TD 2 KAZATOMPROM CUTS '25 GUIDANCE, DELAYS '26
THE TD COWEN INSIGHT
This morning, Kazatomprom (KAP-LN) reduced its 2025 production forecast, delayed the release of its 2026 guide, and also flagged higher production costs. While we do not cover KAP equity, we believe the updated guide will have a positive impact on equities across the uranium space in today's trading as it relieves concerns, in our view, of large y/y production increases.
Impact: POSITIVE
2025 production guidance reduced ~17%, 2026 production release delayed - In this morning's release, management reduced 2025 production guidance by ~17% (midpoints) to 25-26.5ktU (100%-basis) from 30.5-31.5ktU. The company also cautioned that continued uncertainty around sulphuric acid supply may impact 2025 production plans, further stating that 'a noticeable increase in our costs' is expected, partially driven by the acid shortage and new MET. As a result, management has elected to delay the release of its 2026 production plans (normally given ~1.5 years ahead) to August 2025, with the announcement of its H1/25 results.
With KAP producing close to 40% of global primary uranium supply, any updates to production levels are generally a key focus for investors. While consensus estimates for 2025 were at ~23ktU, based on our conversations with several industry participants and investors, we believe others were forecasting the production update to be closer to 26ktU. TD Cowen currently assumes 27ktU in our uranium S/D forecasts.
Recall that the Kazakh subsoil code allows producers to deviate within +/- 20% of this parameter, without triggering a mandatory amendment process, which would have suggested a production floor of 25ktU for 2025, which was right in line with today's updated guide.
In addition to the lack of sulphuric acid supplies, KAP also cited delays in construction of new deposits including surface facilities along with delays with the approval of design documentation. In particular, the Budenovskoye deposit seems to be having some significant ramp-up issues, and the company now expects not only lower production from this deposit in 2025 but also in 2026 (2026: previously 6ktU, now 3.75ktU).
Further detail on new MET — As a reminder, KAP announced in early July that the Kazakh government had amended the mineral extraction tax (MET) applicable to its uranium operations. Management provided sensitivities to these changes in Figure 1. As we have previously highlighted, given KAP's relative size and low cost ISR operations, the global cost curve should rise as a result and increase the relative attractiveness of Western projects, in our view.