Uranium stocks rallied Friday after the world’s largest uranium producer Kazatomprom announced reduced 2025 production targets due to a shortage of sulphuric acid and construction delays.
The reduction of around 5,250 tonnes (11.5 million pounds) is significant to the global market. The World Nuclear Association estimates global uranium production in 2022 was 58,000 tonnes.
The updated 2025 U3O8 production volumes are around 16.9% lower than the previous guidance:
“The company is now adjusting its initial intentions for 2025 production volumes of 30,500 – 31,500 tonnes on a 100% basis. Kazatomprom’s 2025 production is now expected to be between 25,000 – 26,500 tons and approximately 12% growth compared to its 2024 guidance.”
The new 25,000-26,500 tonne target in 2025 would still represent record output for the company.
Updated 2024 guidance now sees the company producing between 22,500 – 23,500 tonnes of U3O8 on a 100% basis (11,600 – 12,600 tonnes on an attributable basis). The chart below shows Kazatomprom’s uranium output since 2017, on a 100% basis.
Kazatomprom’s London-listed shares rose over 6% on the news. Several other major uranium companies and ETFs also rose on the news.
These are the full remarks on the 2025 production guidance from Kazatomprom’s Chief Strategy and International Development Office Dastan Kosherbayev from the company’s Q2 2024 Earnings call held on August 23, 2024.
Dastan Kosherbayev:
Recently, we have observed a shift in the market dynamics, with buyers increasingly making compromises to secure deals. Amid our continued success in long term contracting activity, Kazatomprom has initially intended to ramp up its 2025 production to 100% of subsoil use agreement levels. However, the uncertainty around the sulfuric acid supplies for 2025 needs and delays in the construction works at the newly developed deposits resulted in the need to re-evaluate our 2025 plans.
The company is now adjusting its initial intentions for 2025 production volumes of 30,500 – 31,500 tonnes on a 100% basis. Kazatomprom’s 2025 production is now expected to be between 25,000 and 26,500 tons and approximately 12% growth compared to its 2024 guidance.
A significant portion of the adjusted 2025 production is attributed to JV Budenovskoye production delay. The JV is expected to result in a nearly 80% miss from its 2024 production target under subsoil use agreement and more than 65% miss in 2025.
Since Budenovskoye 2025 production is expected at 1,300 tonnes of uranium instead of the previously approved 4,000 tonnes, changes to its subsoil use agreement are to be introduced to prevent breach of subsoil use obligations. JV Budenovskoye is not the only mining entity that will be applying for changes to its subsoil use agreement. Appak has also initiated subsoil agreement revisions while Baiken, KATCO and Semizbay have already validated their production mismatches. I would like to once again highlight that in ISR mining both the requirements for sulfuric acid and the consequences from its shortages have a different scale and impact due to different geological features of the deposits.
All our uranium mining entities are supplied with acid volumes equally proportioned to their requirements to minimize the risk of harm to the uranium mining process and geological structure of the deposit. However, depending on the geological and technological condition of the deposits, the recovery process requires different efforts, meaning that the same amount of undersupply of sulfuric acid to different blocks can have varying negative effects on production rates.
As a result, it is expected that in 2025, mining entities will have different percentage rate decrease compared to the levels stipulated in the corresponding subsoil use agreements with the acceptable 20% deviation. For example, if the changes of Budenovskoye production targets are approved and corresponding amendments to subsoil use agreement are signed, this JV will potentially result in producing at 100% of its updated subsoil use agreement level instead of a current more than 65% miss estimate.
Despite 2025 production plan adjustments Kazatomprom remains fully committed to fulfilling its existing 2025 sales commitments. We have a comfortable level of inventories to meet these commitments. Our sales strategy involves preserving a portion of our annual production as uncommitted. This strategic reserve allows us to seize emerging opportunities and adapt to fluctuations in the market landscape.
This slide from Kazatomprom’s August 2024 Investor Handout shows the changes made to the company’s production profile through 2025.
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