NYSEAM:UEC - Post by User
Post by
mangoeon Aug 04, 2024 4:46pm
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Post# 36163995
👨🏫Let's discuss Kazatomprom's revised 2024
👨🏫Let's discuss Kazatomprom's revised 2024 
Let's discuss Kazatomprom's revised 2024 #Uranium Production Guidance for #Kazakhstan
Raise your hand if U were fooled by the lying short sellers
screaming 'the sky is falling!'
Let's start last Wednesday with Cameco's conference call commentary on their Inkai JV with Kaztomprom:
Production was down -21% at the Inkai operation for the quarter and down -18.6% in the first half of 2024 compared to 2023 "due primarily to continued challenges with sulfuric acid availability. The current production target at Inkai is 8.3 million lbs for 2024, but that target is tentative and contingent upon receipt of sufficient volumes of sulfuric acid."
"However, all of that has become more complicated due to the sudden taxation changes that will take effect beginning in 2025. To be blunt, we’re becoming increasingly concerned with what we’re seeing in Kazakhstan. The government there has introduced amendments to the country’s tax code, which includes significant increases to the MET, the Mineral Extraction Tax, beginning in 2025. The surprising and disappointing change appears to have the greatest impact on foreign assets investors, as well as foreign equity investors in Kazakhstan, transferring expected value and profits away from investors and to the government. We’re evaluating the changes to the MET, but if it remains as currently formulated, depending on the assumptions used for uranium price, future production profile, and exchange rate, preliminary conclusions indicate that production costs in Kazakhstan would be similar to our northern Saskatchewan operations."
"The increase in cost is happening at a time when the industry is still in the early stages of recovery, and it impacts about 40% of global primary production. So the global supply cost curve is expected to move up significantly. That would mean higher long-term prices are required for future investment decisions."
"which then means that we need to see more sustainable, higher pricing to incent new supply, in particular new supply from elsewhere. So there is a broader industry implication that’s actually very constructive. The days of easy, cheap pounds coming out of Central Asia are effectively over."
The response from Uranium buyers & sellers to this revelation from Cameco's very conservative management team was an immediate over $4 jump in the price of Spot Uranium.
Spot market participants with a deep understanding of uranium market dynamics understood the real impact of this news on future supply to Western markets and responded accordingly. 
On Thursday, Kazatomprom's Operations & Trading Update showed total production in Kazakhstan was up +6% in the first half of 2024 (+1.6M lbs) as $KAP was "able to secure necessary volumes of sulphuric acid required for its 2024 production at minus 20% level relative to Subsoil Use Agreements." As a result, $KAP raised their full year 2024 Guidance by 5.7% (+3.2M lbs) while keeping their sales unchanged, stating that "Uranium expected to be produced as a result of production guidance increase will be used for replenishing the Company’s inventories."
In a nutshell, just enough sulphuric acid was acquired to maintain production at 20% below permitted levels, which increased production by just 1.6M lbs in the first half of the year, with all of $KAP's portion of this year's total projected increase of 3.2M lbs going to rebuild their safety cushion rather than being sold into new contracts with Nuclear utilities. They raised their full year 2024 Guidance by 3.2M lbs to 23,000tU = 59.8M lbs in total.
A 3.2M lbs increase, into a market consuming over 180M lbs this year, barely moves the needle! Clearly the sky is NOT falling! 
But wait! There's more... the main source of the increased production in 2024 comes from the Russian Budenovskoye JV which, as $KAP reminds us in very tiny fine print in the footnotes, is ALL going to Russia!
"For JV Budenovskoye LLP, 100% of the 2024-2026 annual production is fully committed for supplying the needs of the Russian civil nuclear energy industry, under an offtake contract at market-related terms."
When U marry that revelation with Cameco's reported -18.6% decline in Uranium production at its Inkai JV in Kazakhstan, it becomes pretty clear that the priority for injecting the obtained sulphuric acid is with Russia, not the Western JV partners. None of Kazakhstan's increased production is heading West! Take a look at Kazatomprom's Uranium Production Profile that was published in 2022 as the expected quantities of Kazakhstan's total production out to 2057. I've marked it up with the revised 2024 Production Guidance which falls well short of expected production due to COVID disruptions, supply chain issues, a lack of sufficient sulphuric acid and mine development delays.
I've also highlighted the Russian JV that is the main source of increased expansion this decade, with 100% of that volume going only to Russia until the end of 2026, then 51% to Kazatomprom after that. Analysts and journalists have failed to read the find print and review Kazatomprom's guidance over the past few years. They wrongly assume that production increases in Kazakhstan will benefit Western fuel buyers.
On 26 September 2023, Kazatomprom announced that the nation would ramp up production in 2025 to 100% of permitted capacity... a +48% increase of 26 Million lbs from 2023's production of 54M lbs to 80M lbs in 2025.
In 2024 they intended to increase production by 12M lbs to 90% of permitted capacity at 66M lbs... but just a few months later on 1 February this year they slashed that 2024 guidance by -9.5M lbs to just 56.5M lbs this year, which was then raised slightly last week to nearly 60M lbs for 2024. What's the outlook now for 2025? Kazatomprom no longer expects to be ramping up to full production, saying: "As was previously disclosed, limited access to sulphuric acid and delays in the construction schedule at the newly developed deposits could unfavourably influence Kazatomprom’s production plans for 2025." Later this month, Kazatomprom intends to announce their 2025 Production Guidance. Pretty much no one expects a return to 100%, and even if they are able to secure sufficient quantities of sulphuric acid and miraculously accelerate mine construction schedules, it doesn't change the fact that the majority of any increased Uranium production in Kazakhstan is going to Russia.
And don't forget that Kazatomprom signed 2 huge supply contracts with China to fill that new 60 Million lb warehouse on China's side of the Kazakh border. Very little of Kazakhstan's future increased production will actually go towards repairing the huge structural supply deficit in Western uranium markets where global prices are set. Just ask Cameco...
No.. the sky is clearly not falling! What is falling though is the availability of formerly cheap Kazakh-mined Uranium to Western fuel buyers given the increases to Mineral Extraction Taxes, the costs of materials & labour, and a siphoning off of Kazakh production into Russia & China. Soaring Western demand for Nuclear fuel in today's new Nuclear Renaissance will have to be met by Western miners. The only way that will be achieved is through far far higher Uranium prices that incentivize the construction of new U mines in the West... which are many years off on the distant horizon.
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