Kazatomprom agreed to export uranium to China

“National Atomic Company Kazatomprom has signed a contract for the supply of Kazakh natural uranium concentrate with China National Uranium Corporation Limited – CNUC (a subsidiary of China National Nuclear Corporation – CNNC),” the published statement says.

According to Kazatomprom, entering into a contract with a major Chinese energy company will help meet China’s growing need for clean, carbon-free electricity and strengthen the historically long-standing nuclear relationship between the two countries.

“Kazatomprom’s market-oriented strategy is aimed at producing, processing and selling natural uranium concentrates with the aim of creating long-term value for all stakeholders. Close cooperation with one of the large Chinese energy companies, like CNUC, testifies to Kazatomprom’s strong reputation as a reliable and preferred supplier in the global nuclear fuel market,” said Seitzhan Zhanybekov, Managing Director for Strategy and Marketing of Kazatomprom, after the signing .

The signing of a long-term contract with CNUC took place at the China International Import Expo 2023 in Shanghai as part of a previously approved transaction at the annual general meeting of shareholders in May 2023. Kazatomprom does not disclose the volume and commercial terms of the contract with CNUC, calling them confidential and commercially sensitive.

It is worth noting that at the general meeting in May, 91.91% of shareholders approved the deal with CNNC (7.75% of shareholders voted against, 0.34% abstained). Shareholder approval was required because the transaction involved the acquisition or disposal of property valued at more than 50% of the total book value of the company’s assets. As of April 1, Kazatomprom’s total assets amounted to 2.3 trillion tenge. Thus, the cost of the transaction amounted to more than 1.15 trillion tenge or over $2.5 billion at the National Bank exchange rate as of April 1.

According to reports for the first half of the year, Kazatomprom’s key consumer was China, which purchased 218.6 billion tenge of uranium during this period, compared to 97.5 billion tenge in the first half of 2022.

The group also made sales to the following countries: USA – 118 billion tenge (60.3 billion tenge), Russia – 72 billion tenge (30.7 billion tenge), Kazakhstan – 55.5 billion tenge (60.7 billion tenge), France – 51.8 billion tenge (28.7 billion tenge), the Netherlands – 48.4 billion tenge (0), Canada – 30.7 billion tenge (64.9 billion tenge), Great Britain – 4.6 billion tenge (116, 2 billion tenge), other countries – 19.1 billion tenge (35.1 billion tenge). Total revenue amounted to 618.7 billion and 493.7 billion tenge, respectively.

The Kazatomprom company plans to produce uranium in 2025 in 100% volume under subsoil use contracts, compared to minus 10% of contract volumes in 2024 (5.5-6.5 thousand tons of uranium, respectively), the company reported at the end of September. Kazatomprom Chief Commercial Officer  Dastan Kosherbaev  recalled that for seven consecutive years the company maintained uranium production 20% below the volumes planned in subsoil use contracts.

According to the company, the decision to return to 100% production levels under subsoil use contracts is due to the fact that Kazatomprom continues to successfully conclude medium- and long-term contracts with both new and existing clients against the backdrop of improving uranium market conditions. Additional production volumes in 2025 will be used to fulfill the company’s contractual delivery obligations in 2025 and beyond.

It is expected that the implementation of this decision will lead to an increase in the estimated level of global primary uranium production to 6 thousand tons in 2025 compared to the company’s planned production volumes for 2024. Kazatomprom’s production volume in 2025 is therefore expected to be 30.5–31.5 thousand tons of uranium (on a 100% basis), reaching 100% of the total production volume under subsoil use contracts for 2025.

The main part of the significant increase in production volumes from 2024 to 2025, the company notes, is reserved under medium- and long-term contracts. In this regard, Kazatomprom is beginning to work with joint venture partners and uranium mining subsidiaries to prepare budgets and production plans for 2024, taking into account the expected growth in production volumes in 2025. However, a decision regarding production plans and production volumes after 2025 has not yet been made.

Kazatomprom expects to increase uranium sales in 2023, the company’s chairman of the board,  Yerzhan Mukanov , said on August 25 .

“We expect sales to increase from previous guidance due to additional requests from customers to change annual supply volumes under current contracts, some new long-term contracts for delivery through 2023,” he said at a news conference.

The consolidated volume of product sales will increase to 17.5–18 thousand tons compared to the previous forecast of 15.4–15.9 thousand tons. At the same time, Kazatomprom lowered its forecast for the average annual exchange rate to 460 tenge per US dollar from 470 tenge previously. Total revenue will increase to 1.27–1.31 trillion tenge from 1.08–1.09 trillion previously.

In accordance with the company’s strategy, and taking into account restrictions on field development and production, production volumes in 2024 are expected to remain at minus 10% of the total level of subsoil use contracts, which is approximately 25 thousand tons of uranium. Kazatomprom planned to report production plans for 2025 before the end of the current quarter.

Kazatomprom reported an increase in net profit for the first half of the year to 222.3 billion tenge, which is 33% more than in the same period in 2022. The profit growth was mainly due to rising uranium prices and increased sales volumes. The cost of sales increased by 10% – to 320.5 billion tenge. General and administrative expenses increased to 32.2 billion tenge from 18.8 billion tenge a year earlier. Kazatomprom’s net debt as of June 30 amounted to 176.7 billion tenge (at the end of 2022 it was 170.5 billion tenge, as of June 30, 2022 – 282.4 billion tenge).

U3O8 uranium production increased in the first half of the year to 10,225 tons from 10,070 tons a year earlier (+2%). Sales volume amounted to 9,527 tons (9,017 tons a year earlier, or +6%). The average selling price was 55,257 tenge, or $47.04, per pound in the first half, compared with 47,807 tenge and $40.88 a year earlier, respectively, or 16% and 15% higher, respectively. Cash cost as of June 30 was $12.18 per pound, compared to $9.77 per pound a year earlier (+22%). Consolidated inventories of finished U3O8 products as of June 30 amounted to 7,644 tons, which is 18% lower than a year earlier.