the committed sales portfolio and so we know the product forms we need, we know the origins we need, we know the timing that we need to buy that material, that's what drives our purchasing decision. So when we think that we can't meet those criteria, we will buy and be a very aggressive buyer, and we think we can meet those criteria, we can be more opportunistic because remember our incentive is to keep the cost of purchasing down as low as possible. But our strategy is one then where it really doesn't matter to us if the price starts to move away. Because if the price starts to move away because buying is in front of us, well, guess what that's being picked up in our committed sales portfolio. So we get the benefit of the rising price there offsetting the fact that we're buying some material in the market. So our strategy is designed so that we can tolerate a market that price formation hasn't happened yet but it's also designed. So if the price starts to go up, we're actually celebrating that as opposed to panicking and say we need to buy everything before someone else does. So we'll watch how this unfolds. We do think it could be a game-changer with lots of upside and then our inelastic demand I guess would just be leverage on that.

Ben Hatchett -- Private Shareholder -- Analyst

Okay. And also are you guys going -- I know that with the Biden administration in there I don't know if it's going to be a uranium reserve or anything, are you guys going to be involved in that or any of the Canadian producers or do you know if that's just going to be Americans?

Tim Gitzel -- President and Chief Executive Officer

Well, if you're talking about the purchase to strategic purchase of uranium, that was started even before the Biden administration. It looks like they're going to carry on with that, I think a Secretary ground home is as committed to buy that. Of course, we have several different options, we've got Canadian production but we also have our U.S. assets that we were running, that we're the largest producer up until a few years ago when the market fell out. So where I can tell you we're in Washington as much as we can, we're talking to the Department of Energy and there we'll see they haven't come clean and clear yet on whether they're going to spend that $150 million or $75 million to build that strategic reserve, but I can tell you we will be right there to offer our assistance in providing those pounds absolutely.

Ben Hatchett -- Private Shareholder -- Analyst

Okay. Thank you very much.

Tim Gitzel -- President and Chief Executive Officer

Thank you, Ben.

Operator

The next question is from Brian MacArthur from Raymond James. Please go ahead.

Brian MacArthur -- Raymond James -- Analyst

Hi, good morning. Just to follow up on the purchases by junior company discussion. In your strategy, you talk about potential redemptions. It might, I believe, as we look forward the next few years, do you worry about some of those pounds that are being bought out in the curve coming back to the market that is to say, maybe they buy them and it price goes up a little bit and they flip it back. So, all we've done is delayed some of those pounds in future, is that what you're talking about we got through that thinking process?

Tim Gitzel -- President and Chief Executive Officer

Yeah, Grant, why don't you just talked about that this morning.

Grant Issac -- Senior Vice President and Chief Financial Officer

Yeah, Brian, so it would certainly be a worry and it would be a worry rooted in what we've seen even last year, and let me make a distinction between the advanced exploration companies and the funds to start with. Like I said, I think, it's an interesting strategy and I won't comment on it commercially but it does concern me a little bit from the point of view of conviction. I would be disappointed for example if we discovered that when -- the uranium price, we think it's got to go up but it's not going to go up into the right constantly, it's going to saw tooth and so we may see situations where some of these companies that are holding an asset on their balance sheet, probably accounted for derivatively, may have to take a mark-to-market loss at the end of any one quarter if the price is off a bit, if we see in usual quarter end games from the traders, uranium price comes off, they might have to take -- and what are they going to do in that situation, are they going to have the conviction and the support from their investors to hold through that, It would be disappointing. If it simply came back into the market or if they said, hey, we made a 20% return on our uranium purchases, we're going to monetize that. Well, all we did then was just played a show a game with uranium.

So I have to be mindful of that. I'd like to believe that there is probably going to be conviction. I'd like to believe that it's probably linked to making good commercial decisions about funding their projects going forward. I have to believe that they understand how our market works and that if you're going to dispose of material, you should be disposing of it to an end-user where it's never going to come back. If you're disposing it to a trader, they're just going to turn it in your face. So [Indecipherable] but I have to separate what I believe is going to happen from what could happen and we've got to be mindful of that.

With respect to the funds, we did see the redemption examples last year and then we saw material coming out from the funds, either being loaned or sold. And again not meeting, I would say, good criteria they were being loaned or sold to traders who again just churn it down. Traders make their margins by discounting the market not by holding back material to get a premium price. So you know what's going to happen if you put the hand -- material in the hands of traders. So I raise it as a caution, Brian. It's not my expectation and it's not what they said they would do but I just think it would be wise to be aware of it and probably wise to the best of our ability to signal to those who support those strategies how do you sustain the best value going forward.

Brian MacArthur -- Raymond James -- Analyst

Yes, fair enough. My second question just with the reopening of our -- expect to reopening capacity of converge in the United States, have you seen any changes in the conversion market, I mean, as said it all tightened up with constrictions but maybe we're getting back to the a little more balanced market, is there any update there?

Tim Gitzel -- President and Chief Executive Officer

I don't think we've seen grant a lot of change in market. I think it's a little early maybe, Brian, people are waiting might see, I think they said they come back on in 2023 sometime which is at the end of '23, which is a while from now. So, so far we haven't seen much change in the market. We're watching closely and they're presenting at all the conferences and trying to keep the market updated. But I think they're just getting started, so it might be a little bit early, Brian, to have any views on how that will work.

Brian MacArthur -- Raymond James -- Analyst

Got it. Now into forward-looking the market that far out I guess yet?

Tim Gitzel -- President and Chief Executive Officer

It's a ways away yet, Brian, and I think they have a significant amount of capital to put into the plant to get it up to speed, so we'll watch and see how that goes.

Brian MacArthur -- Raymond James -- Analyst

Thank you very much for all the color. I appreciate it.

Tim Gitzel -- President and Chief Executive Officer

Yeah. Thank you, Brian.

Operator

The next question is from Gordon Johnson from GLJ Research. Please go ahead.

Gordon Johnson -- GLJ Research -- Analyst

Hi, guys. Thanks for taking the questions. I guess the first question I have is and maybe you guys answered this but I didn't catch it. I guess the ramping back up of Cigar Lake, there are some viewpoints that this is actually a positive and the thought is that you guys are ramping this back up because you have a limited supply from Incai due to the COVID cases, etc. there and thus that's suggestive of increased demand for uranium industry need to ramp this back-up and that the spot market remains under-supplied. Can you address that and can you also talk about if you're seeing still excess inventory in the market or not and then lastly, I know this was asked but I didn't catch the answer, on the contract which you guys signed, can you talk about the timing around that, the pricing and what geography that's going in? Thank you a lot.

Tim Gitzel -- President and Chief Executive Officer

Yeah. Thanks, Gordon. Let me take the Cigar part and then I'll pass to Grant on the market question. You know Cigar for us when it's done, it's a double hit for us. So, we have care and maintenance costs in the $8 million to $10 million a month category well that's don't -- those are significant costs for us to have that down. And at the same time, we don't have access to a low-cost source of production that we need to put into our contract portfolio, so it is expensive for us to keep that down. And so, as I said before a little bit earlier, we didn't plan to take it down, it was COVID and our super precaution and our concern for employees and the communities that COVID not be spread around that caused us and our lack of on a day-to-day basis qualified operators to run some of the circuits that really kept it down. It wasn't really a market-related issue and so that's why when we felt it was safe and we have all the protocols and procedures in place to protect the workers, we were able to bring it back up in April and it's back up running now and producing, and so for Cameco, that's a good story.

Grant, you want to take the rest of that?

Grant Issac -- Senior Vice President and Chief Financial Officer

Yeah, Gordon, I think that's an interesting way to describe it as sort of a positive to bring Cigar Lake back and really -- let me just map it back through our strategy, the reason we want to run Cigar Lake is for the reasons you talked about because we have supply discipline going on, we've turned our production down well below our committed sales and we made the determination that we'll be able to buy some material but we won't be able to buy all of it because the market is not that deep. So, Cigar Lake coming back, I think you've got an interesting spin on it. It is positive because it's a return to our strategy and our strategy built in the idea that the market isn't deep enough for us to buy everything in it. So I would agree with you from that perspective haven't thought about it that way before but it's probably a good way to think about it.

In terms of excess inventories, we no longer see the uranium market being an inventory story. This kind of ended about two or three years ago when we saw the enrich are under feed be spoken for. Yes, the enrich are still underfeed but most of that is going into the uranium needs for their longer-term enrichment contracts. So we're not seeing kind of enrich or underfeed being dumped into the market. We aren't seeing inventory come to the market, except inventory. Where inventory is playing a role is clearly some utilities they've been consuming off their term contracts but they haven't been replacing them, so where is that coming from? Well, that's coming from their inventory, mobilizing their own inventory, chewing down a little bit of their strategic inventory position. But that differs demand but it doesn't add to supply, it's not like we can buy that material by utility is just chosen to consume a little bit more before they start their buying campaign.

So, for us, the issue in the market is not inventory, it really is the last of this uncommitted primary production. Tim mentioned the Cominak mine coming down, the Ranger mine coming down, that's great because those were two sources of uncommitted primary production, pounds that should have been left in the ground, but weren't, they were being produced and then they had no place to go but to the spot market and contributed to this notion of the spot market being for surplus disposal. So we've got to work through the last bit of this uncommitted primary production coming into the spot market to tighten that up. I talked about some of the new demand, creating homes for that, that's good news, but for us, it just -- it isn't an inventory issue, we don't sit and worry about inventories coming into the market. So I would say that feature of the markets dramatically improved over the last couple of years.

Gordon Johnson -- GLJ Research -- Analyst

I'd say if I could get one more in. So given that you guys are saying that there is not an inventory issue, I know you get this question a lot but maybe if you could talk around it or address it. Is there a point in which you guys expect to see some type of price inflection because I guess the pushback on the comment that inventory hasn't been a problem for two years would be spot prices have been steady some flat? So is there a point at which you guys expect to see an inflection? And lastly, on the China contract, right, those contracts are 10 years dated, a lot of people expect imminent renewals, can you guys address that, discuss that you see anything going on there? And thanks again for the questions.

Tim Gitzel -- President and Chief Executive Officer

Yeah, on the spot market, great point, I think our observation would be -- remember when we started our supply discipline strategy, especially in earnest with McArthur coming down, we were below $20 in the spot market. In fact, I think for one moment there it tucked below $18 and was like $17.75 a pound, that was inventory. That was inventory coming into the market. We started our supply discipline strategy as Tim noted in his comments, having our assets down and our purchasing has led to about GBP145 million swing in the market dynamics. It's bridged us through that inventory challenge, the spot market is up what about 65% since those days. So it's not where it needs to be in terms of incenting primary production in the investment in new capacity but it has come a long way from those inventory mobilization days.

So, I would say the first move was to go from a market that was inventory and primary production-driven to one that's just uncommitted primary production-driven at the moment, the next inflection of course comes with demand. It comes with enough fuel buyers looking at the improving demand outlook that we start to see an acceleration of the completion of contracts, not just off-market, but a steady drumbeat of on-market RFPs. And then that demand signal will begin to build more confidence in the producers who right now when they see an RFP come into the market, they're very aggressive going after it, they'll be able to step back a little bit. So the next leg up I would say is it there is no substitute to end-user utility demand and we're not quite there yet but that's what creates that inflection point that you talked about. The spot market is no longer inventory driven, that's why it's kind of hanging around $30 instead of below $20.

The Chinese story is very interesting, obviously, Tim identified some statistics on just the improvement in their outlook for the role of nuclear power as part of their net carbon zero by 2060. We've seen a bit of an evolution among the customers in China. We no longer sort of think of them as one group anymore, they've behaved very differently. One of our customers has gone out and acquired assets, is running assets in Namibia for example, and that supply is going back to meet some of their needs. Another customer has instead of building their own assets, they've taken equity positions in other assets but they're not running, so we actually see it as being a bit different. We see one has kind of been more proactive in meeting some of its own needs with some of its own investments and the other probably being more uncovered and probably will be the first to come to the market in light of these new plans. Because when you're building a reactor fleet that's going to run for 60 or 80 years, it's probably sufficient to answer to go back to those that are planning power and saying, yeah, but I've only got the fuel procured for another five. So there's probably -- there probably is a cycle coming to start to match up the commitment to 60 to 80 years of power production with the fuel to supply 60 to 80 years of power production. So we're optimistic on the China situation.

Gordon Johnson -- GLJ Research -- Analyst

Thanks again, guys.

Tim Gitzel -- President and Chief Executive Officer

Thanks, Gordon.

Operator

The next question is from John Tumazos from John Tumazos Very Independent Research. Please go ahead.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Thank you very much. I have a first question and then a follow-up from it. The first glance Tim it looks really good that the cash balances went up $107 million in the quarter but there were six one-time benefits to cash without which it would have fallen $135 million, and the inventories fell there was a $49 million credit for long-term receivables. You got the legal fees back in a tax dispute. The capex was way way below trend, money came in from stock and it was could as short-term investments. So how do you look at the cash flow, first, and then, second, does that mean that you need to restart production to generate cash rather than having holding costs or else slim down real deep take your pay in stock or do things to save cash?

Tim Gitzel -- President and Chief Executive Officer

Yes. Thanks, John, for the question and you are right we did have a lot of one-off in the notes during the quarter on the cash side of the CRE and some other government payment. But Grant, just as the CFO, if there was anything abnormal about it and it's how we operate so.

Grant Issac -- Senior Vice President and Chief Financial Officer

Yes. I mean, John, interesting take on a couple of clarifications. So, for example, the cash from the CRA it's actually not in that quarter-end number, that was a subsequent event. But as you puts and takes the main point is, we've said all along as part of our strategy, we would take supply discipline, we would embark on market discipline which had both a purchase in the market to meet our committed sales, as well as being very strategically patient on layering in new business which we spent a lot of time talking about today, and it would be backed up by very conservative financial management that gave our owners the confidence that we could self-manage risk. Whether we're sitting at $1 billion or $900 million we're still achieving that. So, for me, there is no danger here about our financial capacity slipping into a zone where we don't have strategic resolve anymore. So you raised some interesting points but I would just counter it by saying we're still absolutely on track with the third pillar of our strategy that we've talked about which is to be financially conservative and be in a position to self-manage the risk of this strategy and the risk of the market transition.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Thank you.

Tim Gitzel -- President and Chief Executive Officer

Thanks, John.

Operator

The next question is from Jessica Sanger -- sorry, Sondgeroth from Nuclear Intelligence Weekly. Please go ahead.

Jessica Sondgeroth -- Nuclear Intelligence Weekly -- Analyst

Hi, Tim. Hi, Grant. Thank you for taking this call. I just wanted to ask about the GBP9 million in term sales in April and the balance you had I think GBP17 million per year for the first quarter for 2021 to 2025 and you know the commitment is higher in 2021 and 2022, I know let this include the GBP9 million. But I'm wondering if you can add a little color to what the GBP9 million adds to that balance, is this material going to an end-user and intermediary anything you can share?

Tim Gitzel -- President and Chief Executive Officer

Yeah. Thanks for the question, Jessica, that we're happy to get those extra sales and there is more to come where as we've said many, many times our pipeline is busy, COVID related things have slowed down. I think in 2020, it was slow due to that and it was focused on their own operations and not particularly adding to their long-term contract in the portfolio but now we're seeing a few things free up those GBP9 million. Those are included by the way in the GBP17 million -- they're not included, I'm sorry, results say they are not included in the GBP17 million per year over the five-year period. And so, yes, I think Grant give a little bit of color on those pounds earlier, they fit what we want to see in our portfolio, the ratio, that mix between fixed price and market price have done delivery and so, I'd -- Yeah, Grant if you have something to add too.

Grant Issac -- Senior Vice President and Chief Financial Officer

Yeah, I think there is an important tie here between your question, Jessica, and one that was asked quite a bit earlier by Ralph, and that is -- there is no doubt that our contract portfolio is opening up in the later years of that five-year window and I don't want anybody to have the impression that like we're not aware of that, and in fact, that isn't a strategic position. We want to be more exposed to the market that we think that needs to be transitioned. The situation that Ralph was asking us about, that's the one we've learned from. We've layered in a lot of volumes in the past, we layered demand at indexed pricing such that when the market did transition, we didn't really participate in that, we don't want to do that again. So, yes, we have more deliveries that's GBP17 million on average per year for five years it's more heavily weighted to the front end, it's less deliveries in the back end. That's exactly where we want to be looking at a market that's sitting at P5 or a P10 price with a much greater chance of going up than going down. You also asked the question about to whom are we entering into contracts, not intermediaries at all, I mean we're not selling to traders. These are end-users, these are utility contracts. These are the classic term business, and between 1920 and now that's nearly GBP60 million of new business we've added to that pipeline, reflecting that broader portfolio criteria that we have when we layer in contracts.

Jessica Sondgeroth -- Nuclear Intelligence Weekly -- Analyst

Okay, great. Thank you, Grant. Thank you, Tim. And just one more follow-up -- will not a follow-up but it's that's the question on the Cigar Lake run rates uncertainty, can you characterize that a little more, is that something that requires investment or what's the issue really?

Tim Gitzel -- President and Chief Executive Officer

No, Jessica, just normal operations when you take an operation down like that. We kept all of the workers and we kept obviously the facility in good shape on care and maintenance and so we just are being ultra-cautious as we ramp back up. The COVID situation isn't gone in Saskatchewan, we've been very fortunate and I think managed it quite well at the site but we just are not sure what kind of production level we can ramp up to this year and we're just getting started now. We're just sending some uranium down the road to the McClean Lake facility. And so just lots of question marks, nothing that we're seeing that's out of the ordinary but we just want to be very prudent in not putting out numbers that we can't back up right now. So we will see on the next quarter once hopefully we can get them up and running and running normally and then we'll be able to give some better guidance going forward, but right now we're just being cautious.

Jessica Sondgeroth -- Nuclear Intelligence Weekly -- Analyst

Okay, great. Thank you.

Tim Gitzel -- President and Chief Executive Officer

Thank you.

Operator

Next is a follow-up question from Orest Wowkodaw. Please go ahead.

Orest Wowkodaw -- Scotiabank -- Analyst

Hey, good morning and thanks for taking the follow-up. Grant, just had a question about your uranium inventories, I mean based on your guidance, updated guidance for purchases and your unchanged sales guidance. I mean, my mental math would tell me that you plan to exit this year with markedly the lower inventories closer to that GBP9 million to GBP10 million range versus GBP15 million exiting 2020. I'm just curious if you think that's a good targeted run rate for inventories or whether we could actually see Cameco be more opportunistic and buy more purchases under guiding?

Grant Issac -- Senior Vice President and Chief Financial Officer

Can I answer yes to both, Orest, but just a reminder of how we got there. So you go back to last March, last April, COVID starts rolling out around the world. We started to see real supply uncertainty, not just in Canada, but places like Kazakhstan, you'll remember the actions that Kazatomprom took in countries like Uzbekistan, Namibia, COVID cases in the Niger. As the largest buyer in the market and the largest inactive or inelastic buyer in the market, because we had a committed sales portfolio to deliver into, I think of it as we bought some risk material. It wasn't we were building up an inventory to hold, it was as we looked out at our committed sales portfolio and knew what we had to deliver, we bought what we needed when we saw it was available because of that uncertainty. But as the COVID situation began to stabilize and we brought Cigar Lake back and we saw the measures that Kazatomprom were taking, we weren't really in that world anymore, I'm thinking we needed to buy ahead and buy some risk pound. So we ended 2020 with a higher inventory than we would have otherwise enjoyed. We brought it back more in line with what you've traditionally seen, but for some of the -- I would say new factor, not COVID related, but if we do see a piling on, fund start to invest more if -- we talked quite a bit about the Sprott vehicle and the opportunity for that to be more active, if that vehicle starts buying more pounds, we will guess what so are we because we're not going to be completely left out of that because we need it for our committed sales.

So historically, you know what our inventory targets have been, we navigate by those inventory targets but we got to deliver into our committed sales portfolios. So it really is going to depend or is on the buying behavior of others and what we see in the market and we're not going to be left with no material and having to default on a committed sales, that is absolutely not going to happen. So, in a really not helpful way, my answer is yes to both.

Orest Wowkodaw -- Scotiabank -- Analyst

Thanks, Grant. And as a second to follow-up, just coming back again to the your new contracts that you saw in April representing GBP9 million, do you think that represents in your view some kind of inflection point in the recontracting market like do you think that opens the door now or paves the way for others to now start piling on or do you view this more as sort of an isolated event?

Grant Issac -- Senior Vice President and Chief Financial Officer

Well, again I'm a little tempted to say it's a bit of both. I mean, the real inflection point as I said earlier it comes when we start to see greater frequency of the on-market RFPs going along with the kind of off-market business. The off-market business has historically been a leading indicator, a necessary condition, but it kind of hasn't been the sufficient condition for a full-blown term contracting cycle, but here's why we view it as positive. Because utilities, yes, they're watching the supply demand dynamic, but the other thing we know they're watching is each other. It's tempting to sort of say well if my big neighbor here is in buying maybe I don't need to be buying, but then when the word gets out that someone starting to buy and they're starting to buy out in more of that classic term window, you think about the summer of 2010 when the Chinese stepped into the term market for the first time and contracted a GBP150 million basically for kind of 2013 and 2014 to 2024, everybody else who was sitting on the sidelines feeling they were well-covered for 2011 to 2015, saw the big new entrants come into the market and start gobbling up the pounds that hadn't yet been called for and that triggered a contracting cycle. So, we do think maybe it is a drip in the bucket but it's a big drip in the bucket that's getting pretty full ours.

Orest Wowkodaw -- Scotiabank -- Analyst

Thanks, Grant.

Tim Gitzel -- President and Chief Executive Officer

Thanks for your question of yours, Orest.

Operator

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

Tim Gitzel -- President and Chief Executive Officer

Well, thank you very much, operator, and with that, I just want to say thanks to everybody who is on the call today. We as always appreciate your interest and support. And I just have to tell you we're pretty excited about the future and what we're seeing for nuclear power generation. We're excited about the fundamentals of uranium to supply demand and we think our company is in a great spot. We continue to be a responsible commercial supplier with strong balance sheet to long-lived Tier 1 assets and a proven operating track record and I can just assure everyone that we will continue to make the health and safety of our workers, their families, and their communities our priority.

So, with that, thanks again, everybody. Stay safe and healthy and talk to you again soon. Thank you.

Operator

[Operator Closing Remarks]

Duration: 91 minutes

Call participants:

Rachelle Girard -- Vice President, Investor Relations

Tim Gitzel -- President and Chief Executive Officer

Grant Issac -- Senior Vice President and Chief Financial Officer

Orest Wowkodaw -- Scotiabank -- Analyst

Lawson Winder -- Bank of America Securities -- Analyst

Ralph Profiti -- Eight Capital -- Analyst

Andrew Wong -- RBC Capital Markets -- Analyst

Greg Barnes -- TD Securities -- Analyst

Ben Hatchett -- Private Shareholder -- Analyst

Brian MacArthur -- Raymond James -- Analyst

Gordon Johnson -- GLJ Research -- Analyst

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Jessica Sondgeroth -- Nuclear Intelligence Weekly -- Analyst

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