Replies to post #3312 on Uranium Mining and Exploration

[ramipo]

It's "Cameco"

[useeker]

I like the cut of our cloth trosh on confronting Cameco and their contract "liabilities". It is great for David to question Goliath from time to time.

I would suggest however, that Cameco would re-negotiate contracts for delivery not at a discount, but at some escalation of spot price (linked anyway) for Price plus a percentage. This is standard for primary producers like Cameco with a secure supply.

I have been told that utilities pay, and have paid a premiun to spot price when they negotiate contracts to acquire a secure supply from a bone fide producer. This is a premium paid to producers that a mere commodity trader would never see. This is on ereason Cameco apparently never sell on the Spot market.

It is with this management that Cameco survived the $7/lb uranium doldrums of the mid 1990s, etc. There is no way Cameco or any other primary producer could have produced at these prices and made a profit of any magnitude without price plus premium contracts. Cameco did, and one can only commend them and their management on not just surviving, but thriving during this period.

Re-negotiating present & future contracts now, because the price is high in the manner you suggest (discount in future, but paying more up-front) flies in the face of good corporate citizenry and real-world economics.

Imagine how Cameco would react if a utility would have asked for a re-nogotiated contract when the spot price was $7/lb and the contract was originally negotiated when prices were $16/lb a year or so earlier (don't forget primary premium escalation). They would have shown them the door I suspect.

Cameco has access to secure, low cost supply like few other companies. The price of uranium fuel per unit energy produced is so extremely low that utilities could pay 10 times the price for uranium fuel, and there would be no appreciable effect on utility bills

As prices indcrease or stabilize, Cameco, among few others will be reaping the big rewards. If you cane make profit at $7 uranium while few others can... imagine what profit should be made at current prices (when contracts allow) and other companies are only in start-up o rexploration spending mode.