See Financial results by segment for more detailed discussion.
Uranium market update
Since the previous quarter, the uranium market has seen little change. Near to medium-term uncertainty continues to impede a recovery, with neither buyers nor suppliers seeming to feel much pressure to contract. Most suppliers have significant commitments out to 2016, and utilities are well covered for a similar period. As a result, over this quarter, volumes contracted have remained low, and uranium prices have been relatively stable.
As we have noted in previous quarters, we believe the market will remain in this 'wait-and-see' mode until catalyzed by events such as reactor restarts in Japan and a significant return to long-term contracting by utilities. We expect to see both of these catalysts realized, though the timing remains unclear. In our view, utilities are beginning to move into the window of time during which they would normally begin contracting for requirements in 2016, and, as the regulatory process is worked through in Japan, we believe reactors will be restarted in 2013. The process began in January, when the Nuclear Regulatory Authority (NRA) issued draft safety guidelines outlining the proposed requirements for restart. The guidelines have now been released for public comment, with the final guidelines expected in July. We are in frequent contact with our Japanese utility customers and understand that they are investing significantly to prepare their nuclear assets to meet the requirements for restart.
While we watch to see how the near term will evolve, we believe the long-term picture for nuclear continues to be strong. Our current estimates project nuclear generating capacity will reach about 510 gigawatts by 2022 from today's 392 gigawatts, which represents average annual growth of 3%. Of this expected growth, approximately 65 new reactors (65 gigawatts of generating capacity) are under construction today. Much of this growth is coming from India and China, which together plan to bring eight new reactors online this year. Canada recently finalized the details of the Nuclear Cooperation Agreements with both countries, enabling Canada, and Cameco, to take part in the opportunity these countries represent to the nuclear industry by allowing deliveries of Canadian material.
The other side of the equation is supply, which faces challenges both from primary and secondary sources. Secondary sources, which have historically kept supply in balance with demand, continue to diminish, particularly with the end of the Russian Highly Enriched Uranium commercial agreement this year. The end of this agreement will remove more pounds from the market than our total annual production, and there is no secondary source of similar scale expected. But future primary supply is also starting to suffer as a number of projects were cancelled or deferred in 2012 while the uranium spot price remained at a level well below that required to incentivize new projects. This primary supply uncertainty comes at a time when demand growth is on the horizon. However, the reduction in future primary supply does not directly impact the near-term market and there are indications that some supply projects, primarily driven by sovereign interests, may proceed despite market conditions.
Despite the current challenging industry environment, we are well positioned to continue to succeed. We have advantages like extensive mineral reserves and resources, low cost operations, a strong sales contract portfolio, experienced employees and a growth strategy that will allow us to remain competitive in challenging environments, while maintaining the ability to respond quickly with additional production when the market signals that more supply is required.
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