Brian Zinchuk is editor and owner of Pipeline Online
SASKATOON, KYIV – It turns out when you invade your neighbour and shell its nuclear plants, they probably won’t want to buy uranium fuel from you anymore. And as such, Ukraine is turning to Canada, and Saskatchewan’s Cameco, to supply all of Ukraine’s uranium needs for the next 12 years.
SE NNEGC Energoatom (Energoatom), Ukraine’s state-owned nuclear energy utility, and Cameco Corporation (TSX: CCO; NYSE: CCJ), one of the largest global producers of uranium fuel based in Canada, have reached agreement on commercial terms for a major supply contract for Cameco to provide sufficient volumes of natural uranium hexafluoride, or UF6 (consisting of uranium and conversion services), to meet Ukraine’s full nuclear fuel needs through 2035. Key commercial terms, such as pricing mechanism, volume and tenor, have been agreed to, but the contract is subject to finalization, which is anticipated in the first quarter of 2023, Cameco said in a release.
Cameco’s Port Hope UF6 plant. Cameco
“Energoatom will keep working on achieving the energy independence of Ukraine. The development of cooperation between companies in the production and supply of nuclear materials and nuclear fuel is one of the most important conditions for the further safe functioning of our domestic nuclear power generation,” said Petro Kotin, president of Energoatom.
“We are proud to play an essential role in helping Ukraine gain supply security for significant components of their nuclear fuel in these extraordinarily challenging times for the country,” said Cameco president and CEO Tim Gitzel. “This has the potential to be the single largest supply contract in Cameco’s history, and it is only achievable through the strong relationship that has developed between our two companies. Commercial arrangements between Cameco and Energoatom began modestly in 2018 and have grown today into a significant strategic partnership.”
Cameco president and CEO Tim Gitzel
The 12-year agreement will run from 2024 through 2035, with all deliveries in the form of UF6. The contract will contain a required degree of flexibility, given present circumstances in Ukraine. The agreement will see Cameco supply 100 per cent of Energoatom’s UF6 requirements (consisting of uranium and conversion services) for the nine nuclear reactors at its Rivne, Khmelnytskyy and South Ukraine nuclear power plants for the duration of the contract. These plants have combined requirements over the contract term of approximately 15.3 million KgU as UF6 (the equivalent of about 40.1 million pounds of uranium concentrate, or U3O8).
As for that nuclear power plant that’s been occasionally under fire by the Russian army, the contract will also contain an option for Cameco to supply up to 100 per cent of the fuel requirements for the six reactors at the Zaporizhzhya nuclear power plant, one of the largest in the world. It is currently under Russian control, but should it return to Energoatom’s operation, Cameco would supply it, too. If this option was exercised in 2024, the Zaporizhzhya plant would require roughly 10.4 million KgU as UF6 (the equivalent of around 27.2 million pounds of U3O8) over the contract period.
The contract amounts are subject to the customary volume flexibility provisions commonly contained in supply agreements. Financial terms of the contract are confidential and will not be released.
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