Kazatomprom announces extension of production cuts

LONDON: JSC National Atomic Company (Kazatomprom) has announced its intention to continue to flex down production by 20% through 2021, compared to the planned levels under Subsoil Use Contracts.

The Company will now begin working with joint venture partners to assess the impact and implement the plan across all of Kazakhstan’s uranium mines.

The decision to extend production curtailment reflects the fact that the uranium market is still recovering from a period of oversupply, and uranium prices remain low. As the largest uranium producer in the world, Kazatomprom recognizes the need for global output to better align with current demand.

The Company is announcing the plan well before year-end to ensure its mining subsidiaries and joint ventures will be able to incorporate the required changes into their 2020 capital expenditure budgets, accounting for the revised production levels in 2021. No decision has been taken regarding production levels beyond 2021 and the Company continues to monitor market conditions. However, Kazatomprom does not expect to return to full production until a sustained market recovery is evident, and demand and supply conditions signal a need for more uranium.

The full implementation of this decision would remove up to 5,600 tU from anticipated global primary supply in 2021. Kazatomprom’s 2021 production would remain below 23,000 tU (100% basis), which is expected to be in line with production in 2019 and 2020, where a 20% reduction of annual Subsoil Use Contract levels was reflected in previous reports (Competent Persons’ Report, IPO Prospectus 31 October 2018).

Galymzhan Pirmatov, Chief Executive Officer of Kazatomprom, commented: “Uranium recovered somewhat from the lows of 2016, but the market is still signaling that there is no need to bring back existing production capacity. Keeping production levels flat for now supports a return to long-term sustainability in the market, which will benefit all stakeholders. Delaying the return to planned output levels also demonstrates our commitment to the value-over-volume philosophy at the core of our strategy.”

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