Despite the spot market underperforming on soft demand, Cameco said interest in long-term contracting and positive off-market conversations with some of its best and largest customers continued.

"We have not seen the current level of prospective business in our pipeline since before 2011. Since the beginning of 2019, we added just over 36 million pounds of uranium deliveries to our contract portfolio, more than replacing the volumes delivered in 2019, while maintaining leverage to higher future uranium prices," CEO Tim Gitzel said Friday on a briefing call.

Cameco currently has total term commitments to sell more than130Mlb of uranium.

The total volume of long-term contracting reported by market analyst UxC for 2019 was about 95.8Mlb, compared with about 91.5Mlb in 2018.

Gitzel said uncertainty about the future of some reactor fleets and complacency due to low uranium prices continued to impact contracting volumes. The average reported long-term price at the end of the year was US$32.50/lb, up $50c from 2018.

"With the uncertainty created by market access and trade policy issues facing the nuclear industry, we expect contracting in 2020 could remain largely discretionary," he said.

The company said its customers were recognising that, from a security of supply perspective, diversification was important, and in some cases their risk management departments required it.

UxC estimates cumulative uncovered requirements are about 1.5 billion pounds to the end of 2035.

"The longer the recovery of the long-term market is delayed, the less certainty there will be about the availability of future supply to fill growing demand. In fact, recent data from the US Energy Information Administration shows that utility inventories are starting to decline and are approaching levels that could put security of supply at risk," Gitzel said.

"Ultimately, we expect the current market uncertainty to give way to increasing concerns about the security of future supply."

Sideways woes

On the spot market, where purchases call for delivery within one year, the 2019 UcX volume was about 63.3Mlb, compared with 88.7Mlb in 2018. Cameco said most of the spot activity was ‘churn' - the same material changing hands many times.

"There has been a lack of end-user demand primarily caused by the delay of purchasing decisions. Uncertainty due to changing market dynamics, including ongoing market access and trade policy issues continued to keep some utilities on the side-lines. At the end of 2019, the average reported spot price was $24.93/lb and the 2019 average were $25.64," the company said.

Cameco plans to buy between 20-22Mlb uranium off the spot market in 2020, supplemented by about 9Mlb of production. This compared with 13% higher 2019 production.

Perhaps a bellwether for what is to come for the uranium market at large, Cameco said spot uranium hexafluoride (UF6) conversion prices increased to record levels in both the North American and European markets. For North American delivery, the average spot price at the end of 2019 was $22.13/kg, up $8.63 year-on-year. Long-term UF6 conversion prices finished the year at $18.13/kg, up $2.13 over 2018.

"Our optimism and confidence in a uranium market transition is growing, driven by the long-term fundamentals. The underlying fact is that uranium demand is going up, while supply is going down," said Gitzel.

"Today, the market is failing to send the appropriate signals. Current prices are putting future supply availability at risk. This is not sustainable. The longer the transition takes, the greater the likelihood that the uranium price will go beyond what is required to incent tier-one production to return to the market."

Cameco's 2019 headline profit dipped 18% year-on-year to C$41 million, or 10c/share, missing average Bay Street analyst forecasts at 16c, on revenue of $1.79 billion.

The company has guided for consolidated revenue of $1.48-$1.63 billion in 2020.

Cameco has a strong balance sheet, starting 2020 with $1.1 billion in cash and $1 billion in long-term debt with maturities in 2022, 2024 and 2042.

The stock (TSX:CCO) has lost 31% over the past 12 months to trade at $11.42 Friday, capitalising the company at $4.5 billion (US$3.38 billion).