Kazatomprom extends uranium production cuts into 2022

Kazatomprom announced in December 2017 that it would reduce planned uranium production by 20%, compared to planned levels under Subsoil Use Contracts, over three years from January 2018. Last August, it said it would extend the production curtailment through 2020, in a decision that reflected the fact the uranium market was still recovering from a period of oversupply, and uranium prices remained low.

The full implementation of this decision would remove up to 5500 tU from anticipated global primary supply in 2022, Kazatomprom said. The company's 2022 production is now expected to be between 22,000 tU and 22,500 tU (100% basis). Kazatomprom’s total consolidated uranium production is expected to be reduced by over 20,000 tU (100% basis) from its previous 2020 through 2022 production plans.

Kazatomprom said it will now begin working with joint venture partners to assess the impact and implement the plan across all of Kazakhstan's uranium mines.

After reducing the number of employees at its mine sites between April and July in response to the COVID-19 pandemic, Kazatomprom announced earlier this month that it planned to return staffing levels at its uranium mines to normal by around the end of August. Uranium output during the first-half of the year was 10,434 tU, down 3% from 10,800 tU in the first half of 2019. Kazatomprom said uranium production levels for the second-half of 2020 are expected to be "severely impacted" by the four-month shutdown of its mines. It expects to produce 19,250 tU in 2020, down 16% from 2019's output of 22,808 tU. In February, the company said it expected its 2020 uranium output to remain at about 22,750-22,800 tU.

"The decision to keep production similar year-over-year, and extend production curtailment into 2022, is indicative of a global uranium market that is still recovering from a long period of oversupply," said Kazatomprom CEO Galymzhan Pirmatov. "We are simply not seeing the market signals and fundamental support needed to ramp up mine development in 2021 and take our low-cost, tier one production centres back to full capacity in 2022."

Pirmatov noted the market uncertainty attributed to the COVID-19 pandemic is "significant", but despite the anticipated supply deficit in 2020, uranium prices and long-term contracting activity, while higher than in 2019, remain unsustainably low. "Consequently, in line with our market-centric strategy, we intend to continue with the level of spending and operational activity commensurate with a 20% reduction to Subsoil Use Contract levels that we have maintained since 2018. We cannot rule out the possibility of further production disruptions due to COVID-19, given that the measures necessary to ensure the health and safety of our staff will continue to be our first priority."

No decision has yet been taken regarding production levels beyond 2022, the company said, adding that it 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," it said.

According to World Nuclear Association, Kazakhstan has 11% of the world's uranium resources and in 2019 produced about 22,808 tU. It has been the world's leading uranium producer since 2009, with a 43% share of world production in 2019. Kazatomprom's 2019 production of 13,291 tU was 25% of world production.